As filed with the Securities and Exchange Commission on December 17, 1998
Securities Act File No. 333-12075
Investment Company Act File No. 811-07813
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment
No.
Post-Effective Amendment No. 9 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 X
KOBREN INSIGHT FUNDS
(Exact Name of Registrant as Specified in Charter)
20 William Street, Suite 310, Wellesley Hills, Massachusetts 02181
(Address of principal Executive Office)
Registrant's Telephone Number, including Area Code: (617) 573-1557
Name and Address of Agent for Service: Copies to:
Gail A. Hanson, Esq. Pamela Wilson, Esq.
Kobren Insight Funds Hale and Dorr
One Exchange Place 60 State Street
Boston, MA 02109 Boston, MA 02109
It is proposed that this filing will become effective (check appropriate box):
__ immediately upon filing pursuant to Rule 485(b);or
__ on December 17, 1998 pursuant to paragraph (b);or
60 days after filing pursuant to Rule 485(a)(1);or on ________
pursuant to paragraph (a)(1);or 75 days after filing pursuant to
Rule 485(a)(2);or on ________ pursuant to paragraph (a)(2)
If appropriate, check the following box:
X this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant filed a Rule 24f-2 Notice for its most recent fiscal year ended
December 31, 1997 on March 31, 1998.
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KOBREN INSIGHT FUNDS
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495 (a)
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Part A.
Item No. Prospectus Caption
1. Front and Back Cover Pages Front Cover; Back Cover
2. Risk/Return Summary: Investments, Factors Every Investor Should
Risks, and Performance Know: Principal Investments;
Principal Investment
Risks; Performance; The Funds'
Investments
3. Risk/Return Summary: Fee Table Factors Every Investor Should
Know: Fees and Expenses
4. Investment Objectives, Principal Factors Every Investor Should
Investment Strategies, and Related Risks Know: Investment Goals; Principal
Investments; Principal Investment
Risks; The Funds' Investments
5 Management's Discussion of Fund Not Applicable
Performance
6. Management, Organization, and Back Cover; Factors Every Investor
Capital Structure Should Know: Principal Investments;
Fees and Expenses; The Funds'
Investments; Investment Adviser
7. Shareholder Information Factors Every Investor Should
Know: Who May Want to Invest;
Investment and Account Policies:
Calculation of Net Asset Value;
How to Purchase Shares; How to
Exchange/Redeem Shares;
Dividends, Distributions and
Taxes
8. Distribution Arrangements For More Information
9. Financial Highlights Information Financial Highlights
<PAGE>
Part B. Statement of Additional
Item No. Information Caption
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Not Applicable
12. Description of the Fund and Its Investment Objectives and
Investments and Risks Policies; Investment Restrictions
13. Management of the Fund Management of the Trust and the Funds
14. Control Persons and Principal Holders Management of the Trust and the
of Securities Funds
15. Investment Advisory and Other Services Management of the Trust and the Funds;
Custodian, Counsel and Independent
Accountants; Portfolio Transactions
16. Brokerage Allocation and Other Practices Portfolio Transactions
17. Capital Stock and Other Securities Description of the Trust
18. Purchase, Redemption and Pricing of Purchase, Redemption and
Shares Determination of Net Asset Value;
Special Redemptions
19. Taxation of the Fund Dividends, Distributions and Taxes
20. Underwriters Management of the Trust and the Funds
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
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<PAGE>
Kobren Insight Funds
Registration Statement on Form N-1A
The purpose of filing Post-Effective Amendment No. 9 is to designate
December 17, 1998 as the new effective date for the Registrant's Post-Effective
Amendment No. 5 as filed with the Securities and Exchange Commission ("SEC") on
October 27, 1998 (Accession No. 0000927405-98-000313) ("Post-Effective Amendment
No. 5").
PART A
Prospectus for Kobren Growth Fund, Kobren Moderate Growth Fund and Kobren
Conservative Allocation Fund is incorporated by reference to Post-Effective
Amendment No. 3.
PART B
Statement of Additional Information for Kobren Growth Fund, Kobren Moderate
Growth Fund and Kobren Conservative Allocation Fund is incorporated by reference
to Registrant's Post-Effective Amendment No. 3.
P R O S P E C T U S
December 17, 1998
Kobren
Delphi Value Fund
The Securities and Exchange Commission has not approved the fund's shares as an
investment or determined whether this prospectus is accurate or complete. It is
a criminal offense to state otherwise.
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TABLE OF CONTENTS
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Page
FACTORS EVERY INVESTOR SHOULD KNOW............................................................................3
Investment goal..........................................................................................3
Principal investments....................................................................................3
How the manager selects the fund's investments............................................................3
Principal investment risks...............................................................................3
Who may want to invest...................................................................................4
Fees and expenses........................................................................................4
THE FUND'S INVESTMENTS........................................................................................5
INVESTMENT ADVISER AND SUBADVISER.............................................................................6
INVESTMENT AND ACCOUNT POLICIES...............................................................................7
Calculation of net asset value...........................................................................7
How to purchase shares...................................................................................8
How to exchange shares....................................................................................9
How to redeem shares......................................................................................9
Dividends, distributions and taxes......................................................................10
FOR MORE INFORMATION.........................................................................................12
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<PAGE>
FACTORS EVERY INVESTOR SHOULD KNOW
INVESTMENT GOAL
- - Long term growth of capital.
PRINCIPAL INVESTMENTS
- - At least 65% of assets in equity securities of U.S. companies. The fund may
invest in a mix of large, medium and small capitalization companies. The fund
may invest up to 35% of assets in securities of foreign issuers, including
emerging market issuers.
- - Equity securities include exchange-traded and over-the-counter (OTC) common
and preferred stocks, warrants, rights, convertible debt securities, trust
certificates, partnership interests and equity participations
HOW THE MANAGER SELECTS THE FUND'S INVESTMENTS
In selecting stocks for the fund's portfolio, the manager, Delphi Management,
Inc., follows a strict value discipline evaluating each company on
its own merits.
The manager uses a quantitative model to identify attractive companies
that have some of the following characteristics:
At least a 15% return on equity
Low debt to equity ratios
Sound financial conditions and conservative accounting practices
Good businesses with sustainable franchises
The model also considers revenues, earnings and free cash flow levels.
The manager engages in in-person visits or discussions with company
management before investing in a company.
The manager looks for management that is capable and candid about problems
and that has a viable strategic plan.
The manager selects for the fund's portfolio those attractive companies
that appear to be undervalued by the stock market. The measures of value used by
the manager include price/earnings multiples, cash flow multiples and low
price-to-liquidation values. These companies may be temporarily out of favor or
not closely followed by investors.
The manager intends to keep the fund fully invested in equity securities
and does not attempt to "time the market."
PRINCIPAL INVESTMENT RISKS
You could lose money on your investment in the Kobren Delphi Fund or the fund
could perform worse than other possible investments if any of the following
occurs:
The U.S. or a foreign stock market goes down.
- - The market favors growth stocks over value stocks or favors companies at a
particular capitalization level. An adverse event, such as an unfavorable
earnings report, depresses the value of a particular company's
stocks.
- - Prices of the fund's foreign securities go down because of unfavorable changes
in foreign currency exchange rates, foreign government actions, political
instability or the more limited availability of accurate information about
foreign issuers. These risks are more severe for issuers in emerging market
countries.
- The manager's judgments about the attractiveness, value
and potential appreciation of particular companies' stocks
prove to be incorrect.
<PAGE>
FACTORS EVERY INVESTOR SHOULD KNOW
WHO MAY WANT TO INVEST IN THE FUND
The fund may be appropriate for investors:
Seeking growth of capital.
With a long term time horizon and no need for current income.
Willing to accept stock market risk in exchange for the opportunity to
achieve higher long-term returns.
An investment in the fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
FEES AND EXPENSES
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This table describes the estimated fees and expenses that you may pay
if you buy and hold shares of the Kobren Delphi Fund.
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For year ended 12/31/99 Retail Class Institutional Class
Shareholder fees
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases None None
Maximum deferred sales charge (load) None None
Redemption fee None None
Exchange fee None None
Annual fund operating expenses
(expenses that are deducted from fund assets)
Management fees 1.00% 1.00%
Distribution (12b-1) and/or service fees 0.25% None
Other expenses 0.23% 0.23%
Total annual fund operating expenses 1.48% 1.23%
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The example assumes that
You invest $10,000 in the fund for the time periods indicated; Your
investment has a 5% return each year; The fund's operating expenses remain
the same; and You redeem your investment at the end of each period.
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
Retail Class Institutional Class
1 year $151 $125
3 years $468 $390
<PAGE>
THE FUND'S INVESTMENTS
More about the fund's strategies and investments
DEFENSIVE INVESTING
The fund may depart from its principal investment strategies by taking temporary
defensive positions in debt securities in response to adverse market,
economic or political conditions for up to 100% of the portfolio. These
securities may be of any maturity or duration and may be issued by the U.S.
Governent or any of its agencies, foreign governments, supranational entities
such as the World Bank and U.S. and foreign companies. Defensive investing may
prevent the fund from achieving its goal of capital growth. The fund could give
up potential gains and minimize losses while defensively invested.
DERIVATIVE CONTRACTS
The fund may, but is not required to, use derivative contracts for any of the
following purposes:
To hedge against adverse changes in the market value of securities held by
or to be bought for the fund. These changes may be caused by changing stock
market prices or currency exchange rates.
As a substitute for purchasing or selling securities or foreign
currencies.
A derivative contract will obligate or entitle the fund to deliver or receive an
asset or a cash payment that is based on the change in value of a designated
security, index or currency. Examples of derivative contracts are futures
contracts, options, forward contracts, swaps, caps, collars and floors.
THE FUND'S INVESTMENT GOAL
The board of trustees may change the fund's investment goal without obtaining
the approval of the fund's shareholders. The fund might not succeed in achieving
its goal.
ADDITIONAL INVESTMENT RISKS
The fund could lose money or underperform for the reasons listed in the
"Factors Every Investor Should Know" section or for the following additional
reasons:
Small company risk. Securities of smaller companies may have more risks than
those of larger companies - they may be more susceptible to market downturns and
their prices may be more volative.
Interest rate risk. If interest rates go up, bond prices and the value of
the fund's investments in fixed income securities go down.
Credit risk. An issuer of a debt security or OTC derivative contract could
default on its obligation to pay principal and interest, or a rating
organization could downgrade the credit rating of the issuer.
Leverage risk. Because of investments in derivative contracts, the fund
may suffer disproportionately heavy losses relative to the amount of its
investment. Leverage can magnify the impact of poor investment decisions.
Correlation risk. Changes in the value of the fund's derivative contracts
or other hedging instruments may not match or fully offset changes in the value
of the hedged portfolio securities.
Liquidity and valuation risks. Securities that were liquid when purchased
by the fund may become temporarily illiquid and hard to value, especially in
declining markets.
Turnover risks. The fund may engage in active trading to achieve its
investment strategies. However, the fund anticipates an annual portfolio
turnover rate of less than 50%.
YEAR 2000
The fund's securities trades, pricing and accounting services and other
operations could be adversely affected if the computer systems of the adviser,
subadviser, distributor, custodian or transfer agent were unable to recognize
dates after 1999. The adviser, the subadviser and other service providers have
told the fund that they are taking action to prevent, and do not expect the fund
to suffer from, significant year 2000 problems. The value of their
securities could go down if they do noy fix these problems in time or if fixing
them is very expensive.
<PAGE>
INVESTMENT ADVISER AND SUBADVISER
KOBREN INSIGHT MANAGEMENT, INC.
Kobren Insight Management, Inc. ("KIM") provides investment advice and portfolio
management services to the fund. KIM has engaged Delphi Management, Inc.
("Delphi") as the fund's subadviser. Under the supervision of KIM and the board
of trustees, Delphi makes the fund's day-to-day investment decisions, arranges
for the execution of portfolio transactions and generally manages the fund's
investments.
KIM, a registered investment adviser, was established in 1987. KIM currently
manages over 1,000 client accounts with assets totaling approximately $1
billion. KIM is also the investment adviser of three funds of funds under the
Kobren Insight Funds label.
Eric M. Kobren owns all of the stock of KIM and of the fund's distributor. Mr.
Kobren is also the principal shareholder of Mutual Fund Investors Association,
Inc., the publisher of Fidelity Insight and FundsNet Insight reports with over
100,000 paid subscribers.
Scott M. Black has been the fund's portfolio manager since the fund's inception
in 1998. Mr. Black has been the president and controlling shareholder of Delphi
since 1983. Since 1980, Delphi (and its predecessor firm) has limited its
management services to institutional investors, including pensions, endowments
and high net worth individuals. Delphi currently manages approximately $1
billion in assets.
