As filed with the Securities and Exchange Commission on May 1, 1997
Registration No. 33-45437
File No. 811-6549
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
-------------------------------------------------------
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [ X ]
ACT OF 1940
Amendment No. 10 [ X ]
(Check appropriate box or boxes)
AMERICA'S UTILITY FUND, INC.
(Exact name of registrant as specified in charter)
901 East Byrd Street
Richmond, Virginia 23219
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (804) 775-5719
---------------
Linwood R. Robertson, President
901 East Byrd Street
Richmond, Virginia 23219
(Name and address of agent for service)
-----------------
Copy to:
Timothy W. Diggins, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
--------------
It is proposed that this filing will become effective (check appropriate box):
[ X ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Fund registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of
1940. A Rule 24f-2 notice in respect of the Fund for its fiscal year ending
December 31, 1996 was filed on February 27, 1997.
-2-
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Proposed maximum
Title of securities being Amount being Proposed maximum aggregate offering Amount of registration
registered registered offering price per unit price* fee
- ------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial 815,122 shares N/A $0 $0
Interest
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Calculated pursuant to Rule 24e-2 under the Investment Company Act of
1940. The total amount of securities redeemed or repurchased during the
Registrant's previous fiscal year was 1,674,189 shares, 858,859 of
which have been used for reductions pursuant to Rule 24e-2(a) or Rule
24f-2(c) under said Act in the current fiscal year, and 815,122 of
which are being used for such reduction in this Amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Part A
N-1A Item No.
Location
1. Cover Page............................ Cover Page
2. Synopsis.............................. Cover Page; Expense Summary;
Example
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; Investment Objective
and Policies; Other Investment
Practices; The Fund; Transfer and
Dividend Agent Services;
Performance Information
5. Management of the Fund................ Management of the Fund; Taxes
5A. Management's Discussion
of Fund Performance................. Contained in the Annual Report of
the Registrant
6. Capital Stock and Other
Securities.......................... How to Invest in the Fund;
Method of Investing Payments and
Distributions; Your Rights in the
Fund and Under Your Plan; Taxes
7. Purchase of Securities Being
Offered............................. How to Invest in the Fund;
Method of Investing Payments and
Distributions; Your Rights in the
Fund and Under Your Plan; Tax-
Sheltered Retirement Plans
8. Redemption or Repurchase.............. Your Rights in the Fund and
Under Your Plan
9. Pending Legal Proceedings............. Not Applicable
-3-
<PAGE>
Part B
N-1A Item No. Location
10. Cover Page........................... Cover Page
11. Table of Contents.................... Table of Contents
12. General Information and History...... General Information; Ratings
13. Investment Objectives and
Policies........................... Investment Restrictions; Certain
Investment Techniques
14. Management of the Fund............... Management
15. Control Persons and Principal
Holders of Securities.............. Management; Control Persons and
Principal Holders of Securities
16. Investment Advisory and Other
Services........................... Investment Advisory Services;
Other Services; Brokerage;
Custodian; Independent Auditors;
Members of Investment Teams at
Mentor Advisors
17. Brokerage Allocation................. Brokerage
18. Capital Stock and Other
Securities......................... General Information
19. Purchase, Redemption and Pricing
of Securities Being Offered........ How to Buy Shares; Distribution;
Determining Net Asset Value;
Redemption in Kind
20. Tax Status........................... Tax Status
21. Underwriters......................... Distribution
22. Calculations of Yield Quotations
of Money Market Funds.............. Performance Information
23. Financial Statements................. Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
-4-
<PAGE>
[LOGO]
AMERICA'S UTILITY FUND
AMERICA'S UTILITY FUND, INC.
PROSPECTUS DATED MAY 1, 1997
America's Utility Fund, Inc. seeks current income and moderate capital
growth. The Fund invests primarily in the securities of utility companies.
Mentor Investment Advisors, LLC is the Fund's investment manager.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Please read this Prospectus
and retain it for future reference. INVESTORS CAN FIND MORE DETAILED INFORMATION
IN THE MAY 1, 1997 STATEMENT OF ADDITIONAL INFORMATION, AS AMENDED FROM TIME TO
TIME. FOR A FREE COPY OF THE STATEMENT, CALL AMERICA'S UTILITY FUND SERVICE
COMPANY AT 1-800-487-3863. The Statement has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. The
Fund's address is 901 East Byrd Street, Richmond, Virginia 23219.
------------------------
PROJECT AMERICA, INC.
DISTRIBUTOR
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing in the Fund.
The following table summarizes an investor's maximum transaction costs from
investing in the Fund and Fund expenses based on its last fiscal year. The
Example shows the cumulative expenses attributable to a hypothetical $1,000
investment in the Fund over specified periods.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees* 0.23%
12b-1 Fees None
Other Expenses
Administrative Services Expenses* 0.42%
Shareholder Servicing Arrangements 0.25%
Other Fund Expenses (after expense limitation)** 0.31%
Total Other Expenses (after expense limitation)** 0.98%
----
Total Fund Operating Expenses (after expense limitation)** 1.21%
</TABLE>
- ---------------
* The aggregate of Management Fees and Administrative Services Expenses may not
exceed 0.65% of net assets per annum.
** Other Fund Expenses, Total Other Expenses, and Total Fund Operating Expenses
reflect an expense limitation currently in effect. Absent the expense
limitation, Other Fund Expenses, Total Other Expenses, and Total Fund
Operating Expenses would be 0.40%, 1.07%, and 1.30%, respectively; for the
Fund's most recent fiscal year, these amounts would have been, absent the
expense limitation, 0.46%, 1.13%, and 1.36%, respectively, reflecting
extraordinary expenses of 0.06% incurred during the year.
EXAMPLE
Your investment of $1,000 in the Fund would incur the following expenses,
assuming a 5% annual return and redemption at the end of each period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$ 13 $39 $67 $147
</TABLE>
The tables are provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses of the Fund. The Example
should not be considered a representation of future performance; actual expenses
may be greater or less than those shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data has been audited and reported on by Deloitte &
Touche LLP, the Fund's independent auditors for the periods shown. Their report
dated February 4, 1997 on the financial statements of the Fund is included in
the Fund's annual report to shareholders, and is incorporated by reference into
the Statement of Additional Information. A copy of the Fund's annual report may
be obtained free of charge from the Fund. This table should be read in
conjunction with the financial statements and related notes.
<TABLE>
<CAPTION>
FOR THE PERIOD
5/5/92
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF OPERATIONS)
12/31/96 12/31/95 12/31/94 12/31/93 TO 12/31/92(A)
---------- ---------- ---------- ---------- ----------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.72 $ 19.50 $ 23.54 $ 21.95 $20.54
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.98 0.96 0.96 0.91 0.63
Net realized and unrealized gain
(loss) on investments 0.33 5.22 (4.04) 2.00 1.80
---------- ---------- ---------- ---------- ------
Total from investment operations 1.31 6.18 (3.08) 2.91 2.43
LESS DISTRIBUTIONS
Dividends from net investment income (0.96) (0.96) (0.96) (0.92) (0.67)
Distributions from net realized
capital gains 0.00 0.00 0.00 (0.40) (0.35)
---------- ---------- ---------- ---------- ------
Total distributions (0.96) (0.96) (0.96) (1.32) (1.02)
---------- ---------- ---------- ---------- ------
NET ASSET VALUE, END OF PERIOD $ 25.07 $ 24.72 $ 19.50 $ 23.54 $21.95
---------- ---------- ---------- ---------- ------
---------- ---------- ---------- ---------- ------
Total Return 5.46% 32.30% (13.10%) 13.26% 18.76%
RATIOS/
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 144.42 $ 162.83 $ 125.01 $ 133.53 $43.67
Ratio of expenses to average net assets 1.27% 1.21% 1.21% 1.21% 1.21%
Ratio of expenses to average net assets
before expense reductions 1.36% 1.34% 1.33% 1.41% 1.41%
Ratio of net investment income to
average net assets 3.90% 4.40% 4.66% 4.19% 4.99%
Portfolio turnover rate 24.05% 27.77% 28.85% 21.20% 24.16%
Average commission rate on portfolio
transactions $ 0.0680 -- -- -- --
</TABLE>
- ---------------
(a) Dividends from net investment income include investment income earned prior
to commencement of sales to the public. The total return and the ratios to
average net assets are annualized.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income and moderate
capital growth by investing primarily in securities issued by utility companies.
The Fund's investments in utility companies may include equity securities,
including common stocks and preferred stocks, and debt securities. Mentor
Investment Advisors, LLC ("Mentor Advisors") is the Fund's investment manager.
"Utility companies" include companies engaged in the manufacture,
production, generation, transmission, sale, or distribution of electric or gas
energy and companies engaged in telecommunications, including telephone,
telegraph, satellite, microwave, and other communications media. Mentor Advisors
considers a particular company to be a "utility company" if at the time of
investment Mentor Advisors determines that at least 50% of the company's assets,
revenues, or profits are derived from one or more of the activities described
above (other than public broadcasting or cable television). Under normal
circumstances, the Fund will invest at least 65% of its total assets (determined
at the time of investment) in the securities of utility companies.
The Fund may invest the remainder of its assets in other securities it
believes have the potential to produce current income, capital growth, or both.
These may include U.S. government securities, corporate bonds, notes, and
debentures, and equity securities of other kinds of companies. The types of
securities held by the Fund will vary from time to time in light of the Fund's
investment objective, changes in interest rates, and economic and other factors.
The Fund may hold a portion of its assets in cash and money market instruments.
