SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN 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
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
MENTOR INCOME FUND, INC.
(Name of Registrant as Specified in Its Charter/
Declaration of Trust)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
_________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
_________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
(5) Total fee paid:
_________________________________________________________________
[ ] Fee paid previously with preliminary materials:
_________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identity the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
_________________________________________________________________
(2) Form, Schedule or Registration Statement no.:
_________________________________________________________________
(3) Filing Party:
_________________________________________________________________
(4) Date Filed:
[logo]
MENTOR INCOME FUND, INC.
November 21, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders (the "Meeting") of Mentor Income Fund, Inc. (the
"Fund") to be held on Monday, December 22, 1997, at 9:00 a.m.,
Eastern Standard Time, at Riverfront Plaza, 901 East Byrd Street,
Richmond, Virginia. At the Meeting, shareholders will be asked
to approve a new investment management agreement between Mentor
Investment Advisors, LLC and the Fund, to become effective upon
consummation of the proposed merger of Wheat First Butcher
Singer, Inc., corporate parent of the Mentor group of companies,
with First Union Corporation.
In addition, shareholders will also be asked to approve a
new investment management agreement for the Fund in contemplation
of the potential acquisition of an additional interest in Mentor
Investment Group, LLC by EVEREN Securities Holdings, Inc.
Finally, shareholders will be asked to elect six additional
Directors for the Fund.
Although the Board of Directors of the Fund would like very
much to have each shareholder attend the Meeting, it realizes
that this is not possible. Whether or not you plan to be present
at the Meeting, your vote is needed. PLEASE COMPLETE, SIGN, AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY. A POSTAGE-PAID ENVELOPE
IS ENCLOSED FOR THIS PURPOSE.
We look forward to seeing you at the Meeting or receiving
your proxy card so your shares may be voted at the Meeting.
Sincerely yours,
Daniel J. Ludeman Paul F. Costello
Chairman of the Board President
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED ENVELOPE SO AS TO BE REPRESENTED AT THE MEETING.
MENTOR INCOME FUND, INC.
______________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
______________________
A Special Meeting of Shareholders (the "Meeting") of Mentor
Income Fund, Inc. (the "Fund") will be held at Riverfront Plaza,
901 East Byrd Street, Richmond, Virginia, on Monday, December 22,
1997, at 9:00 a.m., Eastern Standard Time, for the following
purposes:
1. To approve a new investment management agreement
between the Fund and Mentor Investment Advisors, LLC,
as described in the attached Proxy Statement;
2. To approve a new investment management agreement
between the Fund and Mentor Investment Advisors, LLC in
contemplation of the potential acquisition of an
additional interest in Mentor Investment Group, LLC by
EVEREN Securities Holdings, Inc.;
3. To elect six additional Directors to hold office for
the term specified and until their successors are duly
elected and qualified; and
4. To consider and act upon such other matters as may
properly come before the Meeting.
Shareholders of record as of the close of business on
November 21, 1997 are entitled to notice of and to vote at the
Meeting.
By order of the Board of Directors,
John M. Ivan
Secretary
Richmond, Virginia
November 21, 1997
MENTOR INCOME FUND, INC.
901 East Byrd Street
Richmond, Virginia 23219
______________________
Proxy Statement
______________________
The enclosed proxy is solicited by the Board of Directors of
Mentor Income Fund, Inc. (the "Fund") for use at the Special
Meeting of Shareholders of the Fund to be held at Riverfront
Plaza, 901 East Byrd Street, Richmond, Virginia 23219, at 9:00
a.m., Eastern Standard Time, on December 22, 1997, and at any
adjournment thereof (the "Meeting"). Shareholders of record at
the close of business on November 21, 1997 (the "Record Date")
are entitled to vote at the Meeting or any adjourned session.
These proxy materials are first being made available to
shareholders on or about November 25, 1997.
Shares represented by timely and properly executed proxies
will be voted as specified. Executed proxies that are unmarked
will be voted for the election of the nominees for Director and
in favor of other proposals set forth in the attached Notice of
the Meeting. A proxy may be revoked at any time prior to its
use. It may be revoked by filing with the Secretary of the Fund
an instrument of revocation or a duly executed proxy bearing a
later date. It may also be revoked by attendance at the meeting
and election to vote in person.
As of the Record Date, there were 11,817,776 shares of the
Fund outstanding. Record Date shareholders will be entitled to
one vote for each share on all matters presented at the Meeting.
The shares of the Fund do not have cumulative voting rights. As
of November 7, 1997, all the Directors and officers of the Fund,
as a group, owned beneficially 62,694 Fund shares (less than 1%
of the total outstanding shares). As of November 7, 1997, to the
knowledge of management, no person owned beneficially 5% or more
of the outstanding Fund shares.
As of November 7, 1997, the Fund had net assets of
$120,186,844.
COPIES OF THE ANNUAL REPORT OF THE FUND FOR THE FISCAL YEAR
ENDED OCTOBER 31, 1996 AND THE SEMI-ANNUAL REPORT OF THE FUND FOR
THE PERIOD ENDED APRIL 30, 1997 MAY BE OBTAINED WITHOUT CHARGE BY
CALLING MENTOR INVESTMENT GROUP, LLC AT 1-800-825-5353 OR WRITING
MENTOR INVESTMENT GROUP, LLC, INVESTOR RELATIONS OFFICE,
RIVERFRONT PLAZA, 901 EAST BYRD STREET, RICHMOND, VIRGINIA 23219.
I. APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT
On August 20, 1997, Wheat First Butcher Singer, Inc. ("Wheat
First") entered into an Agreement and Plan of Merger with First
Union Corporation ("First Union"), pursuant to which Wheat First
would be merged into First Union. Upon the consummation of the
merger (expected to occur as early as December of this year),
First Union will become the owner of a majority of the beneficial
interest in Mentor Investment Advisors, LLC ("Mentor Advisors").
(In this Proxy Statement this series of transactions is referred
to as the "Merger".)
The Board of Directors is recommending that shareholders of
the Fund approve a new investment management agreement between
the Fund and Mentor Advisors. The new agreement will replace the
existing investment management agreement between the Fund and
Mentor Advisors. Your approval of the new agreement is being
sought because the Merger will result in an "assignment," as
defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), of the existing agreement, resulting in its
automatic termination.
THE AGREEMENT AND PLAN OF MERGER (the "Merger Agreement").
Under the Merger Agreement, Wheat First will be merged into First
Union, and will cease to exist as a separate entity. (The
surviving entity in the Merger is referred to in this Proxy
Statement as "Wheat First Union".)
