As filed with the Securities and Exchange Commission on September 4, 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. 3 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 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 ________ pursuant to paragraph (b);or
X 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:
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.
<PAGE>
KOBREN INSIGHT FUNDS
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495 (a)
Part A.
Item No. Prospectus Caption
1. Front and Back Cover Pages Front Cover; Back Cover
2. Risk/Return Summary: Investments, What Every Investor Should Know:
Risks, and Performance Principal Investments and
Strategies; Principal Investment
Risks; Performance; The Fund's
Investments
3. Risk/Return Summary: Fee Table What Every Investor Should Know:
Fees and Expenses
4. Investment Objectives, Principal What Every Investor Should Know:
Investment Strategies, and Investment Goals; Principal
Related Risks Investments and Strategies; Principal
Investment Risks; The Fund's
Investments
5 Management's Discussion of Fund Not applicable
Performance
6. Management, Organization, and Back Cover; What Every Investor
Capital Structure Should Know: Principal Investments and
Strategies; Fees and Expenses; The
Fund's Investments; Investment Adviser
7. Shareholder Information What 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 Shares; How to Redeem
Shares; Dividends, Distributions
and Taxes
8. Distribution Arrangements For More Information
9. Financial Highlights Information Financial Highlights
<PAGE>
COVER PAGE
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Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
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page appears in center of page in a colored box]
P R O S P E C T U S
November 1, 1998
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The Securities and Exchange Commission has not approved any fund's shares as an
investment or determined whether this prospectus is accurate or complete. It is
a criminal offense to state otherwise.
TABLE OF CONTENTS
FACTORS EVERY INVESTOR SHOULD KNOW 3
Investment goals 3
Principal investments and strategies 3
Principal investment risks 4
Performance 4
Who may want to invest 5
Fees and expenses 5
THE FUNDS' INVESTMENTS 6
INVESTMENT ADVISER 8
INVESTMENT AND ACCOUNT POLICIES 9
Calculation of net asset value 9
How to purchase shares 10
How to exchange shares 11
How to redeem shares 11
Dividends, distributions and taxes 12
FINANCIAL HIGHLIGHTS 13
FOR MORE INFORMATION back cover
FACTORS EVERY INVESTOR SHOULD KNOW
The Fund
Growth Fund
Investment Goals:
Long term growth of capital without regard to income. A volatility level over a
full market cycle approximating that of the S&P 500 Index.
Principal Investments and Strategies:
- - At least 65% of assets in open-end and closed-end, growth and growth
and income funds. These may include both U.S. and international funds.
- - Up to 35% of assets in fixed income funds and direct investments in
stocks, bonds and other permitted investments.
Moderate Growth Fund
Investment Goals:
Long term growth of capital without regard to income. A volatility level over a
full market cycle approximately 20% below that of the S&P 500 Index.
Principal Investments and Strategies:
- - At least 65% of assets in open-end and closed-end, growth and growth
and income funds. These may include both U.S. and international funds.
- - Up to 35% of assets in fixed income funds and direct investments in
stocks, bonds and other permitted investments.
Conservative Allocation Fund
Investment Goals:
Enough long term growth of capital to maintain purchasing power in the face of
inflation. Current income is a secondary objective. Volatility level over a full
market cycle approximately 30% below that of the S&P 500 Index.
Principal Investments and Strategies:
- - At least 40% of assets in open-end and closed-end, growth and growth
and income funds. These may include both U.S. and international funds.
- - At least 20% of assets in income producing funds or securities.
- - Up to 40% of assets in direct investments in stocks, bonds and other
permitted investments.
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How Kobren Insight Management (KIM) Selects the Funds' Investments
1. ASSET ALLOCATION -- KIM begins with a "top down" fundamental analysis of the
economy and investment markets in the U.S. and foreign countries. In deciding
what percentage of the funds' assets should be allocated to U.S.
stocks, foreign stocks, U.S. bonds and cash equivalents, KIM focuses on:
- - A fund's risk tolerance
- - Economic factors such as inflation, employment and interest rates
- - The outlook for corporate earnings
- - Current stock valuations (e.g., Price to earnings and price to
book ratios)
- - Supply and demand for various asset classes
2. INVESTMENT STYLES -- Next KIM determines the percentage of fund assets
allocated to each of the following seven global equity styles:
- - U.S. Growth--Large Cap
- - U.S. Growth--Small Cap
- - U.S. Value--Large Cap
- - U.S. Value--Small Cap
- - Diversified International Equity
- - Specialized International Equity
- - U.S. Real Estate Investment Trusts
In allocating among styles, KIM first reviews the broad-based economic factors
that will influence the earnings prospects for each style. Then, to determine
each style's relative attractiveness, KIM compares the resulting earnings
outlook for each style with the style's current valuation in relation to
historical norms and other styles.
3. SELECTING FUNDS -- KIM looks for funds appearing to offer the highest
risk-adjusted return potential for each style. KIM applies its internally
developed screening process to virtually all publicly available mutual funds - a
risk-adjusted return analysis and the evaluation of each fund against its peers.
Based on interviews with and other information from fund portfolio managers, KIM
evaluates each portfolio fund's asset allocation, sector weightings, individual
holdings and risk characteristics.
FACTORS EVERY INVESTOR SHOULD KNOW
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PRINCIPAL INVESTMENT RISKS
You could lose money on your investment in a Kobren Insight fund or the fund
could perform less well than other possible investments if any of the following
occurs:
- - The U.S. or a foreign stock market goes down.
- - Interest rates go up, which will make bond prices and the value of the
fund's investments in fixed income funds and securities go down.
- - An adverse event, such as an unfavorable earnings report or credit
downgrade, depresses the value of a particular issuer's stocks or bonds
that are held by the fund or an underlying fund.
- - The adviser's judgments about the attractiveness and risk adjusted
return potential of particular asset classes, investment styles,
industries, underlying funds or other issuers prove to be wrong.
Special risks of investing in other mutual funds.
The funds' practice of investing primarily in other mutual funds presents
special risks.
- - You will bear, not just your proportionate share of the funds'
operating expenses, but also, indirectly, the operating expenses of the
underlying funds.
- - One underlying fund may be buying the same securities that another
underlying fund is selling. You would indirectly bear the costs of
these transactions without accomplishing any investment purpose.
- - You may receive higher taxable capital gains distributions than if you
invested directly in the underlying funds.
- - Because of regulatory restrictions, a fund's ability to invest in an
attractive underlying fund may be limited to the extent that the
underlying fund's shares are already held by the other Kobren Insight
funds, KIM or their affiliates.
Summary of Past Performance
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The bar chart and table shown below indicate the risks of investing in the
Kobren Insight funds. The bar chart shows the performance of the funds for 1997,
their first and only full calendar year. The table shows how each fund's average
annual return for 1997 compares to that of a widely recognized, unmanaged index
of common stock prices, as well as several blended indices.
[Bar chart showing the performance of the funds for 1997, their first and only
full calendar year. The results are 15.03% for Growth, 23.25% for Moderate
Growth and 20.64% for Conservative Allocation]
Average Annual 1 year ended
Total Returns 12/31/97
Growth 15.03%
Moderate Growth 23.25%
Conservative Allocation 20.64%
S&P 500 Index 33.39%
Year to date and quarterly returns.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Growth Moderate Growth Conservative Allocation
YTD (6/30/98) returns 11.90% 6.95% 4.21%
Best quarterly returns 11.12% in 1st quarter 199810.43% in 2nd quarter 1997 8.29% in 3rd quarter 1997
Worst quarterly returns -3.21% in 4th quarter 1997-0.85% in 2nd quarter 1998 -1.25% in 2nd quarter 1998
</TABLE>
A fund's past performance does not necessarily indicate how the fund will
perform in the future.
FACTORS EVERY INVESTOR SHOULD KNOW
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WHO MAY WANT TO INVEST IN THE KOBREN INSIGHT FUNDS
Growth Fund
- - Investors seeking growth of capital and a volatility level
approximating that of the S&P 500 Index.
- - Investors with a minimum five year time horizon and no need
for current income.
Moderate Growth Fund
- - Investors seeking growth of capital and a volatility level below that
of the S&P 500 Index.
- - Investors with a minimum time horizon of three to five years and
modest income needs.
Conservative Allocation Fund
- - Investors seeking enough long-term growth of capital to offset the
loss of purchasing power due to inflation.
- - Conservative investors willing to sacrifice some growth potential in
exchange for less (but not zero) volatility.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of a Kobren Insight fund.
For year ended 12/31/97
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Moderate Conservative
Growth Growth Allocation
Shareholder fees
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases None None None
Maximum deferred sales charge (load) None None None
Redemption fee None None None
Exchange fee None None None
Annual fund operating expenses before expense limitation (expenses that are
deducted from fund assets)1
Advisory fees 0.75% 0.75% 0.75%
Revenues from underlying funds2 (0.11%) (0.06%) (0.00%)
Distribution (12b-1) and/or service fees None None None
Other expenses 0.53% 0.83% 2.07%
Total annual fund operating expenses 1.28% 1.58% 2.82%
1 After expense limitation continuing until January 1, 2001, expenses were:
Other expenses 0.25% 0.25% 0.25%
Total annual fund operating expenses 0.89% 0.92% 1.00%
2 Payments made by an underlying fund or its adviser, based on shares
held by a Kobren Insight fund.
</TABLE>
This example is intended to help you compare the cost of investing in each fund
with the cost of investing in other mutual funds.
The example for each fund 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.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
Growth Moderate Conservative
Growth Allocation
1 year $90 $90 $100
3 years $280 $290 $320
5 years $490 $510 $550
10 years $1,090 $1,130 $1,220
FACTORS EVERY INVESTOR SHOULD KNOW
INDUSTRY ALLOCATION PROCESS
The funds' strategies are designed to identify and avoid industries that appear
overvalued. KIM compares stock valuations for companies in a particular industry
to current and historical valuations for industries represented in the S&P 500
Index. When stock valuations in a particular industry are outside their normal
range, that industry may be underweighted or overweighted in a fund's portfolio.
INVESTING IN UNDERLYING FUNDS
The Kobren Insight funds invest primarily in other mutual funds, including those
whose investment objectives do not match those of the funds. KIM believes that,
by investing in a combination of funds with a broad range of goals and
offsetting risk characteristics, a Kobren Insight fund can achieve a higher
composite rate of return while meeting its volatility targets.
Underlying funds may engage in all types of investment practices, even those
that the Kobren Insight funds do not engage in directly. The funds will bear all
the risks associated with underlying funds' investments.
Due to KIM's size and buying power, the funds can invest at net asset value in
underlying funds that would otherwise be sold with a front-end sales charge. A
fund will not buy underlying fund shares if the fund would have to pay a
front-end sales charge on the purchase. However, the funds may buy underlying
fund shares subject to a deferred sales charge or redemption fee.
PRINCIPAL INVESTMENTS
- - Equity
The funds and the underlying funds in their portfolios may invest in equity
securities of U.S. and foreign companies. These 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.
- - Fixed income
The funds and the underlying funds in their portfolios may invest in fixed
income securities of any maturity or duration. These securities may be issued by
the U.S. government or any of its agencies, foreign governments, supranational
entities such as the World Bank and U.S. and foreign companies.
The funds' investments in fixed income securities may be of any credit quality
and may have all types of interest rate payment and reset terms. They may
include mortgage-backed, asset-backed and derivative securities as well as junk
bonds.