Debt securities in which the Fund may invest will be rated at the time of
purchase at least Baa by Moody's Investors Service, Inc. or BBB by Standard &
Poor's (or comparably rated by another nationally recognized rating
organization), or may be unrated securities determined to be of comparable
quality by Mentor Advisors. Investments in securities rated BBB or Baa have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the issuer to
make principal and interest payments than would likely be the case with
investments in securities with higher credit ratings. The Fund will not
necessarily dispose of a security when its rating is reduced below its rating at
the time of purchase, although Mentor Advisors will monitor the investment to
determine whether continued investment in the security would serve the Fund's
investment objective.
The investment policies in this prospectus are not fundamental, and the
Board of Directors may change such policies without shareholder approval. As a
matter of policy, the Board of Directors would not change the Fund's investment
objective without shareholder approval.
RISK FACTORS REGARDING THE FUND'S INVESTMENTS IN UTILITY COMPANIES. Since
the Fund's investments are concentrated in securities of utility companies, the
value of its shares can be expected to change in response to factors affecting
utilities and their industries, and may fluctuate more widely than the value of
shares of a portfolio that invests in a broader range of companies. Many utility
companies, especially electric, gas, and other energy-related utility companies,
have historically been subject to risks of increase in fuel costs and other
operating costs, changes in interest rates on borrowings for capital improvement
programs, changes in applicable laws and regulations, changes in technology
which may render existing plants, equipment, or products obsolete, the effects
of energy conservation and operating constraints, and increased costs and delays
associated with compliance with environmental regulations. In particular,
regulatory changes could increase costs or impair the ability of utility
companies to operate their facilities or obtain adequate return on invested
capital. Generally, prices charged by utilities are regulated in the United
States and in foreign countries with the intention of protecting the
4
<PAGE>
public while ensuring that utility companies earn a return sufficient to allow
them to attract capital in order to grow and continue to provide appropriate
services. There can be no assurance that such pricing policies or regulated
rates of return will continue in the future.
In recent years, regulatory changes in the United States have increasingly
allowed utility companies to provide services and products outside their
traditional geographic areas and lines of business, creating new areas of
competition within the utilities industries. This trend toward deregulation and
the emergence of new entrants have caused non-regulated providers of utility
services to become a significant part of the utilities industries. Mentor
Advisors believes that the emergence of competition and deregulation will result
in certain utility companies being able to earn more than their traditional
regulated rates of return, while others may be forced to defend their core
business from increased competition and may be less profitable. Although Mentor
Advisors seeks to take advantage of favorable investment opportunities that may
arise from these structural changes, there can be no assurance that the Fund
will benefit from any such changes.
FOREIGN INVESTMENTS. The Fund may invest in foreign securities. Foreign
investments can involve risks that may not be present in domestic investments.
Since foreign securities are normally denominated and traded in foreign
currencies, the value of the Fund's assets may be affected favorably or
unfavorably by currency exchange rates and exchange control regulations. There
may be less information publicly available about a foreign company than a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable with those
in the United States.
The securities of some foreign companies are less liquid and at times more
volatile than securities of comparable U.S. companies. Foreign brokerage
commissions and other fees are also generally higher than those in the United
States. Foreign settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in the recovery of
Fund assets held abroad) and expenses not present in the settlement of domestic
investments. In addition, there may be a possibility of nationalization or
expropriation of assets, impositions of currency exchange controls, confiscatory
taxation, political or financial instability and diplomatic developments that
could affect the value of investments in certain foreign countries. Legal
remedies available to investors in certain foreign countries may be more limited
than those available with respect to investments in the United States or in
certain other foreign countries. The laws of some foreign countries may limit
investments in securities of certain issuers located in those foreign countries.
Special tax considerations apply to investments in foreign securities.
The Fund may buy and sell foreign currencies and foreign currency forward
and futures contracts for hedging purposes in connection with its foreign
investments.
FIXED-INCOME SECURITIES. The values of fixed-income securities typically
fluctuate in response to changes in interest rates. A decrease in interest rates
will generally result in an increase in the value of fixed-income securities
held by the Fund. Conversely, during periods of rising interest rates, the value
of such securities will generally decline. The magnitude of these fluctuations
generally is greater for securities with longer maturities. However, the yields
on such securities are also generally higher. In addition, the values of
fixed-income securities may be affected by changes in general economic
conditions and business conditions affecting the specific industries of their
issuers.
5
<PAGE>
OTHER INVESTMENT PRACTICES
INVESTMENTS IN COMPANIES ENGAGED IN THE OIL INDUSTRY. The Fund may invest
in securities of issuers engaged in the production, refining, sale, or
distribution of oil or oil-related products. Under certain market conditions,
the prices of such securities may vary inversely to the prices of securities of
utility companies, and so may provide some limited protection against a decline
in the Fund's net asset value at times of a general decline in prices of
securities of utility companies. The Fund may invest in such securities in an
attempt to gain such protection or in an attempt generally to increase the
Fund's investment return.
The prices of securities of companies in the oil industry and the price of
oil are subject to substantial fluctuations, and may be affected by
unpredictable economic and political circumstances such as social, political, or
military disturbances in or near oil-producing countries or oil shipping or
pipeline routes, the taxation and regulatory policies of various governments,
the activities and policies of OPEC (an organization of major oil producing
countries), the discovery of new oil and gas reserves and the development of new
techniques for producing, refining, and transporting oil, gas, and related
products, energy conservation practices, and the development of alternative
energy sources and alternative uses for oil and gas products. In addition, the
facilities and other assets of such companies in certain jurisdictions may be
subject to the risks of nationalization or expropriation, confiscatory taxation,
and the general risks of political or financial instability and diplomatic
developments that could affect their values adversely.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks, broker/dealers, and other financial institutions pursuant to procedures
approved by the Board of Directors. These transactions must be fully
collateralized at all times, but involve some risk to the Fund if the other
party should default on its obligations and the Fund is delayed or prevented
from recovering the collateral.
PORTFOLIO TURNOVER. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. A change in
the securities held by the Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may result in
realization of taxable capital gains. Portfolio turnover rates for the life of
the Fund are shown above in the section "Financial Highlights."
MANAGEMENT OF THE FUND
The Board of Directors of the Fund has overall responsibility for the
management and supervision of the Fund. MENTOR INVESTMENT ADVISORS, LLC, LOCATED
AT 901 East Byrd Street, Richmond, Virginia 23219, serves as investment manager
to the Fund. Mentor Advisors, at its expense, furnishes continuously an
investment program for the Fund and makes investment decisions on behalf of the
Fund consistent with the Fund's stated investment objective, policies, and
restrictions. Mentor Advisors and its affiliates currently have assets under
management in excess of $10 billion, and serve as investment manager to
twenty-three separate investment companies. All investment decisions are made by
a team of investment professionals at Mentor Advisors.
MENTOR INVESTMENT GROUP, LLC ("MENTOR"), located at 901 East Byrd Street,
Richmond, Virginia 23219, serves as administrator to the Fund. Mentor, as
administrator, continuously provides business management services to the Fund
and generally, subject to the oversight of the Board of Directors of the Fund,
manages all of the business and affairs of the Fund (other than those managed by
Mentor Advisors). The Fund pays Mentor a fee at
6
<PAGE>
an annual rate of 0.65% of the Fund's average daily net assets, less the amount
of any management fees paid to Mentor Advisors.
Mentor, itself, through America's Utility Fund Service Company ("AUF
Service Company"), or through other financial institutions (the
"Administrator"), provides shareholder support services to the Fund and its
shareholders. These services might include, among other things, providing office
space, equipment, telephone facilities, and various clerical, supervisory, and
computer personnel, as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions; answering routine shareholder inquiries regarding the Fund;
assisting shareholders in changing dividend options, account designations, and
addresses; and providing such other services as the Fund may reasonably request.
Mentor provides these services for a fee paid by the Fund at an annual rate of
0.25% of the Fund's average daily net assets.
Mentor Advisors, which is organized under the laws of Virginia, is a wholly
owned subsidiary of Mentor, which in turn is a subsidiary of Wheat First Butcher
Singer, Inc. EVEREN Capital Corporation has a 20% ownership in Mentor and may
acquire additional ownership based principally on the amount of Mentor's
revenues derived from assets attributable to clients of EVEREN Securities, Inc.
and its affiliates. Wheat First Butcher Singer, through its affiliated
companies, engages in securities brokerage, investment advisory, investment
banking, and related businesses. AUF Service Company is a wholly owned
subsidiary of Dominion Capital, Inc.
HOW TO INVEST IN THE FUND
There are two basic methods by which you may invest in the Fund: by
installment payments through an installment plan (a "Plan"), or by a single
initial investment with a higher minimum investment amount.
Anyone wishing to invest in the Fund may enroll in a Plan to make regular
monthly payments to the Fund over the course of a year, except for IRA or other
retirement plan accounts. The investor selects the monthly payment amount on the
Plan enrollment form. After receipt of an investor's monthly payment, the Fund
will credit the investor's account with shares in the Fund and any fractions
thereof, priced at the net asset value next determined after receipt thereof.
Similarly, dividends and distributions declared by the Fund will be reinvested
in additional Fund shares unless an investor otherwise notifies the Fund in
writing. A Plan investor may prepay required monthly installments ahead of
schedule.
Alternatively, a person wishing to invest in the Fund may make a single
initial investment in the Fund. This method requires a minimum initial
investment of $1,000 and is the method you should use for establishing an IRA or
other retirement plan account. The Fund will credit such investor's account with
shares in the Fund and any fractions thereof priced at net asset value next
determined after receipt by the Fund of an enrollment application and
accompanying payment. Additional investments may be made at any time, in amounts
of $100 or more. These additional investments will purchase whole and fractional
shares in the Fund priced at the net asset value next determined after receipt
of payment.
