UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|X| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-12
KOBREN INSIGHT FUNDS
(FILE NOS. 333-12075; 811-07813)
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
KOBREN INSIGHT FUNDS
September [ ], 2005
Dear Shareholder:
E*TRADE FINANCIAL Corporation ("E*TRADE") has proposed to purchase your
fund's investment adviser, Kobren Insight Management, Inc. ("KIM"). E*TRADE is
seeking through the acquisition of KIM to bolster its wealth management strategy
by obtaining a U.S. registered investment adviser with an established
reputation, existing products and in-place management. For KIM, the acquisition
represents an opportunity to continue to provide its clients with the same
quality services to which they have become accustomed while becoming part of a
larger organization with a greater array of products, resources, personnel and
distribution channels. This transaction will also afford KIM's clients access to
additional systems capabilities and a strengthened capital base.
The Board of Trustees of Kobren Insight Funds has called a joint special
shareholder meeting for Kobren Growth Fund and Delphi Value Fund (each, a
"Fund") to be held on October 19, 2005. The primary purpose of the joint special
meeting is to permit each Fund's shareholders to consider a new investment
advisory agreement with KIM to take effect after the acquisition, as required by
the U.S. federal securities laws. The terms of the proposed new investment
advisory agreement between each Fund and KIM are substantially identical to the
terms of each Fund's current investment advisory agreement, except for the dates
of execution, effectiveness and termination, and the inclusion of escrow
provisions (which are applicable in the event that the transaction closes prior
to the approval of the new advisory agreement by the shareholders). The enclosed
proxy statement seeks shareholder approval on this and other proposals.
NONE OF THE PROPOSALS REQUESTS AN INCREASE IN THE RATE OF YOUR FUND'S
INVESTMENT ADVISORY FEE. FURTHER, THE ACQUISITION WILL NOT RESULT IN A CHANGE IN
YOUR FUND'S PORTFOLIO MANAGER.
The Board of Trustees of Kobren Insight Funds has unanimously approved the
proposals and recommends that you vote "FOR" each of these proposals.
YOUR IMMEDIATE RESPONSE WILL HELP SAVE THE COSTS OF ADDITIONAL
SOLICITATIONS. EACH FUND VOTES SEPARATELY, SO PLEASE SIGN A PROXY CARD FOR EACH
FUND INCLUDED IN THIS PACKAGE IF YOU OWN SHARES OF BOTH FUNDS. We look forward
to your participation, and we thank you for your continued confidence in KIM.
Sincerely,
Eric M. Kobren
President and Chairman of the Board
KOBREN INSIGHT FUNDS
20 WILLIAM STREET, SUITE 310
WELLESLEY HILLS, MA 02481
(800) 456-2736
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NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 19, 2005
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To the Shareholders of:
KOBREN GROWTH FUND
DELPHI VALUE FUND
Notice is hereby given that a joint Special Meeting of Shareholders (the
"Meeting") of Kobren Growth Fund and Delphi Value Fund (each, a "Fund" and
together, the "Funds"), each a series of Kobren Insight Funds, will be held at
the offices of Kobren Insight Management, Inc., 20 William Street, Suite 310,
Wellesley Hills, MA 02481 on Wednesday, October 19, 2005 at 10:00 a.m. (Boston
time):
The Meeting will be held for the following purposes:
1. For each Fund, to approve a new investment advisory agreement;
2. For Delphi Value Fund, to approve a new investment subadvisory agreement;
3. For Delphi Value Fund (retail class only), to approve a new Rule 12b-1
distribution plan;
4. For each Fund, to transact such other business as may properly come before
the Meeting and any adjournment thereof.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU
VOTE IN FAVOR OF ALL OF THE FOREGOING PROPOSALS.
The Board of Trustees has no knowledge of any other business to be
transacted at the Meeting. Shareholders of record of each Fund at the close of
business on August 10, 2005 are entitled to notice of, and to vote at, the
Meeting and any adjournment thereof.
By Order of the Board of Trustees,
Eric J. Godes,
Secretary
September [ ], 2005
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IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
COMPLETE, DATE AND SIGN THE PROXY CARD FOR THE SHARES HELD BY YOU AND RETURN THE
PROXY IN THE ENVELOPE PROVIDED SO THAT YOUR VOTE CAN BE RECORDED. NO POSTAGE IS
REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES. IF YOU ARE PRESENT AT
THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
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KOBREN INSIGHT FUNDS
20 WILLIAM STREET, SUITE 310
WELLESLEY HILLS, MA 02481
(800) 456-2736
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JOINT PROXY STATEMENT
----------
This joint proxy statement ("Proxy Statement") is being furnished in
connection with the solicitation of proxies by the Board of Trustees (the
"Trustees" or "Board") of Kobren Insight Funds (the "Trust") to be voted at a
joint Special Meeting of Shareholders (the "Meeting") of Kobren Growth Fund and
Delphi Value Fund (each, a "Fund" and together, the "Funds") that will be held
at the offices of Kobren Insight Management, Inc., 20 William Street, Suite 310,
Wellesley Hills, MA 02481 on Wednesday, October 19, 2005 at 10:00 a.m. (Boston
time).
The approximate mailing date of this Proxy Statement and accompanying form
of proxy is September [ ], 2005.
The primary purpose of the Meeting is to permit each Fund's shareholders
to consider proposals ("Proposals") related to the proposed acquisition (the
"Acquisition") of the Funds' investment adviser ("KIM" or the "Adviser") by
E*TRADE FINANCIAL Corporation ("E*TRADE"), including approving a New Advisory
Agreement (defined below) between each Fund and KIM. If a Fund's shareholders
approve the New Advisory Agreement (Proposal 1) and the Acquisition is
completed, KIM will remain as the Fund's investment adviser but will be a
wholly-owned subsidiary of E*TRADE. The vote of shareholders on the New Advisory
Agreement is required under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a result of E*TRADE's contemplated acquisition of KIM. The New
Advisory Agreement is substantially identical to each Fund's Current Advisory
Agreement (defined below), except for the dates of execution, effectiveness and
termination, and the inclusion of escrow provisions (which are applicable only
in the event that the Acquisition closes prior to the approval of the New
Advisory Agreement by the shareholders). AS DESCRIBED BELOW, NONE OF THE
PROPOSALS REQUESTS AN INCREASE IN THE RATE OF EITHER FUND'S INVESTMENT ADVISORY
FEE. FURTHER, THE ACQUISITION WILL NOT RESULT IN A CHANGE IN EITHER FUND'S
PORTFOLIO MANAGER.
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The following table summarizes each Proposal to be presented at the
Meeting and the Funds solicited with respect to such Proposal:
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PROPOSAL AFFECTED FUNDS
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1. Approval of New Advisory Agreement Each Fund
2. Approval of New Subadvisory Agreement Delphi Value Fund
3. Approval of New 12b-1 Distribution Plan Delphi Value Fund (retail class)
Participating in the Meeting are holders of shares of beneficial interest
(collectively, the "Shares") of each Fund. The Board has fixed the close of
business on August [ ], 2005 as the record date (the "Record Date") for the
determination of holders of Shares of each Fund entitled to vote at the Meeting
and any adjournment thereof. Shareholders of a Fund on the Record Date will be
entitled to one vote per each Share held with respect to each Proposal submitted
to the shareholders of that Fund, and a fractional vote with respect to
fractional Shares on each matter as to which such Shares are entitled to vote,
with no Share having cumulative voting rights.
A copy of the Annual Report (including financial statements) and
Semi-Annual Report for each Fund for the fiscal year ended December 31, 2004 and
the most recent Semi-Annual Report succeeding the Annual Report was previously
mailed to each Fund's shareholders. ADDITIONAL COPIES OF EACH FUND'S ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT) ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE FUNDS, C/O KIM, AT 20
WILLIAM STREET, WELLESLEY HILLS, MA 02481 OR BY CALLING THE FOLLOWING NUMBER
TOLL-FREE: (800) 456-2736. The Funds' principal underwriter, Kobren Insight
Brokerage, Inc. ("KIB"), shares the same address as the Fund and KIM. The
principal business address of PFPC, Inc., the Funds' administrator, is 4400
Computer Drive, Westborough, MA 01581.
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PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENT
THE ACQUISITION
The President and sole shareholder of KIM, Mr. Eric M. Kobren, has entered
an agreement (the "Purchase Agreement") with E*TRADE to sell all of the equity
interests of KIM to E*TRADE (the "Acquisition"). After the completion of the
Acquisition, KIM will be a wholly-owned subsidiary of E*TRADE.
E*TRADE is seeking through the Acquisition to bolster its wealth
management strategy by obtaining a U.S. registered investment adviser with an
established reputation, existing products and in-place management. For KIM, the
Acquisition represents an opportunity to continue to provide its clients with
the same quality services to which they have become accustomed while becoming
part of a larger organization with a greater array of products, resources,
personnel and distribution channels. The Acquisition will also afford KIM's
clients access to additional systems capabilities and a strengthened capital
base.
The Acquisition is not expected to result in any material changes to the
business or composition of the senior management or personnel of KIM or the
manner in which KIM renders advisory services to the Funds. Except as described
below under "Certain Arrangements," the Purchase Agreement does not contemplate
any changes, other than changes in the ordinary course of business, in the
management or operations of KIM relating to the Funds, the personnel managing
the Funds or in the other service providers (other than the Funds' principal
underwriter) to or business activities of the Funds. E*TRADE and KIM do not
anticipate that the Acquisition or any ancillary transactions will cause any
reduction in the quality of services now provided by KIM to the Funds or will
have any adverse effect on KIM's ability to fulfill its obligations under the
New Advisory Agreement. Upon consummation of the Acquisition, KIM expects to
operate its business in a manner consistent with its past practices.
THE TERMS OF THE PURCHASE AGREEMENT
The Acquisition is expected to close during the fourth quarter of 2005,
provided that a number of conditions set forth in the Purchase Agreement are met
or waived. The conditions require, among other things, that as of the closing of
the Acquisition the shareholders of the Funds and investors in certain accounts
advised by KIM (representing in the aggregate an agreed upon percentage of KIM's
net revenues) have approved new investment advisory agreements or consented to
the assignment of their existing investment advisory agreements. In
consideration for all of the outstanding equity interests in KIM to be
transferred to E*TRADE, E*TRADE will pay a combination of cash and stock,
subject to certain purchase price adjustments, as set forth in the Purchase
Agreement. The initial purchase price is subject to certain adjustments based
on, among other things, the amount of revenues generated by assets under
management of KIM at specified times.
CERTAIN ARRANGEMENTS
Prior to the closing of the Acquisition, the current composition of the
Board will change. Michael P. Castellano and Robert I. Goldfarb will resign.
This change to the Board's composition is being implemented in response to final
rules promulgated by the Securities and Exchange Commission ("SEC"), which
require, among other things, that 75% of the members of the Board be comprised
of Trustees who are not "interested persons" (as defined in the 1940 Act,
"Independent Trustees"). The change to the Board's composition is also being
implemented to comply with the requirements under Section 15(f) under the 1940
Act. See "Section 15(f) of the 1940 Act" below for a more detailed explanation.
See also Annex A to this Proxy Statement for a description of the current Board
members.
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In addition, Mr. Eric M. Kobren has entered into an employment agreement
in connection with the Acquisition. The employment agreement is intended to
ensure that Mr. Kobren will continue to manage KIM (and therefore, Kobren Growth
Fund) for a term of at least 2.5 years. The Purchase Agreement also prohibits
Mr. Kobren from competing with KIM in various ways for a certain time period
after the termination of employment. Although there can be no assurance that Mr.
Kobren will choose to remain employed by KIM after the Acquisition, KIM expects
to continue after the Acquisition to provide competitive compensation and
benefit packages and other incentives necessary to retain and attract quality
personnel.
Finally, upon consummation of the Acquisition, KIB will be replaced by
E*TRADE Securities, LLC, a registered broker-dealer and subsidiary of E*TRADE as
the Funds' principal underwriter. Shares of the Funds will be distributed by
E*TRADE Securities, LLC. The Board, including all of the Independent Trustees,
approved E*TRADE Securities, LLC as the Trust's principal underwriter (effective
upon the closing of the Acquisition) at a meeting held in person on August 11,
2005. The Board considered that E*TRADE Securities, LLC's current distribution
channels and overall potential growth were greater than those of KIB. As a
result, the Board determined that E*TRADE Securities, LLC's distribution network
could benefit the Funds and their shareholders by increasing each Fund's assets
under management and providing potential economies of scale. E*TRADE Securities,
LLC's distribution channels was one of the many positive factors that Mr. Kobren
weighed when entering into the Purchase Agreement with E*TRADE Securities, LLC.
