As filed with the Securities and Exchange Commission on June 3, 1999
Securities Act File No. 333-12075
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 1
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) 535-0525
Name and Address of Agent for Service:
Gail A. Hanson, Esq.
Kobren Insight Funds
101 Federal Street, 6th Floor
Boston, MA 02110
Copies to:
Pamela Wilson, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Title of Securities Being Registered: Shares of beneficial interest, par value
$.001 per share
No filing fee is due because an indefinite number of shares has previously been
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. This
Registration Statement relates to shares previously registered on Form N-1A
(File Nos. 333-12075, 811-07813).
It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b).
<PAGE>
PROSPECTUS DATED MAY 24, 1999 OF
KOBREN MODERATE GROWTH FUND
(a series of Kobren Insight Funds)
This prospectus contains the information about the proposed reorganization of
your fund, Kobren Conservative Allocation Fund, into Kobren Moderate Growth
Fund. Please read it carefully and retain it for future reference. This
prospectus is for information purposes only and does not require any action on
your part.
How the Reorganization Will Work
Your fund will transfer all of its assets to Moderate Growth Fund. Moderate
Growth Fund will assume your fund's liabilities.
Moderate Growth Fund will issue shares in a dollar amount equal to the value of
your fund's shares. These shares will be distributed to your fund's shareholders
in proportion to their holdings on the reorganization date.
The reorganization will be tax-free.
Your fund will be liquidated and you will end up as a shareholder of Moderate
Growth Fund.
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Investment Goals
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Conservative Allocation
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Enough long-term growth of capital to offset the loss of the value of your
investment due to inflation. Current income is a secondary objective. A
volatility level over a full market cycle approximately 30% below that of the
S&P 500 Index.
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Moderate Growth
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Long-term growth of capital without regard to income. A volatility level over a
full market cycle approximately 30% below that of the S&P 500 Index.
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Where to Get More Information
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Conservative Allocation
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Prospectus of your fund and Moderate Growth Fund dated 5/3/99.
Latest annual report to shareholders for your fund and Moderate Growth Fund.
A statement of additional information dated 5/24/99. It contains addit-
ional information about your fund and Moderate Growth Fund.
To ask questions about this prospectus and the reorganization.
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Moderate Growth
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In the same envelope as this prospectus. Incorporated by reference into this
prospectus.
Call our toll-free telephone number: 1-800-4KOBREN (1-800-456-2736) E-mail:
[email protected]
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The address of your fund and Moderate Growth Fund is: 20 William Street, Suite
310, P.O. Box 9150, Wellesley Hills, MA 02481.
An investment in Moderate Growth Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Securities and Exchange Commission has not approved or disapproved shares of
Moderate Growth Fund or determined whether this prospectus is accurate or
complete. It is a criminal offense to state otherwise.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY 1
FEES AND EXPENSES 7
THE REORGANIZATION 8
CAPITALIZATION 12
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES 13
BOARD'S EVALUATION 14
OWNERSHIP OF SHARES OF THE FUNDS 14
EXPERTS 15
AVAILABLE INFORMATION 15
EXHIBITS
A Agreement and Plan of Reorganization between Kobren Conservative Allocation
Fund and Kobren Moderate Growth Fund (attached to this document).
B Combined prospectus dated May 3, 1999 of Kobren Conservative Allocation
Fund and Kobren Moderate Growth Fund.
C Statement of additional information ("SAI") of Kobren Moderate Growth Fund
dated May 24, 1999 incorporating the combined SAI dated May 3,
1999 of Kobren Conservative Allocation Fund and Kobren Moderate Growth
Fund.
D Combined annual report dated December 31, 1998 of Kobren Conservative
Allocation Fund and Kobren Moderate Growth Fund.
<PAGE>
SUMMARY
The following is a summary of more complete information appearing later in this
prospectus. You should read the entire prospectus, Exhibit A and the enclosed
documents carefully because they contain details that are not in the summary.
The prospectus and the other documents are for information purposes only and do
not require any action on your part.
Comparison of Conservative Allocation Fund to Moderate Growth Fund
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Conservative Allocation Moderate Growth
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Business
Each fund is a diversified series of Kobren Insight Funds, a Massachusetts
business trust. The trust is an open-end management investment company.
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Net assets
as of April $16,573,245 $31,664,239
30, 1999
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Investment adviser and
portfolio manager
The funds' investment adviser is Kobren Insight Management, Inc. ("KIM"). Eric
M. Kobren is the portfolio manager for each fund. Mr. Kobren has been the
president of KIM and the funds' distributor since their inception in 1987 and of
Mutual Fund Investors Association, Inc. since its inception in 1985. Mr. Kobren
has been in the investment business since 1976.
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INVESTMENT OBJECTIVES AND POLICIES
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Investment goals
Conservative Allocation
Enough long-term growth of capital to offset the loss of the value of your
investment due to inflation. Current income is a secondary objective. A
volatility level over a full market cycle approximately 30% below that of the
S&P 500 Index.
Moderate Growth
Long-term growth of capital without regard to income. A volatility level over a
full approximately 20% below that of the S&P 500 Index.
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Volatility means price changeability. A full market cycle is the market's peak
to its trough.
The funds' board of trustees may change each fund's investment goals without
obtaining the approval of the fund's shareholders.
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Principal investments
Conservative Allocation
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 funds. producing funds or securities.
Up to 40% of assets in direct investments in stocks, bonds and other permitted
investment.
Moderate Growth
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.
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<PAGE>
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Principal investment
strategy
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:
o A fund's risk tolerance and its target volatility relative to the S&P 500
Index
o Economic factors such as inflation, employment and interest rates
o The outlook for corporate earnings
o Current stock valuations (e.g., price to earnings and price to book ratios)
o Supply and demand for various asset classes
2. INVESTMENT STYLES--Next KIM determines the percentage of fund assets
allocated to each of the following six global equity styles:
o U.S. Growth--Large Cap
o U.S. Growth--Small Cap
o U.S. Value--Large Cap
o U.S. Value--Small Cap
o Diversified International Equity
o Specialized International Equity relative attractiveness, KIM compares
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 the style relative to each fund's target
volatility. 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.
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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.
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<PAGE>
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Investing in underlying
funds
Both 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 underlying funds with a broad range of goals and
offsetting risk characteristics, each 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 sale 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 that are subject to a deferred sales charge or redemption fee.
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Equity investments
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.
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Fixed income
investments
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. Junk bonds involve more credit risk and interest-rate risk than
investment grade bonds.
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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 for up to 100% of the portfolio. A fund could give up potential gains
and minimize losses while defensively invested.
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<PAGE>
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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:
o 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.
o As a substitute for purchasing or selling securities or foreign currencies.
o To shorten or lengthen the effective maturity or duration of a fund's fixed
income portfolio.
o 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.
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Principal investment
risks
You could lose money on your investment in either fund or the fund could perform
less well than other possible investments if any of the following occurs:
o The U.S. or a foreign stock market goes down.
o 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
o 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.
o 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.
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<PAGE>
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Special risks of investing
in other mutual funds
The funds' practice of investing primarily in other mutual funds presents spec-
ial risks.
o You will bear, not just your proportionate share of the funds' operating
expenses, but also, indirectly, the operating expenses of the underlying funds.
o 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.
o You may receive higher taxable capital gains distributions than if you
invested directly in the underlying funds.
o 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.
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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.
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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.
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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 reinvest
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.
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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.
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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.
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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.
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<PAGE>
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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.
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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. Each fund anticipates that
its annual turnover will be less than 100%.
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BUYING, EXCHANGING AND REDEEMING SHARES
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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. 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. Fair
value means estimating a security's value at other than the market quotation.
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Buying shares
Conservative Allocation Fund is not currently offering its shares except in
connection with dividend reinvestments. The procedures for buying shares of
Moderate Growth Fund are identical to those previously in effect for
Conservative Allocation Fund. Individuals, institutions, companies and
fiduciaries may buy shares of Moderate Growth Fund without a sales charge at its
NAV next calculated after the order has been received in proper form.
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Minimum investment
amounts
Moderate Growth Fund has and Conservative Allocation Fund had the same initial
investment minimums. These are $2,500 for regular accounts, $2,000 for
Individual Retirement Accounts and $2,500 for accounts with shares purchased
through the following fund networks:
o Charles Schwab Mutual Fund Marketplace
o Fidelity FundsNetwork
o Waterhouse Securities
o Jack White Mutual Fund Network
Each fund's minimum subsequent investment is $500.
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Exchanging shares
Shareholders of both funds may exchange their shares at net asset value for
shares of any other Kobren Insight fund other than Conservative Allocation Fund.
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Redeeming shares
A shareholder may redeem shares of each fund on any business day at the NAV next
calculated after the receipt of the redemption request in proper form.
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of a fund. The table also shows pro forma expenses of Moderate Growth
Fund as if the reorganization had occurred on December 31, 1998. The fees and
expenses shown in the table are in addition to those paid by the underlying
funds in which a fund may invest.
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Pro Forma
For year ended 12/31/98 Moderate Moderate Conservative
Growth Growth Allocation
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Shareholder fees
(fees paid directly from your investment)
Maximum sales charge (load)
imposed on purchases None None None
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Maximum deferred sales
charge (load) None None None
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Redemption fee None None None
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Exchange fee None None None
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Annual fund operating expenses before expense
limitation1
(expenses that are deducted from fund assets)
Management fees 0.75% 0.75% 0.75%
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Distribution (12b-1) None None None
and/or service fees
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Other expenses 0.32% 0.38% 0.69%
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Total annual fund 1.07% 1.13% 1.44%
operating expenses
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1 Each fund has an expense limitation which continues until January 1, 2001, but
is voluntary and may be revoked at any time. Under this expense limitation, the
maximum expenses other than management fees for the funds is 0.25%. In addition,
payments made by an underlying fund or its adviser will serve to reduce the
total operating expenses of the Kobren Insight funds. For the year ended
December 31, 1998, pro forma and actual expense reductions and total annual fund
operating expenses would have been or were:
Expense reductions
and limitations (0.16%) (0.22%) (0.44%)
Total annual fund
operating expenses 0.91% 0.91% 1.00%
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<PAGE>
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This example is intended to help you compare the cost of investing in each fund
with the cost of investing in other mutual funds.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
Pro Forma
Moderate Moderate Conservative
Growth Growth Allocation
1 year $109 $115 $147
3 years $340 $359 $456
5 years $590 $622 $787
10 years $1,306 $1,375 $1,724
The example for each fund assumes that:
o You invest $10,000 in the fund for the time periods indicated;
o Your investment has a 5% return each year;
o The fund's operating expenses remain the same; and
o You redeem your investment at the end of each period.