The fund has agreed to pay KIM a monthly advisory fee at the annual rate of
1.00% of the fund's average daily net assets. KIM is responsible for Delphi's
subadvisory fee.
KIM has voluntarily agreed to cap the fund's total annual
operating expenses of the retail class at no more than
1.75% annually of the fund's average daily net assets and
of the institutional class at no more than 1.50%. This cap
does not apply to brokerage commissions, taxes, interest
and litigation, indemnification and other extraordinary
expenses. Although this expense cap arrangement can be
revoked at any time, KIM plans to continue this
arrangement until January 1, 2000.
DISTRIBUTION ARRANGEMENTS
The fund has adopted a plan under rule 12b-1 for the retail class shares of the
fund. The plan allows the fund to use part of the fund's assets (up to .25% of
its average daily net assets) for the sale and distribution of its shares,
including advertising, marketing and other promotional activities. Because
these fees are paid out of fund assets, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
Delphi Management, Inc. Composite Performance
The composite is made up of all high net worth individual and institutional
equity portfolios under Delphi's discretionary management. The portfolios have
objectives, policies and strategies similar to those of the fund.
Average Annual Total Return
Return of Composite
(for the Periods Ended June 30, 1998)
Since Inception
1 year 3 years 5 years 10 years (January 1, 1980)
- ------ ------- ------- -------- -----------------
27.51% 27.13% 20.35% 15.62% 17.58%
Performance of the composite is not that of Kobren Delphi Value Fund, is not a
substitute for the fund's performance and does not predict the fund's future
performance results, which may differ from those of the composite.
Net performance data reflects the deduction of a 1.48% fee, which is the
same as Kobren Delphi Value Fund's estimated first year operating expenses.
Composite performance was calculated using a time-weighted methodology,
adjusting for significant cash flows and linking montly returns. Individual
account performance was equal-weighted and therefore did not factor in account
size.
Composite performance would be reduced if advisory accounts held cash positions
or had inflows and outflows of cash to the same extent as the fund. In
addition, advisory accounts are not subject to 1940 Act investment restrictions
nor to the provisions of the Internal Revenue Code relating to regulated
investment companies. These restrictions and provisions could have had an
adverse effect on the composite performance.
Since the above returns were not calculated for a mutual fund, they are not
based on SEC performance standards. Performance calculations based on SEC
standards would have been different.
<PAGE>
INVESMENT AND ACCOUNT POLICIES
The fund calculates its NAV every business day.
CALCULATION OF NET ASSET VALUE
The fund calculates the net asset value per share (NAV) for each class at the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.
eastern time) on each business day. A business day is a weekday that is not a
holiday listed in the statement of additional information. If the New York Stock
Exchange closes early, the time for calculating NAV and the deadlines for share
transactions will be accelerated to the earlier closing times.
The fund's portfolio securities are valued on the basis of either market
quotations or at fair value, which may include the use of pricing services.
Fair value means estimating a security's value at other than the market
quotation. The effect of such method may be that the price used may be different
than other fund's pricing using market quotations.
PURCHASING FUND SHARES
Individuals, institutions, companies and fiduciaries may buy shares of the fund
without a sales charge at the NAV next calculated after the order has been
received in proper form.
CHOOSING A SHARE CLASS
The fund offers two share classes, each with its own expense structure. The
retail class has a 12b-1, or marketing fee. The fee allows the fund to pay for
certain activities and expenses intended primarily to result in the sale of the
retail class shares of the fund. The institutional class, available only to
qualified investors, does not have a marketing fee, but has substantial initial
and on-going minimum investment levels.
TAX-DEFERRED RETIREMENT PLANS
Traditional individual retirement account (IRA) plans and Roth individual
retirement plans can invest in the fund through Investor Services Group. The
following retirement plans are available through the mutual fund networks listed
on page 8.
Keough plans for self-employed individuals
SEP and SARSEP plans for corporations
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
WIRE AND ACH TRANSFERS
The fund currently imposes no fee for wire and Automated Clearing House (ACH)
transfers of purchase payments and redemption proceeds. However, the fund's
custodian may charge a fee in the future.
TELEPHONE TRANSACTIONS
The fund and Investor Services Group have procedures designed to verify that
telephone instructions are genuine. If they follow these procedures, they will
not be liable for any losses caused by acting on unauthorized telephone
instructions.
MINIMUM INVESTMENT AMOUNTS
The following minimum investment requirements apply to initial
purchases of the retail class:
TYPE OF ACCOUNT RETAIL INSTITUTIONAL
Regular Accounts $2,500 $1 million
Individual Retirement Accounts $2,000 N/A
Through fund networks (see page 8) $2,500 $1 million
Subsequent Investments: There is a $500 minimum for Retail Class (no minimum
for Institutional Class).
Institutional Class: The minimum investment requirement for the institutional
class is $1million. For investors purchasing through registered investment
advisers, institutions such as trusts or foundations or other qualified
investors purchasing through an omnibus account, shareholder purchases may be
aggregated to meet this minimum. The minimum does not apply to employees of KIM
and its affiliates and their immediate families, KIM clients and employees of
Delphi and their immediate families.
Retail and Institutional Classes: You can get prospectuses, sales literature and
applications from the fund's distributor at the address and telephone number
listed on the back cover of this prospectus. The fund and its distributor may
reject all or part of any order to buy fund shares. The fund may be closed to
new investors, temporarily or permanently, without advance notice to investors.
Fund officers have discretion to waive or reduce any of the minimum
investment requirements.
<PAGE>
HOW TO PURCHASE SHARES
Method of Purchase/Purchase Procudures
By check
OPEN AN ACCOUNT
To open an account and make an initial investment in retail class shares,
send a minimum $2,500 ($2,000 for IRAs) check and a completed account
application to the address shown below. The initial minimum investment in
institutional class shares is $1 million.
- - An account application is included with this prospectus.
ADD TO AN ACCOUNT
Send a check (no less than $500 for retail class shares) with your account
name and number to permit proper crediting. You can use the deposit slip
attached to the bottom of all account statements.
- - If you are adding to an IRA account, please provide the contribution year.
ALL PURCHASES
Your checks should be drawn on a U.S. bank or savings institution and
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 to the fund, its distributor or Investor
Services Group.
By wire
OPEN AN ACCOUNT
To purchase shares by wire, call Investor Services Group for instructions
at the number shown below.
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 payment.
You will be assigned a new account number. You should write this number on
and complete an account application, which must be sent promptly to the address
shown below.
Your purchase order will not take effect until both the wire and the
purchase order are received by the fund.
You will be able to redeem shares of the fund, but not receive the
proceeds, until the fund has received your completed account application
form. Also, if a signed application form is not received within 60 days, your
account will be subject to backup tax withholding.
ADD TO AN ACCOUNT
When you purchase more shares by wire, provide your fund name, account
name and account number to permit proper crediting.
- To receive timely credit, you must call and tell Investor
Services Group that your bank is sending a wire.
By Automated Clearing House transfer (ACH)
If you want to purchase shares for non-retirement accounts via electronic
funds transfer, check this option in section 5 of your application.
Call Investor Services Group before 4:00 p.m. Eastern time.
By automatic investment plan
After your initial investment, you can make automatic monthly, quarterly
or annual purchases (on the day you choose in advance) of $100 or more.
To use this plan, complete sections 5 and 6 of the application. You can
change the purchase amount or terminate the plan at any time by notifying the
fund in writing.
Through broker dealers and fund networks
Contact your broker-dealer to find out about its procedures for processing
orders to purchase fund shares. Purchase orders received by your broker-dealer
or its agent before 4:00 p.m. Eastern time on any business day receive that
day's NAV. Your dealer is responsible for promptly transmitting properly
completed orders to Investor Services Group.
- - The fund may also be purchased through the following fund networks:
Fidelity Investments 800-544-9697
Charles Schwab & Company 800-266-5623
Jack White & Company 800-323-3263
Waterhouse Securities 800-934-4443
Send mail to:
Kobren Insight Funds
P.O. Box 5146
4400 Computer Drive
Westborough, MA 01581
Call:
Investor Services Group
toll-free at
800-895-9936
<PAGE>
HOW TO EXCHANGE/REDEEM SHARES
Method of Exchange/Exchange Procedures
All exchanges
You may exchange shares of the fund for shares of any other Kobren Insight
fund at the NAV of the funds next determined after receipt of your exchange
request.
Exchanges must meet the applicable minimum initial investment requirements
for the acquired fund.
To protect other shareholders of the fund, the fund may cancel the
exchange privileges of any person that, in the opinion of the fund, is using
market timing strategies or making more than four exchanges per owner or
controlling person per calendar year. The fund may also close the accounts of
shareholders whose exchange privilege has been cancelled.
The fund's trustees may change or terminate the exchange privilege on 60 days'
prior notice to shareholders.
By mail
Send a written exchange request to the address shown below.
Your request must state the number of shares or dollar amount to be
exchanged, both funds' names and the applicable account numbers for both funds.
The request must be signed exactly as your name appears on the account
registration.
By telephone
Call Investor Services Group at the telephone number shown below.
- - If you are unable to execute a telephone exchange (for example during times
of unusual market activity), you should consider requesting an exchange by
mail.
Method of Redemption/Redemption Procedures
By mail
You may redeem shares of the fund by sending a written redemption request
to the Kobren Insight funds at the address shown below.
Your request must state the number of shares or dollar amount to be
redeemed and the applicable account number.
The request must be signed exactly as your name appears on the account
registration.
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 under "Signature guarantees."
If you want redemption proceeds deposited directly through an ACH transfer in
the bank account or brokerage account designated on your account application,
you should say so in your written redemption request. Call Investor Services
Group for more information about ACH transfers.
By telephone
To redeem by telephone, call Investor Services Group at the number shown
below.
- - You can request that redemption proceeds be deposited directly through an ACH
transfer in the bank account or brokerage account designated on your account
application.
Through broker-dealers and fund networks
Contact your broker-dealer to find out about its procedures for processing
orders to redeem fund shares. Redemption orders received by yourbroker-dealer or
its agent before 4:00 p.m. Eastern time on any business day receive that day's
NAV. Your broker-dealer is responsible for promptly transmitting properly
completed orders to Investor Services Group and may charge a transaction fee for
this service.
Systematic withdrawal plan
If shares in your account have a value of at least $5,000, 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.
- - Call Investor Services Group at the number shown below for more information.
Send mail to:
Kobren Insight Funds
P.O. Box 5146
4400 Computer Drive
Westborough, MA 01581
Call:
Investor Services Group
toll-free at
800-895-9936
<PAGE>
INVESTMENT AND ACCOUNT POLICIES
You may redeem shares of the fund on any business day at the NAV next calculated
after the receipt of your redemption request in proper form.
REDEEMING FUND SHARES
Redemption proceeds are usually sent on the business day after the effective
date of a redemption. However, the payment of redemption proceeds for shares
purchased by check will be delayed until after the check has cleared, which may
take up to 15 days. Under unusual circumstances, the fund may suspend
redemptions, if allowed by the SEC, or postpone payment.
Redemption proceeds are paid by wire or, at your request, ACH transfer to the
bank or brokerage account designated on your account application. If you have
not designated an account or if is impossible or impractical to wire redemption
proceeds, they will be sent by mail to your record address. You may change your
designated account by sending to the address on the previous page a written
request or supplemental telephone redemption authorization form (available from
Investor Services Group) that has been signature guaranteed by an eligible
guarantor institution.
SIGNATURE GUARANTEES
The fund will accept signature guarantees from the following institutions:
banks, broker-dealers, credit unions, savings institutions, national securities
exchanges, registered securities associations and clearing agencies.
Shareholders that are corporations, partnerships, trusts, estates or other
organizations may be required to provide documents evidencing that a request to
redeem shares or change a designated bank or brokerage account has been properly
authorized.
CLOSING OR CONVERSION OF SUB-MINIMUM ACCOUNTS
The fund may close your retail class account if, for reasons other than market
losses, the value of your shares falls below $1,000, or any other minimum set by
the fund's trustees. The fund may convert your institutional class shares to
retail class shares if the value of your account as a result of share
redemptions falls below $250,000. After the fund notifies you of its intention
to close your retail class account or convert your institutional shares, you
will have 60 days to bring the account back to the minimum level.
The fund declares and pays dividends according to the schedule on the right.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Redemptions and exchanges of fund shares are taxable events on which you may
recognize a gain or loss. Dividends and distributions are also taxable, as
described in the chart below, whether they are received in additional shares or
cash.
Dividends are paid in additional shares of the fund unless you elect to receive
them in cash.