DEFENSIVE INVESTING
Each fund (and each underlying fund in its portfolio) may depart from its
principal investment strategies by taking temporary defensive positions in
short-term debt securities in response to adverse market, economic or political
conditions.
DERIVATIVE CONTRACTS
The funds and the underlying funds in their portfolios may, but are 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 a fund. These changes may be caused by changing
interest rates, stock market prices or currency exchange rates.
- - As a substitute for purchasing or selling securities or foreign
currencies.
- - To shorten or lengthen the effective maturity or duration of a fund's
fixed income portfolio.
- - In non-hedging situations, to attempt to profit from anticipated
market developments.
A derivative contract will obligate or entitle a 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.
ADDITIONAL INVESTMENT RISKS
The funds (and the underlying funds in their portfolios) could lose money or
underperform for the reasons listed in the "Factors Every Investor Should Know"
section or for the following additional reasons:
- - Foreign country and currency risks
Prices of a fund's investments in foreign securities may go down because of
unfavorable foreign government actions, political instability or the absence of
accurate information about foreign issuers. Also, a decline in the value of
foreign currencies relative to the U.S. dollar will reduce the value of
securities denominated in those currencies. Foreign securities are sometimes
less liquid and harder to value than securities of U.S. issuers. These risks are
more severe for securities of issuers in emerging market countries.
- - 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. Junk bonds involve more credit risk
than higher quality debt securities.
- - Prepayment or call risk
The issuer of a debt security may exercise its right when interest rates are
falling to prepay principal earlier than scheduled, forcing the fund to
re-invest in lower yielding securities. Prepayments will also depress the value
of interest-only securities. Corporate bonds, mortgage-backed securities and
asset-backed securities are especially susceptible to prepayment risk.
- - Extension risk
The issuer of a debt security may exercise its right when interest rates are
rising to extend the time for paying principal. This will lock in a below-market
interest rate, increase the security's duration and reduce the value of the
security. Mortgage-backed securities and asset-backed securities are especially
susceptible to extension risk.
- - Leverage risk
Because of borrowing or investments in derivative contracts or leveraged
derivative securities, a fund may suffer disproportionately heavy losses
relative to the amount of its investment. Leverage can magnify the impact of
poor asset allocation or investment decisions.
- - Correlation risk
Changes in the value of a 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 a fund may become temporarily
illiquid and hard to value, especially in declining markets.
Also, an underlying fund's obligation to redeem shares held by a Kobren Insight
fund is limited to 1% of the underlying fund's outstanding shares per 30-day
period. Because the Kobren Insight funds and their affiliates may together
acquire up to 3% of an underlying fund's shares, it may take up to 90 days for
the funds to completely dispose of their underlying fund shares.
IMPACT OF HIGH PORTFOLIO TURNOVER
Each fund or any underlying fund in its portfolio may engage in active and
frequent trading to achieve its principal investment strategies. As a result, a
fund may realize and distribute to shareholders higher capital gains, which
would increase their tax liability. Frequent trading also increases transaction
costs, which could detract from a fund's performance.
THE FUNDS' INVESTMENT GOALS
The funds' board of trustees may change each fund's investment goals without
obtaining the approval of the fund's shareholders. A fund might not succeed in
achieving its goals.
INVESTMENT ADVISER
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KOBREN INSIGHT MANAGEMENT, INC.
Kobren Insight Management, Inc. (KIM) provides investment advice and portfolio
management services to the Kobren Insight funds. Under the supervision of the
funds' board of trustees, KIM makes the funds' day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
funds' investments.
Kobren Insight Management, Inc., a registered investment adviser, was
established in 1987. KIM has historically used mutual funds, rather than
individual securities, as the primary investment vehicle for client accounts.
KIM has extensive experience managing mutual fund portfolios for high net worth
individuals and corporations with minimum $400,000 account sizes. KIM currently
manages over 1,000 client accounts with assets totaling over $1 billion.
Eric M. Kobren owns all of the stock of KIM and of the funds' 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.
Mr. Kobren is the primary portfolio manager for each of the Kobren Insight
funds. Mr. Kobren has been the president of KIM and the funds' distributor since
their inception in 1987 and of the Mutual Fund Investors Association, Inc. since
its inception in 1985. Mr. Kobren has been in the investment business since
1976.
Each fund has agreed to pay KIM a monthly advisory fee at the annual rate
of 0.75% of the fund's average daily net assets.
A Kobren Insight fund may invest in shares of an underlying mutual fund:
- - that makes payments of Rule 12b-1 or service fee revenues based on
the amount of shares held by the Kobren Insight fund or
- - whose investment adviser is willing to share a portion of the
underlying fund's advisory fee attributable to the underlying fund
shares held by the Kobren Insight fund.
Rule 12b-1, service fee or revenue sharing payments made as to shares of any
underlying fund will be applied to advisory fees owed to KIM by the affected
Kobren Insight fund. In addition, some Rule 12b-1 and subtransfer agent fee
revenues will be used to defray the costs of participating in certain fund
network programs.
KIM has voluntarily agreed to cap each fund's total operating expenses at no
more than 1.00% annually of the fund's average daily net assets. 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, 2001.
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YEAR 2000
The funds' securities trades, pricing and accounting services and other
operations could be adversely affected if the computer systems of the adviser,
distributor, custodian or transfer agent were unable to recognize dates after
1999. The adviser and other service providers have told the funds that they are
taking action to prevent, and do not expect the funds to suffer from,
significant year 2000 problems.
INVESTMENT AND ACCOUNT POLICIES
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CALCULATION OF NET ASSET VALUE
Each fund calculates its net asset value per share (NAV) 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 the NAV and the deadlines for share transactions
will be accelerated to the earlier closing times.
Shares of underlying funds are valued at their reported NAVs. Each fund's other
portfolio securities are valued on the basis of either market quotations or at
fair value, which may include the use of pricing services. Although each Kobren
Insight fund's NAV will be calculated every business day, the NAV reported to
NASDAQ for distribution to news agencies will be delayed by one business day.
PURCHASING FUND SHARES
Individuals, institutions, companies and authorized fiduciaries may buy shares
of each Kobren Insight fund without a sales charge at its NAV next calculated
after the order has been received in proper form.
TAX-DEFERRED RETIREMENT PLANS
Traditional individual retirement account (IRA) plans and Roth individual
retirement plans can invest in the funds through Investor Services Group. The
following retirement plans are available through the mutual fund networks listed
in the box below:
- - 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 funds currently impose no fee for wire and Automated Clearing House (ACH)
transfers of purchase payments and redemption proceeds. However, the funds'
custodian may charge a fee in the future. Telephone transactions
The funds 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.
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MINIMUM INVESTMENT AMOUNTS
The following minimum investment requirements apply to initial purchases:
TYPE OF ACCOUNT MINIMUM
Regular accounts $2,500
Individual Retirement Accounts $2,000
Accounts purchased through the following $2,500 fund networks:
- - Charles Schwab Mutual Fund Marketplace
- - Fidelity FundsNetwork
- - Waterhouse Securities
- - Jack White Mutual Fund Network
The minimum subsequent investment is $500. Fund officers have discretion to
waive or reduce any of the minimum investment requirements.
You can get prospectuses, sales literature and applications from the funds'
distributor at the address and telephone number listed on the back cover of this
prospectus.
The funds and their distributor may reject all or part of any order to buy fund
shares.
HOW TO PURCHASE SHARES
Method of Purchase
By Check [Picture of a check appears here]
Purchase Procedures
OPEN AN ACCOUNT
- - To open an account and make an initial investment, send a minimum
$2,500 check and a completed account application to the address
shown below.
- - An account application is included with this prospectus.
ADD TO AN ACCOUNT
- - Send a check for no less than $500 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 funds,
their distributor or Investor Services Group.
By Wire [Picture of a bank appears here]
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 funds.
- - You will not be able to redeem shares of a fund 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 [Picture of a calendar appears here]
- - After your initial investment of $2,500 or more, 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 section 6 of the application. You can change
the purchase amount or terminate the plan at any time by notifying the
funds in writing.
Through Broker-Dealers and Fund Networks
- - Contact your dealer to find out about its procedures for processing
orders to purchase fund shares. Purchase orders received by your 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 Kobren Insight funds may also be purchased with a $2,500 minimum
through the following fund networks:
Fidelity Investments 800-544-9697 (No transaction fee)
Charles Schwab & Company 800-266-5623
Jack White & Company 800-323-3263
Waterhouse Securities 800-934-4443
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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
HOW TO EXCHANGE/REDEEM SHARES
Method of Exchange
All Exchanges [Picture of a dollar sign with arrow pointing to upper right
appears here] Exchange Procedures - You may exchange shares of any Kobren
Insight fund for shares of the other funds at the NAV of each fund
next determined after receipt of your exchange request.
- - Exchanges must meet the applicable minimum initial investment
requirements for each fund.
- - To protect other shareholders of the funds, the funds may cancel the
exchange privileges of any person
that, in the opinion of the funds, is using market timing strategies or
making more than four exchanges per owner or controlling person per
calendar year. The funds may also close the accounts of shareholders
whose exchange privilege has been cancelled.
- - The funds' trustees may change or terminate the exchange privilege on
60 days' prior notice to shareholders.
By Mail [Picture of an envelope appears here] - Send a written request to the
address shown below.
- - Your request must state the number of shares or the 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 [Picture of a telephone appears here]
- - Call Investor Services Group at the toll-free 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
By Mail [Picture of an envelope appears here]
Redemption Procedures
- - You may redeem shares of the funds 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" on page 12.
- - 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
specify this in your written redemption request. Call Investor Services
Group for more information about ACH transfers.
By Telephone [Picture of a telephone appears here]
- - 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 dealer to find out about its procedures for processing
orders to redeem fund shares. Redemption orders received by your
dealers 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.
Systematic Withdrawal Plan [Picture of a calendar appears here]
- - 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 info.
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
INVESTMENT AND ACCOUNT POLICIES
You may redeem shares of the funds 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 funds 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 it 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 funds 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 SUB-MINIMUM ACCOUNTS
The funds may close your account if, for reasons other than market losses, the
value of your shares falls below $1,000, the applicable initial investment
minimum or any other minimum set by the funds' trustees. After the funds notify
you of their intention to close your account, you will have 60 days to bring the
account back to the minimum level.
DIVIDENDS, DISTRIBUTIONS AND TAXES
[This section appears in a colored box]
Each fund declares and pays dividends according to the schedule on the right.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Type of Distribution Name of Fund Declared Federal Tax Status
and Paid
Dividends from net investment income Growth Fund annually Taxable as ordinary
income.
Dividends from net investment income Moderate Growth Fund annually Taxable as ordinary
income.
</TABLE>
Dividends from net investment income Conservative Allocation Fund quarterly
Taxable as ordinary income. Distributions of short term capital gain All Kobren
Insight Funds annually Taxable as ordinary income. Distributions of long term
capital gain All Kobren Insight Funds annually Taxable as capital gain.
You should generally avoid investing in a 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 funds will send you information about the fund's dividends
and distributions during the previous calendar year.
If you do not provide the funds with a correct taxpayer identification number
and required certifications, you may be subject to federal backup withholding
tax.
Dividends are paid in additional shares of the same fund unless you elect to
receive them in cash.