INFORMATION CONCERNING KIM
KIM is a registered investment adviser and was established in 1987. KIM
has historically used mutual funds, rather than individual securities, as the
primary investment vehicle for managing its client accounts. KIM has extensive
experience managing mutual fund portfolios for high net worth individuals and
corporations with minimum $500,000 account sizes. As of June 30, 2005, KIM
managed approximately 850 client accounts with assets totaling approximately
$1.121 billion, including the Funds. Mr. Kobren is the sole stockholder of KIM
and of the Funds' current principal underwriter, KIB. He and/or his family are
also the principal shareholders of Mutual Fund Investors Association, Inc., the
publisher of Fidelity Insight and Fundsnet Insight Reports. Mr. Kobren also
currently serves as the Trust's President and Chairman of the Board. Annex A to
this Proxy Statement lists the name, address and principal occupation of (i)
principal executive officer and each director of KIM, and (ii) each Trustee and
each officer of the Trust who is an employee of KIM.
After completion of the Acquisition, KIM will be a wholly-owned indirect
subsidiary of E*TRADE. Mr. Kobren will continue to serve as KIM's President and
Chief Investment Officer, subject to the terms of his employment agreement.
INFORMATION CONCERNING E*TRADE
E*TRADE, a global financial services holding company headquartered in New
York, New York, provides an integrated offering of diversified financial
services and solutions to retail and institutional customers. E*TRADE currently
offers branded web sites in 14 countries and serves approximately 2.7 million
households and approximately 3.6 million customer accounts worldwide. E*TRADE's
customer assets total approximately $100 billion.
Building on a foundation of providing online investment products and
services, E*TRADE has expanded to provide retail customers with an integrated
and personalized suite of investing, banking, lending, planning and advice
services. In the United States, E*TRADE also offers corporate services,
including employee stock plan administration, as well as market-making services
to brokerage firms. In addition, E*TRADE provides global institutional customers
with a range of securities brokerage products and services, including
institutional trading.
E*TRADE became a public company in August 1996. E*TRADE's common stock
trades on the New York Stock Exchange under the symbol "ET." E*TRADE's options
trade on the Chicago Board Options Exchange and the American Stock Exchange
under the option root symbol "ET." On its web site, E*TRADE offers four
proprietary index funds and a mutual fund supermarket where investors have over
6,000 mututal funds to choose from, including a wide selection of bond, stock
and sector funds. E*TRADE, through its investment advisory affiliates, also
offers advice and wealth management services to retail and institutional
customers.
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EFFECT OF THE ACQUISITION ON THE CURRENT ADVISORY AGREEMENTS
Consummation of the Acquisition will constitute an "assignment" (as
defined in the 1940 Act) of the investment advisory agreement currently in
effect between each Fund and KIM (the "Current Advisory Agreements"). As
required by the 1940 Act, each Current Advisory Agreement provides for its
automatic termination in the event of an assignment. Accordingly, the Current
Advisory Agreements will terminate upon consummation of the Acquisition.
In anticipation of the Acquisition and in order for KIM to continue to
serve as each Fund's investment adviser after consummation of the Acquisition, a
new investment advisory agreement (the "New Advisory Agreement") between each
Fund and KIM (i) was unanimously approved by the Trustees, including the
Independent Trustees at a meeting held in person on August 11, 2005 and (ii)
must be approved by vote of the holders of "a majority of the outstanding voting
securities" (within the meaning of the 1940 Act and as defined below as a "1940
Act Majority Vote") of such Fund.
TERMS OF THE CURRENT AND NEW ADVISORY AGREEMENTS
The continuance of each Fund's Current Advisory Agreement and approval of
each Fund's New Advisory Agreement were last approved by the Trustees, including
the Independent Trustees, unanimously voting in person at a meeting called for
that purpose on May 3, 2005 and August 11, 2005, respectively. Each Fund's
Current Advisory Agreement, dated November 15, 1995, as amended from time to
time, was last approved by KIM, as the sole shareholder, by written consent
dated November 8, 1996, for Kobren Growth Fund, and by written consent dated
December 10, 1998, for Delphi Value Fund.
The terms of each Fund's proposed New Advisory Agreement are substantially
identical to the terms of each Fund's Current Advisory Agreement, except for the
dates of execution, effectiveness and termination, and the inclusion of escrow
provisions (which are applicable only in the event that the Acquisition closes
prior to the approval of the New Advisory Agreement by the shareholders). All
the terms described below with respect to the New Advisory Agreements were
contained in the Current Advisory Agreements. The following summary of the New
Advisory Agreement is qualified by reference to the form of New Advisory
Agreement attached to this Proxy Statement as Annex B.
THE RATE AT WHICH EACH FUND'S ADVISORY FEES ARE PAID WILL NOT INCREASE AS
A RESULT OF THE APPROVAL OF THIS PROPOSAL. The investment advisory fee, as a
percentage of net assets payable by each Fund, will be the same under each New
Advisory Agreement as under the Current Advisory Agreement (such rates are set
forth below). If each New Advisory Agreement had been in effect for each Fund's
most recently completed fiscal year, the amount of advisory fees payable to KIM
by each Fund would have been identical to those payable under each Current
Advisory Agreement.
The New and Current Advisory Agreement provides that KIM will provide a
continuous investment program for each Fund's assets entrusted to it for
portfolio management purposes, including investment research and management with
respect to all securities, investments, cash and cash equivalents in the Funds
consistent with each Fund's investment objectives and policies. KIM will
determine from time to time what securities to purchase for the Fund, what
securities to be held or sold by the Fund and what portion of the Fund's assets
to be held uninvested as cash. The New and Current Advisory Agreements provide
that KIM pays the compensation and expenses of all of its personnel and may
consult with other persons as may be necessary to render the services required
to be provided by KIM or furnished to the Funds pursuant to the terms of such
Agreements. KIM will bear the cost of rendering the
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services to be performed by it under the New and Current Advisory Agreements,
and provides the Funds with office space, facilities, equipment, clerical help,
and other personnel and services, as the Funds shall reasonably require in the
conduct of its business. KIM has retained Delphi Management, Inc. ("Delphi") to
be the subadviser to Delphi Value Fund. See Proposal 2 for a detailed
explanation of Delphi's duties with respect to the management of Delphi Value
Fund.
Each Fund is responsible for the following expenses, including:
organizational expenses; taxes, interest, brokerage costs and commissions;
Independent Trustees' fees; SEC fees; state Blue Sky qualification fees; charges
of the administrator, the custodian, any subcustodians, and transfer and
dividend-paying agents; insurance premiums; auditing, pricing and legal
expenses; costs of maintenance of the Trust's existence; costs of preparing and
printing prospectuses and statements of additional information; costs of
shareholder reports and meetings of the shareholders of the Funds and of the
officers or Board of Trustees of the Trust; membership fees in trade
associations; litigation, indemnification and other extraordinary or
non-recurring expenses.
Each New and Current Advisory Agreement provides that KIM shall not be
liable for any error of judgment, mistake of law or for any other loss suffered
by the Trust in connection with its performance under the Agreements, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of KIM in the performance of its duties or
from reckless disregard by it of its obligation and duties under the Agreements.
KIM's activities with respect to the Funds are subject to the review and
supervision of the Board, to which KIM renders periodic reports with respect to
each Fund's investment activities. If approved by shareholders at the Meeting,
the New Advisory Agreement would take effect upon the later to occur of (i) the
obtaining of shareholder approval or (ii) the closing of the Acquisition. The
New Advisory Agreement would continue in effect for an initial period of two
years after its effectiveness and would continue in effect thereafter for
successive one year periods as long as each such continuance is approved in
accordance with the requirements of the 1940 Act. The New Advisory Agreement may
be terminated at any time, without the payment of any penalty, by the Board or
by at least a 1940 Act Majority Vote (as defined below) of the Shares of the
relevant Fund, or by KIM, upon not more than 60 days' written notice, and
automatically terminates in the event of its assignment.
For its investment advisory services under the New Advisory Agreement, KIM
is entitled to receive an annual fee, payable monthly, which varies in
accordance with the average daily net assets of the Funds under the management
of KIM. The advisory fee is accrued daily and will be prorated if KIM shall not
have acted as a Fund's investment adviser during any entire monthly period.
The annual fee rates under the Current and New Advisory Agreements and the
advisory fees paid to KIM with respect to each Fund are as follows:
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ANNUAL ADVISORY FEE RATE ADVISORY FEES PAID TO KIM
(as a percentage of FOR THE MOST RECENT FISCAL YEAR
FUND average daily net assets) ENDED DECEMBER 31, 2004
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Kobren Growth Fund 0.75% $ 325,634*
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Delphi Value Fund 1.00% $ 1,134,089**
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* KIM has voluntarily agreed to reimburse Kobren Growth Fund to the extent
necessary to maintain the Fund's operating expenses (excluding investment
advisory fees, brokerage commissions, taxes, interest and litigation,
indemnification and other extraordinary expenses) at 0.25% annually of the
Fund's average daily net assets. This voluntary expense cap may be revoked at
any time at the discretion of KIM. For the fiscal year ended December 31, 2004,
KIM waived fees and reimbursed expenses for Kobren Growth Fund in the amounts of
$86,045. Had those fees not been waived or reimbursed, KIM would have earned
gross advisory fees for such period in the amount of $411,679.
** KIM has voluntarily agreed to cap Delphi Value Fund's total annual operating
expenses of the retail class at no more than 1.75% annually of the Fund's
average daily net assets and of the institutional class at no more than 1.50%.
This cap does not apply to brokerage commissions, taxes, interest and
litigation, indemnification and other extraordinary expenses. This voluntary
expense cap arrangement may be revoked at any time at the discretion of KIM. The
retail class of the Fund will pay a portion of the fees associated with
participation in various network programs. Since the Fund's total expenses were
less than the voluntary expense caps, KIM did not waive or reimburse any fees
for the periods shown above.
KIM is responsible for decisions to buy and sell securities for Kobren
Growth Fund. Under the supervision of KIM and the Board, Delphi is responsible
for decisions to buy and sell securities for Delphi Value Fund as the Fund's
subadviser. KIM and Delphi are also referred to herein individually as the
"Adviser" or together as the "Advisers." The Adviser is also responsible for
placement of the Fund's portfolio business and negotiation of commissions, if
any, paid on these transactions.
For the most recent fiscal year ended December 31, 2004, neither Fund paid
any brokerage commissions to any affiliate.
FACTORS CONSIDERED BY THE BOARD IN APPROVING THE NEW ADVISORY AGREEMENTS.
The 1940 Act requires that each Fund's advisory agreement be approved
annually by both the Board and a majority of the Independent Trustees voting
separately. At meetings held on May 3, 2005 and August 11, 2005, the Trustees
determined that the terms of the Current and New Advisory Agreements were fair
and reasonable. At the August 11, 2005 meeting, the Trustees determined that the
approval of the New Advisory Agreements would enable each Fund to continue to
receive quality investment advisory services at a cost deemed reasonable and in
the best interests of each Fund and its shareholders. In making such
determinations, the Independent Trustees relied upon the assistance of Wilmer
Cutler Pickering Hale and Dorr LLP, counsel to the Trust (that also serves as
counsel to KIM and MR. Kobren), but did not engage their own separate counsel,
and the Independent Trustees met in a separate executive session with no
personnel of KIM, Delphi, or E*TRADE present.
In meetings specifically addressed to renewal of the Current Advisory
Agreements and the approval of the New Advisory Agreements held during the
course of the year, the Trustees, including the Independent Trustees, received
materials relating to KIM's investment and management services under the Current
and New Advisory Agreements. These materials included (i) information on the
investment performance of each Fund, a peer group of funds and an index, (ii)
sales and redemption data with respect to each Fund, (iii) the general
investment outlook in the markets in which each Fund invests, (iv) arrangements
in respect of the distribution of each Fund's shares, (v) the procedures
employed to determine the value of each of each Fund's assets, and (vi) the
record of compliance with each Fund's investment policies and restrictions and
with each Fund's Code of Ethics and the structure and responsibilities of KIM's
compliance department.
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As part of the review of the Current and New Advisory Agreements, the
Independent Trustees requested, reviewed and considered, and KIM provided,
additional information in order to evaluate the quality of KIM's services and
the reasonableness of the fee under the Current and New Advisory Agreements.
Among other items, this information included data or analyses of (1) management
and other fees incurred by a peer group of funds, (2) expense ratios for each
Fund and a peer group of funds, (3) investment performance for each Fund and an
appropriate index and a peer group over various time periods, (4) KIM's
financial results and condition, including its profitability from services
performed for each Fund, (5) investment management staffing, and (6) the
potential for achieving further economies of scale in light of expenses that are
not incurred as fees based on a percentage of net assets.
The following summarizes matters considered by the Trustees in connection
with their approval of the New Advisory Agreements. However, the Trustees did
not identify any single factor as all-important or controlling, and the summary
does not detail all the matters that were considered.