Investors using the single payment method may also participate in a monthly
installment plan, if desired. However, the installment method is not available
for IRA or other retirement plan accounts.
7
<PAGE>
INVESTMENT THROUGH AN INSTALLMENT PLAN
1. To invest by making monthly installment payments, complete and sign the
enrollment application and mail it to Project America, Inc. (the "Distributor")
no later than the date specified on the enrollment application.
2. Decide how much you want to invest each month.
Your monthly investment can be any dollar amount that is forty dollars
($40.00) or more. For administrative purposes, the amount you decide to invest
must be a multiple of five dollars (for example, $40.00, $45.00, $50.00, etc.)
Make sure that you choose an amount that you can afford each month because it is
not possible to decrease your monthly installment during a 12-month payment
period. Investments over the amount of your monthly installment will be accepted
and invested in Fund shares. The excess payment will be applied as prepayment to
your next scheduled monthly installment.
3. After the Fund receives your properly completed application, the Fund
will mail you a coupon book. The coupon book will contain 12 coupons showing
your chosen monthly investment amount and the dates each of your payments is
due.
4. You should mail your check and appropriate coupon each month to the
Distributor. ALL INSTALLMENT PAYMENTS SHOULD BE MADE BY CHECK MADE PAYABLE TO
AMERICA'S UTILITY FUND, INC. AND MAILED TO THE DISTRIBUTOR, P.O. BOX 85124,
RICHMOND, VIRGINIA 23285-5124.
5. If during your first year of participation in a Plan you stop
participating for any reason prior to your Plan's completion and you request a
redemption of your share account, you will receive cash in an amount equal to
the then current net asset value of your shares in the Fund.
INVESTMENT BY SINGLE INITIAL PAYMENT
1. TO INVEST IN THE FUND BY SINGLE INITIAL PAYMENT, COMPLETE THE
APPROPRIATE PORTION OF THE ENROLLMENT APPLICATION AND MAIL THE ENROLLMENT
APPLICATION, WITH A CHECK PAYABLE TO AMERICA'S UTILITY FUND, INC., TO THE
DISTRIBUTOR, 901 EAST BYRD STREET, P.O. BOX 26501, RICHMOND, VIRGINIA
23261-6501. If you do not have an enrollment application, you may call AUF
Service Company or the Distributor to obtain one.
2. Individual Retirement Accounts (IRAs) and other retirement accounts are
established by single initial payment, and require separate enrollment
documentation. If you are interested in an IRA, call the Fund at 1-800-487-3863
to request our IRA enrollment kit.
3. The minimum initial investment is $1,000 or more. Subsequent investments
can be made, whenever you wish, in amounts of $40 or more except for IRAs, which
require subsequent investments in amounts of $100 or more.
4. If you request a redemption of your share account, you will receive cash
in an amount equal to the then current net asset value of your shares in the
Fund.
GENERAL. Shares of the Fund are sold at the net asset value next determined
after a purchase order in good order is received by the Fund, whether by
installment or single payment method.
8
<PAGE>
The address of the Distributor is P.O. Box 26782, 901 East Byrd Street,
Richmond, Virginia 23261-6782. The Distributor is not obligated to sell any
specific amount of shares of the Fund. The Distributor is a wholly owned
subsidiary of Dominion Capital, Inc.
METHOD OF INVESTING PAYMENTS AND DISTRIBUTIONS
GENERAL
However you choose to invest in the Fund, the price paid for Fund shares is
the net asset value next determined after receipt of payment and any appropriate
documentation.
Reinvestment of dividends and any capital gains distribution is made at the
net asset value determined on the payment date thereof.
NET ASSET VALUE
Net asset value per share is determined by subtracting the liabilities of
the Fund from the market value of its assets, dividing the remainder by the
number of shares outstanding and adjusting the results to the nearest full cent.
Net asset value is computed once daily as of 4:00 P.M. on each day that the New
York Stock Exchange is open for trading. Portfolio securities for which market
quotations are readily available are stated at market value. Short-term
investments that will mature in 60 days or less are stated at amortized cost,
which has been determined to approximate the fair market value of such
investments. All other securities and assets are valued at their fair values.
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rates or at such other rates as may be used in accordance
with procedures approved by the Board of Directors. As a result, fluctuations in
the values of such currencies in relation to the U.S. dollar will affect the net
asset value of Fund shares even though there has not been any change in the
values of such securities as quoted in such foreign currencies.
YOUR RIGHTS IN THE FUND AND UNDER YOUR PLAN
When you indicate on your enrollment application that you wish to invest in
the Fund and make systematic installment payments, you will become a Plan
participant. This installment program is referred to as your Plan. You may
complete the terms of your Plan ahead of schedule by making any or all payments
in advance of their due dates. Unless you exercise a termination of your Plan,
your Plan shall continue in force for a period of 12 months.
DIVIDENDS AND DISTRIBUTIONS
All dividends and capital gain distributions on Fund securities will be
reinvested in additional Fund shares for your account on the payment date as
determined by the Board of Directors, unless in a written notice received by the
Administrator not less than five business days prior to the payment date, the
shareholder elects to receive such dividends and distributions in cash. Once the
Fund receives such written notice of election to receive cash distributions, the
Fund will continue to pay all such distributions in cash until otherwise
instructed in writing by the shareholder.
9
<PAGE>
Dividends of ordinary income will normally be paid by the Fund quarterly,
and long-term capital gains, if any, will normally be paid annually. Investors
must report on their income tax form both dividends and capital gains, whether
received in cash or reinvested in additional Fund shares.
REDEMPTION OF FUND SHARES
Regardless of whether your participation in the Fund is through a Plan or
by the single initial payment method, you may redeem all of your account and
terminate your participation at any time by sending a written request for full
redemption to the Administrator. You can also redeem portions of your account.
The Fund may redeem and terminate those shareholder accounts which fall
below a minimum investment balance of $240. Effective September 1, 1999, the
minimum investment balance will be $1,000. If your account investment balance is
less than the required minimum, prior to an involuntary redemption and
termination by the Fund, you will be given 60 days notice in which to invest a
sufficient amount to establish the minimum investment balance. However, new
installment accounts established after August 1998 will have 30 months from the
date of first investment to reach the $1,000 minimum.
All requests for redemptions must be made to the Administrator in writing
signed by the shareholder(s) of the account, in the name(s) as shown on the
account statement. It is suggested that all redemption requests be sent by
certified mail, return receipt requested. The Fund's Custodian or Administrator
may require certain documentation. If the cash redemption is $25,000 or more,
your written redemption request must have your signature guaranteed by a
commercial bank, trust company or broker. All documents must be in proper order
before any liquidations can be made. The redemption price will be the net asset
value next determined after such documents have been received in proper order.
Your request should be sent to the Administrator at 901 East Byrd Street, P.O.
Box 26501, Richmond, Virginia 23261-6501.
The Fund may also redeem shares if you own shares of the Fund above any
maximum amount set by the Board of Directors. There is presently no maximum, but
the Board of Directors may establish one at any time, which could apply to both
present and future shareholders.
OTHER INFORMATION CONCERNING REDEMPTION. Under unusual circumstances, the
Fund may suspend redemption, or postpone payment for more than seven days, as
permitted by federal securities laws. As long as the right of redemption of
shares of the Fund is suspended, no shares may be redeemed, and therefore no
cash withdrawals may be made. In addition, the Fund reserves the right, if
conditions exist which make cash payments undesirable, to honor any request for
redemption by making payment in whole or in part by securities valued in the
same way as they would be valued for purposes of computing the Fund's per share
net asset value. If payment is made in securities, a shareholder may incur
brokerage expenses in converting those securities into cash.
TAXES
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund will distribute substantially all of its net investment
income and capital gain net income on a current basis.
10
<PAGE>
All Fund distributions will be taxable to shareholders as ordinary income,
except that any distributions of net capital gain will be taxed as long-term
capital gain, regardless of how long a shareholder has held the shares (although
the loss on a sale of shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain distribution received
with respect to those shares). Distributions will be taxable as described above
whether received in cash or in shares through the reinvestment of distributions.
Early in each year the Fund will notify shareholders of the amount and tax
status of distributions paid by the Fund for the preceding year. In buying or
selling securities for the Fund, Mentor Advisors will not normally take into
account the effect any purchase or sale of securities will have on the tax
positions of the Fund's shareholders.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. Dividends and distributions also may be subject to state
and local taxes. Shareholders are urged to consult their tax advisers regarding
specific questions as to federal, state, or local taxes. Non-U.S. investors
should consult their tax advisers concerning the tax consequences of ownership
of shares of the Fund, including the possibility that distributions may be
subject to United States withholding tax.
TAX-SHELTERED RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNT
An Individual Retirement Account (IRA) is a tax-sheltered way to save for
retirement. Call the Fund at 1-800-487-3863 for a complete IRA enrollment kit, a
description of fees and expenses, and information and forms related to IRA
distributions.
The various types of IRAs available under our program are:
o INDIVIDUAL RETIREMENT ACCOUNT -- Allows anyone under age 70 1/2
with earned income to make contributions up to the lesser of such
earned income or $2,000 each tax year.
o SPOUSAL IRA -- Allows $250 contributions for a non-working spouse.
o ROLLOVER IRA -- Allows contributions of tax-free distributions
from one IRA, or from a qualified employer-sponsored plan, to
another IRA.
o SIMPLIFIED-EMPLOYEE PENSION IRA (SEP-IRA) -- Allows employers to
set up an individual retirement account for both employees and the
employer. Employers may contribute up to 15 percent of an
employee's compensation, or $30,000, whichever is less. Existing
tax codes treat the employer as an employee in these cases.