FINANCIAL HIGHLIGHTS
Kobren Growth Fund
For a fund share outstanding throughout the period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Six Months
Ended For the Year For the Period
6/30/98 Ended Ended
(Unaudited) 12/31/97 12/31/96 (a)
Net asset value - beginning of period $11.51 $10.24 $10.00
Net investment income/(loss) (0.05) 0.05 0.00(d)
Short term capital gains -- 0.22 --
Net realized and unrealized gain on
investments 0.24 1.42 1.27
Net increase in net assets resulting
from investment operations 1.37 1.54 0.24
Distributions from net investment income -- (0.05) --
Distributions from net realized
short term capital gains -- (0.22) --
Distributions from net realized
long term capital gains -- (0.00)(d) --
Total distributions -- (0.27) --
Net asset value - end of period $12.88 $11.51 $10.24
Total return (b) 11.90% 15.03% 2.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $71,285 $62,509 $251
Ratio of net investment income/(loss)
to average net assets (0.84)%(c) 0.60% (0.97)%(c)(e)
Ratio of operating expenses to average
net assets after reimbursements and
reductions 0.89%(c) 0.89% 1.00%(c)
Portfolio turnover rate 18% 43% n/a(e)
Ratio of operating expenses to average
net assets before fees waived and/or
expenses reimbursed by investment adviser,
administrator and transfer agent
and other reductions 1.06%(c) 1.28% n/a(e)
Net investment income/(loss) per share
before fees waived and/or expenses
reimbursed by investment adviser,
administrator and transfer agent
and other reductions $(0.06) $0.02 $(0.42)
(a) Kobren Growth Fund commenced operations on December 16, 1996.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
(e) Since Kobren Growth Fund was in operation for a short period of time, these
ratios are not meaningful.
</TABLE>
<PAGE>
Financial Highlights
Kobren Moderate Growth Fund
For a fund share outstanding throughout the period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Six Months
Ended For the Year For the Period
6/30/98 Ended Ended
(Unaudited) 12/31/97 12/31/96(a)
Net asset value - beginning of period $11.94 $10.06 $10.00
Net investment income 0.01 0.19 0.00(d)
Short term capital gains -- 0.27 --
Net realized and unrealized gain on 0.82 1.88 0.06
Net increase in net assets resulting
From investment operations 0.83 2.34 0.06
Distributions from net investment income -- (0.19) --
Distributions from net realized
short term capital gains -- (0.27) --
Distributions from net realized
long term capital gains -- (0.00)(d) --
Total distributions -- (0.46) --
Net asset value - end of period $12.77 $11.94 $10.06
Total return (b) 6.95% 23.25% 0.60%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $57,380 $43,381 $190
Ratio of net investment income to
average net assets 0.22% (c) 2.76% 8.95%(c) (e)
Ratio of operating expenses to average
net assets after reimbursements and
reductions 0.91%(c) 0.92% 1.00%(c)
Portfolio turnover rate 10% 14% n/a(e)
Ratio of operating expenses to average
net assets before fees waived and/or
expenses reimbursed by investment adviser,
administrator and transfer agent
and other reductions 1.10%(c) 1.58% n/a(e)
Net investment income/(loss) per share
before fees waived and/or expenses
reimbursed by investment adviser,
administrator and transfer agent
and other reductions $0.00 $0.14 $(0.50)
(a) Kobren Moderate Growth Fund commenced operations on December 24, 1996.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
(e) Since Kobren Moderate Growth Fund was in operation for a short period of
time, these ratio are not meaningful.
</TABLE>
Financial Highlights
Kobren Conservative Allocation Fund
For a fund share outstanding throughout the period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Six Months
Ended For the Year For the Period
6/30/98 Ended Ended
(Unaudited) 12/31/97 12/31/96(a)
Net asset value - beginning of period $11.39 $9.98 $10.00
Net investment income 0.07 0.57 0.00(d)
Short term capital gains -- 0.04 --
Net realized and unrealized gain/(loss)
on investments 0.41 1.44 (0.02)
Net increase/(decrease) in net assets
resulting from investment operations 0.48 2.05 (0.02)
Distributions from net investment income (.02) (0.57) --
Distributions from net realized
short term capital gains -- (0.04) --
Distributions from net realized
long term capital gains -- (0.03) --
Total distributions (.02) (0.64) --
Net asset value - end of period $11.85 $11.39 $9.98
Total return (b) 4.21% 20.64% (0.20)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $24,794 $17,475 $165
Ratio of net investment income/(loss)
to average net assets 1.02%(c) 3.99% (1.00)%(c)(e)
Ratio of operating expenses to average
net assets after reimbursements and
reductions 1.00%(c) 1.00% 1.00%(c)
Portfolio turnover rate 18% 13% n/a(e)
Ratio of operating expenses to average
net assets before fees waived and/or
expenses reimbursed by investment adviser,
administrator and transfer agent
and other reductions 1.44%(c) 2.82% n/a(e)
Net investment income/(loss) per share
before fees waived and/or expenses
reimbursed by investment adviser,
administrator and transfer agent
and other reductions $0.04 $0.31 $(0.56)
(a) Kobren Conservative Allocation Fund commenced operations on December 30,
1996.
(b) Total return represents aggregate total return for the period
indicated.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
(e) Since Kobren Conservative Allocation Fund was in operation for a short
period of time, these ratios are not meaningful.
</TABLE>
BACK COVER
FOR MORE INFORMATION
For investors who want more information about the Kobren Insight funds, the
following documents are available free upon request:
Annual/Semiannual Reports
Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. These reports contain a
discussion of the market conditions and investment strategies that significantly
affected each fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI provides more detailed information about the funds 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 funds by contacting the funds' principal
distributor at:
Address: Kobren Insight Brokerage, Inc.
20 William Street, Suite 310
P.O. Box 9150
Wellesley Hills, MA 02481
Phone: 1-800-4KOBREN (1-800-456-2736)
E-mail: [email protected]
Internet: http://www.kobren .com
Contacting the SEC
Investors can review the funds' reports and SAIs at the Public Reference Room of
the Securities and Exchange Commission. 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.
The funds' Investment Company Act file number is 811-07813.
INVESTMENT ADVISER
Kobren Insight
Management, Inc.
Toll-free: 1-800-456-2736
LEGAL COUNSEL
Hale and Dorr LLP
ADMINISTRATOR
First Data Investor
Services Group, Inc.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRANSFER AGENT
First Data Investor
Services Group, Inc.
Toll-free: 1-800-895-9936
CUSTODIAN
Boston Safe Deposit & Trust Co.
<PAGE>
Part B. Statement of Additional
Item No. Information Caption
10. Cover Page and Table of Cover Page; Table of Contents
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 Management of the Trust and the
Holders of Securities Funds
15. Investment Advisory and Other Management of the Trust and the Funds;
Services Custodian, Counsel and Independent
Accountants; Portfolio Transactions
16. Brokerage Allocation and Other Portfolio Transactions
Practices
17. Capital Stock and Other Description of the Trust
Securities
18. Purchase, Redemption and Purchase, Redemption and
Pricing of 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
<PAGE>
November 1, 1998
KOBREN INSIGHT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This statement of additional information is not a prospectus, but expands upon
and supplements the information contained in the prospectus of Kobren Insight
Funds (the "Trust"), dated November 1, 1998. The statement of
additional information should be read in conjunction with the prospectus. The
Trust's prospectus may be obtained by writing to the Trust at P.O. Box 5146,
Westborough, Massachusetts 01581 or by telephoning the Trust toll free at
800-895-9936. Capitalized terms not otherwise defined herein have the same
meaning as in the prospectus.
TABLE OF CONTENTS
PAGE
I. INVESTMENT OBJECTIVES AND POLICIES.................................2
II. INVESTMENT RESTRICTIONS...........................................17
III. MANAGEMENT OF THE TRUST AND THE FUNDS
A. Trustees and Officers......................................19
B. Investment Adviser.........................................22
C. Distributor................................................23
D.Administrator, Transfer Agent and Dividend Paying Agent....................23
IV. PURCHASE, REDEMPTION AND DETERMINATION
OF NET ASSET VALUE.........................................23
V. SPECIAL REDEMPTIONS...............................................24
VI. PORTFOLIO TRANSACTIONS............................................25
VII. PERFORMANCE INFORMATION
A. Total Return...............................................26
B. Non-Standardized Total Return..............................27
C. Other Information Concerning Fund Performance..............27
VIII. DIVIDENDS, DISTRIBUTIONS AND TAXES................................32
IX. CUSTODIAN, COUNSEL AND INDEPENDENT ACCOUNTANTS....................37
X. DESCRIPTION OF THE TRUST..........................................37
XI. ADDITIONAL INFORMATION............................................38
XII. FINANCIAL STATEMENTS..............................................38
APPENDIX - RATINGS OF DEBT INSTRUMENTS...........................A-1
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 consists of three separate series,
each with different investment objectives (each, a "fund" and collectively, the
"funds"). The funds seek to achieve their investment objectives by investing
primarily in shares of other investment companies ("underlying funds" or "mutual
funds"). As of the date of this statement of additional information, the Trust's
series are:
KOBREN GROWTH FUND, which seeks long-term growth of capital without
regard to current income and with a volatility level approximating that of the
S&P 500 Index;
KOBREN MODERATE GROWTH FUND, which seeks long-term growth of capital
without regard to current income and with a volatility level below that of the
S&P 500 Index; and
KOBREN CONSERVATIVE ALLOCATION FUND, which seeks enough long-term
growth of capital to maintain purchasing power in the face of inflation (as
measured by the Consumer Price Index) with a volatility level below that of the
S&P 500 Index.
Each fund will concentrate its investments in the shares of mutual
funds. Mutual funds pool the investments of many investors and use professional
management to select and purchase securities of different issuers for their
portfolios. Some mutual funds invest in particular types of securities (i.e.,
equity or debt), some concentrate in certain industries, and others may invest
in a variety of securities to achieve a particular type of return or tax result.
Some of the underlying funds are, like the funds, "open-end" funds and stand
ready to redeem their shares. Any investment in a mutual fund involves risk.
Even though the funds may invest in a number of mutual funds, this investment
strategy cannot eliminate investment risk. Investing in mutual funds through a
fund involves additional and duplicative expenses and certain tax results that
would not be present if an investor were to make a direct investment in the
underlying funds. See "Expense Information" and "Dividends, Distributions and
Taxes" in the prospectus.
A fund, together with the other funds and any "affiliated persons" (as
defined in the 1940 Act) may purchase only up to 3% of the total outstanding
securities of an underlying mutual fund. Accordingly, when affiliated persons of
Kobren Insight Management, Inc. ("KIM" or the "Adviser") hold shares of any of
the underlying funds, each fund's ability to invest fully in shares of such
mutual funds is restricted, and the Adviser must then, in some instances, select
alternative investments for the fund that would not have been its first
investment choice.
The 1940 Act also provides that a mutual fund whose shares are
purchased by a fund is obliged to redeem shares held by the fund only in an
amount up to 1% of the underlying mutual fund's outstanding securities during
any period of less than 30 days. Accordingly, because the funds and their
affiliates may together acquire up to 3% of an underlying fund's shares, a fund
that has decided to sell its entire position in an underlying fund may need up
to 90 days to completely implement this decision. In addition, shares held by a
fund in excess of 1% of an underlying mutual fund's outstanding securities may
be considered not readily marketable securities. Together with other illiquid
securities, these mutual funds may not exceed 15% of net assets of each Kobren
Insight fund. However, since the funds have reserved the right to pay redemption
requests in portfolio securities, these positions may be treated as liquid.