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THE REORGANIZATION
Terms of the Reorganization
The funds' trustees have approved an Agreement and Plan of Reorganization, a
copy of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
The reorganization is scheduled to occur at 4:00 p.m., Eastern time, on May
28, 1999, but may occur on any later date before December 31, 1999.
Your fund will transfer all of its assets to Moderate Growth Fund. Moderate
Growth Fund will assume your fund's liabilities. This will result in the
addition of your fund's assets to Moderate Growth Fund's portfolio. The net
asset value of both funds will be computed as of 4:00 p.m., Eastern time, on the
reorganization date.
Moderate Growth Fund will issue shares in an amount equal to the aggregate net
asset value of your fund's shares. As part of the liquidation of your fund,
these shares will immediately be distributed to your fund's shareholders in
proportion to their holdings on the reorganization date. As a result,
shareholders of your fund will end up as shareholders of Moderate Growth Fund.
After the reorganization is over, your fund will be terminated.
The following diagram shows how the reorganization will be carried out.
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Conservative Allocation Fund Moderate Growth Fund
transfers its assets and receives assets
liabilities to Moderate from and assumes
Growth Fund liabilities of
Conservative
Allocation Fund
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Conservative Conservative
Allocation Fund Allocation Fund Moderate Growth
shareholders receives these Fund shares are
receive Moderate shares and issued
Growth Fund shares distributes them
to its shareholders
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Tax Status of the Reorganization
The reorganization will be tax-free for federal income tax purposes and will not
take place unless both funds receive a satisfactory opinion from Hale and Dorr
LLP, counsel to the funds, substantially to the effect that:
The reorganization described above will be a "reorganization" within the meaning
of Section 368(a)(1)(C) of the Internal Revenue Code of 1986 (the "Code"), and
each fund will be "a party to a reorganization" within the meaning of Section
368 of the Code;
No gain or loss will be recognized by your fund upon (1) the transfer of all of
its assets to Moderate Growth Fund as described above or (2) the distribution by
your fund of Moderate Growth Fund shares to your fund's shareholders;
No gain or loss will be recognized by Moderate Growth Fund upon the receipt of
your fund's assets solely in exchange for the issuance of Moderate Growth Fund
shares and the assumption of all of your fund's liabilities by Moderate Growth
Fund;
The basis of the assets of your fund acquired by Moderate Growth Fund will be
the same as the basis of those assets in the hands of your fund immediately
before the transfer;
The tax holding period of the assets of your fund in the hands of Moderate
Growth Fund will include your fund's tax holding period for those assets;
<PAGE>
The shareholders of your fund will not recognize gain or loss upon the exchange
of all their shares of your fund solely for Moderate Growth Fund shares as part
of the reorganization;
The basis of Moderate Growth Fund shares received by your fund's shareholders in
the reorganization will be the same as the basis of the shares of your fund
surrendered in exchange; and
The tax holding period of the Moderate Growth Fund shares received by your
fund's shareholders will include, for each shareholder, the tax holding period
of the shares of your fund surrendered in exchange, provided that the Moderate
Growth Fund shares were held as capital assets on the reorganization date.
Reasons for the Proposed Reorganization
The board of trustees of your fund believes that the proposed reorganization
will be advantageous to the shareholders of your fund and has considered the
following matters, among others, in approving the reorganization.
Possible Reduction in Expense Ratios
A combined fund offers economies of scale that may lead to better control over
expenses than is possible for either fund alone. Both funds incur substantial
expenses for accounting, legal, transfer agency services, insurance, and
custodial and administrative services. Many of these expenses are fixed, which
means that they do not depend on the level of the funds' assets.
KIM has voluntarily agreed to cap these expenses at no more than 0.25% annually
of each fund's average daily net assets. However, this cap will expire on
January 1, 2001 and may be revoked sooner by KIM. KIM estimates that the funds'
projected gross expense ratios (before reimbursement) will be approximately as
follows:
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If Assets Stay If Assets If Assets
the Same as on Decrease 10% Increase 10%
April 7, 1999
Conservative Allocation 1.65% 1.75% 1.57%
Moderate Growth 1.26% 1.31% 1.21%
Combined fund 1.19% 1.24% 1.16%
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Thus, the gross expense ratio (before reimbursement) of the combined fund after
the reorganization is expected to be at least 5 basis points (0.05%) lower than
that of Moderate Growth Fund alone and at least 40 basis points (0.40%) lower
than that of Conservative Allocation Fund alone.
Viability of Conservative Allocation Fund
Mutual fund investors have in general been channeling a relatively insignificant
portion of their investable assets into conservatively managed asset allocation
products, such as Conservative Allocation Fund. Based on current trends and
KIM's projections, your fund's board is not optimistic that the fund will grow
to a viable asset size in the near future.
<PAGE>
Similarity to Moderate Growth Fund
Although Moderate Growth Fund and Conservative Allocation Fund have slightly
different investment goals, in practice, both funds have used almost identical
asset and style allocation strategies, have held similar investments and have
experienced similar returns. Thus, the board has concluded that the Moderate
Growth Fund shares received in the reorganization will provide your fund's
shareholders with substantially the same investment advantages as they currently
have at a comparable level of risk.
In addition, it is not advantageous to operate and market your fund separately
from Moderate Growth Fund. Offering each fund separately hinders the other
fund's potential for asset growth.
Benefits to Funds' Adviser and Distributor
The board considered that the adviser and the funds' distributor, Kobren Insight
Brokerage, Inc., will also benefit from the reorganization. For example, the
adviser would incur a lower cost to cap the funds' expenses and might be able to
reduce the time it spends managing the funds' portfolios and preparing
prospectuses, reports and regulatory filings.
Comparative Performance
The trustees also took into consideration the relative performance of your fund
and Moderate Growth Fund. For most periods shown in the table below, Moderate
Growth Fund has outperformed your fund.
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AVERAGE ANNUAL TOTAL RETURNS
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Conservative Allocation Moderate Growth
(Inception 12/30/96) (Inception 12/24/96)
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1 year ended 3/31/99 -2.32% -3.78%
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Inception to 3/31/99 10.08% 11.78%
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1 year ended 12/31/98 3.36% 3.44%
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Inception to 12/31/98 11.55% 13.12%
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Additional Terms of Reorganization
Conditions to Closing the Reorganization
The obligation of both funds to consummate the reorganization is subject to the
satisfaction of certain conditions, including the receipt of all consents,
orders and permits necessary to consummate the reorganization. In addition, the
obligations of the funds are subject to the receipt of a favorable opinion of
Hale and Dorr LLP as to the federal income tax consequences of the
reorganization. (see Agreement, paragraph 3).
Termination of Agreement
The funds' board may terminate the Agreement on behalf of either fund at any
time before the reorganization occurs, if the board believes that proceeding
with the reorganization would no longer be advisable.
<PAGE>
Expenses of the Reorganization
Moderate Growth Fund and your fund will each be responsible for its own expenses
incurred in connection with entering into and carrying out the provisions of the
Agreement, whether or not the reorganization occurs. These expenses are
estimated to be approximately $10,000 for Moderate Growth Fund and $22,300
for your fund.
Dissenters' Rights
Massachusetts law does not give shareholders of your fund any dissenters'
rights.
CAPITALIZATION
The following table sets forth the capitalization of each fund as of April 30,
1999 and the pro forma combined capitalization of both funds as if the
reorganization had occurred on that date. The table reflects pro forma exchange
ratios of approximately 0.936 Moderate Growth Fund shares for each share of your
fund. If the reorganization is consummated, the actual exchange ratio on the
reorganization date may vary from the exchange ratio indicated due to changes in
any of the following:
The market value of the portfolio securities of both Moderate Growth Fund and
your fund between April 30, 1999 and the reorganization date.
Changes in the amount of undistributed net investment income and net realized
capital gains of Moderate Growth Fund and your fund during that period resulting
from income and distributions.
Changes in the accrued liabilities of Moderate Growth Fund and your fund during
the same period.
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As of April 30, 1999 Conservative Moderate Pro Forma
Allocation Growth Combined1
Net assets $16,573,245 $31,664,239 $48,237,484
Net asset value per share $11.86 $12.67 $12.67
Shares outstanding 1,397,306 2,499,767 3,807,837
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1 If the reorganization had taken place on April 30, 1999, your fund would have
received 1,308,070 shares of Moderate Growth Fund, which would have been
available for distribution to the shareholders of your fund.
It is impossible to predict how many shares of Moderate Growth Fund will
actually be received and distributed by your fund on the reorganization date.
You should not rely on the above table to determine the amount of Moderate
Growth Fund shares that you will actually receive.
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
The following table shows where in the funds' combined prospectus you can find
additional information about the business of each fund.
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Type of Information Headings in Combined Prospectus of
Both Funds
- -------------------------------------------- -----------------------------------
Risk/return summary FACTORS EVERY INVESTOR SHOULD KNOW
- -------------------------------------------- -----------------------------------
Investment objectives/goals INVESTMENT GOALS
- -------------------------------------------- -----------------------------------
Principal investment strategies PRINCIPAL INVESTMENTS
KOBREN INSIGHT MANAGEMENT (KIM)
INVESTMENT STRATEGY
- -------------------------------------------- -----------------------------------
Principal risks of investing in the funds: PRINCIPAL INVESTMENT RISKS
narrative disclosure WHO MAY WANT TO INVEST IN THE
KOBREN INSIGHT FUNDS
- -------------------------------------------- -----------------------------------
Principal risks of investing in the funds: Summary of Past Performance
risk/return bar chart
and table
- -------------------------------------------- -----------------------------------
Fee table Fees and Expenses
- -------------------------------------------- -----------------------------------
Body of prospectus
- -------------------------------------------- -----------------------------------
Investment objectives, principal THE FUND'S INVESTMENTS
investment strategies and INDUSTRY ALLOCATION PROCESS
related risks INVESTING IN UNDERLYING FUNDS
PRINCIPAL INVESTMENTS
DEFENSIVE INVESTING
DERIVATIVE CONTRACTS
ADDITIONAL INVESTMENT RISKS
IMPACT OF HIGH PORTFOLIO TURNOVER
THE FUNDS' INVESTMENT GOALS
- -------------------------------------------- -----------------------------------
Management: investment adviser and INVESTMENT ADVISER
portfolio manager KOBREN INSIGHT MANAGEMENT, INC.