11
<PAGE>
THE FUND
America's Utility Fund, Inc. is a Maryland corporation organized on January
28, 1992. The Fund is an open-end, diversified, management investment company
with 500,000,000 shares of authorized common stock, $.001 par value. Each share
has one vote, with fractional shares voting proportionately. Shares of the Fund
are freely transferable, are entitled to dividends as declared by the Board of
Directors, and, if the Fund were liquidated, would receive the net assets of the
Fund. The Fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Although the Fund is not required to hold annual
meetings of its shareholders, shareholders have the right to call a meeting to
elect or remove Directors, or to take other actions as provided in the Articles
of Incorporation.
In the interest of economy and convenience, the Fund will not issue
certificates for its shares.
TRANSFER AND DIVIDEND AGENT SERVICES
STATE STREET BANK AND TRUST COMPANY, c/o Boston Financial Data Services,
Inc., 2 Heritage Drive, North Quincy, Massachusetts 02171, serves as the Fund's
transfer and dividend agent. AMERICA'S UTILITY FUND SERVICE COMPANY, 901 East
Byrd Street, Richmond, Virginia, 23219, serves as the sub-transfer and dividend
agent of the Fund.
PERFORMANCE INFORMATION
Yield and total return data may from time to time be included in
advertisements about the Fund. The Fund's "yield" is calculated by dividing the
Fund's annualized net investment income per share during a recent 30-day period
by its net asset value on the last day of that period. "Total return" for the
one-, five-, and ten-year periods (or for the life of the Fund, if shorter)
through the most recent calendar quarter represents the average annual
compounded rate of return on an investment of $1,000 in the Fund over the
period. The Fund's performance may be compared to various indices. See the
Statement of Additional Information. Information may be presented in
advertisements about the Fund describing the background and professional
experience of the Fund's investment manager or its personnel.
ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES NOT
PREDICT FUTURE PERFORMANCE. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the Fund's
investments, and the Fund's operating expenses. Investment performance also
often reflects the risks associated with the Fund's investment objective and
policies. These factors should be considered when comparing the Fund's
investment results to those of other mutual funds and other investment vehicles.
12
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY
BE MADE. THIS PROSPECTUS OMITS CERTAIN INFORMATION CONTAINED IN THE REGISTRATION
STATEMENT, TO WHICH REFERENCE IS MADE, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. ITEMS WHICH ARE THUS OMITTED, INCLUDING CONTRACTS AND OTHER
DOCUMENTS REFERRED TO OR SUMMARIZED HEREIN, MAY BE OBTAINED FROM THE COMMISSION
UPON PAYMENT OF THE PRESCRIBED FEES. ADDITIONAL INFORMATION CONCERNING THE
SECURITIES OFFERED HEREBY AND THE FUND IS TO BE FOUND IN THE REGISTRATION
STATEMENT, INCLUDING VARIOUS EXHIBITS THERETO AND FINANCIAL STATEMENTS INCLUDED
OR INCORPORATED THEREIN, WHICH MAY BE INSPECTED AT THE OFFICE OF THE COMMISSION.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Expense Summary................................. 2
Example......................................... 2
Financial Highlights............................ 3
Investment Objective and Policies............... 4
Other Investment Practices...................... 6
Management of the Fund.......................... 6
How to Invest in the Fund....................... 7
Method of Investing Payments and
Distributions................................. 9
Your Rights in the Fund and Under
Your Plan..................................... 9
Taxes........................................... 10
Tax-Sheltered Retirement Plans.................. 11
The Fund........................................ 12
Transfer and Dividend Agent Services............ 12
Performance Information......................... 12
</TABLE>
PROSPECTUS
America's Utility Fund, Inc.
[LOGO]
AMERICA'S UTILITY FUND
PROJECT AMERICA, INC.
DISTRIBUTOR
Prospectus Dated May 1, 1997
<PAGE>
AMERICA'S UTILITY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of America's Utility Fund, Inc. dated
May 1, 1997, a copy of which may be obtained by writing America's Utility
Fund Service Company, 901 East Byrd Street, P.O. Box 26501, Richmond, Virginia
23261-6501, or by calling 1-800-487-3863.
TABLE OF CONTENTS
Page
GENERAL INFORMATION.........................................B-2
INVESTMENT RESTRICTIONS.....................................B-2
CERTAIN INVESTMENT TECHNIQUES...............................B-4
MANAGEMENT.................................................B-10
CONTROL PERSONS AND PRINCIPAL HOLDERS......................B-14
INVESTMENT ADVISORY SERVICES...............................B-14
OTHER SERVICES.............................................B-16
BROKERAGE..................................................B-18
DETERMINATION OF NET ASSET VALUE...........................B-20
TAX STATUS.................................................B-21
DISTRIBUTION ..............................................B-23
PERFORMANCE INFORMATION....................................B-23
MEMBERS OF INVESTMENT TEAMS AT MENTOR ADVISORS.............B-27
CUSTODIAN..................................................B-29
INDEPENDENT AUDITORS.......................................B-30
RATINGS ..................................................B-30
FINANCIAL STATEMENTS.......................................B-33
B-1
<PAGE>
GENERAL INFORMATION
America's Utility Fund, Inc. (the "Fund") was organized on January 28,
1992 as a Maryland corporation, and is registered as a diversified, open-end,
management investment company.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions, which may not be
changed without approval by the holders of a majority of the outstanding shares
of the Fund:
1. Not to purchase any security (other than obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, for temporary investment) if as a result
more than 5% of the Fund's total assets are invested in the
securities of any one issuer; the Fund will concentrate its
investments (more than 25% of its assets) in securities issued
by utility companies.
2. Not to purchase any security if as a result the Fund would
then hold more than 10% of any class of securities of an
issuer (taking all common stock issues as a single class, all
preferred stock issues as a single class and all debt issues
as a single class) or more than 10% of the outstanding voting
securities of any one issuer.
3. Not to borrow money or securities for any purpose except to
the extent that borrowing up to 10% of the Fund's total assets
is permitted for emergency purposes. (Any such borrowings will
be made on a temporary basis from banks and will not be made
for investment purposes.) Money borrowed will be repaid before
additional portfolio securities are purchased.
4. Not to invest in securities of any issuer if, to the knowledge
of the Fund, any officer or director of the Fund or of the
Manager owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers and directors who own more
than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
5. Not to purchase securities for the purpose of exercising
control over the issuers thereof.
6. Not to underwrite securities of other issuers; provided, that
this policy shall not be construed to prevent or limit in any
manner the right of the Fund to purchase securities for
investment purposes.
B-2
<PAGE>
7. Not to make loans to other persons other than (i) through the
purchase of a portion of an issue of publicly distributed debt
securities which are not considered loans, (ii) through the
purchase of bonds, debentures, commercial paper, corporate
notes and similar evidences of indebtedness of a type commonly
sold privately to financial institutions, or (iii) by entering
into repurchase agreements with respect to not more than 25%
of its total assets (taken at current value).
8. Not to buy securities on margin, or to effect short sales of
securities. (Margin payments in connection with transactions
in futures contracts, options, forward contracts, and other
financial instruments are not considered to constitute the
purchase of securities on margin for this purpose.)
9. Not to issue senior securities other than as consistent with
borrowings permitted under 3 above.
10. Not to invest in the securities of other investment companies
except by purchases in the open market involving only
customary brokerage commissions and as a result of which not
more than 5% of its total assets (taken at current value)
would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.
11. Not to own, buy or sell commodities or commodity contracts
(except that the Fund may purchase and sell foreign
currencies, foreign currency futures contracts and related
options), or real estate or interests in real estate;
provided, that the Fund may purchase and sell securities which
are secured by real estate and securities of companies which
invest or deal in real estate.
12. Not to invest in warrants unless acquired as a unit or
attached to other securities.
13. Not to invest in puts, calls, straddles, spreads, or any
combination thereof (except that the Fund may invest in
foreign currency futures and options transactions and forward
contracts).
14. Not to invest in limited partnerships or similar interests in
oil, gas and other mineral exploration development programs;
provided, that the Fund may invest in the securities of other
corporations whose activities include such exploration and
development.
15. Not to invest more than 5% of its total assets in any issuer
or issuers having a record of less than three years continuous
operation, which may include the operations of predecessor
companies.
B-3
<PAGE>
16. Not to purchase any security restricted as to disposition
under federal securities laws.
The Investment Company Act of 1940, as amended (the "1940 Act"),
provides that the approval of a majority of the outstanding shares of the Fund
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy.
All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.
Subject to future changes in the law or in the rules or regulations of
the Securities and Exchange Commission, the Fund will not invest in Dominion
Resources, Inc. or any affiliates thereof unless appropriate exemptive relief is
first obtained from the Commission.
It is also a policy of the Fund, which may be changed without
shareholder approval, not to purchase any voting security of any electric or gas
utility company (as defined by the Public Utility Holding Company Act of 1935)
if as a result the Fund would then hold 5% or more of the outstanding voting
securities of such company.
Although not a fundamental policy, the Fund will not invest in
securities which are not readily marketable. (Foreign currency forward
contracts, futures contracts, and options are not considered securities for this
purpose.)
CERTAIN INVESTMENT TECHNIQUES
Set forth below is information concerning certain investment techniques
in which the Fund may engage, and certain of the risks they may entail.