These limitations are not fundamental and may therefore be changed by the Board
of Trustees of the Trust without shareholder approval.
Under certain circumstances an underlying fund may determine to make
payment of a redemption by a fund (wholly or in part) by a distribution in kind
of securities from its portfolio, instead of in cash. As a result, a fund may
hold securities distributed by an underlying fund until such time as KIM
determines it appropriate to dispose of such securities. Such disposition will
impose additional costs on the fund.
Industry Concentration. An underlying fund may concentrate its investments
within one industry. Since the investment alternatives within an industry are
limited, the value of the shares of such a fund may be subject to greater market
fluctuation than an investment in a fund that invests in a broader range of
securities.
Investment decisions by the investment advisers of the underlying funds
are made independently of the funds and the Adviser. At any particular time, one
underlying fund may be purchasing shares of an issuer whose shares are being
sold by another underlying fund. As a result, a fund would incur indirectly
certain transaction costs without accomplishing any investment purpose. Each
fund limits its investments in underlying funds to mutual funds whose shares a
fund may purchase without the imposition of an initial sales load. The
underlying funds may incur distribution expenses in the form of Rule 12b-1 fees.
An investor could invest directly in the underlying funds. By investing in
mutual funds indirectly through the funds, the investor bears not only his or
her proportionate share of the expenses of the funds (including operating costs
and investment advisory and administrative fees) but also, indirectly, similar
expenses of the underlying funds. An investor may indirectly bear expenses paid
by underlying funds related to the distribution of such mutual funds' shares. As
a result of the funds' policies of investing in other mutual funds, an investor
may receive taxable capital gains distributions to a greater extent than would
be the case if he or she invested directly in the underlying funds.
See "Dividends, Distributions and Taxes" below.
The types of securities that may be acquired by the funds and the
underlying funds and the various investment techniques which either may employ,
including the risks associated with these investments, are described below.
Foreign Securities. A fund or an underlying 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.
Exchange Rates. Since a fund or an underlying fund may purchase securities
denominated in foreign currencies, changes in foreign currency exchange rates
will affect the value of the assets from the perspective of U.S. investors.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to the
investor by a mutual fund. The rate of exchange between the U.S. dollar and
other currencies is determined by the forces of supply and demand in foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. A fund or an underlying fund may seek to protect
itself against the adverse effects of currency exchange rate fluctuations by
entering into currency-forward, futures, options or swaps contracts. Hedging
transactions will not, however, always be fully effective in protecting against
adverse exchange rate fluctuations. Furthermore, hedging transactions involve
transaction costs and the risk that the fund or the underlying fund will lose
money, either because exchange rates move in an unexpected direction, because
another party to a hedging contract defaults, or for other reasons.
Exchange Controls. The value of foreign investments and the investment income
derived from them may also be affected (either favorably or unfavorably) by
exchange control regulations. It is expected that a fund or an underlying fund
will invest only in securities denominated in foreign currencies that are fully
exchangeable into U.S. dollars without legal restriction at the time of
investment. However, there is no assurance that currency controls will not be
imposed after the time of investment. In addition, the value of foreign fixed
income investments will fluctuate in response to changes in U.S. and foreign
interest rates.
Limitations of Foreign Markets. There is often less information
publicly-available about a foreign issuer than about a U.S. issuer. Foreign
issuers are not generally subject to accounting, auditing, and financial
reporting standards and practices comparable to those in the United States. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions,
custodial expenses, and other fees are also generally higher than for securities
traded in the United States. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of a fund's assets held abroad) and expenses not present in the
settlement of domestic investments. A delay in settlement could hinder the
ability of a fund or an underlying fund to take advantage of changing market
conditions, with a possible adverse effect on net asset value. There may also be
difficulties in enforcing legal rights outside the United States.
Foreign Laws, Regulations and Economies. There may be a possibility of
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability, and
diplomatic developments that could affect the value of a fund's or an underlying
fund's investments in certain foreign countries. Legal remedies available to
investors in certain foreign countries may be more limited than those available
with respect to investments in the United States or in other foreign countries.
The laws of some foreign countries may limit a fund or an underlying fund's
ability to invest in securities of certain issuers located in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth or gross national product, inflation
rate, capital reinvestment, resource self-sufficiency and balance of payment
positions.
Foreign Tax Considerations. Income (possibly including, in some cases, capital
gains) received by a fund or an underlying fund from sources within foreign
countries may be reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes in some cases. Any such taxes paid by a fund will
reduce the net income of the fund available for distribution. Special tax
considerations apply to foreign securities.
Emerging Markets. Risks may be intensified in the case of investments by a fund
or an underlying fund in emerging markets or countries with limited or
developing capital markets. Security prices in emerging markets can be
significantly more volatile than in more developed nations, reflecting the
greater uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions on repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with emerging markets may be predominantly based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially making
prompt liquidation of substantial holdings difficult or impossible at times.
Securities of issuers located in 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. A fund or an underlying fund may enter into
forward contracts to purchase or sell an agreed-upon amount of a specific
currency at a future date that may be any fixed number of days from the date of
the contract agreed upon by the parties at a price set at the time of the
contract. Under such an arrangement, a fund would, at the time it enters into a
contract to acquire a foreign security for a specified amount of currency,
purchase with U.S. dollars the required amount of foreign currency for delivery
at the settlement date of the purchase; the fund would enter into similar
forward currency transactions in connection with the sale of foreign securities.
The effect of such transactions would be to fix a U.S. dollar price for the
security to protect against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the particular foreign currency
during the period between the date the security is purchased or sold and the
date on which payment is made or received (usually 3 to 14 days). These
contracts are traded in the interbank market between currency traders (usually
large commercial banks and 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. A fund or an underlying fund may lend its portfolio
securities as long as: (1) the loan is continuously secured by collateral
consisting of U.S. government securities or cash or cash equivalents maintained
on a daily mark-to-market basis in an amount at least equal to the current
market value of the securities loaned; (2) the fund or the underlying fund may
at any time call the loan and obtain the securities loaned; (3) the fund or the
underlying fund will receive any interest or dividends paid on the loaned
securities; and (4) the aggregate market value of the securities loaned will not
at any time exceed one-third of the total assets of the fund or the underlying
fund. The funds may pay reasonable fees in connection with securities loans. KIM
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 Kobren Insight funds. Lending portfolio securities involves
risk of delay in the recovery of the loaned securities and in some cases, the
loss of rights in the collateral if the borrower fails.
Short Sales. A fund or an underlying fund may sell securities short. In a short
sale the fund sells stock it does not own and makes delivery with securities
"borrowed" from a broker. The fund then becomes obligated to replace the
security borrowed by purchasing it at the market-price at the time of
replacement. This price may be more or less than the price at which the security
was sold by the fund. Until the security is replaced, the fund is obligated to
pay to the lender any dividends or interest accruing during the period of the
loan. In order to borrow the security, the fund may be required to pay a premium
that would increase the cost of the security sold. The proceeds of the short
sale will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out.
When it engages in short sales, a fund or an underlying fund must also
deposit in a segregated account an amount of cash or 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.
A fund will incur a loss as a result of a short sale if the price of
the security increases between the date of the short sale and the date on which
the fund replaces the borrowed security. The fund will realize a gain if the
security declines in price between such dates. The amount of any gain will be
decreased and the amount of any loss increased by the amount of any premium,
dividends or interest the fund may be required to pay in connection with a short
sale.
Short Sales "Against the Box". A short sale is "against the box" if at all times
when the short position is open the fund or an underlying fund owns an equal
amount of the securities or securities convertible into, or exchangeable without
further consideration for, securities of the same issue as the securities sold
short. 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. A fund incurs liability to a counterparty in connection with
transactions in futures contracts, swaps and forward contracts and the selling
of options, caps, floors and collars. As a result, the loss on these derivative
contracts may exceed a fund's initial investment. A fund may also lose the
entire premium paid for purchased options, caps, floors and collars that expire
before they can be profitably exercised by the fund. In addition, the funds
incur transaction costs in opening and closing positions in derivative
contracts.
Derivative contracts may sometimes increase or leverage a fund's
exposure to a particular market risk. Leverage magnifies the price volatility of
derivative contracts held by a fund. A fund may cover, or partially offset, the
leverage inherent in derivative contracts by maintaining a segregated account
consisting of cash and liquid securities, by holding offsetting portfolio
securities or contracts or by covering written options.
A fund's success in using derivative contracts to hedge portfolio
assets depends on the degree of price correlation between the derivative
contract and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative contract, the assets underlying the derivative contract, and the
fund's portfolio assets.
During periods of extreme market volatility, a commodity or options
exchange may suspend or limit trading in an exchange-traded derivative contract,
which may make the contract temporarily illiquid and difficult to price. Some
over-the-counter options may be illiquid, while others may be determined to be
liquid in accordance with procedures established by the Trustees. The funds'
ability to terminate over-the-counter options, swaps, caps, floors, collars and
forward contracts may depend on the cooperation of the counterparties to such
contracts. For thinly traded derivative contracts, the only source of price
quotations may be the selling dealer or counterparty.
Options on Securities, Securities Indices and Currency. A fund or underlying
fund in its portfolio 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. A 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 a
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 a 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 a 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 a 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 each 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. A 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.
A 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. A 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. A fund may also sell call and put options to close out its purchased
options.
The purchase of a call option would entitle a fund, in return for the
premium paid, to purchase specified securities or currency at a specified price
during the option period. A 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 a 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 a fund's portfolio securities
or the currencies in which they are denominated. Put options may also be
purchased by a fund for the purpose of affirmatively benefiting from a decline
in the price of securities or currencies which it does not own. A 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 a fund's portfolio securities.
A 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 a
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 a 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 a 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.
A 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 each 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 a 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, a fund or underlying fund in its portfolio may purchase and sell
various kinds of futures contracts, and purchase and write call and put options
on these futures contracts. A 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 a 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, a 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 a 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, a 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, a 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. A
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.
A 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 a fund or securities with characteristics similar to those of
the fund's portfolio securities. Similarly, a 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, there is a sufficient degree of
correlation between price trends for a 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 a
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 a fund's portfolio securities would be
substantially offset by a decline in the value of the futures position.
On other occasions, a fund may take a "long" position by purchasing
futures contracts. This would be done, for example, when a 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. A 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. A 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 a 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 a fund's assets. By writing
a call option, a 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, a 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 a 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. A 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. A 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 a 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. A 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 a 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 a 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 a 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 a 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 a fund
than if it had not entered into any futures contracts or options transactions.
Perfect correlation between a 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 a 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 a fund from closing out
positions and limiting its losses.
Restricted and Illiquid Securities. Each fund may invest up to 15% of its net
assets in illiquid securities, including certain restricted and private
placement securities. It may be difficult to dispose of illiquid securities
quickly or at a price that fully reflects their fair value. Restricted
securities that are eligible for resale in reliance on Rule 144A under the
Securities Act of 1933, as amended (the "1933 Act"), and commercial paper
offered under Section 4(2) of the 1993 Act are not subject to the funds' 15%
limit on illiquid investments, if they are determined to be liquid.
An underlying fund whose shares are held by a Kobren Insight fund is
obligated to redeem these shares only in an amount up to 1% of the underlying
fund's outstanding securities during any period of less than 30 days.
