SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MENTOR INCOME FUND, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than 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 identify 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:
<PAGE>
MENTOR INCOME FUND, INC.
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
August 11, 2000
Dear Shareholder,
We are pleased to invite you to attend a Special Meeting (the
"Meeting") of shareholders of Mentor Income Fund, Inc. (the "Fund") to be held
on September 27, 2000. The enclosed proxy includes proposals relating to the
approval of a new investment advisory agreement, the election of members of the
Fund's Board of Directors, approval of amendments to the Articles of
Incorporation changing the Fund's name and deleting certain provisions, and the
approval of auditors.
U.S. Bank National Association ("U.S. Bank") has agreed to acquire
certain assets of the Fund's investment advisor, Mentor Investment Advisors, LLC
("Mentor"), that relate to the management and operations of the Fund. In
connection with this transaction, it is proposed that the Fund engage U.S. Bank
to serve as its investment advisor pursuant to a new investment advisory
agreement between the Fund and U.S. Bank (the "New Advisory Agreement").
Due to U.S. Bank's experience and expertise in managing closed-end
funds, as well as the other factors described in the accompanying proxy
statement, both Mentor and the Fund's Board of Directors believe it is in the
best interests of Fund shareholders for U.S. Bank to replace Mentor as
investment advisor of the Fund.
The New Advisory Agreement is the same in all material respects as the
advisory agreement currently in effect between the Fund and Mentor except for
the fact that (i) U.S. Bank, rather than Mentor, will serve as the investment
advisor of the Fund, (ii) the standard of care and indemnification provisions in
the New Advisory Agreement are more favorable to Fund shareholders than those in
the current advisory agreement, (iii) the law chosen to govern the New Advisory
Agreement is that of Minnesota rather than Virginia, and (iv) the New Advisory
Agreement takes effect upon the effectiveness of U.S. Bank's acquisition of
assets from Mentor . There will be no change in the investment advisory fees
payable by the Fund under the New Advisory Agreement.
It is important to keep in mind that U.S. Bank is acquiring certain
assets of Mentor and is not acquiring the assets of the Fund. Moreover, the
acquisition will not result in any change in investment policies or restrictions
of the Fund.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSALS AND RECOMMENDS THAT
YOU VOTE FOR ALL OF THE PROPOSALS.
Whether or not you plan to attend the Meeting, you may vote by proxy by
completing, dating, signing and returning the enclosed proxy card in the
enclosed postage prepaid envelope. You may record your vote by telephone by
calling 877-504-5025. You may also FAX your completed and signed proxy card
(both front and back sides) to 800-733-1885. If you attend the Meeting and wish
to vote in person, you may revoke your proxy at that time. You will receive more
than one proxy card if you hold shares in more than one account. Please sign and
return each card you receive. Instructions on how to vote are included at the
end of the proxy statement.
If you have any questions about the proposals or the proxy card, please
call Shareholder Communications Corporation, our proxy solicitor, at
877-504-5025. If the Fund does not receive a sufficient number of votes in favor
of the proposals, you may receive a telephone call from Shareholder
Communications Corporation requesting your vote.
Thank you for taking this matter seriously and participating in this
important process.
Sincerely,
/s/ W. Douglas Munn
W. Douglas Munn
President
Mentor Income Fund, Inc.
<PAGE>
MENTOR INCOME FUND, INC.
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-------------------------------
Notice is hereby given that a Special Meeting of shareholders of Mentor
Income Fund, Inc. (the "Fund") will be held at 200 Berkeley Street, Boston,
Massachusetts 02116 on September 27, 2000 at 10:00 a.m., Eastern time for the
following purposes:
1. TO APPROVE OR DISAPPROVE A NEW INVESTMENT ADVISORY AGREEMENT
BETWEEN THE FUND AND U.S. BANK NATIONAL ASSOCIATION.
2. TO ELECT MEMBERS OF THE FUND'S BOARD OF DIRECTORS TO HOLD OFFICE
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
3. TO APPROVE OR DISAPPROVE AN AMENDMENT TO ARTICLE I OF THE FUND'S
RESTATED AND AMENDED ARTICLES OF INCORPORATION CHANGING THE NAME
OF THE FUND TO AMERICAN INCOME FUND INC.
4. TO APPROVE OR DISAPPROVE AN AMENDMENT TO ARTICLE II OF THE FUND'S
RESTATED AND AMENDED ARTICLES OF INCORPORATION DELETING SECTION 2
THEREOF WHICH CURRENTLY RESTRICTS CERTAIN TRANSFERS OF FUND
SHARES.
5. TO RATIFY OR REJECT THE SELECTION OF KPMG LLP AS INDEPENDENT
ACCOUNTANTS OF THE FUND FOR THE FISCAL YEAR ENDED OCTOBER 31,
2000.
6. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
The close of business on July 28, 2000 has been fixed as the record
date for the determination of shareholders of the Fund entitled to notice of and
to vote at the Meeting or any adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN WITHOUT DELAY AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors
W. Douglas Munn
President
<PAGE>
MENTOR INCOME FUND, INC.
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 27, 2000
The accompanying Proxy is solicited by the Board of Directors (the
"Directors") of Mentor Income Fund, Inc. (the "Fund") to be used at a Special
Meeting of shareholders of the Fund to be held on September 27, 2000 at 10:00
a.m., Eastern time, at 200 Berkeley Street, Boston, Massachusetts 02116 and at
any adjournment or adjournments thereof (the "Meeting"). The purpose of the
Meeting is to consider and act upon the proposals set forth in the accompanying
Notice of Special Meeting of Shareholders (the "Proposals"). Shareholders of
record at the close of business on July 28, 2000 (the "Record Date") are
entitled to notice of and to vote at the Meeting. Each share is entitled to one
vote on all matters described herein and each fractional share is entitled to a
proportionate share of one vote on such matters. The most recent annual report
to shareholders of the Fund and most recent semi-annual report to shareholders
are available upon request, without charge, by writing to the Fund at 200
Berkeley Street, Boston, Massachusetts 02116, or by calling the Fund at
877-504-5025. The principal executive offices of the Fund are located at 200
Berkeley Street, Boston, Massachusetts 02116.
The Fund has retained Shareholder Communications Corporation (the
"Proxy Solicitor") to assist it in the solicitation of proxies. It is expected
that the cost of soliciting proxies will be approximately $25,000. The Proxy
Solicitor may supplement its solicitation of proxies by mail, telephone or
otherwise. The costs of soliciting proxies, including the cost of preparing and
mailing the Notice of Special Meeting of Shareholders and this Proxy Statement,
will be paid by the Fund, First Union Corporation ("FUC") and U.S. Bank National
Association ("U.S. Bank"). The Fund will bear the expenses of the proxy up to
$20,000. Thereafter, FUC and U.S. Bank will equally share the expenses up to
$40,000. Finally, FUC will bear the expenses that exceed $40,000. However, if
shareholders do not approve the New Advisory Agreement, FUC will bear all
expenses in excess of the $20,000 borne by the Fund. These proxy materials are
first being mailed to shareholders on or about August 11, 2000.
All properly executed proxies received prior to the Meeting and not
revoked will be voted at the Meeting in accordance with the instructions marked
thereon. Executed proxies that are unmarked will be voted for each of Proposals
1 through 5. Votes cast by proxy or in person at the Meeting will be counted by
one or more persons appointed by the Fund to act as inspectors for the Meeting.
The inspectors 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 inspectors will count shares represented by proxies that withhold
authority to vote or that reflect abstentions as shares that are present and
entitled to vote on the matter for purposes of determining the presence of a
quorum. Proxies that withhold authority to vote or that reflect abstentions will
have the effect of a negative vote on each of the Proposals, other than the
election of Directors which requires only a plurality of the shares present in
person or by proxy at the Meeting.
Any shareholder may revoke his or her proxy at any time before it is
voted by (i) giving written notice of revocation to the Secretary of the Fund at
the address set forth on the cover of this proxy statement, (ii) properly
executing and delivering a later-dated proxy, or (iii) appearing in person at
the Meeting to vote his or her shares.
In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
any of the Proposals are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. A shareholder vote may be taken on one or more Proposals prior to such
adjournment if sufficient votes have been received. Any adjournment will require
the affirmative vote of a majority of those shares present at the Meeting in
person or by proxy. In the event any adjournment of the Meeting is proposed, the
persons named as proxies will vote those proxies which they are entitled to vote
FOR any of the Proposals in favor of adjournment and will vote those proxies
required to be voted AGAINST all of the Proposals against any such adjournment.
On the Record Date, 11,817,776 shares were outstanding.
The following entities owned of record or are known by the Fund to own
beneficially 5% or more of the outstanding shares of the Fund as of the Record
Date:
------------------------------- ---------------------------- -------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Owner Percent of Fund
------------------------------- ---------------------------- -------------------
------------------------------- ---------------------------- -------------------
Charles Schwab & Co., Inc. 823,687 6.96%
Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, New York 11717
------------------------------- ---------------------------- -------------------
------------------------------- ---------------------------- -------------------
First Clearing Corporation 667,146 5.65%
Wanda Kelly
10700 North Park Drive
Glen Allen, Virginia 23060
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------------------------------- ---------------------------- -------------------
Prudential Securities, Inc. 616,922 5.22%
Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, New York 11717
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------------------------------- ---------------------------- -------------------
Salomon Smith Barney, Inc. 2,912,120 24.64%
Pat Haller
333 W. 34th Street
New York, New York 10001
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PROPOSAL 1 -- APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN THE FUND
AND U.S. BANK
INTRODUCTION
On July 7, 2000, U.S. Bank, First Union Corporation ("FUC") and Mentor
Investment Advisors, LLC ("Mentor") entered into an Asset Purchase Agreement
("Acquisition Agreement"), pursuant to which U.S. Bank will purchase certain
assets of Mentor, the Fund's present investment advisor, that relate to the
management and operations of the Fund (the "Acquisition").
The Acquisition is subject to various conditions being satisfied prior
to closing, including, among other things, the requisite approvals of a new
investment advisory agreement ("New Advisory Agreement") by Fund shareholders
and the election of a new Board of Directors, the composition of which is
reconstituted in a manner acceptable to both U.S. Bank and Mentor. U.S. Bank and
Mentor agreed in the Acquisition Agreement that Mentor will use its reasonable
best efforts to cause the Fund to call a shareholders meeting for the purpose of
causing the Board to be reconstituted and approving the New Advisory Agreement.
The Acquisition is not expected to result in any material change in the
investment policies or restrictions of the Fund.
Other than the Fund and one other closed-end fund, the advisory
subsidiaries of FUC manage only open-end mutual funds. U.S. Bank on the other
hand, currently manages 11 closed-end funds with a total of approximately $1.5
billion in assets, as well as 41open-ends funds with more than $33 billion in
assets. Due to U.S. Bank's experience and expertise in managing closed-end
funds, as well as the other factors described below under "Board Consideration,"
both FUC and the Fund's Board of Directors believe it is in the best interests
of Fund shareholders for U.S. Bank to replace Mentor as investment advisor of
the Fund. Upon consummation of the Acquisition, the Fund will change its name to
American Income Fund Inc.
Accordingly, shareholders of the Fund are being asked to approve a New
Advisory Agreement with U.S. Bank, pursuant to which U.S. Bank will be retained
to provide investment advisory and management services to the Fund. If approved
by shareholders, the New Advisory Agreement will become effective upon the
Acquisition. If the Acquisition is not consummated, the New Advisory Agreement
will not be entered into, the Fund's current investment advisory agreement would
remain in place, and Mentor would continue to serve as the investment advisor of
the Fund.
1940 ACT REQUIREMENTS
Section 15(a) of the Investment Company Act of 1940 (the "1940 Act")
prohibits any person from serving as an investment advisor to a registered
investment company except pursuant to a written contract that has been approved
by shareholders. Therefore, in order for U.S. Bank to provide investment
advisory services to the Fund, shareholders of the Fund must approve the New
Advisory Agreement with U.S. Bank.
Mentor has informed the Fund that it proposes to comply with Section
15(f) of the 1940 Act in connection with the Acquisition. In this regard, U.S.
Bank has agreed in the Acquisition Agreement to use its reasonable best efforts
to assure compliance with Section 15(f). In substance, Section 15(f) provides
that when a sale of any interest in an investment advisor occurs, the investment
advisor or any of its affiliated persons may receive any amount or benefit in
connection therewith as long as two conditions are satisfied. First, an "unfair
burden" must not be imposed on the investment company as a result of the
transaction relating to the sale of such interests, 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 advisor (or predecessor or
successor advisor), or any "interested person" (as defined in the 1940 Act) of
any such advisor, receives or is entitled to receive any compensation, directly
or indirectly, from the investment company or its securities holders (other than
fees for bona fide investment advisory or other services) or, with certain
exceptions, from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company.
U.S Bank, FUC and Mentor are not aware of any circumstances arising from the
Acquisition that might result in an unfair burden being imposed on the Fund. In
particular, U.S Bank has agreed not to request an increase in advisory fees
payable by the Fund during the two-year period following the effective date of
the New Advisory Agreement. The second condition of Section 15(f) is that during
the three-year period following the consummation of a transaction, at least 75%
of the investment company's board must not be "interested persons" of the
company's investment advisor or predecessor advisor. The Acquisition Agreement
provides that this condition need not be complied with if U.S. Bank obtains
Securities and Exchange Commission ("SEC") exemptive relief which is in a form
reasonably acceptable to Mentor.
In anticipation of the Acquisition, at a meeting held in person on July
18, 2000, all of the Directors who attended the meeting, including a majority of
the Directors who are not "interested persons" of the Fund, Mentor or U.S. Bank
(the "Independent Directors" as defined by the 1940 Act), approved the New
Advisory Agreement between the Fund and U.S. Bank. The provisions of the New
Advisory Agreement are in all material respects similar to the provisions of the
advisory agreement of the Fund currently in effect, except as described below
under "New Advisory Agreement." Shareholders should note that the advisory fee
payable by the Fund will remain unchanged under the New Advisory Agreement.
U.S. BANK
U.S. Bank is a national banking association that has professionally
managed assets for individuals, investment companies, insurance companies,
foundations, commingled accounts, trust funds, and others for over 75 years. At
June 30, 2000, U.S. Bank had more than $79 billion in assets under management,
including investment company assets of more than $35 billion 41 open-end funds
and 11 closed-end funds (collectively, the "First American Fund complex"). U.S.
Bank's address is 601 Second Avenue South, Minneapolis, Minnesota 55402.
First American Asset Management, a division of U.S. Bank, currently
serves as the investment advisor to the following funds (which are series of
First American Investment Funds, Inc. ("FAIF") and First American Strategy
Funds, Inc. ("FASF")) which have investment objectives similar to those of the
Fund and is entitled to receive advisory fees from such funds as follows:
<TABLE>
<CAPTION>
Name of Fund Net Assets as of Contractual Rate of Actual Advisory Fees
June 30, 2000 Compensation1 After Waivers
<S> <C> <C> <C>
FAIF Fixed Income Fund $ 1,390,763,879 0.70% 0.51%2
FAIF Intermediate Term Income Fund $ 427,817,592 0.70% 0.43%2
FAIF Limited Term Income Fund $ 184,625,232 0.70% 0.18%2
FAIF Strategy Income Fund $ 56,625,232 0.25%3 0.00%3
</TABLE>
1
As a percentage of average daily net assets.
2
Fees paid after waivers (as a percentage of average daily net assets) during
the fiscal year ended September 30, 1999.
3
Although the investment advisor waived the entire contractual rate of
compensation, FASF Strategy Income Fund is a fund of funds that invests
exclusively in other First American Funds, and the investment advisor earns
fees in managing the underlying First American Funds in which FASF Strategy
Income Funds invests.
U.S. Bank is a subsidiary of U.S. Bancorp, which is a regional
multi-state bank holding company headquartered in Minneapolis, Minnesota that
primarily serves the Midwestern, Rocky Mountain and Northwestern states. At
March 31, 2000, U.S. Bancorp and its consolidated subsidiaries had consolidated
assets of more than $83 billion, consolidated deposits of more than $51 billion
and shareholders' equity of $7.7 billion.
The executive officers and directors of U.S. Bank are:
<TABLE>
<CAPTION>
Name/Address Title Principal Occupation
<S> <C> <C>
John P. Grundhofer Chairman and Chief Executive Officer Chairman and Chief Executive Officer
601 Second Avenue South, of U.S. Bancorp
Minneapolis, MN 55402
Philip G. Heasley Director, President and Chief President and Chief Operating
601 Second Avenue South, Minneapolis, Operating Officer Officer of U.S. Bancorp
MN 55402
Andrew J. Cecere Director and Vice Chairman of U.S. Chief Financial Officer of U.S.
601 Second Avenue South, Minneapolis, Bank Bancorp Commercial Services
MN 55402
Andrew S. Duff Vice Chairman of U.S. Bank Wealth Management and Capital
800 Nicollet Mall, Markets
Minneapolis, MN 55402
Daniel J. Frate Vice Chairman of U.S. Bank President of Payment Systems
601 Second Avenue South,
Minneapolis, MN 55402
J. Robert Hoffman Director, Executive Vice President Executive Vice President and Chief
601 Second Avenue South, and Chief Credit Officer Credit Officer of U.S. Bancorp
Minneapolis,
MN 55402
Peter G. Michielutti Executive Vice President of U.S. Bank Information Services
2751 Shephard Road,
St. Paul, MN 55116
Lee R. Mitau Director, Executive Vice Executive Vice President - Corporate
601 Second Avenue South, Minneapolis, President-Corporate Development, Development, General Counsel and
MN 55402 General Counsel and Secretary Secretary of U.S. Bancorp
Daniel M. Quinn Vice Chairman of U.S. Bank Commercial Banking
918 17th Street,
Denver, CO 80202
Peter E. Raskind Director and Vice Chairman of U.S. Branch and Telephone Banking
601 Second Avenue South, Minneapolis, Bank
MN 55402
Daniel C. Rohr Vice Chairman of U.S. Bank Corporate Banking
601 Second Avenue South, Minneapolis,
MN 55402
Robert H. Sayre Executive Vice President Human Executive Vice President of U.S.
601 Second Avenue South, Minneapolis, Resources Bancorp Human Resources
MN 55402
Daniel W. Yohannes Vice Chairman of U.S. Bank Consumer Banking
950 17th Street,
Denver CO 80202
</TABLE>
MENTOR
Mentor is a wholly-owned subsidiary of First Union National Bank
("FUNB"), which is a subsidiary of FUC. The address of Mentor is 901 East Byrd
Street, Richmond, Virginia 23219. The addresses of FUC and FUNB are 301 South
College Street, Charlotte, North Carolina 28288.
For the Fund's most recently completed fiscal year no brokerage
commissions were paid to an affiliate of Mentor by the Fund.
CURRENT ADVISORY AGREEMENT
The current advisory agreement between the Fund and Mentor (the
"Current Advisory Agreement") was first approved by the Board of Directors on
September 10, 1997, and by the shareholders of the Fund on December 22, 1997.
The Current Advisory Agreement was voted upon at that time in connection with
the acquisition of Mentor by FUNB. The Current Advisory Agreement had an initial
term of two years and has been continued in effect thereafter by action of the
Board of Directors. The continuation of the Current Advisory Agreement for an
additional one year period was last approved by the Directors at a meeting held
on December 17, 1999.
As investment advisor to the Fund, Mentor is entitled to receive
from the Fund a monthly fee at an annual rate of 0.65% of the average weekly net
assets of the Fund.
NEW ADVISORY AGREEMENT
Pursuant to the proposed New Advisory Agreement, U.S. Bank will
serve as investment advisor of the Fund. The provisions of the New Advisory
Agreement are in all material respects similar to the provisions of the Current
Advisory Agreement except as follows: . o The advisor under the New Advisory
Agreement will be U.S. Bank rather than Mentor.
o The New Advisory Agreement requires U.S. Bank to indemnify the Fund
in the event, among other things, of negligence on U.S. Bank's
part. The Current Advisory Agreement does not provide for Mentor to
indemnify the Fund.
o The Current Advisory Agreement requires the Fund to indemnify
Mentor except in the case, among other things, of gross negligence
on Mentor's part. The New Advisory Agreement does not provide for
the Fund to indemnify U.S. Bank.
o As a result of the foregoing provisions, U.S. Bank is held to a
simple "negligence" standard of care under the New Advisory
Agreement, compared to the "gross negligence" standard which
applies to Mentor under the Current Advisory Agreement. This simple
negligence standard is more favorable to the shareholders than the
gross negligence standard in the Current Advisory Agreement.
o The law chosen to govern the New Advisory Agreement is that of
Minnesota rather than that of Virginia, as is the case under the
Current Advisory Agreement. However, the Fund does not expect this
change to have a material impact on its operation.
o The New Advisory Agreement will take effect upon the effectiveness
of the Acquisition contemplated by the Acquisition Agreement.
Under the New Advisory Agreement, U.S. Bank will manage and administer
the operations of the Fund, and manage the investment and reinvestment of the
Fund's assets in conformity with such Fund's investment objectives and
restrictions, subject to the supervision of the Directors. In addition, U.S.
Bank will provide office space, all necessary office facilities, equipment and
personnel in connection with its services under the New Advisory Agreement, and
will bear all other expenses it incurs in connection with the services it
renders. All charges and expenses, other than those specifically referred to
above as being borne by its investment advisor, are currently, and will continue
to be, paid by the Fund, including, but not limited to, custodian charges and
expenses, bookkeeping and auditors' charges and expenses, transfer agent charges
and expenses, fees of Independent Directors, brokerage commissions, brokerage
fees and expenses, issue and transfer taxes, interest, taxes and corporate fees
payable to governmental agencies, the cost of share certificates, fees and
expenses of the registration and qualification of the Fund and its shares with
the SEC or under state or other securities laws, expenses of preparing, printing
and mailing of prospectuses, statements of additional information, notices,
reports and proxy materials to shareholders of the Fund, expenses of
shareholders' and Directors' meetings, charges and expenses of legal counsel for
the Fund and for the Directors, charges and expenses of filing annual and other
reports with the SEC and other authorities, and all extraordinary charges and
expenses of the Fund.
The New Advisory Agreement provides that U.S. Bank shall indemnify the
Fund with respect to any loss, liability, judgement, cost or penalty which the
Fund may directly or indirectly suffer or incur in any way arising out of or in
connection with any breach of the agreement by U.S. Bank. It also provides that
U.S. Bank shall, generally, be liable to the Fund and its shareholders or former
shareholders for any negligence or willful misconduct on the part of U.S Bank or
any of its directors, officers, employees, representatives or agents in
connection with the responsibilities assumed by it under the agreement. The New
Advisory Agreement is terminable, without payment of any penalty on 60 days'
written notice, by a vote of the holders of a majority of the Fund's outstanding
voting shares, or by a vote of majority of the members of the Board of
Directors. In addition, the New Advisory Agreement will automatically terminate
upon an "assignment" as such term is defined by the 1940 Act.
If approved by the shareholders of the Fund, the New Advisory Agreement
will have an initial term expiring two years after the date of its execution,
and may be continued in effect from year to year thereafter if approved annually
by the shareholders of the Fund or the Board of Directors, and, in either case,
by a majority of the Independent Directors by vote cast in person at a meeting
called for such purpose, all as required by the 1940 Act. If approved by
shareholders, the New Advisory Agreement will be entered into and become
effective upon consummation of the Acquisition.
The form of the New Advisory Agreement is attached as Exhibit A. The
foregoing description of the New Advisory Agreement is qualified in its entirety
by reference to Exhibit A.
Set forth below are (i) the actual annual operating expenses (as a
percentage of average net assets) of the Fund for the most recently completed
fiscal year ended October 31, 1999. There are no fee waivers or expense
reimbursements currently in place, and the management fees payable by the Fund
will not change under the New Advisory Agreement.
------------------------ ---------------------------------
Actual Annual
Operating Expenses
------------------------ ---------------------------------
------------------------ ---------------------------------
Management Fees 0.65%
------------------------ ---------------------------------
------------------------ ---------------------------------
Other Expenses 0.41%
------------------------ ---------------------------------
------------------------ ---------------------------------
Total 1.06%
------------------------ ---------------------------------
ADMINISTRATIVE SERVICES
At a meeting on July 18, 2000, the Board of Directors approved a new
administrative services agreement with U.S. Bank pursuant to which U.S. Bank
will provide administrative services to the Fund. The provisions and fees of the
new agreement are identical to the provisions and fees of the current
administrative services agreement between the Fund and Evergreen Investment
Services, Inc. The new administrative services agreement will become effective
upon the Acquisition as contemplated by the Acquisition Agreement. If the
Acquisition is not consummated, Evergreen Investment Services, Inc. will
continue to serve as the administrator of the Fund pursuant to the terms of the
administrative services agreement now in effect.
SHAREHOLDER SERVICES AND EXCHANGE PRIVILEGES
The Acquisition is not expected to result in any significant changes in
shareholder services available to shareholders of the Fund. The Fund expects
that it will continue to offer an automatic reinvestment plan under which all
dividends and other distributions are automatically reinvested in full and
fractional shares of the Fund.
TRANSFER AGENCY SERVICES
Equiserve, located at P.O. Box 8128, Boston, Massachusetts 02200,
presently serves as the transfer agent and registrar of the Fund and will
continue to serve in the same capacity immediately after the Acquisition.
BOARD CONSIDERATION
In approving the New Advisory Agreement and determining to submit it to
shareholders of the Fund for approval, the Board of Directors considered among
other things:
o the fact that the New Advisory Agreement and the Current Advisory
Agreement are the same in all material respects, except as described
above, including the terms relating to the services to be provided and the
fees to be paid by the Fund thereunder
o the performance of U.S. Bank as advisor to other closed-end funds
the skills and capabilities of the personnel of U.S. Bank
o the experience of U.S. Bank as advisor of fixed-income funds
o the financial resources of U.S. Bank
o the New Advisory Agreement will enable the Fund to obtain high quality
investment advisory services at no increase in investment advisory fees
Because the Fund is a closed-end fund, it was noted by the Directors
that the Fund would benefit from retaining an investment advisor that advises
several other closed-end funds. The Directors believed such affiliation may
result in an increased organizational emphasis on the Fund because it would no
longer be part of a large fund complex whose primary focus is open-end mutual
funds.
The Board also considered that FUC and Mentor have both expressed a
desire to focus their management efforts and resources on open-end funds rather
than closed-end funds.
During their consideration, the Directors met with counsel to the
Independent Directors regarding the legal issues involved.
Based upon their consideration of the matters noted above, all of the
Directors present at the meeting determined to recommend to shareholders of the
Fund that they approve the New Advisory Agreement. (As noted above, no increase
in the rate of advisory fees to be charged to the Fund is proposed.)
REQUIRED VOTE AND RECOMMENDATION OF THE DIRECTORS
As provided in the 1940 Act, approval of the New Advisory 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.
ALL OF THE DIRECTORS PRESENT AT THE MEETING, INCLUDING A
MAJORITY OF THE INDEPENDENT DIRECTORS,
RECOMMEND THAT SHAREHOLDERS VOTE
"FOR" THE NEW ADVISORY AGREEMENT.
PROPOSAL 2 -- ELECTION OF DIRECTORS
At the Meeting, shareholders of the Fund will vote for the election of
eight persons to serve as Directors of the Fund, each to hold office until his
successor is elected and qualifies or until his death, retirement, resignation
or removal from office. The nominees have been proposed for election by a
majority of the persons now serving as Independent Directors of the Fund.
Subject to the election of the nominees, each of the persons now serving as
Director will resign his position with the Fund, effective upon consummation of
the Acquisition. The Fund's Restated and Amended Articles of Incorporation
("Articles of Incorporation") provide that the Fund's Board of Directors shall
be divided into three classes, each having a term of three years. 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.
The Acquisition is subject to various conditions being satisfied prior
to closing, including, among other things, the election of a new Board of
Directors, the composition of which is reconstituted in a manner acceptable to
both U.S. Bank and Mentor. The Board at a meeting on July 18, 2000 nominated for
election eight new Directors.
The persons named on the accompanying proxy card intend, in the absence
of contrary instructions, to vote all proxies in favor of the election of the
nominees named below as Directors of the Fund to serve until their successors
are duly elected and qualified. The nominees have each consented to stand for
election and to serve if elected. If any of the nominees should be unable to
serve, an event not now anticipated, the proxies will be voted for such other
person or persons, if any, as shall be designated by the Board of Directors. The
Board of Directors recommends that shareholders vote in favor of the election of
the nominees.
The following table sets forth certain information concerning
the persons nominated for election as Directors. Each individual currently
serves on the Board of Directors of each entity in the First American Fund
complex, advised by U.S. Bank.
<TABLE>
<CAPTION>
NAME/AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
-------------------- -----------------------------------------------------------------------------------------------
<S> <C>
CLASS I NOMINEES TO SERVE UNTIL 2001
ANNUAL MEETING OF SHAREHOLDERS:
Robert J. Dayton Director of the First American Fund complex since September 1994; Chief Executive
Age 58 Officer and Chairman of Okabena Company (a private
family investment office) since 1993.
Roger A. Gibson Director of the First American Fund complex since October 1997; Vice President of
Age 54 North America-Mountain Region for United Airlines since June 1995.
Andrew M. Hunter III Director of the First American Fund complex since January 1997. Chairman of Hunter,
Age 53 Keith Industries, Inc., a diversified manufacturing and management
services company since 1975.
CLASS II NOMINEES TO SERVE UNTIL 2002
ANNUAL MEETING OF SHAREHOLDERS:
Leonard W. Kedrowski Director of the First American Fund complex since November 1993. Owner and
Age 58 President of Executive Management Consulting, Inc., a management consulting firm since
1992.
John M. Murphy, Jr.* Director of the First American Fund complex since June 1999; Chairman and
Age 58 Chief Investment Officer of First American Asset Management and U.S. Bank Trust, N.A.,
from 1991 to 1999; Executive Vice President of U.S. Bancorp since 1991; Chairman
Minnesota - U.S. Bancorp since 2000.
Robert L. Spies * Director of the First American Fund complex since 1997; employed by U.S Bancorp and
Age 66 subsidiaries from 1957 to 1997, most recently as Vice President, U.S. Bank National
Association.
CLASS III NOMINEES TO SERVE UNTIL 2003
ANNUAL MEETING OF SHAREHOLDERS:
Joseph D. Strauss Director of First American Fund complex since 1984; Owner and President, Strauss,
Age 60 Management Company, since 1993; Owner and President, Community Resource Partnerships,
Inc., a community business retention survey company, since 1992.
Virginia L. Stringer Director of the First American Fund complex since August 1987; Chair since September
Age 55 1997; Owner and President, Strategic Management Resources, Inc. since 1993.
</TABLE>
*Denotes Directors who are considered "interested persons" as defined by the
1940 Act due to their past or current positions as officers of the Fund's
proposed new investment advisor or its parent.
REMUNERATION OF CURRENT DIRECTORS
Each current Director who is not an officer or employee of Mentor, FUC
or its affiliates, receives an annual fee of $6,000 from the Fund and $56,000
from the Evergreen open-end funds. In addition, the Directors receive a fee of
$1,000 from the Fund and $6,000 from the Evergreen open-end funds for each
meeting attended. The Chairman of the Board received an additional annual fee of
$2,500 from the Fund and $25,000 from the Evergreen open-end funds. Members of
the Audit Committee receive a fee of $1,000 from the Fund and $5,000 from the
Evergreen open-end funds for each meeting of the Audit Committee they attended,
in addition to which the Chairman of the Audit Committee received an annual fee
of $2,000 from the Fund and $15,000 from the Evergreen open-end funds. The Fund
did not pay any compensation to its officers or Directors who are affiliated
with Mentor or FUC.
The following table sets forth aggregate compensation paid by the Fund
to each non-interested Director during the fiscal year ended October 31, 1999.
The Total Compensation column listed below includes compensation paid to each of
the Directors for his services as a Director or Trustee of one or more of the
Funds in the Evergreen Family of Funds for the calendar year ended December 31,
1999.
Total
Aggregate Compensation
Compensation From Evergreen
Name of Director From the Fund Fund Complex
-------------------------- --------------- ------------------
Arch T. Allen, III**............. $257 N/A
Laurence B. Ashkin* ......... $0 $75,000
Charles A. Austin III*......... $0 $75,000
Jerry R. Barrentine** $267 N/A
Arnold H. Dreyfuss ........... $267 $0
Weston E. Edwards**.......... $257 N/A
K. Dun Gifford*.................. $0 $75,000
Leroy Keith, Jr.*......... $0 $75,000
Thomas F. Keller** ............... $227 N/A
Gerald M. McDonnell* ............ $0 $75,000
Thomas L. McVerry*............ $0 $85,000
Louis W. Moelchert, Jr....... $267 $0
J. Garnett Nelson** .............. $257 N/A
Troy A. Peery, Jr.** ............. $257 N/A
William Walt Pettit* ........... $0 $75,000
David M. Richardson* ....... $0 $75,000
Russell A. Salton, III MD*.. $0 $77,000
Michael S. Scofield* .......... $0 $102,000
Richard J. Shima* ........... $0 $75,000
* Approved by shareholders as a Director of the Fund on December 15, 1999.
** Retired from the Fund as of December 15, 1999 which was prior to the Fund
becoming part of the Evergreen Fund complex.
REMUNERATION OF NOMINATED DIRECTORS
It is anticipated that the Board will adopt the current compensation
schedule in place for the other entities in the First American Fund complex
(assuming the directors who have been nominated are elected by shareholders).
Under this schedule, no compensation is paid by any fund in the First American
Fund complex to any director who is an officer or employee of U.S. Bank or any
of its affiliates. Each director, other than the Chair, currently receives an
annual retainer from the First American Fund complex of $27,000 and a fee of
$4,000 for each full Board meeting attended. The Board Chair receives an annual
retainer of $40,500 and a fee of $6,000 for each full Board meeting attended.
Each committee member, other than the Chair of the applicable committee,
receives a fee of $1,200 for each committee meeting attended; the Chair of a
committee receives a fee of $1,800. Directors also receive a fee of $500 for
telephonic Board or committee meetings. The Board or Committee Chair receives a
fee of $750 for such meetings. Directors are also reimbursed for travel expenses
and, in certain cases, receive a per diem fee of $1,500 when traveling out of
town on Fund business. The amounts specified in this paragraph are allocated
among the closed-end and open-end funds in the First American Fund complex on
the basis of net assets.
For the year ended December 31, 1999, the nominees who served on the
First American Fund complex Boards of Directors received the following total
compensation from the First American Fund complex:
Name of Director Total Compensation From
First American Fund complex
Robert J. Dayton ......................... $55,800
Roger A. Gibson ......................... $55,300
Andrew M. Hunter, III......................... $52,800
Leonard W. Kedrowski ......................... $63,400
John M. Murphy, Jr. ......................... $0
Robert L. Spies ......................... $59,800
Joseph D. Strauss ......................... $73,000
Virginia L. Stringer ......................... $77,700
COMMITTEES
The Fund currently has a standing Audit Committee. The nominated
Directors who are expected to serve on the Audit Committee are Messrs. Gibson,
Kedrowski, Spies and Strauss and Ms. Stringer (ex officio), each of whom is
currently a Director and member of the Audit Committee of the other funds in the
First American Fund complex. The Audit Committee reviews both the audit and
non-audit 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.
During the most recent fiscal year ended October 31, 1999, there were
four meetings of the Board of Directors of the Fund. Each of the Directors of
the Fund attended at least 75% of the meetings of the Board of Directors and the
Committee that he or she was eligible to attend.
OFFICERS OF THE FUND
Officers of the Fund are appointed by the Directors and serve
at the pleasure of the Board. The current officers of the Fund are:
<TABLE>
<CAPTION>
Name/Age Title Principal Occupation During the Past Five Years
<S> <C> <C>
W. Douglas Munn President (since December 1999) Senior Vice President and Chief Operating Officer,
Age 37 and Secretary (since March 1999) Evergreen Investment Services, Inc.; former Strategic
Planning Director, First Union Brokerage Services; Secretary of the
Evergreen Funds.
Carol A. Kosel Treasurer Senior Vice President, Evergreen Investment
Age 36 (since December 1999) Services, Inc. and Treasurer, Vestaur Securities,
Inc.; former Senior Manager, KPMG LLP; Treasurer of the
Evergreen Funds.
</TABLE>
If the Acquisition is consummated, it is anticipated that the following
individuals will be appointed by the Board of Directors at the next scheduled
meeting of the Directors to serve as the officers of the Fund:
<TABLE>
<CAPTION>
Name/Age Title Principal Occupation During the Past Five Years
<S> <C> <C>
Thomas Plumb President President of First American Fund complex since March 1,
Age 40 2000; Chief Executive Officer of First American Asset
Management since 1999;
Executive Vice President of
First American Asset
Management from 1997 to
1999; Senior Vice President
of First American Asset
Management from 1992 to
1997.
Paul A. Dow Vice President Vice President - Investments of First American Fund complex
Age 49 since March 11, 2000; Chief Investment officer and President
of First American Asset
Management since 1999;
Senior Vice President of
First American Asset
Management from 1998 to
1999; Chief Executive
Officer of Piper Capital
Management Inc. from 1997
to 1998; Chief Investment
Officer of Piper Capital
from 1989 to 1997.
Jeffery M. Wilson Vice President Vice President - Administration of First American Fund
Age 44 complex since March 11, 2000; Senior Vice President of
First American Asset Management since 1991.
Robert H. Nelson Treasurer Treasurer of First American Fund complex since
Age 35 March 11, 2000; Senior Vice President of First American
Asset Management since
1998; Senior Vice President
of Piper Jaffray from 1994
to 1998.
Christopher J. Smith Secretary Secretary of First American Fund complex since
Age 37 March 11, 2000; Executive Vice President of First American
Asset Management since 1998; General Counsel of Investment
Advisors Inc. from 1991 to 1998.
Michael J. Radmer Secretary Secretary of First American Fund complex since 1981;
Age 55 Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm
and General Counsel of First American Funds.
</TABLE>
REQUIRED VOTE AND RECOMMENDATION OF THE DIRECTORS
Election of each of the nominees for Director requires the affirmative
vote of a plurality of all outstanding shares of the Fund represented in person
or by proxy and entitled to vote, provided that a quorum is present at the
Meeting.
ALL OF THE DIRECTORS PRESENT AT THE MEETING,
INCLUDING A MAJORITY OF THE INDEPENDENT DIRECTORS,
RECOMMEND THAT SHAREHOLDERS VOTE
"FOR" THE ELECTION OF EACH OF THE NOMINEES.
PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO ARTICLE I TO THE ARTICLES OF
INCORPORATION TO CHANGE THE NAME OF THE FUND
At a meeting on July 18, 2000, all of the Directors present at the
meeting approved by majority vote and recommended the approval by shareholders
of an amendment to Article I of the Fund's Articles of Incorporation that would
change the name of the Fund from Mentor Income Fund, Inc. to American Income
Fund Inc.
The purpose of this change is to allow the Fund to be identified as one
advised by U.S. Bank and part of the First American Fund complex.
REQUIRED VOTE AND RECOMMENDATION OF THE DIRECTORS
Approval of this proposal requires the affirmative vote of a majority
of the Fund's shares outstanding and entitled to vote at the Meeting.
ALL OF THE DIRECTORS PRESENT AT THE MEETING, INCLUDING A
MAJORITY OF THE INDEPENDENT DIRECTORS,
RECOMMEND THAT THE SHAREHOLDERS VOTE
"FOR" THIS PROPOSAL.
PROPOSAL 4 - APPROVAL OF AN AMENDMENT TO ARTICLE II, SECTION 2 OF THE ARTICLES
OF INCORPORATION
At a meeting on July 18, 2000, all of the Directors present at the
meeting approved and recommended the approval by shareholders of an amendment to
the Fund's Articles of Incorporation that would delete Section 2 of Article II.
This Section refers to certain restrictions on the transfer of shares of the
Fund to "Disqualified Organizations" (defined below). These restrictions were
originally designed to avoid tax liabilities that may be imposed on the Fund
when certain shareholders invest in the Fund. The Fund's prospectus states that
it may invest in interests issued by real estate mortgage investment conduits
("REMICs"). When the Fund began, certain aspects of the tax treatment of
investment in REMICs were not completely clear. Specifically, certain tax rules
applied to certain shareholders who owned stock in regulated investment
companies, such as the Fund, that acquired residual interests in REMICs. These
certain shareholders ("Disqualified Organizations") were not allowed, without
serious tax repercussions, to own shares of a fund that held residual interests
of REMICs. Furthermore, if a Disqualified Organization owned shares of the Fund,
an annual tax could be imposed on the Fund equal to that portion of the "excess
inclusion income" of the Fund for the taxable year that is allocable to the
Disqualified Organization, multiplied by the highest tax rate applicable to
corporations. Since this tax would be detrimental to the other shareholders of
the Fund, Article II, Section 2 was inserted into the Articles of Incorporation.
This provision provided a method for the removal of certain shareholders found
to be Disqualified Organizations.
Since the Fund no longer invests or intends to invest in residual
interests of REMICs, the tax concerns related to a Disqualified Organization
purchasing shares of the Fund are no longer present. Also, it is very onerous to
track compliance with this provision. For these reasons the Directors believe it
would be beneficial to delete Article II, Section 2 of the Articles of
Incorporation.
The text of Article II, Section 2 of the Articles of Incorporation is
attached as Exhibit B.
REQUIRED VOTE AND RECOMMENDATION OF THE DIRECTORS
Approval of this proposal requires the affirmative vote of a majority
of the Fund's shares outstanding and entitled to vote at the Meeting.
ALL OF THE DIRECTORS PRESENT AT THE MEETING, INCLUDING A
MAJORITY OF THE INDEPENDENT DIRECTORS,
RECOMMEND THAT SHAREHOLDERS VOTE
"FOR" THIS PROPOSAL.
PROPOSAL 5 - RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, including the Directors who are not interested
persons of the Fund, has selected KPMG LLP as independent accountants for the
Fund for the fiscal year ended October 31, 2000. KPMG LLP was selected primarily
on the basis of its expertise as auditors of investment companies, the quality
of its audit services, and the competitiveness of the fees charged for such
services. Shareholders of the Fund have previously selected KPMG LLP as the
Fund's independent accountants. No representative of KPMG LLP is expected to be
present at the Meeting, although an opportunity will be afforded KPMG LLP to
make a statement if it desires to do so and to respond to appropriate questions.
REQUIRED VOTE AND RECOMMENDATION OF THE DIRECTORS
Approval of this proposal requires the affirmative vote of a majority
of the Fund's shares present and entitled to vote at the Meeting, assuming a
quorum is present.
ALL OF THE DIRECTORS PRESENT AT THE MEETING, INCLUDING A
MAJORITY OF THE INDEPENDENT DIRECTORS,
RECOMMEND THAT SHAREHOLDERS VOTE
"FOR" THIS PROPOSAL.
ADDITIONAL INFORMATION
OTHER MATTERS TO COME BEFORE THE MEETING
The Directors know of no business which will be presented for
consideration at the Meeting other than that set forth in Proposals 1 through 5
of the Notice of Special Meeting. If any other matters are properly presented,
it is the intention of the persons designated as proxies to vote such proxies in
accordance with their judgment on such matters.
DEADLINE FOR SHAREHOLDER PROPOSALS
The Fund intends to hold an annual meeting of shareholders in the year
2001 to elect Directors, to ratify or reject the selection of its independent
accountants, and to conduct other business that may come before it. Shareholder
proposals for inclusion in the Fund's proxy statement for the meeting must be
received by the Fund no later than April 30, 2001.
INSTRUCTIONS FOR VOTING AND EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and may help to avoid the time and expense involved in validating your vote if
you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the Registration on the proxy
card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of Registration. For
example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
------------------
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACOUNTS
--------------
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
-----------------------------
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
After completing your proxy card, return it in the enclosed postage paid
envelope.
OTHER WAYS TO VOTE YOUR PROXY
VOTE BY TELEPHONE:
1. Read the proxy statement and have your proxy card at hand.
2. Call toll-free 877-504-5025.
3. Follow the simple recorded instructions.
VOTE BY FAX:
1. Read the proxy statement and have your completed proxy card at hand.
2. Fax both front and back sides of your proxy card by dialing
800-733-1885.
The above methods of voting are generally available 24 hours a day. Do not mail
the proxy card if you are voting by telephone or fax.
If you have any questions about the proxy card, please call Shareholder
Communications Corporation, our proxy solicitor, at 877-504-5025.
<PAGE>
EXHIBITS
Exhibit A Form of Investment Advisory Agreement between the Fund and
U.S. Bank National Association
Exhibit B Text of Article II, Section 2 of the Restated and Amended
Articles of Incorporation
<PAGE>
EXHIBIT A
FORM OF INVESTMENT ADVISORY AGREEMENT
This Agreement, made as of this __ day of _____ 2000, by and between the
American Income Fund Inc., a Virginia corporation (the "Fund"), and U.S. Bank
National Association, a national banking association organized and existing
under the laws of the United States of America (the "Advisor").
1. The Fund hereby retains the Advisor, and the Advisor hereby agrees to act, as
investment advisor for, and to manage the investment of the assets of, the Fund
as set forth herein and as further requested by the Board of Directors of the
Fund. In acting hereunder the Advisor shall be an independent contractor and,
unless otherwise expressly provided or authorized hereunder or by the Board of
Directors of the Fund, shall have no authority to act for or in any way
represent or otherwise be an agent of the Fund.
2. The Advisor, at its own expense, shall provide the Fund with all necessary
office space, personnel and facilities necessary and incident to the performance
of the Advisor's services hereunder. The Advisor shall pay or be responsible for
the payment of all compensation to personnel of the Fund and the officers and
directors of the Fund who are affiliated with the Advisor or any entity which
controls, is controlled by, or is under common control with the Advisor.
3. The Advisor shall be responsible only for those expenses expressly stated in
Paragraph 2 and shall not be responsible for any other expenses of the Fund
including, as illustrative and without limitation, fees and charges of any
custodian (including charges as custodian and for keeping books and records and
similar services to the Fund); fees and expenses of directors, other than
directors described in Paragraph 2; fees and expenses of independent auditors,
legal counsel, transfer agents, dividend disbursing agents, and registrars;
costs of and incident to issuance, redemption and transfer of its shares, and
distributions to shareholders (including dividend payments and reinvestment of
dividends); brokers' commissions; interest charges; taxes and corporate fees
payable to any government or governmental body or agency (including those
incurred on account of the registration or qualification of securities issued by
the Fund); dues and other expenses incident to the Fund's membership in the
Investment Company Institute and other like associations; costs of stock
certificates, shareholder meetings, corporate reports and reports and notices to
shareholders; and costs of printing, stationery and bookkeeping forms. The
Advisor shall be reimbursed by the Fund on or before the fifteenth day of each
calendar month for all expenses paid or incurred during the preceding calendar
month by the Advisor for or on behalf of, or at the request or direction of, the
Fund which is not the responsibility of the Advisor hereunder.
4. The Advisor may utilize an affiliate of the Advisor as a broker, including as
a principal broker, provided that the brokerage transactions and procedures are
in accordance with Rule 17e-1 under the Investment Company Act of 1940, as
amended (the "Act"). The investment of the assets of the Fund shall at all times
be subject to the applicable provisions of the Articles of Incorporation,
Bylaws, Registration Statement on Form N-2 of the Fund and shall conform to the
policies and purposes of the Fund as set forth in such Registration Statement
(i) as interpreted from time to time by the Board of Directors of the Fund and
(ii) as may be amended from time to time by the Board of Directors and/or
shareholders of the Fund as permitted by the Act. Within the framework of the
investment policies of the Fund, the Advisor shall have the sole and exclusive
responsibility for management of the Fund's assets and the making and execution
of all investment decisions for the Fund.
5. The Advisor shall see that there are rendered to the Board of Directors of
the Fund such periodic and special reports as the Board of Directors may
reasonably request, including any reports in respect to placement of security
transactions for the Fund.
6. For the services provided and the expenses assumed by the Advisor pursuant to
this Agreement, the Fund will pay to the Advisor as full compensation therefor a
monthly fee at an annual rate of 0.65% of the Fund's average weekly net assets.
For purposes of the calculation of the fee payable to the Advisor, average
weekly net assets shall be determined on the basis of the Fund's average net
assets for each weekly period ending during the month. The net assets for each
weekly period are determined by averaging the net assets on the last day of such
weekly period
with the net assets on the last day of the immediately preceding weekly period.
When the last day of a weekly period is not a Fund business day, then the
calculation will be based on the net assets of the Fund on the immediately
preceding Fund business day. Such fee shall be payable on the fifth day of each
calendar month for services performed hereunder during the preceding month.
7. Services of the Advisor herein provided are not to be deemed exclusive, and
the Advisor shall be free to render similar services or other services to others
so long as its services hereunder shall not be impaired thereby.
8. The Advisor agrees to indemnify the Fund with respect to any loss, liability,
judgement, cost or penalty which the Fund may directly or indirectly suffer or
incur in any way arising out of or in connection with any breach of this
Agreement by the Advisor.
The Advisor shall be liable to the Fund and its shareholders or former
shareholders for any negligence or willful misconduct on the part of the Advisor
or any of its directors, officers, employees, representatives or agents in
connection with the responsibilities assumed by it hereunder, provided, however,
that the Advisor shall not be liable for any investments made by the Advisor in
accordance with the explicit or implicit direction of the Board of Directors of
the Fund or the investment objectives and policies of the Fund as set forth in
the Registration Statement of the Fund (i) as interpreted from time to time by
the Board of Directors of the Fund and (ii) as may be amended from time to time
by the Board of Directors and/or shareholders of the Fund as permitted by the
Act, and provided further that any liability of the Advisor resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services shall be limited to the period and amount set forth in Section 36(b)(3)
of the Act.
9. It is understood that the officers, directors, agents and shareholders of the
Fund are or may be interested in the Advisor of the Fund as officers, directors,
agents or shareholders and that the officers, directors, shareholders and agents
of the Advisor may be interested in the Fund otherwise than as shareholders.
10. The effective date of this Agreement with respect to the Fund shall be
________, which date shall not precede the date that this Agreement is approved
by the vote of the holders of at least a majority of the outstanding shares of
the Fund and the vote of the Board of Directors of the Fund, including the vote
of a majority of the directors who are not parties to this Agreement or
"interested persons" (as defined in the Act) of the Advisor or of the Fund, cast
in person at a meeting called for the purpose of voting on such approval.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect for a period of more than two years from the date of its
execution but only as long as such continuance is specifically approved at least
annually by (a) the Board of Directors of the Fund or by the vote of a majority
of the outstanding shares of the Fund and (b) the vote of a majority of the
directors, who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Advisor or of the Fund, cast in person at a meeting
called for the purpose of voting on such approval.
11. This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the Board of Directors of the Fund or by
the vote of a majority of the outstanding shares of the Fund, or by the Advisor,
upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Act), provided, however, that such automatic
termination shall be prevented in a particular case by an order of exemption
from the Securities and Exchange Commission or a no-action letter of the staff
of the Commission to the effect that such assignment does not require
termination as a statutory or regulatory matter.
12. This Agreement may be modified by mutual consent, such consent as to the
Fund only to be authorized by a majority of the directors who are not parties to
this Agreement or "interested persons" (as defined in the Act) of the Advisor or
of the Fund and the vote of a majority of the outstanding shares of the Fund.
13. Wherever referred to in this Agreement, the vote or approval of the holders
of a majority of the outstanding shares of the Fund shall mean the lesser of (a)
the vote of 67% or more of the shares of the Fund represented at a meeting where
more than 50% of the outstanding shares are present in person or by proxy, or
(b) the vote of more than 50% of the outstanding shares of the Fund.
14. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
15. Any notice under this Agreement shall be in writing, addressed, delivered or
mailed, postage prepaid, to the other party at such address as such other party
may designate in writing for receipt of such notice.
16. The internal law, and not the law of conflicts, of the State of Minnesota
will govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement.
17. This Agreement, including its exhibits, constitutes the entire agreement
between the parties concerning its subject matter and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
AMERICAN INCOME FUND INC.
By _________________________________
Its__________________________________
U.S. BANK NATIONAL ASSOCIATION
By _________________________________
Its _________________________________
<PAGE>
EXHIBIT B
TEXT OF ARTICLE II, SECTION 2 OF THE
RESTATED AND AMENDED ARTICLES OF INCORPORATION
Article II
2.a. Whenever it is deemed by the Board of Directors to be prudent to prevent
the imposition of a tax or penalty on the Corporation, the Board of
Directors or its delegate may require to be filed with the Corporation an
affidavit from any owner or other holder or proposed transferee of shares
of capital stock stating whether such owner, holder or proposed
transferee is a "Disqualified Organization" and providing such other
information (in a form determined by the Board of Directors) as the Board
of Directors may request for this purpose. Furthermore, the Corporation
shall have the right, but shall not be required, to refuse to recognize
any transfer of any shares of capital stock purportedly transferred if an
affidavit requested pursuant to this Section 2.a has not been completed
as requested and received by the Corporation at such place as shall be
designated by the Board of Directors or its delegate.
b. The Corporation shall not issue shares of its capital stock to a
Disqualified Organization and shares of capital stock of the Corporation
may not be transferred to any Disqualified Organization. Any such
attempted or purported transfer shall be null and void and ineffective as
against the Corporation, and the Corporation shall not recognize such
attempted or purported transfer for any purpose whatsoever (except as
provided in Subsection c. below), including the determination of who is
entitled to receive dividends or other distributions or to vote in or to
receive notice of the affairs of the Corporation. If the foregoing
provision is determined to be void or invalid by virtue of any final
adjudication by a court of competent jurisdiction, statute, rule or
regulation, then any Disqualified Organization owning or holding shares
of capital stock of the Corporation shall be deemed, at the option of the
Corporation and as of such time as the Corporation shall designate, to
have acted as agent on behalf of the Corporation in acquiring those
shares and to hold those shares on behalf of the Corporation. In the
event that the Corporation incurs a tax or penalty as a result of a
Disqualified Organization owning or holding shares of capital stock of
the Corporation, then such Disqualified Organization shall, at the option
of the Corporation, reimburse the Corporation for the full amount of such
tax or penalty and for any other costs or losses incurred by the
Corporation as a result of such Disqualified Organization owning or
holding shares of the Corporation (including attorneys' and accountants'
fees incurred in connection with the tax or penalty and collection from
the Disqualified Organization pursuant hereto).
c. Whenever it is deemed by the Board of Directors or its delegate to be
prudent in preventing the imposition of a tax or penalty on the
Corporation by reason of the possibility that shares of capital stock of
the Corporation are owned or held by an organization which the Board of
Directors or its delegate in good faith determines is or may be a
Disqualified Organization, the Corporation may, solely at its option,
purchase some or all shares of capital stock owned or held by such
organization. Written notice of such purchase shall be provided to the
owner or holder of such shares to be purchased not less than seven
calendar days prior to the settlement date for the purchase (the
"Settlement Date") determined by the Board of Directors or its delegate
and included in the notice of purchase. The purchase price to be paid for
such shares to be purchased shall be equal to the lowest of (i) (a) with
respect to the shares to be purchased, the closing price of such shares
on the principal national securities exchange on which those shares are
listed or admitted to trading on the last business day prior to the
Settlement Date or, if lower, such price as of the date the shares were
acquired by the owner or holder, or (b) if that class of capital stock
whose shares are to be purchased are not so listed or admitted to
trading, the closing bid price of the shares to be purchased as of the
last business day prior to the Settlement Date as reported on the NASDAQ
System, if quoted thereon or, if lower, such price as of the date the
shares were acquired by the owner or holder, or (ii) the net asset value
of the shares of capital stock to be purchased (the " Net Asset Value"),
as of the last business day prior to the Settlement Date, or if lower,
the Net Asset Value on the date the shares were acquired by the owner or
holder; provided, however, if the purchase price is not determinable in
accordance with either clauses (i) (a) or (i) (b) of this sentence, the
purchase price shall be the lower of Net Asset Value or Fair Market Value
(as determined in good faith by the Board of Directors) as of (i) the
Settlement Date, or (ii) the date on which the shares to be purchased
were acquired by the owner or holder thereof. The purchase price (reduced
by any appropriate offsets) for any shares of capital stock so purchased
shall be payable on the Settlement Date and in no case shall bear
interest.
d. No provision in these Articles shall limit the authority of the Board of
Directors to take any and all other action as it, in its sole discretion,
deems necessary or advisable to protect the Corporation or the interests
of its shareholders to prevent the imposition of a tax or penalty on the
Corporation
e. If any provision of this section 2 or any application of any such
provision is determined in a final adjudication to be invalid by any
court having jurisdiction over the issue, the validity of the remaining
provisions of this Section 2 shall not be affected and other applications
of such provision shall be affected only to the extent necessary to
comply with the determination of that court.
f. For purposes of this Section 2, a "Disqualified Organization" means (i)
the United States, any state or political subdivision thereof, any
foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, (ii) any organization (other
than a cooperative described in section 521 of the Internal Revenue Code
of 1986, as amended ("Code")) which is exempt from tax imposed by chapter
1 of the Code unless such organization is subject to the tax imposed by
section 511 of the Code on its unrelated business taxable income, (iii)
any organization that is a rural electrical or telephone cooperative
described in Code section 1381 (a) (2) (c). For purposes of clause (i) of
the immediately preceding sentence, a corporation shall not be treated as
an instrumentality of the United States or of any state or political
subdivision thereof, if (i) all of the activities of such corporation are
subject to the tax imposed by the Code, and (ii) a majority of the board
of directors of such corporation is not selected (within the meaning of
such term as used in section 168 (h) (2) (D) of the Code) by the United
States or any state or political subdivision thereof (except that this
clause (ii) shall not apply to the Federal Home Loan Mortgage
Corporation).
g. The existence of the restrictions on transfer on the capital stock of the
Corporation set forth in this Article shall be noted conspicuously on the
front or back of the certificate evidencing shares of such stock or
contained in any information statement required by Section 13.1-648(b) of
the Virginia Stock Corporation Act.
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MENTOR INCOME FUND, INC.
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 27, 2000
The undersigned, revoking all Proxies heretofore given, hereby appoints
Catherine E. Foley, Sally E. Ganem, Maureen E. Towle and Beth K. Werths or any
of them as Proxies of the undersigned, with full power of substitution, to vote
on behalf of the undersigned all shares of Mentor Income Fund, Inc. (the "Fund")
that the undersigned is entitled to vote at the special meeting of shareholders
of the Fund to be held at 10:00 a.m. on September 27, 2000 at the offices of the
Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116
and at any adjournments thereof, as fully as the undersigned would be entitled
to vote if personally present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS PROXY. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian, or custodian for a minor, please give your
full title. When signing on behalf of a corporation or as a partner for a
partnership, please give the full corporate or partnership name and your title,
if any.
Date , 2000
----------------------------------------
----------------------------------------
Signature(s) and Title(s), if applicable
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MENTOR
INCOME FUND, INC. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO
THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES REPRESENTED HEREBY
WILL BE VOTED AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED. THE
BOARD OF DIRECTORS OF THE FUND RECOMMENDS A VOTE FOR THE PROPOSALS. PLEASE MARK
YOUR VOTE BELOW IN BLUE OR BLACK INK. DO NOT USE RED INK. EXAMPLE: X
FOR AGAINST ABSTAIN
1. To approve a new investment advisory [ ] [ ] [ ]
agreement between the Fund and U.S.
Bank National Association.
FOR
ALL NOMINEES WITHHOLD
LISTED AUTHORITY
(*except as
noted at left)
2. To elect members of the Board of [ ] [ ]
Directors of the Fund to hold office
until their successors are duly elected
and qualified.
(01) Robert J. Dayton (02) Roger A. Gibson (03) Andrew M. Hunter III
(04) Leonard W. Kedrowski (05) John M. Murphy, Jr. (06) Robert L. Spies
(07) Joseph D. Strauss (08) Virginia L. Stringer
*INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name or number on the line provided below.
FOR AGAINST ABSTAIN
3. To approve the amendment to Article I of [ ] [ ] [ ]
the Fund's Restated and Amended
Articles of Incorporation changing
the name of the Fund to American
Income Fund Inc.
FOR AGAINST ABSTAIN
4. To approve the amendment to Article II [ ] [ ] [ ]
of the Fund's Restated and Amended
Articles of Incorporation deleting
Section 2 thereof.
FOR AGAINST ABSTAIN
5. To ratify the selection of KPMG LLP as [ ] [ ] [ ]
independent accountants.
FOR AGAINST ABSTAIN
6. To consider and vote upon such other [ ] [ ] [ ]
matters as may properly come before
said meeting or any adjournments
thereof.