Repurchase Agreements
A repurchase agreement is a contract under which the Fund acquires a
security for a relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to resell such
security at a fixed time and price (representing the Fund's cost plus interest).
It is the Fund's present intention to enter into repurchase agreements only with
member banks of the Federal Reserve System and securities dealers meeting
certain criteria as to creditworthiness and financial condition established by
the Board of Directors and only with respect to obligations of the U.S.
government or its agencies or instrumentalities or other high quality short term
debt obligations. Repurchase agreements may also be viewed as loans made by the
Fund which are collateralized by the securities subject to repurchase. Mentor
Advisors will monitor such transactions to ensure that the value of the
underlying securities will be at least
B-4
<PAGE>
equal at all times to the total amount of the repurchase obligation, including
the interest factor. If the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the proceeds of sale
including accrued interest are less than the resale price provided in the
agreement including interest. In addition, if the seller should be involved in
bankruptcy or insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor and required to return the
underlying collateral to the seller's estate.
Foreign Securities
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that the Fund's foreign investments are not
United States dollar-denominated, the Fund may be affected favorably or
unfavorably by changes in currency exchange rates or exchange control
regulations and may incur costs in connection with conversion between
currencies.
Income received by the Fund from sources within foreign countries may
be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by the Fund will reduce its net income available for distribution to
stockholders.
Foreign Currency Transactions
The Fund may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. The Fund may engage in both "transaction hedging"
and "position hedging".
When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when
B-5
<PAGE>
it desires to "lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging the Fund will attempt to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the applicable foreign currency during
the period between the date on which the security is purchased or sold or on
which the dividend or interest payment is declared, and the date on which such
payments are made or received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. The
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by the Fund are denominated or are
quoted in their principle trading markets or an increase in the value of
currency for securities which the Fund expects to purchase. In connection with
position hedging, the Fund may buy or sell foreign currency futures contracts
and put and call options on foreign currencies and on foreign currency futures
contracts. The Fund may also purchase or sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of the
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the
B-6
<PAGE>
portfolio security or securities of the Fund if the market value of such
security or securities exceeds the amount of foreign currency the Fund is
obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market.
Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a
B-7
<PAGE>
commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.
Foreign Currency Options. Options on foreign currencies are traded
primarily in the over-the-counter market, although options on foreign currencies
have recently been listed on several exchanges. There can be no assurance that a
liquid secondary market will exist for a particular option at any specific time.
Options on foreign currencies are affected by all of those factors which
influence exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
To the extent that the U.S. options markets are closed while the
markets for the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be reflected in
the U.S. options markets.
Settlement Procedures. Settlement procedures relating to the Fund's
investments in foreign securities and to the Fund's foreign currency exchange
transactions may be more complex than settlements with respect to investments in
debt or equity securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments. For example, settlement of
transactions involving foreign securities or foreign currency may occur within a
foreign country, and the Fund may be required to accept or make delivery of the
underlying securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay any fees, taxes
or charges associated with such delivery. Such investments may also involve the
risk that an entity involved in the settlement may not meet its obligations.
B-8
<PAGE>
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
Segregation of Assets
The Fund may at times segregate assets in respect of certain
transactions in which the Fund enters into a commitment to pay money or deliver
securities at some future date. Any such segregated account will be maintained
by the Fund's custodian and may contain cash, U.S. government securities or
other liquid high grade debt obligations, or other appropriate assets.
B-9
<PAGE>
MANAGEMENT
Officers and Directors
The directors and officers of the Fund are as follows. Unless otherwise
noted, the address of each officer and director is 901 East Byrd Street,
Richmond, Virginia 23219.
Position held Principal occupation(s)
Name and Address with the Fund during past five years
- ---------------- ------------- -----------------------
Arch T. Allen, III Director Attorney at Law, Raleigh,
1214 Cowper Drive North Carolina, August 2, 1995
Raleigh, NC 27608 to date; Vice Chancellor for
Development and University
Relations of the University of
North Carolina at Chapel Hill
from September 15, 1991 to
August 2, 1995; prior to
September 15, 1991, partner
with the law firm of Moore &
Van Allen.
Robert P. Black Director Retired, January 1, 1993;
10 Dahlgren Road prior to that date, President
Richmond, VA 23233 of the Federal Reserve Bank of
Richmond, Virginia. Director
of Media General Corporation,
Rockingham Publishing Company,
Inc., Winchester Evening Star,
Inc., and all of the T. Rowe
Price Fixed Income Funds.
Peter W. Brown Director Physician, Virginia Surgical
4603 Sulgrave Road Associates, P.C.; Director,
Richmond, VA 15260 Bassett Furniture Industries,
Inc.
Clifford A. Cutchins, IV Director Senior Vice-President, General
Counsel, and Secretary, James
River Corporation.
B-10
<PAGE>
<TABLE>
<CAPTION>
Position held Principal occupation(s)
Name and Address with the Fund during past five years
<S> <C>
Daniel J. Ludeman* Director Chairman and Chief Executive Officer of Mentor
Investment Group, LLC since July 1991; Board of
Directors, Wheat, First Securities, Inc. and
Mentor Income Fund, Inc.; Managing Director, Wheat
First Butcher Singer, Inc.; Chairman and Trustee,
The Mentor Funds, Cash Resource Trust, and Mentor
Institutional Trust.
Louis W. Moelchert, Jr. Director Vice President of Business and Finance,
University of Richmond; Chairman, The Common Fund;
Trustee, The Mentor Funds, Cash Resource Trust,
and Mentor Institutional Trust.
Linwood R. Robertson* President and Chief Executive Vice President - Finance and Treasurer;
Operating Officer; from October 1, 1994 to January 1, 1995, Vice
Director President Finance, Treasurer and Corporate
Secretary of DRI; prior to October 1, 1994, Vice
President - Finance and Treasurer of DRI; from
January 28, 1992 to May 17, 1994, Vice President
and Secretary of the Fund; Vice President,
Treasurer and Corporate Secretary of AUF Service
Company from January 31, 1992 to September 30,
1994.
</TABLE>
* This person is deemed to be an "interested person" of the Fund under the
Investment Company Act of 1940, as amended.
B-11
<PAGE>
<TABLE>
<CAPTION>
Position held Principal occupation(s)
Name and Address with the Fund during past five years
<S> <C>
Paul F. Costello Executive Vice President, Managing Director, Mentor Investment Group, LLC
Chief Administrative and Wheat First Butcher Singer; President, Mentor
Officer Income Fund, The Mentor Funds, Mentor
Institutional Trust, and Cash Resource Trust;
Director, Mentor Perpetual Advisors, L.L.C. and
Mentor Trust Company; formerly, Director,
President and Chief Executive Officer, First
Variable Life Insurance Company; President and
Chief Financial Officer, Variable Investors Series
Trust; President and Treasurer, Atlantic Capital &
Research, Inc.; Vice President and Treasurer,
Variable Stock Portfolio, Inc., Monarch Investment
Series Trust, and GEICO Tax Advantage Series
Trust; Vice President, Monarch Life Insurance
Company, GEICO Investment Services Company, Inc.,
Monarch Investment Services Company, Inc., and
Springfield Life Insurance Company.
Glenna G. Bryant Vice President, President and Treasurer of Project America, Inc;
Administration President and Chief Operating Officer of AUF
Service Company from August 31, 1995 to date; from
August 10, 1992 to August 31, 1995, Vice President
of Project America, Inc.; from March to August
1992, self-employed; Vice President of Mariner
Funds Services, Inc. prior to March 1992; from
September 30, 1994 to August 31, 1995, Senior Vice
President and Treasurer of AUF Service Company.
</TABLE>
B-12
<PAGE>
<TABLE>
<CAPTION>
Position held Principal occupation(s)
Name and Address with the Fund during past five years
<S> <C>
Terry L. Perkins Treasurer Senior Vice President, Mentor Investment Group,
LLC; Treasurer, Cash Resource Trust, Mentor Income
Fund, Inc., The Mentor Funds, and Mentor
Institutional Trust.; formerly, Treasurer and
Comptroller, Ryland Capital Management, Inc.
Henry C. Riely Secretary Assistant Corporate Secretary of DRI and Corporate
Secretary of Dominion Capital, Inc.; Secretary of
AUF Service Company and Project America, Inc. from
October 1, 1994 to date.
Michael A. Wade Assistant Treasurer Vice President, Mentor Investment Group, Inc.
since April 1994; Assistant Treasurer, Cash
Resource Trust, Mentor Income Fund, Inc., Mentor
Institutional Trust and The Mentor Funds;
formerly, Senior Accountant, Wheat First Butcher
Singer, Inc., April 1993 through March 1994; Audit
Senior, BDO Seidman, July 1989 through March 1993.
</TABLE>
B-13
<PAGE>
Director Compensation
The table below shows the fees paid to each Director by the Fund for the
1996 fiscal year. Messrs. Cutchins, Ludeman, Moelchert and Robertson were
elected to the Board of Directors in May 1996.
Aggregate compensation
Director from the Fund
- --------- ----------------------
Arch T. Allen, III 11,750
Robert P. Black 11,750
Peter W. Brown 11,750
Clifford A. Cutchins, IV 6,250
Daniel J. Ludeman --
Louis W. Moelchert, Jr. 6,250
Linwood R. Robertson --
The Directors do not currently receive pension or retirement benefits from the
Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS
The Directors and officers as a group owned less than 1% of the
outstanding shares of common stock of the Fund. To the knowledge of the Fund, as
of April 1, 1997 no person owned of record or beneficially more than 5% of the
outstanding shares of common stock of the Fund as of such date.