Accordingly, because the funds and their affiliates may together acquire up to
3% of an underlying fund's shares, a fund that has decided to sell its entire
position in an underlying fund may need up to 90 days to completely implement
this decision. In addition, a fund's holdings of underlying fund shares
representing more than 1% of the underlying fund's outstanding securities may be
subject to the 15% limitation on illiquid investments. However, the funds have
reserved the right to pay redemption requests in portfolio securities and
therefore, these positions may be treated as liquid.
An underlying fund may elect to pay the proceeds of a redemption by a
Kobren Insight fund through a distribution in kind of portfolio securities,
instead of cash. If a fund receives securities that are not considered by KIM to
be desirable investments, the fund will incur additional transaction costs in
disposing of the securities.
Borrowing, Reverse Repurchase Agreements and Leverage. An underlying fund in a
fund's portfolio may borrow money from banks or through reverse repurchase
agreements for emergency and/or leverage purposes. Using the cash proceeds of
reverse repurchase agreements to finance the purchase of additional investments
is a form of leverage. Leverage magnifies the sensitivity of a fund's net asset
value to changes in the market prices of the fund's portfolio securities.
However, each Kobren Insight fund will borrow solely for temporary or emergency
(and not for leverage) purposes. The aggregate amount of such borrowings and
reverse repurchase agreements may not exceed one-third of any fund's total
assets.
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, Kobren Growth Fund and Kobren Moderate Growth Fund each may hold or
invest more than 35% of total assets in cash, investment grade fixed income
securities, repurchase agreements and/or money market fund shares. Kobren
Conservative Allocation Fund may hold more than 35% of total assets in these
securities regardless of market conditions.
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. Kobren Growth Fund, Kobren Moderate Growth Fund and
Kobren Conservative Allocation Fund each may invest up to 35%, 35% and 40%,
respectively, of their total assets directly in money market instruments. Money
market instruments in which the funds may invest include 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.
Master Demand Notes. An underlying fund (particularly an underlying money market
fund) may invest up to 100% of its assets in master demand notes. These are
unsecured obligations of U.S. corporations redeemable upon notice that permit
investment by a mutual fund of fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the mutual fund and the issuing
corporation. Because master demand notes are direct arrangements between the
mutual fund and the issuing corporation, there is no secondary market for the
notes. The notes are, however, redeemable at face value plus accrued interest at
any time.
Repurchase Agreements. Each fund (and the underlying funds in its portfolio)
may, to the extent permitted by its investment policies, enter into repurchase
agreements. A repurchase agreement consists of the sale to a fund of a U.S.
government security or other debt obligation together with an agreement to have
the selling counterparty repurchase the security at a specified future date and
repurchase price. If a repurchase agreement counterparty defaults on its
repurchase obligation, a fund may, under some circumstances, be limited or
delayed in disposing of the repurchase agreement collateral, which could result
in a loss to the fund.
High Yield Securities and Their Risks. A 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. Such fund's investment in such securities is subject
to the risk factors outlined below.
Growth of the High Yield Bond Market. The high yield, high risk market is at
times subject to substantial volatility. An economic downturn or increase in
interest rates may have a more significant effect on the high yield, high risk
securities in a fund's portfolio and their markets, as well as on the ability of
securities' issuers to repay principal and interest. Issuers of high yield, high
risk securities may be of low credit-worthiness and the high yield, high risk
securities may be subordinated to the claims of senior lenders. During periods
of economic downturn or rising interest rates, the issuers of high yield, high
risk securities may have greater potential for insolvency and a higher incidence
of high yield, high risk bond defaults may be experienced.
Sensitivity of Interest Rate and Economic Changes. The prices of high yield,
high risk securities may be more or less sensitive to interest rate changes than
higher-rated investments but are more sensitive to adverse economic changes or
individual corporate developments. During an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may experience
financial stress that would adversely affect their ability to service their
principal and interest payment obligations, to meet projected business goals,
and to obtain additional financing. If the issuer of a high yield, high risk
security owned by an underlying fund defaults, the fund may incur additional
expenses in seeking recovery. Periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of high yield, high
risk securities and the fund's net asset value. Yields on high yield, high risk
securities will fluctuate over time. Furthermore, in the case of high yield,
high risk securities structured as zero coupon or pay-in-kind securities, their
market prices are affected to a greater extent by interest rate changes and
thereby tend to be more volatile than market prices of securities which pay
interest periodically and in cash.
Payment Expectations. Certain securities held by a fund or an underlying fund,
including high yield, high risk securities, may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, such fund would have to replace the security with a lower yielding
security, resulting in a decreased return for the investor. Conversely, a high
yield, high risk security's value will decrease in a rising interest rate
market.
Liquidity and Valuation. The secondary market may at times become less liquid or
respond to adverse publicity or investor perceptions, making it more difficult
for a fund or an underlying fund to accurately value high yield, high risk
securities or dispose of them. To the extent such fund owns or may acquire
illiquid or restricted high yield, high risk securities, these securities may
involve special registration responsibilities, liabilities and costs, and
liquidity difficulties, and judgment will play a greater role in valuation
because there is less reliable and objective data available.
Taxation. Special tax considerations are associated with investing in high yield
bonds structured as zero coupon or pay-in-kind securities or other securities
that have "original issue discount." A fund will report the accrued interest on
these securities as income each year even though it receives no cash interest
until the security's maturity or payment date. Further, a fund must distribute
substantially all of its income for each year to its shareholders to qualify for
pass-through treatment under the tax law. Accordingly, such a fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash or may have to leverage itself by borrowing the cash to satisfy
distribution requirements.
Credit Ratings. Credit ratings evaluate the safety of principal and interest
payments, not the market value risk of high yield, high risk securities. Since
credit rating agencies may fail to change the credit ratings in a timely manner
to reflect subsequent events, the investment adviser to the funds or an
underlying fund 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 an underlying fund invests in high yield, high risk securities,
the achievement of the fund's investment objective may be more dependent on the
underlying fund's own credit analysis than is the case for higher quality bonds.
A fund or an underlying fund may retain a portfolio security whose rating has
been changed. See "Appendix" for credit rating information.
Mortgage-Backed, Asset-Backed, Indexed and Derivative Securities. Each fund (and
the underlying funds in its portfolio) may invest in mortgage-backed,
asset-backed and indexed securities. Some of these securities are considered to
be derivative securities. Mortgage-backed securities represent participation
interests in pools of adjustable and fixed-rate 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.
A fund's investments in mortgage-backed securities may include
conventional mortgage pass through securities, stripped mortgage-backed
securities ("SMBS") and certain classes of multiple class collateralized
mortgage obligations ("CMOs"). Examples of SMBS include interest only ("IO") and
principal only ("PO") securities. Senior CMO classes typically have priority
over less senior and residual CMO classes as to the receipt of principal and/or
interest payments on the underlying mortgages. The CMO classes in which 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.
A fund may invest in floating rate and other indexed securities. The
interest rate and/or the principal payable at the maturity of an indexed
security may change positively or inversely in relation to one or more interest
rates, financial indices, currency rates or other reference prices. In addition,
changes in the amount payable on a leveraged indexed security may be a multiple
of changes in the reference rate or price. Examples of indexed securities
include IOs, POs, inverse floaters, inverse IOs, super floaters, capped
floaters, range floaters, dual index or yield curve floaters and Cost of Funds
Index ("COFI") floaters.
Mortgage-backed, asset-backed and indexed securities are subject to
different combinations of call (prepayment), extension, interest-rate and other
market risks. These risks and the price volatility of a security are magnified
to the extent that a security has imbedded leverage. Under adverse market
conditions, any of these risks could lead to a decline in the yield on or market
value of these securities. In addition, these securities can at times be
difficult to price accurately or to liquidate at a fair price.
Conventional mortgage-backed securities and sequential pay CMOs are
subject to all of these risks, but are typically not leveraged. PACs and other
senior classes of sequential and parallel pay CMOs usually involve less exposure
to prepayment, extension and interest-rate risk than other mortgage-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, a fund could be adversely affected if the
computer systems used by the Adviser 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 funds' 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 funds.
II. INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES. Each fund has adopted certain
fundamental investment policies. These fundamental investment policies cannot be
changed unless the change is approved by the lesser of (1) 67% or more of the
voting securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the fund are present or represented by proxy,
or (2) more than 50% of the outstanding voting securities of the fund. These
fundamental policies provide that a fund may not:
1. Invest 25% or more of its total assets in securities of issuers in any
one industry (securities issued or guaranteed by the United States government,
its agencies or instrumentalities are not considered to represent industries) or
in shares of underlying funds ("sector funds") that each have a policy of
concentrating in the same industry. This limitation does not apply to underlying
funds that have a policy against concentrating in any one industry and does not
preclude a fund from investing 25% or more of its assets in sector funds
generally, provided that cumulative investments in sector funds that all
concentrate as a matter of policy in the same industry do not equal or exceed
25% of the fund's total assets. Each fund will concentrate in the mutual fund
industry.
2. Borrow money or issue senior securities except to the extent
permitted by the 1940 Act.
3. Make loans of securities to other persons, except loans of
securities not exceeding 33 1/3% of the fund's total assets,
investments in debt obligations and transactions in repurchase
agreements.
4. Underwrite securities of other issuers, except insofar as the
fund may be deemed an underwriter under the Securities Act of
1933, as amended (the "1933 Act") in selling portfolio
securities.
5. Purchase or sell real estate or any interest therein,
including interests in real estate limited partnerships,
except securities issued by companies (including real estate
investment trusts) that invest in real estate or interests
therein and real estate acquired as a result of owning
securities.
6. Invest in commodities or commodity futures contracts, provided
that this limitation shall not prohibit the purchase or sale
by the fund of forward currency contracts; financial futures
contracts and options on financial futures contracts; options
on securities, currencies and securities indices; and swaps,
caps, floors and collars, as permitted by the fund's
prospectus.
The 1940 Act currently prohibits the funds from issuing senior
securities or borrowing money, except that each fund may borrow from banks or
pursuant to reverse repurchase agreements in an amount not exceeding one-third
of total assets (including the amount borrowed). A fund is required to reduce
the amount of its borrowings to not more than one-third of total assets within
three days after such borrowings first exceed this one-third limitation.
Additional investment restrictions adopted by the funds, which may be
changed by the Board of Trustees, provide that a fund may not:
1. With respect to 75% of the fund's assets, invest more than 5%
of the fund's assets (taken at market value at the time of
purchase) in the outstanding securities of any single issuer
or own more than 10% of the outstanding voting securities of
any one issuer, in each case other than (1) securities issued
or guaranteed by the United States government, its agencies or
instrumentalities, or (2) securities of other investment
companies.
2. Invest more than 15% of its net assets (taken at market value
at the time of purchase) in illiquid securities.
3. Make investments for the purpose of exercising control
or management.
4. Invest in other investment companies except as permitted under the
1940 Act.
The mutual funds in which the funds may invest may, but need not, have
the same investment objectives or policies as a fund. Although all of the funds
may from time to time invest in shares of the same underlying mutual fund, the
percentage of each fund's assets so invested may vary, and KIM will determine
that such investments are consistent with the investment objective and policies
of each fund. The investments that may, in general, be made by underlying funds
in which the funds may invest, as well as the risks associated with such
investments, are described in the prospectus.
III. MANAGEMENT OF THE TRUST AND THE FUNDS
A. Trustees and Officers
The principal occupations of the Trustees and officers of the Trust
during the past five years are set forth below: Each Trustee who is deemed to be
an "interested person" of the Trust, as defined in the 1940 Act, is indicated by
an asterisk.