Under the terms of the Merger Agreement, First Union will
exchange up to 10,267,029 shares of First Union common stock,
valued at $471 million, based on First Union's closing stock
price of $45.875 on August 15, 1997, for all of the outstanding
stock of Wheat First. In addition, First Union has agreed to
establish an employee retention pool consisting of approximately
1,700,000 shares of restricted stock of First Union to be granted
to certain key employees of Wheat First, which would vest over a
three-year period following the Merger, if they remain employed
by Wheat First Union during that period. In addition, First
Union has entered into employment agreements with the five senior
executive officers of Wheat First, which provide for salary,
bonus, and continuing payments with a three-year term for four of
such executives, and salary, bonus and a termination payment over
a one-year term for one such executive.
Mentor Advisors has informed the Fund that the purpose of
the retention pool is principally to provide an incentive to
Wheat First employees, including key investment professionals at
Mentor Advisors, to continue their association with Wheat First
Union. Any person who terminates his or her employment with
Wheat First Union before he or she receives all of the shares of
restricted stock from the retention pool to which he or she would
otherwise be entitled will forfeit any such amount not yet paid.
The Merger Agreement does not contemplate any changes in the
management or operations of Mentor Advisors, including any
changes in the personnel managing the Fund or other services or
business activities relating to the Fund. Mentor Advisors does
not anticipate that the Merger will cause any reduction in the
quality of services now provided to the Fund, or have any adverse
effect on Mentor Advisors' ability to fulfill its obligations to
the Fund.
FIRST UNION. First Union is a bank holding company
registered under the Bank Holding Company Act of 1956, as
amended. Through its network of subsidiaries, First Union
provides numerous banking and banking-related services, including
retail and commercial banking, retail investment, and capital
market services. First Union also provides other financial
services including mortgage banking, home equity lending,
leasing, insurance, and securities brokerage services. At
September 30, 1997, First Union had assets of $144 billion,
making it the sixth largest banking company in the United States.
THE EXISTING INVESTMENT MANAGEMENT AGREEMENT. Mentor
Advisors currently provides investment advisory services to the
Fund pursuant to a investment management agreement in effect
between the Fund and it (the "Existing Agreement"). Under the
Existing Agreement and subject to the general oversight of the
Board of Directors, Mentor Advisors manages the Fund in
accordance with the stated policies of the Fund. Mentor Advisors
makes investment decisions for the Fund and places purchase and
sale orders for portfolio transactions. Mentor Advisors bears
all its expenses in connection with the performance of its
services (except as may be approved from time to time by the
Board of Directors) and pays the salaries of all officers and
employees who are employed by it and the Fund. Mentor Advisors
is located at 901 East Byrd Street, Richmond, Virginia 23219.
The Fund pays Mentor Advisors a management fee as
compensation for the services provided under the Existing
Agreement. The fee is payable to Mentor Advisors monthly at an
annual rate of 0.65% of the Fund's average weekly net assets.
For the fiscal year ended October 31, 1996, the Fund paid Mentor
Advisors investment management fees in the amount of $769,296.
The Existing Agreement was approved by the Fund's
shareholders on August 26, 1993 in connection with the
acquisition of the Fund's former investment manager, Ryland
Capital Management, Inc., by Mentor Advisors (named Commonwealth
Investment Counsel, Inc. at the time of the transaction).
The Fund was organized under the laws of the Commonwealth of
Virginia on August 23, 1988.
The table below provides information relating to investment
companies with investment objectives similar to the Fund for
which Mentor Advisors provides investment advisory services. As
opposed to the Fund, each of the portfolios listed below is an
open-end investment company, which means that each portfolio
engages in a continuous offering of new shares to the public.
NET ASSETS
AS OF INVESTMENT
PORTFOLIO NOVEMBER 7, ADVISORY
(YEAR ORGANIZED) 1997 FEE
MENTOR FUNDS
Income and Growth Portfolio (1993) $181,129,853 0.75%(1)
Municipal Income Portfolio (1992) $79,536,753 0.60%
Quality Income Portfolio (1992) $145,661,655 0.34%(1)(2)
Short-Duration Income Portfolio (1994) $69,170,346 0.20%(1)(2)
(1) Mentor Advisors waived or reimbursed fees with respect
to these portfolios.
(2) After expense limitation. Mentor Advisors agreed to
limit its investment advisory fees from each of the Quality
Income and Short-Duration Income Portfolios until September 30,
1997 to the extent necessary to limit the total operating
expenses of those Portfolios. In the absence of these expense
limitations, investment advisory fees for the Quality Income and
Short-Duration Income Portfolios would have been 0.60% and 0.50%,
respectively.
ADMINISTRATIVE FEES. The Fund has entered into an
administration agreement with Mentor Investment Group, LLC
("Mentor Group"), an affiliate of Mentor Advisors, pursuant to
which Mentor Group assists the Fund in, among other things, the
preparation of certain reports to shareholders of the Fund, tax
returns, and filings with the Securities and Exchange Commission
(the "SEC") and state Blue Sky authorities, prepares and
furnishes reports to the Fund's Board of Directors, calculates
the net asset value of the Fund's shares and generally assists in
all aspects of the Fund's business operations, all subject to the
provisions of the Fund's Articles of Incorporation, Bylaws and
the 1940 Act, and other policies and instructions the Board of
Directors may from time to time establish.
The Fund pays Mentor Group for such services at an annual
rate of 0.10% of the Fund's average weekly net assets. During
the fiscal year ended October 31, 1996, the Fund paid Mentor
Group $118,353 for administrative services. Mentor Group's
address is 901 East Byrd Street, Richmond, Virginia 23219.
The administration agreement will terminate by its terms
upon consummation of the Merger. The Board of Directors of the
Fund has approved a new administration agreement with Mentor
Group upon substantially identical terms, to become effective
upon consummation of the Merger.
THE NEW INVESTMENT MANAGEMENT AGREEMENT. The Existing
Agreement will by its terms terminate upon the consummation of
the Merger, since the Merger will constitute a change in control
of Mentor Advisors for purposes of the 1940 Act. The Board of
Directors is recommending that shareholders of the Fund approve a
new investment management agreement (the "New Agreement") to be
effective immediately upon consummation of the Merger. The New
Agreement is identical to the Existing Agreement, other than its
effective and termination dates. It contemplates that, subject
to the supervision of the Board of Directors of the Fund, Mentor
Advisors will manage the Fund's assets in accordance with its
investment objective, policies, and limitations, make investment
decisions for the Fund, and place all orders for the purchase and
sale of the Fund's investments with broker-dealers.
The New Agreement provides that it will continue in effect
for an initial term of two years from its effective date (which
is expected to be the date on which the Merger is consummated)
and thereafter only so long as such Agreement is approved at
least annually by (i) the vote, cast in person at a meeting
called for such purpose, of a majority of the Directors who are
not "interested persons" (as defined in the 1940 Act) of Mentor
Advisors or the Fund and by (ii) the majority vote of either the
Board of Directors or the vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund. It
is intended that the proposed New Agreement will take effect upon
consummation of the Merger, with its continuing effectiveness
subject to the receipt of shareholder approval, as described
below.