- -------------------------------------------- -----------------------------------
Shareholder information: pricing of fund INVESTMENT AND ACCOUNT POLICIES
shares CALCULATION OF NET ASSET VALUE
- -------------------------------------------- -----------------------------------
Shareholder information: purchase of fund INVESTMENT AND ACCOUNT POLICIES
shares PURCHASING FUND SHARES
TAX-DEFERRED RETIREMENT PLANS
WIRE AND ACH TRANSFERS
TELEPHONE TRANSACTIONS
MINIMUM INVESTMENT AMOUNTS
HOW TO PURCHASE SHARES
- -------------------------------------------- -----------------------------------
Shareholder information: redemption of HOW TO EXCHANGE/REDEEM SHARES
fund shares INVESTMENT AND ACCOUNT POLICIES
REDEEMING FUND SHARES
SIGNATURE GUARANTEES
CLOSING SUB-MINIMUM ACCOUNTS
<PAGE>
- -------------------------------------------- -----------------------------------
Shareholder information: dividends and INVESTMENT AND ACCOUNT POLICIES
distributions; DIVIDENDS, DISTRIBUTIONS AND TAXES
tax consequences
- -------------------------------------------- -----------------------------------
Financial highlights information FINANCIAL HIGHLIGHTS
- -------------------------------------------- -----------------------------------
BOARD'S EVALUATION
For the reasons described above, the board of trustees of the funds,
including the trustees who are not "interested persons" of either fund or the
adviser, approved the reorganization. In particular, the trustees determined
that the reorganization was in the best interests of each fund and that the
interests of each fund's shareholders would not be diluted as a result of the
reorganization.
OWNERSHIP OF SHARES OF THE FUNDS
As of May 14, 1999, 1,373,190 shares of beneficial interest of
your fund were outstanding. To the knowledge of your fund, as of May 14, 1999,
the following persons owned or would have owned, of record or beneficially, 5%
or more of the outstanding shares of your fund, Moderate Growth Fund (before
reorganization) and Moderate Growth Fund (after reorganization).
- --------------------------------------------------------------------------------
Names and Addresses Moderate Moderate
of Owners of More Conservative Growth Fund Growth Fund
Than 5% of Shares Allocation (before (after
reorganization) reorganization)
- --------------------------------------------------------------------------------
Eric M. Kobren
20 William Street $4,419,258* 959,912 $5,379,169*
Suite 310, P.O. Box 9150
Wellesley Hills, MA 02481.
- --------------------------------------------------------------------------------
* Mr. Kobren is/will be a controlling person of this fund.
As of May 14, 1999 the trustees and officers of the funds owned in the aggregate
the following amounts of each fund's shares:
- --------------------------------------------------------------------------------
Conservative Moderate
Allocation Fund Growth Fund
- --------------------------------------------------------------------------------
All trustees and officers as a
group $4,419,258 $1,175,748
- --------------------------------------------------------------------------------
<PAGE>
EXPERTS
The financial statements and the financial highlights of each fund, as
of December 31, 1998 and for the years then ended, are incorporated by reference
into this prospectus. These financial statements and highlights have been
independently audited by PricewaterhouseCoopers LLP, as stated in its report
appearing in the statement of additional information. These financial statements
and highlights are included in reliance upon the reports given upon the
authority of such firms as experts in accounting and auditing.
AVAILABLE INFORMATION
Each fund is subject to the informational requirements of the
Securities Exchange Act of 1934 and the Investment Company Act of 1940 and files
reports, prospectuses and other information with the SEC. These reports,
prospectuses and other information filed by the funds can be inspected and
copied (at prescribed rates) at the public reference facilities of the SEC at
450 Fifth Street, N.W., Washington, D.C., and at the following regional offices:
Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois); and New York
(7 World Trade Center, Suite 1300, New York, New York). Copies of this material
can also be obtained by mail from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies of these documents may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
<PAGE>
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
this 24th day of May, 1999, between Kobren Conservative Allocation Fund
(the "Acquired Fund") and Kobren Moderate Growth Fund (the "Acquiring Fund"),
each of which is a series of Kobren Insight Funds, a Massachusetts business
trust (the "Trust").
1. Plan of Reorganization and Liquidation
(a) The Acquired Fund shall assign, sell, convey, transfer and deliver to the
Acquiring Fund at the Closing provided for in Section 2 (the "Closing") all
of its then existing assets of every kind and nature. In consideration
therefor, the Acquiring Fund agrees that at the Closing (i) the Acquiring
Fund shall assume all of the Acquired Fund's obligations and liabilities
then existing, whether absolute, accrued, contingent or otherwise,
including all unpaid fees and expenses of the Acquired Fund in connection
with the transactions contemplated hereby and (ii) the Acquiring Fund shall
issue and deliver to the Acquired full and fractional shares of beneficial
interest of the Acquiring Fund (the "Acquiring Fund Shares") that have an
aggregate net asset value equal to the value of the assets transferred to
the Acquiring Fund by the Acquired Fund, less the liabilities of Acquired
Fund assumed by Acquiring Fund.
(b) Upon consummation of the transactions described in paragraph (a) of this
Section 1, the Acquired Fund shall distribute in complete liquidation pro
rata to its shareholders of record as of the Closing Date the Acquiring
Fund Shares received by the Acquired Fund. This distribution shall be
accomplished by establishing an account on the share record books of the
Acquiring Fund in the name of each shareholder an amount of full and
fractional Acquiring Fund Shares equal to the amount of shares of the
Acquired Fund owned of record by the shareholder at the Closing Date.
(c) As promptly as practicable after the above liquidation of the Acquired
Fund, the legal existence of the Acquired Fund shall be terminated.
2. Closing and Closing Date. The Closing shall occur as of the close of business
on May 28, 1999 or at such other time and date as the parties may
mutually agree (the "Closing Date").
3. Conditions Precedent. The obligations of the Acquired Fund and the Acquiring
Fund to effect the transactions contemplated hereunder (the "Reorganization")
shall be subject to the satisfaction of each of the following conditions:
(a) All such filings shall have been made with, and all such authorizations and
orders shall have been received from, the Securities and Exchange
Commission (the "SEC") and state securities commissions as may be necessary
to permit the parties to carry out the transactions contemplated by this
Agreement.
(b) Each party shall have received an opinion of counsel substantially to the
effect that for federal income tax purposes: (1) the acquisition of the
assets of the Acquired Fund by the Acquiring Fund in exchange for Acquiring
Fund's assumption of Acquired Fund's liabilities and Acquiring Fund's
issuance of Acquiring Fund Shares to the Acquired Fund, the distribution of
such Acquiring Fund Shares to the shareholders of the Acquired Fund in
complete liquidation of the Acquired Fund, and the termination of the
Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Acquiring Fund and the Acquired Fund will each be "a party
to a reorganization" within the meaning of Section 368(b) of the Code; (2)
no gain or loss will be recognized by the Acquired Fund upon the transfer
of all of its assets to the Acquiring Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund and the distribution by the Acquired Fund
of such Acquiring Fund Shares to the shareholders of the Acquired Fund; (3)
no gain or loss will be recognized by the Acquiring Fund upon the receipt
of all of the assets of the Acquired Fund in exchange solely for Acquiring
Fund Shares and the assumption by the Acquiring Fund of the liabilities of
the Acquired Fund; (4) the tax basis of the Acquiring Fund in the assets
received from the Acquired Fund will be the same as the tax basis of such
assets in the hands of the Acquired Fund immediately prior to the transfer
of such assets to the Acquiring Fund; (5) the Acquiring Fund's tax holding
period for the assets acquired from the Acquired Fund will include, in each
instance, the Acquired Fund's tax holding period for those assets; (6) no
gain or loss will be recognized by the Acquired Fund's shareholders upon
the exchange of their shares of the Acquired Fund solely for Acquiring Fund
Shares as part of the reorganization; (7) the tax basis of the Acquiring
Fund Shares received by the Acquired Fund's shareholders in the transaction
will be, for each shareholder, the same as the tax basis of the shares of
the Acquired Fund exchanged therefor; and (8) the tax holding period of the
Acquiring Fund Shares received by the Acquired Fund's shareholders will
include, for each shareholder, the shareholder's tax holding period for the
shares of the Acquired Fund surrendered in exchange therefor, provided that
the surrendered shares were held as capital assets in the hands of the
Acquired Fund's shareholders on the date of the exchange. The opinion may
cover any additional matters deemed material by such counsel.
(c) At any time prior to the Closing, any of the foregoing conditions may be
waived by the Trustees of the Trust if in their judgment, the waiver will
not have a material adverse effect on the interests of the shareholders of
the Acquired Fund or Acquiring Fund.
4. Amendment. This Agreement may be amended at any time by action of the
Trustees of the Trust, provided that no amendment shall have a material adverse
effect on the interests of the shareholders of the Acquired Fund or Acquiring
Fund.
5. Termination. The Trustees of the Trust may terminate this Agreement and
abandon the Reorganization at any time prior to the Closing, if circumstances
should develop that, in their judgment, make proceeding with the Reorganization
inadvisable.
This Agreement shall be executed in any number of counterparts each of which
shall be deemed to be an original, but all counterparts together shall
constitute only one instrument.
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to
be executed and delivered by their duly authorized officers as of the day and
year first above written.