COMPLIANCE AND INVESTMENT PERFORMANCE. The Trustees determined that KIM
had policies and systems reasonably designed to achieve compliance with each
Fund's investment objective and regulatory requirements. The Trustees also
reviewed each Fund's investment performance, as well as each Fund's performance
compared to both the performance of a peer group and the results of an index.
The Trustees concluded that the performance of each Fund, together with other
factors considered by the Trustees, supported the approval of the New Advisory
Agreement.
KIM'S PERSONNEL AND METHODS. The Trustees reviewed the background of
members of the team responsible for the daily management of each Fund and each
Fund's investment objective and discipline. The Independent Trustees also have
had discussions with senior management of KIM responsible for investment
operations. The Trustees also considered the favorable history, reputation,
qualifications and background of KIM as well as the qualifications of its
personnel. The Trustees concluded that KIM has the quality and depth of
personnel and the well-developed methods essential to performing its duties
under the New Advisory Agreements.
NATURE AND QUALITY OF OTHER SERVICES. The Trustees also considered the
nature, quality, cost and extent of the other services provided by KIM's
affiliate, KIB, under other contracts and its supervision of Delphi as the
Delphi Value Fund's investment subadviser and of third party service providers
to the Funds. The Trustees noted the Funds' record of compliance with their
investment policies and restrictions, and the quality of managerial and
administrative services provided by KIM in an increasingly regulated industry.
Based on these considerations, the Trustees concluded that the nature, quality,
cost and extent of such services are satisfactory and reliable and serve the
shareholders of each Fund well.
MANAGEMENT FEE AND EXPENSES. The Trustees considered KIM's fee under the
New Advisory Agreements relative to the management fees charged by a peer group
of funds. The Trustees also considered each Fund's expense ratio relative to
industry averages for the Fund's peer group category and the advisory fees
charged by KIM to other accounts. The Trustees viewed favorably the current and
historic willingness of KIM to limit the Funds' total expense ratios. The
Trustees concluded that, for each Fund, the advisory fee is acceptable based
upon qualifications, experience, reputation and performance of KIM and the
moderate overall expense ratio of the Funds given the relatively small size of
the Funds and the fund complex.
PROFITABILITY. The Trustees considered the estimated level of KIM's
profits with respect to the management of each Fund. This consideration included
a review of KIM's methodology in allocating
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certain of its costs to the management of each Fund. The Trustees also
considered the financial results realized by KIM in connection with the
operation of each Fund. The Trustees recognized that increased fixed costs,
particularly legal and audit fees, have a greater impact on smaller fund
families, such as the Funds, than on larger fund complexes. The Trustees
concluded that KIM's profits (which are either very small or negative), from
management of the Funds, including the financial results derived from the Fund,
are eminently fair to the Funds for the management of each Fund in light of the
business risks involved.
ECONOMIES OF SCALE. The Trustees considered whether there have been
economies of scale in respect of the management of each Fund, whether the Funds
have appropriately benefited from any economies of scale, and whether there is
potential for realization of any further economies of scale. The Trustees
concluded that any perceived and potential economies of scale were not yet a
relevant consideration given the size of each Fund.
OTHER BENEFITS TO KIM. The Trustees also considered the character and
amount of other direct and incidental benefits received by KIM and its
affiliates from their association with the Funds, including the brokerage
commissions received by, and the amount of 12b-1 fees and sales commissions
retained by, KIB. The Trustees concluded that potential "fall-out" benefits that
KIM may receive, such as greater name recognition, appear to be reasonable, and
may in some cases benefit the Funds.
In evaluating the New Advisory Agreements, the Trustees also reviewed
materials furnished by E*TRADE, including information regarding E*TRADE, its
affiliates, personnel, operations and financial condition. The Trustees also
reviewed the terms of the Acquisition and its possible effects on the Funds and
their shareholders. Representatives of KIM discussed with the Trustees the
anticipated effects of the Acquisition, and, together with a representative of
E*TRADE, indicated their belief that as a consequence of the proposed
transaction, the operations of the Funds and the capabilities of KIM to provide
advisory and other services to the Funds would not be adversely affected and may
be enhanced by the resources of E*TRADE, though there could be no assurance as
to any particular benefits that may result.
In making their recommendation, the Trustees deemed to be especially
important the experience of KIM's key personnel in portfolio management, the
arrangements made to secure the continued service of the key personnel in
portfolio management, the high quality and extent of research and management
services KIM is expected to continue to provide to the Funds, and the fair and
reasonable compensation proposed to be paid to KIM by the Funds under the New
Advisory Agreements and that the rate of such compensation is identical to the
rate of compensation under the Current Advisory Agreements (which they had
recently reviewed and approved). The Trustees also specifically considered the
following as relevant to their recommendations: (1) that the fee and expense
ratios of the Funds are reasonable given the quality of services expected to be
provided and are comparable to the fee and expense ratios of similar mutual
funds; (2) the relative performance of the Funds since commencement of
operations to comparable mutual funds and unmanaged indices; (3) that the terms
of the New Advisory Agreement are substantially identical to those of the
Current Advisory Agreement, except for different execution dates, effective
dates and termination dates, and the inclusion of escrow provisions (which are
applicable only in the event that the Acquisition closes prior to the approval
of the New Advisory Agreement by the shareholders); (4) the favorable history,
reputation, qualification and background of KIM and E*TRADE, as well as the
qualifications of their personnel and their respective financial conditions; (5)
the commitment of KIM and E*TRADE to pay the expenses of the Funds in connection
with the Acquisition so that shareholders of the Funds would not have to bear
such expenses; (6) the possibility of benefits that may be realized by the Funds
as a result of KIM's affiliation with E*TRADE, including any resources of
E*TRADE that would be available to KIM; and (7) other factors deemed relevant by
the Trustees.
- 9 -
SECTION 15(f) OF THE 1940 ACT
Section 15(f) of the 1940 Act permits, in the context of a change in
control of an investment adviser to a registered investment company, the receipt
by such investment adviser (or any of its affiliated persons) of any amount or
benefit in connection with such sale, as long as two conditions are satisfied.
First, there may not be imposed an "unfair burden" on the investment company as
a result of the sale of such interest, or any express or implied terms,
conditions or understandings applicable thereto. The term "unfair burden," as
defined in the 1940 Act, includes any arrangement during the two-year period
after the transaction whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services), or from any person in connection with
the purchase or sale of securities or other property to, from or on behalf of
the investment company (other than ordinary fees for bona fide principal
underwriting services).
The Board has not been advised by KIM of any circumstances arising from
the Acquisition that might result in the imposition of an "unfair burden" being
imposed on the Funds. Moreover, E*TRADE has agreed in the Purchase Agreement
that, upon consummation of the Acquisition, it will take no action which would
have the effect, directly or indirectly, of violating any of the provisions of
Section 15(f) of the 1940 Act in respect of the Acquisition. In this regard, the
Purchase Agreement provides that E*TRADE will conduct itself and cause KIM to
conduct itself so that no "unfair burden" will be imposed on either Fund as a
result of the transactions contemplated by the Purchase Agreement.
Notwithstanding the foregoing, KIM may permit a voluntary fee waiver
unilaterally adopted by it to expire at any time and no assurance can be given
that voluntary waivers will not be permitted to expire during the two-year
period. KIM and E*TRADE do not currently intend to change KIM's policies with
respect to the circumstances under which voluntary fee waivers may be permitted
to expire.
The second condition of Section 15(f) is that during the three-year period
immediately after a transaction to which Section 15(f) is applicable, at least
75% of the subject investment company's board of trustees must not be
"interested persons" (as defined in the 1940 Act) of the investment company's
investment adviser or predecessor adviser. The composition of each Fund's Board
will comply with this condition subsequent to the Acquisition.
CONCLUSION AND RECOMMENDATION OF THE BOARD
Based upon a review of all of the above factors, the Board concluded that
the terms of the New Advisory Agreements are fair to, and in the best interest
of each Fund and the shareholders of each Fund. The Trustees, including the
Independent Trustees, unanimously recommend that the shareholders of each Fund
vote to approve the New Advisory Agreements at the Meeting. The effectiveness of
the Trustees' votes is contingent upon the closing of the Acquisition.
If the shareholders of a Fund do not approve the New Advisory Agreement
with respect to their Fund and the Acquisition is consummated, the Trustees
would consider what further action to take consistent with their fiduciary
duties to the Fund. Such actions may include obtaining for the Fund interim
investment advisory services at cost or at the current fee rate either from KIM
or from another advisory organization. Thereafter, the Trustees of such Fund
would either negotiate a new investment advisory agreement with an advisory
organization selected by the Trustees or make other appropriate arrangements. In
the event the Acquisition is not consummated, KIM would continue to serve as
investment adviser of the Funds pursuant to the terms of the Current Advisory
Agreements.
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VOTE REQUIRED
Each New Advisory Agreement must be approved by the vote of at least "a
majority of the outstanding voting securities" of the respective Fund, which is
defined under the 1940 Act with respect to each Fund as the lesser of (i) 67% or
more of the Shares of the Fund entitled to vote thereon present in person or by
proxy at the Meeting if the holders of more than 50% of such Fund's outstanding
Shares are present in person or represented by proxy or (ii) more than 50% of
such Fund's outstanding Shares entitled to vote thereon (a "1940 Act Majority
Vote").
THE BOARD OF RECOMMENDS THAT SHAREHOLDERS OF EACH FUND
VOTE "FOR" THE APPROVAL OF THE NEW ADVISORY AGREEMENT.
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PROPOSAL 2: APPROVAL OF A NEW SUBADVISORY AGREEMENT
FOR DELPHI VALUE FUND
EFFECT OF THE ACQUISITION ON THE CURRENT SUBADVISORY AGREEMENT
Because KIM is a party to the current investment subadvisory agreement
(the "Current Subadvisory Agreement") by and among the Trust, on behalf of
Delphi Value Fund, KIM and Delphi, consummation of the Acquisition will
constitute an "assignment" (as defined in the 1940 Act) of the Current
Subadvisory Agreement. As required by the 1940 Act, the Current Subadvisory
Agreement provides for its automatic termination in the event of an assignment.
Accordingly, the Current Subadvisory Agreement will terminate upon consummation
of the Acquisition.
In anticipation of the Acquisition of KIM and in order for Delphi to
continue to serve as Delphi Value Fund's investment subadvisor, a new investment
subadvisory agreement (the "New Subadvisory Agreement") by and among Delphi
Value Fund, KIM and Delphi (i) was unanimously approved by the Trustees,
including the Independent Trustees, and (ii) must be approved by at least a 1940
Act Majority Vote of the Shares of Delphi Value Fund.
TERMS OF THE CURRENT AND NEW SUBADVISORY AGREEMENTS
The continuance of Delphi Value Fund's Current Subadvisory Agreement and
approval of the New Subadvisory Agreement were last approved by the Trustees,
including the Independent Trustees, unanimously voting in person at meetings
called for those purposes on May 3, 2005 and August 11, 2005, respectively.
Delphi Value Fund's Current Subadvisory Agreement, dated November 15, 1998, was
last approved by KIM, as the sole shareholder, by written consent dated December
10, 1998.
The terms of the New Subadvisory Agreement are substantially identical to
the terms of the Current Subadvisory Agreement, except for the dates of
execution, effectiveness and termination, and the inclusion of escrow provisions
(which are applicable only in the event that the Acquisition closes prior to the
approval of the New Subadvisory Agreement by the shareholders). All the terms
described below with respect to the New Subadvisory Agreement were contained in
the Current Subadvisory Agreement. The following summary of the New Subadvisory
Agreement is qualified by reference to the form of New Subadvisory Agreement
attached to this Proxy Statement as Annex C.
THE RATE AT WHICH DELPHI VALUE FUND'S ADVISORY AND SUBADVISORY FEES ARE
PAID WILL NOT INCREASE AS A RESULT OF THE APPROVAL OF THIS PROPOSAL. Pursuant to
the New Subadvisory Agreement, KIM will continue to pay to Delphi a monthly
advisory fee, equal on an annual basis to 0.50% of the average daily net assets
of Delphi Value Fund. The Fund has no responsibility for any fee payable to
Delphi and pays advisory fees only to KIM. For the fiscal year ended December
31, 2004, KIM paid Delphi subadvisory fees in the amount of $609,057.
Under both the New and the Current Subadvisory Agreements, Delphi provides
Delphi Value Fund and KIM, among other services, with continuing and suitable
investment advice with respect to investments, consistent with the investment
policies, objective and restrictions of the Fund. Delphi bears its own costs of
maintaining the staff and personnel necessary for it to perform its obligations
under the Agreements, the expenses of office rent, telephone, telecommunications
and other facilities that it is obligated to provide in order to perform the
services, and any other expense incurred by it in connection with the
performance of its duties under the Agreements.
