KOBREN INSIGHT FUNDS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
Prospectus - November 15, 1996
Kobren Insight Funds is a no-load open-end diversified
investment company that currently includes three series:
Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren
Conservative Allocation Fund. Each fund pursues the
investment objectives outlined below by investing in a
diversified portfolio consisting primarily of mutual funds.
The primary focus of each fund is to develop an appropriate
asset allocation strategy and to select from the wide range
of mutual funds currently available.
The investment adviser to the funds is Insight Management,
Inc. ("Insight Management"). Insight Management has
extensive experience in managing mutual fund portfolios for
high net worth individuals and corporations with a minimum
account size of $250,000. Insight Management currently
manages over 1,000 client accounts with assets totaling
approximately $750 million.
As the funds' investment adviser, Insight Management may
select from virtually all publicly available mutual funds.
The funds' strategy of investing in other mutual funds
results in greater expenses than shareholders would incur if
they invested directly in mutual funds.
Kobren Growth Fund seeks long-term growth of capital without
regard to current income and with a volatility level
approximating that of the S&P 500 Index.
Kobren Moderate Growth Fund seeks long-term growth of
capital without regard to current income and with a
volatility level below that of the S&P 500 Index.
Kobren Conservative Allocation Fund seeks enough long-term
growth of capital to maintain purchasing power in the face
of inflation (as measured by the Consumer Price Index) with
a volatility level below that of the S&P 500 Index.
Shares of the funds are not deposits or obligations of, or
guaranteed or endorsed by, any bank and are not federally
insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus contains information about the funds that
you should consider before investing. Please read the
prospectus carefully and retain it for future reference. A
statement of additional information dated November 15, 1996
has been filed with the Securities and Exchange Commission.
The statement of additional information contains more
information about the funds and is incorporated by reference
into this prospectus. The statement of additional
information is available without charge and can be obtained
by writing the distributor at the address shown on page 14
or by calling the telephone number shown below.
The principal distributor (the "Distributor") of the funds'
shares is Insight Brokerage Services, Inc. For further
information, please call the Kobren Insight funds toll free
at 800-895-9936.
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TABLE OF CONTENTS
<S> <C>
Expense Information 2
Investment Objectives and Policies 2
Management of the Funds 8
Determination of Net Asset Value 10
How to Purchase Shares 10
How to Redeem Shares 11
Exchange Privilege 11
Shareholder Services 12
Dividends, Distributions and Taxes 12
Additional Information 13
</TABLE>
<TABLE>
<CAPTION>
EXPENSE INFORMATION
<S> <C> <C> <C>
Conservative
Growth Moderate Allocation
Fund Growth Fund Fund
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None None None
Sales Load Imposed on
Reinvested Dividends None None None
Deferred Sales Load None None None
Exchange Fee None None None
Redemption Fee1 None None None
Annual Fund Operating Expenses
(As a Percentage of Average Net Assets)
Advisory fees2 0.75% 0.75% 0.75%
Distribution (Rule 12b-1) fees None None None
Other expenses (after expense limitation)3 0.25% 0.25%
0.25%
Total fund operating expenses
(after expense limitation)3 1.00% 1.00% 1.00%
<FN>
1 A transaction fee of $10.00 may be charged for redemption
proceeds paid by wire.
2 A Kobren Insight fund may invest in shares of an
underlying mutual fund that (1) makes payments of Rule 12b-1
revenues with respect to shares held by the Kobren Insight
fund or (2) whose investment adviser is willing to share a
portion of the underlying fund's advisory fee attributable
to underlying fund shares held by the Kobren Insight fund.
Any Rule 12b-1 or revenue sharing payments made with respect
to shares of any underlying fund will be applied to the
advisory fees owed to Insight Management by the affected
Kobren Insight fund.
3 Insight Management has voluntarily agreed to limit each
fund's other expenses until December 31, 1997 to 0.25% of
the fund's average daily net assets. Without this expense
limitation and without the revenues from underlying funds
(described in note 2 above), the estimated other expenses
and total fund operating expenses, respectively, of each
fund would be -- Growth Fund: 0.26% and 1.01%; Moderate
Growth Fund: 0.31% and 1.06 %; and Conservative Allocation
Fund: 0.44% and 1.19%.
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<TABLE>
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Example
You would pay the following expenses on a hypothetical
$1,000 investment assuming (1) a 5% annual return and (2)
redemption at the end of each time period.
<S> <C> <C> <C>
Growth Moderate Conservative
Fund Growth Fund Allocation Fund
1 year $10 $10 $10
3 years $32 $32 $32
<FN>
The purpose of the tables on this page is to help you
understand the various costs and expenses that investors in
the funds will bear, directly or indirectly. These expenses
are based on the estimated expenses for each fund's first
fiscal year, after any applicable expense limitation, and
should not be considered representative of past or future
expenses. Actual expenses may be greater or less than those
shown. Also, while the example assumes a 5% annual return, a
fund's actual performance may vary and may result in a
return greater or less than 5%.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren
Conservative Allocation Fund are diversified mutual funds.
Each fund has its own investment objective, policies and
practices, as described below. Each fund pursues its
investment objective by investing primarily in other mutual
funds, but may also invest directly in securities that are
suitable investments for that fund. There is no guarantee
that a fund will be able to achieve its objectives.
Kobren Growth Fund
Investment Objective
The investment objective of Kobren Growth Fund is long-term
growth of capital without regard to current income. By
using the active asset allocation strategy described on this
page, the fund seeks reduced volatility (risk) over a full
market cycle to a level approximating that of the S&P 500
Index. However, at any particular time, the fund's
volatility may be higher or lower than its target
volatility. Under normal market conditions, at least 65% of
the fund's total assets will be invested in open-end and
closed-end, U.S. and international stock funds. The fund
may invest up to 35% of total assets in fixed income funds
or directly in stocks, bonds, money market instruments,
options, futures contracts and other permissible
investments.
Who Should
Invest in the Fund?
Kobren Growth Fund is designed for investors seeking growth
of capital and a volatility level approximating that of the
S&P 500 Index. These investors should have a minimum five
year time horizon and no need for current income.
Kobren Moderate Growth Fund
Investment Objective
The investment objective of Kobren Moderate Growth Fund is
long-term growth of capital without regard to current
income. By using the active asset allocation strategy
described on this page, the fund seeks reduced volatility
(risk) over a full market cycle to a level approximately 20%
below that of the S&P 500 Index. However, at any particular
time, the fund's volatility may be higher or lower than its
target volatility. Under normal market conditions, at least
65% of the fund's total assets will be invested in open-end
and closed-end, growth and growth and income funds. These
may include both U.S. and international funds. The fund may
invest up to 35% of total assets in fixed income funds or
directly in stocks, bonds, money market instruments,
options, futures contracts and other permissible
investments.
Who should
invest in the fund?
Kobren Moderate Growth Fund is designed for investors
seeking growth of capital and a volatility level below that
of the S&P 500 Index. These investors should have a minimum
3 to 5 year time horizon and modest income needs.
Kobren Conservative Allocation Fund
Investment Objective
The investment objective of Kobren Conservative Allocation
Fund is enough long-term growth of capital to maintain
purchasing power in the face of inflation. Current income
is a secondary objective. By using the active asset
allocation strategy described on this page, the fund seeks
reduced volatility (risk) over a full market cycle to a
level approximately 30% below that of the S&P 500 Index.
However, at any particular time, the fund's volatility may
be higher or lower than its target volatility. The fund
expects, under normal market conditions, to invest at least
40% of its total assets in open-end and closed-end, growth
and growth and income funds. These may include both U.S.
and international funds. In addition, at least 20% of the
fund's total assets will be invested in income producing
funds or securities. The fund may invest up to 40% of its
total assets directly in stocks, bonds, money market
instruments, options, futures contracts and other
permissible investments.
Who should
invest in the fund?
Kobren Conservative Allocation Fund is designed for
investors seeking enough long-term growth of capital to
offset the loss of purchasing power due to inflation, as
well as current income. Although not without risk, the fund
may be suitable for conservative investors willing to
sacrifice some growth potential in exchange for less
volatility.
All Funds:
Characteristics and
Risks of Investment
Securities and
Practices
Insight Management's
Investment Process
Insight Management intends to construct for each Kobren
Insight fund a diversified portfolio in a risk controlled
manner consistent with the fund's investment objectives.
Insight Management uses a multi-faceted approach and relies
on fundamental valuations and analysis to make investment
decisions for the funds. Insight Management identifies
asset classes and investment styles that appear to be
undervalued relative to their earnings potential or other
characteristics. For example, the price to earnings ("P/E")
ratio of small capitalization growth stocks is often between
0.6 and 1.0 times their earnings growth rate. P/E ratios
significantly above or below this range may prompt trading
action or equity style shifts in a fund's portfolio.
Insight Management seeks to identify and avoid industries or
types of securities that appear overvalued.
Insight Management monitors stock valuations for issuers in
a particular industry relative to current and historical
stock valuations for industries represented in the S&P 500
Index. When stock valuations in a particular industry are
outside their norms, that industry may be accordingly
underweighted or overweighted in a fund's portfolio. In
selecting investments in other mutual funds, Insight
Management considers a variety of quantitative factors such
as historical total returns, style analysis, volatility
levels, expenses and underlying fund size. In addition to
quantitative analysis techniques, a variety of qualitative
factors may be used to identify appropriate funds for
investment. These may include interviews with underlying
fund managers and their research staff. Insight Management
will combine the underlying funds in such a manner as to
achieve an asset allocation mix that reflects its views of
the financial markets as well as the objectives of each
fund.
By using an active asset allocation strategy, each fund
seeks reduced volatility over a full market cycle to a
specified level relative to the volatility of the S&P 500
Index. Risk is reduced by first determining the appropriate
mix of stocks, bonds and cash most likely to achieve the
fund's target volatility. For example, Kobren Growth Fund
would typically invest a greater percentage of its assets in
stocks than would the other two funds. Once the stock
allocation is determined, Insight Management determines the
style allocation (i.e., growth vs. value stocks or small
capitalization vs. large capitalization stocks). Finally,
Insight Management selects specific funds (including their
managers). During this three step process, Insight
Management analyzes historical and expected returns,
underlying fund volatility levels and correlations between
underlying funds in order to construct for each fund a
portfolio with an appropriate risk level.
Investments in
Other Mutual Funds
Each fund will invest primarily in the shares of open-end
and closed-end funds (sometimes referred to in this
prospectus as "mutual funds"). Mutual funds pool the
investments of many investors and use professional
management to select and purchase securities and other
investments for their portfolios. The Kobren Insight funds
are authorized to invest in underlying funds with investment
objectives that do not match those of the funds. Insight
Management believes that, by investing in a combination of
funds with a broad range of objectives and offsetting risk
characteristics, a Kobren Insight fund can achieve a higher
composite rate of return while assuming a level of risk
commensurate with the fund's objective.
The underlying funds in the Kobren Insight funds' portfolios
may invest in any or all of the investments described in
this prospectus and will expose the Kobren Insight funds to
all of the risks that would be associated with the direct
ownership of these investments. The underlying funds may be
authorized by their investment policies to engage in
investment practices that the Kobren Insight funds do not
engage in directly.
As the funds' investment adviser, Insight Management may
select from virtually all publicly available open-end and
closed-end funds. Due to its size and buying power, many
mutual funds that would otherwise be sold with a front-end
sales charge may be available to the Kobren Insight funds at
net asset value. The funds will not purchase shares of
open-end mutual funds if a front-end sales charge would be
imposed on such purchase. However, the funds may purchase
shares of an underlying fund that are subject to a deferred
sales charge or redemption fee.
Investing in mutual funds through the Kobren Insight funds
involves additional and duplicative expenses and certain tax
results that would not be present if you were to make a
direct investment in the underlying mutual funds. By
investing in mutual funds indirectly through the funds, you
bear not only your proportionate share of the expenses of
the funds (including operating costs and investment advisory
and administrative fees) but also, indirectly, similar
expenses of the underlying funds. Investment decisions by
the investment advisers of the underlying funds are made
independently of Insight Management and the Kobren Insight
funds. At any particular time, one underlying fund may be
purchasing shares of an issuer whose shares are being sold
by another underlying fund. As a result, a Kobren Insight
fund would incur indirectly certain transaction costs
without accomplishing any investment purpose. In addition,
an underlying fund may incur service fees or expenses
related to the distribution of the underlying fund's shares.
As a shareholder of the Kobren Insight funds, you may
receive taxable capital gains distributions to a greater
extent than if you invested directly in the underlying
funds.
A fund, together with the other Kobren Insight funds,
Insight Management and any of their affiliated persons, may
purchase only up to 3% of the total outstanding securities
of an underlying fund. Accordingly, each fund's ability to
invest fully in shares of an underlying fund is limited to
the extent that the other Kobren Insight funds, Insight
Management or their affiliates also hold shares of the same
underlying fund.
Equity Securities
The funds and the underlying funds in their portfolios
invest in equity securities of U.S. and foreign companies.
Equity securities consist of exchange-traded, over-the-
counter ("OTC") and unlisted common and preferred stocks,
warrants, rights, convertible debt securities, trust
certificates, limited partnership interests and equity
participations. The prices of the funds' equity investments
will change in response to stock market movements.
Warrants and
Convertible Securities
Warrants acquired by a fund (or an underlying fund in its
portfolio) will entitle it to buy common stock from the
issuer at a specified price and time. Warrants are subject
to the same market risks as stocks, but may be more volatile
in price. A fund's investment in warrants will not entitle
it to receive dividends or exercise voting rights and will
become worthless if the warrants cannot be profitably
exercised before their expiration dates. Convertible debt
securities and preferred stock acquired by a fund will
entitle it to acquire the issuer's stock by exchange or
purchase. Convertible securities are subject both to the
credit and interest rate risks associated with fixed income
securities and to the stock market risk associated with
equity securities.
Fixed Income Securities
Each fund (and the underlying funds in its portfolio) may
invest, to the extent permitted by its investment policies,
in any type of fixed income security. Fixed income
securities include: (1) securities issued or guaranteed by
the U.S. government and any of its agencies and
instrumentalities ("U.S. government securities") and
custodial receipts based on U.S. government securities; (2)
securities issued or guaranteed by a foreign government, any
of its political subdivisions, authorities, agencies and
instrumentalities or supranational entities such as the
World Bank; (3) debt securities issued by U.S. and foreign
companies; (4) certificates of deposit, bankers' acceptances
and time deposits issued by or maintained at U.S. and
foreign banks; (5) commercial paper; and (6)
mortgage-backed, asset-backed, indexed and derivative
securities.
The value of fixed income securities, including U.S.
government securities, varies inversely with changes in
interest rates. When interest rates decline, the value of
fixed income securities tends to rise. When interest rates
rise, the value of fixed income securities tends to decline.
The market prices of zero coupon, delayed coupon and
payment-in-kind securities are affected to a greater extent
by interest rate changes and tend to be more volatile than
the market prices of securities providing for regular cash
interest payments.
In addition, fixed income securities are subject to the risk
that the issuer may default on its obligation to pay
principal and interest. The value of fixed income
securities may also be reduced by the actual or perceived
deterioration in an issuer's creditworthiness, including
credit rating downgrades.
Fixed income securities may be subject to both call
(prepayment) risk and extension risk. Call risk is the risk
that an issuer of a security will exercise its right to pay
principal on an obligation earlier than scheduled. Early
principal payments tend to be made during periods of
declining interest rates. This forces the affected fund to
reinvest the unanticipated cash flow in lower yielding
securities. Extension risk is the risk that an issuer will
exercise its right to pay principal later than scheduled.
This typically happens during periods of rising interest
rates and prevents the affected fund from reinvesting in
higher yielding securities. Unscheduled principal
prepayments and delays in payment can both reduce the value
of an affected security. Unlike most conventional fixed
income securities, mortgage-backed and asset-backed
securities are generally subject to both call (prepayment)
risk and extension risk.
High Yield "Junk" Bonds
Each fund will not invest directly more than 35% of its
total assets in below investment grade fixed income
securities, which are often referred to as "junk bonds."
Junk bonds are securities rated below the top 4 bond rating
categories of Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. or another nationally recognized
statistical rating organization or, if unrated, determined
by the investment adviser to be of comparable credit
quality. There is no minimum credit quality standard for
fixed income securities held by the Kobren Insight funds or
by the underlying funds.
The prices of high yield bonds can be very volatile and may
decline more steeply following an economic downturn or
increase in interest rates than would the prices of
investment grade debt securities. An adverse economic or
interest rate climate may also impair the ability of high
yield bond issuers to repay principal and interest,
resulting in a default or credit downgrade that may
substantially reduce the yield on, or value of, a fund's
investment.
Repurchase Agreements
Each fund (and the underlying funds in its portfolio) may,
to the extent permitted by its investment policies, enter
into repurchase agreements. A repurchase agreement consists
of the sale to a fund of a U.S. government security or other
debt obligation together with an agreement to have the
selling counterparty repurchase the security at a specified
future date and repurchase price. If a repurchase agreement
counterparty defaults on its repurchase obligation, a fund
may, under some circumstances, be limited or delayed in
disposing of the repurchase agreement collateral, which
could result in a loss to the fund.