*ERIC M. KOBREN, 20 William Street, Suite 310, P.O. Box 9135, Wellesley
Hills, Massachusetts 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
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL COMPENSATION
AGGREGATE FROM THE TRUST
NAME OF PERSON COMPENSATION AND FUND COMPLEX
AND POSITION FROM THE TRUST PAID TO TRUSTEES
Eric M. Kobren, $ 0 $ 0
Chairman of the Board,
President and Trustee
Michael P. Castellano, $ 0 $ 0
Trustee
Edward B. Bloom, $ 6,750 $ 6,750
Trustee
Arthur Dubroff, $ 7,250 $ 7,250
Trustee
Stuart J. Novick, $ 6,750 $ 6,750
Trustee
Scott A. Schoen* $ 6,250 $ 6,250
* (Resigned as Trustee effective 1/22/98)
</TABLE>
Control Persons and Principal Holders of Securities
As of September __, 1998, the following entities/individuals owned of
record or beneficially 5% or more of the outstanding shares of the funds:
Kobren Growth Fund
--------------------------------------
Name and Address % of Fund Nature of Ownership
National Financial Services Corporation ____% Record (a)
One World Financial Center
200 Liberty Street
New York, NY 10281
Mutual Fund Investors Association, Inc. ____% Beneficial
P.O. Box 9135
Wellesley, MA 02481
Kobren Moderate Growth Fund
--------------------------------------
Name and Address % of Fund Nature of Ownership
National Financial Services Corporation ____% Record (a)
One World Financial Center
200 Liberty Street
New York, NY 10281
Eric M. Kobren & Catherine S. Kobren ____% Beneficial
JT WROS
20 William Street, Suite 310
P.O. Box 9135
Wellesley Hills, MA 02481
Kobren Conservative Allocation Fund
-------------------------------------
Name and Address % of Fund Nature of Ownership
National Financial Services Corporation ____% Record (a)
One World Financial Center
200 Liberty Street
New York, NY 10281
(a) National Financial Services Corporation disclaims beneficial ownership and
no one underlying shareholder owns beneficially more than 5% of the shares
of the fund.
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 its funds 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.
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 funds with office space for managing their
affairs, with the services of required executive personnel, and with certain
clerical services and facilities. These services are provided without
reimbursement by the funds for any costs incurred. As compensation for its
services, each fund pays KIM a fee computed daily and paid monthly at the annual
rate of 0.75% of the fund's average daily net assets. This fee will be reduced
by agreements the Kobren Insight funds have structured with underlying funds to
receive Rule 12b-1 and service fees and to share in a portion of their
advisory fee revenue. For the fiscal period ended December 31, 1996 and the
fiscal year ended December 31, 1997, the Adviser was paid $23 and $324,325,
respectively, by Kobren Growth Fund; $6 and $178,947, respectively, by Kobren
Moderate Growth Fund; and $1 and $66,652, respectively, by Kobren Conservative
Allocation Fund.
Each fund is responsible for all expenses not expressly assumed by KIM
or the administrator. These include, among other things, organization expenses,
legal fees, audit and accounting expenses, insurance costs, the compensation and
expenses of the Trustees, the expenses of printing and mailing reports, notices
and proxy statements to fund shareholders, registration fees under federal and
state securities laws, brokerage commissions, interest, taxes and extraordinary
expenses (such as for litigation).
KIM has agreed to reimburse each fund to the extent necessary to
maintain each fund's operating expenses (excluding investment advisory fees,
brokerage commissions, taxes, interest and litigation, indemnification and other
extraordinary expenses) at 0.25% annually of the fund's average daily net
assets. Although this expense cap arrangement can be revoked at any time, KIM
plans to continue this arrangement until January 1, 2001.
By its terms, the Trust's investment advisory agreement will remain in
effect through November 15, 1998 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or, with respect to a particular
fund, (b) a vote of the majority of that fund's outstanding voting securities.
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 may be terminated at any time, on sixty days'
written notice, without the payment of any penalty, by the Board of Trustees, by
a vote of the majority of a particular fund's outstanding voting securities, or
by KIM. The investment advisory agreement automatically terminates in the event
of its assignment, as defined by the 1940 Act and the rules thereunder.
C. Distributor
Kobren Insight Brokerage, Inc., an affiliate of Kobren Insight
Management, 20 William Street, Suite 310, P.O. Box 9135, Wellesley Hills,
Massachusetts 02481 , serves as each fund's distributor pursuant to an
agreement which is renewable annually. Each fund's shares are sold on a
continuous basis by 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 a fund (excluding preparation and
printing expenses necessary for the continued registration of a fund's shares)
and of preparing, printing and distributing all sales literature.
D. Administrator, Transfer Agent and Dividend Paying Agent
The Board of Trustees of the Trust has approved an Administration
Agreement between the Trust and First Data Investor Services Group, Inc.
("Investor Services Group"), a subsidiary of First Data Corporation, pursuant to
which Investor Services Group serves as administrator to the Trust and to each
of the funds. Investor Services Group is located at One Exchange Place, Boston,
Massachusetts 02109. The administrative services necessary for the operation of
the Trust and its funds 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 its funds, 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. Of the $3,144 payable by each fund for the
fiscal period ended December 31, 1996 and the $67,500 payable by each fund for
the fiscal year ended December 31, 1997, $3,144 and $6,381, respectively, was
waived for each fund by Investor Services Group.
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 each 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 a fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for a fund fairly to determine the value of its net assets; or (iii)
for such other periods as the SEC may permit for the protection of shareholders
of the Trust.
Each fund's underlying funds are valued according to the net asset
value per share ("NAV") furnished by that fund's accounting agent. Each fund's
investment securities are valued at the last sale price on the securities
exchange or national securities market on which such securities primarily are
traded. Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average of the
most recent bid and asked prices. Bid price is used when no asked price is
available. Short-term investments are carried at amortized cost, which
approximates market value. Any securities or other assets for which recent
market quotations are not readily available are valued at fair value as
determined in good faith by 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 each fund's shares.
Each fund computes the NAV of its shares at the close of regular
trading on the NYSE (normally 4:00 p.m. New York 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 each fund's shares is determined by subtracting from
the value of the fund's total assets the amount of the fund's liabilities and
dividing the remainder by the number of outstanding fund shares. Although the
NAV will be calculated at the close of all regular trading days, the NAV
reported to NASDAQ for distribution to news agencies will be delayed by one
business day.
Foreign securities in which the funds or the underlying funds may
invest may be listed primarily on foreign stock exchanges that may trade on
other days (i.e., Saturday). Accordingly, the net asset value of a fund's or an
underlying fund's portfolio may be significantly affected by such trading on
days when KIM does not have access to the underlying funds and an investor does
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 a fund to
make payment wholly or partly in cash, that fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the portfolio of
that fund, instead of in cash, in conformity with any applicable rules of the
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.
VI. PORTFOLIO TRANSACTIONS
KIM is responsible for decisions to buy and sell securities for the
funds and for the placement of the funds' portfolio business and negotiation of
commissions, if any, paid on these transactions.
In placing portfolio transactions with brokers and dealers, KIM
attempts to obtain the best overall terms for the funds, taking into account
such factors as price (including dealer spread), the size, type and difficulty
of the transaction involved, and the financial condition and execution
capability of the broker or dealer. In selecting broker-dealers and to the
extent that the execution and price offered by more than one dealer are
comparable, KIM may consider research, including statistical or pricing
information, and brokerage services furnished to the funds or KIM. In addition,
the funds may pay brokerage commissions to brokers or dealers in excess of those
otherwise available upon a determination that the commission is reasonable in
relation to the value of the brokerage services provided, viewed in terms of
either a specific transaction or overall brokerage services provided with
respect to the funds' portfolio transactions by such broker or dealer. KIM may
use this research information in managing the funds' assets, as well as assets
of other clients.
Stocks, other equity securities and options may be traded through
brokers on an agency basis with a stated brokerage commission or on a principal
basis in the over-the-counter market. Fixed income securities are generally
traded on the over-the-counter market on a "net" basis without a stated
commission, through dealers acting for their own account and not as brokers.
Prices paid to a dealer on principal transactions will generally include a
"spread", which is the difference between the prices at which the dealer is
willing to purchase and sell the specific security at that time. Shares of
underlying funds may be purchased or redeemed in transactions with the funds,
their principal underwriters or independent dealers. Certain money market
instruments and government agency securities may be purchased directly from the
issuer, in which case no commissions or premiums are paid. Futures contracts are
traded on an agency basis with a futures commission merchant. Swaps and other
over-the-counter contracts are traded directly with the counterparty, which is
usually a dealer, a bank or other institution.
Other investment advisory clients advised by KIM may also invest in the
same securities as a fund. When these clients buy or sell the same securities at
substantially the same time, KIM may average the transactions as to price and
allocate the amount of available investments in a manner which KIM believes to
be equitable to each client, including the funds. In some instances, this
investment procedure may adversely affect the price paid or received by a fund
or the size of the position obtainable for it. On the other hand, to the extent
permitted by law, KIM may aggregate the securities to be sold or purchased for a
fund with those to be sold or purchased for other funds or clients managed by it
in order to obtain best execution.
The funds will arrange to be included within a class of investors
entitled not to pay sales charges by purchasing initial load fund shares under
letters of intent, rights of accumulation, cumulative purchase privileges and
other quantity discount programs.
VII. PERFORMANCE INFORMATION
A. Total Return
From time to time, quotations of a fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures may be calculated in the following manner:
Total return is computed by finding the average annual compounded rates of
return over the designated periods that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated period
assuming a hypothetical $1,000 payment made at the beginning of the
designated period
The calculation set forth above is based on the further assumptions
that: (i) all dividends and distributions of a fund during the period were
reinvested at the net asset value on the reinvestment dates; and (ii) all
recurring expenses that were charged to all shareholder accounts during the
applicable period were deducted.
Total returns quoted in advertising reflect all aspects of a fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the fund's net asset value per share (NAV) over
the period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in a fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady
annual return rate that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that a fund's performance is
not constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the fund.
The funds' average annual total returns were as follows:
Series One Year Life of Fund
Kobren Growth Fund 15.03% 17.04% (a)
Kobren Moderate Growth Fund 23.25% 23.50% (b)
Kobren Conservative Allocation Fund 20.64% 20.34% (c)
(a) The fund commenced operations on December 16, 1996 (b) The fund commenced
operations on December 24, 1996 (c) The fund commenced operations on December
30, 1996
B. Non-Standardized Total Return
In addition to the performance information described above, a fund may
provide total return information for designated periods, such as for the most
recent rolling six months or most recent rolling twelve months. A fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount, and may be calculated for a
single investment, a series of investments, and/or a series of redemptions over
any time period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns and other performance information may be quoted
numerically or in a table, graph or similar illustration.
C. Other Information Concerning Fund Performance
A fund may quote its performance in various ways, using various types
of comparisons to market indices, other funds or investment alternatives, or to
general increases in the cost of living. All performance information supplied by
a fund in advertising is historical and is not intended to indicate future
returns. A fund's share prices and total returns fluctuate in response to market
conditions and other factors, and the value of a fund's shares when redeemed may
be more or less than their original cost.