The New Agreement provides, as do the Existing Agreements,
that Mentor Advisors shall not, in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard
by it of its obligations or duties, be subject to liability to
the Fund or the shareholders of the Fund for any act or omission
in the course, or connected with, its rendering services
thereunder, or for any losses that may be sustained in the
purchase, holding, or sale of any security by the Fund.
The New Agreement may be terminated, without penalty, (i) at
any time by the Board of Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund on 60
days' written notice, or (ii) by Mentor Advisors, upon 60 days'
written notice. The New Agreement terminates automatically in
the event of its assignment.
It is possible that shareholders will not have acted on the
New Agreement prior to the consummation of the Merger. The Fund
and Mentor Advisors have filed with the SEC an application for an
exemption from relevant provisions of the 1940 Act permitting the
Fund to enter into a New Agreement following the consummation of
the Merger, even if the Fund's shareholders have not yet approved
the Agreement by that time. If the New Agreement is implemented
under those circumstances, it will provide that the fees payable
by the Fund under the Agreement prior to shareholder approval of
the New Agreement will be held in an interest-bearing escrow
account to be paid to Mentor Advisors only upon shareholder
approval of the New Agreement, or, if shareholders do not approve
the New Agreement within the 60 days following consummation of
the Merger, to the Fund. A vote to approve the New Agreement
will include a vote in favor of this provision and in favor of
the release to Mentor Advisors upon receipt of shareholder
approval of the New Agreement, of any amounts held in the escrow
account.
A copy of the form of the New Agreement is attached to this
proxy statement as Exhibit A.
DIRECTOR ACTION. The Fund's Directors approved the New
Agreement at a meeting held on September 10, 1997.
In evaluating the New Agreement, the Directors considered
the fact that the Existing Agreement and the New Agreement are
substantially identical, including the terms relating to the
services to be provided and the fees to be paid by the Fund
thereunder. The Directors considered the performance of Mentor
Advisors to date in providing services to the Fund, and the
skills and capabilities of the personnel of Mentor Advisors.
The Directors also considered statements made by a
representative of senior management of First Union as reported by
Mr. Ludeman at their meeting. Mr. Ludeman stated, among other
things, that First Union expects that Mentor Group would continue
to operate as an independent operating unit of First Union after
the Merger and that the integrity of the Mentor group of
companies as an operating unit would remain intact; and that
there would be no change in the investment advisory or
administration services, or the pricing of those services,
provided by the Mentor group of companies to the Fund. The
Directors also considered generally the financial resources of
First Union, and the reputation, expertise, and resources of
First Union and its affiliates, including those engaged in
investment management businesses, and in domestic and
international financial markets.
The Directors also considered the fact that key members of
senior management of Wheat First had entered into the employment
agreements, described above, with First Union, and that key
members of management of Mentor Group would be entitled to
receive stock of First Union from the retention pool described
above.
GENERAL. Investment decisions for the Fund and for the
other investment advisory clients of Mentor Advisors and its
affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or
sold for other clients at the same time. It also sometimes
happens that two or more clients simultaneously purchase or sell
the same security, in which event each day's transactions in such
security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in the opinion
of Mentor Advisors is equitable to each and in accordance with
the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for
one or more clients will have an adverse effect on other clients.
Mentor Advisors employs professional staffs of portfolio managers
who draw upon a variety of resources for research information for
the Fund.
The Fund pays all expenses related to its operation which
are not borne by Mentor Advisors, including, but not limited to,
fees of the Directors who are not employed by Mentor Advisors and
meeting expenses of the Board of Directors, fees of Mentor Group,
interest charges, taxes and governmental fees, outside auditing,
accounting, and legal services, charges of the custodian,
transfer agent, registrar and dividend disbursing agent of the
Fund, expenses of repurchasing shares, expenses of printing and
mailing share certificates, expenses relating to investor and
public relations, shareholder reports, notices, proxy statements
and reports to government offices, brokerage and other expenses
connected with the execution, recording and settlement of
portfolio security transactions, costs of shareholders' and other
meetings, expenses in connection with negotiating, effecting the
purchase and sale, or registering privately-issued portfolio
securities, expenses of calculating and publishing the net asset
value of the Fund's shares, dues and expenses of membership in
investment company associations, expenses of fidelity bonding and
other insurance expenses including insurance premiums, expenses
in connection with the dividend reinvestment plan, SEC
registration and state Blue Sky fees, New York Stock Exchange
listing fees, fees payable to the National Association of
Securities Dealers, Inc., and other business and operating
expenses.
OWNERSHIP OF MENTOR ADVISORS. Mentor Group owns 99% of the
outstanding shares of Mentor Advisors; Wheat First owns the
remaining 1%. Wheat First also owns a 79.8% interest in Mentor
Group, which, together with its 1% direct interest in Mentor
Advisors, gives Wheat First an 80% economic interest in Mentor
Advisors. EVEREN Securities Holdings, Inc. owns the 20.2% of the
outstanding shares of Mentor Group not owned by Wheat First and
may increase its ownership based principally on the amount of
Mentor Group's revenues derived from assets attributable to
clients of EVEREN Securities Holdings, Inc. and its affiliates.
EVEREN Securities, Inc. is an affiliate of EVEREN Securities
Holdings, Inc.
Wheat First is located at 901 East Byrd Street, Richmond,
Virginia 23219 and EVEREN Securities Holdings, Inc. is located at
77 West Wacker Drive, Chicago, Illinois 60601.
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF MENTOR
ADVISORS. The names and principal occupations of the principal
executive officer and each director of Mentor Advisors is set
forth below:
PRINCIPAL
NAME POSITION OCCUPATION
Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.
Paul F. Costello Managing Director Managing Director,
Mentor Investment
Group, LLC.
John G. Davenport Managing Director Managing Director,
Mentor Investment
Group, LLC.
P. Michael Jones Managing Director Managing Director,
Mentor Investment
Group, LLC.
R. Preston Nuttall Managing Director Managing Director,
Mentor Investment
Group, LLC.
Theodore W. Price Managing Director Managing Director,
Mentor Investment
Group, LLC.
Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.
Karen H. Wimbish Managing Director Managing Director,
Mentor Investment
Group, LLC.
In addition to their positions with Mentor Advisors, Messrs.
Ludeman and Costello are also Director and President,
respectively, of the Fund. Terry L. Perkins, John M. Ivan, and
Michael A. Wade, the Fund's Treasurer, Secretary, and Assistant
Treasurer, respectively, are stockholders of Wheat First. The
address of each of the above named individuals is 901 East Byrd
Street, Richmond, Virginia 23219.