Type of Distribution Declared and Paid Federal Tax Sta
Dividends from net annually Taxable as ordinary gain
investment income
Distributions of short annually Taxable as ordinary income
term capital gain
Distributions of long annually Taxable as capital gain
term capital gain
<PAGE>
You should generally avoid investing in the fund shortly before an expected
dividend or distribution. Otherwise, you may pay taxes on dividends or
distributions that are economically equivalent to a partial return of your
investment.
You should consult your tax adviser about particular federal, state, local and
other taxes that may apply to you.
Every January, the fund will send you information about the fund's dividends and
distributions during the previous calendar year. Most of the fund's
distributions are expected to be capital gains.
If you do not provide the fund with a correct taxpayer identification number and
required certifications, you may be subject to federal backup withholding tax.
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FOR MORE INFORMATION
For investors who want more information about the fund, the following documents
are available free upon request.
Annual/Semiannual Reports
Additional information about the fund's investments is available in the fund's
annual and semiannual reports to shareholders. The fund's annual report contains
a discussion of the market conditions and investment strategies that
significantly affected the fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI provides more detailed information about the fund and is incorporated
into this prospectus by reference.
Contacting Principal Distributor
Investors can get free copies of reports and SAIs, request other information and
discuss their questions about the fund by contacting the fund's principal
distributor at:
Address: Kobren Insight Brokerage, Inc.
20 William Street, Suite 310
P.O. Box 9150
Wellesley Hills, MA 02181
Phone: 1-800-4KOBREN (1-800-456-2736)
E-mail: [email protected]
Internet: http://www.kobren.com
Contacting the SEC
Investors can review the fund's reports and SAIs at the Public Reference Room of
the Securities and Exchange Commission. Information on the operation of the
Public Reference room may be obtained by calling the Commission at
1-800-SEC-0330. Investors can get text-only copies:
For a fee, by writing to or calling the Public Reference Room of the Commission,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330.
Free from the Commission's Internet website at http://www.sec.gov.
Investment Company Act file no. 811-07813
INVESTMENT ADVISER
Kobren Insight Management, Inc.
20 William Street, PO Box 9135
Wellesley Hills, MA 02481
Toll-free: 1-800-456-2736
ADMINISTRATOR
First Data Investor
Services Group, Inc.
TRANSFER AGENT
First Data Investor
Services Group, Inc.
Toll-free: 1-800-895-9936
SUBADVISER
Delphi Management, Inc.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
LEGAL COUNSEL
Hale and Dorr LLP
CUSTODIAN
Boston Safe Deposit
and Trust Company
December 17, 1998
KOBREN INSIGHT FUNDS
KOBREN DELPHI VALUE FUND
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 the Kobren Delphi
Value Fund (the "fund"), a series of Kobren Insight Funds (the "trust"), dated
December 15, 1998. The statement of additional information should be
read in conjunction with the fund's prospectus. The fund'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. Terms not otherwise
defined herein have the same meaning as in the prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PAGE
I. INVESTMENT OBJECTIVE AND POLICIES..................................................................2
II. INVESTMENT RESTRICTIONS...........................................................................15
III. MANAGEMENT OF THE TRUST AND THE FUND
A. Trustees and Officers.....................................................................17
B. Investment Adviser.........................................................................19
C. Distribution...............................................................................20
D.Administrator, Transfer Agent and Dividend Paying Agent....................................................21
IV. PURCHASE, REDEMPTION AND DETERMINATION
OF NET ASSET VALUE.........................................................................21
V. SPECIAL REDEMPTIONS...............................................................................22
VI. PORTFOLIO TRANSACTIONS............................................................................23
VII. PERFORMANCE INFORMATION
A. Total Return...............................................................................24
B. Non-Standardized Total Return..............................................................24
C. Other Information Concerning Fund Performance..............................................25
VIII. DIVIDENDS, DISTRIBUTIONS AND TAXES................................................................30
IX. CUSTODIAN, COUNSEL AND INDEPENDENT ACCOUNTANTS....................................................34
X. DESCRIPTION OF THE TRUST..........................................................................34
XI. ADDITIONAL INFORMATION............................................................................35
</TABLE>
<PAGE>
I. INVESTMENT OBJECTIVES AND POLICIES
Kobren Insight Funds (the "trust") is a no-load open-end, diversified
investment company, registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust currently offers four separate
series, each with different investment objectives. This Statement of Additional
Information pertains to the Kobren Delphi Value Fund (the "fund") only. The
fund's investment objective is long term growth of capital. The fund seeks to
achieve its investment objective by investing at least 65% of its assets in
equity securities of U.S. companies.
Investments in Small, Unseasoned Companies. The securities of small, unseasoned
companies may have a limited trading market, which may adversely affect their
disposition and can result in their being priced lower than what might otherwise
be the case. If other investment companies and investors who invest in these
issuers trade the same securities when the fund attempts to dispose of its
holdings, the fund may receive lower prices than what might otherwise be
obtained.
Foreign Securities. The fund may invest a portion of its assets 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 special risks and
considerations that are not present when a fund invests in domestic securities.
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. In addition, the value of foreign fixed income investments will
fluctuate in response to changes in U.S. and foreign rates.
Exchange Rates. Since the 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.
The 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 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. It is expected that the 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. However, there
is no assurance that currency controls will not be imposed after the time of
investment.
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 the fund's assets held abroad) and expenses not present in
the settlement of domestic investments. A delay in settlement could hinder the
ability of the 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 the 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 the 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 the 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 the 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 the
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 emerging market countries 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. The 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, the fund could , 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 could 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 other financial institutions) 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.
Portfolio Securities Loans. The 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 may at any time call the loan and obtain the
securities loaned; (3) the 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.
The fund may pay reasonable fees in connection with securities loans. Kobren
Insight Management, Inc. ("KIM" or the "Adviser") and/or Delphi Management, Inc.
("Delphi" or the "Subadviser") will evaluate the credit-worthiness of
prospective institutional borrowers and monitor the adequacy of the collateral
to reduce the risk of default by borrowers from the 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. The 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, the fund must also deposit in a
segregated account an amount of cash or liquid securities equal to the
difference between (1) the market value of the securities 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 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.
The 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 owns an equal amount of the securities
or securities convertible into, or exchangeable without further consideration
for, securities of the same issuer as the securities sold short. The extent to
which such a transaction may be used to defer a gain for federal income tax
purposes was significantly curtailed by federal tax legislation enacted in 1997.
FUTURES, OPTIONS, SWAPS AND CURRENCY CONTRACTS
Futures, Options, Swaps and Currency Contracts and Their Risks. Any 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. The 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 the fund's initial investment. The 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 fund
incurs transaction costs in opening and closing positions in derivative
contracts.
Derivative contracts may sometimes increase or leverage the fund's
exposure to a particular market risk. Leverage magnifies the price volatility of
derivative contracts held by the 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.
The 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 fund's
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.
Options on Securities, Securities Indices and Currency. The fund may purchase
and write (sell) call and put options on any securities in which it may invest,
any securities index based on securities in which it may invest or any currency
in which fund investments may be denominated. These options may be listed on
U.S. or foreign securities exchanges or traded in the over-the-counter market.
The fund may write covered put and call options and purchase put and call
options to enhance total return, as a substitute for the purchase or sale of
securities or currency, or to protect against declines in the value of portfolio
securities and against increases in the cost of securities to be acquired.
Writing Covered Options. A call option on securities or currency written by the
fund obligates the fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by the fund
obligates the fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive the fund of the opportunity to profit from an increase in the market
price of the securities or foreign currency assets in its portfolio. Writing
covered put options may deprive the fund of the opportunity to profit from a
decrease in the market price of the securities or foreign currency assets to be
acquired for its portfolio.
All call and put options written by the fund are covered. A written
call option or put option may be covered by (i) maintaining cash or liquid
securities, either of which may be quoted or denominated in any currency, in a
segregated account with a value at least equal to the fund's obligation under
the option, (ii) entering into an offsetting forward commitment and/or (iii)
purchasing an offsetting option or any other option which, by virtue of its
exercise price or otherwise, reduces the fund's net exposure on its written
option position. A written call option on securities is typically covered by
maintaining the securities that are subject to the option in a segregated
account. The fund may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index.
The fund may terminate its obligations under an exchange traded call or
put option by purchasing an option identical to the one it has written.
Obligations under an over-the-counter option may be terminated only by entering
into an offsetting transaction with the counterparty to the option. These
purchases are referred to as "closing purchase transactions."
Purchasing Options. The fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts"), in the market value of securities or currencies of the type
in which it may invest. The fund may also sell call and put options to close out
its purchased options.
The purchase of a call option would entitle the fund, in return for the
premium paid, to purchase specified securities or currency at a specified price
during the option period. The fund would ordinarily realize a gain on the
purchase of a call option if, during the option period, the value of such
securities or currency exceeded the sum of the exercise price, the premium paid
and transaction costs; otherwise the fund would realize either no gain or a loss
on the purchase of the call option.
The purchase of a put option would entitle the fund, in exchange for
the premium paid, to sell specified securities or currency at a specified price
during the option period. The purchase of protective puts is designed to offset
or hedge against a decline in the market value of the fund's portfolio
securities or the currencies in which they are denominated. Put options may also
be purchased by the fund for the purpose of affirmatively benefiting from a
decline in the price of securities or currencies which it does not own. The fund
would ordinarily realize a gain if, during the option period, the value of the
underlying securities or currency decreased below the exercise price
sufficiently to cover the premium and transaction costs; otherwise the fund
would realize either no gain or a loss on the purchase of the put option. Gains
and losses on the purchase of put options may be offset by countervailing
changes in the value of the fund's portfolio securities.
The fund's options transactions will be subject to limitations
established by each of the exchanges, boards of trade or other trading
facilities on which these options are traded. These limitations govern the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written or purchased on the same or different exchanges, boards
of trade or other trading facilities or are held or written in one or more
accounts or through one or more brokers. Thus, the number of options which the
fund may write or purchase may be affected by options written or purchased by
other investment advisory clients of the fund's adviser. An exchange, board of
trade or other trading facility may order the liquidation of positions found to
be in excess of these limits, and it may impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The fund's ability to terminate over-the-counter options is more
limited than with exchange-traded options and may involve the risk that
broker-dealers participating in these transactions will not fulfill their
obligations. The Adviser will determine the liquidity of the fund's
over-the-counter options in accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The successful use of options
depends in part on the ability of the fund's adviser to predict future price
fluctuations and, for hedging transactions, the degree of correlation between
the options and securities or currency markets.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates, securities prices or currency
exchange rates, the fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on these futures
contracts. The fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. The futures contracts may be
based on various securities (such as U.S. government securities), securities
indices, foreign currencies and any other financial instruments and indices. All
futures contracts entered into by the fund are traded on U.S. or foreign
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract is an agreement between two parties to buy
and sell particular financial instruments or currencies for an agreed price
during a designated month (or to deliver the final cash settlement price, in the
case of a contract relating to an index or otherwise not calling for physical
delivery at the end of trading in the contract).
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which may
result in a profit or a loss. While futures contracts on securities or currency
will usually be liquidated in this manner, the fund may instead make, or take,
delivery of the underlying securities or currency whenever it appears
economically advantageous to do so. A clearing corporation associated with the
exchange on which futures contracts are traded guarantees that, if still open,
the sale or purchase will be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish the effective
price or rate of return on portfolio securities or securities that the fund
proposes to acquire or the exchange rate of currencies in which portfolio
securities are quoted or denominated. When interest rates are rising or
securities prices are falling, the fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When interest rates are falling or securities prices are rising, the fund,
through the purchase of futures contracts, can attempt to secure better rates or
prices than might later be available in the market when it effects anticipated
purchases. The fund may seek to offset anticipated changes in the value of a
currency in which its portfolio securities, or securities that it intends to
purchase, are quoted or denominated by purchasing and selling futures contracts
on these currencies.
The fund may, for example, take a "short" position in the futures
market by selling futures contracts in an attempt to hedge against an
anticipated rise in interest rates or a decline in market prices or foreign
currency rates that would adversely affect the dollar value of the fund's
portfolio securities. These futures contracts may include contracts for the
future delivery of securities held by the fund or securities with
characteristics similar to those of the fund's portfolio securities. Similarly,
the fund may sell futures contracts on any currencies in which its portfolio
securities are quoted or denominated or in one currency to hedge against
fluctuations in the value of securities denominated in a different currency if
there is an established historical pattern of correlation between the two
currencies.
If, in the opinion of the Adviser or Subadviser, there is a sufficient
degree of correlation between price trends for the fund's portfolio securities
and futures contracts based on other financial instruments, securities indices
or other indices, the fund may also enter into these futures contracts as part
of its hedging strategy. Although under some circumstances prices of securities
in the fund's portfolio may be more or less volatile than prices of these
futures contracts, the Adviser will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any
differential by having the fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the fund's portfolio securities.