INVESTMENT ADVISORY SERVICES
Mentor Investment Advisors, LLC ("Mentor Advisors"), the successor to
Commonwealth Investment Counsel, Inc., acts as investment adviser to the Fund
pursuant to a Management Contract. Mentor Advisors is a wholly-owned subsidiary
of Mentor Investment Group, LLC, which in turn is a subsidiary of Wheat First
Butcher Singer, Inc. Subject to the supervision and direction of the Board of
Directors, Mentor Advisors manages the Fund's portfolio in accordance with the
stated policies of the Fund. Mentor Advisors make investment decisions for
the Fund and places the purchase and sale orders for portfolio transactions.
Mentor Advisors provides the Fund with investment officers who are
authorized to execute purchases and sales of securities. Investment decisions
for the Fund and for the other investment advisory clients of Mentor Advisors
and its affiliates are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same
B-14
<PAGE>
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 Mentor Advisors' opinion 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 a professional staff of
investment personnel who draw upon a variety of resources for research
information for the Fund.
Expenses incurred in the operation of the Fund, including but not
limited to taxes, interest, brokerage fees and commissions, SEC fees and related
expenses, state Blue Sky qualification fees, charges of the custodian and
transfer and dividend disbursing agents, outside auditing, accounting, and legal
services, investor servicing fees and expenses, charges for the printing of
prospectuses and statements of additional information for regulatory purposes or
for distribution to shareholders, certain shareholder report charges, and
charges relating to corporate matters are borne by the Fund.
The Management Contract is subject to annual approval (commencing in
1997) by (i) the Board of Directors or (ii) vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Fund, provided that in
either event the continuance is also approved by a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund or Mentor
Advisors by vote cast in person at a meeting called for the purpose of voting on
such approval. The Management Contract is terminable without penalty, on not
more than sixty days' notice by the Fund or Mentor Advisors.
Under the Management Contract, the Fund pays a monthly fee, calculated
daily, to Mentor Advisors at the following rates expressed as a percentage of
the Fund's average net assets: 0.75% of the first $5 million, 0.50% of 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% thereafter.
Prior to September 9, 1995, Lord, Abbett & Co. ("Lord, Abbett"), the
General Motors Building, 767 Fifth Avenue, New York, New York 10153 served as
investment adviser to the Fund under an Investment Advisory Agreement dated
February 14, 1992. For its services, Lord, Abbett received $200,000 from
February 14, 1993 through February 13, 1994, and $300,000 from February 14, 1994
through February 13, 1995. After February 13, 1995, the Fund paid a quarterly
fee to Lord, Abbett according to the same schedule for fees under the Management
Contract with Mentor Advisors.
Management Fees
The Fund paid management fees in the following amounts for the fiscal
years indicated below:
B-15
<PAGE>
1994 1995 1996
-------- -------- --------
$292,099 $323,431(1) $352,144
(1) $198,375 of this amount was paid to Lord, Abbett.
OTHER SERVICES
Administrative Services
Mentor Investment Group, LLC ("Mentor") acts as administrator to the
Fund pursuant to an Administrative Services Agreement. Pursuant to the
Administrative Services Agreement, Mentor assists the Fund in preparation of
certain reports to shareholders of the Fund, tax returns, and filings with the
SEC and state Blue Sky authorities, prepares and furnishes reports to the Fund's
Board of Directors, and generally assists in the Fund's business operations.
The Administrative Services Agreement is subject to annual approval
(commencing in 1997) by (i) the Board of Directors or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance is also approved by a majority of
the Directors who are not "interested persons" (as defined in the 1940 Act) of
the Fund, or Mentor, by vote cast in person at a meeting called for the purpose
of voting on such approval. The Agreement is terminable without penalty,
immediately upon notice, by the Board of Directors or by vote of the holders of
a majority of the Fund shares, and on not less than thirty days' notice by
Mentor. The Agreement will terminate automatically in the event of its
assignment.
The Fund pays Mentor for such services at an annual rate of 0.65% of
the Fund's average daily net assets, less the amount of any management fees paid
to Mentor Advisors pursuant to the Management Contract.
Prior to August 21, 1995, America's Utility Fund Service Company ("AUF
Service Company") provided administrative services and certain shareholder and
transfer and dividend payment agent services to the Fund pursuant to an
Administrative Services and Transfer Agency Agreement. For these combined
services, AUF Service Company received fees from the Fund at the annual rate of
1% of the Fund's average net assets. AUF Service Company also paid the
management fee for the Fund.
Administrative Fees
The Fund paid the following fees for administrative services for the
fiscal years indicated below. Amounts prior to August 21, 1995 reflect the 1%
fee paid to AUF Service Company.
B-16
<PAGE>
1994 1995 1996
-------- -------- --------
$952,198 $948,530(1) $617,040
- ----------------
(1) Of this amount, $735,127 was paid to AUF Service Company.
Shareholder Servicing
The Fund has entered into a Shareholder Service Agreement dated August
21, 1995 with Mentor, pursuant to which Mentor, by itself, through AUF Service
Company, or through other financial institutions, provides shareholder support
services to the Fund and its shareholders. 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 shareholders.
In return for providing these services, the Fund pays Mentor a fee, at the
annual rate of 0.25% of the Fund's average daily net assets. Pursuant to a
Sub-Shareholder Services Agreement between Mentor and AUF Service Company,
Mentor agrees to pay fees to AUF Service Company at the same annual rate of the
Fund's net assets in respect of which AUF Service Company provides specified
shareholder services.
The Fund paid shareholder services fees to Mentor (which in turn paid
fees to AUF Service Company) of $372,763 during fiscal year 1996.
Transfer agent services
AUF Service Company receives fees from State Street Bank and Trust
Company ("State Street"), the Fund's transfer agent, for services performed
under a Sub-Transfer Agency Agreement dated August 21, 1995. Pursuant to that
Agreement, AUF Service Company provides certain transfer agent, dividend
disbursing agent, and other services to the Fund and its shareholders who
purchase shares of the Fund through facilities made available to Virginia Power
and North Carolina Power customers. State Street pays AUF Service Company a fee
at the annual rate of 0.10% of the Fund's average net assets attributable to
shares held such shareholders. For fiscal year 1996, these fees amounted to
$149,105.
Expense reimbursement
AUF Service Company (prior to August 21, 1995) agreed, and Mentor
(after August 21, 1995) has agreed, to bear the expenses of the Fund to the
extent total Fund operating expenses exceed 1.21% of the Fund's average daily
net assets. Mentor has agreed to maintain the expense limitation in effect until
September 11, 1996. As a result of this expense limitation, AUF Service Company
and Mentor incurred expenses of $118,162 and $66,941 respectively, for the Fund
B-17
<PAGE>
during the 1995 fiscal year, and Mentor incurred expenses of $144,093 for the
1996 fiscal year. The expense limitation does not apply to extraordinary
expenses of the Fund.
BROKERAGE
Transactions on U.S. stock exchanges, commodities markets, and futures
markets and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
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 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 allocations 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.
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 it may be
permitted to pay higher brokerage commissions as described below. In doing so,
Mentor Advisors, having in mind the Fund's best interests, considers all factors
it deems 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
B-18
<PAGE>
financial stability of the broker-dealer involved, and the quality of service
rendered by the broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the Management
Contract, the 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 Directors may adopt from time to time. Mentor Advisors does not currently
intend to cause the Fund to make such payments. It is the position of the staff
of the Securities and Exchange Commission that Section 28(e) does not apply to
the payment of such greater commissions in "principal" transactions.
Accordingly, Mentor Advisors will use its best efforts to obtain the best
overall terms available with respect to such transactions, as described above.
For the 1996 fiscal year, all of the Fund's brokerage transactions were effected
through brokers who provided brokerage and research services to the Fund.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to such other policies as the Board of
Directors may determine, Mentor Advisors may consider sales of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
Portfolio transactions for the Fund may be effected through Wheat,
First Securities, Inc. ("Wheat"), and EVEREN Securities, Inc. ("EVEREN"),
broker-dealers affiliated with Advisors. The Board of Directors have adopted
certain policies incorporating the standards of Rule 17e-l issued by the SEC
under the 1940 Act which requires, among other things, that the commissions paid
to Wheat and EVEREN must be reasonable and fair compared to the commissions,
fees, or other remuneration received by other brokers in connection with
comparable transactions involving similar securities during a comparable period
of time. Wheat and EVEREN will not participate in brokerage commissions given by
the Fund to other brokers or dealers. Over-the-counter purchases and sales are
transacted directly with principal market makers except in those cases in which
better prices and executions may be obtained elsewhere. The Fund will in no
event effect principal transactions with Wheat and EVEREN in over-the-counter
securities in which Wheat or EVEREN makes a market.
Under rules adopted by the SEC, Wheat and EVEREN may not execute
transactions for the Fund on the floor of any national securities exchange, but
may effect transactions for the Fund by transmitting orders for execution and
arranging for the performance of this function by members of the exchange not
associated with them. Wheat and EVEREN will be required to pay fees charged to
those persons performing the floor brokerage elements out of the brokerage
compensation they receive from the Fund. The Fund has been advised by Wheat that
on most transactions, the floor brokerage generally constitutes from 5% and 10%
of the total commissions paid.
B-19
<PAGE>
Brokerage Commissions
The Fund paid brokerage commissions in the following amounts during the
periods set forth below:
Fiscal year Fiscal year Fiscal year
1994 1995 1996
------------ ------------ -----------
$145,900 $162,737 $102,955
The following table shows brokerage commissions paid by the Fund to the
following brokers for the periods indicated:
Fiscal year Fiscal year
1995 1996
------------ --------
Wheat First Securities, Inc. $29,539(1) $39,946
EVEREN Securities, Inc. N/A $ 3,360(2)
- ----------------
(1) For the period September, 1995 through December 31, 1995.