SECTION 15(f). The Fund has been informed by Mentor
Advisors and First Union that they intend to comply with Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive
"safe harbor" for an investment adviser or any affiliated persons
to receive any amount or benefit in connection with a change in
control of the investment adviser as long as two conditions are
met. First, for a period of three years after the change of
control, at least 75% of the board of directors of the investment
company must not be interested persons of the adviser or the
predecessor adviser. Second, an "unfair burden" must not be
imposed on the investment company as a result of the transaction
or any express or implied terms, conditions, or understandings
applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year
period after the transaction whereby the investment 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 bona fide ordinary compensation as principal
underwriter for such investment company). The Fund has been
advised that none of Mentor Advisors, First Union, and their
affiliates, is aware of any express or implied term, condition,
arrangement or understanding which would impose an "unfair
burden" on the Fund as a result of the Merger. First Union has
undertaken to pay all costs and expenses of the Meeting.
REQUIRED VOTE. As provided in the 1940 Act, approval of the
New Agreement requires the affirmative vote of a "majority of the
outstanding voting securities" of the Fund, which for this
purpose means the affirmative vote of the lesser of (i) more than
50% of the outstanding shares of the Fund or (ii) 67% or more of
the shares of the Fund present at the Meeting if more than 50% of
the outstanding shares are present at the Meeting in person or by
proxy. If the shareholders of the Fund do not approve the New
Agreement, the Board of Directors will take such further action
as they may deem to be in the interests of the shareholders of
the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE FUND VOTE TO APPROVE THE NEW AGREEMENT.
II. APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT --
ACQUISITION OF ADDITIONAL INTEREST IN MENTOR GROUP BY EVEREN
SECURITIES HOLDINGS, INC.
EVEREN Securities Holdings, Inc. ("EVEREN") may from time to
time in the future acquire an additional interest in Mentor
Group. For the reasons stated below, that acquisition might be
seen to result in a change of control of Mentor Group, and so to
result in the termination of the investment management agreement
between the Fund and Mentor Advisors. The Board of Directors is
recommending that shareholders approve a new investment
management agreement at the Meeting, to take effect upon the
occurrence of any such change of control of Mentor Group.
POSSIBLE CHANGE IN CONTROL; NEED FOR SHAREHOLDER APPROVAL.
Wheat First owns 79.8% of the outstanding interest in Mentor
Group. EVEREN owns the remaining 20.2%. EVEREN acquired its
interest in Mentor Group in connection with Mentor Group's
organization in 1996. Wheat First also owns a 1% interest in
Mentor Advisors, which, together with Wheat First's 79.8%
interest in Mentor Group, gives Wheat First an 80% economic
interest in Mentor Advisors.
By agreement between Wheat First and EVEREN, EVEREN has the
right to acquire from Wheat First an additional interest in
Mentor Group. (That transaction is referred to herein as the
"Final Acquisition.") The amount of that interest will be
calculated based on the amount of Mentor Group's revenues
attributable to EVEREN during the period immediately prior to the
Final Acquisition. The amount of EVEREN's interest in Mentor
Group may not, however, exceed 50%. The Final Acquisition would
occur not later than March 31, 1999.
It is also possible, in light of the continuing relationship
between Wheat First and EVEREN and EVEREN's success to date in
the distribution of the shares of other funds in the Mentor
family of funds, that EVEREN will, by agreement with Wheat First,
receive an additional interest in Mentor Group prior to the Final
Acquisition.
If, as a result of any acquisition of additional interest in
Mentor Group, EVEREN's interest in Mentor Group exceeds 25%, the
acquisition may be deemed to result in a "change in control" of
Mentor Group, and, as a result, of Mentor Advisors. Any such
change in control would, in turn, result in an "assignment," as
defined in the 1940 Act, of the investment management agreement
in effect at the time between the Fund and Mentor Advisors,
resulting in its automatic termination.
The Board of Directors is recommending that shareholders of
the Fund approve a new investment management agreement between
the Fund and Mentor Advisors. The new investment management
agreement would be substantially identical to the Existing
Agreement and to the New Agreement, except as to its effective
and termination dates.
MANAGEMENT OF MENTOR GROUP. Mentor Group is a limited
liability company organized under the laws of the Commonwealth of
Virginia. It is managed by a Management Committee consisting of
members nominated by Wheat First and members nominated by EVEREN.
Under the Operating Agreement pursuant to which Mentor Group was
organized, Wheat First currently is entitled to nominate a
majority of the members of the Management Committee, and, so long
as EVEREN's interest remains below 45%, will continue to have
that right.
The Operating Agreement provides that the Management
Committee acts by the vote of a majority of the members of the
Committee. It also provides that, at any time when EVEREN owns
40% or more of the outstanding shares of Mentor Group, then the
Management Committee may only vote to admit any additional member
to Mentor Group, or to merge or consolidate with any corporation
or other entity, or sell, lease, transfer, distribute, or
otherwise dispose of all or substantially all of its assets, with
the vote of a majority of the members of the Committee nominated
by Wheat First and the vote of a majority of the members of the
Committee nominated by EVEREN.
THE EFFECT OF A POSSIBLE CHANGE IN CONTROL OF MENTOR GROUP.
At any time when EVEREN's interest in Mentor Group is less than
45%, it will be entitled to nominate only a minority of the
members of the Management Committee; Wheat First's nominees to
the Management Committee would continue to constitute a majority
of its members. Accordingly, Mentor Advisors has advised the
Board of Directors that it does not expect that EVEREN's holding
an interest less than 45% would result in any material change in
the management or operation of Mentor Group. Mentor Advisors has
also advised the Board of Directors that EVEREN's owning an
additional interest in Mentor Group would not reduce the quality
of services now provided the Fund, or have any effect on Mentor
Advisors' ability to fulfill its obligations to the Fund under
the investment management agreement. In any event, no new
investment management agreement would be implemented unless the
Board of Directors, including a majority of the disinterested
Directors, had approved the agreement, under the specific facts
and circumstances then prevailing.
SHAREHOLDERS ARE NOT BEING ASKED TO VOTE ON ANY INVESTMENT
MANAGEMENT AGREEMENT TO BE IMPLEMENTED FOLLOWING AN ACQUISITION
BY EVEREN OF AN INTEREST IN MENTOR GROUP IF, AFTER THE
ACQUISITION, EVEREN WOULD BE PERMITTED TO NOMINATE A NUMBER OF
MEMBERS OF THE MANAGEMENT COMMITTEE EQUAL TO THE NUMBER WHEAT
FIRST IS PERMITTED TO NOMINATE.
EVEREN SECURITIES HOLDINGS, INC. EVEREN is a wholly-owned
subsidiary of EVEREN Capital Corporation. EVEREN Capital
Corporation, through its subsidiaries, is a full-service
securities brokerage firm that provides a broad range of
investment services and products primarily to individuals and
also to institutions, corporations, and municipalities. It also
engages in capital markets, asset management, and clearing
activities. At December 31, 1996, EVEREN Capital Corporation,
through its subsidiaries, held over $40 billion of customer
assets in approximately 500,000 client accounts.