Defensive Investing
For temporary defensive purposes under abnormal market
conditions, Kobren Growth Fund and Kobren Moderate Growth
Fund may each may hold or invest more than 35% of total
assets in cash, investment grade fixed income securities,
repurchase agreements and/or money market fund shares.
Kobren Conservative Allocation Fund may hold more than 35%
of total assets in these securities regardless of market
conditions.
Restricted
and Illiquid Securities
Each fund may invest up to 15% of its net assets in illiquid
securities, including certain restricted and private
placement securities. It may be difficult to dispose of
illiquid securities quickly or at a price that fully
reflects their fair value. Restricted securities that are
eligible for resale in reliance on Rule 144A under the
Securities Act of 1933 and commercial paper offered under
Section 4(2) of the Act are not subject to the funds' 15%
limit on illiquid investments, if they are determined to be
liquid.
An underlying fund whose shares are held by a Kobren Insight
fund is obligated to redeem these shares only in an amount
up to 1% of the underlying fund's outstanding securities
during any period of less than 30 days. Accordingly,
because the funds and their affiliates may together acquire
up to 3% of an underlying fund's shares, a fund that has
decided to sell its entire position in an underlying fund
may need up to 90 days to completely implement this
decision. In addition, a fund's holdings of underlying fund
shares representing more than 1% of the underlying fund's
outstanding securities may be subject to the 15% limitation
on illiquid investments. However, the funds have reserved
the right to pay redemption requests in portfolio securities
and therefore, these positions may be treated as liquid.
An underlying fund may elect to pay the proceeds of a
redemption by a Kobren Insight fund through a distribution
in kind of securities of portfolio securities, instead of
cash. If a fund receives securities that are not considered
by Insight Management to be desirable investments, the fund
will incur additional transaction costs in disposing of the
securities.
Foreign Investments
Each fund (and the underlying funds in its portfolio) may,
to the extent permitted by its investment policies, invest
in securities of foreign issuers. These investments may be
in the form of American Depositary Receipts ("ADRs") or
similar securities representing interests in an underlying
foreign security. ADRs are not necessarily denominated in
the same currency as the underlying foreign securities. If
an ADR is not sponsored by the issuer of the underlying
foreign security, the institution issuing the ADR may have
reduced access to information about the issuer.
Investments in foreign securities involve risks in addition
to those associated with investments in the securities of
U.S. issuers. These risks include less publicly-available
financial and other information about foreign companies;
less rigorous securities regulation; the potential
imposition of currency controls, foreign withholding and
other taxes; and war, expropriation or other adverse
governmental actions. Foreign equity markets may be less
liquid than United States markets and may be subject to
delays in the settlement of portfolio transactions.
Brokerage commissions and other transaction costs in foreign
markets tend to be higher than in the United States. The
value of foreign securities denominated in a foreign
currency will vary in accordance with changes in currency
exchange rates, which can be very volatile.
Mortgage-Backed,
Asset-Backed, Indexed and
Derivative Securities
Each fund (and the underlying funds in its portfolio) may
invest in mortgage-backed, asset-backed and indexed
securities. Some of these securities are considered to be
derivative securities. Mortgage-backed securities represent
participation interests in pools of adjustable and fixed-
rate mortgage loans. Mortgage-backed securities either may
be issued or guaranteed by agencies or instrumentalities of
the U.S. Government or may be privately issued. Unlike
conventional debt obligations, mortgage-backed securities
provide monthly payments derived from the monthly interest
and principal payments (including any prepayments) made by
the individual borrowers on the pooled mortgage loans.
A fund's investments in mortgage-backed securities may
include conventional mortgage pass through securities,
stripped mortgage-backed securities ("SMBS") and certain
classes of multiple class collateralized mortgage
obligations ("CMOs"). Examples of SMBS include interest
only ("IO") and principal only ("PO") securities. Senior
CMO classes typically have priority over less senior and
residual CMO classes as to the receipt of principal and/or
interest payments on the underlying mortgages. The CMO
classes in which the fund may invest include sequential and
parallel pay CMOs, including planned amortization class
securities ("PACs").
The principal and interest on asset-backed securities are
collateralized by pools of assets such as auto loans, credit
card receivables, leases, installment contracts and personal
property. Asset-backed securities generally are not
collateralized as securely as mortgage-backed securities.
A fund may invest in floating rate and other indexed
securities. The interest rate and/or the principal payable
at the maturity of an indexed security may change positively
or inversely in relation to one or more interest rates,
financial indices, currency rates or other reference prices.
In addition, changes in the amount payable on a leveraged
indexed security may be a multiple of changes in the
reference rate or price. Examples of indexed securities
include IOs, POs, inverse floaters, inverse IOs, super
floaters, capped floaters, range floaters, dual index or
yield curve floaters and Cost of Funds Index ("COFI")
floaters.
Mortgage-backed, asset-backed and indexed securities are
subject to different combinations of call (prepayment),
extension, interest-rate and other market risks. These
risks and the price volatility of a security are magnified
to the extent that a security has imbedded leverage. Under
adverse market conditions, any of these risks could lead to
a decline in the yield on or market value of these
securities. In addition, these securities can at times be
difficult to price accurately or to liquidate at a fair
price.
Conventional mortgage-backed securities and sequential pay
CMOs are subject to all of these risks, but are typically
not leveraged. PACs and other senior classes of sequential
and parallel pay CMOs usually involve less exposure to
prepayment, extension and interest-rate risk than other
mortgage-backed securities, provided that prepayment rates
stay within expected prepayment ranges or collars. Call or
prepayment risk is the risk primarily associated with
mortgage IOs and superfloaters. Mortgage POs, inverse IOs,
inverse floaters, capped floaters and COFI floaters are
especially susceptible to extension and interest rate risk.
Range floaters are subject to the risk that a designated
interest rate will float outside the specified interest rate
collar. Dual index floaters are subject to depreciation if
there is an unfavorable change in the spread between two
designated interest rates.
When-Issued and Forward
Commitment Transactions
The funds (and the underlying funds in their portfolios) may
purchase when-issued securities and enter into other forward
commitments to purchase or sell securities. The value of
securities purchased on a when-issued or forward commitment
basis may decline between the purchase date and the
settlement date.
Futures, Options, Swaps and
Currency Contracts
Each fund (and the underlying funds in its portfolio) may
enter into derivative contracts to hedge against
fluctuations in securities prices or, for non-hedging
purposes, as a substitute for the purchase or sale of
securities. These derivative contracts may include the
purchase or sale of futures contracts on securities, indices
or currencies; options on futures contracts; options on
securities, indices or currencies; interest rate and
currency swaps, caps, floors and collars; and forward
contracts to buy or sell foreign currencies.
All of the funds' transactions in derivative contracts
involve a risk of loss or depreciation due to unanticipated
adverse changes in securities prices, interest rates or
currency exchange rates. A fund incurs liability to a
counterparty in connection with transactions in futures
contracts, swaps and forward contracts and the selling of
options, caps, floors and collars. As a result, the loss on
these derivative contracts may exceed a fund's initial
investment. A fund may also lose the entire premium paid
for purchased options, caps, floors and collars that expire
before they can be profitably exercised by the fund. In
addition, the funds incur transaction costs in opening and
closing positions in derivative contracts.
Derivative contracts may sometimes increase or leverage a
fund's exposure to a particular market risk. Leverage
magnifies the price volatility of derivative contracts held
by a fund. A fund may cover, or partially offset, the
leverage inherent in derivative contracts by maintaining a
segregated account consisting of cash and liquid securities,
by holding offsetting portfolio securities or contracts or
by covering written options.
A fund's success in using derivative contracts to hedge
portfolio assets depends on the degree of price correlation
between the derivative contract and the hedged asset.
Imperfect correlation may be caused by several factors,
including temporary price disparities among the trading
markets for the derivative contract, the assets underlying
the derivative contract and the fund's portfolio assets.
During periods of extreme market volatility, a commodity or
options exchange may suspend or limit trading in an
exchange-traded derivative contract, which may make the
contract temporarily illiquid and difficult to price. Some
over-the-counter options may be illiquid, while others may
be determined to be liquid in accordance with procedures
established by the Trustees. The funds' ability to
terminate over-the-counter options, swaps, caps, floors,
collars and forward contracts may depend on the cooperation
of the counterparties to such contracts. For thinly traded
derivative contracts, the only source of price quotations
may be the selling dealer or counterparty. In addition,
over-the-counter derivative contracts involve a risk that
the counterparty will fail to perform its contractual
obligations.
Portfolio Securities Loans
Each fund (and the underlying funds in its portfolio) may
lend portfolio securities with a value equal to one-third of
its total assets. Each loan must be fully collateralized by
cash or other eligible assets. The funds may pay reasonable
fees in connection with securities loans. Insight
Management will evaluate the creditworthiness of prospective
institutional borrowers and monitor the adequacy of the
collateral to reduce the risk of default by borrowers from
the Kobren Insight funds.
Borrowing and Reverse
Repurchase Agreements
An underlying fund in a fund's portfolio may borrow money
from banks or through reverse repurchase agreements for
emergency and/or leverage purposes. Using the cash proceeds
of reverse repurchase agreements to finance the purchase of
additional investments is a form of leverage. Leverage
magnifies the sensitivity of a fund's net asset value to
changes in the market prices of the fund's portfolio
securities. However, each Kobren Insight fund will borrow
solely for temporary or emergency (and not for leverage)
purposes. The aggregate amount of such borrowings and
reverse repurchase agreements may not exceed one-third of
any fund's total assets.
Short-Term Trading
Each fund is actively managed, but is not expected to have a
portfolio turnover rate that exceeds 200%. A 100% annual
portfolio turnover rate would be achieved if each security
in a fund's portfolio (other than securities with less than
one year remaining to maturity) were replaced once during
the year. Trading may also increase transaction costs and
the realization of capital gains, distributions of which are
taxable to shareholders.
Investment Policies
and Restrictions
Except as otherwise stated in this prospectus or the funds'
statement of additional information, the funds' investment
objectives, policies and restrictions are not fundamental
and may be changed without shareholder approval. Each
Kobren Insight fund is diversified and therefore may not,
with respect to 75% of its total assets, (1) invest more
than 5% of its total assets in the securities of any one
issuer, other than U.S. government securities and other
mutual funds, or (2) acquire more than 10% of the
outstanding voting securities of any one issuer. No Kobren
Insight fund will concentrate (invest 25% or more of its
total assets) in the securities of issuers in any one
industry.
MANAGEMENT OF
THE FUNDS
Trustees
The funds are series of Kobren Insight Funds (the "Trust").
The Trustees of the Trust decide upon matters of general
policy and review the actions of Insight Management and
other service providers. The Trustees of the Trust are
identified in the statement of additional information.
Investment Adviser
Each fund has retained the services of Insight Management as
investment adviser. Insight Management provides investment
advice and portfolio management services to the funds.
Subject to the supervision of the Trustees, Insight
Management makes the funds' day-to-day investment decisions,
arranges for the execution of portfolio transactions and
generally manages the funds' investments.
Insight Management, a registered investment adviser, was
established in 1987. Although Insight Management has not
previously managed a mutual fund, it has extensive
experience in managing mutual fund portfolios for high net
worth individuals and corporations with minimum $250,000
account sizes. Insight Management currently manages over
1,000 client accounts with assets totaling approximately
$750 million. Insight Management has historically used
mutual funds, rather than individual securities, as the
primary investment vehicle for its client accounts. Eric M.
Kobren, the President and Director of Insight Management,
owns all of Insight Management's stock. Mr. Kobren is also
the sole shareholder of the Distributor, and principal
shareholder of Mutual Fund Investors Association, Inc., the
publisher of Fidelity Insight and FundsNet Insight reports
with approximately 120,000 paid subscribers.
Mr. Kobren is each fund's primary portfolio manager. Mr.
Kobren has been the president of Insight Management and of
the Distributor since 1987 and of Mutual Fund Investors
Association, Inc. since 1985. Mr. Kobren has been in the
investment business since 1976.
As compensation for the services rendered and related
expenses borne by Insight Management under its investment
advisory agreement with each fund, each fund has agreed to
pay to Insight Management a monthly fee at the annual rate,
as a percentage of that fund's average daily net assets,
shown below.
<TABLE>
<CAPTION>
ANNUAL RATES
<S> <C>
Name of Fund Annual Advisory Fee Rate
Kobren Growth Fund 0.75%
Kobren Moderate Growth Fund 0.75%
Kobren Conservative Allocation Fund 0.75%
</TABLE>
A Kobren Insight fund may invest in shares of an underlying
mutual fund that (1) makes payments of Rule 12b-1 revenues
with respect to shares held by the Kobren Insight fund or
(2) whose investment adviser is willing to share a portion
of the underlying fund's advisory fee attributable to
underlying fund shares held by the Kobren Insight fund. Any
Rule 12b-1 or revenue sharing payments made with respect to
shares of any underlying fund will be applied to the
advisory fees owed to Insight Management by the affected
Kobren Insight fund.
Expenses
Each fund is responsible for all expenses not expressly
assumed by Insight Management or the Administrator. These
include, among other things, organization expenses, legal
fees, audit and accounting expenses, insurance costs, the
compensation and expenses of the Trustees, the expenses of
printing and mailing reports, notices and proxy statements
to fund shareholders, registration fees under federal and
state securities laws, brokerage commissions, interest,
taxes and extraordinary expenses (such as for litigation).
Insight Management has agreed to reimburse each fund to the
extent necessary to maintain each fund's operating expenses
(excluding investment advisory fees, brokerage commissions,
taxes, interest and litigation, indemnification and other
extraordinary expenses) at 0.25% annually of the fund's
average daily net assets. Although this reimbursement
arrangement can be revoked at any time, Insight Management
currently plans to continue this arrangement through
December 31, 1997.
Administrator
First Data Investor Services Group, Inc. ("First Data")
serves as each fund's administrator, accounting agent and
transfer agent. As the funds' administrator, subject to the
oversight of the Trustees, First Data supervises each fund's
day-to-day operations, other than the management of the
fund's investments.
DETERMINATION
OF NET ASSET VALUE
Each fund computes the net asset value per share ("NAV") of
its shares at the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m. New York time) on each
weekday that is not a holiday listed in the statement of
additional information (a "business day"). If the New York
Stock Exchange closes early, the time of computing the NAV
and the deadlines for purchasing and redeeming shares will
be accelerated to the earlier closing time. The NAV of each
fund's shares is determined by subtracting from the value of
the fund's total assets the amount of the fund's liabilities
and dividing the remainder by the number of outstanding fund
shares. Exchange listed stocks are valued on the basis of
reported market prices or dealer quotations. Shares of
underlying funds are valued at their reported NAVs. All
other investments are valued at fair value, which may
include the use of a pricing service or matrix pricing.
Although the NAV will be calculated at the close of all
regular trading days, the NAV reported to Nasdaq for
distribution to news agencies will be delayed by one
business day.
HOW TO
PURCHASE SHARES
Shares of the funds are available to individuals,
institutions, companies and fiduciaries. Prospectuses,
sales material and applications can be obtained from the
Distributor or First Data at the address and telephone
number listed on page 14 of this prospectus. Shares of each
fund may be purchased without a sales charge at the NAV next
calculated after receipt of an order in proper form by First
Data.
HOW TO PURCHASE SHARES
Method of Purchase Purchase Procedures
By Check:
Initial Purchase: You may open an account and make an
initial investment in any fund by sending a check made
payable to Kobren Insight Funds and a completed account
application form to Kobren Insight Funds, P.O. Box 5146,
Westborough, MA 01581. An account application is included
with this prospectus.
Subsequent Purchases: Each additional request to purchase
shares by check must contain the account name and number to
permit proper crediting.
All Purchases: Checks should be made payable to Kobren
Insight Funds. If an order to purchase shares is cancelled
because your check does not clear, you will be responsible
for any resulting losses or fees incurred by the Trust, the
Distributor or First Data in the transaction.
Through Broker-Dealers: Contact your dealer to find out
about its procedures for processing orders to purchase fund
shares. Purchase orders received by dealers prior to 4:00
p.m. Eastern time on any business day, and transmitted to
First Data by 5:00 p.m. Eastern time on that day, receive
that day's net asset value. It is the responsibility of
dealers to transmit properly completed orders so that they
will be received by First Data by 5:00 p.m. Eastern time.
Dealers or other agents may charge you a fee for effecting
transactions.
By Wire:
Initial Purchases: You may purchase shares of the funds
by wire. Please call First Data at 800-895-9936 for
instructions. You should be prepared to give the name in
which the account will be opened, the address, telephone
number and taxpayer identification number for the account,
and the name of the bank that will wire the purchase amount.
For initial wire purchases, you must confirm the information
provided by telephone by mailing to First Data a completed
account application. If First Data does not receive timely
and complete account information, there may be a delay in
the purchase of fund shares and in the accrual of dividends
(if any).
Subsequent Purchases: Each additional wire purchase
request must contain your account name and number to permit
proper crediting.