When a short hedging position is successful, any depreciation in the
value of portfolio securities will be substantially offset by appreciation in
the value of the futures position. On the other hand, any unanticipated
appreciation in the value of the fund's portfolio securities would be
substantially offset by a decline in the value of the futures position.
On other occasions, the fund may take a "long" position by purchasing
futures contracts. This would be done, for example, when the fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices or currency exchange rates then available in the
applicable market to be less favorable than prices that are currently available.
The fund may also purchase futures contracts as a substitute for transactions in
securities or foreign currency, to alter the investment characteristics of or
currency exposure associated with portfolio securities or to gain or increase
its exposure to a particular securities market or currency.
Options on Futures Contracts. The fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, a fund obtains the benefit of the
futures position if prices move in a favorable direction but limits its risk of
loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of the fund's assets. By
writing a call option, the fund becomes obligated, in exchange for the premium
(upon exercise of the option) to sell a futures contract if the option is
exercised, which may have a value higher than the exercise price. Conversely,
the writing of a put option on a futures contract generates a premium which may
partially offset an increase in the price of securities that a fund intends to
purchase. However, the fund becomes obligated (upon exercise of the option) to
purchase a futures contract if the option is exercised, which may have a value
lower than the exercise price. The loss incurred by the fund in writing options
on futures is potentially unlimited and may exceed the amount of the premium
received.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option of the same series.
There is no guarantee that these closing transactions can be effected. The
fund's ability to establish and close out positions on these options will be
subject to the development and maintenance of a liquid market.
Other Considerations. The fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities (or the currency in which
they are quoted or denominated) that the fund owns or futures contracts will be
purchased to protect the fund against an increase in the price of securities (or
the currency in which they are quoted or denominated) it intends to purchase.
The fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the fund or securities or instruments which
it expects to purchase. As evidence of the fund's hedging intent, on 75% or more
of the occasions on which it takes a long futures or option position (involving
the purchase of futures contracts), the fund must have purchased, or will be in
the process of purchasing, equivalent amounts of related securities (or assets
denominated in the related currency) in the cash market at the time when the
futures or option position is closed out. However, in particular cases, when it
is economically advantageous for the fund to do so, a long futures position may
be terminated or an option may expire without the corresponding purchase of
securities or other assets.
To the extent that the fund engages in nonhedging transactions in
futures contracts and options on futures, the aggregate initial margin and
premiums required to establish these nonhedging positions may not exceed 5% of
the net asset value of the fund's portfolio, after taking into account
unrealized profits and losses on any such positions and excluding the amount by
which these options were in-the-money at the time of purchase.
Transactions in futures contracts and options on futures involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the fund to purchase securities or currencies, require the
fund to establish a segregated account consisting of cash or liquid securities
in an amount equal to the underlying value of these contracts and options.
While transactions in futures contracts and options on futures may
reduce certain risks, these transactions themselves entail certain other risks.
For example, unanticipated changes in interest rates, securities prices or
currency exchange rates may result in a poorer overall performance for the fund
than if it had not entered into any futures contracts or options transactions.
Perfect correlation between the fund's futures positions and portfolio
positions will be impossible to achieve. In the event of an imperfect
correlation between a futures position and the portfolio position to be hedged,
the desired protection may not be obtained and the fund may be exposed to risk
of loss. In addition, it is not possible to hedge fully or protect against
currency fluctuations affecting the value of securities denominated in foreign
currencies because the value of these securities is likely to fluctuate as a
result of independent factors not related to currency fluctuations.
Some futures contracts or options on futures may become illiquid under
adverse market conditions. In addition, during periods of market volatility, a
commodity exchange may suspend or limit trading in a futures contract or related
option, which may make the instrument temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or related option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the fund from closing out
positions and limiting its losses.
Restricted and Illiquid Securities. The 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, as amended (the "1933 Act"), and commercial paper
offered under Section 4(2) of the 1993 Act are not subject to the fund's 15%
limit on illiquid investments, if they are determined to be liquid.
Borrowing, Reverse Repurchase Agreements and Leverage. The fund 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, the 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.
Under the 1940 Act, a 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.
Defensive Investing. For temporary defensive purposes under abnormal market
conditions, the fund may hold or invest up to 100% of its total assets
in cash, investment grade fixed income securities, repurchase agreements and/or
money market fund shares.
FIXED INCOME SECURITIES
Fixed Income 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 credit-worthiness, 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.
Money Market Instruments. The fund may invest up to 100% in money market
instruments, including obligations issued or guaranteed by the United States
government, its agencies or instrumentalities; certificates of deposit, time
deposits and bankers' acceptances issued by or maintained at U.S. and foreign
banks; and commercial paper.
Repurchase Agreements. The fund 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.
High Yield Securities and Their Risks. The fund will not invest directly more
than 35% of its total assets in high yield, high-risk, lower-rated securities,
commonly known as "junk bonds." Junk bonds are securities rated below the top
four 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. The 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 the 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 the 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 the 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, the 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 the fund to accurately value high yield, high risk securities or dispose of
them. To the extent the 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." The 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, the 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, the 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 fund must 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 the fund invests in high yield, high risk securities, the achievement of
the fund's investment objective may be more dependent on the fund's own credit
analysis than is the case for higher quality bonds. The 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. The fund 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 mortgages. They may be issued 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.
The 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 a 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.
The 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-based
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.
Year 2000 Risks. Like other mutual funds, financial and business organizations
and individuals around the world, the fund could be adversely affected if the
computer systems used by the Adviser or Subadviser and other service providers
do not properly process and calculate date-related information from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." KIM is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by each of the
fund's other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on the
fund. In addition, the companies in which the fund may invest may have Year
2000 computer problems. The value of their securities could go down if they do
not fix their problems in time or if fixing them is very expensive.
II. INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES. The 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 the 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).
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 fund from issuing senior
securities or borrowing money. However, the 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). If borrowings
exceed this one-third limitation, for any reason, the fund must reduce the
amount of its borrowings to not more than one-third of total assets within three
business days.
Additional investment restrictions adopted by the fund, which may be
changed by the Board of Trustees, provide that the fund may not:
1. With respect to 75% of the fund's assets, invest more than 5%
of the fund's assets (taken at 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.
III. MANAGEMENT OF THE TRUST AND THE FUND
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 02481 - 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 Kobren Insight Management, Inc. and Kobren Insight
Brokerage, Inc. since 1987. These are a financial publishing concern, a
registered investment advisory firm and a registered broker-dealer,
respectively. Mr. Kobren is 44 years old.
*MICHAEL P. CASTELLANO, 134 Redspruce Drive, Lake Naomi, Pennsylvania, 18350 -
Trustee. Retired. From December 1994 to June 1997, Mr. Castellano served as
Chief Administrative Officer of Kobren Insight Management, Inc. and as a
registered representative of Kobren Insight Brokerage, Inc. 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 56 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 47 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 also acted as a Director of Enhance Financial from 1986
to 1991 and 1992 to 1996. 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. Mr. Dubroff is 47 years old.
STUART J. NOVICK, Children's Hospital, 300 Longwood Avenue, Boston,
Massachusetts 02115 - Trustee. Since April 1997, Mr. Novick has served as Senior
Vice President and General Counsel of Children's Hospital. From July 1984 to
April 1997, Mr. Novick served as Vice President and General Counsel of
Children's Hospital. He is 47 years old.
ERIC J. GODES, 20 William Street, Suite 310, P.O. Box 9135, Wellesley Hills,
Massachusetts 02481 - Vice President, Treasurer and Secretary. Mr. Godes, an
investment advisory representative of Kobren Insight Management, Inc. and Vice
President and a registered representative of Kobren Insight Brokerage, Inc., has
been associated with both companies since 1990. He is 37 years old.
EDWARD R. GOLDFARB, 20 William Street, Suite 310, P.O. Box 9135, Wellesley
Hills, Massachusetts 02481 - Vice President. Since September 1995, Mr. Goldfarb
has been Director of Research and Chief Strategist of Kobren Insight Management,
Inc. as well as a registered representative of Kobren Insight Brokerage, Inc.
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 37 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.
Compensation Table
<TABLE>
<CAPTION>
The following table sets forth the compensation paid to the Trustees of
the trust for the fiscal year ended December 31, 1997. No compensation is paid
to any officers of the trust by the funds.
<S> <C> <C> <C>
TOTAL COMPENSATION
AGGREGATE FROM THE FUND
NAME OF PERSON COMPENSATION AND FUND COMPLEX
AND POSITION FROM THE FUND PAID TO TRUSTEES
Eric M. Kobren, $ 0 $ 0
Chairman of the Board,
President and Trustee
Michael P. Castellano, $ 0 $ 0
Trustee
Edward B. Bloom, $ 0 $ 6,750
Trustee
Arthur Dubroff, $ 0 $ 7,250
Trustee
Stuart J. Novick, $ 0 $ 6,750
Trustee
Scott A. Schoen* $ 0 $ 6,250
</TABLE>
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
KIM serves as investment adviser to the trust and the fund pursuant to
a written investment advisory agreement. KIM is a Massachusetts corporation
organized in 1987, and is a registered investment adviser under the Investment
Advisers Act of 1940. KIM has engaged Delphi as the fund's subadviser. Under the
supervision of KIM and the fund's Board of Trustees, Delphi makes the fund's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages the fund's investments.
Certain services provided by KIM under the investment advisory
agreement are described in the prospectus. In addition to those services, KIM
may, from time to time, provide the fund with office space for managing its
affairs, with the services of required executive personnel, and with certain
clerical services and facilities. These services are provided without
reimbursement by the fund for any costs incurred. As compensation for its
services, the fund pays KIM a fee computed daily and paid monthly at the annual
rate of 1.00% of the fund's average daily net assets. KIM is responsible for
Delphi's subadvisory fee.
The fund is responsible for all expenses not expressly assumed by KIM
or the administrator. These include, among other things, 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).
KIM has agreed to reimburse the fund to the extent necessary to
maintain the fund's operating expenses (excluding investment advisory fees,
brokerage commissions, taxes, interest and litigation, indemnification and other
extraordinary expenses) at 0.75% annually of the fund's average daily net
assets. Although this expense cap arrangement can be revoked at any time, KIM
plans to continue this arrangement until January 1, 2000.
By its terms, the trust's investment advisory agreement with respect to
the fund will remain in effect through December 15, 2000 and from year to year
thereafter, subject to annual approval by (a) the Board of Trustees or, with
respect to the fund, (b) a vote of the majority of the fund's outstanding voting
securities. In either event, continuance must also be 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 with respect to the fund may be terminated at any
time, on 60 days' written notice, without the payment of any penalty, by the
Board of Trustees, by a vote of the majority of the fund's outstanding voting
securities, or by KIM. The investment advisory agreement automatically
terminates in the event of its assignment, as defined by the 1940 Act and the
rules thereunder.
C. Distribution
Distributor
Kobren Insight Brokerage, Inc., an affiliate of KIM, 20 William Street,
Suite 310, P.O. Box 9135, Wellesley Hills, Massachusetts 02481, serves as the
fund's distributor pursuant to an agreement which is renewable annually. The
fund's shares are sold on a continuous basis by Kobren Insight Brokerage, Inc.
as agent, although Kobren Insight Brokerage, Inc. 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 the fund
(excluding preparation and printing expenses necessary for the continued
registration of the fund's shares) and of preparing, printing and distributing
all sales literature.
Distribution Plan - (Retail Class Only)
The trust on behalf of the fund, has adopted a plan of
distribution pursuant to Rule 12b-1 under the 1940 Act with respect to the
retail class shares of the fund. Pursuant to the plan, the fund uses its assets
to finance activities relating to the distribution of retail class shares to
investors and provision of certain shareholder services. Certain categories of
such expenditures have been approved by the Board of Trustees and are set forth
in the Prospectus. See "Distribution Arrangements" in the Prospectus. The fund
compensates Kobren Insight Brokerage, Inc., distributor of the fund, at a fee
calculated at an annual rate of 0.25% of the value of the Fund's average daily
net assets attributable to retail class shares.
General In accordance with the terms of the plan, Kobren Insight
Brokerage, Inc. provides to the trust for review by the Trustees a quarterly
written report of the amounts expended under the plan and the purpose for which
such expenditures were made.
No interested person of the trust, nor any Trustee of the trust who is
not an interested person of the Trust, has any direct or indirect financial
interest in the operation of the plan.