A fund may compare its performance over various periods to various
indices or benchmarks or combinations of indices and benchmarks, including the
performance record of the Standard & Poor's 500 Composite Stock Price Index
("S&P"), the Dow Jones Industrial Average ("DJIA"), the NASDAQ Industrial Index,
the Ten Year Treasury Benchmark and the cost of living (measured by the Consumer
Price Index, or CPI) over the same period. Comparisons may also be made to
yields on certificates of deposit, treasury instruments or money market
instruments. The comparisons to the S&P and DJIA show how such fund's total
return compared to the record of a broad average of common stock prices (S&P)
and a narrower set of stocks of major industrial companies (DJIA). The fund may
have the ability to invest in securities or underlying funds not included in
either index, and its investment portfolio may or may not be similar in
composition to the indices. Figures for the S&P and DJIA are based on the prices
of unmanaged groups of stocks, and unlike the fund's returns, their returns do
not include the effect of paying brokerage commissions and other costs of
investing.
Comparisons may be made on the basis of a hypothetical initial
investment in the fund (such as $1,000), and reflect the aggregate cost of
reinvested dividends and capital gain distributions for the period covered (that
is, their cash value at the time they were reinvested). Such comparisons may
also reflect the change in value of such an investment assuming distributions
are not reinvested. Tax consequences of different investments may not be
factored into the figures presented.
A fund's performance may be compared in advertising to the performance
of other mutual funds in general or to the performance of particular types of
mutual funds, especially those with similar objectives.
Other groupings of funds prepared by Lipper Analytical Services, Inc.
("Lipper") and other organizations may also be used for comparison to the funds.
Although Lipper and other organizations such as Investment Company Data, Inc.
("ICD"), CDA Investment Technologies, Inc. ("CDA") and Morningstar Investors,
Inc. ("Morningstar"), include funds within various classifications based upon
similarities in their investment objectives and policies, investors should be
aware that these may differ significantly among funds within a grouping.
From time to time a fund may publish the ranking of the performance of
its shares by Morningstar, an independent mutual fund monitoring service that
ranks mutual funds, including the funds, in broad investment categories (equity,
taxable bond, tax-exempt and other) monthly, based upon each fund's one-,
three-, five- and ten-year average annual total returns (when available) and a
risk adjustment factor that reflects fund performance relative to three-month
U.S. Treasury bill monthly returns. Such returns are adjusted for fees and sales
loads. There are five ranking categories with a corresponding number of stars:
highest (5), above average (4), neutral (3), below average (2) and lowest (1).
Ten percent of the funds, series or classes in an investment category receive 5
stars, 22.5% receive 4 stars, 35% receive 3 stars, 22.5% receive 2 stars, and
the bottom 10% receive one star.
From time to time, in reports and promotional literature, a fund's
yield and total return will be compared to indices of mutual funds and bank
deposit vehicles such as Lipper's "Lipper - Fixed Income Fund Performance
Analysis," a monthly publication which tracks net assets, total return, and
yield on approximately 1,700 fixed income mutual funds in the United States.
Ibbotson Associates, CDA Wiesenberger and F.C. Towers are also used for
comparison purposes as well as the Russell and Wilshire Indices. Comparisons may
also be made to bank certificates of deposit ("CD"), which differ from mutual
funds, such as the funds, in several ways. The interest rate established by the
sponsoring bank is fixed for the term of a CD, there are penalties for early
withdrawal from CDs, and the principal on a CD is insured. Comparisons may also
be made to the 10 year Treasury Benchmark.
Performance rankings and ratings reported periodically in national
financial publications such as Money Magazine, Forbes, Business Week, The Wall
Street Journal, Micropal, Inc., Morningstar, Stanger's, Barron's, etc.
will also be used.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") and others
provide historical returns of the capital markets in the United States. A fund
may compare its performance to the long-term performance of the U.S. capital
markets in order to demonstrate general long-term risk versus reward investment
scenarios. Performance comparisons could also include the value of a
hypothetical investment in common stocks, long-term bonds or treasuries. A fund
may discuss the performance of financial markets and indices over various time
periods.
The capital markets tracked by Ibbotson are common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, and the U.S. rate of
inflation. These capital markets are based on the returns of several different
indices. For common stocks the S&P is used. For small capitalization stocks,
return is based on the return achieved by Dimensional Fund Advisors Small
Company Fund. This fund is a market value-weighted index of the ninth and tenth
deciles of the 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 funds may use for comparison
purposes include the Lehman Bond Index, the Lehman Aggregate Bond Index, the
Lehman GNMA Single Family Index, the Lehman Government/Corporate Bond Index, the
Salomon Brothers Long-Term High Yield Index, the Salomon Brothers Non-Government
Bond Index, the Salomon Brothers Non-U.S. Government Bond Index, the Salomon
Brothers World Government Bond Index and the J.P. Morgan Government Bond Index.
The Salomon Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets throughout the
world, including the United States. 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 funds may also discuss in advertising the relative performance of
various types of investment instruments, such as stocks, treasury securities and
bonds, over various time periods and covering various holding periods. Such
comparisons may compare these investment categories to each other or to changes
in the CPI. In addition, the funds may employ historical mutual fund performance
data and industry asset allocation studies in their advertisements.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, the
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares had been purchased at those intervals. In evaluating
such a plan, investors should consider their ability to continue purchasing
shares through periods of low price levels.
The funds may be available for purchase through retirement plans or
other programs offering deferral of or exemption from income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually, compounded monthly, would have an
after-tax value of $2,009 after ten years, assuming tax was deducted from the
return each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,178 after ten years, assuming tax was deducted at a 31%
rate from the deferred earnings at the end of the ten year period.
Evaluations of fund performance made by independent sources may also be
used in advertisements concerning the funds, including reprints of, or
selections from, editorials or articles about the fund. These editorials or
articles may include quotations of performance from other sources such as Lipper
or Morningstar. Sources for fund performance information and articles about the
funds may include the following:
BANXQUOTE, an on-line source of national averages for leading money market
and bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
BARRON'S, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund
performance data.
THE BOSTON GLOBE, a regional daily newspaper.
BUSINESS WEEK, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA INVESTMENT TECHNOLOGIES, INC., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
CONSUMER DIGEST, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
FINANCIAL WORLD, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
FORBES, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
FORTUNE, a national business publication that periodically rates the performance
of a variety of mutual funds.
IBC/DONOGHUES' MONEY FUND REPORT, a weekly publication of the Donoghue
Organization, Inc. of Holliston, Massachusetts, reporting on the performance of
the nation's money market funds, summarizing money market fund activity, and
including certain averages as performance benchmarks, specifically "Donoghue's
Money Fund Average," and "Donoghue's Government Money Fund Average."
IBBOTSON ASSOCIATES, INC., a company specializing in investment research and
data.
INVESTMENT COMPANY DATA, INC., an independent organization which provides
performance ranking information for broad classes of mutual funds.
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 Fidelity Investments-owned monthly business publication.
When comparing yield, total return and investment risk of shares of a
fund with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
the funds. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while a fund's
returns will fluctuate and its share values and returns are not guaranteed.
Money market accounts offered by banks also may be insured by the FDIC and may
offer stability of principal. U.S. Treasury securities are guaranteed as to
principal and interest by the full faith and credit of the U.S. government.
Money market mutual funds may seek to offer a fixed price per share.
The performance of the funds is not fixed or guaranteed. Performance
quotations should not be considered to be representative of performance of a
fund for any period in the future. The performance of a fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions, purchases and sales of underlying funds, sales
and redemptions of shares of beneficial interest, and changes in operating
expenses are all examples of items that can increase or decrease a fund's
performance.
VIII. DIVIDENDS, DISTRIBUTIONS AND TAXES
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. Each fund has qualified and intends to continue to qualify as a separate
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In any year in which a fund qualifies as a
regulated investment company and distributes to its shareholders substantially
all of its investment company taxable income (which includes, among other items,
interest, dividends and the excess of net short-term capital gain over net
long-term capital loss) and its net capital gain (the excess of net long-term
capital gain over net short-term capital loss) the fund will not be subject to
federal income tax on the amounts distributed to shareholders in the manner
required under the Code. A fund would be taxed at regular corporate income tax
rates on any amounts not distributed to shareholders in accordance with these
requirements.
Amounts not distributed on a timely basis in accordance with a separate
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To avoid imposition of the excise tax, each fund must distribute for each
calendar year an amount equal to the sum of (1) at least 98% of its net ordinary
income (excluding any capital gains or losses) for the calendar year, (2) at
least 98% of the excess of its capital gains over capital losses (adjusted for
certain ordinary losses) realized during the one-year period ending October 31
of such year, and (3) all ordinary income and capital gains for the previous
year that were not distributed during such year and on which the fund has not
paid income tax. A distribution will be treated as paid by a fund, and taxable
to shareholders as if received, on December 31 of the year if it is declared by
a fund in October, November or December of that year with a record date in such
a month and paid by the fund during January of the following year. Each fund
intends to seek to distribute its income in accordance with this requirement to
avoid or minimize any excise tax. Shortly after the end of each year, the Trust
will notify shareholders of the federal tax status of dividends and
distributions for that year.
All income and capital gains received by a fund from a mutual fund in
that fund's portfolio will be distributed by the fund (after deductions for the
fund's 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 or underlying mutual fund realized the
gains, and the fund's or underlying fund's holding periods for those assets.
Because each fund is actively managed and may realize taxable net short-term
capital gains by selling shares of a mutual fund in its portfolio with
unrealized appreciation, or capital losses that might be disallowed under wash
sale rules or recharacterized, investing in a fund rather than directly in the
underlying funds may result in increased tax liability to a shareholder since
the fund must distribute its net realized gains in accordance with the rules
described above.
Distributions of net capital gain received by a fund from the
underlying funds (as described above), as well as net capital gain realized by a
fund from the 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.
For purposes of determining the character of income received by a fund
when an underlying fund distributes net capital gain to a fund, the fund will
treat the distribution as a long-term capital gain, even if the fund has held
shares of the underlying fund for less than one year. Any loss incurred by a
fund on the redemption or other sale of such mutual fund's shares that have a
tax holding period of six months or less, however, if it is not disallowed under
wash sale rules, will be treated as a long-term capital loss to the extent of
the gain distribution received on the shares disposed of by the fund.
If a fund acquires 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. Each fund may limit and/or manage its holdings in
passive foreign investment companies to minimize its tax liability or maximize
its return from these investments.
Each fund may be subject to foreign withholding or other foreign taxes
imposed by foreign countries with respect to the fund's investments in foreign
securities. Tax conventions between certain countries and the U.S. may reduce or
eliminate such taxes in some cases. The funds do not expect to qualify to pass
such taxes or associated foreign tax credits or deductions through to their
shareholders, who consequently are not expected to take them into account on
their own tax returns.
Foreign exchange gains and losses realized by a fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, 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 a 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 funds may restrict each fund's ability to enter into options and futures
contracts, foreign currency positions and foreign currency forward contracts.
Certain of these transactions may cause a fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated and
may affect the character as long-term or short-term (or, in the case of certain
foreign currency options, futures and forward contracts, as ordinary income or
loss) of some capital gains and losses realized by the fund. A 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 a fund's losses on transactions involving options, futures, forward
contracts, and any offsetting or successor positions in its portfolio, may be
deferred rather than being taken into account currently in calculating the
fund's taxable income or gain. Certain of such transactions may also cause the
fund to dispose of investments sooner than would otherwise have occurred. These
transactions may therefore affect the amount, timing and character of a fund's
distributions to shareholders. The funds will take into account the special tax
rules applicable to options, futures or forward contracts, including
consideration of available elections, in order to seek to minimize any potential
adverse tax consequences.