- 12 -
Both the New and the Current Subadvisory Agreements provide that Delphi
will not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust, Delphi Value Fund or KIM in connection with the matters
to which the Agreements relate, except a loss resulting from willful
misfeasance, bad faith or gross negligence on Delphi's part in the performance
of its duties or from reckless disregard by it of its obligations and duties
under the Agreements.
If approved by Delphi Value Fund's shareholders at the Meeting, the New
Subadvisory Agreement would take effect upon the later to occur of (i) the
obtaining of shareholder approval or (ii) the closing of the Acquisition. The
New Subadvisory Agreement would continue in effect for an initial period of two
years after its effectiveness and would continue in effect thereafter for
successive one year periods as long as each such continuance is approved in
accordance with the requirements of the 1940 Act. The New Subadvisory Agreement
may be terminated upon not more than 60 days' notice, without penalty by the
Trustees, by at least a 1940 Act Majority Vote (as defined above) of the Shares
of Delphi Value Fund or by KIM or Delphi. In addition, the New Subadvisory
Agreement terminates automatically in the event of its assignment.
DELPHI MANAGEMENT, INC.
Scott M. Black has been Delphi Value Fund's portfolio manager since the
Fund's inception in 1998. Mr. Black has been the president and controlling
shareholder of Delphi since 1983. Since 1980, Delphi (and its predecessor firm)
has limited its management services to institutional investors, including
pensions, endowments and high net worth individuals. As of December 31, 2004,
Delphi managed approximately $1.5 billion in assets.
FACTORS CONSIDERED BY THE BOARD IN APPROVING THE NEW SUBADVISORY AGREEMENT
The Independent Trustees determined that the terms of the Current
Subadvisory Agreement and the New Subadvisory Agreement are fair and reasonable
and as being in the best interests of Delphi Value Fund. The Independent
Trustees believe that the Current Subadvisory Agreement and New Subadvisory
Agreement enable Delphi Value Fund to enjoy high quality investment advisory and
services at costs which they deem appropriate, reasonable and in the best
interests of the Fund and its shareholders. In making such determinations, the
Independent Trustees met in separate executive sessions with no personnel of
KIM, Delphi, or E*TRADE present. The Independent Trustees also relied upon the
assistance of Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Trust
(that also serves as counsel to KIM and Mr. Kobren), but did not engage their
own separate counsel.
In evaluating the Current Subadvisory Agreement and New Subadvisory
Agreement, the Independent Trustees reviewed and considered materials that they
requested, as well as other materials that they received regarding Delphi Value
Fund during the course of the year, and that KIM and Delphi furnished, including
information regarding KIM and Delphi, their affiliates and personnel, operations
and financial condition. These materials are described in Proposal 1.
In addition, as part of the review of the Current and New Subadvisory
Agreements, the Independent Trustees considered the additional information and
materials described in Proposal 1 in order to evaluate the quality of Delphi's
services and the reasonableness of the fee under the Current and New Subadvisory
Agreements.
The following summarizes matters considered by the Trustees in connection
with their approval of the New Subadvisory Agreement. However, the Trustees did
not identify any single factor as all-important or controlling, and the summary
does not detail all the matters that were considered.
- 13 -
COMPLIANCE AND INVESTMENT PERFORMANCE. The Trustees determined that Delphi
had policies and systems reasonably designed to achieve compliance with Delphi
Value Fund's investment objective and regulatory requirements. The Trustees also
reviewed Delphi Value Fund's investment performance, as well as Delph Value
Fund's performance compared to both the performance of a peer group and the
results of an index. The Trustees concluded that the performance of Delphi Value
Fund, together with other factors considered by the Trustees, supported the
approval of the New Subadvisory Agreement.
DELPHI'S PERSONNEL AND METHODS. The Trustees reviewed the background of
members of the team responsible for the daily management of Delphi Value Fund,
as well as Delphi Value Fund's investment objective and discipline. The
Independent Trustees also have had discussions with senior management of Delphi
responsible for investment operations. The Trustees also considered the
favorable history, reputation, qualifications and background of Delphi as well
as the qualifications of its personnel. The Trustees noted the Fund's record of
compliance with its investment policies and restrictions, and the quality of
managerial services provided by Delphi. The Trustees concluded that Delphi has
the quality and depth of personnel and the well-developed methods essential to
performing its duties under the New Subadvisory Agreement.
MANAGEMENT FEE AND EXPENSES. The Trustees considered Delphi's fee under
the New Subadvisory Agreement relative to the management fees charged by a peer
group of funds. The Trustees also considered the Fund's expense ratio relative
to industry averages for the Fund's peer group category and the advisory fees
charged by Delphi to other accounts. The Trustees noted that Delphi's fee for
the Fund is significantly less than the fee that it generally charges its other
clients for providing similar services. The Trustees concluded that, the
subadvisory fee is acceptable based upon the qualifications, experience,
reputation and performance of Delphi and the moderate overall expense ratio of
the Fund given the relatively small size of the Fund and the fund complex.
PROFITABILITY. The Trustees did not review profitability data for Delphi
because its fees had been negotiated on an arm's-length basis by KIM and that
the Fund is not directly responsible for paying Delphi's fees.
ECONOMIES OF SCALE. The Trustees considered whether there have been
economies of scale in respect of the management of the Fund, whether the Fund
had appropriately benefited from any economies of scale, and whether there is
potential for realization of any further economies of scale. The Trustees
concluded that any perceived and potential economies of scale were not yet a
relevant consideration given the size of the Fund and the fund complex.
OTHER BENEFITS TO DELPHI. The Trustees also considered other direct and
incidental benefits received by Delphi from its association with the Fund. The
Trustees concluded that potential "fall-out" benefits that Delphi may receive,
such as greater name recognition, appear to be reasonable, and may in some cases
benefit the Fund.
CONCLUSION AND RECOMMENDATION OF THE BOARD
Based upon a review of all of the factors listed above, the Board
concluded that the terms of the New Subadvisory Agreement are fair to, and in
the best interest of Delphi Value Fund and its shareholders. The Trustees,
including the Independent Trustees, unanimously recommend that the shareholders
of Delphi Value Fund vote to approve the New Subadvisory Agreement at the
Meeting. The effectiveness of the Trustees' votes is contingent upon the closing
of the Acquisition.
- 14 -
VOTE REQUIRED
The New Subadvisory Agreement must be approved by at least a 1940 Act
Majority Vote (as defined above) of the Shares of Delphi Value Fund. If the
shareholders of Delphi Value Fund do not approve the New Subadvisory Agreement,
the Trustees would consider what further action to take consistent with their
fiduciary duties to the Fund. In the event that the Acquisition is not
consummated, Delphi would continue to serve as the investment subadviser to
Delphi Value Fund pursuant to the terms of the Current Subadvisory Agreement.
THE BOARD RECOMMENDS THAT SHAREHOLDERS OF DELPHI VALUE FUND
VOTE "FOR" APPROVAL OF THE NEW SUBADVISORY AGREEMENT.
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PROPOSAL 3: ADOPTION OF NEW RULE 12B-1 DISTRIBUTION PLAN
FOR DELPHI VALUE FUND (RETAIL CLASS)
GENERAL
Consummation of the Acquisition will constitute an "assignment" (as
defined in the 1940 Act) of the Delphi Value Fund's current Plan of Distribution
Pursuant to Rule 12b-1 for its retail class (the "Current Distribution Plan").
As required under Rule 12b-1, the Fund's Current Distribution Plan will
terminate automatically in the event of its assignment. Accordingly, Delphi
Value Fund may not continue to participate in its Current Distribution Plan
unless the Fund's retail class shareholders adopt a new Plan of Distribution
Pursuant to Rule 12b-1 (the "New Distribution Plan").
TERMS OF THE CURRENT AND NEW DISTRIBUTION PLAN
The continuance of the Current Distribution Plan for the retail class of
the Delphi Value Fund and approval of the New Distribution Plan was last
approved by the Trustees, including a majority of the Independent Trustees,
unanimously voting in person at a meeting called for that purpose on May 3, 2005
and August 11, 2005, respectively. Delphi Value Fund's Current Distribution Plan
was adopted by the sole shareholder of the retail class on October 22, 1998.
THE RATE AT WHICH FEES ARE PAID UNDER THE NEW DISTRIBUTION PLAN WILL NOT
INCREASE AS A RESULT OF THE APPROVAL OF THIS PROPOSAL. The terms of the New
Distribution Plan are substantially identical to the terms of the Current
Distribution Plan, except for the principal underwriter and dates of execution
and effectiveness. See "Certain Arrangements" in Proposal 1 above for details on
the proposed change in principal underwriter from KIB to E*TRADE Securities,
LLC. All the terms described below with respect to the New Distribution Plan
were contained in the Current Distribution Plan. The following summary of the
New Distribution Plan is qualified by reference to the form of New Distribution
Plan attached to this Proxy Statement as Annex D.
Pursuant to the New and the Current Distribution Plans, Delphi Value Fund
uses its retail class assets to finance activities relating to the distribution
of retail class Shares to investors and provision of certain shareholder
services. Certain categories of such expenditures have been approved by the
Board of Trustees and include, among other things, compensation to and expenses
(including overhead and telephone expenses) of account executives and other
employees of the principal underwriter or of other broker-dealers who engage in
or support the distribution of Delphi Value Fund's retail class Shares, the
printing and mailing of prospectuses and other reports for other than existing
shareholders, advertising and allowances to other broker-dealers. Under the
Current Distribution Plan, Delphi Value Fund pays KIB a fee calculated at an
annual rate of 0.25% of the Fund's average daily net assets attributable to
retail class Shares. The fee is paid to KIB without regard to its expenses and
is used by KIB to furnish directly or through others services and incentives to
promote the distribution of Delphi Value Fund's retail class Shares. Under the
New Distribution Plan, Delphi Value Fund would compensate E*TRADE Securities,
LLC, rather than KIB, at the same annual rate of 0.25% upon consummation of the
Acquisition. In accordance with the terms of the New Distribution Plan, E*TRADE
Securities, LLC would provide the Trust for review by the Trustees a quarterly
written report of the amounts expended under the New Distribution Plan and the
purpose for which such expenditures were made. The total amount paid under the
Current Distribution Plan for the most recent fiscal year ended December 31,
2004 was $158,768: $762 for printing, $281 for postage; $105,047 for
distribution services; and $40,334 for marketing.
- 16 -
Eric Kobren and Scott Black are the principal shareholders of KIM and
Delphi, respectively, and are also "interested" persons of Delphi Value Fund. As
principals, they benefit to the extent that payments under the Distribution Plan
reduce the distribution expenses paid by KIM and Delphi. After the closing of
the Acquisition, KIM will be indirectly owned by E*TRADE.
The New Distribution Plan may not be amended to increase materially the
amounts to be payable thereunder for distribution services without the approval
by at least a 1940 Act Majority Vote (as defined above) of the retail class
Shares of Delphi Value Fund and, in any event, may not be amended in any way
without the approval of a majority of the Independent Trustees.
If approved by Delphi Value Fund's shareholders at the Meeting, the New
Distribution Plan would take effect upon the later to occur of (i) the obtaining
of shareholder approval or (ii) the closing of the Acquisition. The New
Distribution Plan will continue in effect from year-to-year as long as each such
continuance is approved annually in accordance with the requirements of the 1940
Act. The New Distribution Plan may be terminated without penalty by a majority
of the Independent Trustees or by at least a 1940 Act Majority Vote (as defined
above) of the retail class Shares of Delphi Value Fund. In addition, the New
Distribution Plan terminates automatically in the event of its assignment.
The terms of the New Distribution Plan are intended to comply with Rule
12b-1 under the 1940 Act and with the Conduct Rules of the National Association
of Securities Dealers, Inc. ("NASD"). The SEC and the NASD may from time to time
propose various amendments to Rule 12b-1 and the Conduct Rules, respectively,
which may affect the New Distribution Plan. If any amendment of Rule 12b-1 or
the Conduct Rules is adopted, the Trustees will consider what, if any,
modification of the New Distribution Plan or related practices may be
appropriate. Rule 12b-1 requires that the selection and nomination of the
Trust's Trustees who are not "interested persons" be committed to the discretion
of the Trust's Independent Trustees.
FACTORS CONSIDERED BY THE BOARD IN APPROVING THE NEW DISTRIBUTION PLAN.
The continuance of the Current Distribution Plan was last approved by the
Board of Trustees, including the Independent Trustees, unanimously voting in
person at a meeting called for that purpose on May 3, 2005. At a meeting held on
August 11, 2005, the Board, including the Independent Trustees, unanimously
voted to approve the New Distribution Plan for Delphi Value Fund's retail class
and to recommend that the shareholders of Delphi Value Fund vote FOR the
approval of the New Distribution Plan.