The plan was adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons of the Trust, as defined in the 1940 Act (none of whom had or
have any direct or indirect financial interest in the operation of the plan),
cast in person at a meeting called for the purpose of voting on the plan. In
approving the plan, the Trustees identified and considered a number of potential
benefits which the plan may provide. The Board of Trustees believes that there
is a reasonable likelihood that the plan will benefit the fund and its future
shareholders. Under its terms, the plan remains in effect from year to year
provided such continuance is approved annually by vote of the Trustees in the
manner described above. The plan may not be amended to increase materially the
annual percentage limitation of average net assets which may be spent for the
services described therein without approval of the shareholders of the fund
affected thereby, and material amendments of the plan must also be approved by
the Trustees in the manner described above. The plan may be terminated at any
time, without payment of any penalty, by vote of the majority of the Trustees
who are not interested persons of the Trust and have no direct or indirect
financial interest in the operations of the plan, or by a vote of a majority of
the outstanding voting securities of the Retail Class (as defined in the 1940
Act). The plan will automatically terminate in the event of its assignment (as
defined in the 1940 Act).
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.
("Investor Services Group"), a subsidiary of First Data Corporation, pursuant to
which Investor Services Group serves as administrator to the trust and to the
fund. Investor Services Group is located at One Exchange Place, Boston,
Massachusetts 02109. The administrative services necessary for the operation of
the trust and the fund provided by Investor Services Group 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 ("SEC") and state securities commissions and (iii) general
supervision of the operation of the trust and the fund, including coordination
of the services performed by the transfer agent, custodian, independent
accountants, legal counsel and others. For these services, Investor Services
Group is entitled to receive $67,500 annually for administration and fund
accounting on a per fund basis.
Investor Services Group 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 Investor Services Group are provided pursuant to a Transfer Agency
and Services Agreement between the trust and Investor Services Group. Pursuant
to such Agreement, Investor Services Group receives from the trust, with respect
to the fund, an annual fee of $14 per shareholder account (subject to a $32,000
annual minimum per fund). Investor Services Group 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 NYSE 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 the
fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the fund fairly to determine the value of its net
assets; or (iii) for such other periods as the SEC may permit for the protection
of shareholders of the trust.
The 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 or under the direction of 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 the fund's shares.
The fund computes the net asset value ("NAV") of its shares at the
close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) on each
weekday that is not a holiday. The holidays (as observed) on which the NYSE is
scheduled to be closed currently are: New Year's Day, Martin Luther King's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. If the NYSE 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 the 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
Foreign securities in which the fund may invest may be listed primarily
on foreign stock exchanges that may trade on other days (i.e., Saturday).
Accordingly, the NAV of the fund's portfolio may be significantly affected by
such trading on days when KIM and an investor do not have access to the funds.
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 the fund to
make payment wholly or partly in cash, the fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the portfolio of
the fund, instead of in cash, in conformity with any applicable rules of the
SEC. 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.
<PAGE>
VI. PORTFOLIO TRANSACTIONS
Under the supervision of KIM and the Board of Trustees, Delphi is
responsible for decisions to buy and sell securities for the fund and for the
placement of the fund's portfolio business and negotiation of commissions, if
any, paid on these transactions.
In placing portfolio transactions with brokers and dealers, Delphi
attempts to obtain the best overall terms for the fund, 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, Delphi may
consider research, including statistical or pricing information, and brokerage
services furnished to the funds or Delphi. In addition, the fund 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
fund's portfolio transactions by such broker or dealer. Delphi 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. 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 KIM and/or Delphi may also
invest in the same securities as the fund. When these clients buy or sell the
same securities at substantially the same time, KIM and/or Delphi may average
the transactions as to price and allocate the amount of available investments in
a manner which KIM and/or Delphi believes to be equitable to each client,
including the fund. In some instances, this investment procedure may adversely
affect the price paid or received by the fund or the size of the position
obtainable for it. On the other hand, to the extent permitted by law, KIM and/or
Delphi may aggregate the securities to be sold or purchased for the fund with
those to be sold or purchased for other funds or clients managed by it in order
to obtain best execution.
<PAGE>
VII. PERFORMANCE INFORMATION
A. Total Return
From time to time, quotations of the 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 the 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 the 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 the 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 the 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, the fund
may provide total return information for designated periods, such as for the
most recent rolling six months or most recent rolling twelve months. The 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
The 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
the fund in advertising is historical and is not intended to indicate future
returns. The 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.
The 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"), Russell 2000 Index, Russell Value Indices, 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 compare 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 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.
The 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, the 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 fund, 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, the fund's
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 fund, 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. The 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. The
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 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 five
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 fund 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. The 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 fund 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 fund may employ historical mutual fund performance
data and industry asset allocation studies in their advertisements.
The 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 the 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 fund 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
fund 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.
INVESTORS BUSINESS 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 PRINCIPIA, 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 monthly business publication.
When comparing total return and investment risk of shares of the fund
with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
the fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while the 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 fund 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 the fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions, purchases and sales of the fund, sales and
redemptions of shares of beneficial interest, and changes in operating expenses
are all examples of items that can increase or decrease the fund's performance.
VIII. DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividend and other distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
Taxes. The 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 the 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.
The 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, the 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 the fund, and taxable
to shareholders as if received, on December 31 of the year if it is declared by
the 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 year. The 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 federal tax status of dividends and
distributions for that year.
All income and capital gains will be distributed by the fund (after
deductions for the fund's allowable losses and expenses) and will be taxable to
shareholders as ordinary income, except for any distributions attributable to
the fund's net capital gain, which will be taxable to shareholders as long-term
capital gains. These long-term capital gains may be subject to tax at different
maximum rates for individual (noncorporate) investors, depending upon each
investor's tax bracket, the assets from which the fund realized the gains, and
the fund's holding periods for those assets. Because the 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, or capital
losses that might be disallowed under wash sale rules or recharacterized,
investing in the fund may result in increased tax liability to a shareholder
since the fund must distribute its net realized gains in accordance with the
rules described above.
Distributions of net capital gain received by the fund, as well as net
capital gain realized by the fund from the sale (or redemption) of mutual fund
shares or other securities, after reduction by allowable capital losses, will be
taxable to a shareholder as long-term capital gain (even if the shareholder has
held the shares for less than one year).
Redemptions and exchanges are taxable events for shareholders that are
subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any particular
transaction in fund shares is properly treated as a sale for tax purposes, as
the following discussion assumes, and the character of and tax rate applicable
to any gains or losses recognized in such transactions. 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.
If the fund acquires any equity interest in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and 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. An election may generally
be available to ameliorate these adverse tax consequences, but any such election
could require the fund to recognize taxable income or gain without the
concurrent receipt of cash. These investments could also result in the treatment
of associated capital gains as ordinary income. The 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.
The 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 fund does not expect to qualify to pass
such taxes or associated foreign tax credits or deductions through to its
shareholders, who consequently are not expected to take them into account on
their own tax returns.
Foreign exchange gains and losses realized by the fund in connection
with certain transactions involving foreign currency-denominated debt
securities, foreign currency forward contracts, certain options and futures
contracts relating to foreign currency, 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 the fund's investment in stock or securities, possibly including any
such transaction not used for hedging purposes, 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 fund may restrict the fund's ability to enter into options and futures
contracts, foreign currency positions and foreign currency forward contracts.
Certain of these transactions may cause the 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.
The fund may also be required to recognize gain if an option, futures contract,
forward contract, short sale or other transaction that is not subject to the
mark to market rules is treated as a "constructive sale" of an "appreciated
financial position" held by the fund under Section 1259 of the Code. Any net
mark to market gains and/or gains from constructive sales may also have to be
distributed to satisfy the distribution requirements referred to above even
though no corresponding cash amounts may concurrently be received, possibly
requiring the disposition of portfolio securities or borrowing to obtain the
necessary cash. Additionally, certain of the 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 fund 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 and currency swaps are unclear in certain respects, and the
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 fund. 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 the 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 the 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.
The fund may invest in mutual funds with capital loss carryforwards. 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, the fund may incur capital losses that it may carry
forward to future taxable years, to the extent provided by the Code and
applicable regulations, 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, the fund in their particular circumstances.
The fund is 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.
The 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 the 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 investment in the fund.
The fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that each fund qualifies as a regulated investment company under
the Code, the fund 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 the trust Company ("Boston Safe"), a subsidiary of Mellon Bank
Corporation, Boston Safe provides custodial services to the trust and the fund.
The principal business address of Boston Safe is One Boston Place, Boston,
Massachusetts 02108.
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, is
counsel for the trust.
PricewaterhouseCoopers LLP, One Post Office Square, Boston,
Massachusetts 02109, are the independent accountants 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 four 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 recordholders 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
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.
<PAGE>
PART C: OTHER INFORMATION
Item 23. Exhibits.
(a) Declaration of Trust is incorporated by reference to
Exhibit 1 of the Registrant's Registration Statement on
Form N-1A as filed with the SEC on September 16, 1996 (the
"Registration Statement").
Amendment to the Declaration of Trust on behalf of Kobren Delphi Value Fund
is filed herein.
(b) By-Laws are incorporated by reference to Exhibit 2 of the Registration
Statement.
(c) Not Applicable.
(d) Investment Advisory Agreement with Kobren Insight Management, Inc. dated
November 15, 1996 is incorporated by reference to Exhibit 5 of Post-Effective
Amendment No. 2.
Amendment to Investment Advisory Agreement with Kobren Insight Management, Inc.
on behalf of Kobren Delphi Value Fund is filed herein.
Subadvisory Agreement with Delphi Management, Inc. on behalf of Kobren Delphi
Value Fund
is filed herein.
(e) Distribution Agreement with Kobren Insight Management, Inc. dated November
15, 1996 is incorporated by reference to Exhibit 6 of Post-Effective Amendment
No. 2.
Amendment to Distribution Agreement with Kobren Insight Management, Inc. on
behalf of Kobren Delphi Value Fund is filed herein.
(f) Not Applicable.
(g) Custody Agreement with Boston Safe Deposit and Trust
Company dated November 18, 1996 is incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No.
2.
Amendment to Custody Agreement with Boston Safe Deposit
and Trust Company dated January 8, 1998 is incorporated by
reference to Exhibit 8(b) of Post-Effective Amendment No.
2.
Sub-Custodian Agreement with Boston Safe Deposit and Trust Company and National
Financial Services Corporation dated January 8, 1998 is incorporated by
reference to Exhibit 8(c) of Post-Effective Amendment No. 2. . Amendment to
Custody Agreement with Boston Safe Deposit and Trust Company on behalf of Kobren
Delphi Value Fund dated October 8, 1998 is incorporated by reference to Exhibit
23(g) of Post-Effective Amendment No. 5 to the Registration Statement as filed
with the SEC on October 27, 1998 (Accession No.
0000927405-97-000313)("Post-Effective Amendment No. 5").
(h) Transfer Agency Agreement with First Data Investor
Services Group, Inc. dated November 15, 1996 is
incorporated by reference to Exhibit 9(a) of
Post-Effective Amendment No. 1 to the Registration
Statement as filed with the SEC on June 13, 1997
(Accession No.
0000927405-97-000202)("Post-Effective Amendment No. 1").
Amendment to Transfer Agency Agreement with First Data
Investor Services Group, Inc. dated June 30, 1998 is
incorporated by reference to Exhibit 9(b) of
Post-Effective Amendment No. 3 to the Registration
Statement as filed with the SEC on September 4, 1998
(Accession No.
0000927405-98-000293)("Post-Effective Amendment No. 3").
Amendment to Transfer Agency Agreement with First Data Investor Services Group,
Inc. on behalf of Kobren Delphi Value Fund is filed herein.
Administration Agreement with First Data Investor Services Group, Inc. dated
November 15, 1996 is incorporated by reference to Exhibit 9(b) of Post-Effective
Amendment No. 1.
Amendment to Administration Agreement with First Data Investor Services Group,
Inc. on behalf of Kobren Delphi Value Fund is filed herein.
(i) Opinion of Counsel on behalf of Kobren Delphi Value Fund is filed
herein.
(j) Consent of Independent Accountants is filed herein.
(k) Not Applicable.
(l) Purchase Agreement relating to Initial Capital between the
Registrant, on behalf of Kobren Growth Fund and Kobren
Insight Management, Inc., dated November 6, 1996 is
incorporated by reference to Exhibit 13(a) of
Pre-Effective Amendment No. 1 to the Registration
Statement as filed with the SEC on November 8, 1996
("Pre-Effective Amendment No. 1").
Purchase Agreement relating to Initial Capital between the
Registrant, on behalf of Kobren Moderate Growth Fund and
Kobren Insight Management, Inc., dated November 6, 1996 is
incorporated by reference to Exhibit 13(b) of
Pre-Effective Amendment No. 1.
Purchase Agreement relating to Initial Capital between the
Registrant, on behalf of Kobren Conservative Allocation
and Kobren Insight Management, Inc., dated November 6,
1996 is incorporated by reference to Exhibit 13(c) of
Pre-Effective Amendment No. 1.