The federal income tax rules applicable to interest rate swaps, caps,
floors and collars and currency swaps are unclear in certain respects, and a
fund may be required to account for these instruments under tax rules in a
manner that, under certain circumstances, may limit its transactions in these
instruments.
Investments in debt obligations that are at risk of or are in default
(i.e., junk bonds) present special tax issues for the funds. Tax rules are not
entirely clear about issues such as when the funds may cease to accrue interest,
original issue discount, or market discount, when and to what extent deductions
may be taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by a fund that holds such obligations in
order to reduce the risk of distributing insufficient income to preserve its
status as a regulated investment company and seek to avoid becoming subject to
federal income or excise tax.
The tax treatment of distributions from a fund is the same whether the
distributions are received in additional shares or in cash. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share received equal to the amount of
cash that could have been received instead.
A fund may invest in mutual funds with capital loss 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, a 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, a fund in their particular circumstances.
The funds are generally required to withhold federal income tax at a
rate of 31% ("backup withholding") from dividends and other distributions,
including redemption proceeds, paid to individuals and other non-exempt
shareholders if (1) the shareholder fails to furnish the Trust with and to
certify his or her correct social security number or other taxpayer
identification number, (2) the Internal Revenue Service (the "IRS") or a broker
notifies the Trust that the shareholder is subject to withholding or (3) the
shareholder fails to certify that he or she is not subject to backup
withholding.
Each fund will distribute investment company taxable income and any net
capital gain at least annually. All dividends and distributions will be
reinvested automatically at net asset value in additional shares of the fund
making the distribution, unless the shareholder notifies the fund in writing of
his or her election to receive distributions in cash.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as retirement plans, tax-exempt entities, insurance companies
and financial institutions.
Non-U.S. investors not engaged in a U.S. trade or business with which their
fund investment is effectively connected will be subject to U.S. federal income
tax treatment that is different from that described above. These investors may
be subject to non-resident alien withholding tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as ordinary dividends
from a fund and, unless an effective Form W-8 is on file, 31% backup withholding
on certain other payments from the fund. Non-U.S. investors should consult their
tax advisers regarding such treatment and the applicability of foreign taxes to
an investment in the funds.
The funds are not subject to Massachusetts corporate excise or
franchise taxes. Provided that each fund qualifies as a regulated investment
company under the Code, the funds will also not be required to pay Massachusetts
income tax.
<PAGE>
IX. CUSTODIAN, COUNSEL AND INDEPENDENT ACCOUNTANTS
Pursuant to a Custody Agreement between the Trust and Boston Safe
Deposit and Trust Company ("Boston Safe"), a subsidiary of Mellon Bank
Corporation, Boston Safe provides custodial services to the Trust and each of
the funds. The principal business address of Boston Safe is One Boston Place,
Boston, Massachusetts 02108.
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, is
counsel for the Trust.
PricewaterhouseCoopers LLP, One Post Office Square, Boston,
Massachusett 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 three series. Each
share in a particular series represents an equal proportionate interest in that
series with each other share of that series and is entitled to such dividends
and distributions as are declared by the Trustees of the Trust. Upon any
liquidation of a series, shareholders of that series are entitled to share pro
rata in the net assets of that series available for distribution. Shareholders
in one of the series have no interest in, or rights upon liquidation of, any of
the other series.
The Trust will normally not hold annual meetings of shareholders to
elect Trustees. If less than a majority of the Trustees of the Trust holding
office have been elected by shareholders, a meeting of shareholders of the Trust
will be called to elect Trustees. Under the Declaration of Trust and the 1940
Act, the 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.
<PAGE>
XI. ADDITIONAL INFORMATION
The prospectus and this statement of additional information do not
contain all of the information included in the Trust's registration statement
filed with the SEC under the 1933 Act, with respect to the securities offered
hereby. Certain portions of the registration statement have been omitted
pursuant to the rules and regulations of the SEC. This registration statement,
including the exhibits filed therewith, may be examined at the offices of the
SEC in Washington, D.C.
Statements contained in the prospectus and this statement of additional
information as to the contents of any agreement or other documents referred to
are not necessarily complete, and, in each instance, reference is made to the
copy of such agreement or other documents filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference.
XII. FINANCIAL STATEMENTS
The following financial statements for the six month period ended
June 30, 1998 as well as the related Notes to Financial Statements and Report of
Independent Accountants are incorporated into this statement of additional
information by reference to the Trust's Semi-Annual Report for the six month
period ended June 30, 1998: Portfolios of Investment at June 30, 1998;
Statements of Assets and Liabilities at June, 30, 1998; Statements of Operations
for the six month period ended June 30, 1998; and Statements of Changes in Net
Assets for the six month period ended June 30, 1998 and for the year ended
December 31, 1997.
<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 Securities and Exchange
Commission ("SEC") on September 16, 1996 (the
"Registration Statement").
(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 2 to the
Registration Statement as filed with the SEC
on April 22, 1998 (Accession No.
0000927405-98-000133)("Post-Effective Amendment No. 2").
(e) Distribution Agreement with Kobren Insight Brokerage,
Inc. dated November 15, 1996 is
incorporated by reference to Exhibit 6 of Post-Effective
Amendment No. 2.
(f) Not Applicable.
(g)(1) 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.
(2) Amendment to the 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.
(3) 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.
.
(h)(1) 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").
(2) Amendment to the Transfer Agency Agreement with First
Data Investor Services Group, Inc.
dated June 30, 1998 is filed herein.
(3) 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.
(i) Not Applicable.
(j)(1) Consent of Independent Accountants will be filed by
amendment.
(2) Consent of Counsel will be filed by amendment.
(k) Not Applicable.
(l)(1) 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").
(2) 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.
(3) 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.
(m) Not Applicable.
(n) Financial Data Schedules will be filed by amendment.
.
(o) Not Applicable.
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., established in 1987, manages the
investment needs of clients seeking to invest in the fixed revenue
and equity markets.
The list required by this Item 26 of officers and directors of
Kobren Insight Management, Inc., together with the information as
to any other business, profession, vocation or employment of
substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to
Schedules A and D of Form ADV filed by Kobren Insight Management,
Inc. pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-30125).
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)
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.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant will furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and
without charge.
(d) The Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question
of removal of a trustee or trustees of Registrant when
requested in writing to do so by the holders of at least
10% of Registrant's outstanding shares required by Section
16(c) of the Investment Company Act of 1940, as amended.
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 FUNDS, 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 4th day of September,
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.
Signatures Title Date
/s/ Eric M. Kobren President, Chairman of the Board and 09/04/98
Eric M. Kobren Trustee (Chief Executive Officer)
/s/ Eric J. Godes Treasurer, Chief Financial Officer and 09/04/98
Chief Accounting Officer
Eric J. Godes
/s/ Michael P. Castellano Trustee 09/04/98
Michael P. Castellano
/s/ Arthur Dubroff Trustee 09/04/98
Arthur Dubroff
/s/ Edward B. Bloom Trustee 09/04/98
Edward B. Bloom
/s/ Stuart J. Novick Trustee 09/04/98
Stuart J. Novick
EXHIBIT INDEX
Exhibit
Number Description
9(b) Amendment to the Transfer Agency Agreement with First Data
Investor Services Group, Inc. dated
June 30, 1998 is incorporated herein.
<PAGE>
AMENDMENT TO THE TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AMENDMENT, dated as of June 30, 1998 is made to the Transfer
Agency and Services Agreement dated November 15, 1996 (the "Transfer Agent
Agreement") between KOBREN INSIGHT FUNDS (the "Fund") and FIRST DATA INVESTOR
SERVICES GROUP, INC. ("Investor Services Group").
WITNESSETH
WHEREAS, Investor Services Group has developed a recordkeeping service
link ("DCXchangesm") between investment companies and benefit plan consultants
(the "Recordkeepers") which administer employee benefit plans, including plans
qualified under Section 401(a) of the Internal Revenue Code (the "Plans"); and
WHEREAS, Investor Services Group has entered into agreements with
various Recordkeepers relating to the recordkeeping and related services
performed on behalf of such Plans in connection with daily valuation and
processing of orders for investment and reinvestment of assets of the Plans in
various investment options available to the participants under such Plans (the
"Participants"); and
WHEREAS, the Fund, on behalf of the Portfolios set forth in the
attached Exhibit 1, desires to participate in the DCXchangesm Program and retain
Investor Services Group to perform such services with respect to shares of the
Funds ("Shares") held by or on behalf of the Participants as further described
herein and Investor Services Group is willing and able to furnish such services
on the terms and conditions hereinafter set forth.
NOW THEREFORE, the Fund and Investor Services Group agree that as of
the date first referenced above, the Transfer Agent Agreement shall be amended
as follows:
1. Investor Services Group agrees to perform recordkeeping and related
services for the benefit of the Plan Participants that maintain shares
of the Fund through Plans administered by certain Recordkeepers.
Investor Services Group shall subcontract with Recordkeepers to link
the Investor Services Group recordkeeping system with the
Recordkeepers, in order for the Recordkeepers to maintain Fund shares
positions for each Participant. Fund positions of the Participants
shall constitute open accounts for which the Fund shall pay to Investor
Services Group the annual fees specified in the schedule of fees
attached hereto as Schedule A.
2. This Amendment contains the entire understanding between the parties
with respect to the transactions contemplated hereby. To the extent
that any provision of this Amendment modifies or is otherwise
inconsistent with any provision of the Transfer Agent Agreement and
related agreements, this Amendment shall control, but the Transfer
Agent Agreement and all related documents shall otherwise remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first above
written.
KOBREN INSIGHT FUNDS
By: /s/Eric Godes
Title:Vice President
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: /s/Robert Guillocheau
Title:Senior Vice President
Schedule A
DCXchangesm Fees
The Fund shall pay Investor Services Group annualized fees of 25 basis points on
each Plan Participant account in the respective portfolio that is open during
any monthly period. These fees shall be billed by Investor Services Group
monthly in arrears on a prorated basis of 1/12 of the annualized fee for all
accounts that are open during such month.
- - Printing costs, including certificates, envelopes, checks and stationery -
Postage (bulk, pre-sort, Zip+4, barcoding, first class) direct pass through to
the Fund - Due diligence mailings - Ad hoc reports - Proxy solicitations,
mailings and tabulations - Courier services
The Fund shall also reimburse Investor Services Group monthly for such other
miscellaneous expenses reasonably incurred by Investor Services Group in
performing its duties and responsibilities under this Agreement, as pre-approved
by the Fund. The Fund further agrees that any volume discounts achieved by
Investor Services Group on behalf of its clients shall be returned by Investor
Services Group, unless otherwise agreed to by Investor Services Group and the
Fund.
The Fund will pay to Investor Services Group the amount so billed by Federal
Funds Wire within fifteen (15) days after the Fund's receipt of the invoice. In
addition, with respect to all fees under this Amendment, Investor Services Group
may charge a service fee equal to the lesser of (i) one and one half percent
(1-1/2%) per month or (ii) the highest interest rate legally permitted on any
past due invoiced amounts.
EXHIBIT 1
LIST OF PORTFOLIOS
Kobren Growth Fund
Kobren Moderate Growth Fund
Kobren Conservative Allocation Fund