In approving the Current and New Distribution Plans, the Trustees
identified and considered a number of potential benefits which the Current and
New Distribution Plans may provide. The Board believes that there is a
reasonable likelihood that the Current and New Distribution Plans will benefit
Delphi Value Fund and its future shareholders. Under its terms, the Current and
New Distribution Plans remain in effect from year to year, provided such
continuance is approved annually by vote of the Trustees in the manner described
above.
At a meeting held on August 11, 2005, the Board evaluated all information
deemed reasonably necessary to make an informed determination that, in the
exercise of their reasonable business judgment and in view of their fiduciary
duties, there was a reasonable likelihood that the adoption of the New
Distribution Plan would benefit Delphi Value Fund and its shareholders. In
particular, the Board believes that the amounts spent under the Current
Distribution Plan have assisted the retail class of the Delphi Value Fund in
asset growth and portfolio management by reducing the likelihood of net
redemptions and the negative effects associated therewith, and in competing with
providers for a variety of services. The
- 17 -
Board believes that the New Distribution Plan may similarly benefit the retail
class of the Delphi Value Fund.
In making its determination, the Board considered that the level of fees
prescribed by the New Distribution Plan is identical to the level prescribed
under the Current Distribution Plan and that the terms of the New Distribution
Plan are substantially identical to those of the Current Distribution Plan,
except for the principal underwriter and the dates of execution and
effectiveness. The Board also considered other potential benefits to the retail
class of the Delphi Value Fund of entering into the New Distribution Plan with
E*TRADE Securities, LLC given E*TRADE Securities, LLC's larger, more extensive
distribution channels and potential for growth.
CONCLUSION AND RECOMMENDATION OF THE BOARD
Based upon a review of the above factors, the Board concluded that there
was a reasonable likelihood that the adoption of the New Distribution Plan would
benefit the retail class of the Delphi Value Fund and its retail class
shareholders. The Trustees, including the Independent Trustees, unanimously
recommend that the retail class shareholders of Delphi Value Fund vote to adopt
the New Distribution Plan at the Meeting. The effectiveness of the Trustees'
votes is contingent upon the closing of the Acquisition.
VOTE REQUIRED
To be adopted, the New Distribution Plan must be approved by at least a
1940 Act Majority Vote (as defined above) of the retail class Shares of Delphi
Value Fund. If the shareholders of the Fund do not adopt that Fund's New
Distribution Plan, the Trustees would consider what further action to take.
THE BOARD RECOMMENDS THAT
THE RETAIL CLASS SHAREHOLDERS OF DELPHI VALUE FUND
VOTE "FOR" THE ADOPTION OF THE NEW DISTRIBUTION PLAN.
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PROXIES AND VOTING AT THE MEETING
A proxy, if properly executed, duly returned and not revoked, will be
voted in accordance with the instructions marked thereon. As to Proposals for
which no instructions are given, such proxy will be voted in favor of each
Proposal. The proxy confers discretionary authority upon the persons named
therein to vote on other business which may come before the Meeting. The Board
knows of no other business to be presented at the Meeting. Should other business
properly be brought before the Meeting, it is intended that the accompanying
proxy will be voted thereon in accordance with the judgment of the persons named
as proxies.
A shareholder may revoke a proxy at any time prior to its exercise by
filing with the Secretary of the Trust at 20 William Street, Suite 310,
Wellesley Hills, MA 02481 a written notice revoking the proxy or by executing a
proxy dated subsequent to the date of a previously executed proxy or by the
Trust's receipt of a subsequent valid internet or telephonic vote. Attendance at
the Meeting will not itself be deemed to revoke a proxy unless the shareholder
gives affirmative notice at the Meeting that the shareholder intends to revoke
the proxy and vote in person.
With respect to Proposal 1, 2 and 3, the "vote of a majority of the
outstanding voting securities" is required, which is defined under the 1940 Act
(and as defined in this Proxy Statement as a "1940 Act Majority Vote"), with
respect to a Fund (or the retail class, in the case of Proposal 3), as the
lesser of (i) 67% or more of the voting securities of the Fund (or applicable
class) entitled to vote thereon present in person or by proxy at the Meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund
(or applicable class) are present in person or represented by proxy or (ii) more
than 50% of the outstanding voting securities of the Fund (or applicable class)
entitled to vote thereon.
The holders of a majority of the outstanding Shares of each Fund (or
relevant class) present in person or by proxy shall constitute a quorum for the
Meeting or any adjournment thereof. In the event that a quorum is not obtained
with respect to any session of the Meeting, or in the event that there is an
insufficient number of votes for the approval of a particular Proposal at the
Meeting for which a quorum is present, an adjournment or adjournments of the
Meeting for that Fund may be sought by that Board to permit further solicitation
of proxies. Any adjournment would require the affirmative vote of the holders of
a majority of the Shares of the particular Fund present in person or by proxy at
the Meeting (or any adjournment thereof) and entitled to vote on the Proposal
subject to the adjournment. Any adjourned meeting may be held as adjourned
without further notice. The persons named as proxies will vote all Shares
represented by proxies which they are entitled to vote in favor of the Proposal
in favor of an adjournment and will vote all Shares required to be voted against
the Proposal against an adjournment. A shareholder vote may be taken on one or
more of the Proposals prior to such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate. Such vote will be
considered final regardless of whether the Meeting is adjourned to permit
additional solicitation with respect to any other Proposal. A proxy that is
properly executed by a broker or nominee and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote." A
broker non-vote occurs when a broker or nominee does not receive instructions
from the beneficial owner or other person entitled to vote on a particular
matter with respect to which the broker or nominee does not have discretionary
power. Shares represented by broker non-votes will be considered to be present
at the Meeting for purposes of determining the existence of a quorum and counted
as an abstention with respect to the Proposals. If no instructions are received
by the broker or nominee from the shareholder with reference to
- 19 -
routine matters for which the broker or nominee retains the discretion to vote,
the Shares represented thereby may be considered present for purposes of
determining the existence of a quorum and, if so determined, will be deemed cast
as a vote with respect to such matters. Also, a properly executed and returned
proxy marked with an abstention will be considered present at the Meeting for
purposes of determining a quorum. Although broker non-votes and abstentions do
not constitute a vote "for" or "against" the matter, they have the effect of a
"no" vote for purposes of determining whether the Proposals have been approved.
Proposals 1 through 3 are considered to be routine matters as to which brokers
may vote without instructions.
The Meeting is scheduled as a joint meeting of the Funds' shareholders
because the shareholders of each Fund are expected to consider and vote on
similar matters. The Board has determined that the use of a joint Proxy
Statement for the Meeting is in the best interest of the shareholders of each
Fund. In the event that a shareholder of any Fund present at the Meeting objects
to the holding of a joint meeting and moves for an adjournment of the meeting of
such Fund to a time immediately after the Meeting so that such Fund's meeting
may be held separately, the persons named as proxies will vote in favor of the
adjournment. Shareholders of each Fund will vote separately on each Proposal
relating to their Fund, and an unfavorable vote on a Proposal by the
shareholders of one Fund will not affect the implementation of such Proposal
approved by the shareholders of another Fund.
SHAREHOLDER PROPOSALS
A Proposal from a shareholder of a Fund intended to be presented at any
shareholder meeting hereafter called must be received by the Secretary of the
Trust, at 20 William Street, Suite 310, Wellesley Hills, MA 02481, within a
reasonable time before the solicitation relating thereto is made in order to be
included in the proxy statement and proxy card related to such meeting. Under
the Declaration of Trust and the By-Laws of the Trust, meetings of the
shareholders are required to be held only when necessary under the 1940 Act. It
is therefore likely that, in future years, shareholder meetings will not be held
on an annual basis. The submission by a shareholder of a Proposal for inclusion
in a proxy statement does not guarantee that it will be included. Shareholder
Proposals are subject to certain regulations under the federal securities laws.
GENERAL
It is anticipated that proxy solicitations will be made principally by
mail, although Managing Directors and officers of the Funds and KIM may, without
special compensation, contact shareholders by telephone, facsimile or other
electronic media. Arrangements have been made with brokers, custodians, nominees
and fiduciaries to send proxy materials to beneficial owners. In addition, KIM
may retain an outside firm to assist in the solicitation of proxies. E*TRADE
shall pay 50% the expenses related to the shareholder solicitation of the Funds
up to a maximum of $50,000. All other costs shall be paid by KIM.
SHARE OWNERSHIP
Only shareholders of record on August 10, 2005 (the "record date") are
entitled to notice of and to vote at the Meeting. As of the record date, the
following number of Shares, representing the indicated number of votes, of each
Fund were outstanding.
- 20 -
SHARES
OUTSTANDING
FUND (AUGUST 10, 2005) NUMBER OF VOTES
- ------------------------------ ----------------- ---------------
Kobren Growth Fund............ [ ]
Delphi Value Fund (total) [ ]
- Retail Class [ ]
- Institutional Class [ ]
On the record date, August 10, 2005, the following entities / individuals
owned beneficially or of record 5% or more of the outstanding Shares of the
Funds.
NUMBER OF SHARES NATURE OF
NAME AND ADDRESS OWNED OWNERSHIP PERCENT OF CLASS
- ----------------------------- ---------------- ------------ ----------------
KOBREN GROWTH FUND
[Insert 5% shareholder data]
Eric Kobren [ ] [Beneficial] [24.3]%
DELPHI VALUE FUND
[Insert 5% shareholder data -
retail class]
Scott Black [ ] Beneficial [9.5%]
Eric Kobren [ ] Beneficial [6.7%]
[Insert 5% shareholder data -
institutional class]
As of July 31, 2005, the Trustees and officers of the Trust beneficially
owned in the aggregate less than 1% of the outstanding Shares of Kobren Growth
Fund, except for Eric M. Kobren, who owned 24.3%, which includes Shares
indirectly beneficially owned as a result of his position as a controlling
person of certain shareholders, including family members, charitable trusts,
Mutual Fund Investors Association and KIM.
As of July 31, 2005, the Trustees and officers of the Trust beneficially
owned in the aggregate less than 1% of the outstanding Shares of Delphi Value
Fund's institutional class Shares.
As of July 31, 2005, the Trustees and officers of the Trust beneficially
owned in the aggregate [ ]% of the outstanding Shares of Delphi Value Fund's
retail class Shares, including Eric Kobren, who owned 6.7% and Edward Bloom, who
owned 0.7%.
- 21 -
METHOD OF SOLICITATION AND EXPENSES
The cost of preparing, assembling and mailing this Proxy Statement and the
attached notice of special meeting of shareholders and the accompanying proxy
card will not be borne by the Funds. In addition to soliciting proxies by mail,
KIM may have one or more of its officers, representatives or compensated
third-party agents, including [_____________], aid in the solicitation of
proxies by personal interview, telephone, telegraph, facsimile or electronic
means and may request brokerage houses and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of the
Shares held of record by such persons.
The Funds may also arrange to have votes recorded by telephone, the
internet or other electronic means. The voting procedures used in connection
with such voting methods are designed to authenticate shareholders' identities,
to allow shareholders to authorize the voting of their Shares in accordance with
their instructions and to confirm that their instructions have been properly
recorded. If these procedures were subject to a successful legal challenge, such
votes would not be counted at the shareholder meeting. The Funds are unaware of
any such challenge at this time. In the case of telephone voting, shareholders
would be called at the phone number the Funds' transfer agent has in its records
for their accounts, and would be asked for their Social Security number or other
identifying information. The shareholders would then be given an opportunity to
authorize proxies to vote their Shares at the Meeting in accordance with their
instructions. In the case of automated telephone and internet voting,
shareholders would be required to provide their Social Security number or other
identifying information and would receive a confirmation of their instructions.
Persons holding Shares as nominees will be reimbursed, upon request, for
the reasonable expenses of mailing soliciting materials to the principals of the
accounts.
(September [__], 2005)
- 22 -
ANNEX A
INFORMATION REGARDING
THE TRUSTEES OF KOBREN INSIGHT FUNDS
AND OFFICERS OF KIM
Independent Trustees of Kobren Insight Funds
TERM OF
OFFICE AND
LENGTH OF
NAME, ADDRESS, AGE AND POSITION(S) TIME
WITH TRUST SERVED(1) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------
Edward B. Bloom 8 years Chief Financial Officer and Treasurer of International
c/o 20 William St., Suite 310 Data Group Inc., a publishing company.
Wellesley Hills, MA 02481
Age: 55, Trustee
- ------------------------------------------------------------------------------------------------------------
Arthur Dubroff 8 years Chief Financial Officer of Net2Phone, Inc. a provider of
c/o 20 William St., Suite 310 Voice over Internet Protocol telephony services, from
Wellesley Hills, MA 02481 November 2002 to present; Chief Financial Officer of
Virtual Communities, Inc, a software provider, from July
Age: 54, Trustee 2000 to the present; Consultant for Turnberry Consulting,
LLC from October 1999 to November 2002.