(2) For the period November, 1996 through December 31, 1996.
For fiscal 1995, the brokerage commissions shown above paid to Wheat
amounted to 18.15% of the Fund's aggregate brokerage commissions and 13.51% of
the Fund's aggregate dollar amount of brokerage transactions. For fiscal 1996
the brokerage commissions shown above paid to Wheat amounted to 38.8% of the
Fund's aggregate brokerage commissions and 11.45% of the Fund's aggregate dollar
amount of brokerage transactions. The brokerage commissions shown above paid to
EVEREN amounted to 3.26% of the Fund's aggregate brokerage commissions and 0.71%
of the Fund's aggregate dollar amount of brokerage transactions.
DETERMINATION OF NET ASSET VALUE
The Fund determines its net asset value per share each day the New York
Stock Exchange (the "Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays, and the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving, and
Christmas.
Securities for which market quotations are readily available are
valued at prices which, in the opinion of the Board of Directors or Mentor
Advisors, most nearly represent the market values of such securities. Currently,
such prices are determined using the last reported sale price or, if no sales
are reported (as in the case of some securities traded over-the-counter), the
last reported bid price, except that certain U.S. Government securities are
stated at the mean between the last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value. All other securities and assets
B-20
<PAGE>
are valued at their fair value following procedures approved by the Board of
Directors. Liabilities are deducted from the total, and the resulting amount is
divided by the number of shares of the Fund outstanding.
If any securities held by the Fund are restricted as to resale, Mentor
Advisors determines their fair values. The fair value of such securities is
generally determined as the amount which the Fund could reasonably expect to
realize from an orderly disposition of such securities over a reasonable period
of time. The valuation procedures applied in any specific instance are likely to
vary from case to case. However, consideration is generally given to the
financial position of the issuer and other fundamental analytical data relating
to the investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Fund
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer.
In the case of certain fixed-income securities, including certain less
common mortgage-backed securities, market quotations are not readily available
to the Fund on a daily basis, and pricing services may not provide price
quotations. In such cases, Mentor Advisors is typically able to obtain dealer
quotations for each of the securities on at least a weekly basis. On any day
when it is not practicable for Mentor Advisors to obtain an actual dealer
quotation for a security, Mentor Advisors may reprice the securities based on
changes in the value of a U.S. Treasury security of comparable duration. When
the next dealer quotation is obtained, Mentor Advisors compares the dealer quote
against the price obtained by it using its U.S. Treasury-spread calculation, and
makes any necessary adjustments to its calculation methodology. Mentor Advisors
attempts to obtain dealer quotes for each security at least weekly, and on any
day when there has been an unusual occurrence affecting the securities which, in
Mentor Advisors' view, makes pricing the securities on the basis of U.S.
Treasuries unlikely to provide a fair value of the securities.
Reliable market quotations are not considered to be readily available
for long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, or certain foreign securities. These investments are stated at fair
value on the basis of valuations furnished by pricing services, which determine
valuations for normal, institutional-size trading units of such securities using
methods based on market transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Fund's shares are computed as of such times. Also, because of the amount
of time required to collect and process trading information as to large numbers
of securities issues, the values of certain securities (such as convertible
bonds, U.S. Government securities, and tax-exempt securities) are determined
based on market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange. Occasionally, events
B-21
<PAGE>
affecting the value of such securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value following procedures approved by the Board of Directors.
TAX STATUS
The Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund will not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders.
In order to qualify as a "regulated investment company," the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies;
(b) derive less than 30% of its gross income from the sale or other disposition
of certain assets (including stock and securities) held less than three months;
(c) diversify its holdings so that, at the close of each quarter of its taxable
year, (i) at least 50% of the value of its total assets consists of cash, cash
items, U.S. Government Securities, and other securities limited generally with
respect to any one issuer to not more than 5% of the total assets of the Fund
and not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any issuer (other than U.S. Government Securities). In order to receive the
favorable tax treatment accorded regulated investment companies and their
shareholders, moreover, the Fund must in general distribute at least 90% of its
interest, dividends, net short-term capital gain, and certain other income each
year.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Portfolio
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by the Fund during October, November, or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
B-22
<PAGE>
The Fund is required to withhold 31% of all income dividends and
capital gain distributions, and 31% of the gross proceeds of all redemptions of
Fund shares, in the case of any shareholder who does not provide a correct
taxpayer identification number, about whom the Fund is notified that the
shareholder has under reported income in the past, or who fails to certify to
the Fund that the shareholder is not subject to such withholding. Tax-exempt
shareholders are not subject to these back-up withholding rules so long as they
furnish the Fund with a proper certification.
Foreign currency-denominated securities and related hedging
transactions. The Fund's transactions in foreign currencies, foreign
currency-denominated debt securities, and certain foreign currency options,
futures contracts, and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
If more than 50% of the Fund's assets at year end consists of the debt
and equity securities of foreign corporations, the Fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign countries.
In such a case, shareholders will include in gross income from foreign sources
their pro rata shares of such taxes. A shareholder's ability to claim a foreign
tax credit or deduction in respect of foreign taxes paid by the Fund may be
subject to certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount of such taxes.
Shareholders who do not itemize on their federal income tax returns may claim a
credit (but no deduction) for such foreign taxes.
Investment by the Fund in certain "passive foreign investment
companies" could subject the Fund to a U.S. federal income tax or other charge
on the proceeds from the sale of its investment in such a company; however, this
tax can be avoided by making an election to mark such investments to market
annually or to treat the passive foreign investment company as a "qualified
electing fund."
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions. Dividends and distributions also may be subject to state
and federal taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes. The foregoing
discussion relates solely to U.S. federal income tax law. Non-U.S. investors
should consult their tax advisers concerning the tax consequences of ownership
of shares of the Fund, including the possibility that distributions may be
subject to a 30% United States withholding tax (or a reduced rate of withholding
provided by treaty).
B-23
<PAGE>
DISTRIBUTION
Project America, Inc. serves as principal distributor of the Fund under
a Distribution Agreement dated February 13, 1992. Pursuant to the Distribution
Agreement, Project America agrees to bear the expenses of printing any
promotional or sales literature used by Project America or furnished by Project
America to dealers in connection with the public offering of the Fund's shares,
including expenses of advertising in connection with such public offerings.
Project America has not undertaken to sell any specified number of shares of the
Fund. Project America receives no compensation from the Fund for the services it
provides under the Distribution Agreement.
The Fund or Project America may terminate the Distribution Agreement on
sixty days' written notice without penalty. The Distribution Agreement will
terminate automatically in the event of its assignment.
PERFORMANCE INFORMATION
Total return for the one-, five-, and ten-year periods (or for the life
of the Fund, if shorter) is determined by calculating the actual dollar amount
of investment return on a $1,000 investment in the Fund at the beginning of the
period, and then calculating the annual compounded rate of return which would
produce that amount. Total return for a period of one year is equal to the
actual return of the Fund during that period. Total return calculations assume
reinvestment of all Fund distributions at net asset value per share on their
respective reinvestment dates. The total return for the one-year period ending
December 31, 1996 and the average annual total return for the life of the Fund
(May 5, 1992 through December 31, 1996) was 5.46% and 9.67%, respectively.
The Fund's yield is presented for a specified thirty-day period (the
"base period"). Yield is based on the amount determined by (i) calculating the
aggregate amount of dividends and interest earned by the Fund during the base
period less expenses accrued for that period, and (ii) dividing that amount by
the product of (A) the average daily number of shares of the Fund outstanding
during the base period and entitled to receive dividends and (B) the net asset
value per share on the last day of the base period. The result is annualized on
a compounding basis to determine the yield. For this calculation, interest
earned on debt obligations held by the Fund is generally calculated using the
yield to maturity (or first expected call date) of such obligations based on
their market values (or, in the case of receivables-backed securities such as
GNMA's, based on cost). Dividends on equity securities are accrued daily at
their stated dividend rates. The yield for the Fund for the thirty-day period
ended December 31, 1996 was 4.08%.
All data for the Fund are based on past performance and do not predict
future results.
B-24
<PAGE>
Independent statistical agencies measure the Fund's investment
performance and publish comparative information showing how the Fund, and other
investment companies, performed in specified time periods. Agencies whose
reports are commonly used for such comparisons are set forth below. From time to
time, the Fund may distribute these comparisons to its shareholders or to
potential investors. The agencies listed below measure performance based on the
basis of their own criteria rather than on the basis of the standardized
performance measures described above.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated
by Lipper, reflecting generally changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of
performance periods, for example year-to-date, 1-year, 5-year, and
10-year performance. Lipper classifies mutual funds by investment
objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. the
ratings are divided into five groups: highest, above average, neutral,
below average and lowest. They represent a fund's historical
risk/reward ratio relative to other funds with similar objectives. The
performance factor is a weighted-average assessment of the Portfolio's
3-year, 5-year, and 10-year total return performance (if available)
reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of
the fund. The ratings are derived from a purely quantitative system
that does not utilize the subjective criteria customarily employed by
rating agencies such as Standard & Poor's Corporation and Moody's
Investor Service, Inc.
Weisenberger's Management Results publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year performance. Mutual funds are ranked in
general categories (e.g., international bond, international equity,
municipal bond, and maximum capital gain). Weisenberger rankings do not
reflect deduction of sales charges or fees.
Independent publications may also evaluate the Fund's performance.