All Purchases: Banks may impose a charge for sending a
wire. First Data does not currently charge any fee for
handling wired funds, but reserves the right to charge
shareholders for this service in the future.
Minimum
Investment Amounts
The minimum initial investment in a fund is $25,000, but the
officers of the Trust may, in their sole discretion, waive
or reduce the minimum initial investment amount for certain
investors and financial intermediaries. The minimum initial
investment is waived for purchases by Trustees, directors,
officers and employees of the Trust and Insight Management,
private clients of Insight Management and members of exempt
persons' immediate families. The minimum subsequent
investment is $1,000. The minimum initial investment for
purchases of fund shares through the following networks is
$2,500: Charles Schwab Mutual Fund Marketplace, Fidelity
FundsNetwork and Jack White Mutual Fund Network.
Other Information
About Purchasing Shares
Certificates representing shares will not be issued. The
Trust and the Distributor reserve the right to limit the
amount of investments and to reject any order to purchase
fund shares.
HOW TO
REDEEM SHARES
Shares of the funds may be redeemed on each business day.
You will receive the NAV next determined after the receipt
by First Data of a redemption request in the proper form.
Payment is ordinarily sent by mail or by wire within three
business days after the effective date of the redemption.
However, the payment of redemption proceeds for shares
purchased by check will be made only after the check has
cleared, which may take up to fifteen days from the purchase
date. The Trust reserves the right to suspend the right of
redemption or to postpone the date of payment for more than
three business days under unusual circumstances as
determined by the SEC. In addition, the Trust may redeem
shares involuntarily (1) as described below under
"Redemptions of Sub-Minimum Accounts" or (2) if the
shareholder's exchange privileges have been cancelled for
the reasons described under "Exchange Privilege" below.
HOW TO REDEEM SHARES
Method of Redemption Redemption Procedures
By Mail: Shares of the funds may be redeemed by sending a
written redemption request to Kobren Insight Funds, P.O. Box
5146, Westborough, MA 01581. The request must state the
number of shares or the dollar amount to be redeemed and the
applicable account number. The request must be signed
exactly as your name appears on the Trust's account records.
If the shares to be redeemed have a value of $50,000 or
more, your signature must be guaranteed by one of the
eligible guarantor institutions listed in "Signature
Guarantees" on page 11.
Written redemption requests may direct that the proceeds be
deposited directly in the bank account or brokerage account
designated on an investor's account application for
telephone redemptions.
By Telephone: To redeem by telephone, call First Data
toll-free at 800-895-9936. The proceeds will be sent by
mail to the address designated on your account or wired
directly to your existing account in any commercial bank or
brokerage firm in the United States, as designated on the
application.
The telephone redemption privilege is automatically
available to you. You may change the bank or brokerage
account designated under this procedure at any time by
sending to First Data a written request or completed
supplemental telephone redemption authorization form
(available from First Data) that has been signature
guaranteed by any eligible guarantor institution. Further
documentation will be required to change the designated
account if shares are held by a company, fiduciary or other
organization.
Through Broker-Dealers: Contact your dealer to find out
about its procedures for processing orders to redeem fund
shares. Redemption orders received by dealers prior to 4:00
p.m. Eastern time on any business day, and transmitted to
First Data by 5:00 p.m. Eastern time on that day, receive
that day's NAV. It is the responsibility of broker-dealers
to promptly transmit wire redemption orders. Broker-dealers
may impose a fee for this service.
Payment of
Redemption Proceeds
by Wire or ACH Transfer
For each payment of redemption proceeds by wire, the funds'
custodian will charge a wire fee of $10.00. The funds and
the custodian reserve the right to change the processing
fee. Your bank or brokerage firm may also impose a charge
for processing the wire. In the event that the wire
transfer of redemption proceeds is impossible or
impracticable, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be
deposited directly in a shareholder's account with a
commercial bank or other depository institution by way of an
Automated Clearing House (ACH) transaction. There is
currently no charge for ACH transactions. Contact First
Data for more information about ACH transactions.
Signature Guarantees
Written requests to redeem shares above a specified amount
or to change account information for telephone redemptions
should be accompanied by a signature guarantee. The
institutions from whom the funds will accept a signature
guarantee include banks, brokers and dealers, credit unions,
national securities exchanges, registered securities
associations, clearing agencies and savings associations.
In addition, shareholders that are corporations,
partnerships, trusts, estates or other associations may be
required to furnish appropriate evidence that a redemption
request has been properly authorized.
Responsibility
for Unauthorized
Telephone Instructions
Neither the Trust, the Distributor, First Data nor their
respective affiliates will be liable for complying with
telephone instructions which they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting
on such telephone instructions. The shareholder will bear
the risk of any such loss. The Trust and First Data will
employ reasonable procedures to determine that telephone
instructions are genuine. If the Trust or First Data
employs such procedures, it will not be liable for losses
due to unauthorized or fraudulent instructions. Such
procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone
instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
Redemptions of
Sub-Minimum Accounts
The Trust reserves the right to require you to close your
account if at any time the value of the shares is less than
$5,000 (based on actual amounts invested, without regard to
market fluctuations) or such other minimum amount as the
Trustees may establish. After notification of the Trust's
intention to close your account, you will be given sixty
days to increase the value of your account to the minimum
amount.
EXCHANGE PRIVILEGE
Shares of each fund may be exchanged for shares of the other
funds at net asset value. You may request an exchange by
sending a written request to First Data. The request must
be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by
telephone. If you are unable to execute a transaction by
telephone (for example during times of unusual market
activity) you should consider requesting the exchange by
mail. An exchange will be effected at the next determined
NAV of each fund after receipt of a request by First Data.
Exchanges may only be made for shares of funds then offered
for sale in your state of residence and are subject to the
applicable minimum initial investment requirements of the
fund whose shares will be received in the exchange. To
protect the interests of other shareholders of the fund, a
fund may cancel the exchange privileges of any persons that,
in the opinion of the fund, are using market timing
strategies or making more than four exchanges per owner or
controlling person per calendar year. The exchange
privilege may be modified or terminated by the Trustees upon
60 days' prior notice to shareholders. An exchange involves
a sale of fund shares, which may cause you to recognize a
gain or loss for tax purposes.
SHAREHOLDER SERVICES
Call First Data toll-free at 800-895-9936 for additional
information about the shareholder services described below.
Systematic Withdrawal Plan
If the shares in your account have a value of at least
$25,000, you may elect to receive, or may designate another
person to receive, monthly, quarterly, or annual payments in
a specified amount. There is no charge for this service.
Automatic Investment Plan
You may make automatic monthly or quarterly investments in
the funds from your bank, savings and loan or other
depository institution account. The minimum initial and
subsequent investments must be $25,000 and $500 under the
plan. The Trust pays the costs associated with these
transfers, but reserves the right to make reasonable charges
for this service. A depository institution may impose its
own charge for debiting your account, which would reduce the
return from an investment in a fund.
Tax-Deferred
Retirement Plans
Shares of the funds are available in connection with the
following tax-deferred retirement plans: Keogh Plans for
self-employed individuals; SEP and SARSEP plans; individual
retirement account (IRA) plans for individuals and their
non-employed spouses; and qualified pension and profit-
sharing plans for employees, including 401(k) plans and
403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations. Contact the Kobren Insight funds for further
information and the necessary forms.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
Dividends and Distributions
The net investment income and realized net capital gains, if
any, of Kobren Growth Fund, Kobren Moderate Growth Fund and
Kobren Conservative Allocation Fund will ordinarily be
declared and paid in accordance with the schedule below.
<TABLE>
<CAPTION>
DIVIDENDS & DISTRIBUTIONS
<S> <C>
Type of Distribution and Name of Fund Declared and Paid
Dividends from net investment income
Kobren Growth Fund Declared and paid annually
Kobren Moderate Growth Fund Declared and paid annually
Kobren Conservative Allocation Fund Declared and paid
quarterly
Distributions from realized net capital gains
All Funds Declared and paid annually
</TABLE>
Dividends and distributions will be payable to shareholders
of record on the record date. If investors purchase shares
shortly before the record date of a dividend or
distribution, they may be subject to adverse tax
consequences as described under "Taxes."
A fund's dividends and distributions are paid in additional
shares of the same fund unless the shareholder elects to
have them paid in cash. Cash dividends and distributions
are paid by a check and mailed to the shareholder's address
of record. The tax treatment of dividends and distributions
is the same whether they are paid in shares or cash.
Taxes
Each fund is treated as a separate entity for tax purposes.
Each fund intends to elect to be treated and qualify as a
regulated investment company under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). To qualify as
such, each fund must satisfy certain requirements relating
to the sources of its income, diversification of its assets
and distribution of its income to shareholders. As a
regulated investment company, each fund will not be subject
to federal income or excise tax on any net investment income
and net realized capital gains that are distributed to
shareholders in accordance with certain timing requirements
of the Code.
Dividends paid by a fund from net investment income, certain
net foreign currency gains, and the excess of short-term
capital gain over net long-term capital loss will be taxable
to its shareholders as ordinary income. Distributions paid
by a fund from the excess of net long-term capital gain over
net short-term capital loss and designated as "capital gain
dividends", will be taxable as long-term capital gains
regardless of how long shareholders have held their shares.
These tax consequences will apply whether distributions are
received in additional shares or in cash. The dividends
paid by each fund to its corporate shareholders that are
attributable to qualifying dividends received by the fund
from U.S. domestic corporations may be eligible, in the
hands of these corporate shareholders, for the corporate
dividends-received deduction, subject to certain holding
period requirements and debt financing limitations under the
Code. Shareholders will be informed annually about the
amount and character, for federal income tax purposes, of
distributions received from the funds.
Investors should consider the adverse tax implications of
buying fund shares immediately before a distribution.
Investors who purchase shares shortly before the record date
for a distribution will pay a per share price that includes
the value of the anticipated distribution and will be taxed
on the distribution even though the distribution represents
a return of a portion of the purchase price.
Redemptions of shares, whether for cash or in-kind, are
taxable events on which a shareholder may recognize a gain
or loss. Individuals and certain other shareholders may be
subject to 31% backup withholding of federal income tax on
distributions and redemptions (including exchanges) if they
fail to furnish their correct taxpayer identification number
and certain certifications or if they are otherwise subject
to backup withholding.
In addition to federal taxes, a shareholder may be subject
to state, local or other taxes on distributions received
from the funds, redemptions or exchanges of fund shares, or
the value of their investment in a fund. Shareholders are
urged to consult their own tax advisers concerning specific
questions about federal, state, local or other taxes.
ADDITIONAL
INFORMATION
Shareholder Reports
and Confirmations
Each fund sends to its shareholder annual and semiannual
reports. The financial statements appearing in annual
reports are audited by independent accountants.
Shareholders will also be sent confirmations of each
transaction and quarterly statements reflecting all account
activity.
Performance Advertising
Each fund may advertise historical performance information
and compare its performance to other investments or relevant
indexes. An advertisement may also include data supplied by
Lipper Analytical Services, Inc., Micropal Inc., Morningstar
Inc., Ibbotson Associates and other industry publications or
services.
The funds may advertise average annual total return and
other forms of total return data. Average annual total
return is determined by computing the average annual
percentage change in value of $1,000 invested at NAV for
specified periods ending with the most recent calendar
quarter. The total return calculation assumes a complete
redemption of the investment at the end of the relevant
period. Each fund may also advertise total return on a
cumulative, average, year-by-year or other basis for
specified periods. The investment results of a fund will
fluctuate over time and should not be considered a
prediction of the fund's performance in the future.
In addition, each fund may advertise its yield. Yield
reflects a fund's rate of income on portfolio investments as
a percentage of its NAV. The yield on fund shares is
computed by annualizing the result of dividing the net
investment income per share over a 30 day period by the NAV
on the last day of that period. Yield is calculated by
accounting methods that are standardized for all stock and
bond funds and differ from the methods used for other
accounting purposes. Therefore, the yield on fund shares
may not equal the income paid on these shares or the income
reported in a fund's financial statements.
Organization
The Trust was organized on September 13, 1996 as a
Massachusetts business trust. The Trust currently has three
series of shares of a single class, which are the funds and
shares offered by this prospectus. The Trustees reserve the
right to authorize and issue additional series and classes
of shares.
Shareholders of each fund are entitled to one full or
fractional vote for each share. There is no cumulative
voting and shares have no preemption or conversion rights.
The Trust does not intend to hold annual meetings of
shareholders. The Trustees will call special meetings of
shareholders to the extent required by the Trust's
Declaration of Trust or the Investment Company Act of 1940
(the "1940 Act"). The 1940 Act requires the Trustees, under
certain circumstances, to call a meeting to allow
shareholders to vote on the removal of a Trustee and to
assist shareholders in communicating with each other.
KOBREN INSIGHT FUNDS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
Prospectus
November 15, 1996
INVESTMENT ADVISER: TRANSFER AGENT:
Insight Management, Inc. First Data Investor
20 William Street, Suite 310 Services Group, Inc.
P.O. Box 9135 4400 Computer Drive
Wellesley Hills, MA 02181 Westborough, MA 01581
Toll-free: 1-800-566-4274 Toll-free: 1-800-895-
9936
ADMINISTRATOR: CUSTODIAN:
First Data Investor Boston Safe Deposit
Services Group, Inc. and Trust Company
One Exchange Place One Boston Place
Boston, MA 02109-2873 Boston, MA 02108
LEGAL COUNSEL:
Hale and Dorr
60 State Street
Boston, MA 02109
PRINCIPAL DISTRIBUTOR:
Insight Brokerage Services, Inc.
INDEPENDENT ACCOUNTANTS: 20 William Street, Suite 310
Coopers & Lybrand L.L.P. P.O. Box 9135
One Post Office Square Wellesley Hills, MA 02181
Boston, MA 02109 Toll-free: 1-800-566-4274
November 15, 1996
as supplemented
December 16, 1996
KOBREN INSIGHT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This statement of additional information is not a
prospectus, but expands upon and supplements the information
contained in the prospectus of Kobren Insight Funds (the
"Trust"), dated November 15, 1996, as supplemented from time
to time. The statement of additional information should be
read in conjunction with the prospectus. The Trust's
prospectus may be obtained by writing to the Trust at P.O.
Box 5146, Westborough, Massachusetts 01581 or by telephoning
the Trust toll free at 800-895-9936. Capitalized terms not
otherwise defined herein have the same meaning as in the
prospectus.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PAGE
I. INVESTMENT OBJECTIVES AND POLICIES 2
II. INVESTMENT RESTRICTIONS 15
III. MANAGEMENT OF THE TRUST AND THE FUNDS
A. Trustees and Officers 17
B. Investment Adviser 20
C. Distributor 21
D. Administrator, Transfer Agent and Dividend Paying
Agent 21
IV. PURCHASE, REDEMPTION AND DETERMINATION 22
OF NET ASSET VALUE
V. SPECIAL REDEMPTIONS 23
VI. PORTFOLIO TRANSACTIONS 23
VII. PERFORMANCE INFORMATION
A. Total Return 24
B. Non-Standardized Total Return 25
C. Other Information Concerning Fund Performance
25
VIII. DIVIDENDS, DISTRIBUTIONS AND TAXES 31
IX. CUSTODIAN, COUNSEL AND INDEPENDENT ACCOUNTANTS 36
X. DESCRIPTION OF THE TRUST 36
XI. ADDITIONAL INFORMATION 37
XII. FINANCIAL STATEMENTS 37
APPENDIX A-1
</TABLE>
I. INVESTMENT OBJECTIVES AND POLICIES
Kobren Insight Funds is a no-load open-end,
diversified investment company, registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of three separate series, each
with different investment objectives (each, a "fund" and
collectively, the "funds"). The funds seek to achieve their
investment objectives by investing primarily in shares of
other investment companies ("underlying funds" or "mutual
funds"). As of the date of this statement of additional
information, the Trust's series are:
KOBREN GROWTH FUND, which seeks long-term growth of
capital without regard to current income and with a
volatility level approximating that of the S&P 500 Index;
KOBREN MODERATE GROWTH FUND, which seeks long-term
growth of capital without regard to current income and with
a volatility level below that of the S&P 500 Index; and
KOBREN CONSERVATIVE ALLOCATION FUND, which seeks
enough long-term growth of capital to maintain purchasing
power in the face of inflation (as measured by the Consumer
Price Index) with a volatility level below that of the S&P
500 Index.
Each fund will concentrate its investments in the
shares of mutual funds. Mutual funds pool the investments
of many investors and use professional management to select
and purchase securities of different issuers for their
portfolios. Some mutual funds invest in particular types of
securities (i.e., equity or debt), some concentrate in
certain industries, and others may invest in a variety of
securities to achieve a particular type of return or tax
result. Some of the underlying funds are, like the funds,
"open-end" funds and, as such, stand ready to redeem their
shares. Any investment in a mutual fund involves risk. Even
though the funds may invest in a number of mutual funds,
this investment strategy cannot eliminate investment risk.