Not applicable.
(m) Plan of Distribution pursuant to Rule 12b-1 on behalf of
the Kobren Delphi Value Fund is incorporated by reference
to Exhibit 23(m) of Post-Effective Amendment No. 5.
(n) Financial Data Schedules are filed herein.
.
(o) Plan pursuant to Rule 18f-3 on behalf of the Kobren Delphi
Value Fund is incorporated by reference to Exhibit 23(o)
of Post-Effective Amendment No. 5.
Item 24. Persons Controlled by or Under Common Control with the Fund.
Not Applicable.
Item 25. Indemnification.
The response to this Item 25 is incorporated by reference to Item 27 of
Pre-Effective Amendment No. 1.
Item 26. Business and Other Connections of the Investment Adviser.
Kobren Insight Management, Inc. serves as adviser to the Registrant. For
information as to its business, profession, vocation or employment of a
substantial nature, reference is made to Form ADV filed by Koben Insight
Management, Inc. under the Investment Advisers Act of 1940, as amended (the
"Advisers Act") (SEC File No. 801-30125).
Delphi Management, Inc. performs certain investment advisory services for the
Registrant, under the supervision of Kobren Insight Management, Inc. For
information as to its business, profession, vocation or employment of a
substantial nature, reference is made to Form ADV filed by Delphi Management,
Inc. under the Advisers Act.
Item 27. Principal Underwriters.
(a) Kobren Insight Brokerage, Inc., the Fund's Distributor, does not
act as principal underwriter, depositor or investment adviser for
any other mutual funds.
(b) For information with respect to each director, officer or partner
of Kobren Insight Brokerage, Inc., please refer to the following:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Business Positions and Offices with Underwriter Position and Offices
Address* with Fund
Eric M. Kobren Director, President and Treasurer President
Cathy Kobren Secretary None
* The business address of the above-listed persons is 20 William Street, Suite 310, P.O. Box 9135, Wellesley
Hills, Massachusetts 02181.
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required by Section 31(a)
of the Investment Company Act of 1940, as amended, and Rules 31a-1
through 31a-3 thereunder are maintained at the offices of:
Kobren Insight Management, Inc.
20 William Street, Suite 310
P.O. Box 9135
Wellesley Hills, Massachusetts 02181
(records relating to its functions as investment adviser)
Delphi Management, Inc.
50 Rowes Wharf, Suite 540
Boston, Massachusetts 02110
(records relating to its functions as subadviser)
Kobren Insight Brokerage, Inc.
20 William Street, Suite 310
P.O. Box 9135
Wellesley Hills, Massachusetts 02181
(records relating to its functions as distributor)
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(records relating to its functions as administrator)
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
(records relating to its functions as transfer agent)
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(records relating to its functions as custodian)
Item 29. Management Services.
Not Applicable.
Item 30. Undertakings.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant, KOBREN
INSIGHT FUND has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Boston, and Commonwealth of Massachusetts on the 17th day of December,
1998.
KOBREN INSIGHT FUNDS
By: /s/ Eric M. Kobren
Eric M. Kobren, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signatures Title Date
/s/ Eric M. Kobren President, Chairman of the Board and 12/17/98
Eric M. Kobren Trustee (Chief Executive Officer)
/s/ Eric J. Godes Treasurer, Chief Financial Officer and 12/17/98
Chief Accounting Officer
Eric J. Godes
/s/ Michael P. Castellano Trustee 12/17/98
Michael P. Castellano
/s/ Arthur Dubroff Trustee 12/17/98
Arthur Dubroff
/s/ Edward B. Bloom Trustee 12/17/98
Edward B. Bloom
/s/ Stuart J. Novick Trustee 12/17/98
Stuart J. Novick
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
23(a) Amendment to Declaration of Trust
23(d) Amendment to Investment Advisory Agreement
Subadvisory Agreement
23(e) Amendment to Distribution Agreement
23(h) Amendment to Transfer Agency Agreement
Amendment to Administration Agreement
23(i) Opinion of Counsel
23(j) Consent of Independent Accountants
23(n) Financial Data Schedules
CERTIFICATE OF AMENDMENT
TO
DECLARATION OF TRUST
OF
KOBREN INSIGHT FUNDS
The undersigned, Assistant Secretary of Kobren Insight Funds (the
"Trust"), a Massachusetts business trust created under a Declaration of Trust
dated September 13, 1996 (the "Declaration"), does hereby certify that pursuant
to Article 8, Section 8.3 of the Trust's Declaration, as amended, the following
votes were duly adopted by at least a majority of the Trustees of the Trust at a
meeting held on October 22, 1998:
VOTED: That pursuant to Article 5, Section 5.11 of the
Kobren Insight Funds' (the "Trust") Declaration of
Trust, one additional series of shares be, and hereby
is, designated as Kobren Delphi Value Fund (the
"Fund"), and an unlimited number of shares of
beneficial interest, $.001 par value per share, is
hereby allocated to the series, effective on or about
November 3, 1998; and further
VOTED: That the appropriate officer of the Trust be, and they hereby are,
authorized ----- and directed to execute all instruments and documents, and to
perform such other acts as may be required to carry out the intents and purposes
of the foregoing vote, including the filing of an Amendment to the Trust's
Declaration of Trust with the Secretary of State of the Commonwealth of
Massachusetts and the Clerk of the City of Boston, Massachusetts, as they in
their sole discretion deem necessary or appropriate.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
11th day of December, 1998.
/S/GAIL A. HANSON
Gail A. Hanson
Assistant Secretary
FIRST AMENDMENT TO THE
ADVISORY AGREEMENT
This First Amendment is entered into as of the 15th day of November,
1998 in order to amend the Advisory Agreement dated November 15, 1996 (the
"Advisory Agreement") by and between Insight Premier Funds (the "Trust") on
behalf of its series (each a "Fund" and collectively, the "Funds") and Insight
Management, Inc. (the "Adviser").
WHEREAS, the Trust and the Adviser have entered previously into the Advisory
Agreement; and
WHEREAS, pursuant to Section 13 of the Advisory Agreement, the Trust
and the Adviser wish to amend certain provisions of said Agreement.
NOW, THEREFORE, the parties hereto agree to amend the Advisory
Agreement as follows:
1. Paragraph 1 of the Advisory Agreement is hereby modified and
amended to reflect the change in the name of the Trust to "Kobren Insight Funds"
and the name of the Adviser to "Kobren Insight Management, Inc. "
2. Section 8 of the Advisory Agreement is hereby modified and
amended to (i) reflect the change in the names of the
series previously established and designated and (ii) add
Kobren Delphi Value Fund (1.00%) to the names of the
series as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Section 8 Section 8 as Amended
--------- --------------------
Insight Growth Fund (0.75%) Kobren Growth Fund (0.75%)
Insight Moderate Growth Fund (0.75%) Kobren Moderate Growth Fund (0.75%)
Insight Conservative Allocation Fund (0.75%) Kobren Conservative Allocation Fund (0.75%)
Kobren Delphi Value Fund (1.00%)
</TABLE>
3. All other terms and conditions of the Advisory Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the date set forth above.
ATTEST: KOBREN INSIGHT FUNDS
By: /s/ Eric J. Godes By: /s/ Eric M. Kobren
Name: Eric J. Godes ame: Eric M. Kobren
Title: Vice President Title: President
<PAGE>
ATTEST: KOBREN INSIGHT MANAGEMENT, INC.
By: /s/ Eric J. Godes By: /s/ Eric M. Kobren
Name: Eric J. Godes Name: Eric M. Kobren
Title: Vice President Title: President
Kobren Insight Management, Inc.
20 William Street, Suite 310
P.O. Box 9150
Wellesley Hills, MA 02181
November 15, 1998
Kobren Insight Funds TRUST, on behalf of
Kobren Delphi Value Fund
20 William Street, Suite 310
P.O. Box 9150
Wellesley Hills, MA 02481
Delphi Management, Inc.
50 Rowes Wharf
Boston, MA 02111
Subadvisory Agreement
Dear Sirs:
Kobren Insight Funds (the "trust"), of which Kobren Delphi Value Fund
(the "fund") is a series, has been organized as a business trust under the laws
of the Commonwealth of Massachusetts to engage in the business of an investment
company. The trust's shares of beneficial interest are currently divided into
four series (including the fund), each series representing the entire undivided
interest in a separate portfolio of assets.
The board of trustees of the trust (the "trustees") has selected Kobren
Insight Management, Inc. (the "adviser") to provide overall investment advice
and management for the fund, and to provide certain other services, under the
terms and conditions provided in the investment advisory agreement, dated as of
the date hereof, between the trust, on behalf of the fund, and the adviser (the
"investment advisory agreement").
The adviser and the trustees have selected Delphi Management, Inc. (the
"subadviser") to provide the adviser and the fund with the advice and services
set forth below, and the subadviser is willing to provide such advice and
services, subject to the review of the trustees and overall supervision of the
adviser, under the terms and conditions hereinafter set forth. The subadviser
hereby represents and warrants that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
Accordingly, the trust, on behalf of the fund, and the adviser agree with the
subadviser as follows:
1. Delivery of Documents. The trust has furnished the subadviser with copies,
properly certified or otherwise authenticated, of each of the following:
a) agreement and declaration of trust of the trust, dated September 13, 1996, as
amended to date (the "declaration of trust");
b) by-laws of the trust as in effect on the date hereof;
c) resolutions of the trustees selecting the subadviser as the
investment subadviser to the fund and approving this
subadvisory agreement (the "agreement") and resolutions
adopted by the initial shareholder of the fund approving the
investment subadvisory agreement;
d) resolutions of the trustees selecting the adviser as
investment adviser to the fund and approving the investment
advisory agreement and resolutions adopted by the initial
shareholder of the fund approving the investment advisory
agreement;
e) the adviser's investment advisory agreement;
f) the fund's prospectus and statement of additional information; and
g) the trust's code of ethics.
The adviser will furnish the subadviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services. The subadviser will use its best efforts to
provide to the fund continuing and suitable investment advice with
respect to investments, consistent with the investment policies,
objectives and restrictions of the fund as set forth in the fund's
prospectus and statement of additional information. In the performance
of the subadviser's duties hereunder, subject always to the provisions
contained in the documents delivered to the subadviser pursuant to
Section 1 above, as from time to time amended or supplemented, the
subadviser will, at its own expense:
a) furnish the adviser and the fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the fund as set forth above,
with respect to the purchase, holding and disposition of
portfolio securities and other permitted investments;
b) furnish the adviser and the fund with advice in connection
with policy decisions to be made by the board of trustees or
any committee thereof about the fund's investments and, as
requested, furnish the fund with research, economic and
statistical data in connection with the fund's investments and
investment policies;
c) submit such reports relating to the valuation of the fund's securities as the
adviser may reasonably request;
d) subject to prior consultation with the adviser, assist the
fund in any negotiations relating to the fund's investments
with issuers, investment banking firms, securities brokers or
dealers and other institutions or investors;
e) consistent with the provisions of Section 7 of this agreement,
place orders for the purchase, sale or exchange of portfolio
securities for the fund's account with brokers or dealers
selected by the adviser or the subadviser, provided that in
connection with the placing of such orders and the selection
of such brokers or dealers the subadviser will seek to obtain
best price and execution, except as otherwise provided in the
prospectus and statement of additional information of the
fund;
f) from time to time or at any time requested by the adviser or the trustees,
make reports to the adviser or the trustees, as requested, of the subadviser's
performance of the foregoing services;
g) subject to the supervision of the adviser, maintain and
preserve the records required by the Investment Company Act of
1940 (the "1940 Act") to be maintained by the subadviser (the
subadviser agrees that such records are the property of the
trust and copies will be surrendered to the trust promptly
upon request therefor);
h) give instructions to the custodian (including any
sub-custodian) of the fund as to deliveries of securities to
and from such custodian and payments of cash for the account
of the fund, and advise the adviser on the same day such
instructions are given;
i) cooperate generally with the fund and the adviser to provide
information necessary for the preparation of registration
statements and periodic reports to be filed with the
Securities and Exchange Commission, including Form N-1A,
semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished to
holders of shares of the fund, filings with states and with
United States agencies responsible for tax matters, and other
reports and filings of like nature.
In the performance of its duties hereunder, the subadviser is
and will be an independent contractor and unless otherwise
expressly provided or authorized will have no authority to
act for or represent the fund or trust in any way or
otherwise be deemed to be an agent of the fund, the trust
or of the adviser.
3. Expenses Paid by the Subadviser. The subadviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its
obligations under this agreement, the expenses of office rent,
telephone, telecommunications and other facilities that it is obligated
to provide in order to perform the services specified in Section 2, and
any other expenses incurred by it in connection with the performance of
its duties hereunder.