- ------------------------------------------------------------------------------------------------------------
Robert I. Goldfarb* 6 years Vice President and Assistant General Counsel of Andrx
c/o 20 William St., Suite 310 Corporation since March 2000; Partner at Hughes Hubbard &
Wellesley Hills, MA 02481 Reed LLP, a law firm, and associated with the firm from
July 1989 through July 2000.
Age: 49, Trustee
- ------------------------------------------------------------------------------------------------------------
Stuart J. Novick 8 years Senior Vice President, General Counsel and Secretary of
c/o 20 William St., Suite 310 Children's Hospital Boston since April 1997.
Wellesley Hills, MA 02481
Age: 55, Trustee
- ------------------------------------------------------------------------------------------------------------
- ----------
(1) Trustees serve for an indefinite term until the earliest of a Trustee's: (i)
removal by a two-thirds vote of the Board of Trustees or shareholders, (ii)
resignation, (iii) death, (iv) bankruptcy or (v) adjudicated incompetence.
* Mr. Goldfarb resigned as Trustee effective as of the closing of the
Acquisition.
A-1
Interested Trustees of Kobren Insight Funds (3)
TERM OF
OFFICE AND
NAME, ADDRESS, AGE AND POSITION(S) WITH LENGTH OF
TRUST TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------------
Eric M. Kobren 8 years President of Mutual Fund Investors Association, Inc.;
c/o 20 William St., Suite 310 President of Kobren Insight Management, Inc. and Kobren
Wellesley Hills, MA 02481 Insight Brokerage, Inc. These are a financial publishing
company, a registered investment advisory firm and a
Age: 51, Chairman and President registered broker-dealer, respectively. Since 2001,
Managing Member of Alumni Capital, LLC, a General Partner
to a private investment partnership.
- --------------------------------------------------------------------------------------------------------------------
Michael P. Castellano * 8 years Registered representative of Kobren Insight Brokerage,
c/o 20 William St., Suite 310 Inc. From December 1994 to June 1997; Chief Administrative
Wellesley Hills, MA 02481 Officer of Kobren Insight Management, Inc.
Age: 63, Trustee
- --------------------------------------------------------------------------------------------------------------------
Officer(s) Who Are Not Trustees
TERM OF
OFFICE AND
NAME, ADDRESS, AGE AND POSITION(S) WITH LENGTH OF
TRUST TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------
Eric J. Godes 8 years Managing Director of Kobren Insight Management, Inc. and
c/o 20 William St., Suite 310 Managing Director and a registered representative of
Wellesley Hills, MA 02481 Kobren Insight Brokerage, Inc. Since 2001, Managing
Director of Alumni Capital, LLC, a General Partner to a
Age: 44, Chief Financial Officer, Vice private investment partnership.
President, Treasurer, Secretary
- --------------------------------------------------------------------------------------------------------------------
As of December 31, 2004, none of the Independent Trustees, not any member of
their immediate families, except for Edward Bloom, Independent Trustee,
beneficially owned any securities issued by KIM or any other entity in a control
relationship to KIM or KIB or any person in a control relationship to KIB or
Delphi. Mr. Bloom beneficially owns interests valued at more than $60,000 in
Alumni Partners I, L.P., a limited partnership managed by Alumni Capital, LLC,
which is an affiliate of KIM. Alumni Partners I, L.P. is a collective investment
vehicle. Mr. Kobren is a director and the principal executive officer of KIM.
- ---------------------
(3) "Interested person" of the Trust as defined in the 1940 Act. Messrs. Kobren
and Castellano are each considered an "interested person" because of their
affiliation with Kobren Insight Management, Inc. and Kobren Insight Brokerage,
Inc., which act as the Trust's investment adviser and distributor, respectively.
* Mr. Castellano resigned as Trustee effective as of the closing of the
Acquisition.
A-2
ANNEX B
FORM OF NEW ADVISORY AGREEMENTS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this ___th day of _______, 2005 between Kobren
Insight Funds, a Massachusetts business trust (the "Trust"), on behalf of its
series (each, a "Fund" and collectively, the "Funds"), and Kobren Insight
Management, Inc. (the "Adviser"), registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Funds in the management of each Fund's assets, and the
Adviser is willing to furnish such services for the Trust on the terms
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as
investment adviser to each Fund for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided. In the event
that the Trust establishes one or more series other than the Funds with respect
to which it desires to retain the Adviser to act as investment adviser
hereunder, it shall notify the Adviser in writing. If the Adviser is willing to
render such services under this Agreement it shall notify the Trust in writing
whereupon such series shall become a Fund hereunder and shall be subject to the
provisions of this Agreement except to the extent that said provisions
(including those relating to the compensation payable by the Fund to the
Adviser) are modified with respect to such Fund in writing by the Trust and the
Adviser at the time.
2. Delivery of Documents. The Trust has furnished the Adviser with
copies, properly certified or authenticated, of each of the following:
(a) The Trust's Declaration of Trust as filed with the Secretary
of the Commonwealth of Massachusetts on September 13, 1996 (such
Declaration of Trust, as presently in effect and as it shall from time to
time be amended, is herein called the "Declaration of Trust");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and
as they shall from time to time be amended, are herein called the
"By-Laws");
(c) Votes of the Trust's Board of Trustees authorizing the
appointment of the Adviser and approving this Agreement;
B-1
(d) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 (the "1933 Act"), and under the 1940 Act, relating
to shares of beneficial interest of the Trust (herein called the "Shares")
as filed with the Securities and Exchange Commission (the "SEC") and all
amendments thereto; and
(e) The most recent prospectus of the Trust relating to the Funds
(such prospectus together with the related Statement of Additional
Information, as presently in effect and all amendments and supplements
thereto, are herein called the "Prospectus").
The Trust will furnish the Adviser from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Adviser will provide a continuous investment program for each
Fund's assets entrusted to it for portfolio management purposes, including
investment research and management with respect to all securities, investments,
cash and cash equivalents in the Funds. The Adviser will determine from time to
time what securities and other investments will be purchased, retained or sold
with respect to the Funds and will place the daily purchase or sale orders. The
Adviser will provide the services rendered by it under this Agreement in
accordance with each Fund's investment objective, policies and restrictions as
stated in the Prospectus and votes of the Trust's Board of Trustees. The Adviser
agrees that it will supply the Trust and its Board of Trustees with reports and
statistical data as requested with respect to the securities that each Fund may
hold or contemplate purchasing.
4. Other Covenants. The Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the
SEC and will, in addition, conduct its activities under this Agreement in
accordance with regulations of any other Federal and State agencies which
may now or in the future have jurisdiction over its activities under this
Agreement;
(b) will use its best efforts to seek the best overall terms
available in executing transactions for the Funds and soliciting brokers
or dealers. In assessing the best overall terms available for any
transaction, the Adviser shall consider all factors that it deems
relevant, including, but not limited to, the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In evaluating the best overall terms available, and in selecting
the brokers or dealers to execute a particular transaction, the Adviser
may consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) provided to the Funds and/or other accounts over which the
Adviser or an affiliate of the Adviser exercises investment discretion.
The Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if, but only if, the Adviser determines in good faith that such commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or in terms of all of the accounts over which the
Adviser or any affiliate of the Adviser exercises investment discretion;
B-2
(c) will provide certain executive personnel for the Trust as may
be mutually agreed upon from time to time with the Board of Trustees, the
salaries and expenses of such personnel to be borne by the Adviser unless
otherwise mutually agreed upon;
(d) will, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as may be
necessary to render the services required to be provided by the Adviser or
furnished to the Trust under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Adviser shall
be deemed to include persons employed or otherwise retained by the Adviser
to furnish statistical and other factual data, advice regarding economic
factors and trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the
Adviser may desire. The Adviser will also provide such additional
management and administrative services as may be required in connection
with the business affairs and operations of the Trust beyond those
furnished by the Trust's administrator;
(e) will bear the cost of rendering the services to be performed
by it under this Agreement, and shall provide the Trust with such office
space, facilities, equipment, clerical help, and other personnel and
services as the Trust shall reasonably require in the conduct of its
business.
5. Services Not Exclusive. The advisory services furnished by the
Adviser hereunder are not to be deemed exclusive, and the Adviser shall be free
to furnish similar services to others so long as its services under this
Agreement are not impaired thereby. To the extent that the purchase or sale of
securities or other investments of the same issuer may be deemed by the Adviser
to be suitable for two or more accounts managed by the Adviser, the available
securities or investments may be allocated in a manner believed by the Adviser
to be equitable to each account. The Trust recognizes that in some cases this
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtainable for or disposed of by that Fund.
6. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for the benefit of the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
request. The Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by it
pursuant to Rule 31a-1 under the 1940 Act that are not maintained by others on
behalf of the Trust.
7. Expenses. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its investment advisory services
under this Agreement other than the cost of securities, commodities and other
investments (including brokerage commissions and other transaction charges, if
any) purchased or sold for a Fund. Each Fund will bear certain other expenses
incurred in its operation, including: organizational expenses; taxes, interest,
brokerage costs and commissions; fees of Trustees of the Trust who are not
officers, directors, or employees of the Adviser, the distributor or
administrator or any of their affiliates; Securities and Exchange Commission
fees; state Blue Sky qualification fees; charges of the administrator, the
custodian, any subcustodians, and transfer and dividend-paying agents; insurance
premiums; auditing, pricing and legal expenses; costs of maintenance of the
Trust's existence; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
shareholders of the Funds and of the officers or Board of Trustees of the Trust;
membership fees in trade associations; litigation, indemnification and other
extraordinary or non-recurring expenses.
B-3
8. Compensation. For the services provided by the Adviser pursuant to
this Agreement, the Trust will pay the Adviser and the Adviser will accept as
full compensation an investment advisory fee, based upon the average daily net
assets of each Fund, accrued daily and paid monthly as soon as practicable after
the end of each month, at the annual rate set forth below. If the Adviser shall
serve for less than the whole of any month, the foregoing compensation shall be
prorated. The Adviser may, from time to time, waive certain amounts payable
hereunder or reimburse Fund expenses for such period or periods as the Adviser
deems to be advisable.
Kobren Growth Fund 0.75%
Delphi Value Fund 1.00%
The fees payable by a Fund to the Adviser under this Agreement shall be
paid into an interest-bearing escrow account at a bank or with the Funds'
custodian in the event that the holdings of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of such Fund have not voted to
approve this Agreement ("Fund Shareholder Approval") by the date of the closing
of the acquisition of the Adviser by E*TRADE FINANCIAL Corporation (the
"Acquisition"). If Fund Shareholder Approval has subsequently been obtained by
the date that is 150 days after the closing of the Acquisition, the fees paid by
such Fund held in the escrow account (and interest thereon) shall be paid to the
Adviser. If Fund Shareholder Approval has not been obtained by such date, this
Agreement shall terminate and the fees paid by the relevant Fund into the escrow
account (and interest thereon) shall be paid to such Fund; provided, however,
that the Adviser shall be entitled to be paid out of the escrow account the
lesser of (i) any costs incurred in performing its services during the period
from and after the date of the closing of the Acquisition through the date that
is 150 days after the closing of the Acquisition and (ii) the total amount in
the escrow account (plus interest earned).
9. Reimbursement of the Fund. If in any fiscal year the aggregate
expenses of a Fund (as defined under the securities regulations of any state
having jurisdiction over the merits of the offering of Fund Shares) exceed the
expense limitation of any such state, the Adviser will reimburse that Fund for
such excess expenses. The obligation of the Adviser to reimburse a Fund
hereunder is limited in any fiscal year to the amount of its fee hereunder for
such fiscal year, provided, however, that notwithstanding the foregoing, the
Adviser shall reimburse that Fund for such excess expenses regardless of the
amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the over the merits
of the offering of Fund Shares so requires. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis.
10. Corporate Name. The Trust acknowledges that it uses the name
"KOBREN" in connection with the Funds and the Trust by consent of the Adviser,
which consent was given in reliance upon the provisions hereafter contained. The
Trust agrees that if the Adviser should cease to be the investment adviser of
the Funds, the Trust will, upon written demand of the Adviser, forthwith delete
from the Funds' name and from the Trust's name the word "KOBREN" or any
approximation thereof. The Trust further agrees that the Adviser may permit
other persons, partnerships (general or limited), associations, trusts,
corporations or other incorporated or unincorporated groups of persons,
including without limitation any investment company or companies of any type
which may be initially sponsored or organized by the Adviser in the future, to
use the word "KOBREN" or any approximation thereof as part of their names. As
used in this section, "KOBREN" and "Kobren Insight Management, Inc." and
"Adviser" shall include any successor corporation, partnership, limited
partnership, trust or person.