EVEREN Capital Corporation is a public company whose common
stock is traded on the New York Stock Exchange. The EVEREN
Capital Corporation 401(k) and Employee Stock Ownership Plan
("KSOP") owns approximately 62% of EVEREN Capital Corporation.
EVEREN Capital Corporation's employees and directors, through the
KSOP and otherwise, own in excess of 70% of the outstanding
common stock of EVEREN Capital Corporation.
REQUIRED VOTE. As provided in the 1940 Act, approval of the
new investment management agreement requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund,
which for this purpose means the affirmative vote of the lesser
of (i) more than 50% of the outstanding shares of the Fund or
(ii) 67% or more of the shares of the Fund present at the Meeting
if more than 50% of the outstanding shares are present at the
Meeting in person or by proxy. If the shareholders of a Fund do
not approve the new investment management agreement, the Board of
Directors will take such further action with as it may deem to be
in the interests of the shareholders of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE FUND VOTE TO APPROVE THE NEW INVESTMENT
MANAGEMENT AGREEMENT.
III. ELECTION OF DIRECTORS
The Fund's Articles of Incorporation provide that the Fund's
Board of Directors shall be divided into three classes whose
number shall be as nearly equal as possible, each having a term
of three years. The Fund's Bylaws provide for a Board of
Directors consisting of between three (3) and fifteen (15)
Directors. The Board of Directors of the Fund is proposing that
shareholders elect Messrs. Troy A. Peery, Jr., Arnold H.
Dreyfuss, Thomas F. Keller, Peter J. Quinn, Jr., Louis W.
Moelchert, Jr. and Arch T. Allen, III each to serve as a Director
of the Fund until his successor is duly elected and qualified.
Since the term of office of one class will expire each year,
certain nominees will serve less than three years during their
initial terms as Directors of the Fund. Messrs. Peery, Dreyfuss,
Keller, Quinn, Moelchert and Allen have each consented to serve
as a Director if elected. It is not expected that any of them
will be unable to serve as a Director; however, if that should
occur for any reason prior to the Meeting, the proxy holders will
vote in their discretion for another person of their choice. The
following table provides information concerning the nominees for
election as Directors and each of the current Directors of the
Fund.
SHARES OWNED
BENEFICIALLY
NAME, ADDRESS PRINCIPAL AS OF
AND OFFICES OCCUPATION NOVEMBER 7,
WITH THE FUND AND AGE 1997
CLASS I NOMINEE TO SERVE UNTIL THE 2000 ANNUAL MEETING OF
SHAREHOLDERS:
Troy A. Peery, Jr. President, Heilig-Meyers None
12560 West Creek Parkway Company. Trustee, Mentor
Richmond, VA 23238 Funds, Mentor Institutional
Trust, and Cash Resources
Trust. (Age 51)
Peter J. Quinn, Jr.* President, Mentor None
901 East Byrd Street Distributors, LLC.
Richmond, VA 23219 Managing Director,
Mentor Investment Group,
Inc., Wheat First Butcher
Singer, Inc., and Mentor
Investment Advisors, LLC.
Director, Mentor Perpetual
Advisors, LLC. Trustee,
Mentor Funds and Cash
Resources Trust. (Age 37)
CLASS II NOMINEE TO SERVE UNTIL THE 1998 ANNUAL MEETING OF
SHAREHOLDERS:
Arch T. Allen, III Attorney at Law, Raleigh None
1214 Cowper Drive North Carolina (since
Raleigh, NC 27608 August 1995). Director,
America's Utility Fund,
Inc. Formerly, Vice Chan-
cellor for Development and
University Relations,
University of North
Carolina at Chapel Hill
(September 1991-August
1995). (Age 57)
Arnold H. Dreyfuss Chairman of the Board, None
901 Morefield Park Eskimo Pie Corporation.
Drive Trustee, Mentor Funds,
Richmond, VA 23236 Mentor Institutional Trust,
and Cash Resources Trust.
Formerly, Chairman of the
Board and Chief Executive
Officer, Hamilton Beach/
Proctor-Silex, Inc.
(Age 69)
CLASS III NOMINEE TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
SHAREHOLDERS:
Thomas F. Keller Trustee, Mentor Funds, None
Fuqua School of Business Mentor Institutional Trust,
Duke University and Cash Resources Trust.
Box 90120 Formerly, Dean of the
Durham, NC 27708-0120 Fuqua School of Business
at Duke University.
(Age 66)
Louis W. Moelchert, Jr. Vice President for None
University of Richmond Investments, University
Maryland Hall of Richmond. Chairman
Richmond, VA 23173 of the Board and Director,
The Common Fund. Director,
America's Utility Fund, Inc.
Trustee, Mentor Funds,
Mentor Institutional Trust,
and Cash Resources Trust.
(Age 56)
CONTINUING DIRECTORS. The current Directors consist of one Class
I Director, one Class II Director and two Class III Directors,
none of whom is a nominee for election at the Meeting and all of
whom will continue in office after the Meeting for the terms
shown below. Mr. Barrentine was elected at the 1995 Annual
Meeting of Shareholders, Messrs. Nelson and Ludeman were elected
at the 1996 Annual Meeting of Shareholders, and Mr. Edwards was
elected at the 1997 Annual Meeting of Shareholders. The
Directors are as follows:
SHARES
OWNED
BENEFI-
CIALLY
DIREC- AS OF
NAME, ADDRESS AND PRINCIPAL OCCUPATION TOR NOVEMBER
OFFICES WITH THE FUND AND AGE SINCE 7, 1997
CLASS I (TERM EXPIRING IN 2000)
Weston E. Edwards President, Weston 1988 46,952**
361 Forest Avenue Edwards & Associates
Suite 205 (business brokers and
Laguna Beach, CA 92651 consultants) (September
Director 1994-present and July
1988- July 1993);
President, Smart
Mortgage Access, Inc.
(realtor-based
mortgage services)
(July 1993-September
1994); Founder and
Chairman, The Housing
Roundtable (since
February 1981).
(Age 63)
CLASS II (TERM EXPIRING IN 1998)
Jerry R. Barrentine President, J. R. 1988 5,725**
17716 River Ford Drive Barrentine &
Davidson, NC 28036 Associates (mortgage
Director banking consultants)
(since July 1997);
Executive Vice
President and CFO,
Barclays American/
Mortgage Corporation
(financial services)
(November 1992-July
1997); Managing
Partner, Barrentine
Lott & Associates,
Inc. (financial
services consultants)
(November 1981-
November 1992).
(Age 63)
CLASS III (TERM EXPIRING IN 1999)
J. Garnett Nelson Consultant, Mid- 1991 7,017**
101 Shockoe Slip Atlantic Holdings,
Richmond, VA 23219 L.L.C. (since
Director February 1995); Senior
Vice President, The
Life Insurance Company
of Virginia (1990-
February 1995);
Director, GE
Investment Funds,
Inc., successor to
Life of Virginia
Series Fund, Inc.
(since 1990);
Director, Lawyers
Title Corporation
(since 1991); Member,
Investment Advisory
Committee, Virginia
Retirement System
(since April 1995).
(Age 58)
Daniel J. Ludeman* Chairman and Chief 1993 3,000**
901 East Byrd Street Executive Officer,
Richmond, VA 23219 Mentor Investment
Chairman of the Board Group, LLC (since
July 1991); Managing
Director, Wheat,
First Securities,
Inc. (since August
1984); Managing
Director, Wheat First
Butcher Singer, Inc.
(since June 1991);
Chairman and Trustee,
Mentor Funds, Cash
Resource Trust and
Mentor Institutional
Trust. (Age 40)
* Messrs. Ludeman and Quinn are "interested persons" of the
Fund, and of Mentor Advisors, the Fund's investment adviser,
by virtue of their positions with that firm and its
affiliates.
** Less than 1% of the total outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
Each Director who is not an officer or employee of Mentor
Advisors, the Fund's investment adviser, or its affiliates,
receives an annual fee of $20,000 from the Mentor Family of
Funds. The term "Mentor Family of Funds" includes the Fund,
America's Utility Fund, Inc., Mentor Funds, Mentor Institutional
Trust and Cash Resource Trust. A portion of the annual fee will
be paid by the Fund based on the amount of its net assets in
relation to the net assets of the Mentor Family of Funds. In
addition, the Directors receive a fee of $3,000 for each meeting
attended. Members of the Audit Committee receive a fee of $1,000
for each meeting of the Audit Committee they attend, except for
the Chairman of the Audit Committee who receives a fee of $3,000.
The Fund does not pay any compensation to its officers or
Directors who are affiliated with Mentor Advisors.
The following table sets forth aggregate compensation paid
by the Fund to each Director during the fiscal year ended October
31, 1996. The Total Compensation column listed below includes
compensation paid to each of the nominees for his services as a
Trustee of one or more of Mentor Funds, Mentor Institutional
Trust and Cash Resources Trust (the "Trusts"). The Fund and the
Trusts are considered part of the same "Fund Complex" for this
purpose.
TOTAL
PENSION OR COMPEN-
RETIREMENT SATION
BENEFITS FROM FUND
AGGREGATE ACCRUED AS COMPLEX
COMPENSATION PART OF PAID TO
NAME OF DIRECTOR FROM FUND* FUND EXPENSES DIRECTORS*
Jerry R. Barrentine $20,000 None $20,000
Weston E. Edwards 28,000 None 28,000
J. Garnett Nelson 20,000 None 20,000
Daniel J. Ludeman -- -- --
Arch T. Allen, III -- -- 11,750**
Arnold H. Dreyfuss -- -- 12,200
Thomas F. Keller -- -- 12,200
Louis W. Moelchert, Jr. -- -- 18,450**
Troy A. Peery, Jr. -- -- 11,175
Peter J. Quinn, Jr. -- -- --
* The compensation figures listed reflect the fee
schedules for Directors of the Fund and Trustees of the
Trusts in effect through October 14, 1997.
** The total compensation for Messrs. Allen and Moelchert
includes compensation for their services as Directors
of America's Utility Fund, Inc., which is advised by
Mentor Advisors.
SUPPLEMENTAL INFORMATION
Officers of the Fund are appointed by the Directors and
serve at the pleasure of the Board. The officers of the Fund are
as follows: Paul F. Costello (Age 37), President; Terry L.
Perkins (Age 50), Treasurer; John M. Ivan (Age 41), Secretary;
Michael A. Wade (Age 30), Assistant Treasurer; Sander M. Bieber
(Age 47), Assistant Secretary; and Joseph R. Fleming (Age 43),
Assistant Secretary. During the past five years, the principal
occupations of the officers have been as follows (similar
positions with the same company are omitted): Paul F. Costello -
President (since June 1994) - Managing Director, Wheat First
Butcher Singer, Inc. (since June 1994), Mentor Investment Group,
LLC, Mentor Investment Advisors, LLC and Mentor Perpetual
Advisors, LLC; President, America's Utility Fund, Inc., Mentor
Funds (since 1995), Mentor Institutional Trust, and Cash Resource
Trust; Formerly, President, Mentor Series Trust. Terry L.
Perkins - Treasurer (since December 1988) - Senior Vice
President, Mentor Investment Group, LLC (since April 1996);
Treasurer, America's Utility Fund, Inc., Mentor Funds (since
1994), Mentor Institutional Trust (since 1994), and Cash Resource
Trust (since 1993); Formerly, Treasurer and Comptroller, Ryland
Capital Management, Inc. John M. Ivan - Secretary (since June
1994) - Managing Director and Assistant Secretary, Wheat First
Butcher Singer, Inc.; Managing Director, Director of Compliance
and Assistant General Counsel, Wheat, First Securities, Inc.;
Secretary, America's Utility Fund, Inc.; Secretary/Clerk, Mentor
Funds (since 1995), Mentor Institutional Trust, and Cash Resource
Trust. Michael A. Wade - Assistant Treasurer (since June 1995) -
Accounting Manager and Vice President of Mentor Investment Group,
LLC (since October 1996); Formerly, Accounting Manager and
Associate Vice President of Mentor Investment Group, LLC (since
April 1994); Formerly, Senior Accountant, Wheat First Butcher
Singer, Inc. (April 1993-March 1994); Audit Senior, BDO Seidman
(July 1989-March 1993). Sander M. Bieber - Assistant Secretary
(since December 1994) - Partner with the law firm of Dechert
Price & Rhoads (since 1981), counsel to the Fund. Joseph R.
Fleming - Assistant Secretary (since December 1996) - Partner
with the law firm of Dechert Price & Rhoads (since 1988).
The Fund has a standing Audit Committee currently consisting
of Messrs. Barrentine, Edwards and Nelson, each of whom is a
Director and not an interested person of the Fund. The Audit
Committee reviews both the audit and nonaudit work of the Fund's
independent accountants, submits a recommendation to the Board of
Directors as to the selection of independent accountants, and
reviews generally the maintenance of the Fund's records and the
safekeeping arrangements of the Fund's custodian. The Fund has
no other committees of the Board of Directors.
During the fiscal year ended October 31, 1996, there were
four meetings of the Board of Directors and two meetings of the
Audit Committee. All of the incumbent Directors attended at
least 75% of the meetings of the Board of Directors and the Audit
Committee, for those eligible to attend, held during the fiscal
year ended October 31, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Fund's
Directors, its officers, and any persons holding more than ten
percent of the Fund's common stock, as well as affiliated persons
of the Investment Manager, are required to report their ownership
of the Fund's common stock and any changes in that ownership to
the SEC and the New York Stock Exchange. Specific due dates for
these reports have been established and the Fund is required to
report in this proxy statement any failure to file by these dates
during the most recent fiscal year ended October 31, 1997. All
of these filing requirements were satisfied by the Fund's
Directors and officers, except statements of changes in
beneficial ownership filed on behalf of Mr. Edwards, which were
inadvertently filed late. In making these statements, the Fund
has relied on the representations of its incumbent Directors and
officers and copies of the reports that they have filed with the
Commission.
REQUIRED VOTE. The candidates receiving the affirmative
vote of a plurality of the votes cast by shareholders of the Fund
at the Meeting, if a quorum is present, shall be elected
Directors of the Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF EACH OF THE NOMINEES AS A DIRECTOR OF THE FUND.
IV. MISCELLANEOUS
OTHER BUSINESS. The Board of Directors knows of no other
business to be brought before the Meeting. However, if any other
matters properly come before the Meeting, it is the Board of
Directors' intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed
form of proxy.
SOLICITATION OF PROXIES. The costs of solicitation of
proxies will be borne by First Union. Solicitation of proxies by
personal interview, mail, telephone, and telegraph may be made by
officers and Directors of the Fund (who will receive no
compensation therefor in addition to their regular salaries). In
addition, the firm of __________________, Inc. has been retained
by Mentor Group to assist in the solicitation of proxies at a
cost to First Union which is not expected to exceed $_______.
The Fund may also arrange to have votes recorded by
telephone. The telephone voting procedure is designated 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. The Fund has been advised by counsel that
these procedures are consistent with the requirements of
applicable law. If these procedures were subject to a successful
legal challenge, such votes would not be counted at the Meeting.
The Fund is unaware of any such challenge at this time.
Shareholders would be called at the phone number the Fund (or a
shareholder's financial institution) 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. To ensure
that the shareholders' instructions have been recorded correctly,
they will also receive a confirmation of their instructions in
the mail. A special toll-free number will be available in case
the information contained in the confirmation is incorrect.
QUORUM. The Fund's Bylaws provide that the holders of a
majority of the shares issued and outstanding and entitled to
vote, present in person or by proxy, shall constitute a quorum
for the transaction of business at a meeting.
ADJOURNMENT. In the event that sufficient votes in favor of
any of the proposals set forth in the Notice of the Meeting are
not received by the time scheduled for the Meeting, the persons
named as proxies may propose one or more adjournments of the
Meeting with respect to those proposals, in accordance with
applicable law, to permit further solicitation of proxies with
respect to those proposals. In addition, if, in the judgment of
the persons named as proxies, subsequent developments make it
advisable to defer action on one or more proposals, but not all
proposals, the persons named as proxies may propose one or more
adjournments of the Meeting with respect to those proposals for a
reasonable time in order to defer action on such proposals as
they deem advisable. Any such adjournments will require the
affirmative vote of a majority of the votes cast on the question
in person or by proxy at the session of the Meeting to be
adjourned, as required by the Fund's Bylaws. The persons named
as proxies will vote in favor of such adjournment with respect to
a proposal those proxies which they are entitled to vote in favor
of the proposal. They will vote against any such adjournment
those proxies which have been instructed to vote against such
proposal, and they will vote to abstain any such proxies which
they are required to abstain from voting on such proposal. The
costs of any such additional solicitation and of any adjourned
session will be borne by First Union. Any proposals for which
sufficient favorable votes have been received by the time of the
Meeting may be acted upon and considered final regardless of
whether the Meeting is adjourned to permit additional
solicitation with respect to any other proposal.
TABULATION OF VOTES. Votes cast by proxy or in person at
the Meeting will be counted by persons appointed by the Fund to
act as tellers for the Meeting. The tellers will count the total
number of votes cast "for" approval of each proposal for purposes
of determining whether sufficient affirmative votes have been
cast. The tellers will count shares represented by proxies that
withhold authority to vote or that reflect abstentions or "broker
non-votes" (i.e., shares held by brokers or nominees as to which
(i) instructions have not been received from the beneficial
owners or persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular
matter) as shares that are present and entitled to vote on the
matter for purposes of determining the presence of a quorum.
Abstentions and broker non-votes will have the effect of negative
votes on the proposals to approve the new agreements.
DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS FOR SUBSEQUENT
MEETINGS OF SHAREHOLDERS. The Fund intends to hold an annual
meeting of shareholders in 1998 to elect directors and to ratify
or reject the selection of its independent accountants, among
other things. Shareholder proposals for inclusion in the Fund's
proxy statement for this meeting must be received by the Fund no
later than April 28, 1998.
Exhibit A
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the ____ day of _________, 199__,
between MENTOR INCOME FUND, INC. (hereinafter referred to as the
"Company") and MENTOR INVESTMENT ADVISORS, LLC (hereinafter
referred to as the "Manager").
In consideration of the mutual agreements herein made,
the Company and the Manager understand and agree as follows:
(1) DUTIES AND RESPONSIBILITIES OF THE MANAGER. The
Manager agrees, during the life of this Agreement, to
continuously furnish the Company with an investment program for
the assets of the Company, to manage and supervise the investment
and reinvestment of the assets of the Company and to arrange for
the purchase and sale of securities and other assets held in the
investment portfolio of the Company consistent with the
investment policies adopted and declared by the Company's Board
of Directors and the provisions of the Articles of Incorporation
and Bylaws of the Company, as such documents are amended from
time to time.
(2) ALLOCATION OF EXPENSES. Except as otherwise
provided herein, the Company shall bear all of its expenses
including, but not limited to, fees of the directors who are not
employed by the Manager and meeting expenses of the Board of
Directors; fees of the Administrator; interest charges; taxes;
organizational expenses, charges and expenses of the Fund's legal
counsel, auditors and independent accountants; fees and expenses
of the transfer agent, registrar and dividend disbursing agent of
the Fund; taxes and governmental fees; expenses of repurchasing
shares; expenses of printing and mailing share certificates;
expenses relating to investor and public relations, shareholder
reports, notices, proxy statements and reports to government
offices; brokerage and other expenses connected with the
execution, recording and settlement of portfolio security
transactions; costs of shareholders' and other meetings; expenses
in connection with negotiating, effecting the purchase or sale,
or registering privately issued portfolio securities; custodian
fees, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating
and publishing the net asset value of the Fund's shares; dues and
expenses of membership in investment company associations;
expenses of fidelity bonding and other insurance expenses
including insurance premiums; expenses in connection with the
Dividend Reinvestment Plan; SEC and state blue sky registration
fees; New York Stock Exchange listing fees; fees payable to the
National Association of Securities Dealers, Inc.; and other
business and operating expenses.