4. Compensation of the Subadviser. The adviser will pay the subadviser, as
compensation for services and ------------------------------- expenses assumed
hereunder, a monthly fee as set forth in Schedule A. Subadvisory fees for each
month payable hereunder will be computed daily and paid promptly after the
adviser's actual receipt of advisory fees for that month. If this agreement is
effective subsequent to the first day of the month, or if this agreement is
terminated, the fee provided in this section will be computed on the basis of
the number of days in the month for which this agreement is in effect, subject
to a pro rata adjustment based on the number of days elapsed in the current
month as a percentage of the total number of days in such month. The subadviser
understands and agrees that neither the trust nor the fund has any liability for
the subadviser's fee hereunder. Calculations of the subadviser's fee will be
based on average net asset values as provided by the adviser.
5. Other Activities of the Subadviser and Its Affiliates. Nothing herein
contained will prevent the subadviser or any of its affiliates or
associates from engaging in any other business or from acting as
investment adviser or investment manager for any other person or
entity, whether or not having investment policies or a portfolio
similar to the fund. It is specifically understood that officers,
directors and employees of the subadviser and its affiliates may engage
in providing portfolio management services and advice to other
investment advisory clients of the subadviser or of its affiliates.
6. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities for the account of the fund, neither the
subadviser nor any of its directors, officers or employees will act as
principal or agent or receive any commission. The subadviser will not
knowingly recommend that the fund purchase, sell or retain securities
of any issuer in which the subadviser has a financial interest without
obtaining prior approval of the adviser prior to the execution of any
such transaction. Access persons (as defined in Rule 17j-1 under the
1940 Act) of the subadviser will provide personal trading reports to a
designated representative of the adviser in accordance with the trust's
code of ethics.
7. No Partnership or Joint Venture. The trust, the fund, the adviser and
the subadviser are not partners of or joint venturers with each other
and nothing herein shall be construed so as to make them such partners
or joint venturers or impose any liability as such on any of them.
8. Limitation of Liability of the Subadviser. The subadviser will not be
liable for any error of judgment or mistake of law or for any loss
suffered by the trust, the fund or the adviser in connection with the
matters to which this agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the subadviser's
part in the performance of its duties or from reckless disregard by it
of its obligations and duties under this agreement.
9. Duration and Termination of this Agreement. This agreement will remain in
effect until November 15, --------------------------------------------- 2000 and
from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by (a) a majority of the trustees who
are not interested persons of the adviser, of the subadviser or (other than as
board members) of the trust, cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the trustees or (ii) a majority
of the outstanding voting securities of the fund. This agreement may, on 60
days' written notice, be terminated at any time without the payment of any
penalty by the fund by vote of a majority of the outstanding voting securities
of the fund or by the board of trustees, by the adviser or the subadviser.
Termination of this agreement with respect to the fund will not be deemed to
terminate or otherwise invalidate any provisions of any contract between you and
any other series of the trust. This agreement will automatically terminate in
the event of its assignment or upon the termination of the adviser's investment
advisory agreement. In interpreting the provisions of this Section 10, the
definitions contained in Section 2(a) of the 1940 Act (including the definitions
of "assignment," "interested person" and "voting security"), will be applied.
10. Amendment of this Agreement. No provision of this agreement may be
changed or waived orally, but only by an instrument in writing signed
by the party against which enforcement of the change or waiver is
sought. No amendment, transfer, assignment, sale, hypothecation or
pledge of this agreement will be effective until approved by (a) the
trustees, including a majority of the trustees who are not interested
persons of the adviser, the subadviser or (other than as board members)
the trust, cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting
securities of the fund, as defined in the 1940 Act.
11. Miscellaneous.
a) The captions in this agreement are included for convenience of
reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect. This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
b) The name Kobren Insight Funds (formerly Insight Premier Funds) is the
designation of the trustees under the declaration of trust, dated September 13,
1996 as amended November 20, 1996, and the declaration of trust and amendments
thereto have been filed with the Secretary of State of the Commonwealth of
Massachusetts. The obligations of the trust and the fund are not personally
binding upon, nor will resort be had to the private property of, any of the
trustees, shareholders, officers, employees or agents of the trust or the fund,
but only the fund's property will be bound. The fund will not be liable for the
obligations of any other series of the trust.
c) Nothing herein contained will limit or restrict the subadviser or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The trust and fund
acknowledge that the subadviser and its officers, affiliates and employees, and
its other clients may at any time have, acquire, increase, decrease or dispose
of positions in investments which are at the same time being acquired or
disposed of by the fund. The subadviser will have no obligation to acquire for
the fund a position in any investment which the subadviser, its officers,
affiliates or employees may acquire for its or their own accounts or for the
account of another client if, in the sole discretion of the subadviser, it is
not feasible or desirable to acquire a position in such investment for the fund.
Nothing herein will prevent the subadviser from purchasing or recommending the
purchase of a particular security for one or more funds or clients while other
funds or clients may be selling the same security.
d) Any information supplied by the subadviser, which is not
otherwise in the public domain, in connection with the
performance of its duties hereunder is confidential and may be
used only by the fund and/or its agents, and only in
connection with the fund and its investments.
e) Governing Law. The substantive law of the Commonwealth of Massachusetts and
the applicable provisions of the 1940 Act shall govern this agreement.
Yours very truly,
Kobren Insight Management, inc.
By: /s/ Eric M. Kobren
Its: President
The foregoing agreement is hereby agreed to as of the date thereof.
Kobren Insight Funds
on behalf of Kobren Delphi Value Fund
By: /s/ Eric M. Kobren
Its: President
Delphi Management, Inc.
By: /s/ Scott M. Black
Its: President
<PAGE>
SCHEDULE A
Annual Fee Rate as a Percentage
of Average Daily Net Asset Value
Kobren Delphi Value Fund 0.50%
The average net asset value for the month will be based on the net
asset value used in determining the price at which fund shares are sold,
repurchased or redeemed on each day of the month.
If this agreement becomes effective as to a fund after the first day of
a month, or terminates before the last day of a month, your compensation for
such fraction of the month will be determined by applying the foregoing
percentages to the average daily net asset value of the fund during such
fraction of a month and in the proportion that such fraction of a month bears to
the entire month.
FIRST AMENDMENT TO THE
DISTRIBUTION AGREEMENT
This First Amendment is entered into as of the 15th day of November,
1998 in order to amend the Distribution Agreement dated November 15, 1996 (the
"Distribution Agreement") by and between Insight Premier Funds on behalf of each
of the funds listed on Schedule A to the Distribution Agreement (the "Trust")
and Insight Brokerage Services, Inc. (the "Distributor").
WHEREAS, the Trust and the Distributor have entered previously into the
Distribution Agreement; and
WHEREAS, pursuant to Section 6 of the Distribution Agreement, the Trust
and the Distributor wish to amend Schedule A of said Agreement.
NOW, THEREFORE, the parties hereto agree to amend the Distribution
Agreement as follows:
1. Paragraph 1 of the Distribution Agreement is hereby modified
and amended to reflect the change in the name of the Trust to "Kobren Insight
Funds" and the name of the Distributor to "Kobren Insight Brokerage, Inc. "
2. Schedule A of the Distribution Agreement is hereby modified and
amended to (i) reflect the change in the names of the series previously
established and designated and (ii) add Kobren Delphi Value Fund to the names of
the series as follows:
Schedule A Schedule A as Amended
Insight Growth Fund Kobren Growth Fund
Insight Moderate Growth Fund Kobren Moderate Growth Fund
Insight Conservative Allocation Fund Kobren Conservative Allocation Fund
Kobren Delphi Value Fund
3. All other terms and conditions of the Distribution Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the date set forth above.
KOBREN INSIGHT FUNDS, on behalf of the Funds
listed on Schedule A to the Distribution Agreement
By: /s/ Eric M. Kobren
Name: Eric M. Kobren
Title: President
<PAGE>
KOBREN INSIGHT BROKERAGE, INC.
By: /s/ Eric M. Kobren
Name: Eric M. Kobren
Title: President
EXHIBIT 1 TO THE
TRANSFER AGENCY AND SERVICES AGREEMENT
REVISED AS OF OCTOBER 14, 1998
LIST OF PORTFOLIOS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
Kobren Delphi Value Fund
KOBREN INSIGHT FUNDS FIRST DATA INVESTOR SERVICES
GROUP, INC
By: /s/ Eric J. Godes By: /s/ James L. Fox
Date: 11/27/98 Date: 11/16/98
Title: Vice President Title: Chief Operating Officer
<PAGE>
EXHIBIT 1 TO THE AMENDMENT TO THE TRANSFER AGENCY
AND SERVICES AGREEMENT DATED JUNE 30, 1998
REVISED AS OF OCTOBER 14, 1998
LIST OF PORTFOLIOS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
Kobren Delphi Value Fund
KOBREN INSIGHT FUNDS FIRST DATA INVESTOR SERVICES
GROUP, INC
By: /s/ Eric J. Godes By: /s/ James L. Fox
Date: 11/27/98 Date: 11/16/98
Title: Vice President Title: Chief Operating Officer
<PAGE>
Exhibit 1 to the Teleservicing Services Agreement
Revised As Of October 14, 1998
LIST OF PORTFOLIOS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
Kobren Delphi Value Fund
KOBREN INSIGHT FUNDS FIRST DATA INVESTOR SERVICES
GROUP, INC
By: /s/ Eric J. Godes By: /s/ James L. Fox
Date: 11/27/98 Date: 11/16/98
Title: Vice President Title: Chief Operating Officer
<PAGE>
SCHEDULE B
FEE SCHEDULE
Revised As Of October 14, 1998
SECTION I
The following fees are in effect for the Kobren Growth Fund, Kobren Moderate
Growth Fund and the Kobren Conservative Allocation Fund:
<TABLE>
<CAPTION>
<S> <C> <C>
ANNUAL FEES
A. Open Account Fees: $14.00 per open account (subject to minimum fees set forth below)
B. Fund Minimums: $32,000 per Portfolio per year, provided however, the Fund shall pay
a minimum of $64,000 per annum regardless of the number of Portfolios
C. Out of Pocket Expenses: As set forth in Schedule C
D. Individual Retirement
Accounts: $20.00 per Shareholder Account (multiple accounts across Portfolios
with the same account number will be treated as a single Shareholder
Account)
</TABLE>
GENERAL
After the completion of the third year of the Agreement, First Data may adjust
any annual or monthly fees once per calendar year, upon thirty (30) days prior
written notice in an amount not to exceed the previous years cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
SECTION II
<TABLE>
<CAPTION>
THE FOLLOWING FEES ARE IN EFFECT FOR THE KOBREN DELPHI VALUE FUND:
<S> <C> <C>
A. Open Account Fees: $14.00 per open account (subject to minimum fees set forth
below)
B. Fund Minimums: $26,000 for the Portfolio per year
------------------------------------------------------------------------------
Additional Classes $18,000 for the first class ($1,500 per month)
$ 6,000 per each additional class in excess of one class
($500 per month)
C. Out of Pocket Expenses As set forth in Schedule C
D. Individual Retirement
Accounts $20.00 per Shareholder
Account (multiple accounts
across Portfolios with the
same account number will be
treated as a single
Shareholder Account)
</TABLE>
GENERAL
FDISG agrees to a fee waiver of $20,000 to be applied to Fund expenses in the
first year of the Fund's existence. The Fund may allocate the fee waiver of
$20,000 across one or all services provided to the Fund by FDISG.
After the first 36 months from the effective date of this Schedule, FDISG may
adjust any annual or monthly fees once per calendar year, upon thirty (30) days
prior written notice in an amount not to exceed the previous years cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
IN WITNESS WHEREOF, the parties hereto have caused this Schedule to be executed
by their duly authorized officers, as of the day and year first above written.
KOBREN INSIGHT FUNDS FIRST DATA INVESTOR SERVICES
GROUP, INC
By: /s/ Eric J. Godes By: /s/ James L. Fox
Date: 11/27/98 Date: 11/16/98
Title: Vice President Title: Chief Operating Officer
SCHEDULE A TO THE
ADMINISTRATION AGREEMENT
REVISED AS OF OCTOBER 14, 1998
LIST OF PORTFOLIOS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
Kobren Delphi Value Fund
KOBREN INSIGHT FUNDS FIRST DATA INVESTOR SERVICES
GROUP, INC
By: /s/ Eric J. Godes By: /s/ James L. Fox
Date: 11/27/98 Date: 11/16/98
Title: Vice President Title: Chief Operating Officer
<PAGE>
SCHEDULE B
FEE SCHEDULE
Revised As Of October 14, 1998
SECTION I
The following fees are in effect for the Kobren Growth Fund, Kobren Moderate
Growth Fund and the Kobren Conservative Allocation Fund:
For the services to be rendered, the facilities to be furnished and the
payments to be made by FDISG, as provided for in this Agreement, the Company, on
behalf of each Fund, will pay FDISG on the first business day of each month a
fee for the previous month at the rates listed below. The fee for the period
from the the earlier of commencment of operations of a Fund or December 15, 1996
to the end of such month shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
Flat fee of $67,500 per Fund per annum, provided however, the
Company shall pay a minimum of $125,000 per annum regardless of
the number of Funds; First Data reserves the right to terminate
this agreement should the fund family consist of only 1 Fund.