11. Limitation of Liability. The Adviser shall not be liable for any
error of judgment, mistake of law or for any other loss whatsoever suffered by
the Trust in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligation and duties under this
Agreement. The Trust and the Adviser agree that the obligations of the Trust
under this Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers,
B-4
employees or agents, whether past, present or future, of the Trust,
individually, but are binding only upon the assets and property of the Trust, as
provided in the Declaration of Trust. No Fund shall be liable for the
obligations incurred by any other Fund hereunder. The execution and delivery of
this Agreement have been authorized by the Board of Trustees and a majority of
the holders of each Fund's outstanding voting securities, and signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees and shareholders nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the Trust as provided in the Declaration of Trust.
12. Duration and Termination. This Agreement shall become effective with
respect to a Fund as of the closing date of the Acquisition and, unless sooner
terminated as provided herein, shall continue in effect until the second
anniversary of the effective date of this Agreement; provided, however, that if
Fund Shareholder Approval with respect to a Fund has not been obtained prior to
the 150th day after the closing of the Acquisition, this Agreement shall
terminate with respect to that Fund on the 150th day after the closing of the
Acquisition. Thereafter, this Agreement shall be renewable as to any Fund for
successive periods of one year each, provided such continuance is specifically
approved annually:
(a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not interested persons of any such party (as
that term is defined in the 1940 Act), cast in person at a meeting called
for the purpose of voting on such approval; and
(b) by the Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of such Fund; provided, however, that if
the holders of any one Fund fail to approve the Agreement, the Adviser may
continue to act as investment manager of the Fund(s) which did approve the
Agreement, and may continue to act as investment manager for the Fund
which did not approve the Agreement until new arrangements are made by
such Fund.
Notwithstanding the foregoing, this Agreement may be terminated as to a
Fund at any time, without the payment of any penalty, by the Trust (by vote of
the Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund), or by the Adviser, in each case, on sixty days' prior
written notice. This Agreement will immediately terminate in the event of its
assignment; provided, however, that if Fund Shareholder Approval with respect to
a Fund has not been obtained prior to the closing of the Acquisition, this
Agreement may be terminated with respect to that Fund by any of the foregoing
persons in the manner so provided on ten days' prior written notice. (As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meanings as such terms
have in the 1940 Act.)
13. Amendment of Agreement. This Agreement may be amended as to any Fund
by mutual written consent, but the consent of the Trust must be approved (a) by
vote of a majority of those members of the Board of Trustees of the Trust who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such amendment, and
(b) if required by the 1940 Act, by vote of a majority of the outstanding voting
securities of that Fund. However, the provisions of this Section 13 shall not
restrict or limit the Adviser's ability to waive its fees or reimburse any
Fund's expenses in accordance with Section 8 of this Agreement.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and shall
B-5
be governed by the laws of the Commonwealth of Massachusetts. This Agreement may
be executed in one or more counterparts, all of which taken together shall be
deemed one original.
B-6
ATTEST: KOBREN INSIGHT FUNDS
By: _____________________________ By: _____________________________
Name: Name: Eric Godes
Title: Title: V.P., Secretary
ATTEST: KOBREN INSIGHT MANAGEMENT, INC.
By: _____________________________ By: _____________________________
Name: Name: Eric M. Kobren
Title: Title: President
B-7
ANNEX C
FORM OF NEW SUBADVISORY AGREEMENT
KOBREN INSIGHT MANAGEMENT, INC.
20 William Street, Suite 310
P.O. Box 9150
Wellesley Hills, MA 02181
[ ], 2005
Kobren Insight Funds, on behalf of
Delphi Value Fund
20 William Street, Suite 310
P.O. Box 9150
Wellesley Hills, MA 02481
Delphi Management, Inc.
50 Rowes Wharf
Boston, MA 02111
Subadvisory Agreement
Dear Sirs:
Kobren Insight Funds (the "trust"), of which Delphi Value Fund (the
"fund") is a series, has been organized as a business trust under the laws of
the Commonwealth of Massachusetts to engage in the business of an investment
company. The trust's shares of beneficial interest are currently divided into
two series (including the fund), each series representing the entire undivided
interest in a separate portfolio of assets.
The board of trustees of the trust (the "trustees") has selected Kobren
Insight Management, Inc. (the "adviser") to provide overall investment advice
and management for the fund, and to provide certain other services, under the
terms and conditions provided in the investment advisory agreement, dated as of
the date hereof, between the trust, on behalf of the fund, and the adviser (the
"investment advisory agreement").
The adviser and the trustees have selected Delphi Management, Inc. (the
"subadviser") to provide the adviser and the fund with the advice and services
set forth below, and the subadviser is willing to provide such advice and
services, subject to the review of the trustees and overall supervision of the
adviser, under the terms and conditions hereinafter set forth. The subadviser
hereby represents and warrants that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
Accordingly, the trust, on behalf of the fund, and the adviser agree with the
subadviser as follows:
1. DELIVERY OF DOCUMENTS. The trust has furnished the subadviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) agreement and declaration of trust of the trust, dated September 13, 1996,
as amended to date (the
C-1
"declaration of trust");
(b) by-laws of the trust as in effect on the date hereof;
(c) votes taken at the board meeting whereby the trustees selected the
subadviser as the investment subadviser to the fund and approved this
subadvisory agreement (the "agreement") and the votes taken at the shareholder
meeting of the fund approving the investment subadvisory agreement;
(d) votes taken at the board meeting whereby the trustees selecting the
adviser as investment adviser to the fund and approving the investment advisory
agreement and the votes taken at the shareholder of the fund approving the
investment advisory agreement;
(e) the adviser's investment advisory agreement;
(f) the fund's prospectus and statement of additional information; and
(g) the trust's code of ethics.
The adviser will furnish the subadviser from time to time with copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT SERVICES. The subadviser will use its best efforts to provide
to the fund continuing and suitable investment advice with respect to
investments, consistent with the investment policies, objectives and
restrictions of the fund as set forth in the fund's prospectus and statement of
additional information. In the performance of the subadviser's duties hereunder,
subject always to the provisions contained in the documents delivered to the
subadviser pursuant to Section 1 above, as from time to time amended or
supplemented, the subadviser will, at its own expense:
(a) furnish the adviser and the fund with advice and recommendations,
consistent with the investment policies, objectives and restrictions of the fund
as set forth above, with respect to the purchase, holding and disposition of
portfolio securities and other permitted investments;
(b) furnish the adviser and the fund with advice in connection with policy
decisions to be made by the board of trustees or any committee thereof about the
fund's investments and, as requested, furnish the fund with research, economic
and statistical data in connection with the fund's investments and investment
policies;
(c) submit such reports relating to the valuation of the fund's securities
as the adviser may reasonably request;
(d) subject to prior consultation with the adviser, assist the fund in any
negotiations relating to the fund's investments with issuers, investment banking
firms, securities brokers or dealers and other institutions or investors;
(e) consistent with the provisions of Section 7 of this agreement, place
orders for the purchase, sale or exchange of portfolio securities for the fund's
account with brokers or dealers selected by the adviser or the subadviser,
provided that in connection with the placing of such orders and the selection of
such brokers or dealers the subadviser will seek to obtain best price and
execution, except as otherwise provided in the prospectus and statement of
additional information of the fund;
C-2
(f) from time to time or at any time requested by the adviser or the
trustees, make reports to the adviser or the trustees, as requested, of the
subadviser's performance of the foregoing services;
(g) subject to the supervision of the adviser, maintain and preserve the
records required by the Investment Company Act of 1940 (the "1940 Act") to be
maintained by the subadviser (the subadviser agrees that such records are the
property of the trust and copies will be surrendered to the trust promptly upon
request therefor);
(h) give instructions to the custodian (including any sub-custodian) of the
fund as to deliveries of securities to and from such custodian and payments of
cash for the account of the fund, and advise the adviser on the same day such
instructions are given;
(i) cooperate generally with the fund and the adviser to provide
information necessary for the preparation of registration statements and
periodic reports to be filed with the Securities and Exchange Commission,
including Form N-l A, semi-annual reports on Form N-CSR, periodic statements,
shareholder communications and proxy materials furnished to holders of shares of
the fund, filings with states and with United States agencies responsible for
tax matters, and other reports and filings of like nature.
In the performance of its duties hereunder, the subadviser is and will be an
independent contractor and unless otherwise expressly provided or authorized
will have no authority to act for or represent the fund or trust in any way or
otherwise be deemed to be an agent of the fund, the trust or of the adviser.
3. EXPENSES PAID BY THE SUBADVISER. The subadviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this agreement, the expenses of office rent, telephone, telecommunications
and other facilities that it is obligated to provide in order to perform the
services specified in Section 2, and any other expenses incurred by it in
connection with the performance of its duties hereunder.
4. COMPENSATION OF THE SUBADVISER. The adviser will pay the subadviser, as
compensation for services and expenses assumed hereunder, a monthly fee as set
forth in Schedule A. Subadvisory fees for each month payable hereunder will be
computed daily and paid promptly after the adviser's actual receipt of advisory
fees for that month. If this agreement is effective subsequent to the first day
of the month, or if this agreement is terminated, the fee provided in this
section will be computed on the basis of the number of days in the month for
which this agreement is in effect, subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of the total number
of days in such month. The subadviser understands and agrees that neither the
trust nor the fund has any liability for the subadviser's fee hereunder.
Calculations of the subadviser's fee will be based on average net asset values
as provided by the adviser.
The fees payable to the subadviser by the adviser under this agreement
shall, upon receipt by the adviser of its fees under the investment advisory
agreement with respect to the fund, be paid by the adviser into an
interest-bearing escrow account with a bank or the Fund's custodian in the event
that the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the fund have not voted to approve this agreement
("fund shareholder approval") by the date of the closing of the acquisition of
the adviser by E*TRADE FINANCIAL Corporation (the "acquisition"). If fund
shareholder approval has subsequently been obtained by the date that is 150 days
after the closing of the acquisition, the fees paid by the adviser into the
escrow account (and interest thereon) shall be paid to the subadviser. If fund
shareholder approval has not been obtained by such date, this agreement shall
terminate and the adviser shall have no responsibility to pay the fees held in
the escrow account (and interest thereon) to the subadviser; provided, however,
that the subadviser shall be entitled to be paid out of the escrow account the
lesser of (i) any costs incurred in performing its services during the period
from and after the date of the closing of the Acquisition through the date that
is 150 days after the closing of the Acquisition and (ii) the total amount in
the escrow account (plus interest earned).
C-3
5. OTHER ACTIVITIES OF THE SUBADVISER AND ITS AFFILIATES. Nothing herein
contained will prevent the subadviser or any of its affiliates or associates
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the fund. It is specifically
understood that officers, directors and employees of the subadviser and its
affiliates may engage in providing portfolio management services and advice to
other investment advisory clients of the subadviser or of its affiliates.
6. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or sales
of portfolio securities for the account of the fund, neither the subadviser nor
any of its directors, officers or employees will act as principal or agent or
receive any commission. The subadviser will not knowingly recommend that the
fund purchase, sell or retain securities of any issuer in which the subadviser
has a financial interest without obtaining prior approval of the adviser prior
to the execution of any such transaction. Access persons (as defined in Rule
17j-l under the 1940 Act) of the subadviser will provide personal trading
reports to a designated representative of the adviser in accordance with the
trust's code of ethics.
7. NO PARTNERSHIP OR JOINT VENTURE. The trust, the fund, the adviser and the
subadviser are not partners of or joint venturers with each other and nothing
herein shall be construed so as to make them such partners or joint venturers or
impose any liability as such on any of them.
8. LIMITATION OF LIABILITY OF THE SUBADVISER. The subadviser will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the trust, the fund or the adviser in connection with the matters to which this
agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the subadviser's part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
agreement.
9. DURATION AND TERMINATION OF THIS AGREEMENT. This agreement become
effective as of the closing date of the acquisition and, unless sooner
terminated as provided herein, shall continue in effect until the second
anniversary of the effective date of this agreement; provided, however, that if
fund shareholder approval has not been obtained prior to the 150th day after the
closing of the acquisition, this agreement shall terminate on the 150th day
after the closing of the acquisition. Thereafter, this agreement shall be
renewable from year to year, but only so long as such continuance is
specifically approved at least annually by (a) a majority of the trustees who
are not interested persons of the adviser, of the subadviser or (other than as
board members) of the trust, cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the trustees or (ii) a majority
of the outstanding voting securities of the fund.
This agreement may, on 60 days' written notice, be terminated at any time
without the payment of any penalty by the fund by vote of a majority of the
outstanding voting securities of the fund or by the board of trustees, by the
adviser or the subadviser. Termination of this agreement with respect to the
fund will not be deemed to terminate or otherwise invalidate any provisions of
any contract between you and any other series of the trust. This agreement will
automatically terminate in the event of its assignment or upon the termination
of the adviser's investment advisory agreement; provided, however, that if fund
shareholder approval has not been obtained prior to the closing of the
acquisition, this agreement may be terminated by any of the foregoing persons in
the manner so provided on ten days' prior written notice. In interpreting the
provisions of this Section 9, the definitions contained in Section 2(a) of the
1940 Act (including the definitions of "assignment," "interested person" and
"voting security"), will be applied.