KOBREN INSIGHT FUNDS on behalf of
Kobren Conservative Allocation Fund
Attest: /s/ ERIC J. GODES By: /s/ ERIC M. KOBREN
By: Eric J. Godes Name: Eric M. Kobren
Its: Secretary Its: Chairman of the Board
KOBREN INSIGHT FUNDS on behalf of
Kobren Growth Fund
Attest: /s/ ERIC J. GODES By: /s/ ERIC M. KOBREN
By: Eric J. Godes Name: Eric M. Kobren
Its: Secretary Its: Chairman of the Board
<PAGE>
Exhibit B
Combined prospectus dated May 3, 1999 of Kobren Conservative Allocation Fund
and Kobren Moderate Growth Fund is incorporated by reference to the Trust's
Registration Statement on Form N-14 as filed with the SEC on May 7, 1999
(Accession No. 0000927405-97-000186) ("Registration Statement on Form
N-14").
<PAGE>
Exhibit C
Combined statement of additional information dated May 3, 1999 of Kobren
Conservative Allocation Fund and Kobren Moderate Growth Fund is incorporated by
reference to the Trust's Registration Statement on Form N-14.
KOBREN MODERATE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
May 24, 1999
This statement of additional information is not a prospectus, but expands upon
and supplements the information contained in the prospectus of Kobren Moderate
Growth Fund, dated May 24, 1999. This statement of additional informat-
ion should be read in conjunction with the prospectus.
The Fund's prospectus is being delivered with this statement of additional
information. Additional copies of the prospectus may be obtained by writing to
the Fund at P.O. Box 5146, Westborough, Massachusetts 01581 or by telephoning
the Fund toll free at (800)-895-9936.
This statement of additional information is accompanied by and incorporates by
reference the combined statement of additional information dated May 3, 1999
(the "combined SAI") of Kobren Moderate Growth Fund and Kobren Conservative
Allocation Fund (collectively, the "Funds").
<PAGE>
ADDITIONAL INFORMATION ABOUT
MODERATE GROWTH FUND AND
CONSERVATIVE ALLOCATION FUND
The following table shows where in the funds' combined SAI you can find
additional information about each Fund.
- --------------------------------------------------------------------------------
Type of Information Headings in Combined SAI of Both Funds
- --------------------------------------------------------------------------------
Fund history X. DESCRIPTION OF THE TRUST
- --------------------------------------------------------------------------------
Description of each Fund and its I. INVESTMENT OBJECTIVES AND
investments, strategies, policies and POLICIES
risks II. INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
Management of the Funds, including the III. MANAGEMENT OF THE TRUST
board of trustees, officers and trustee AND THE FUNDS: Trustees and
compensation Officers
- --------------------------------------------------------------------------------
Control persons, principal holders of III. MANAGEMENT OF THE TRUST AND
securities and management ownership THE FUNDS: Trustees and
Officers: Control Persons
and Principal Holders of
Securities
- --------------------------------------------------------------------------------
Investment advisory and other services: III. MANAGEMENT OF THE TRUST
investment adviser, distributor and AND THE FUNDS: Investment
other service providers Adviser,Distributor,
Administrator, Transfer
Agent and Dividend Paying
Agent
IX. CUSTODIAN, COUNSEL AND
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Brokerage allocation and other practices VI PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Shares of beneficial interest X. DESCRIPTION OF THE TRUST
- --------------------------------------------------------------------------------
Purchase, redemption and pricing of IV. PURCHASE, REDEMPTION AND
shares DETERMINATION OF NET ASSET
VALUE
V. SPECIAL REDEMPTIONS
- --------------------------------------------------------------------------------
Taxation of the Funds VIII. DIVIDENDS, DISTRIBUTIONS AND
TAXES
- --------------------------------------------------------------------------------
Calculation of performance data VII. PERFORMANCE INFORMATION
A. Total Return
B. Non-Standardized Total
Return
C. Other Information Concerning
Fund Performance
- --------------------------------------------------------------------------------
Financial statements XII. FINANCIAL STATEMENTS
This section incorporates by
reference the Funds' annual report
dated December 31, 1998.
- --------------------------------------------------------------------------------
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS OF
MODERATE GROWTH FUND AND
CONSERVATIVE ALLOCATION FUND
AS OF DECEMBER 31, 1998
The combined pro forma financial statements of the funds as of December 31, 1998
are attached to this SAI.
<PAGE>
Portfolio of Investments
Kobren Moderate Growth Fund - POST MERGER
December 31, 1998
Shares Mutual Funds - 74.90% Value
- --------------------------------------------------------------------------------
Large Cap Value - 22.57%
- --------------------------------------------------------------------------------
42,228 Fidelity Value Fund 1,957,279
159,968 Franklin Mutual Beacon Fund, Class Z 2,098,775
102,569 Gabelli Westwood Equity Fund 1,030,815
216,105 Longleaf Partners Fund 5,270,795
324,037 MAS Pooled Value Fund 4,688,820
----------------
15,046,484
----------------
Large Cap Growth - 18.71%
- --------------------------------------------------------------------------------
45,419 Fidelity Advisor Growth Opportunities
Fund, Class T 2,280,486
437,678 Marsico Growth & Income Fund 6,276,305
157,184 PIMCo Cadence Capital Appreciation
Fund, Institutional Class 3,920,164
----------------
12,476,955
----------------
International - 14.13%
- --------------------------------------------------------------------------------
560,151 Tweedy, Browne Global Value Fund 9,421,743
Small Cap Value - 10.22
- --------------------------------------------------------------------------------
44,857 Longleaf Partners Small Cap Fund 984,614
242,748 Skyline Special Equities Fund 4,801,565
31,717 Third Avenue Value Fund 1,024,152
----------------
6,810,331
----------------
Real Estate - 5.36%
- --------------------------------------------------------------------------------
179,608 Longleaf Partners Realty Fund 2,613,292
75,320 Morgan Stanley Institutional Real
Estate Fund, Class A 957,314
----------------
3,570,606
----------------
Bond - 2.07%
- --------------------------------------------------------------------------------
53,508 PIMCo Total Return Institutional
Fund 563,971
73,593 Vanguard Intermediate-Term
Treasury Fund 819,825
----------------
1,383,796
----------------
Money Market Fund - 1.84%
- --------------------------------------------------------------------------------
1,226,529 Dreyfus Cash Management Plus Fund 1,226,529
----------------
Total Mutual Funds (Cost $48,830,004) $49,936,444
----------------
Principal Amount U.S. Treasury Obligations - 24.79%
U.S. Treasury Notes - 17.33%
- --------------------------------------------------------------------------------
1,250,000 5.625% 11/30/99 1,261,621
3,150,000 7.250% 08/15/04 3,535,383
2,500,000 7.500% 02/15/05 2,857,617
2,000,000 6.500% 08/15/05 2,195,157
1,500,000 7.000% 07/15/06 1,704,960
----------------
11,554,738
----------------
U.S. Treasury Bonds - 7.46%
- --------------------------------------------------------------------------------
1,500,000 6.000% 02/15/26 1,637,754
2,500,000 8.125% 08/15/19 3,334,767
----------------
4,972,521
----------------
<PAGE>
Total U.S. Treasury Obligations
(Cost $15,524,372) 16,527,259
----------------
TOTAL INVESTMENTS
(Cost $64,354,376*) 99.69% 66,463,703
----------------
OTHER ASSETS AND LIABILITIES
(Net) 0.31% 204,264
-------------- ----------------
NET ASSETS 100% $66,667,967
============== ================
<PAGE>
Statements of Assets and Liabilities
Kobren Insight Funds
December 31, 1998
Kobren Kobren
Moderate Conservative POST
Growth Fund Allocation Fund MERGER
Assets:
Investments, at value
See accompanying $46,829,138 $19,634,565 $66,463,703
schedules
Cash -- -- --
Dividends receivable 6,775 2,772 9,547
Interest receivable 238,867 153,598 392,465
Receivable for fund shares 33,806 5,341 39,147
sold
Unamortized organization 6,208 6,277 12,485
costs
Prepaid expenses and other 13,910 -- --
net assets
-------------------------------------------------
Total assets 47,128,704 19,802,553 66,931,257
-------------------------------------------------
Liabilities:
Payable to custodian 3,492 5,940 9,432
Payable for fund shares 60,114 24,212 84,326
redeemed
Distributions payable 38,252 31,175 69,427
Investment advisory fee 20,511 3,485 23,996
payable
Administration fee payable 5,625 5,625 11,250
Transfer agent fees 7,333 4,667 12,000
payable
Accrued Trustees' fees and 2,500 2,500 5,000
expenses
Accrued expenses and other 32,896 14,963 47,859
payables
-------------------------------------------------
Total liabilities 170,723 92,567 263,290
-------------------------------------------------
Net Assets $46,957,981 $19,709,986 $66,667,967
=================================================
Investments, at cost $45,219,048 $19,135,328 $64,354,376
=================================================
NET ASSETS consist of:
Undistributed net $ -- $ -- $ --
investment income
Accumulated net realized 897,914 (560,666) 337,248
gain/(loss)
on investments sold
Net unrealized appreciation 1,610,090 499,237 2,109,327
of investments
Par value (Shares of 3,960 1,762 5,622
beneficial interest, $.001
per share)
Paid-in capital in excess 44,446,017 19,769,653 64,215,770
of par value
=================================================
NET ASSETS $46,957,981 $19,709,986 $66,667,967
=================================================
SHARES OUTSTANDING 3,959,727 1,761,910 5,621,770
================================================
Net asset value, offering
and $ 11.86 $ 11.19 $ 11.86
redemption price per share
=================================================
See Notes to Financial
Statements
-------------------------------------------------
Merger Calculations Additional shares 1,662,042.58
-------------------------------------------------
Par value 1,662.04
<PAGE>
Statements of Operations
Kobren Insight Funds
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Kobren Kobren
Moderate Conservative
Growth Allocation ADJUSTMENTS PROFORMA
Fund Fund
INVESTMENT INCOME:
Dividends $472,979 $323,338 $ 0 $ 796,317
Interest 598,393 342,871 0 941,264
-----------------------------------------------
Total investment income 1,071,372 666,209 0 1,737,581
-----------------------------------------------
EXPENSES:
Investment advisory fee 388,684 165,999 0 554,683
Administration fee 67,500 67,500 (67,500) a 67,500
Transfer agent fees 55,704 42,076 (30,076) b 67,704
Custodian fees 3,599 3,441 0 7,040
Professional fees 31,264 10,828 0 42,092
Trustees' fees and expenses 9,874 5,059 0 14,933
Registration and filing fees 18,524 16,129 (10,129) c 24,524
Amortization of organization 2,100 2,100 (2,100) d 2,100
costs
Other 10,173 4,624 (4,624) e 10,173
-----------------------------------------------
Total expenses 587,422 317,756 (114,429) 790,749
Expenses reimbursed (69,479) (96,407) 114,715 f (51,171)
by investment adviser
Other reductions (44,404) -- 0 (44,404)
-----------------------------------------------
Net expenses 473,539 221,349 286 695,174
-----------------------------------------------
NET INVESTMENT INCOME /(LOSS)
597,833 444,860 (286) 1,042,407
-----------------------------------------------
NET REALIZED AND UNREALIZED
GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) (1,938,559) (1,178,310) 0 (3,116,869)
from security transactions
Short term capital gain 224,103 140,633 0 364,736
distributions received
Long term capital gain 2,836,492 618,165 0 3,454,657
distributions received
Change in unrealized
appreciation /(depreciation) (371,379) 346,115 0 (25,264)
of securities
-----------------------------------------------
Net realized and unrealized
gain/(loss) on investments 750,657 (73,397) 0 677,260
-----------------------------------------------
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $1,348,490 $371,463 $ (286) $1,719,667
===============================================
a - Per fund fixed annual fee has been eliminated post merger.
b - Per fund fixed annual fee portion has been eliminated post merger.
c - Per fund fixed annual fee has been eliminated post merger.
d - Conservative Allocation's remaining Organization Costs will be completely
expensed prior to merger.
e - Per fund fixed annual fee portion has been eliminated post merger.
f - Reimbursement recalculated based on total proforma expenses.
See Notes to Financial Statements
</TABLE>
<PAGE>
Notes to Proforma Financial Statements
For the Year Ended December 31, 1998
1. Significant Accounting Policies
Kobren Insight Funds (the "Trust") was organized on September 13, 1996, as a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a no-load, open-end
diversified management investment company. As of December 31, 1998, the Trust
offers shares of four funds, Kobren Growth Fund, Kobren Moderate Growth Fund,
Kobren Conservative Allocation Fund and Kobren Delphi Value Fund (individually,
a "fund" and collectively, the "funds"). Information presented in these
financial statements pertains only to Kobren Moderate Growth Fund and Kobren
Conservative Allocation Fund. These funds seek to achieve their investment
objectives by investing primarily in shares of other investment companies
("underlying funds"), but also may invest directly in securities that are
suitable investments for that fund.
Pending SEC approval, the Kobren Conservative Allocation Fund and the Kobren
Moderate Growth Fund will be combined under a tax-free merger. Shares of the
Kobren Conservative Allocation Fund will be exchanged for shares into the Kobren
Moderate Growth Fund at the net asset value of the Moderate Growth Fund on merge
date.
Use of Estimates -- The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the funds
in the preparation of their financial statements.
Portfolio Valuation -- The underlying funds are valued according to their stated
net asset value. Each fund's other 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 valued 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.
Dividends and Distributions -- It is the policy of Kobren Moderate Growth Fund
to declare and pay dividends from net investment income annually. Kobren
Conservative Allocation Fund has a policy of paying such dividends quarterly.
Each fund will distribute net realized capital gains (including net short-term
capital gains), unless offset by any available capital loss carryforward,
annually. Additional distributions of net investment income and capital gains
for each fund may be made in order to avoid the application of a 4%
non-deductible excise tax on certain undistributed amounts of ordinary income
and capital gain. Income distributions and capital gain distributions are
determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles. These differences are due primarily to
differing treatments of income and gain on various investment securities held by
a fund, timing differences and differing characterizations of distributions made
by a fund.
Securities Transactions and Investment Income -- Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the specific identified cost basis. Dividend income
is recognized on the ex-dividend date. Interest income is recognized on the
accrual basis.
<PAGE>
Federal Income Tax -- Each fund has qualified and intends to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no Federal income or excise tax provision is applicable.
Expenses -- Expenses of the Trust which are directly identifiable to a specific
fund are allocated to that fund. Other expenses of the Trust are allocated among
the funds based upon relative net assets of each fund.
2. Investment Advisory Fee, Administration Fee and Other Transactions
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with Kobren Insight Management, Inc. ("KIM"). The Advisory Agreement
provides that each fund pays KIM a fee, computed daily and paid monthly, at the
annual rate of 0.75% of each fund's average daily net assets. In addition,
certain 12b-1 fee and sub-transfer agent fee revenue will be used to defray the
costs associated with participation in certain no transaction fee programs. KIM
has voluntarily agreed to limit each fund's other operating expenses to 0.25% of
each fund's average daily net assets until January 1, 2001.
The Trust also has also entered into an administration agreement (the
"Administration Agreement") with First Data Investor Services Group, Inc. (the
"Administrator"), a wholly-owned subsidiary of First Data Corporation. The
Administrator also serves as the Trust's transfer agent and dividend paying
agent. Boston Safe Deposit and Trust Company, an indirect wholly-owned
subsidiary of Mellon Bank Corporation, serves as the Trust's custodian. Kobren
Insight Brokerage, Inc., an affiliate of KIM, serves as distributor of the
funds' shares and pays all distribution costs. No distribution fees are paid by
the funds.
For the year ended December 31, 1998, expense reimbursement and other
reductions are as follows:
Expenses Reimbursed
By Investment Advisor Other Reductions (1)
Kobren Moderate
Growth Fund $ 69,479 $ 44,404
Kobren Conservative
Allocation Fund 96,407 --
(1) Payments made by an underlying fund or its investment advisor, based on
shares held by a Kobren Insight Fund.
No officer, director or employee of KIM, Kobren Insight Brokerage, Inc.,
the Administrator, or any affiliate thereof, receives any compensation from the
Trust for serving as a trustee or officer of the Trust. Each Trustee who is not
an "affiliated person" receives an annual fee of $5,000 plus $1,000 for each
board meeting attended and $500 for each committee meeting attended. The Trust
also reimburses out-of-pocket expenses incurred by each trustee in attending
such meetings.
3. Purchases and Sales
The aggregate amounts of purchases and sales of underlying funds and
investment securities, other than U.S. government and short-term securities, for
the year ended December 31, 1998, were as follows:
Purchases Sales
Kobren Moderate Growth Fund $ 32,105,786 $ 25,154,303
Kobren Conservative Allocation Fund 18,394,556 14,481,960
<PAGE>
4. Shares of Beneficial Interest
As of December 31, 1998, an unlimited number of shares of beneficial
interest, having a par value of $0.001, were authorized for the Trust. Changes
in shares of beneficial interest were as follows:
Year Ended Year Ended
December 31, 1998 December 31, 1997
Shares Amount Shares Amount
Kobren Moderate
Growth Fund:
Shares Sold 1,885,448 $23,034,304 3,867,539 $ 43,059,814
Shares Issued
as Reinvestment 154,509 1,832,481 130,811 1,561,885
of Dividends
Shares Redeemed (1,713,953) (20,768,039) (383,530) (4,460,468)
---------- ----------- --------- -----------
Net Increase 326,004 $ 4,098,746 3,614,820 $ 40,161,231
========== =========== ========= ============
Kobren Conservative
Allocation Fund:
Shares Sold 1,260,211 $14,740,908 1,763,364 $ 19,397,323
Shares Issued
as Reinvestment 87,053 974,832 71,701 818,115
of Dividends
Shares Redeemed (1,120,082) (12,840,550) (316,837) (3,484,213)
----------- ----------- --------- -----------
Net Increase 227,182 $ 2,875,190 1,518,228 $ 16,731,225
=========== ============ ========= ============
At December 31, 1998, Kobren Insight Management, Inc. and its affiliates
owned 485,712 and 369,573 shares of Kobren Moderate Growth Fund and Kobren
Conservative Allocation Fund, respectively.
5. Organization Expenses
Expenses incurred in connection with the organization of each fund are
being amortized on a straight-line basis over a period not to exceed sixty
months from the date upon which each fund commenced its operations.
6. Risk Factors of the Funds
Investing in underlying funds through a Kobren Insight 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.
A fund, together with the other funds and any "affiliated persons" (as such term
is defined in the 1940 Act) may purchase only up to 3% of the total outstanding
securities of an underlying fund. Accordingly, when the Trust, KIM or their
affiliates hold shares of any of the underlying funds, each fund's ability to
invest fully in shares of such underlying funds may be restricted, and KIM must
then, in some instances, select alternative investments.
7. Capital Loss Carryforward
For the year ended December 31, 1998, the Kobren Conservative
Allocation Fund had a capital loss carryforward of $487,627 expiring December
31, 2006.
<PAGE>
Exhibit D
Combined annual report dated December 31, 1998 of Kobren Conservative
Allocation Fund and Kobren Moderate Growth Fund is incorporated by reference to
the Trust's Registration Statement on Form N-14.
PART C: OTHER INFORMATION
Item 15. Indemnification.
The response to this Item 15 is incorporated by reference to Item 27 of
Pre-Effective Amendment No. 1 (Accession No. 0000927405-96-000432) to the
Registrant's Registration Statement on Form N-1A as filed with the SEC on
November 8, 1996.
Item 16. Exhibits.
(1)(a)(i) Declaration of Trust is incorporated by reference to Exhibit 1 of the
Registrant's Registration Statement on Form N-1A as filed with the SEC on
September 16, 1996 (Accession No. 000927405-96-000374)(the "Form N-1A
Registration Statement").
(a)(ii) Amendment to the Declaration of Trust on behalf of Kobren Delphi Value
Fund is incorporated by reference to Exhibit 23(a) of Post-Effective Amendment
No. 9 to the Form N-1A Registration Statement as filed with the SEC on December
17, 1998 (Accession No. 0000927405-98-000378) ("Post-Effective Amendment No.
9").
(2) By-Laws are incorporated by reference to Exhibit 2 of the Form N-1A
Registration Statement.
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization is filed herein.
(5) Not applicable.
(6)(a) Investment Advisory Agreement with Kobren Insight Management, Inc. dated
November 15, 1996 is incorporated by reference to Exhibit 5 of Post-Effective
Amendment No. 2 to the Form N-1A Registration Statement filed with the SEC on
April 22, 1998 (Accession No. 0000927405-98-000133) ("Post-Effective Amendment
No. 2").
(b) Amendment to Investment Advisory Agreement with Kobren Insight Management,
Inc. on behalf of Kobren Delphi Value Fund is incorporated by reference to
Exhibit 23(d) of Post-Effective Amendment No. 9.
(c) Form of Amendment to Investment Advisory Agreement with Kobren Insight
Management, Inc. on behalf of Kobren Growth Fund and Kobren Moderate Growth Fund
is incorporated by reference to Exhibit (d) of Post-Effective Amendment No. 12
to the Form N-1A Registration Statement filed with the SEC on April 30, 1999
(Accession No. 0000927405-99-000161) ("Post-Effective Amendment No. 12").
(d) Subadvisory Agreement with Delphi Management, Inc. on behalf of Kobren
Delphi Value Fund is incorporated by reference to Exhibit 23(d) of
Post-Effective Amendment No. 9.
(7)(a) Distribution Agreement with Kobren Insight Brokerage, Inc. dated November
15, 1996 is incorporated by reference to Exhibit 6 of Post-Effective Amendment
No. 2.
(b) Amendment to Distribution Agreement with Kobren Insight Brokerage, Inc. on
behalf of Kobren Delphi Value Fund is incorporated by reference to Exhibit 23(e)
of Post-Effective Amendment No. 9.
(c) Form of Amendment to Distribution Agreement with Kobren Insight Brokerage,
Inc. on behalf of Kobren Growth Fund and Kobren Moderate Growth Fund is
incorporated by reference to Exhibit (e) of Post-Effective Amendment No. 12 .
(8) Not Applicable.
(9)(a) 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.
(b) Amendment to Custody Agreement with Boston Safe Deposit and Trust Company
dated January 8, 1998 is incorporated by reference to Exhibit 8(b) of
Post-Effective Amendment No. 2.
(c) 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.
(d) Amendment to Custody Agreement with Boston Safe Deposit and Trust Company on
behalf of Kobren Delphi Value Fund dated October 8, 1998 is incorporated by
reference to Exhibit 23(g) of Post-Effective Amendment No. 5 to the Form N-1A
Registration Statement as filed with the SEC on October 27, 1998 (Accession No.
0000927405-97-000313) ("Post-Effective Amendment No. 5").
(10)(a) Plan of Distribution pursuant to Rule 12b-1 on behalf of the Kobren
Delphi Value Fund is incorporated by reference to Exhibit 23(m) of
Post-Effective Amendment No. 5.
(b) Plan pursuant to Rule 18f-3 on behalf of Kobren Delphi Value Fund is
incorporated by reference to Exhibit 23(o) of Post-Effective Amendment No. 5.
(11) Opinion of Hale and Dorr LLP concerning legality of shares of Kobren
Moderate Growth Fund is incorporated by reference to Exhibit (11) of the Trust's
Registration Statement on Form N-14 as filed with the SEC on May 7, 1999
(Accession No. 0000927405-97-000186) ("Registration Statement on Form N-14").
(12) Opinion of Hale and Dorr LLP concerning the tax matters and
consequences to shareholders discussed in the prospectus is filed herein.
(13)(a) 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 Form N-1A Registration Statement as filed
with the SEC on June 13, 1997 (Accession No.
0000927405-97-000202)("Post-Effective Amendment No. 1").
(b) Amendment to Transfer Agency Agreement with First Data Investor Services
Group, Inc. dated June 30, 1998 is incorporated by reference to Exhibit 9(b) of
Post-Effective Amendment No. 3 to the Form N-1A Registration Statement as filed
with the SEC on September 4, 1998 (Accession No. 000927405-98-000293)
("Post-Effective Amendment No. 3").
(c) Amendment to Transfer Agency Agreement with First Data Investor Services
Group, Inc. on behalf of Kobren Delphi Value Fund is incorporated by reference
to Exhibit 23(h) of Post-Effective Amendment No. 9.
(d) 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.
(e) Amendment to Administration Agreement with First Data Investor Services
Group, Inc. on behalf of Kobren Delphi Value Fund is incorporated by reference
to Exhibit 23(h) of Post-Effective Amendment No. 9.
(j) Consent of Independent Accountants is filed herein.
(15) Not Applicable.
(16) Not Applicable.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public re-offering of
the securities registered through the use of a prospectus which is part of this
registration statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act of 1933,
the re-offering prospectus will contain the information called for by the
applicable registration form for re-offerings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) The undersigned Registrant undertakes to file with the SEC, by
post-effective amendment promptly after the closing of the reorganization, an
opinion of Hale and Dorr LLP concerning the tax matters and consequences to
shareholders discussed in the prospectus.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, KOBREN INSIGHT FUNDS, certifies that it meets the requirements for
effectiveness of this Post-Effective Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933, and the Registrant has
duly caused this Post-Effective Amendment to its Registration Statement on Form
N-14 to be signed on its behalf by the undersigned, duly authorized, in the City
of Boston, and Commonwealth of Massachusetts on the 3rd day of June, 1999.
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
Registration Statement on Form N-14 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 06/03/99
Eric M. Kobren Board and Trustee (Chief
Executive Officer)
/s/ Eric J. Godes Treasurer, Chief Financial 06/03/99
Eric J. Godes Officer and Chief Accounting
Officer
/s/ Edward B. Bloom Trustee 06/03/99
Edward B. Bloom
/s/ Michael P. Castellano Trustee 06/03/99
Michael P. Castellano
/s/ Arthur Dubroff Trustee 06/03/99
Arthur Dubroff
/s/ Robert I. Goldfarb Trustee 06/03/99
Robert I. Goldfarb
/s/ Stuart J. Novick Trustee 06/03/99
Stuart J. Novick
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
(4) Form of Agreement and Plan of Reorganization
(11) Opinion of Hale and Dorr LLP concerning the tax matters and consequences to
shareholders discussed in the prospectus.
(14) Consent of Independent Accountants
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this 24th
day of May, 1999, between Kobren Conservative Allocation Fund (the "Acquired
Fund") and Kobren Moderate Growth Fund (the "Acquiring Fund"), each of which is
a series of Kobren Insight Funds, a Massachusetts business trust (the "Trust").
1. Plan of Reorganization and Liquidation
(a) The Acquired Fund shall assign, sell, convey, transfer and deliver to the
Acquiring Fund at the Closing provided for in Section 2 (the "Closing") all
of its then existing assets of every kind and nature. In consideration
therefor, the Acquiring Fund agrees that at the Closing (i) the Acquiring
Fund shall assume all of the Acquired Fund's obligations and liabilities
then existing, whether absolute, accrued, contingent or otherwise,
including all unpaid fees and expenses of the Acquired Fund in connection
with the transactions contemplated hereby and (ii) the Acquiring Fund shall
issue and deliver to the Acquired full and fractional shares of beneficial
interest of the Acquiring Fund (the "Acquiring Fund Shares") that have an
aggregate net asset value equal to the value of the assets transferred to
the Acquiring Fund by the Acquired Fund, less the liabilities of Acquired
Fund assumed by Acquiring Fund.
(b) Upon consummation of the transactions described in paragraph (a) of this
Section 1, the Acquired Fund shall distribute in complete liquidation pro
rata to its shareholders of record as of the Closing Date the Acquiring
Fund Shares received by the Acquired Fund. This distribution shall be
accomplished by establishing an account on the share record books of the
Acquiring Fund in the name of each shareholder an amount of full and
fractional Acquiring Fund Shares equal to the amount of shares of the
Acquired Fund owned of record by the shareholder at the Closing Date.
(c) As promptly as practicable after the above liquidation of the Acquired
Fund, the legal existence of the Acquired Fund shall be terminated.
2. Closing and Closing Date. The Closing shall occur as of the close of business
on May 28, 1999 or at such other time and date as the parties may mutually agree
(the "Closing Date").
3. Conditions Precedent. The obligations of the Acquired Fund and the Acquiring
Fund to effect the transactions contemplated hereunder (the "Reorganization")
shall be subject to the satisfaction of each of the following conditions:
(a) All such filings shall have been made with, and all such authorizations and
orders shall have been received from, the Securities and Exchange
Commission (the "SEC") and state securities commissions as may be necessary
to permit the parties to carry out the transactions contemplated by this
Agreement.
(b) Each party shall have received an opinion of counsel substantially to the
effect that for federal income tax purposes: (1) the acquisition of the
assets of the Acquired Fund by the Acquiring Fund in exchange for Acquiring
Fund's assumption of Acquired Fund's liabilities and Acquiring Fund's
issuance of Acquiring Fund Shares to the Acquired Fund, the distribution of
such Acquiring Fund Shares to the shareholders of the Acquired Fund in
complete liquidation of the Acquired Fund, and the termination of the
Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Acquiring Fund and the Acquired Fund will each be "a party
to a reorganization" within the meaning of Section 368(b) of the Code; (2)
no gain or loss will be recognized by the Acquired Fund upon the transfer
of all of its assets to the Acquiring Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund and the distribution by the Acquired Fund
of such Acquiring Fund Shares to the shareholders of the Acquired Fund; (3)
no gain or loss will be recognized by the Acquiring Fund upon the receipt
of all of the assets of the Acquired Fund in exchange solely for Acquiring
Fund Shares and the assumption by the Acquiring Fund of the liabilities of
the Acquired Fund; (4) the tax basis of the Acquiring Fund in the assets
received from the Acquired Fund will be the same as the tax basis of such
assets in the hands of the Acquired Fund immediately prior to the transfer
of such assets to the Acquiring Fund; (5) the Acquiring Fund's tax holding
period for the assets acquired from the Acquired Fund will include, in each
instance, the Acquired Fund's tax holding period for those assets; (6) no
gain or loss will be recognized by the Acquired Fund's shareholders upon
the exchange of their shares of the Acquired Fund solely for Acquiring Fund
Shares as part of the reorganization; (7) the tax basis of the Acquiring
Fund Shares received by the Acquired Fund's shareholders in the transaction
will be, for each shareholder, the same as the tax basis of the shares of
the Acquired Fund exchanged therefor; and (8) the tax holding period of the
Acquiring Fund Shares received by the Acquired Fund's shareholders will
include, for each shareholder, the shareholder's tax holding period for the
shares of the Acquired Fund surrendered in exchange therefor, provided that
the surrendered shares were held as capital assets in the hands of the
Acquired Fund's shareholders on the date of the exchange. The opinion may
cover any additional matters deemed material by such counsel.
(c) At any time prior to the Closing, any of the foregoing conditions may be
waived by the Trustees of the Trust if in their judgment, the waiver will
not have a material adverse effect on the interests of the shareholders of
the Acquired Fund or Acquiring Fund.
4. Amendment. This Agreement may be amended at any time by action of the
Trustees of the Trust, provided that no amendment shall have a material adverse
effect on the interests of the shareholders of the Acquired Fund or Acquiring
Fund.
5. Termination. The Trustees of the Trust may terminate this Agreement and
abandon the Reorganization at any time prior to the Closing, if circumstances
should develop that, in their judgment, make proceeding with the Reorganization
inadvisable.
This Agreement shall be executed in any number of counterparts each of which
shall be deemed to be an original, but all counterparts together shall
constitute only one instrument.
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to
be executed and delivered by their duly authorized officers as of the day and
year first above written.
KOBREN INSIGHT FUNDS on behalf of
Kobren Conservative Allocation Fund
Attest: /s/ ERIC J. GODES By: /s/ ERIC M. KOBREN
By: Eric J. Godes Name: Eric M. Kobren
Its: Secretary Its: Chairman of the Board
KOBREN INSIGHT FUNDS on behalf of
Kobren Growth Fund
Attest: /s/ ERIC J. GODES By: /s/ ERIC M. KOBREN
By: Eric J. Godes Name: Eric M. Kobren
Its: Secretary Its: Chairman of the Board
Hale and Dorr LLP
Counselors At Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 * Fax 617-526-5000
May 28, 1999
Board of Trustees
Kobren Insight Funds, on behalf of
Kobren Conservative Allocation Fund and
Kobren Moderate Growth Fund
20 William Street, Suite 310
Wellesley Hills, Massachusetts 02181
Dear Members of the Board of Trustees:
You have requested our opinion regarding certain federal income tax
consequences described below of the acquisition by Kobren Moderate Growth Fund
("Acquiring Fund"), a series of Kobren Insight Funds ("Trust"), of all of the
assets of Kobren Conservative Allocation Fund ("Acquired Fund"), a different
series of Trust, in exchange solely for (i) the assumption by Acquiring Fund of
all of the liabilities of Acquired Fund and (ii) the issuance of voting shares
of beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to
Acquired Fund, followed by the distribution by Acquired Fund, in liquidation of
Acquired Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund
and the termination of Acquired Fund (the foregoing together constituting the
"reorganization" or the "transaction").
In rendering this opinion, we have examined and relied upon the facts
stated and representations made in (i) the prospectus and statement of
additional information for Acquiring Fund, each dated May 24, 1999, which
describes the transaction, (ii) the combined prospectus for Acquiring Fund,
Acquired Fund and another fund, dated May 3, 1999, (iii) the combined statement
of additional information for Acquiring Fund, Acquired Fund and another fund,
dated May 3, 1999, (iv) the written information regarding the transaction
presented by Kobren Insight Brokerage, Inc. to the Board of Trustees (the
"Trustees") in connection with the meeting of the Trustees held on April 12,
1999, to consider the transaction, (v) the registration statement regarding the
transaction filed with the Securities and Exchange Commission (the "SEC") on
Form N-14 on May 7, 1999, (vi) Trust's annual report for the year ended December
31, 1998, (vii) the letter from Trust to the shareholders of Acquired Fund,
describing the reasons for the transaction, dated April 13, 1999, (viii) the
Agreement and Plan of Reorganization, made May 24, 1999, between Acquiring Fund
and Acquired Fund (the "Agreement"), (ix) the representation letters on behalf
of Acquiring Fund and Acquired Fund referred to below and (x) such other
documents as we deemed appropriate.
In our examination of documents, we have assumed the authenticity of
original documents, the accuracy of copies, the genuineness of signatures, and
the legal capacity of signatories. We have assumed that all parties to the
Agreement have acted and will act in accordance with the terms of the Agreement
and all other documents relating to the transaction and that the transaction
will be consummated pursuant to the terms and conditions set forth in the
Agreement without the waiver or modification of any such terms and conditions.
Furthermore, we have assumed that all representations contained in the
Agreement, as well as those representations contained in the representation
letters referred to below are, on the date hereof, true and complete in all
material respects, and that any representation made in any of the documents
referred to herein "to the best of the knowledge and belief" (or similar
qualification) of any person or party is correct without such qualification. We
have not attempted to verify independently such representations, but in the
course of our representation, nothing has come to our attention that would cause
us to question the accuracy thereof.
The conclusions expressed herein represent our judgment regarding the
proper treatment of certain aspects of the transaction affecting Acquiring Fund,
Acquired Fund and the shareholders of Acquired Fund on the basis of our analysis
of the Internal Revenue Code of 1986, as amended (the "Code"), case law,
Treasury regulations and the rulings and other pronouncements of the Internal
Revenue Service (the "Service") which exist at the time this opinion is
rendered. Such authorities are subject to prospective or retroactive change, and
we do not undertake any responsibility to advise you of any such change. Our
opinion represents our best judgment regarding how a court would decide if
presented with the issues addressed herein and is not binding upon the Service
or any court. Moreover, our opinion does not provide any assurance that a
position taken in reliance on such opinion will not be challenged by the Service
and does not constitute any representation or warranty that such position, if so
challenged, will not be rejected by a court.
This opinion addresses only the specific United States federal income
tax consequences of the transaction set forth below, and does not address any
other federal, state, local, or foreign income, estate, gift, transfer, sales,
or other tax consequences that may result from the transaction or any other
transaction.
FACTS
We understand that the facts relating to the transaction are as
described hereinafter.
Acquiring Fund is a series of Trust, a business trust established under
the laws of The Commonwealth of Massachusetts in 1996. Trust is registered as an
open-end investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"). Acquiring Fund has been operating as an investment company
since the inception of business in 1996. Acquiring Fund is one of four series of
Trust. Acquired Fund is a separate, different series of Trust. Acquired Fund has
been operating as an investment company since the inception of business in 1996.
Each series of Trust has assets and liabilities that are separate from those of
each other series, and each such series is treated as a separate corporation and
regulated investment company under Section 851(g) of the Code.
The investment objective of Acquiring Fund is long-term growth of
capital without regard to current income. Acquiring Fund uses an active asset
allocation strategy to seek reduced volatility (risk) over a full market cycle
to a level approximately 20% below that of the S&P 500 Index. Under normal
market conditions, at least 65% of Acquiring Fund's total assets will be
invested in open-end and closed-end growth and growth and income funds,
including both United States ("U.S.") and international funds. Acquiring Fund
may invest up to 35% of its total assets in fixed income funds or directly in
stocks, bonds and other permissible investments.
The investment objective of Acquired Fund is enough long-term growth of
capital to maintain purchasing power in the face of inflation. Current income is
a secondary objective. Acquired Fund uses an active asset allocation strategy to
seek reduced volatility (risk) over a full market cycle to a level approximately
30% below that of the S&P 500 Index. Under normal market conditions, Acquired
Fund expects to invest at least 40% of its total assets in open-end and
closed-end growth and growth and income funds, including both U.S. and
international funds. In addition, at least 20% of Acquired Fund's total assets
will be invested in income producing funds or securities. Acquired Fund may also
invest up to 40% of its total assets directly in stocks, bonds and other
permissible investments.
The steps comprising the reorganization, as set forth in the Agreement,
are as follows:
(i) Acquired Fund will transfer to Acquiring Fund all of its assets
(consisting, without limitation, of portfolio securities and instruments,
dividend and interest receivables, cash and other assets). In exchange for the
assets transferred to it, Acquiring Fund will (A) assume all of the liabilities
of Acquired Fund (comprising all of its known and unknown liabilities and
referred to hereinafter as the "Acquired Fund Liabilities") and (B) issue
Acquiring Fund Shares to Acquired Fund that have an aggregate net asset value
equal to the value of the assets transferred to Acquiring Fund by Acquired Fund,
less the Acquired Fund Liabilities assumed by Acquiring Fund.
(ii) Promptly after the transfer of its assets to Acquiring Fund,
Acquired Fund will distribute in liquidation the Acquiring Fund Shares it
receives in the exchange to Acquired Fund shareholders pro rata in exchange for
their surrender of their shares of beneficial interest of Acquired Fund
("Acquired Fund Shares").
(iii) After such exchanges, liquidation and distribution, the existence
of Acquired Fund will be promptly terminated in accordance with Massachusetts
law.
The Agreement and the transactions contemplated thereby were approved
by the Trustees of Trust, on behalf of Acquiring Fund and Acquired Fund, at a
meeting of the Trustees held on April 12, 1999. Acquiring Fund shareholders and
Acquired Fund shareholders are not required and were not asked to approve the
transaction.
Massachusetts law does not provide dissenters' rights for Acquired Fund
shareholders in the transaction. Additionally, it is the position of the
Division of Investment Management of the SEC that appraisal rights, in contexts
such as the reorganization, are inconsistent with Rule 22c-1 under the 1940 Act
and are therefore preempted and invalidated by such rule. Consequently, Acquired
Fund shareholders will not have dissenters' or appraisal rights in the
transaction.
Our opinions set forth below are subject to the following factual
assumptions being true and correct (including statements relating to future
actions and facts represented to be to the best knowledge of management, whether
or not known). Authorized representatives of Acquiring Fund and Acquired Fund
have represented to us by letters of even date herewith that the following
assumptions are true and correct:
(a) Neither Acquiring Fund nor any person treated as related to
Acquiring Fund under Treasury Regulation Section 1.368-1(e)(3) has any plan or
intention to redeem or otherwise reacquire any of the Acquiring Fund Shares
received by shareholders of Acquired Fund in the transaction except in the
ordinary course of Acquiring Fund's business in connection with its legal
obligation under Section 22(e) of the 1940 Act as a registered open-end
investment company to redeem its own shares (which obligation is not in
connection with, modified in connection with, or in any way related to the
transaction).
(b) After the transaction, Acquiring Fund will continue the historic
business of Acquired Fund and will use all of the assets acquired from Acquired
Fund, which are Acquired Fund's historic business assets, i.e., assets not
acquired as part of or in contemplation of the transaction, in the ordinary
course of a business.
(c) Acquiring Fund has no plan or intention to sell or otherwise
dispose of any assets of Acquired Fund acquired in the transaction, except for
dispositions made in the ordinary course of its business (i.e., dispositions
resulting from investment decisions made after the reorganization on the basis
of investment considerations independent of the reorganization) or to maintain
its qualification as a regulated investment company under Subchapter M of the
Code.
(d) The shareholders of Acquiring Fund and the shareholders of Acquired
Fund will bear their respective expenses, if any, in connection with the
transaction.
(e) Acquiring Fund and Acquired Fund will each bear its own expenses
incurred in connection with the transaction. Any liabilities of Acquired Fund
attributable to such expenses that remain unpaid on the closing date of the
transaction and are assumed by Acquiring Fund in the transaction are
attributable to Acquired Fund's expenses that are solely and directly related to
the transaction in accordance with the guidelines established in Rev. Rul.
73-54, 1973-1 C.B. 187.
(f) There is no indebtedness between Acquiring Fund and Acquired Fund.
(g) Acquired Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code, has qualified as a regulated investment
company for each taxable year since inception, and qualifies as such for its
taxable year ending on the date of the transaction.
(h) Acquiring Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code, has qualified as a regulated investment
company for each taxable year since inception, and qualifies as such as of the
date of the transaction.
(i) Neither Acquiring Fund nor Acquired Fund is under the jurisdiction
of a court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(j) Acquiring Fund does not own and has never owned, directly or
indirectly, any shares of Acquired Fund.
(k) Acquiring Fund will not pay cash in lieu of fractional shares in
connection with the transaction.
(l) As of the date of the transaction, the fair market value of the
Acquiring Fund Shares issued to Acquired Fund in exchange for the assets of
Acquired Fund is approximately equal to the fair market value of the assets of
Acquired Fund received by Acquiring Fund, minus the Acquired Fund Liabilities
assumed by Acquiring Fund. Acquiring Fund will not furnish any consideration in
connection with the acquisition of Acquired Fund's assets other than the
assumption of these Acquired Fund Liabilities and the issuance of these
Acquiring Fund Shares.
(m) Acquired Fund shareholders will not be in control (within the
meaning of Sections 368(a)(2)(H)(i) and 304(c) of the Code, which provide that
control means the ownership of shares possessing at least 50% of the total
combined voting power of all classes of shares that are entitled to vote or at
least 50% of the total value of shares of all classes) of Acquiring Fund after
the transaction.
(n) The principal business purposes of the transaction are to combine
the assets of Acquiring Fund and Acquired Fund in order to capitalize on
economies of scale in expenses, including the costs of accounting, legal,
transfer agency, insurance, custodial, and administrative services, and to
eliminate the difficulty experienced by Acquired Fund in attracting assets.
(o) As of the date of the transaction, the fair market value of the
Acquiring Fund Shares received by each shareholder that holds Acquired Fund
Shares is approximately equal to the fair market value of the Acquired Fund
Shares surrendered by such shareholder. No property other than Acquiring Fund
Shares will be distributed to shareholders of Acquired Fund in exchange for
their Acquired Fund Shares, nor will any such shareholder receive cash or other
property as part of the transaction.
(p) There is no plan or intention on the part of any shareholder of
Acquired Fund that owns beneficially 5% or more of the Acquired Fund Shares and,
to the best knowledge of management of Acquired Fund, there is no plan or
intention on the part of the remaining shareholders of Acquired Fund, in
connection with the transaction, to engage in any transaction with Acquired
Fund, Acquiring Fund, or any person treated as related to Acquired Fund or
Acquiring Fund under the standards made applicable by Treasury Regulation
Section 1.368-1(e)(1)(i) involving the sale, redemption, exchange, transfer,
pledge, or other disposition resulting in a direct or indirect transfer of the
risks of ownership (a "Sale") of any of the Acquired Fund Shares or any of the
Acquiring Fund Shares to be received in the transaction that, considering all
Sales, would reduce the aggregate ownership of the Acquiring Fund Shares by
former Acquired Fund shareholders to a number of shares having a value, as of
the date of the transaction, of less than fifty percent (50%) of the value of
all of the formerly outstanding Acquired Fund Shares as of the same date. All
Sales involving shares of Acquired Fund and Acquiring Fund held by Acquired Fund
shareholders that have occurred or will occur in connection with the transaction
are taken into account for purposes of this representation. No such Sale of
shares of Acquired Fund that is in connection with the transaction has, to the
best knowledge of the management of Acquired Fund, occurred on or prior to the
date of the transaction.
(q) Acquired Fund assets transferred to Acquiring Fund comprise at
least ninety percent (90%) of the fair market value of the net assets and at
least seventy percent (70%) of the fair market value of the gross assets held by
Acquired Fund immediately prior to the transaction. For purposes of this
representation, amounts used by Acquired Fund to pay its outstanding
liabilities, including reorganization expenses, and all redemptions and
distributions (except for redemptions in the ordinary course of business upon
demand of a shareholder that Acquired Fund is required to make as an open-end
investment company pursuant to Section 22(e) of the 1940 Act and regular, normal
dividends, which dividends include any final distribution of previously
undistributed investment company taxable income and net capital gain for
Acquired Fund's final taxable year ending on the date of the transaction) made
by Acquired Fund immediately preceding the transaction are taken into account as
assets of Acquired Fund held immediately prior to the transaction.
(r) The Acquired Fund Liabilities assumed by Acquiring Fund plus the
liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Fund in the ordinary course of its business or are expenses of the
transaction.
(s) The fair market value of the Acquired Fund assets transferred to
Acquiring Fund equals or exceeds the sum of the Acquired Fund Liabilities
assumed by Acquiring Fund and the amount of liabilities, if any, to which the
transferred assets are subject.
(t) Acquired Fund does not pay compensation to any shareholder-
employee.
OPINION
On the basis of and subject to the foregoing and in reliance upon the
representations described above, we are of the opinion that:
(a) The acquisition by Acquiring Fund of all of the assets of Acquired
Fund solely in exchange for the issuance of Acquiring Fund Shares to Acquired
Fund and the assumption of all of the Acquired Fund Liabilities by Acquiring
Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired
Fund, of Acquiring Fund Shares to Acquired Fund shareholders in exchange for
their Acquired Fund Shares and the termination of Acquired Fund, will constitute
a "reorganization" within the meaning of Section 368(a)(1)(C) of the Code.
Acquiring Fund and Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by Acquired Fund upon (i) the
transfer of all of its assets to Acquiring Fund solely in exchange for the
issuance of Acquiring Fund Shares to Acquired Fund and the assumption of all of
the Acquired Fund Liabilities by Acquiring Fund and (ii) the distribution by
Acquired Fund of such Acquiring Fund Shares to the shareholders of Acquired Fund
(Sections 361(a) and 361(c) of the Code).
(c) No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Acquired Fund solely in exchange for the issuance of
Acquiring Fund Shares to Acquired Fund and the assumption of all of the Acquired
Fund Liabilities by Acquiring Fund (Section 1032(a) of the Code).
(d) The basis of the assets of Acquired Fund acquired by Acquiring Fund
will be, in each instance, the same as the basis of those assets in the hands of
Acquired Fund immediately prior to the transfer (Section 362(b) of the Code).
(e) The tax holding period of the assets of Acquired Fund in the hands
of Acquiring Fund will, in each instance, include Acquired Fund's tax holding
period for those assets (Section 1223(2) of the Code).
(f) The shareholders of Acquired Fund will not recognize gain or loss
upon the exchange of all of their Acquired Fund Shares solely for Acquiring Fund
Shares as part of the transaction (Section 354(a)(1) of the Code).
(g) The basis of the Acquiring Fund Shares received by the Acquired
Fund shareholders in the transaction will be the same as the basis of the
Acquired Fund Shares surrendered in exchange therefor (Section 358(a)(1) of the
Code).
(h) The tax holding period of the Acquiring Fund Shares received by
Acquired Fund shareholders will include, for each shareholder, the tax holding
period for the Acquired Fund Shares surrendered in exchange therefor, provided
that the Acquired Fund Shares were held as capital assets on the date of the
exchange (Section 1223(1) of the Code).
No opinion is expressed or implied regarding the federal income tax
consequences to Acquiring Fund, Acquired Fund or Acquired Fund shareholders of
any conditions existing at the time of, effects resulting from, or other aspects
of the transaction except as expressly set forth above. This opinion may not be
relied upon except with respect to the consequences specifically discussed
herein nor may it be relied upon by persons or entities to whom it is not
addressed, other than with our prior written consent.
Very truly yours,
/s/ Hale and Dorr LLP
Hale and Dorr LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Kobren Insight Funds:
RE: Kobren Growth Fund
Kobren Modertae Growth Fund
Kobren Conservative Allocation Fund
We hereby consent to the reference to our Firm under the caption "Experts" in
the Prospectus of the above-referenced funds included in Post-Effective Amend-
ment No. 1 to the Registration Statement on Form N-14 under the Securities Act
of 1933, as amended, of Kobren Insight Funds. We further consent to the incorpo-
ration by reference of our report dated February 5, 1999 on our audit of the
finanacial statements and financial highlights of the above-referenced funds
as of December 31, 1998 in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 2, 1999