FDISG shall be entitled to collect all out-of-pocket fees
described in Schedule C.
$1 per mutual fund quotation for prices manually retrieved or a
pro-rata fee will be assessed for prices retrieved from an
automated vendor feed.
FDISG agrees to waive the first $40,000 of fees FDISG is entitled to
receive under this Agreement during the first year of this Agreement.
SECTION II
THE FOLLOWING FEES ARE IN EFFECT FOR THE KOBREN DELPHI VALUE FUND:
ANNUAL FEES
Net Assets up to 150 million 5.0 Basis Points
Net Assets in Excess of 150 million 3.5 Basis Points
Fund Minimum $67,500 per year
Additional Classes $5,000 per class for the first and any additional classes
GENERAL
After the first 36 months from the effective date of this Amendment, FDISG may
adjust any annual or monthly fees once per calendar year, upon thirty (30) days
prior written notice in an amount not to exceed the previous years cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
IN WITNESS WHEREOF, the parties hereto have caused this Schedule to be executed
by their duly authorized officers, as of the day and year first above written.
KOBREN INSIGHT FUNDS FIRST DATA INVESTOR SERVICES
GROUP, INC
By: /s/ Eric J. Godes By: /s/ James L. Fox
Date: 11/27/98 Date: 11/16/98
TITLE: VICE PRESIDENT TITLE: CHIEF OPERATING OFFICER
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Kobren Insight Funds:
RE: Kobren Delphi Value Fund
We hereby consent to the reference to our Firm under the caption
"Independent Accountants" in the Prospectus and "Custodian, Counsel and
Independent Accountants" in the Statement of Additional Information in the
Post-Effective Amendment to the Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, of Kobren Insight Funds.
HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS *BROBECK HALE AND DORR
INTERNATIONAL (AN INDEPENDENT JOINT VENTURE LAW FIRM) Washington, DC Boston, MA
London, UK*
HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS
*BROBECK HALE AND DORR INTERNATIONAL (AN INDEPENDENT JOINT VENTURE LAW FIRM)
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 o fax 617-526-5000
December 16, 1998
Kobren Insight Funds
One Exhange Place
Boston, Massachusetts 02109
Ladies and Gentlemen:
The Kobren Insight Funds (the "Trust"), formerly know as the Insight
Premier Funds, is a Massachusetts business trust created under a Declaration of
Trust dated, executed and delivered in Boston, Massachusetts on September 13,
1996, as amended from time to time (as so amended, the "Declaration of Trust").
The beneficial interests thereunder are represented by transferable shares of
beneficial interest, $.001 par value.
The Trustees have the powers set forth in the Declaration of Trust,
subject to the terms, provisions and conditions therein provided. Pursuant to
Article V, Section 5.1 of the Declaration of Trust, the number of shares of
beneficial interest authorized to be issued under the Declaration of Trust is
unlimited and the Trustees are authorized to divide the shares into one or more
series of shares and one or more classes thereof as they deem necessary or
desirable. Pursuant to Articles V, Section 5.4 of the Declaration of Trust, the
Trustees are empowered in their discretion to issue shares of any series for
such amount and type of consideration, including cash or property, and on such
terms as the Trustees may deem best (or for no consideration if pursuant to a
share dividend or split-up), all without action or approval of the shareholders.
Pursuant to Article V, Section 5.11 of the Declaration of Trust, the
Trustees have established four separate series of shares representing designated
"Kobren Growth Fund", "Kobren Moderate Growth Fund", "Kobren Conservative
Allocation Fund" and "Kobren Delphi Value Fund".
The Trustees have voted to authorize the officers of the Trust to
determine the appropriate number of shares to be registered, to register with
the Securities and Exchange Commission, and to issue and sell to the public,
such shares.
<PAGE>
Kobren Insight Funds
December 16, 1998
Page
We have examined the Declaration of Trust and By-Laws, each as amended
from time to time, of the Trust, resolutions of the Board of Trustees relating
to the authorization and issuance of shares of beneficial interest of the Trust,
and such other documents as we have deemed necessary or appropriate for the
purposes of this opinion, including, but not limited to, originals, or copies
certified or otherwise identified to our satisfaction, of such documents, Trust
records and other instruments. In our examination of the above documents, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of all documents submitted to us as certified of photostatic copies.
For purposes of this opinion letter, we have not made an independent
review of the laws of any state or jurisdiction other than The Commonwealth of
Massachusetts and express no opinion with respect to the laws of any
jurisdiction other than the laws of The Commonwealth of Massachusetts. Further,
we express no opinion as to compliance with any state or federal securities
laws, including the securities laws of The Commonwealth of Massachusetts.
Our opinion below, as it relates to the non-assessability of the shares
of the Trust, is qualified to the extent that under Massachusetts law,
shareholders of a Massachusetts business trust may be held personally liable for
the obligations of the Trust. In this regard, however, please be advised that
the Declaration of Trust disclaims shareholder liability for acts or obligations
of the Trust and permits notice of such disclaimer to be given in each contract
or instrument made or issued by the Trustees of the Trust. Also, the Declaration
of Trust provides for indemnification out of Trust property for all loss and
expense of any shareholder held personally liable for the obligations of the
Trust.
We are of the opinion that all necessary Trust action precedent to the
issuance of the shares of beneficial interest of the Trust has been duly taken,
and that all such shares may legally and validly be issued for among other
things, cash, and when sold will be, fully paid and non-assessable by the Trust
upon receipt by the Trust or its agent of consideration therefor in accordance
with terms described in the Trust's Declaration of Trust, subject to compliance
with the Securities Act of 1933, as amended, the Investment Company Act of 1940,
as amended, and the applicable state laws regulating the sale of securities.
We consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to any amendments to the Trust's registration statement
with the Commission. Except as provided in this paragraph, this opinion may not
be relied upon by, or filed with, any other parties or for any other purpose.
Very truly yours,
/s/Hale and Dorr LLP
Hale and Dorr LLP
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> KOBREN CONSERVATIVE ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 24090
<INVESTMENTS-AT-VALUE> 24665
<RECEIVABLES> 216
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 7
<TOTAL-ASSETS> 24888
<PAYABLE-FOR-SECURITIES> 16
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78
<TOTAL-LIABILITIES> 94
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23428
<SHARES-COMMON-STOCK> 2092
<SHARES-COMMON-PRIOR> 1535
<ACCUMULATED-NII-CURRENT> 76
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 716
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 574
<NET-ASSETS> 24794
<DIVIDEND-INCOME> 55
<INTEREST-INCOME> 165
<OTHER-INCOME> 0
<EXPENSES-NET> 108
<NET-INVESTMENT-INCOME> 112
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 823
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (36)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 990
<NUMBER-OF-SHARES-REDEEMED> (436)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 7319
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 426
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 82
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 157
<AVERAGE-NET-ASSETS> 22060
<PER-SHARE-NAV-BEGIN> 11.39
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> KOBREN GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 62116
<INVESTMENTS-AT-VALUE> 71328
<RECEIVABLES> 116
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 46
<TOTAL-ASSETS> 71490
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60995
<SHARES-COMMON-STOCK> 5534
<SHARES-COMMON-PRIOR> 5433
<ACCUMULATED-NII-CURRENT> (277)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1355
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9212
<NET-ASSETS> 71285
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18
<OTHER-INCOME> 0
<EXPENSES-NET> 295
<NET-INVESTMENT-INCOME> (277)
<REALIZED-GAINS-CURRENT> 903
<APPREC-INCREASE-CURRENT> 6711
<NET-CHANGE-FROM-OPS> 7337
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1170
<NUMBER-OF-SHARES-REDEEMED> (1069)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8776
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 452
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 248
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349
<AVERAGE-NET-ASSETS> 72234
<PER-SHARE-NAV-BEGIN> 11.51
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 1.42
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.88
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> KOBREN MODERATE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 52320
<INVESTMENTS-AT-VALUE> 57256
<RECEIVABLES> 222
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57541
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 161
<TOTAL-LIABILITIES> 161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50755
<SHARES-COMMON-STOCK> 4495
<SHARES-COMMON-PRIOR> 3634
<ACCUMULATED-NII-CURRENT> 59
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1630
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4936
<NET-ASSETS> 57380
<DIVIDEND-INCOME> 15
<INTEREST-INCOME> 289
<OTHER-INCOME> 0
<EXPENSES-NET> 245
<NET-INVESTMENT-INCOME> 59
<REALIZED-GAINS-CURRENT> 582
<APPREC-INCREASE-CURRENT> 2954
<NET-CHANGE-FROM-OPS> 3595
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1396
<NUMBER-OF-SHARES-REDEEMED> (535)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13999
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1048
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 201
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 297
<AVERAGE-NET-ASSETS> 54188
<PER-SHARE-NAV-BEGIN> 11.94
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.82
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.77
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> Kobren Conservative Allocation Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 16,144,398
<INVESTMENTS-AT-VALUE> 16,297,520
<RECEIVABLES> 1,247,043
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 28,737
<TOTAL-ASSETS> 17,573,300
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 97,932
<TOTAL-LIABILITIES> 97,932
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<SHARES-COMMON-STOCK> 1,534,728
<SHARES-COMMON-PRIOR> 16,500
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<ACCUMULATED-NET-GAINS> 426,021
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 153,122
<NET-ASSETS> 17,475,368
<DIVIDEND-INCOME> 760,706
<INTEREST-INCOME> 141,517
<OTHER-INCOME> 0
<EXPENSES-NET> 88,610
<NET-INVESTMENT-INCOME> 813,613
<REALIZED-GAINS-CURRENT> 473,586
<APPREC-INCREASE-CURRENT> 153,396
<NET-CHANGE-FROM-OPS> 1,440,595
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (813,612)
<DISTRIBUTIONS-OF-GAINS> (47,565)
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<NUMBER-OF-SHARES-SOLD> 1,763,364
<NUMBER-OF-SHARES-REDEEMED> (316,837)
<SHARES-REINVESTED> 71,701
<NET-CHANGE-IN-ASSETS> 17,310,643
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> (1)
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<GROSS-EXPENSE> 250,950
<AVERAGE-NET-ASSETS> 8,886,750
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> 0.61
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<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> (0.03)
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<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Kobren Growth Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 58,467,964
<INVESTMENTS-AT-VALUE> 60,968,485
<RECEIVABLES> 1,670,417
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<OTHER-ITEMS-ASSETS> 41,505
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<OTHER-ITEMS-LIABILITIES> 171,134
<TOTAL-LIABILITIES> 171,134
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<PAID-IN-CAPITAL-COMMON> 59,556,319
<SHARES-COMMON-STOCK> 5,432,609
<SHARES-COMMON-PRIOR> 24,557
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<ACCUMULATED-NET-GAINS> 452,433
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,500,521
<NET-ASSETS> 62,509,273
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<NET-INVESTMENT-INCOME> 1,427,104
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<DISTRIBUTIONS-OF-GAINS> (902)
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<NUMBER-OF-SHARES-SOLD> 6,040,941
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<OVERDISTRIB-NII-PRIOR> (29)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> Kobren Moderate Growth Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 39,939,716
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<OTHER-ITEMS-LIABILITIES> 142,267
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<SHARES-COMMON-PRIOR> 18,903
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<ACCUMULATED-NET-GAINS> 1,048,277
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,981,469
<NET-ASSETS> 43,380,977
<DIVIDEND-INCOME> 1,557,018
<INTEREST-INCOME> 266,475
<OTHER-INCOME> 0
<EXPENSES-NET> 220,103
<NET-INVESTMENT-INCOME> 1,603,390
<REALIZED-GAINS-CURRENT> 1,050,304
<APPREC-INCREASE-CURRENT> 1,981,333
<NET-CHANGE-FROM-OPS> 4,635,027
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<DISTRIBUTIONS-OF-GAINS> (2,027)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,867,539
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<ACCUMULATED-NII-PRIOR> 74
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<GROSS-ADVISORY-FEES> 178,947
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<PER-SHARE-NAV-END> 11.94
<EXPENSE-RATIO> 0.92
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</TABLE>