The Manager shall bear all expenses incurred by it in
connection with its duties and activities under this Agreement
(including overhead and employee costs), except such expenses as
are assumed by the Company under this Agreement. The Manager
further agrees to pay all salaries of the Company's officers, and
all fees of the Company's directors who are employed by the
Manager.
(3) MANAGEMENT FEE. The Company shall pay to the
Manager a monthly fee at an annual rate of 0.65% of the Company's
average weekly net assets. For purposes of this Agreement, the
net assets of the Company shall be calculated pursuant to the
procedures adopted by resolution of the Directors of the Company
for calculating the net asset value of the Company's shares or
delegating such calculations to third parties.
(4) EXECUTION OF PORTFOLIO TRANSACTIONS. The Manager
shall be responsible for selecting members of securities
exchanges, brokers and dealers (such members, brokers and dealers
being hereinafter referred to as "brokers") for the execution of
the Company's portfolio transactions consistent with the
Company's brokerage policies as stated in the Company's
prospectus, as amended from time to time, and, when applicable,
the negotiation of commissions in connection therewith.
In making such selections, the Manager shall take into
account such factors as prompt execution of orders, the size and
breadth of the market for the security, the reliability,
integrity, financial condition and execution capability of the
broker, the size and difficulty in executing the order, and the
best net price. Consistent with this policy, the Manager is
authorized to direct the execution of the Company's portfolio
transactions to brokers furnishing statistical information or
research deemed by the Manager to provide useful, lawful and
appropriate assistance to it in the performance of its investment
decision-making responsibilities for the Company.
(5) TERM OF AGREEMENT. This Agreement shall become
effective on the date first set forth above and shall continue in
effect until __________, 199_. If not sooner terminated, this
Agreement shall continue in effect from year to year thereafter,
provided that each such continuance shall be specifically
approved annually by the vote of a majority of the Company's
Directors who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such
approval and either the vote of (a) a majority of the outstanding
voting securities of the Company, as defined in the 1940 Act, or
(b) a majority of the Company's Board of Directors as a whole.
(6) TERMINATION OF AGREEMENT. Notwithstanding the
foregoing, this Agreement may be terminated by either party at
any time, without the payment of any penalty, on sixty (60) days'
written notice to the other party, provided that termination by
the Company is approved by vote of a majority of the Company's
Board of Directors in office at the time or by vote of a majority
of the outstanding voting securities of the Company, as defined
in the 1940 Act.
(7) ASSIGNMENT OF AGREEMENT. This Agreement will
terminate automatically and immediately in the event of its
"assignment," as defined in the 1940 Act.
(8) LIMITATION OF LIABILITY OF MANAGER. The Manager
may rely on information reasonably believed by it to be accurate
and reliable. Except as may otherwise be required by the 1940
Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees or agents shall be
subject to, and the Company will indemnify such persons from and
against, any liability for any error of judgment, mistake of law,
or any damages, expenses or losses incurred in connection with
any act or omission connected with or arising out of the
performance by the Manager of its duties under this Agreement,
except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Manager's duties or by
reason of reckless disregard of the Manager's obligations and
duties under this Agreement.
(9) SERVICES TO OTHER CLIENTS. It is understood that
the services of the Manager are not deemed to be exclusive, and
nothing in this Agreement shall prevent the Manager, or any
affiliate thereof, from providing similar services to other
investment companies and clients, including clients which may
invest in the same types of securities as the Company, or, in
providing such services, from using information furnished by
others. When the Manager determines to buy or sell the same
security for the Company that the Manager or one or more of its
affiliates has selected for clients of the Manager of its
affiliates, the orders for all such securities transactions shall
be placed for execution by methods determined by the Manager,
with approval by the Company's Board of Directors, to be
impartial and fair.
(10) USE OF MANAGER'S NAME. It is understood that the
name "Mentor" or any derivative thereof or logo associated with
that name is the valuable property of the Manager and its
affiliates, and that the Company has the right to use such name
(or derivative or logo) only for so long as this Agreement shall
continue with respect to the Company. Upon termination of this
Agreement, the Company shall forthwith cease to use such name (or
derivative or logo) and shall promptly amend its Articles of
Incorporation to change its name.
(11) APPLICABLE LAW. This Agreement shall be construed
in accordance with the laws of the Commonwealth of Virginia,
PROVIDED that nothing herein shall be construed as being
inconsistent with applicable federal or state securities laws or
any rules, regulations or orders thereunder.
(12) SEVERABILITY. 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 and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(13) AGENCY. Nothing herein shall be construed as
constituting the Manager an agent of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
MENTOR INCOME FUND, INC.
By______________________________
MENTOR INVESTMENT ADVISORS, LLC
By______________________________
PROXY PROXY
MENTOR INCOME FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints Paul F.
Costello, John M. Ivan and Terry L. Perkins, and each of them, as
proxies to vote for and in the name, place and stead of the
undersigned at the Special Meeting of Shareholders of MENTOR
INCOME FUND, INC. (the "Fund") to be held at Riverfront Plaza,
901 East Byrd Street, Richmond, Virginia 23219, on Monday,
December 22, 1997, at 9:00 a.m., and at any adjournment thereof,
according to the number of votes and as fully as if personally
present, for the purposes listed on the reverse side of this
card.
- -----------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
- -----------------------------------------------------------------
Please sign this proxy card exactly as your name(s)
appear(s) hereon. Joint Owners should each sign personally.
Trustees and other fiduciaries should indicate the capacity in
which they sign, and where more than one name appears, a majority
must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
- -----------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________ _________________________
_________________________ _________________________
_________________________ _________________________
MENTOR INCOME FUND, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
Mark the box at right if an address change or comment has been
noted on the reverse side of this card. [ ]
1. To approve a new investment management agreement between the
Fund and Mentor Investment Advisors, LLC, as described in
the Proxy Statement;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve a new investment management agreement between the
Fund and Mentor Investment Advisors, LLC in contemplation of
the potential acquisition of an additional interest in
Mentor Investment Group, LLC by EVEREN Securities Holdings,
Inc.;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Election of Directors:
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all
below) [ ] nominees listed
below [ ]
NOMINEES: ARCH T. ALLEN, III, ARNOLD H. DREYFUSS, THOMAS F.
KELLER, LOUIS W. MOELCHERT, JR., TROY A. PEERY, JR. AND PETER J.
QUINN, JR.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below.)
__________________________________________________
and with discretionary authority to vote on all matters that may
properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
(OR NOT VOTED) AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE,
THE PROXY WILL BE VOTED IN FAVOR OF ITEMS 1 AND 2 AND FOR THE
NOMINEES FOR DIRECTOR IN ITEM 3.
Please be sure to sign and date this Proxy. RECORD DATE SHARES:
Date: ______________
Shareholder sign here: ___________________
Co-owner sign here: ______________________