Investing in mutual funds through a fund involves additional
and duplicative expenses and certain tax results that would
not be present if an investor were to make a direct
investment in the underlying funds. See "Expense
Information" and "Dividends, Distributions and Taxes" in the
prospectus. A fund, together with the other funds and any
"affiliated persons" (as such term is defined in the 1940
Act) may purchase only up to 3% of the total outstanding
securities of an underlying mutual fund. Accordingly, when
affiliated persons of Insight Management, Inc. ("Insight
Management" or the "Adviser") hold shares of any of the
underlying funds, each fund's ability to invest fully in
shares of such mutual funds is restricted, and the Adviser
must then, in some instances, select alternative investments
for the fund that would not have been its first investment
choice.
The 1940 Act also provides that a mutual fund whose
shares are purchased by a fund is obliged to redeem shares
held by the fund only in an amount up to 1% of the
underlying mutual fund's outstanding securities during any
period of less than 30 days. Accordingly, because the funds
and their affiliates may together acquire up to 3% of an
underlying fund's shares, a fund that has decided to sell
its entire position in an underlying fund may need up to 90
days to completely implement this decision. In addition,
shares held by a fund in excess of 1% of an underlying
mutual fund's outstanding securities may be considered not
readily marketable securities. Together with other illiquid
securities, these mutual funds may not exceed 15% of net
assets of each Kobren Insight fund. However, since the
funds have reserved the right to pay redemption requests in
portfolio securities, these positions may be treated as
liquid. These limitations are not fundamental and may
therefore be changed by the Board of Trustees of the Trust
without shareholder approval. Under certain circumstances
an underlying fund may determine to make payment of a
redemption by a fund (wholly or in part) by a distribution
in kind of securities from its portfolio, instead of in
cash. As a result, a fund may hold securities distributed
by an underlying fund until such time as Insight Management
determines it appropriate to dispose of such securities.
Such disposition will impose additional costs on the fund.
In the case of an issuer that concentrates in a
particular industry or industry group, events may occur that
impact that industry or industry group more significantly
than the stock market as a whole. Accordingly, an
investment in an investment company that concentrates can
normally be expected to have greater fluctuations in value
than an investment in a fund that includes a broader range
of investments. To the extent a fund invests in investment
companies that do not have a policy of concentration, the
impact of conditions affecting an industry or industry group
will be decreased.
Investment decisions by the investment advisers of the
underlying funds are made independently of the funds and the
Adviser. At any particular time, one underlying fund may be
purchasing shares of an issuer whose shares are being sold
by another underlying fund. As a result, a fund would incur
indirectly certain transaction costs without accomplishing
any investment purpose. Each fund limits its investments in
underlying funds to mutual funds whose shares a fund may
purchase without the imposition of an initial sales load.
The underlying funds may incur distribution expenses in the
form of Rule 12b-1 fees. An investor could invest directly
in the underlying funds. By investing in mutual funds
indirectly through the funds, the investor bears not only
his or her proportionate share of the expenses of the funds
(including operating costs and investment advisory and
administrative fees) but also, indirectly, similar expenses
of the underlying funds. An investor may indirectly bear
expenses paid by underlying funds related to the
distribution of such mutual funds' shares. As a result of
the funds' policies of investing in other mutual funds, an
investor may receive taxable capital gains distributions to
a greater extent than would be the case if he or she
invested directly in the underlying funds. See "Dividends,
Distributions and Taxes" below.
The types of securities that may be acquired by the
funds and the underlying funds and the various investment
techniques which either may employ, including the risks
associated with these investments, are described herein.
FOREIGN INVESTMENTS
Foreign Securities. A fund or an underlying fund may invest
a portion of its assets in securities of foreign issuers.
Investments in foreign securities involve special risks and
considerations that are not present when a fund invests in
domestic securities.
Exchange Rates. Since a fund or an underlying fund may
purchase securities denominated in foreign currencies,
changes in foreign currency exchange rates will affect the
value of the assets from the perspective of U.S. investors.
Changes in foreign currency exchange rates may also affect
the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income
and gains, if any, to be distributed to the investor by a
mutual fund. The rate of exchange between the U.S. dollar
and other currencies is determined by the forces of supply
and demand in foreign exchange markets. These forces are
affected by the international balance of payments and other
economic and financial conditions, government intervention,
speculation and other factors. A fund or an underlying fund
may seek to protect itself against the adverse effects of
currency exchange rate fluctuations by entering into
currency-forward, futures, options or swaps contracts.
Hedging transactions will not, however, always be fully
effective in protecting against adverse exchange rate
fluctuations. Furthermore, hedging transactions involve
transaction costs and the risk that the fund or the
underlying fund will lose money, either because exchange
rates move in an unexpected direction, because another party
to a hedging contract defaults, or for other reasons.
Exchange Controls. The value of foreign investments and the
investment income derived from them may also be affected
(either favorably or unfavorably) by exchange control
regulations. Although it is expected that a fund or an
underlying fund will invest only in securities denominated
in foreign currencies that are fully exchangeable into U.S.
dollars without legal restriction at the time of investment,
there is no assurance that currency controls will not be
imposed after the time of investment. In addition, the
value of foreign fixed-income investments will fluctuate in
response to changes in U.S. and foreign interest rates.
Limitations of Foreign Markets. There is often less
information publicly available about a foreign issuer than
about a U.S. issuer. Foreign issuers are not generally
subject to accounting, auditing, and financial reporting
standards and practices comparable to those in the United
States. The securities of some foreign issuers are less
liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions,
custodial expenses, and other fees are also generally higher
than for securities traded in the United States. Foreign
settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of
securities or in the recovery of a fund's assets held
abroad) and expenses not present in the settlement of
domestic investments. A delay in settlement could hinder
the ability of a fund or an underlying fund to take
advantage of changing market conditions, with a possible
adverse effect on net asset value. There may also be
difficulties in enforcing legal rights outside the United
States.
Foreign Laws, Regulations and Economies. There may be a
possibility of nationalization or expropriation of assets,
imposition of currency exchange controls, confiscatory
taxation, political or financial instability, and diplomatic
developments that could affect the value of a fund's or an
underlying fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with
respect to investments in the United States or in other
foreign countries. The laws of some foreign countries may
limit a fund or an underlying fund's ability to invest in
securities of certain issuers located in those countries.
Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as
growth or gross national product, inflation rate, capital
reinvestment, resource self-sufficiency and balance of
payment positions.
Foreign Tax Considerations. Income (possibly including, in
some cases, capital gains) received by a fund or an
underlying fund from sources within foreign countries may be
reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and
the United States may reduce or eliminate such taxes in some
cases. Any such taxes paid by a fund will reduce the net
income of the fund available for distribution. Special tax
considerations apply to foreign securities.
Emerging Markets. Risks may be intensified in the case of
investments by a fund or an underlying fund in emerging
markets or countries with limited or developing capital
markets. Security prices in emerging markets can be
significantly more volatile than in more developed nations,
reflecting the greater uncertainties of investing in less
established markets and economies. In particular, countries
with emerging markets may have relatively unstable
governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less
protection of property rights than more developed countries.
The economies of countries with emerging markets may be
predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions,
and may suffer from extreme and volatile debt or inflation
rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible
at times. Securities of issuers located in countries with
emerging markets may have limited marketability and may be
subject to more abrupt or erratic price movements. Debt
obligations of developing countries may involve a high
degree of risk, and may be in default or present the risk of
default. Governmental entities responsible for repayment of
the debt may be unwilling to repay principal and interest
when due, and may require renegotiation or rescheduling of
debt payments. In addition, prospects for repayment of
principal and interest may depend on political as well as
economic factors.
Foreign Currency Transactions. A fund or an underlying fund
may enter into forward contracts to purchase or sell an
agreed-upon amount of a specific currency at a future date
that may be any fixed number of days from the date of the
contract agreed upon by the parties at a price set at the
time of the contract. Under such an arrangement, a fund
would, at the time it enters into a contract to acquire a
foreign security for a specified amount of currency,
purchase with U.S. dollars the required amount of foreign
currency for delivery at the settlement date of the
purchase; the fund would enter into similar forward currency
transactions in connection with the sale of foreign
securities. The effect of such transactions would be to fix
a U.S. dollar price for the security to protect against a
possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the particular
foreign currency during the period between the date the
security is purchased or sold and the date on which payment
is made or received (usually 3 to 14 days). These contracts
are traded in the interbank market between currency traders
(usually large commercial banks) and their customers. A
forward contract usually has no deposit requirement and no
commissions are charged for trades. While forward contracts
tend to minimize the risk of loss due to a decline in the
value of the currency involved, they also tend to limit any
potential gain that might result if the value of such
currency were to increase during the contract period.
Calculation of Net Asset Value. The funds and the
underlying funds will generally calculate their net asset
values and complete orders to purchase, exchange or redeem
shares only on a Monday through Friday basis, excluding
holidays on which the New York Stock Exchange is closed (see
"Purchase, Redemption and Determination of Net Asset Value"
below). Foreign securities in which the funds or the
underlying funds may invest may be listed primarily on
foreign stock exchanges that may trade on other days (i.e.,
Saturday). Accordingly, the net asset value of a fund's or
an underlying fund's portfolio may be significantly affected
by such trading on days when Insight Management does not
have access to the underlying funds and an investor does not
have access to the funds.
Portfolio Securities Loans. A fund or an underlying fund
may lend its portfolio securities as long as: (1) the loan
is continuously secured by collateral consisting of U.S.
government securities or cash or cash equivalents maintained
on a daily mark-to-market basis in an amount at least equal
to the current market value of the securities loaned; (2)
the fund or the underlying fund may at any time call the
loan and obtain the securities loaned; (3) the fund or the
underlying fund will receive any interest or dividends paid
on the loaned securities; and (4) the aggregate market value
of the securities loaned will not at any time exceed one-
third of the total assets of the fund or the underlying
fund. Lending portfolio securities involves risk of delay
in the recovery of the loaned securities and in some cases,
the loss of rights in the collateral if the borrower fails.
Short Sales. A fund or an underlying fund may sell
securities short. In a short sale the fund sells stock it
does not own and makes delivery with securities "borrowed"
from a broker. The fund then becomes obligated to replace
the security borrowed by purchasing it at the market-price
at the time of replacement. This price may be more or less
than the price at which the security was sold by the fund.
Until the security is replaced, the fund is obligated to pay
to the lender any dividends or interest accruing during the
period of the loan. In order to borrow the security, the
fund may be required to pay a premium that would increase
the cost of the security sold. The proceeds of the short
sale will be retained by the broker, to the extent necessary
to meet margin requirements, until the short position is
closed out.
When it engages in short sales, a fund or an
underlying fund must also deposit in a segregated account an
amount of cash or U.S. government securities equal to the
difference between (1) the market value of the securities
sold short at the time they were sold short and (2) the
value of the collateral deposited with the broker in
connection with the short sale (not including the proceeds
from the short sale). While the short position is open, the
fund must maintain daily the segregated account at such a
level that (1) the amount deposited in the account plus the
amount deposited with the broker as collateral equals the
current market value of the securities sold short, and (2)
the amount deposited in it plus the amount deposited with
the broker as collateral is not less than the market value
of the securities at the time they were sold short.
Depending upon market conditions, up to 80% of the value of
a fund's net assets may be deposited as collateral for the
obligation to replace securities borrowed to effect short
sales and allocated to a segregated account in connection
with short sales.
A fund will incur a loss as a result of a short sale
if the price of the security increases between the date of
the short sale and the date on which the fund replaces the
borrowed security. The fund will realize a gain if the
security declines in price between such dates. The amount
of any gain will be decreased and the amount of any loss
increased by the amount of any premium, dividends or
interest the fund may be required to pay in connection with
a short sale.
Short Sales "Against the Box". A short sale is "against the
box" if at all times when the short position is open the
fund or an underlying fund owns an equal amount of the
securities or securities convertible into, or exchangeable
without further consideration for, securities of the same
issue as the securities sold short. Such a transaction
serves to defer a gain or loss for federal income tax
purposes.
Industry Concentration. An underlying fund may concentrate
its investments within one industry. Since the investment
alternatives within an industry are limited, the value of
the shares of such a fund may be subject to greater market
fluctuation than an investment in a fund that invests in a
broader range of securities.
Master Demand Notes. An underlying fund (particularly an
underlying money market fund) may invest up to 100% of its
assets in master demand notes. These are unsecured
obligations of U.S. corporations redeemable upon notice that
permit investment by a mutual fund of fluctuating amounts at
varying rates of interest pursuant to direct arrangements
between the mutual fund and the issuing corporation.
Because master demand notes are direct arrangements between
the mutual fund and the issuing corporation, there is no
secondary market for the notes. The notes are, however,
redeemable at face value plus accrued interest at any time.
Options. A fund or an underlying fund may write (sell)
listed call options ("calls") if the calls are covered
through the life of the option. A call is covered if the
fund owns the optioned securities. When a fund writes a
call, it receives a premium and gives the purchaser the
right to buy the underlying security at any time during the
call period (usually not more than nine months in the case
of common stock) at a fixed exercise price regardless of
market price changes during the call period. If the call is
exercised, the fund will forgo any gain from an increase in
the market price of the underlying security over the
exercise price.
A fund or an underlying fund may purchase a call on
securities to enhance total return or to effect a "closing
purchase transaction." This is the purchase of a call
covering the same underlying security and having the same
exercise price and expiration date as a call previously
written by the fund on which it wishes to terminate its
obligation. If the fund is unable to effect a closing
purchase transaction, it will not be able to sell the
underlying security until the call previously written by the
fund expires (or until the call is exercised and the fund
delivers the underlying security).
A fund or an underlying fund may write and purchase
put options ("puts"). When a fund writes a put, it receives
a premium and gives the purchaser of the put the right to
sell the underlying security to the fund at the exercise
price at any time during the option period. When a fund
purchases a put, it pays a premium in return for the right
to sell the underlying security at the exercise price at any
time during the option period. A fund or an underlying fund
also may purchase stock index puts, which differ from puts
on individual securities in that they are settled in cash
based upon values of the securities in the underlying index
rather than by delivery of the underlying securities.
Purchase of a stock index put is designed to protect against
a decline in the value of the portfolio generally rather
than an individual security in the portfolio. If any put is
not exercised or sold, it will become worthless on its
expiration date.
A mutual fund's option positions may be closed out
only on an exchange which provides a secondary market for
options of the same series, but there can be no assurance
that a liquid secondary market will exist at any given time
for any particular option. It is impossible to predict to
what extent liquid markets will develop or continue.
A custodian, or a securities depository acting for it,
generally acts as escrow agent for the securities upon which
the fund has written puts or calls, or as to other
securities acceptable for such escrow so that no margin
deposit is required of the fund. Until the underlying
securities are released from escrow, they cannot be sold by
the fund.
In the event of a shortage of the underlying
securities deliverable in the exercise of an option, the
Options Clearing Corporation has the authority to permit
other generally comparable securities to be delivered in
fulfillment of option exercise obligations. If the Options
Clearing Corporation exercises its discretionary authority
to allow such other securities to be delivered, it may also
adjust the exercise prices of the affected options by
setting different prices at which otherwise ineligible
securities may be delivered. As an alternative to
permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement
procedures.
Options Trading Markets. Options in which the funds or the
underlying funds will invest are generally listed on
exchanges. Exchanges on which such options currently are
traded are the Chicago Board Options Exchange and the
American, New York, Pacific, and Philadelphia Stock
Exchanges. Options on some securities may not, however, be
listed on any exchange, but may be traded in the over-the-
counter market. Options traded in the over-the-counter
market involve the additional risk that securities dealers
participating in such transactions would fail to meet their
obligations to the fund. The use of options traded in the
over-the-counter market may be subject to limitations
imposed by certain state securities authorities. In
addition to the limits on the use of options discussed
herein, a mutual fund is subject to the investment
restrictions described in its prospectus and the statement
of additional information.
The staff of the Securities and Exchange Commission
currently takes the position that the premiums that a mutual
fund pays for the purchase of unlisted options, and the
value of securities used to cover unlisted options written
by the fund, are considered to be invested in illiquid
securities or assets for the purpose of calculating whether
a mutual fund is in compliance with its limitation on
illiquid investments.
Futures Contracts. A fund or an underlying fund may enter
into futures contracts for the purchase or sale of debt
securities and stock indexes. A futures contract is an
agreement between two parties to buy and sell a security or
an index for a set price on a future date. Futures
contracts are traded on designated "contract markets" which,
through their clearing corporations, guarantee performance
of the contracts.
A financial futures contract sale creates an
obligation by the seller to deliver the type of financial
instrument called for in the contract in a specified
delivery month for a stated price. A financial futures
contract purchase creates an obligation by the purchaser to
take delivery of the type of financial instrument called for
in the contract in a specified delivery month at a stated
price. The specific instruments delivered or taken,
respectively, at settlement date are not determined until on
or near such date. The determination is made in accordance
with the rules of the exchange on which the futures contract
sale or purchase was made. Futures contracts are traded in
the United States only on commodity exchanges or boards of
trade (known as "contract markets") approved for such
trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm that is a member of the relevant
contract market.
Although futures contracts by their terms call for
actual delivery or acceptance of commodities or securities,
in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by
purchasing a futures contract for the same aggregate amount
of the specific type of financial instrument or commodity
with the same delivery date. If the price of the initial
sale of the futures contract exceeds the price of the
offsetting purchase, the seller is paid the difference and
realizes a gain. On the other hand, if the price of the
offsetting purchase exceeds the price of the initial sale,
the seller realizes a loss. The closing out of a futures
contract purchase is effected by the purchaser's entering
into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a gain,
and if the initial purchase price exceeds the offsetting
sale price, the purchaser realizes a loss.
A fund or an underlying fund may sell financial
futures contracts in anticipation of an increase in the
general level of interest rates. Generally, as interest
rates rise, the market value of the securities held by a
fund will fall, thus reducing its net asset value. This
interest rate risk may be reduced without the use of futures
as a hedge by selling such securities and either reinvesting
the proceeds in securities with shorter maturities or by
holding assets in cash. This strategy, however, entails
increased transaction costs in the form of dealer spreads
and brokerage commissions and would typically reduce the
fund's average yield as a result of the shortening of
maturities.
The sale of financial futures contracts serves as a
means of hedging against rising interest rates. As interest
rates increase, the value of a fund's short position in the
futures contracts will also tend to increase, thus
offsetting all or a portion of the depreciation in the
market value of the fund's investments being hedged. While
a fund will incur commission expenses in selling and closing
out futures positions (by taking an opposite position in the
futures contract), commissions on futures transactions tend
to be lower than transaction costs incurred in the purchase
and sale of portfolio securities.
A fund or an underlying fund may purchase interest
rate futures contracts in anticipation of a decline in
interest rates when it is not fully invested. As such
purchases are made, a fund would probably expect that an
equivalent amount of futures contracts will be closed out.
Unlike when a fund purchases or sells a security, no
price is paid or received by the fund upon the purchase or
sale of a futures contract. Upon entering into a contract,
the fund is required to deposit with its custodian in a
segregated account in the name of the futures broker an
amount of cash and/or U.S. government securities. This is
known as "initial margin." Initial margin is similar to a
performance bond or good faith deposit which is returned to
the fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied. Futures
contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or
"maintenance margin", to and from the broker (or the
custodian) are made on a daily basis as the price of the
underlying security or commodity fluctuates, making the long
and short positions in the futures contract more or less
valuable. This is known as "marking to the market."
A fund or an underlying fund may elect to close some
or all of its futures positions at any time prior to their
expiration in order to reduce or eliminate a hedge position
then currently held by the fund. The fund may close its
positions by taking opposite positions that will operate to
terminate the fund's position in the futures contracts.
Final determinations of variation margin are then made,
additional cash is required to be paid by or released to the
fund, and the fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
A stock index futures contract may be used to hedge a
fund or an underlying fund's portfolio with regard to market
risk as distinguished from risk related to a specific
security. A stock index futures contract is a contract to
buy or sell units of an index at a specified future date at
a price agreed upon when the contract is made. A stock
index futures contract does not require the physical
delivery of securities, but merely provides for profits and
losses resulting from changes in the market value of the
contract to be credited or debited at the close of each
trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash
settlement occurs. Changes in the market value of a
particular stock index futures contract reflect changes in
the specified index of equity securities on which the future
is based.
In the event of an imperfect correlation between the
futures contract and the portfolio position that is intended
to be protected, the desired protection may not be obtained
and the fund may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price
movements may result in a poorer overall performance for the
fund than if it had not entered into futures contracts on
debt securities or stock indexes.
The market prices of futures contracts may also be
affected by certain factors. First, all participants in the
futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, an investor may close futures contracts
through offsetting transactions, which could distort the
normal relationship between the securities and futures
markets. Second, the deposit requirements in the futures
market are less stringent than margin requirements in the
securities market. Accordingly, increased participation by
speculators in the futures market may also cause temporary
price distortions.
Positions in futures contracts may be closed out only
on an exchange or board of trade providing a secondary
market for such futures. There is no assurance that a
liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular
time.
In order to assure that mutual funds have sufficient
assets to satisfy their obligations under their futures
contracts, the funds are required to establish segregated
accounts with their custodians. Such segregated accounts
are required to contain an amount of cash and liquid
securities equal in value to the current value of the
underlying instrument less the margin deposit.
The risk to a fund or an underlying fund from
investing in futures is potentially unlimited. Gains and
losses on investments in options and futures depend upon the
fund's investment adviser's ability to predict correctly the
direction of stock prices, interest rates and other economic
factors.
Options on Futures Contracts. A fund or an underlying fund
may also purchase and sell listed put and call options on
futures contracts. An option on a futures contract gives
the purchaser the right in return for the premium paid, to
assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a
put), at a specified exercise price at any time during the
option period. When an option on a futures contract is
exercised, delivery of the futures position is accompanied
by cash representing the difference between the current
market price of the futures contract and the exercise price
of the option. The fund may also purchase put options on
futures contracts in lieu of, and for the same purpose as, a
sale of a futures contract. A fund may also purchase such
put options in order to hedge a long position in the
underlying futures contract in the same manner as it
purchases "protective puts" on securities.
The holder of an option may terminate the position by
selling an option of the same series. There is, however, no
guarantee that such a closing transaction can be effected.
A fund is required to deposit initial and maintenance margin
with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to
those applicable to futures contracts described above and,
in addition, net option premiums received will be included
as initial margin deposits.
In addition to the risks which apply to all options
transactions, there are several risks relating to options on
futures contracts. The ability to establish and close out
positions on such options is subject to the development and
maintenance of a liquid secondary market. It is not certain
that this market will be liquid. In comparison with the use
of futures contracts, the purchase of options on futures
contracts involves less potential risk to a fund because the
maximum amount of risk is the premium paid for the option
(plus transaction costs). There may, however, be
circumstances when the use of an option on a futures
contract would result in a loss to a fund when the use of a
futures contract would not, such as when there is no
movement in the prices of the underlying securities.
Writing an option on a futures contract involves risks
similar to those arising in the sale of futures contracts,
as described above.
Hedging. A fund or an underlying fund may employ many of
the investment techniques described for investment and
hedging purposes. For example, a fund may purchase or sell
put and call options on common stocks to hedge against
movements in individual common stock prices, or purchase and
sell stock index futures and related options to hedge
against market wide movements in common stock prices.
Although such hedging techniques generally tend to minimize
the risk of loss that is hedged against, they also may limit
the potential gain that might have resulted had the hedging
transaction not occurred. Also, the desired protection
generally resulting from hedging transactions may not always
be achieved.
Leverage. An underlying fund may borrow on an unsecured
basis from banks to increase its holdings of portfolio
securities. Under the 1940 Act, such fund is required to
maintain continuous asset coverage of 300% with respect to
such borrowings and to sell (within three days) sufficient
portfolio holdings in order to restore such coverage if it
should decline to less than 300% due to market fluctuation
or otherwise. Such sale must occur even if disadvantageous
from an investment point of view. Leveraging aggregates the
effect of any increase or decrease in the value of portfolio
securities on the underlying fund's net asset value. In
addition, money borrowed is subject to interest costs (which
may include commitment fees and/or the cost of maintaining
minimum average balances) which may or may not exceed the
income and gains from the securities purchased with borrowed
funds.
HIGH YIELD INVESTMENTS
High Yield Securities and Their Risks. A fund or an
underlying fund may invest in high yield, high-risk, lower-
rated securities, commonly known as "junk bonds." Such
fund's investment in such securities is subject to the risk
factors outlined below.
Growth of the High Yield Bond Market. The high yield, high
risk market is at times subject to substantial volatility.
An economic downturn or increase in interest rates may have
a more significant effect on the high yield, high risk
securities in a fund's portfolio and their markets, as well
as on the ability of securities' issuers to repay principal
and interest. Issuers of high yield, high risk securities
may be of low credit worthiness and the high yield, high
risk securities may be subordinated to the claims of senior
lenders. During periods of economic downturn or rising
interest rates, the issuers of high yield, high risk
securities may have greater potential for insolvency and a
higher incidence of high yield, high risk bond defaults may
be experienced.
Sensitivity of Interest Rate and Economic Changes. The
prices of high yield, high risk securities may be more or
less sensitive to interest rate changes than higher-rated
investments but are more sensitive to adverse economic
changes or individual corporate developments. During an
economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial
stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet
projected business goals, and to obtain additional
financing. If the issuer of a high yield, high risk
security owned by an underlying fund defaults, the fund may
incur additional expenses in seeking recovery. Periods of
economic uncertainty and changes can be expected to result
in increased volatility of market prices of high yield, high
risk securities and the fund's net asset value. Yields on
high yield, high risk securities will fluctuate over time.
Furthermore, in the case of high yield, high risk securities
structured as zero coupon or pay-in-kind securities, their
market prices are affected to a greater extent by interest
rate changes and thereby tend to be more volatile than
market prices of securities which pay interest periodically
and in cash.
Payment Expectations. Certain securities held by a fund or
an underlying fund, including high yield, high risk
securities, may contain redemption or call provisions. If
an issuer exercises these provisions in a declining interest
rate market, such fund would have to replace the security
with a lower yielding security, resulting in a decreased
return for the investor. Conversely, a high yield, high
risk security's value will decrease in a rising interest
rate market.
Liquidity and Valuation. The secondary market may at times
become less liquid or respond to adverse publicity or
investor perceptions, making it more difficult for a fund or
an underlying fund to accurately value high yield, high risk
securities or dispose of them. To the extent such fund owns
or may acquire illiquid or restricted high yield, high risk
securities, these securities may involve special
registration responsibilities, liabilities and costs, and
liquidity difficulties, and judgment will play a greater
role in valuation because there is less reliable and
objective data available.
Taxation. Special tax considerations are associated with
investing in high yield bonds structured as zero coupon or
pay-in-kind securities or other securities that have
"original issue discount." A fund will report the accrued
interest on these securities as income each year even though
it receives no cash interest until the security's maturity
or payment date. Further, a fund must distribute
substantially all of its income for each year to its
shareholders to qualify for pass-through treatment under the
tax law. Accordingly, such a fund may have to dispose of
its portfolio securities under disadvantageous circumstances
to generate cash or may have to leverage itself by borrowing
the cash to satisfy distribution requirements.
Credit Ratings. Credit ratings evaluate the safety of
principal and interest payments, not the market value risk
of high yield, high risk securities. Since credit rating
agencies may fail to change the credit ratings in a timely
manner to reflect subsequent events, the investment adviser
to the funds or an underlying fund should monitor the
issuers of high yield, high risk securities in the fund's
portfolio to determine if the issuers will have sufficient
cash flow and profits to meet required principal and
interest payments, and to attempt to assure the securities'
liquidity so the fund can meet redemption requests. To the
extent that an underlying fund invests in high yield, high
risk securities, the achievement of the fund's investment
objective may be more dependent on the underlying fund's own
credit analysis than is the case for higher quality bonds.
A fund or an underlying fund may retain a portfolio security
whose rating has been changed. See "Appendix" for credit
rating information.
Mortgage-Backed, Asset-Backed, Indexed and Derivative
Securities. A fund or an underlying fund may invest in
mortgage pass-through securities, which are securities
representing interest in pools of mortgage loans secured by
residential or commercial real property in which payments of
both interest and principal on the securities are generally
made monthly, in effect passing through monthly payments
made by individual borrowers on mortgage loans which
underlie the securities (net of fees paid to the issuer or
guarantor of the securities). Early repayment of principal
on some mortgage-related securities (arising from
prepayments of principal due to sale of the underlying
property, refinancing, or foreclosure, net of fees and costs
which may be incurred) may expose a fund to a lower rate of
return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, in
the event of prepayment the value of the premium would be
lost.
Like other fixed income securities, when interest
rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates are
declining, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed
income securities.
A fund or an underlying fund may invest in
collateralized mortgage obligations (CMOs), which are hybrid
mortgage-related instruments. Similar to a bond, interest
and pre-paid principal on a CMO are paid, in most cases,
semiannually. CMOs are collateralized by portfolios of
mortgage pass-through securities and are structured into
multiple classes with different stated maturities. Monthly
payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class;
investors holding the longer maturity classes receive
principal only after the first class has been retired.
Other mortgage-related securities in which a fund or
an underlying fund may invest include other securities that
directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans on real
property, such as CMO residuals or stripped mortgage-backed
securities, and may be structured in classes with rights to
receive varying proportions of principal and interest. In
addition, the funds or the underlying funds may invest in
other asset-backed securities that have been offered to
investors or will be offered to investors in the future.
Several types of asset-backed securities have already been
offered to investors, including certificates for automobile
receivables, which represent undivided fractional interests
in a trust whose assets consist of a pool of motor vehicle
retail installment sales contracts and security interest in
the vehicles securing the contracts.
II. INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES. Each fund has
adopted certain fundamental investment policies. These
fundamental investment policies cannot be changed unless the
change is approved by the lesser of (1) 67% or more of the
voting securities present at a meeting, if the holders of
more than 50% of the outstanding voting securities of the
fund are present or represented by proxy, or (2) more than
50% of the outstanding voting securities of the fund. These
fundamental policies provide that a fund may not:
1. Invest 25% or more of its total assets in securities
of issuers in any one industry (securities issued or
guaranteed by the United States government, its agencies or
instrumentalities are not considered to represent
industries) or in shares of underlying funds ("sector
funds") that each have a policy of concentrating in the same
industry. This limitation does not apply to underlying
funds that have a policy against concentrating in any one
industry and does not preclude a fund from investing 25% or
more of its assets in sector funds generally, provided that
cumulative investments in sector funds that all concentrate
as a matter of policy in the same industry do not equal or
exceed 25% of the fund's total assets. Each fund will
concentrate in the mutual fund industry.
2. Borrow money or issue senior securities except to the
extent permitted by the 1940 Act.
3. Make loans of securities to other persons, except
loans of securities not exceeding 33 1/3% of the fund's
total assets, investments in debt obligations and
transactions in repurchase agreements.
4. Underwrite securities of other issuers, except insofar
as the fund may be deemed an underwriter under the
Securities Act of 1933, as amended (the "1933 Act") in
selling portfolio securities.
5. Purchase or sell real estate or any interest therein,
including interests in real estate limited partnerships,
except securities issued by companies (including real estate
investment trusts) that invest in real estate or interests
therein and real estate acquired as a result of owning
securities.
6. Invest in commodities or commodity futures contracts,
provided that this limitation shall not prohibit the
purchase or sale by the fund of forward currency contracts;
financial futures contracts and options on financial futures
contracts; options on securities, currencies and securities
indices; and swaps, caps, floors and collars, as permitted
by the fund's prospectus.
The 1940 Act currently prohibits the funds from
issuing senior securities or borrowing money, except that
each fund may borrow from banks or pursuant to reverse
repurchase agreements in an amount not exceeding one-third
of total assets (including the amount borrowed). A fund is
required to reduce the amount of its borrowings to not more
than one-third of total assets within three days after such
borrowings first exceed this one-third limitation.
Additional investment restrictions adopted by the
funds, which may be changed by the Board of Trustees,
provide that a fund may not:
1. With respect to 75% of the fund's assets, invest more
than 5% of the fund's assets (taken at a market value at the
time of purchase) in the outstanding securities of any
single issuer or own more than 10% of the outstanding voting
securities of any one issuer, in each case other than (1)
securities issued or guaranteed by the United States
government, its agencies or instrumentalities, or (2)
securities of other investment companies.
2. Invest more than 15% of its net assets (taken at
market value at the time of purchase) in illiquid
securities.
3. Make investments for the purpose of exercising control
or management.
4. Invest in other investment companies except as
permitted under the 1940 Act.
The mutual funds in which the funds may invest may,
but need not, have the same investment objectives or
policies as a fund. Although all of the funds may from time
to time invest in shares of the same underlying mutual fund,
the percentage of each fund's assets so invested may vary,
and Insight Management will determine that such investments
are consistent with the investment objective and policies of
each fund. The investments that may, in general, be made by
underlying funds in which the funds may invest, as well as
the risks associated with such investments, are described in
the prospectus.
III. MANAGEMENT OF THE TRUST AND THE FUNDS
A. Trustees and Officers
The principal occupations of the Trustees and officers
of the Trust during the past five years are set forth below:
Each Trustee who is deemed to be an "interested person" of
the Trust, as defined in the 1940 Act, is indicated by an
asterisk.
*ERIC M. KOBREN, 20 William Street, Suite 310, P.O. Box
9135, Wellesley Hills, Massachusetts 02181 - Chairman of the
Board, President and Trustee. Mr. Kobren has served as
President of Mutual Fund Investors Association, Inc. since
1985 and as President of Insight Management and Insight
Brokerage Services, Inc. ("Insight Brokerage") since 1987.
These are a financial publishing concern, a registered
investment advisory firm and a registered broker-dealer,
respectively. Mr. Kobren is 43 years old.
*MICHAEL P. CASTELLANO, 20 William Street, Suite 310, P.O.
Box 9135, Wellesley Hills, Massachusetts 02181 - Treasurer
and Trustee. Since December 1994, Mr. Castellano has served
as Chief Administrative Officer of Insight Management and as
a Registered Representative of Insight Brokerage. From
October 1993 to December 1994, Mr. Castellano was employed
as Executive Vice President and Chief Administrative Officer
of Wall Street Investor Services, a registered broker-
dealer. Prior to that time, he was a Senior Vice President
with Fidelity Investments, a registered investment advisory
firm and broker-dealer. Mr. Castellano is 55 years old.
EDWARD B. BLOOM, International Data Group Inc., 5 Speen
Street, P.O. Box 9192, Framingham, Massachusetts 01701 -
Trustee. Mr. Bloom, Vice President and Treasurer of
International Data Group Inc., a publishing company, has
been employed there since November 1967. He is 46 years
old.
ARTHUR DUBROFF, 335 Madison Avenue, 25th Floor, New York,
New York 10017 - Trustee. Since July 1996, Mr. Dubroff has
served as Executive Vice President and Chief Financial
Officer of Enhance Financial Services Group, Inc. ("Enhance
Financial"). Mr. Dubroff has also acted as a Director of
Enhance Financial from 1986 to 1991 and 1992 to the present.
From November 1993 to July 1996, he was employed as a Senior
Vice President of First Data Corporation, a financial
services company. From February 1992 to November 1993, Mr.
Dubroff was employed as an Executive Vice President of
Shearson Lehman Brothers, Inc. and from February 1991 to
January 1992 as an Executive Vice President of American
Express Information Services Corp. Mr. Dubroff is 46 years
old.
STUART J. NOVICK, Children's Hospital, 300 Longwood Avenue,
Boston, Massachusetts 02115 - Trustee. Mr. Novick has
served as Vice President and General Counsel of Children's
Hospital since July 1984. He is 46 years old.
SCOTT A. SCHOEN, Thomas H. Lee Company, 75 State Street,
Boston, Massachusetts 02109 - Trustee. Mr. Schoen, Managing
Director of Thomas H. Lee Company, a venture capital firm,
has been employed there since September 1986. He is 38
years old.
ERIC J. GODES, 20 William Street, Suite 310, P.O. Box 9135,
Wellesley Hills, Massachusetts 02181 - Vice President and
Secretary. Mr. Godes, a Vice President of Insight
Management and a registered representative of Insight
Brokerage, has been associated with both companies since
1990. He is 35 years old.
EDWARD R. GOLDFARB, 20 William Street, Suite 310, P.O. Box
9135, Wellesley Hills, Massachusetts 02181 - Vice President.
Since September 1995, Mr. Goldfarb has been Director of
Research and Chief Strategist of Insight Management, as well
as a registered representative of Insight Brokerage. From
June 1992 to September 1995, he was employed as a registered
representative of Aeltus Capital, Inc. and, from March 1994
to September 1995, he also served as Managing Director of
Aeltus Investment Management, Inc. From September 1982 to
September 1995, Mr. Goldfarb was employed as a Vice
President of Aetna Life & Casualty serving in various
capacities. During that time, he was also a registered
representative of Aetna Financial Services, Inc. and, from
May 1992 to March 1994, a registered representative of Aetna
Capital Management, Inc. Mr. Goldfarb is 36 years old.
The Trustees who are not employed by the Adviser each
receive a $5,000 annual retainer paid in quarterly
installments, a $1,000 fee for each board meeting attended
and a $500 fee per committee meeting attended, plus out-of-
pocket expenses incurred in attending such meetings.
<TABLE>
<CAPTION>
Compensation Table
The following table sets forth the anticipated
compensation to be paid to the Trustees of the Trust for the
fiscal period ending December 31, 1996. No compensation is
paid to any officers of the Trust by the funds.
<S> <C> <C>
TOTAL
AGGREGATE COMPENSATION
NAME OF PERSON COMPENSATION FROM THE TRUST
AND POSITION FROM THE TRUST PAID TO TRUSTEES
Eric M. Kobren, $0 $0
Chairman of the Board,
President and Trustee
Michael P. Castellano, $0 $0
Treasurer and Trustee
Edward B. Bloom, $0 $0
Trustee
Arthur Dubroff, $2,250 $2,250
Trustee
Scott P. Mason, $2,250 $2,250
Trustee
Stuart J. Novick, $2,250 $2,250
Trustee
Scott A. Schoen, $2,250 $2,250
Trustee
<FN>
Scott P. Mason resigned as a Trustee effective December
11, 1996 and was replaced by Edward B. Bloom who was elected
to fill the vacancy.
</TABLE>
Control Persons and Principal Holders of Securities
As of the date of this statement of additional
information, the following entity owned 5% or more of the
outstanding shares of the Trust:
Insight Management, Inc. 100.00%
20 William Street, Suite 310
P.O. Box 9135
Wellesley Hills, Massachusetts 02181
As of the date of this statement of additional
information, Mr. Kobren, by virtue of his ownership of
Insight Management, could be deemed to be a control person
and principal holder of the Trust's securities.
The Trust's Declaration of Trust provides that the
Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with
litigation in which they may be involved as a result of
their positions with the Trust, unless, as to liability to
the Trust or its shareholders, it is finally adjudicated
that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
their offices, or unless with respect to any other matter it
is finally adjudicated that they did not act in good faith
in the reasonable belief that their actions were in the best
interests of the Trust and its funds. In the case of
settlement, such indemnification will not be provided unless
it has been determined by a court or other body approving
the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available
facts, by vote of a majority of disinterested Trustees or in
a written opinion of independent counsel, that such officers
or Trustees have not engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of their
duties.
B. Investment Adviser
Insight Management serves as investment adviser to the
Trust and its funds pursuant to a written investment
advisory agreement. Insight Management is a Massachusetts
corporation organized in 1987, and is a registered
investment adviser under the Investment Advisers Act of
1940, as amended.
Certain services provided by Insight Management under
the investment advisory agreement are described in the
prospectus. In addition to those services, Insight
Management may, from time to time, provide the funds with
office space for managing their affairs, with the services
of required executive personnel, and with certain clerical
services and facilities. These services are provided
without reimbursement by the funds for any costs incurred.
As compensation for its services, each fund pays Insight
Management a fee computed daily and paid monthly at the
annual rate of 0.75% of the fund's average daily net assets.
This fee will be reduced by agreements the Kobren Insight
funds have structured with underlying funds to receive 12b-1
fees and share in a portion of their advisory fee revenue.
Each fund is responsible for all expenses not
expressly assumed by Insight Management or the
administrator. These include, among other things,
organization expenses, legal fees, audit and accounting
expenses, insurance costs, the compensation and expenses of
the Trustees, the expenses of printing and mailing reports,
notices and proxy statements to fund shareholders,
registration fees under federal and state securities laws,
brokerage commissions, interest, taxes and extraordinary
expenses (such as for litigation).
Insight Management has agreed to reimburse each fund
to the extent necessary to maintain each fund's operating
expenses (excluding investment advisory fees, brokerage
commissions, taxes, interest and litigation, indemnification
and other extraordinary expenses) at 0.25% annually of the
fund's average daily net assets. The investment advisory
agreement with Insight Management provides that if the total
expenses of a fund in any fiscal year exceed the permissible
limits applicable to the fund in any state in which shares
of the fund are then qualified for sale, the compensation
due Insight Management for such fiscal year shall be reduced
by the amount of such excess by a reduction or refund
thereof at the time such compensation is payable after the
end of each calendar month during such fiscal year of the
fund, subject to readjustment during the fund's fiscal year.
Until December 31, 1996, the only state expense limitation
provision applicable to the funds limits each fund's
expenses to 2 1/2% of the first $30 million of average net
assets, 2% of the next $70 million of average net assets and
1 1/2% of any remaining average net assets. Taxes,
brokerage costs, interest expenses and extraordinary
expenses are excluded from this limitation.
By its terms, the Trust's investment advisory
agreement will remain in effect through November 15, 1998
and from year to year thereafter, subject to annual approval
by (a) the Board of Trustees or, with respect to a
particular fund, (b) a vote of the majority of that fund's
outstanding voting securities; provided that in either event
continuance is also approved by a majority of the Trustees
who are not interested persons of the Trust, by a vote cast
in person at a meeting called for the purpose of voting such
approval. The Trust's investment advisory agreement may be
terminated at any time, on sixty days' written notice,
without the payment of any penalty, by the Board of
Trustees, by a vote of the majority of a particular fund's
outstanding voting securities, or by Insight Management.
The investment advisory agreement automatically terminates
in the event of its assignment, as defined by the 1940 Act
and the rules thereunder.
C. Distributor
Insight Brokerage Services, Inc., an affiliate of
Insight Management, 20 William Street, Suite 310, P.O. Box
9135, Wellesley Hills, Massachusetts 02181, serves as each
fund's distributor pursuant to an agreement which is
renewable annually. Each fund's shares are sold on a
continuous basis by Insight Brokerage as agent, although
Insight Brokerage is not obligated to sell any particular
amount of shares. The distributor pays the cost of printing
and distributing prospectuses to persons who are not
shareholders of a fund (excluding preparation and printing
expenses necessary for the continued registration of a
fund's shares) and of preparing, printing and distributing
all sales literature.
D. Administrator, Transfer Agent and Dividend Paying Agent
The Board of Trustees of the Trust has approved an
Administration Agreement between the Trust and First Data
Investor Services Group, Inc. ("First Data"), a subsidiary
of First Data Corporation, pursuant to which First Data
serves as administrator to the Trust and to each of the
funds. First Data is located at One Exchange Place, Boston,
Massachusetts 02109. The administrative services necessary
for the operation of the Trust and its funds provided by
First Data include among other things: (i) preparation of
shareholder reports and communications, (ii) regulatory
compliance, such as reports to and filings with the
Securities and Exchange Commission and state securities
commissions and (iii) general supervision of the operation
of the Trust and its funds, including coordination of the
services performed by the transfer agent, custodian,
independent accountants, legal counsel and others. For
these services, First Data is entitled to receive the
following annual fees on a per fund basis: $67,500 for
administration and fund accounting.
First Data also serves as the Trust's transfer and
dividend paying agent and performs shareholder service
activities. The location for these services is 4400
Computer Drive, Westborough, Massachusetts 01581. The
services of First Data are provided pursuant to a Transfer
Agency and Services Agreement between the Trust and First
Data. Pursuant to such Agreement, First Data will receive
from the Trust, with respect to each fund, an annual fee of
$14 per shareholder account (subject to a $32,000 annual
minimum). First Data also receives reimbursement under the
Transfer Agency and Services Agreement for certain out-of-
pocket expenses incurred in rendering such services.
IV. PURCHASE, REDEMPTION AND DETERMINATION
OF NET ASSET VALUE
Detailed information on purchase and redemption of
shares is included in the prospectus. The Trust may suspend
the right to redeem its shares or postpone the date of
payment upon redemption for more than three business days
(i) for any period during which the New York Stock Exchange
is closed (other than customary weekend or holiday closings)
or trading on the exchange is restricted; (ii) for any
period during which an emergency exists as a result of which
disposal by a fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable
for a fund fairly to determine the value of its net assets;
or (iii) for such other periods as the Securities and
Exchange Commission may permit for the protection of
shareholders of the Trust.
Each fund's underlying funds are valued according to
the net asset value per share ("NAV") furnished by that
fund's accounting agent. Each fund's investment securities
are valued at the last sale price on the securities exchange
or national securities market on which such securities
primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there
were no transactions, are valued at the average of the most
recent bid and asked prices. Bid price is used when no
asked price is available. Short-term investments are
carried at amortized cost, which approximates market value.
Any securities or other assets for which recent market
quotations are not readily available are valued at fair
value as determined in good faith by the Board of Trustees.
Income, expenses and fees, including the advisory and
administration fees, are accrued daily and taken into
account for the purpose of determining the net asset value
of each fund's shares.
Each fund computes the NAV of its shares at the close
of regular trading on the New York Stock Exchange (normally
4:00 p.m. New York time) on each weekday that is not a
holiday. The holidays (as observed) on which the New York
Stock Exchange is scheduled to be closed currently are: New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. If
the New York Stock Exchange closes early, the time of
computing the NAV and the deadlines for purchasing and
redeeming shares will be accelerated to the earlier closing
time. The NAV of each fund's shares is determined by
subtracting from the value of the fund's total assets the
amount of the fund's liabilities and dividing the remainder
by the number of outstanding fund shares. Although the NAV
will be calculated at the close of all regular trading days,
the NAV reported to NASDAQ for distribution to news agencies
will be delayed by one business day.
V. SPECIAL REDEMPTIONS
If the Board of Trustees of the Trust determines that
it would be detrimental to the best interests of the
remaining shareholders of a fund to make payment wholly or
partly in cash, that fund may pay the redemption price in
whole or in part by a distribution in kind of securities
from the portfolio of that fund, instead of in cash, in
conformity with any applicable rules of the Securities and
Exchange Commission. The proceeds of redemption may be more
or less than the amount invested and, therefore, a
redemption may result in a gain or loss for federal income
tax purposes.
VI. PORTFOLIO TRANSACTIONS
Insight Management is responsible for decisions to buy
and sell securities for the funds and for the placement of
the funds' portfolio business and negotiation of
commissions, if any, paid on these transactions.
In placing portfolio transactions with brokers and
dealers, Insight Management attempts to obtain the best
overall terms for the funds, taking into account such
factors as price (including dealer spread), the size, type
and difficulty of the transaction involved, and the
financial condition and execution capability of the broker
or dealer. In selecting broker-dealers and to the extent
that the execution and price offered by more than one dealer
are comparable, Insight Management may consider research,
including statistical or pricing information, and brokerage
services furnished to the funds or Insight Management. In
addition, the funds may pay brokerage commissions to brokers
or dealers in excess of those otherwise available upon a
determination that the commission is reasonable in relation
to the value of the brokerage services provided, viewed in
terms of either a specific transaction or overall brokerage
services provided with respect to the funds' portfolio
transactions by such broker or dealer. Insight Management
may use this research information in managing the funds'
assets, as well as assets of other clients.
Stocks, other equity securities and options may be
traded through brokers on an agency basis with a stated
brokerage commission or on a principal basis in the over-
the-counter market. Fixed income securities are generally
traded on the over-the-counter market on a "net" basis
without a stated commission, through dealers acting for
their own account and not as brokers. Prices paid to a
dealer on principal transactions will generally include a
"spread", which is the difference between the prices at
which the dealer is willing to purchase and sell the
specific security at that time. Shares of underlying funds
may be purchased or redeemed in transactions with the funds,
their principal underwriters or independent dealers.
Certain money market instruments and government agency
securities may be purchased directly from the issuer, in
which case no commissions or premiums are paid. Futures
contracts are traded on an agency basis with a futures
commission merchant. Swaps and other over-the-counter
contracts are traded directly with the counterparty, which
is usually a dealer, a bank or other institution.
Other investment advisory clients advised by Insight
Management may also invest in the same securities as a fund.
When these clients buy or sell the same securities at
substantially the same time, Insight Management may average
the transactions as to price and allocate the amount of
available investments in a manner which Insight Management
believes to be equitable to each client, including the
funds. In some instances, this investment procedure may
adversely affect the price paid or received by a fund or the
size of the position obtainable for it. On the other hand,
to the extent permitted by law, Insight Management may
aggregate the securities to be sold or purchased for a fund
with those to be sold or purchased for other funds or
clients managed by it in order to obtain best execution.
The funds will arrange to be included within a class
of investors entitled not to pay sales charges by purchasing
initial load fund shares under letters of intent, rights of
accumulation, cumulative purchase privileges and other
quantity discount programs.
VII. PERFORMANCE INFORMATION
A. Total Return
From time to time, quotations of a fund's performance
may be included in advertisements, sales literature or
reports to shareholders or prospective investors. These
performance figures may be calculated in the following
manner:
Total return is computed by finding the average annual
compounded rates of return over the designated periods that
would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated
period assuming a hypothetical $1,000 payment made at
the beginning of the designated period
The calculation set forth above is based on the
further assumptions that: (i) all dividends and
distributions of a fund during the period were reinvested at
the net asset value on the reinvestment dates; and (ii) all
recurring expenses that were charged to all shareholder
accounts during the applicable period were deducted.
Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of
reinvesting dividends and capital gain distributions, and
any change in the fund's net asset value per share (NAV)
over the period. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and
then calculating the annually compounded percentage rate
that would have produced the same result if the rate of
growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which
is the steady annual return rate that would equal 100%
growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing
investment alternatives, investors should realize that a
fund's performance is not constant over time, but changes
from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year
performance of the fund.
B. Non-Standardized Total Return
In addition to the performance information described
above, a fund may provide total return information for
designated periods, such as for the most recent rolling six
months or most recent rolling twelve months. A fund may
quote unaveraged or cumulative total returns reflecting the
simple change in value of an investment over a stated
period. Average annual and cumulative total returns may be
quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments,
and/or a series of redemptions over any time period. Total
returns may be broken down into their components of income
and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these
factors and their contributions to total return. Total
returns and other performance information may be quoted
numerically or in a table, graph or similar illustration.
C. Other Information Concerning Fund Performance
A fund may quote its performance in various ways,
using various types of comparisons to market indices, other
funds or investment alternatives, or to general increases in
the cost of living. All performance information supplied by
a fund in advertising is historical and is not intended to
indicate future returns. A fund's share prices and total
returns fluctuate in response to market conditions and other
factors, and the value of a fund's shares when redeemed may
be more or less than their original cost.
A fund may compare its performance over various
periods to various indices or benchmarks or combinations of
indices and benchmarks, including the performance record of
the Standard & Poor's 500 Composite Stock Price Index
("S&P"), the Dow Jones Industrial Average ("DJIA"), the
NASDAQ Industrial Index, the Ten Year Treasury Benchmark and
the cost of living (measured by the Consumer Price Index, or
CPI) over the same period. Comparisons may also be made to
yields on certificates of deposit, treasury instruments or
money market instruments. The comparisons to the S&P and
DJIA show how such fund's total return compared to the
record of a broad average of common stock prices (S&P) and a
narrower set of stocks of major industrial companies (DJIA).
The fund may have the ability to invest in securities or
underlying funds not included in either index, and its
investment portfolio may or may not be similar in
composition to the indices. Figures for the S&P and DJIA
are based on the prices of unmanaged groups of stocks, and
unlike the fund's returns, their returns do not include the
effect of paying brokerage commissions and other costs of
investing.
Comparisons may be made on the basis of a hypothetical
initial investment in the fund (such as $1,000), and reflect
the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (that is, their cash
value at the time they were reinvested). Such comparisons
may also reflect the change in value of such an investment
assuming distributions are not reinvested. Tax consequences
of different investments may not be factored into the
figures presented.
A fund's performance may be compared in advertising to
the performance of other mutual funds in general or to the
performance of particular types of mutual funds, especially
those with similar objectives.
Other groupings of funds prepared by Lipper Analytical
Services, Inc. ("Lipper") and other organizations may also
be used for comparison to the funds. Although Lipper and
other organizations such as Investment Company Data, Inc.
("ICD"), CDA Investment Technologies, Inc. ("CDA") and
Morningstar Investors, Inc. ("Morningstar"), include funds
within various classifications based upon similarities in
their investment objectives and policies, investors should
be aware that these may differ significantly among funds
within a grouping.
From time to time a fund may publish the ranking of
the performance of its shares by Morningstar, an independent
mutual fund monitoring service that ranks mutual funds,
including the funds, in broad investment categories (equity,
taxable bond, tax-exempt and other) monthly, based upon each
fund's one-, three-, five- and ten-year average annual total
returns (when available) and a risk adjustment factor that
reflects fund performance relative to three-month U.S.
treasury bill monthly returns. Such returns are adjusted
for fees and sales loads. There are five ranking categories
with a corresponding number of stars: highest (5), above
average (4), neutral (3), below average (2) and lowest (1).
Ten percent of the funds, series or classes in an investment
category receive 5 stars, 22.5% receive 4 stars, 35% receive
3 stars, 22.5% receive 2 stars, and the bottom 10% receive
one star.
From time to time, in reports and promotional
literature, a fund's yield and total return will be compared
to indices of mutual funds and bank deposit vehicles such as
Lipper's "Lipper - Fixed Income Fund Performance Analysis,"
a monthly publication which tracks net assets, total return,
and yield on approximately 1,700 fixed income mutual funds
in the United States. Ibbotson Associates, CDA Wiesenberger
and F.C. Towers are also used for comparison purposes as
well as the Russell and Wilshire Indices. Comparisons may
also be made to bank certificates of deposit ("CD"), which
differ from mutual funds, such as the funds, in several
ways. The interest rate established by the sponsoring bank
is fixed for the term of a CD, there are penalties for early
withdrawal from CDs, and the principal on a CD is insured.
Comparisons may also be made to the 10 year Treasury
Benchmark.
Performance rankings and ratings reported periodically
in national financial publications such as Money Magazine,
Forbes, Business Week, The Wall Street Journal, Micropal,
Inc., Morningstar, Stanger's, Barron's, etc. will also be
used.
Ibbotson Associates of Chicago, Illinois ("Ibbotson")
and others provide historical returns of the capital markets
in the United States. A fund may compare its performance to
the long-term performance of the U.S. capital markets in
order to demonstrate general long-term risk versus reward
investment scenarios. Performance comparisons could also
include the value of a hypothetical investment in common
stocks, long-term bonds or treasuries. A fund may discuss
the performance of financial markets and indices over
various time periods.
The capital markets tracked by Ibbotson are common
stocks, small capitalization stocks, long-term corporate
bonds, intermediate-term government bonds, long-term
government bonds, Treasury Bills, and the U.S. rate of
inflation. These capital markets are based on the returns
of several different indices. For common stocks the S&P is
used. For small capitalization stocks, return is based on
the return achieved by Dimensional Fund Advisors Small
Company Fund. This fund is a market value-weighted index of
the ninth and tenth deciles of the New York Stock Exchange
("NYSE"), plus stocks listed on the American Stock Exchange
and over-the-counter with the same or less capitalization as
the upper bound of the NYSE ninth decile.
Long-term corporate bond returns are based on the
performance of the Salomon Brothers Long-Term-High-Grade
Corporate Bond Index which includes nearly all Aaa- and Aa-
rated bonds. Returns on intermediate-term government bonds
are based on a one-bond portfolio constructed each year,
containing a bond which is the shortest noncallable bond
available with a maturity not less than 5 years. This bond
is held for the calendar year and returns are recorded.
Returns on long-term government bonds are based on a one-
bond portfolio constructed each year, containing a bond that
meets several criteria, including having a term of
approximately 20 years. The bond is held for the calendar
year and returns are recorded. Returns on U.S. Treasury
bills are based on a one-bill portfolio constructed each
month, containing the shortest-term bill having not less
than one month to maturity. The total return on the bill is
the month-end price divided by the previous month-end price,
minus one. Data up to 1976 is from the U.S. Government Bond
file at the University of Chicago's Center for Research in
Security Prices; the Wall Street Journal is the source
thereafter.
Inflation rates are based on the CPI. Ibbotson
calculates total returns in the same method as the fund.
Other widely used indices that the funds may use for
comparison purposes include the Lehman Bond Index, the
Lehman Aggregate Bond Index, The Lehman GNMA Single Family
Index, the Lehman Government/Corporate Bond Index, the
Salomon Brothers Long-Term High Yield Index, the Salomon
Brothers Non-Government Bond Index, the Salomon Brothers
Non-U.S. Government Bond Index, the Salomon Brothers World
Government Bond Index and the J.P. Morgan Government Bond
Index. The Salomon Brothers World Government Bond Index
generally represents the performance of government debt
securities of various markets throughout the world,
including the United States. Lehman Government/Corporate
Bond Index generally represents the performance of
intermediate and long-term government and investment grade
corporate debt securities. The Lehman Aggregate Bond Index
measures the performance of U.S. corporate bond issues, U.S.
government securities and mortgage-backed securities. The
J.P. Morgan Government Bond Index generally represents the
performance of government bonds issued by various countries
including the United States. The foregoing bond indices are
unmanaged indices of securities that do not reflect
reinvestment of capital gains or take investment costs into
consideration, as these items are not applicable to indices.
The funds may also discuss in advertising the relative
performance of various types of investment instruments, such
as stocks, treasury securities and bonds, over various time
periods and covering various holding periods. Such
comparisons may compare these investment categories to each
other or to changes in the CPI. In addition, the funds may
employ historical mutual fund performance data and industry
asset allocation studies in their advertisements.
A fund may advertise examples of the effects of
periodic investment plans, including the principle of dollar
cost averaging. In such a program, the investor invests a
fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares
when prices are low. While such a strategy does not assure
a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed
numbers of shares had been purchased at those intervals. In
evaluating such a plan, investors should consider their
ability to continue purchasing shares through periods of low
price levels.
The funds may be available for purchase through
retirement plans or other programs offering deferral of or
exemption from income taxes, which may produce superior
after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually,
compounded monthly, would have an after-tax value of $2,009
after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred
investment would have an after-tax value of $2,178 after ten
years, assuming tax was deducted at a 31% rate from the
deferred earnings at the end of the ten year period.
Evaluations of fund performance made by independent
sources may also be used in advertisements concerning the
funds, including reprints of, or selections from, editorials
or articles about the fund. These editorials or articles
may include quotations of performance from other sources
such as Lipper or Morningstar. Sources for fund performance
information and articles about the funds may include the
following:
BANXQUOTE, an on-line source of national averages for
leading money market and bank CD interest rates, published
on a weekly basis by Masterfund, Inc. of Wilmington,
Delaware.
BARRON'S, a Dow Jones and Company, Inc. business and
financial weekly that periodically reviews mutual fund
performance data.
THE BOSTON GLOBE, a regional daily newspaper.
BUSINESS WEEK, a national business weekly that periodically
reports the performance rankings and ratings of a variety of
mutual funds investing abroad.
CDA INVESTMENT TECHNOLOGIES, INC., an organization which
provides performance and ranking information through
examining the dollar results of hypothetical mutual fund
investments and comparing these results against appropriate
market indices.
CONSUMER DIGEST, a monthly business/financial magazine that
includes a "Money Watch" section featuring financial news.
FINANCIAL WORLD, a general business/financial magazine that
includes a "Market Watch" department reporting on activities
in the mutual fund industry.
FORBES, a national business publication that from time to
time reports the performance of specific investment
companies in the mutual fund industry.
FORTUNE, a national business publication that periodically
rates the performance of a variety of mutual funds.
IBC/DONOGHUES' MONEY FUND REPORT, a weekly publication of
the Donoghue Organization, Inc. of Holliston, Massachusetts,
reporting on the performance of the nation's money market
funds, summarizing money market fund activity, and including
certain averages as performance benchmarks, specifically
"Donoghue's Money Fund Average," and "Donoghue's Government
Money Fund Average."
IBBOTSON ASSOCIATES, INC., a company specializing in
investment research and data.
INVESTMENT COMPANY DATA, INC., an independent organization
which
provides performance ranking information for broad classes
of mutual funds.
INVESTOR'S DAILY, a daily newspaper that features financial,
economic, and business news.
KIPLINGER'S PERSONAL FINANCE, a monthly business
publication.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE
ANALYSIS, a weekly publication of industry-wide mutual fund
averages by type of fund.
MONEY, a monthly magazine that from time to time features
both specific funds and the mutual fund industry as a whole.
MORNINGSTAR INVESTOR and MORNINGSTAR ONDISC, monthly mutual
fund reporting services.
MUTUAL FUND MAGAZINE, a monthly business magazine published
by the Institute for Econometric Research.
MUTUAL FUND VALUES, a bi-weekly Morningstar, Inc.
publication that provides ratings of mutual funds based on
fund performance, risk and portfolio characteristics.
THE NEW YORK TIMES, a nationally distributed newspaper which
regularly covers financial news.
PERSONAL INVESTING NEWS, a monthly news publication that
often reports on investment opportunities and market
conditions.
PERSONAL INVESTOR, a monthly investment advisory publication
that includes a "Mutual Funds Outlook" section reporting on
mutual fund performance measures, yields, indices and
portfolio holdings.
SMART MONEY, a Dow Jones & Company, Inc. monthly business
magazine.
SUCCESS, a monthly magazine targeted to the world of
entrepreneurs and growing business, often featuring mutual
fund performance data.
USA TODAY, a nationally distributed newspaper.
U.S. NEWS AND WORLD REPORT, a national business weekly that
periodically reports mutual fund performance data.
THE WALL STREET JOURNAL, a Dow Jones & Company, Inc.
newspaper which regularly covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an annual
compendium of information about mutual funds and other
investment companies, including comparative data on funds'
background, management policies, salient features,
management results, income and dividend records, and price
ranges.
WORTH MAGAZINE, a Fidelity Investments-owned monthly
business publication.
When comparing yield, total return and investment risk
of shares of a fund with other investments, investors should
understand that certain other investments have different
risk characteristics than an investment in shares of the
funds. For example, certificates of deposit may have fixed
rates of return and may be insured as to principal and
interest by the FDIC, while a fund's returns will fluctuate
and its share values and returns are not guaranteed. Money
market accounts offered by banks also may be insured by the
FDIC and may offer stability of principal. U.S. Treasury
securities are guaranteed as to principal and interest by
the full faith and credit of the U.S. government. Money
market mutual funds may seek to offer a fixed price per
share.
The performance of the funds is not fixed or
guaranteed. Performance quotations should not be considered
to be representative of performance of a fund for any period
in the future. The performance of a fund is a function of
many factors including its earnings, expenses and number of
outstanding shares. Fluctuating market conditions,
purchases and sales of underlying funds, sales and
redemptions of shares of beneficial interest, and changes in
operating expenses are all examples of items that can
increase or decrease a fund's performance.
VIII. DIVIDENDS, DISTRIBUTIONS AND TAXES
Each fund intends to qualify as a separate regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In any year
in which a fund qualifies as a regulated investment company
and distributes to its shareholders substantially all of its
investment company taxable income (which includes, among
other items, interest, dividends and the excess of net
short-term capital gain over net long-term capital loss) and
its net capital gain (the excess of net long-term capital
gain over net short-term capital loss) the fund will not be
subject to federal income tax on the amounts distributed to
shareholders in the manner required under the Code. A fund
would be taxed at regular corporate income tax rates on any
amounts not distributed to shareholders in accordance with
these requirements.
Amounts not distributed on a timely basis in
accordance with a separate calendar year distribution
requirement are subject to a nondeductible 4% excise tax.
To avoid imposition of the excise tax, each fund must
distribute for each calendar year an amount equal to the sum
of (1) at least 98% of its net ordinary income (excluding
any capital gains or losses) for the calendar year, (2) at
least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) realized
during the one-year period ending October 31 of such year,
and (3) all ordinary income and capital gains for the
previous year that were not distributed during such year and
on which the fund has not paid income tax. A distribution
will be treated as paid by a fund, and taxable to
shareholders as if received, on December 31 of the calendar
year if it is declared by a fund in October, November or
December of that year with a record date in such a month and
paid by the fund during January of the following calendar
year. Each fund intends to seek to distribute its income in
accordance with this requirement to avoid or minimize any
excise tax. Shortly after the end of each year, the Trust
will notify shareholders of the tax status of dividends and
distributions for that year.
All income and capital gains received by a fund from a
mutual fund in that fund's portfolio will be distributed by
the fund (after deductions for the fund's losses and
expenses) and will be taxable to shareholders as ordinary
income, except for any distributions attributable to net
capital gain, which will be taxable to shareholders as long-
term capital gains. Because each fund is actively managed
and may realize taxable net short-term capital gains by
selling shares of a mutual fund in its portfolio with
unrealized appreciation, investing in a fund rather than
directly in the underlying funds may result in increased tax
liability to a shareholder since the fund must distribute
its gains in accordance with the rules described above. A
fund's ability to dispose of shares of underlying funds held
less than three months may be limited by requirements
relating to a fund's qualification as a regulated investment
company for federal income tax purposes.
Distributions of net capital gain received by a fund
from the underlying funds (as described above), as well as
net capital gain realized by a fund from the purchase and
sale (or redemption) of mutual fund shares or other
securities held by a fund for more than one year, will be
taxable to a shareholder as long-term capital gain (even if
the shareholder has held the shares for less than one year).
If a shareholder who has received a capital gain
distribution suffers a loss on the redemption or other sale
of his or her fund shares that have a tax holding period of
six months or less, the loss on those shares will be treated
as a long-term capital loss to the extent of the capital
gain distribution received on those shares. Also, any loss
realized on a redemption or other sale of fund shares may be
disallowed to the extent the shares disposed of are replaced
with other shares of the same fund within a period of 61
days beginning 30 days before and ending 30 days after the
shares are disposed of, such as pursuant to automatic
dividend reinvestments. Long-term capital gains, including
distributions of net capital gain, are currently subject to
a maximum federal tax rate of 28%, which is less than the
maximum rate imposed on other types of taxable income.
For purposes of determining the character of income
received by a fund when an underlying fund distributes net
capital gain to a fund, the fund will treat the distribution
as a long-term capital gain, even if the fund has held
shares of the underlying fund for less than one year. Any
loss incurred by a fund on the redemption or other sale of
such mutual fund's shares that have a tax holding period of
six months or less, however, will be treated as a long-term
capital loss to the extent of the gain distribution received
on the shares disposed of by the fund.
If a fund acquires stock of certain foreign
corporations that receive at least 75% of their annual gross
income from passive sources (such as interest, dividends,
rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income
("passive foreign investment companies"), the fund could be
subject to federal income tax and additional interest
charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies,
even if all income or gain actually received by the fund is
timely distributed to its shareholders. The fund would not
be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may, if
available, ameliorate these adverse tax consequences, but
any such election would require the fund to recognize
taxable income or gain without the concurrent receipt of
cash. Each fund may limit and/or manage its holdings in
passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
Each fund may be subject to foreign withholding or
other foreign taxes imposed by foreign countries with
respect to the fund's investments in foreign securities.
Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes in some cases. The funds do
not except to qualify to pass such taxes or associated
foreign tax credits or deductions through to their
shareholders, who consequently are not expected to take them
into account on their own tax returns.