10. AMENDMENT OF THIS AGREEMENT. No provision of this agreement may be changed
or waived orally, but only by an instrument in writing signed by the party
against which enforcement of the change or waiver is sought. No amendment,
transfer, assignment, sale, hypothecation or pledge of this agreement will be
effective until approved by (a) the trustees, including a majority of the
trustees who are not
C-4
interested persons of the adviser, the subadviser or (other than as board
members) the trust, cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting securities of the
fund, as defined in the 1940 Act.
11. MISCELLANEOUS.
(a) The captions in this agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect. This agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(b) The name Kobren Insight Funds (formerly Insight Premier Funds) is the
designation of the trustees under the declaration of trust, dated September
13,1996, as amended, and the declaration of trust and amendments thereto have
been filed with the Secretary of State of the Commonwealth of Massachusetts. The
obligations of the trust and the fund are not personally binding upon, nor will
resort be had to the private property of, any of the trustees, shareholders,
officers, employees or agents of the trust or the fund, but only the fund's
property will be bound. The fund will not be liable for the obligations of any
other series of the trust.
(c) Nothing herein contained will limit or restrict the subadviser or any of
its officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The trust and fund
acknowledge that the subadviser and its officers, affiliates and employees, and
its other clients may at any time have, acquire, increase, decrease or dispose
of positions in investments which are at the same time being acquired or
disposed of by the fund. The subadviser will have no obligation to acquire for
the fund a position in any investment which the subadviser, its officers,
affiliates or employees may acquire for its or their own accounts or for the
account of another client if, in the sole discretion of the subadviser, it is
not feasible or desirable to acquire a position in such investment for the fund.
Nothing herein will prevent the subadviser from purchasing or recommending the
purchase of a particular security for one or more funds or clients while other
funds or clients may be selling the same security.
(d) Any information supplied by the subadviser, which is not otherwise in the
public domain, in connection with the performance of its duties hereunder is
confidential and may be used only by the fund and/or its agents, and only in
connection with the fund and its investments.
(e) Governing Law. The substantive law of the Commonwealth of Massachusetts
and the applicable provisions of the 1940 Act shall govern this agreement.
C-5
Yours very truly,
Kobren Insight Management, Inc.
By:___________________________________________
Its:__________________________________________
The foregoing agreement is hereby
agreed to as of the date thereof.
Kobren Insight Funds
on behalf of Delphi Value Fund
By:____________________________________________
Its:___________________________________________
Delphi Management, Inc.
By:____________________________________________
Its:___________________________________________
C-6
SCHEDULE A
Annual Fee Rate as a Percentage of
Average Daily Net Asset Value
----------------------------------
Delphi Value Fund 0.50%
The average net asset value for the month will be based on the net asset
value used in determining the price at which fund shares are sold, repurchased
or redeemed on each day of the month.
If this agreement becomes effective as to a fund after the first day of a
month, or terminates before the last day of a month, your compensation for such
fraction of the month will be determined by applying the foregoing percentages
to the average daily net asset value of the fund during such fraction of a month
and in the proportion that such fraction of a month bears to the entire month.
C-7
ANNEX D
FORM OF 12B-1 PLAN
(For Delphi Value Fund - Retail Class)
KOBREN INSIGHT FUNDS
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
ON BEHALF OF
DELPHI VALUE FUND
(the "Fund")
WHEREAS, KOBREN Insight LLC, a Massachusetts business trust (the "Trust"),
is an open-end management investment company and is registered as such under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust is authorized to issue shares of beneficial interest
with a par value per share of $.001;
WHEREAS, E*TRADE Securities, LLC (the "Distributor") serves as the
principal underwriter and distributor of the shares of the Fund pursuant to a
written distribution agreement ("Distribution Agreement") dated [ ], 2005,
which Distribution Agreement has been duly approved by the Board, in accordance
with the requirements of the 1940 Act;
WHEREAS, the Board of Trustees as a whole, including a majority of the
Trustees who are not "interested persons" (as defined by the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Rule 12b-1
plan provided for herein (the "Plan") or any agreements related to the Plan,
have determined, after review of all information and consideration of all
pertinent facts reasonably necessary to an informed determination of whether the
Plan should be implemented, in the exercise of reasonable business judgement and
in light of their fiduciary duties, that there is a reasonable likelihood that
the Plan will benefit the Fund and the shareholders, and have accordingly
approved the Plan by votes cast in person at a meeting called for the purpose of
voting on the Plan.
NOW, THEREFORE, in consideration of the foregoing, the Trust on behalf of
the Fund hereby adopts the Plan in accordance with Rule 12b-1 under the 1940 Act
on the following terms and conditions:
1. The Trust will pay to the Distributor, as principal distributor of
the shares, a distribution and service fee at the rate of 0.25% per year of the
average daily net assets of the Fund. The fee shall be calculated and accrued
daily and paid monthly or at such other intervals as the Board shall determine.
The Fund's obligation hereunder shall be limited to the assets of the Fund and
shall not constitute an obligation of the Fund except out of such assets and
shall not constitute an obligation of any shareholder of the Fund.
D-1
2. The amounts set forth in paragraph 1 of the Plan shall be paid for
the Distributor's services and expenses as the principal distributor of the
Fund's shares and shall be used by the Distributor to furnish, or cause or
encourage others to furnish, services and incentives in connection with the
promotion, offering and sale of the Fund's shares, and where suitable and
appropriate, the retention of the Fund's shares by the Fund's shareholders, and
in connection therewith may be spent by the Distributor, in its discretion, on,
among other things, compensation to and expenses (including overhead and
telephone expenses) of account executives or other employees of the Distributor
or of other broker-dealers who engage in or support the distribution of the
Fund's shares; printing of prospectus and reports for other than existing
shareholders; advertising; preparation, printing and distribution of sales
literature; and allowances to other broker-dealers.
3. The Fund is hereby authorized and directed to enter into appropriate
written agreements with the Distributor and each other person to whom the Fund
intends to make any payment, and the Distributor is hereby authorized and
directed to enter into appropriate written agreements with each person to whom
the Distributor intends to make any payments in the nature of a payment. The
foregoing requirement is not intended to apply to any agreement or arrangement
with respect to which the party to whom payment is to be made does not have the
purpose set forth in Paragraph 2 above (such as the printer in the case of the
printing of a prospectus or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or arrangement should be treated as
a "related" agreement for purposes of Rule 12b-1 under the 1940 Act.
4. The Plan shall not take effect until it has been approved by (i) a
vote of at least "a majority vote of the outstanding voting securities" (as
defined in the 1940 Act) of the Fund, and (ii) a majority vote of both the Board
and a majority of the Trustees who are not "interested persons" of the Fund, by
vote cast in person at a meeting called for the purpose of voting on the Plan.
5. The Plan and any related agreements shall continue in effect for so
long as such continuance is specifically approved at least annually by a
majority of the Board and by a majority of the Trustees who are not "interested
persons" of the Fund and have no direct or indirect financial interest in the
operation of the Plan or any such agreement, by vote cast in person at a meeting
called for the purpose of voting on the Plan.
6. In each year that the Plan remains in effect, the officers,
investment adviser or Distributor of the Fund, as appropriate, shall prepare and
furnish to the Board, and the Board shall review, at least quarterly, a written
report, complying with the requirements of Rule 12b-1 under the 1940 Act, of the
amounts expended under the Plan and the purposes for which such Payments were
made.
7. The Plan may be terminated at any time by a majority vote of the
Trustees who are not "interested persons" of the Fund, or by a "vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund, by vote cast in person at a meeting called for the purposes of voting
on such termination.
D-2
8. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in Paragraph 1 above unless such amendment is
approved by the shareholders in the manner provided in Paragraph 4(i) above, and
no material amendment to the Plan shall be made unless approved by both the
Board and a majority of the Trustees who are not "interested persons" of the
Fund in the manner provided in Paragraph 4(ii) above.
9. To the extent any activity is covered by Paragraph 2 and is also an
activity which the Trust may pay for on behalf of the Fund without regard to the
existence or terms and conditions of a plan of distribution under Rule 12b-1 of
the 1940 Act, the Plan shall not be construed to prevent or restrict the Trust
from paying such amounts outside of the Plan and without limitation hereby and
without such payments being included in calculation of payments subject to the
limitation set forth in Paragraph 1.
10. The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Paragraph 6 hereof, for a period of
not less than six years from the date of the Plan, or the agreements or such
reports, as the case may be, the first two years in an easily accessible place.
Adopted by Board on August 11, 2005
D-3
PROXY CARD
KOBREN GROWTH FUND
The undersigned, revoking all prior proxies, hereby appoints Messrs. Eric
M. Kobren, Eric J. Godes and Kevin Kiernan or any of them individually, as
proxies, with full power of substitution, to vote for the undersigned at the
Special Meeting of Shareholders of Kobren Growth Fund (the "Fund"), a series of
Kobren Insight Funds, to be held at the offices of Kobren Insight Management,
Inc. ("KIM"), 20 William Street, Wellesley Hills, MA 02481, on Wednesday,
October 19, 2005, at 10:00 a.m. (Boston time) or at any adjournment thereof,
notice of which meeting and the Proxy Statement accompanying the same have been
received by the undersigned, upon the following matters as described in the
Notice of Special Meeting and accompanying Proxy Statement:
1. To approve a new investment advisory agreement between the Fund and KIM,
to take effect only in the event the proposed acquisition of KIM by
E*TRADE FINANCIAL Corporation is consummated.
FOR __ AGAINST ___ ABSTAIN ___
2. Not Applicable.
3. Not Applicable.
4. To transact such other business as may properly come before the meeting
and any adjournment thereof.
Said proxies will vote this proxy as directed, or if no direction is
indicated, for each of the Proposals unless authority to do so is specifically
withheld in the manner provided.
VOTE VIA THE INTERNET: http://[__________]
VOTE VIA THE TELEPHONE: [_____________]
Dated:______________________, 2005
Account #: __________________________________________
__________________________________________
Signature(s)
IN SIGNING, PLEASE WRITE NAME(S) EXACTLY AS YOUR ACCOUNT IS REGISTERED. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR OR OTHER FIDUCIARY, PLEASE GIVE
YOUR FULL TITLE AS SUCH. JOINT OWNERS SHOULD EACH SIGN PERSONALLY.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND SHOULD BE
RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED.
PROXY CARD
DELPHI VALUE FUND
The undersigned, revoking all prior proxies, hereby appoints Messrs. Eric
M. Kobren, Eric J. Godes and Kevin Kiernan, or any of them individually, as
proxies, with full power of substitution, to vote for the undersigned at the
Special Meeting of Shareholders of Delphi Value Fund (the "Fund"), a series of
Kobren Insight Funds, to be held at the offices of Kobren Insight Management,
Inc. ("KIM"), 20 William Street, Wellesley Hills, MA 02481, on Wednesday,
October 19, 2005, at 10:00 a.m. (Boston time) or at any adjournment thereof,
notice of which meeting and the Proxy Statement accompanying the same have been
received by the undersigned, upon the following matters as described in the
Notice of Special Meeting and accompanying Proxy Statement:
1. To approve a new investment advisory agreement between the Fund and KIM,
to take effect only in the event the proposed acquisition of KIM by
E*TRADE FINANCIAL Corporation (the "Acquisition") is consummated.
FOR __ AGAINST ___ ABSTAIN ___
2. To approve a new investment advisory subadvisory agreement among the Fund,
KIM and Delphi Management, Inc., to take effect only in the event the
Acquisition is consummated.
FOR __ AGAINST ___ ABSTAIN ___
3. (Retail Class Shareholders Only) To approve a new rule 12b-1 distribution
plan, to take effect only in the event the Acquisition is consummated.
FOR __ AGAINST ___ ABSTAIN ___
4. To transact such other business as may properly come before the meeting
and any adjournment thereof.
Said proxies will vote this proxy as directed, or if no direction is
indicated, for each of the Proposals unless authority to do so is specifically
withheld in the manner provided.
VOTE VIA THE INTERNET: http://[__________]
VOTE VIA THE TELEPHONE: [_____________]
Dated:______________________, 2005
Account #: __________________________________________
__________________________________________
Signature(s)
IN SIGNING, PLEASE WRITE NAME(S) EXACTLY AS YOUR ACCOUNT IS REGISTERED. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR OR OTHER FIDUCIARY, PLEASE GIVE
YOUR FULL TITLE AS SUCH. JOINT OWNERS SHOULD EACH SIGN PERSONALLY.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND SHOULD BE
RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED.