Filed with the Securities and Exchange Commission on November 7, 1997
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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
[ ] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materia [ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
</TABLE>
America's Utility Fund, Inc.
(Name of Registrant as Specified in its Charter)
(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 a table below per Exchange Act Rules 14a-6(i)(1) 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 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>
AMERICA'S UTILITY FUND, INC.
901 East Byrd Street
Richmond, Virginia 23219
November 18, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of
Stockholders of America's Utility Fund, Inc. (the "Fund") to be held on Monday,
December 22, 1997, at 9:00 a.m., Eastern Standard Time, at 901 East Byrd Street,
Richmond, Virginia. At the Meeting, stockholders will be asked to approve a new
management contract between Mentor Investment Advisors, LLC and the Fund, to
become effective upon consummation of the proposed acquisition of Wheat First
Butcher Singer, Inc., corporate parent of the Mentor group of companies, by
First Union Corporation.
In addition, stockholders will also be asked to approve a new
management contract for the Fund in contemplation of the potential acquisition
of an additional interest in Mentor Investment Group, LLC by EVEREN Securities
Holdings, Inc. and to ratify the selection of the Fund's auditors.
Although the Board of Directors of the Fund would like very much to
have each stockholder 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,
Paul F. Costello
President
STOCKHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED ENVELOPE SO AS TO BE REPRESENTED
AT THE MEETING.
<PAGE>
AMERICA'S UTILITY FUND, INC.
-----------------------------------
Notice of Special Meeting of Stockholders
-----------------------------------
A Special Meeting of Stockholders of America's Utility Fund, Inc. (the
"Fund") will be held at 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 management contract between the Fund and
Mentor Investment Advisors, LLC, as described in the attached
Proxy Statement;
2. To approve a new management contract 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 ratify the selection of independent auditors by the Board
of Directors; and
4. To consider and act upon such other matters as may properly
come before the Meeting.
Stockholders of record as of the close of business on November 7, 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 18, 1997
<PAGE>
AMERICA'S UTILITY FUND, INC.
901 East Byrd Street
Richmond, Virginia 23219
-----------------------------------
Proxy Statement
-----------------------------------
The enclosed proxy is solicited by the Board of Directors of America's
Utility Fund, Inc. (the "Fund") for use at the Special Meeting of Stockholders
of the Fund to be held at 901 East Byrd Street, Richmond, Virginia 23219, at
9:00 a.m., Eastern Standard Time, on December 22, 1997, and at any adjournment
thereof. Stockholders of record at the close of business on November 7, 1997
(the "Record Date") are entitled to vote at the Meeting or any adjourned
session. These proxy materials are first being made available to stockholders on
or about November 18, 1997.
Shares represented by duly executed proxies will be voted in accordance
with the specification made. If no specification is made, shares will be voted
in accordance with the recommendation of the Board of Directors. You may revoke
a proxy at any time before it is exercised by sending or delivering a written
revocation to the Secretary of the Fund (which will be effective when it is
received by the Secretary), by properly executing a later-dated proxy, or by
attending the Meeting, requesting return of your proxy, and voting in person.
Copies of the Annual Report of the Fund for the fiscal year ended December 31,
1996 and the Semi-Annual Report of the Fund for the period ended June 30, 1997
may be obtained without charge by calling America's Utility Fund Service Company
at 1-800-487-3863 or writing America's Utility Fund Service Company at 901 East
Byrd Street, Richmond, Virginia 23219.
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I. APPROVAL OF NEW MANAGEMENT CONTRACT
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 stockholders of the Fund
approve a new management contract between the Fund and Mentor Advisors. The new
agreement will replace the existing management contract between the Fund and
Mentor Advisors. Your approval of the new contract 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 contract, 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.
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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 management contract. Mentor Advisors currently provides
investment advisory services to the Fund pursuant to a management contract 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 fee, calculated daily and payable
monthly, based on average net assets at the following annual rates: 0.75% of the
first $5 million, 0.50% of
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the next $5 million, 0.25 % of the next $90 million, 0.20% of the next $100
million, 0.15% of the next $100 million, and 0.10% of amounts over $300 million.
During fiscal year 1996, the Fund paid Mentor Advisors investment advisory fees
in the amount of $352,144 (reflecting a reduction of $144,093 due to an expense
limitation then in effect).
The Existing Agreement was approved by stockholders of the Fund in
August 1995.
Administrative fees. The Fund has entered into an administrative
services agreement with Mentor Investment Group, LLC ("Mentor Group"), an
affiliate of Mentor Advisors, pursuant to which Mentor Group assists the Fund in
the preparation of certain reports to stockholders of the Fund, tax returns, and
filings with the Securities and Exchange Commission and state Blue Sky
authorities, prepares and furnishes reports to the Fund's Board of Directors,
and generally assists the Fund's business operations, all subject to the
provisions of the Fund's Articles of Incorporation, By-laws 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 0.65%
of the Fund's average daily net assets, less the amount of any investment
advisory fees paid to Mentor Advisors pursuant to the Existing Agreement. During
fiscal year 1996, the Fund paid Mentor Group $617,040 for administrative
services. Mentor Group's address is 901 East Byrd Street, Richmond, Virginia
23219.
The administrative services agreement will terminate by its terms upon
consummation of the Merger. The Board of Directors of the Fund has approved a
new administrative services agreement with Mentor Group upon substantially
identical terms, to become effective upon consummation of the Merger.
The new management contract. The Existing Agreement will by its terms
terminate upon the consummation of the Merger, since the Merger will constitute
a change of control of Mentor Advisors for purposes of the 1940 Act. The Board
of Directors is recommending that stockholders of the Fund approve a new
management contract (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
objectives,
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<PAGE>
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 New Agreement will take effect upon
consummation of the Merger, with its continuing effectiveness subject to the
receipt of stockholder 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 stockholders 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 stockholders will not have acted on the New
Agreement prior to the consummation of the Merger. The Fund and Mentor Advisors
have filed with the Securities and Exchange Commission 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 stockholders 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 stockholder approval of
the New Agreement will be held in an interest-bearing escrow account to be paid
to Mentor Advisors only upon stockholder approval of the New Agreement, or, if
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<PAGE>
stockholders 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 stockholder approval of the New Agreement, of
any amounts held in the escrow account.
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 its 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. Likewise, a particular security may be bought for one or more clients when
one or more other clients are selling the security. In some instances, one
client may sell a particular security to another client. 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 taxes, interest, brokerage fees
and commissions, compensation paid under the Fund's shareholder service plan,
fees paid to members of the Board of Directors who are not officers, directors,
stockholders, or employees of Mentor Advisors, SEC fees and related expenses,
state Blue Sky qualification fees, charges of custodians, transfer agents,
registrars or other agents, outside auditing, accounting, and legal services,
charges for the printing of prospectuses and statements of additional
information for regulatory purposes or for distribution to stockholders, certain
stockholder report charges, and charges relating to corporate matters.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Mentor Advisors receives brokerage and research services and
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<PAGE>
other similar services from many broker-dealers with which it places the Fund's
portfolio transactions and from third parties with which these broker-dealers
have arrangements. These services include such matters as general economic and
market reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services, and personal
computers utilized by Mentor Advisors' managers and analysts. Where the services
referred to above are not used exclusively by Mentor Advisors for research
purposes, Mentor Advisors, based upon its own allocation of expected use, bears
that portion of the cost of these services which directly relates to its
non-research use. Some of these services are of value to Mentor Advisors and its
affiliates in advising various of its clients (including the Fund), although not
all of these services are necessarily useful and of value in managing the Fund.
The investment advisory fee paid by the Fund is not reduced because Mentor
Advisors or its affiliates receive these services even though Mentor Advisors
might otherwise be required to purchase some of these services for cash.
Mentor Advisors places all orders for the purchase and sale of
portfolio investments for the Fund and buys and sells investments for the Fund
through a substantial number of brokers and dealers. Mentor Advisors seeks the
best overall terms available for the Fund, except to the extent Mentor Advisors
may be permitted to pay higher brokerage commissions as described below. In
doing so, Mentor Advisors, having in mind the Fund's best interests, consider
all factors they deem relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience, and financial
stability of the broker-dealer involved, and the quality of service rendered by
the broker-dealer in other transactions. Mentor Advisors may enter into
transactions with broker-dealers that furnish it, without cost to it, certain
brokerage and research services of value to it and its affiliates in advising
the Fund and other clients. In doing so, Mentor Advisors may cause the Fund to
pay greater brokerage commissions than it might otherwise pay.
As permitted by Section 28(e) of the 1934 Act, and by the Existing
Agreement, Mentor Advisors may cause the Fund to pay a broker-dealer which
provides "brokerage and research services" (as defined in the 1934 Act) to
Mentor Advisors an amount of disclosed commission for effecting securities
transactions on stock exchanges and other transactions for the Fund on an agency
basis in excess of the commission which another broker-dealer would have charged
for effecting that transaction. Mentor Advisors' authority to cause the Fund to
pay any such greater commissions is also subject to such policies as the Board
of
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Directors may adopt from time to time. Mentor Advisors does not currently intend
to cause the Fund to make such payments.
Wheat, First Securities, Inc. ("Wheat") and EVEREN Securities, Inc.,
affiliates of Mentor Advisors, may receive brokerage commissions from the Fund
in accordance with certain procedures adopted by the Board of Directors. See
"Ownership of Mentor Advisors," below, for a description of the affiliation
between EVEREN Securities, Inc. and Mentor Advisors.
The aggregate amount of commissions paid to Wheat and EVEREN
Securities, Inc. by the Fund during fiscal year 1996, and the percentage that
such amount represents of the aggregate brokerage commissions paid by the Fund
for that year, was $39,946 (38.8%) and $3,360 (3.26%), respectively.
Distribution. Mentor Distributors, LLC ("Mentor Distributors") serves
as principal distributor of the Fund under a distribution agreement between
Mentor Distributors and the Fund. Pursuant to the distribution agreement, Mentor
Distributors bears the expense of printing any promotional or sales literature
used by Mentor Distributors or furnished by Mentor Distributors to dealers in
connection with the public offering of the Fund's shares, including expenses of
advertising in connection with such public offerings. Mentor Distributors has
not undertaken to sell any specified number of shares of the Fund. Mentor
Distributors receives no compensation from the Fund for the services it provides
under the distribution agreement. Mentor Distributors address is 901 East Byrd
Street, Richmond, Virginia 23219.
Shareholder service agreement. The Fund has entered into a shareholder
service agreement (the "Agreement") with Mentor Advisors,
pursuant to which Mentor Advisors, by itself or through other financial
institutions, provides shareholder support services to the Fund and its
stockholders. These services may include, but are not limited to, providing
office space and various clerical, supervisory, and computer personnel for the
maintenance of shareholder accounts, processing purchase and redemption
transactions, and providing assistance to stockholders. In return for providing
these services, the Fund pays Mentor Advisors a fee, at the annual rate of 0.25%
of the Fund's average daily net assets.
The Fund paid shareholder services fees to Mentor Advisors of $372,763
during fiscal year 1996. Prior to October 31, 1997, Mentor Advisors paid all
amounts received under the Agreement to America's Utility Fund Service Company
pursuant to a sub-shareholder services agreement. The sub-shareholder services
agreement was terminated
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on October 31, 1997.
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:
Name Position Principal 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.
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Name Position Principal Occupation
- ---- -------- --------------------
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. 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
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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. Stockholders of the Fund will vote as a single class on
the New Agreement. 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 and (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
stockholders of the Fund do not approve the New Agreement, the Board of
Directors will take such further action as it may deem to be in the interests
of the stockholders of the Fund.
The Board of Directors unanimously recommends that stockholders of the
Fund vote to approve the New Agreement.
II. APPROVAL OF NEW MANAGEMENT CONTRACT -- 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 management contract
between the Fund and Mentor Advisors. The Board of Directors is recommending
that stockholders approve a new management contract at the Meeting, to take
effect upon the occurrence of any such change of control of Mentor Group.
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Possible change of control; need for stockholder 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
Fund's shares, 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 of control" of Mentor Group, and, as a result, of
Mentor Advisors. Any such change of control would, in turn, result in an
"assignment", as defined in the 1940 Act, of the management contract in effect
at the time between the Fund and Mentor Advisors, resulting in its automatic
termination.
The Board of Directors is recommending that stockholders of the Fund
approve new management contract between the Fund and Mentor Advisors. The new
management contract 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
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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 and the vote of a majority of the members of
the Committee nominated by EVEREN.
The effect of a possible change of 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 any interest less than
45% would result in any material change in the management or control of Mentor
Group. Mentor Advisors has also advised the Board of Directors that EVEREN's
owning 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 management contract. In any
event, no new investment advisory 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.
Stockholders are not being asked to vote on any management contract 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
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<PAGE>
$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. Stockholders of the Fund will vote as a single class on
the new management contract. As provided in the 1940 Act, approval of the new
management contract 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 and (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 stockholders of the Fund do not approve the new management
contract, the Board of Directors will take such further action as it may deem to
be in the interests of the stockholders of the Fund.
The Board of Directors unanimously recommends that stockholders of the
Fund vote to approve the new management contract.
III. SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, including the Directors who are not interested
persons of the Fund, has selected KPMG Peat Marwick LLP ("KPMG") as independent
auditors for the Fund for the fiscal year ending December 31, 1997. KPMG 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 these services. A representative of KPMG will be present at the
Meeting and will have an opportunity to make a statement if he or she desires to
do so and to respond to appropriate questions.
The Board of Directors' policy regarding engaging independent
accountants' services is that management may engage the Fund's independent
auditors to perform any services normally provided by independent accounting
firms, provided that any such services meet any and all of the independence
requirements of the American Institute of Certified Public Accountants and the
Securities and Exchange Commission.
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<PAGE>
Required vote. The affirmative vote of a majority of the votes cast at
the meeting, if a quorum is present, is required to ratify the Board of
Directors' selection of independent auditors. Shares of the Fund shall vote
together as a single class.
The Board of Directors unanimously recommends that you vote "FOR" this
proposal.
IV. MISCELLANEOUS
Ownership of shares. As of the Record Date, the Fund had
shares outstanding . Each share is entitled to one vote, with fractional shares
voting proportionally. To the Fund's knowledge, as of the Record Date, no person
owned beneficially more than 5% of the outstanding shares of the Fund.
None of the Directors owns beneficially any shares of the Fund except for
Mr. , who owns shares, and Mr. who owns shares.
These holdings, individually or in the aggregate, represent less than 1% of
the outstanding shares of the Fund.
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 stockholders'
identities, to allow stockholders 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
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<PAGE>
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. Stockholders would
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<PAGE>
be called at the phone number the Fund (or a stockholder's financial
institution) has in its records for their accounts, and would be asked for their
Social Security number or other identifying information. The stockholders 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 stockholders'
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 Articles of Incorporation of the Fund provide that
one-third of the shares entitled to vote on a matter shall constitute a quorum
for the transaction of business on that matter at a meeting. However, approval
of any new management contract will require the presence of a greater percentage
of the Fund's shares at the Meeting in person or by proxy.
Adjournment. In the event that sufficient votes in favor of any of the
proposals set forth in the Notice of Special 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 for a period or
periods of not more than 60 days in the aggregate 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 Articles of
Incorporation and By-laws. 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 Mentor Advisors. 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
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<PAGE>
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 proposal to approve any new management contract.
Date for receipt of stockholders' proposals for subsequent meetings of
stockholders. The Fund's By-laws do not provide for annual meetings of
stockholders, and the Fund does not currently intend to hold such a meeting in
1998. Stockholder proposals for inclusion in the Fund's proxy statement for any
subsequent meeting must be received by the Fund a reasonable period of time
prior to any such meeting.
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<PAGE>
Exhibit A
AMERICA'S UTILITY FUND, INC.
MANAGEMENT CONTRACT
This Management Contract dated as of ,1997 between AMERICA'S
UTILITY FUND, INC., a Maryland corporation (the "Fund"), and MENTOR INVESTMENT
ADVISORS, LLC, a Virginia limited liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO THE FUND.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Fund, will determine what investments shall be
purchased, held, sold, or exchanged by the Fund and what portion, if any, of the
assets of the Fund shall be held uninvested and shall, on behalf of the Fund,
make changes in the Fund's investments. In the performance of its duties, the
Manager will comply with the provisions of the Articles of Incorporation and
By-Laws of the Fund and the Fund's stated investment objectives, policies, and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Fund and to comply with other policies which the Board of Directors may
from time to time determine.
(b) The Manager, at its expense, will furnish (i) all necessary
investment and related management facilities, including, salaries of personnel,
required for it to execute its duties faithfully, (ii) suitable office space for
the Fund, and (iii) such facilities, including bookkeeping, clerical personnel,
and equipment as may be necessary for the efficient performance by the Manager
of its obligations. The Manager will pay the compensation of such of its
directors, officers, and employees as may duly be elected Directors or officers
of the Fund.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Fund's account with brokers
or dealers selected by the Manager. In the selection of such brokers or dealers
and the placing of such orders, the Manager shall give primary consideration to
securing for the Fund the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In doing so, the Manager,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account
A-1
<PAGE>
market prices and trends, the reputation, experience, and financial stability of
the broker or dealer involved, and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the Board of
Directors of the Fund may determine, the Manager shall not be deemed to have
acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Fund to pay a broker or
dealer that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission that another broker or dealer would have charged for
effecting that transaction, if the Manager determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall responsibilities
with respect to the Fund and to other clients of the Manager as to which the
Manager exercises investment discretion.
(d) The Fund hereby authorizes any entity or person associated with the
Manager which is a member of a national securities exchange to effect any
transaction on the exchange for the account of the Fund which is permitted by
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and the Fund hereby consents to the retention of compensation for
such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Fund not expressly assumed by the Manager pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Directors, officers, and
employees of the Fund may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Fund. It is also understood that the Manager and any person controlled by or
under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Fund shall pay the Manager, promptly (but in any
event within three business days) after the last day of each calendar month, a
fee, calculated daily, at an annual rate as follows: for the first $5 million of
assets under management, 0.75% of the average daily net assets in the Fund; for
the next $5 million under management, .50% of the average daily net assets in
the Fund; for the next $90 million under management, .25% of the average daily
net assets in the
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<PAGE>
Fund; for the next $100 million under management, .20% of the average daily net
assets in the Fund; for the next $100 million under management, .15% of the
average daily net assets in the Fund; and for any amounts over $300 million
under management, .10% of the average daily net assets in the Fund.
If this Agreement is terminated as of any date not the last day of a
calendar month, the fee payable to the Manager shall be paid promptly (but in
any event within three business days) after such date of termination.
The average daily net assets of the Fund shall in all cases be based
only on business days and be computed as of the time of the regular close of
business of the New York Stock Exchange, or such other time as may be determined
by the Board of Directors. Each such payment shall be accompanied by a report of
the Fund prepared either by the Fund or by a reputable firm of independent
accountants which shall show the amount properly payable to the Manager under
this Agreement and the detailed computation thereof.
3. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Directors of the Fund who are not interested persons of the Fund or of the
Manager.
4. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect for two years from the date hereof, and is
renewable annually thereafter by specific approval of the Board of Directors or
by vote of a majority of the outstanding voting securities of the Fund. Any such
renewal shall be approved by the vote of a majority of the Directors who are not
interested persons under the Investment Company Act of 1940, as amended, cast in
person at a meeting called for the purpose of voting on such renewal. This
Contract may be terminated without penalty at any time by the Fund or the
Manager upon 60 days written notice. The termination of this Contract shall not
affect any obligation or liability on the Fund's part for any transaction
entered into or obligation incurred on the Fund's behalf prior to such
termination.
Termination of this Contract pursuant to this Section 4 will be without
the payment of any penalty.
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<PAGE>
5. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "vote of a majority of the
outstanding shares" of the Fund means the affirmative vote, at a duly called and
held meeting of such shareholders, (a) of the holders of 67% or more of the
shares of the Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "interested person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, as amended, and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act; the term "approval by a majority of the
outstanding voting securities of the Fund" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
6. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder.
IN WITNESS WHEREOF, AMERICA'S UTILITY FUND, INC. and MENTOR INVESTMENT
ADVISORS, LLC, have each caused this instrument to be signed in duplicate in its
behalf by its President or Vice President thereunto duly authorized, all as of
the day and year first above written. This document is executed by each of the
parties hereto under seal. This Agreement shall be governed and construed in
accordance with the laws (other than conflict of laws rules) of The Commonwealth
of Virginia.
AMERICA'S UTILITY FUND, INC.
By:
------------------------
MENTOR INVESTMENT ADVISORS, LLC
By:
------------------------
A-4
<PAGE>
AMERICA'S UTILITY FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 22, 1997
The undersigned hereby appoints Daniel J. Ludeman, Paul F. Costello, and Peter
J. Quinn, Jr., and each of them separately, proxies, with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Special Meeting of Stockholders of the America's Utility Fund,
Inc. (the "Fund"), on December 22, 1997 at 9:00 a.m., Eastern Standard Time, and
at any adjournments thereof, all of the shares of the Fund which the undersigned
would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, AND 3. The Board of Directors recommends a vote FOR each
proposal.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting.
<TABLE>
<S> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ] KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
</TABLE>
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED AMERICA'S UTILITY FUND, INC.
<TABLE>
<S> <C>
FOR AGAINST ABSTAIN
1. Proposal to approve new management contract for the Fund to [ ] [ ] [ ]
take effect upon the merger of Wheaton First Butcher Singer, Inc. with
First Union Corporation.
2. Proposal to approve new management contract for the Fund to [ ] [ ] [ ]
take effect upon the acquisition of additional interest in Mentor
Investment Group, LLC by EVEREN Securities Holdings, Inc.
3. Proposal to ratify the selection of KPMG Peat Marwick LLP as the [ ] [ ] [ ]
independent auditor of the Fund
</TABLE>
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
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Signature [PLEASE SIGN WITHIN BOX] Date
- --------------------------------- -------------------
Signature (Joint Owners) Date