Foreign exchange gains and losses realized by a fund
in connection with certain transactions involving foreign
currency-denominated debt securities, foreign currency
forward contracts, foreign currencies, or payables or
receivables denominated in foreign currency are subject to
Section 988 of the Code, which generally causes such gains
and losses to be treated as ordinary income and losses and
may affect the amount, timing and character of distributions
to shareholders. Any such transactions that are not
directly-related to a fund's investment in stock or
securities, possibly including any such transaction not used
for hedging purposes, may increase the amount of gain it is
deemed to recognize from the sale of certain investments or
derivatives held for less than three months, which gain is
limited under the Code to less than 30% of its gross income
for each taxable year, and may under future Treasury
regulations produce income not among the types of
"qualifying income" from which the fund must derive at least
90% of its gross income for each taxable year. If the net
foreign exchange loss for a year treated as ordinary loss
under Section 988 were to exceed the fund's investment
company taxable income computed without regard to such loss,
the resulting overall ordinary loss for such year would not
be deductible by the fund or its shareholders in future
years.
Limitations imposed by the Code on regulated
investment companies like the funds may restrict each fund's
ability to enter into options and futures contracts, foreign
currency positions and foreign currency forward contracts.
Certain of these transactions may cause a fund to recognize
gains or losses from marking to market even though its
positions have not been sold or terminated and may affect
the character as long-term or short-term (or, in the case of
certain foreign currency options, futures and forward
contracts, as ordinary income or loss) of some capital gains
and losses realized by the fund. Additionally, certain of a
fund's losses on transactions involving options, futures,
forward contracts, and any offsetting or successor positions
in its portfolio, may be deferred rather than being taken
into account currently in calculating the fund's taxable
income or gain. Certain of such transactions may also cause
the fund to dispose of investments sooner than would
otherwise have occurred. These transactions may therefore
affect the amount, timing and character of a fund's
distributions to shareholders. The funds will take into
account the special tax rules applicable to options, futures
or forward contracts, including consideration of available
elections, in order to seek to minimize any potential
adverse tax consequences.
The federal income tax rules applicable to interest
rate swaps, caps, floors and collars are unclear in certain
respects, and a fund may be required to account for these
instruments under tax rules in a manner that, under certain
circumstances, may limit its transactions in these
instruments.
Investments in debt obligations that are at risk of or
are in default (i.e., junk bonds) present special tax issues
for the funds. Tax rules are not entirely clear about
issues such as when the funds may cease to accrue interest,
original issue discount, or market discount, when and to
what extent deductions may be taken for bad debts or
worthless securities, how payments received on obligations
in default should be allocated between principal and income,
and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be
addressed by a fund that holds such obligations in order to
reduce the risk of distributing insufficient income to
preserve its status as a regulated investment company and
seek to avoid becoming subject to federal income or excise
tax.
The tax treatment of distributions from a fund is the
same whether the distributions are received in additional
shares or in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for
federal income tax purposes in each share received equal to
the amount of cash that could have been received instead.
A fund may invest in mutual funds with capital loss
carry-forwards. If such a mutual fund realizes capital
gains, it will be able to offset the gains to the extent of
its loss carryforwards in determining the amount of capital
gains which must be distributed to shareholders. To the
extent that gains are offset in this manner, distributions
to a fund and its shareholders will likely be reduced.
Similarly, a fund may incur capital losses that it may carry
forward to future taxable years to offset capital gains it
may realize in such years.
Depending upon a shareholder's residence for tax
purposes, distributions and the value of fund shares may
also be subject to state and local taxes, or other taxes.
Shareholders should consult their own tax advisers regarding
the tax consequences of ownership of shares of, and receipt
of distributions from, a fund in their particular
circumstances.
The funds are generally required to withhold federal
income tax at a rate of 31% ("backup withholding") from
dividends and other distributions, including redemption
proceeds paid to individuals and other non-exempt
shareholders if (1) the shareholder fails to furnish the
Trust with and to certify his or her correct social security
number or other taxpayer identification number, (2) the
Internal Revenue Service (the "IRS") or a broker notifies
the Trust that the shareholder is subject to withholding or
(3) the shareholder fails to certify that he or she is not
subject to backup withholding.
Each fund will distribute investment company taxable
income and any net capital gain at least annually. All
dividends and distributions will be reinvested automatically
at net asset value in additional shares of the fund making
the distribution, unless the shareholder notifies the fund
in writing of his or her election to receive distributions
in cash.
The foregoing discussion relates solely to U.S.
federal income tax law as applicable to U.S. persons (i.e.,
U.S. citizens or residents and U.S. domestic corporations,
partnerships, trusts or estates) subject to tax under such
law. The discussion does not address special tax rules
applicable to certain classes of investors, such as
retirement plans, tax-exempt entities, insurance companies
and financial institutions.
Non-U.S. investors not engaged in a U.S. trade or
business with which their fund investment is effectively
connected will be subject to U.S. federal income tax
treatment that is different from that described above.
These investors may be subject to non-resident alien
withholding tax at the rate of 30% (or a lower rate under an
applicable tax treaty) on amounts treated as ordinary
dividends from a fund and, unless an effective Form W-8 is
on file, 31% backup withholding on certain other payments
from the fund. Non-U.S. investors should consult their tax
advisers regarding such treatment and the applicability of
foreign taxes to an investments in the funds.
The funds are not subject to Massachusetts corporate
excise or franchise taxes. Provided that each fund
qualifies as a regulated investment company under the Code,
the funds will also not be required to pay Massachusetts
income tax.
IX. CUSTODIAN, COUNSEL AND INDEPENDENT ACCOUNTANTS
Pursuant to a Custody Agreement between the Trust and
Boston Safe Deposit and Trust Company ("Boston Safe"), a
subsidiary of Mellon Bank Corporation, provides custodial
services to the Trust and each of the funds. The principal
business address of Boston Safe is One Boston Place, Boston,
Massachusetts 02108.
Hale and Dorr, 60 State Street, Boston, Massachusetts
02109, is counsel for the Trust.
Coopers & Lybrand L.L.P., One Post Office Square,
Boston, Massachusetts 02109, has been selected as auditors
of the Trust.
X. DESCRIPTION OF THE TRUST
The Trust is an open-end, diversified series
management investment company established as a business
trust under the laws of The Commonwealth of Massachusetts
pursuant to a Declaration of Trust dated September 13, 1996.
The name of the Trust, formerly Insight Premier Funds, was
changed to Kobren Insight Funds in November 1996 by
amendment to the Declaration of Trust.
The Trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest in an
unlimited number of series, each share with a par value of
$.001. Currently, the Trust consists of three series. Each
share in a particular series represents an equal
proportionate interest in that series with each other share
of that series and is entitled to such dividends and
distributions as are declared by the Trustees of the Trust.
Upon any liquidation of a series, shareholders of that
series are entitled to share pro rata in the net assets of
that series available for distribution. Shareholders in one
of the series have no interest in, or rights upon
liquidation of, any of the other series.
The Trust will normally not hold annual meetings of
shareholders to elect Trustees. If less than a majority of
the Trustees of the Trust holding office have been elected
by shareholders, a meeting of shareholders of the Trust will
be called to elect Trustees. Under the Declaration of Trust
and the 1940 Act, the record holders of not less than two-
thirds of the outstanding shares of the Trust may remove a
Trustee by votes cast in person or by proxy at a meeting
called for the purpose or by a written declaration filed
with the Trust's custodian bank. Except as described above,
the Trustees will continue to hold office and may appoint
successor Trustees.
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered
into or executed by the funds or the Trustees. The
Declaration of Trust provides for indemnification out of the
Trust's property for all loss and expense of any shareholder
held personally liable for obligations of the Trust and its
funds. Accordingly, the risk of a shareholder of the Trust
incurring a financial loss on account of shareholder
liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations. The
likelihood of such circumstances is remote.
XI. ADDITIONAL INFORMATION
The prospectus and this statement of additional
information do not contain all of the information included
in the Trust's registration statement filed with the
Securities and Exchange Commission under the Securities Act
of 1933, as amended, with respect to the securities offered
hereby. Certain portions of the registration statement have
been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Such registration
statement, including the exhibits filed therewith, may be
examined at the offices of the Securities and Exchange
Commission in Washington, D.C.
Statements contained in the prospectus and this
statement of additional information as to the contents of
any agreement or other documents referred to are not
necessarily complete, and, in each instance, reference is
made to the copy of such agreement or other documents filed
as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.
XII. FINANCIAL STATEMENTS
The financial statements of each fund as of November
6, 1996 included in this statement of additional information
have been audited by Coopers & Lybrand L.L.P., independent
public accountants, as indicated in their report with
respect thereto. The financial statements are included
herein in reliance upon the authority of said firm as
experts in accounting and auditing and giving said report.
<TABLE>
<CAPTION>
INSIGHT PREMIER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
November 6, 1996
<S> <C> <C> <C>
Insight Insight
Insight Moderate Conservative
Growth Growth Allocation
Fund Fund Fund
ASSETS:
Cash....... $50,000 $25,000 $25,000
Deferred organizational
costs (Note 1).. 21,000 10,500 10,500
Total Assets 71,000 35,500 35,500
LIABILITIES:
Accrued organizational
costs (Note 1).. 21,000 10,500 10,500
Total
Liabilities ... 21,000 10,500 10,500
NET ASSETS..... $50,000 $25,000 $25,000
SHARES OF BENEFICIAL INTEREST
OUTSTANDING... 5,000 2,500 2,500
NET ASSET VALUE, offering and
redemption price per share of beneficial
interest
outstanding .. $ 10.00 $ 10.00 $ 10.00
</TABLE>
INSIGHT PREMIER FUNDS
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 6, 1996
1. Insight Premier Funds (the "Trust") was
organized as a Massachusetts business trust on
September 13, 1996, and is registered under the
Investment Company Act of 1940, as amended, as
an open-end management investment company. The
Trust offers three funds: Insight Growth Fund,
Insight Moderate Growth Fund and Insight
Conservative Allocation Fund (individually, a
"Fund", collectively the "Funds"). The primary
focus of each Fund is to develop an asset
allocation strategy and to select from the wide
range of mutual funds currently available. The
preparation of financial statements in
accordance with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
and disclosures in the financial statements.
Actual results could differ from those
estimates. The Trust has had no operations
other than organizational matters and the
issuance and sale of initial shares of each of
the Funds to Insight Management, Inc.
("Insight"), each Fund's investment adviser.
Costs incurred by the Trust and the Funds in
connection with their organization will be
deferred and amortized on a straight line basis
over a period not to exceed sixty months from
the date upon which each Fund commences its
investment operations. If any of the initial
shares are redeemed during the amortization
period by any holder thereof, the redemption
proceeds will be reduced by a pro rata portion
of the then unamortized organization costs.
Expenses: General expenses of the Trust are
allocated to the respective Funds based upon
relative net assets. Operating expenses
directly attributable to a Fund are charged to
that Fund's operations.
2. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Investment
Advisory Agreement with Insight. For its
investment advisory services to the Funds,
Insight is entitled to receive a monthly
advisory fee calculated at an annual rate of
0.75% of the value of the average daily net
assets of each Fund. Insight has voluntarily
agreed to limit each Fund's other expenses until
December 31, 1997, to 0.25% of the Fund's
average daily net assets.
Insight Brokerage Services, Inc., an affiliate
of Insight, serves as the distributor of each
Fund. First Data Investor Services Group, Inc.
("First Data"), a wholly-owned subsidiary of
First Data Corporation, serves as the
administrator and transfer agent of each Fund.
Report of Independent Accountants
To the Shareholders and Board of Trustees
of Insight Premier Funds:
We have audited the accompanying statements of assets
and liabilities of each of the series of Insight
Premier Funds (comprised of Insight Growth Fund,
Insight Moderate Growth Fund and Insight Conservative
Allocation Funds (the "Funds")), as of November 6,
1996. These financial statements are the
responsibility of the Funds' management. Our
responsibility is the express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall
financial statement presentation. We believe that our
audit of the financial statements provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of the Funds enumerated above as of
November 6, 1996, in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 7, 1996
APPENDIX
RATINGS OF DEBT INSTRUMENTS
Standard & Poor's Ratings Group ("S&P") Corporate Bond
Ratings. An S&P corporate bond rating is a current
assessment of the credit worthiness of an obligor,
with respect to a specific obligation. This
assessment may take into consideration obligors such
as guarantors, insurers or lessees. The debt rating
is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market
price or suitability for a particular investor. The
ratings are based on current information furnished by
the issuer or obtained by S&P from other sources it
considers reliable. S&P does not perform any audit in
connection with the ratings and may, on occasion, rely
on unaudited financial information.
The ratings are based, in varying degrees, on
the following considerations: (a) likelihood of
default capacity and willingness of the obligor as to
the timely payment of interest and repayment of
principal in accordance with the terms of the
obligation; (b) nature of and provisions of the
obligation; and (c) protection afforded by and
relative position of the obligation in the event of
bankruptcy reorganization or other arrangement under
the laws of bankruptcy and other laws affecting
creditors' rights. To provide more detailed
indications of credit quality, ratings from "AA" to
"CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major
rating categories.
A provisional rating is sometimes used by S&P.
It assumes the successful completion of the project
being financed by the debt being rated and indicates
that payment of debt service requirements is largely
or entirely dependent upon the successful and timely
completion of the project. This rating, however,
while addressing credit quality subsequent to
completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of,
such completion.
Bond ratings are as follows:
AAA -- Bonds rated AAA have the highest rating
assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to
pay interest and repay principal and differs from the
higher rated issues only in small degree.
A -- Bonds rated A have strong capacity to pay
interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories.
BBB -- Bonds rated BBB are regarded as having an
adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt
in this category than in higher rated categories.
BB, B, CCC, CC -- Bonds rated BB, B, CCC or CC are
regarded on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and
repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation.
While such bonds will likely have some quality and
protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
C -- The rating C is reserved for income bonds on
which no interest is being paid.
D -- Debt rated D is in default, and payment of
interest and/or repayment of principal is in arrears.
S&P Note Ratings. An S&P note rating reflects the
liquidity concerns and market access risks unique to
notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three
years will most likely receive a long-term debt
rating. The following criteria are used in making
that assessment: (a) Amortization schedule (the
larger the final maturity relative to other
maturities, the more likely it will be treated as a
note), and (b) Source of payment (the more dependent
the issue is on the market for its refinancing, the
more likely it will be treated as a note).
Note ratings are as follows:
SP-1 -- Very strong or strong capacity to pay
principal and interest. Those issues determined to
possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and
interest.
SP-3 -- Speculative capacity to pay principal and
interest.
Demand Bonds. S&P assigns "Dual" ratings to all long-
term debt issues that have as part of their provisions
a demand or double feature. The first rating
addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols
are used for bonds to denote the long-term maturity
and the commercial paper rating symbols are used to
denote the put options (for example, "AAA/A-1+). For
the newer "Demand Notes," S&P note rating symbols,
combined with the commercial paper symbols, are used
(for example, "SP-1+/A-1+").
Moody's Corporate Bond Ratings. Moody's ratings are
as follows:
Aaa -- Bonds that are rated Aaa are judged to be of
the best quality. They carry the smallest degree of
investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a
large or by an exceptionally stable margin and
principal is secure. While the various protective
elements are likely to change, such changes as can be
visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds
because margins of protection may not be as large as
in Aaa securities or fluctuation of protective
elements may be of great amplitude or there may be
other elements present that make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable
investment attributes and are to be considered as
upper medium grade obligations. Factors giving
security to principal and interest are considered
adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa -- Bonds that are rated Baa are considered as
medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest
payments and principal security appear adequate for
the present, but certain protective elements may be
lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding
investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers, 1, 2 and 3, in
each generic rating classification from Aa through Baa
in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating
category.
Ba -- Bonds that are rated Ba are judged to have
speculative elements; their future cannot be
considered as well assured. Often the protection of
interest and principal payments may be very moderate
and thereby not well safeguarded during good and bad
times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds that are rated B generally lack
characteristics of the desirable investment.
Assurance of interest and principal payments, or of
maintenance of other terms of the contract over any
long period of time, may be small.
Caa -- Bonds rated Caa are of poor standing. Such
issues may be in default or there may be present
elements of danger with respect to principal or
interest.
Ca -- Bonds rated Ca represent obligations that are
speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
C -- Bonds rated C are the lowest rated class of bonds
and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Moody's Note Ratings. Moody's Short-Term Loan Ratings
- -- Moody's ratings for short-term obligations will be
designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences
between short-term credit risk and long-term risk.
Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while
various factors of major importance in bond risk are
of lesser importance over the short run.
Rating symbols and their meanings follow:
MIG 1 -- This designation denotes best quality. There
is present strong protection by established cash
flows, superior liquidity support, or demonstrated
broad-based access to the market for refinancing.
MIG 2 -- This designation denotes high quality.
Margins of protection are ample, although not so large
as in the preceding group.
MIG 3 -- This designation denotes favorable quality.
All security elements are accounted for, but this is
lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to
be less well established.
MIG 4 -- This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and, although not
distinctly or predominantly speculative, there is
specific risk.