Certain of those publications are listed below. The Fund may distribute
evaluations by or excerpts from these publications to its shareholders or to
potential investors. The following illustrates the types of information provided
by these publications.
Business Week publishes mutual fund rankings in its Investment Figures
of the Week column. The rankings are based on 4-week and 52-week total
return reflecting changes in net asset value and the reinvestment of
all distributions. They do not reflect deduction of any sales charges.
Portfolios are not categorized; they compete in a large universe of
over 2,000 funds. The source for rankings is data generated by
Morningstar, Inc.
B-25
<PAGE>
Investor's Business Daily publishes mutual fund rankings on a daily
basis. The rankings are depicted as the top 25 funds in a given
category. The categories are based loosely on the type of fund, e.g.,
growth funds, balanced funds, U.S. government funds, GNMA funds, growth
and income funds, corporate bond funds, etc. Performance periods for
sector equity funds can vary from 4 weeks to 39 weeks; performance
periods for other fund groups vary from 1 year to 3 years. Total return
performance reflects changes in net asset value and reinvestment of
dividends and capital gains. The rankings are based strictly on total
return. They do not reflect deduction of any sales charges Performance
grades are conferred from A+ to E. An A+ rating means that the fund has
performed within the top 5% of a general universe of over 2000 funds;
an A rating denotes the top 10%; an A- is given to the top 15%, etc.
Barron's periodically publishes mutual fund rankings. The rankings are
based on total return performance provided by Lipper Analytical
Services. The Lipper total return data reflects changes in net asset
value and reinvestment of distributions, but does not reflect deduction
of any sales charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example) to long-term
periods (five-year or ten-year performance, for example). Barron's
classifies the funds using the Lipper mutual fund categories, such as
Capital Appreciation Portfolios, Growth Portfolios, U.S. Government
Portfolios, Equity Income Portfolios, Global Portfolios, etc.
Occasionally, Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with assets in
excess of $25 million; "small funds" may be those with less than $25
million in assets.
The Wall Street Journal publishes its Mutual Portfolio Scorecard on a
daily basis. Each Scorecard is a ranking of the top-15 funds in a given
Lipper Analytical Services category. Lipper provides the rankings based
on its total return data reflecting changes in net asset value and
reinvestment of distributions and not reflecting any sales charges. The
Scorecard portrays 4-week, year-to-date, one-year and 5-year
performance; however, the ranking is based on the one-year results. The
rankings for any given category appear approximately once per month.
Fortune magazine periodically publishes mutual fund rankings that have
been compiled for the magazine by Morningstar, Inc. Portfolios are
placed in stock or bond fund categories (for example, aggressive growth
stock funds, growth stock funds, small company stock funds, junk bond
funds, Treasury bond funds etc.), with the top-10 stock funds and the
top- 5 bond funds appearing in the rankings. The rankings are based on
3-year annualized total return reflecting changes in net asset value
and reinvestment of distributions and not reflecting sales charges.
Performance is adjusted using quantitative techniques to reflect the
risk profile of the fund.
Money magazine periodically publishes mutual fund rankings on a
database of funds tracked for performance by Lipper Analytical
Services. The funds are placed in 23 stock or
B-26
<PAGE>
bond fund categories and analyzed for five-year risk adjusted return.
Total return reflects changes in net asset value and reinvestment of
all dividends and capital gains distributions and does not reflect
deduction of any sales charges. Grades are conferred (from A to E): the
top 20% in each category receive an A, the next 20% a B, etc. To be
ranked, a fund must be at least one year old, accept a minimum
investment of $25,000 or less and have had assets of at least $25
million as of a given date.
Financial World publishes its monthly Independent Appraisals of Mutual
Portfolios, a survey of approximately 1000 mutual funds. Portfolios are
categorized as to type, e.g., balanced funds, corporate bond funds,
global bond funds, growth and income funds, U.S. government bond funds,
etc. To compete, funds must be over one year old, have over $1 million
in assets, require a maximum of $10,000 initial investment, and should
be available in at least 10 states in the United States. The funds
receive a composite past performance rating, which weighs the
intermediate - and long-term past performance of each fund versus its
category, as well as taking into account its risk, reward to risk, and
fees. An A+ rated fund is one of the best, while a D- rated fund is one
of the worst. The source for Financial World rating is Schabacker
investment management in Rockville, Maryland.
Forbes magazine periodically publishes mutual fund ratings based on
performance over at least two bull and bear market cycles. The funds
are categorized by type, including stock and balanced funds, taxable
bond funds, municipal bond funds, etc. Data sources include Lipper
Analytical Services and CDA Investment Technologies. The ratings are
based strictly on performance at net asset value over the given cycles.
Portfolios performing in the top 5% receive an A+ rating; the top 15%
receive an A rating; and so on until the bottom 5% receive an F rating.
Each fund exhibits two ratings, one for performance in "up" markets and
another for performance in "down" markets.
Kiplinger's Personal Finance Magazine (formerly Changing Times),
periodically publishes rankings of mutual funds based on one-, three-
and five-year total return performance reflecting changes in net asset
value and reinvestment of dividends and capital gains and not
reflecting deduction of any sales charges. Portfolios are ranked by
tenths: a rank of 1 means that a fund was among the highest 10% in
total return for the period; a rank of 10 denotes the bottom 10%.
Portfolios compete in categories of similar funds --aggressive growth
funds, growth and income funds, sector funds, corporate bond funds,
global governmental bond funds, mortgage-backed securities funds, etc.
Kiplinger's also provides a risk-adjusted grade in both rising and
falling markets. Portfolios are graded against others with the same
objective. The average weekly total return over two years is
calculated. Performance is adjusted using quantitative techniques to
reflect the risk profile of the fund.
U.S. News and World Report periodically publishes mutual fund rankings
based on an overall performance index (OPI) devised by Kanon Bloch
Carre & Co., a Boston research firm. Over 2000 funds are tracked and
divided into 10 equity, taxable bond and tax-free
B-27
<PAGE>
bond categories. Portfolios compete within the 10 groups and three
broad categories. The OPI is a number from 0-100 that measures the
relative performance of funds at least three years old over the last 1,
3, 5 and 10 years and the last six bear markets. Total return reflects
changes in net asset value and the reinvestment of any dividends and
capital gains distributions and does not reflect deduction of any sales
charges. Results for the longer periods receive the most weight.
The 100 Best Mutual Portfolios You Can Buy (1992), authored by Gordon
K. Williamson. The author's list of funds is divided into 12 equity and
bond fund categories, and the 100 funds are determined by applying four
criteria. First, equity funds whose current management teams have been
in place for less than five years are eliminated. (The standard for
bond funds is three years.) Second, the author excludes any fund that
ranks in the bottom 20 percent of its category's risk level. Risk is
determined by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill. Third, a
fund must have demonstrated strong results for current three-year and
five-year performance. Fourth, the fund must either possess, in Mr.
Williamson's judgment, "excellent" risk-adjusted return or "superior"
return with low levels of risk. Each of the 100 funds is ranked in five
categories: total return, risk/volatility, management, current income
and expenses. The rankings follow a five-point system: zero designates
"poor"; one point means "fair"; two points denote "good"; three points
qualify as a "very good"; four points rank as "superior"; and five
points mean "excellent."
MEMBERS OF INVESTMENT TEAMS AT MENTOR ADVISORS
The following persons are investment personnel of Mentor Advisors, as
indicated.
Large Capitalization Quality Equity Growth
John G. Davenport, CFA -- Managing Director, Chief Investment Officer
Mr. Davenport has twelve years of investment management experience. He joined
the Mentor organization after heading equity research for Lowe, Brockenbrough,
Tierney, & Tattersall. He earned his undergraduate business degree from the
University of Richmond and his graduate degree in business from the University
of Virginia.
Richard H. Skeppstrom II -- Vice President, Portfolio Manager
Mr. Skeppstrom has six years of investment management experience. He has earned
both his undergraduate degree and masters of business administration from the
University of Virginia.
Richard L. Rice, CFA -- Vice President, Portfolio Manager
Mr. Rice has twenty-four years' experience in the securities industry. Prior to
joining the Mentor organization in 1993, he was a partner in the equity
management software firm, Parata Analytics Research, which was acquired by the
Mentor organization. His previous responsibilities include director of Research
for Signet Asset Management, Senior Research Analyst for Capitoline
B-28
<PAGE>
Investment Services, and research positions at First Atlanta Corp. and Southeast
Banking. He earned his undergraduate business degree from the University of
Florida.
Active Fixed-Income
P. Michael Jones, CFA -- Managing Director, Chief Investment Officer
Mr. Jones has eleven years of investment management experience. Mr. Jones is
responsible for the design and implementation of the fixed-income group's
proprietary analytical system. He earned his undergraduate degree from the
College of William and Mary.
Steven C. Henderson -- Associate Vice President, Portfolio Manager
Mr. Henderson has seven years of investment management experience. He has an
undergraduate degree from the University of Richmond and a masters in business
administration from George Washington University.
Stephen R. McClelland -- Vice President, Portfolio Manager
Mr. McClelland has six years of investment management experience, all of which
have been with the Mentor organization. He is a Certified Public Accountant and
received his undergraduate degree in accounting from Iowa State University and
his graduate business degree from Virginia Commonwealth University.
Keith Wantling
Mr. Wantling has five years of experience. Mr. Wantling performs analysis and
screening for credit sensitive private label mortgage-backed securities and
directs the firm's portfolio analysis effort. He holds his undergraduate degree
in accounting information systems from Virginia Polytechnic Institute.
Small-to-Medium Capitalization Equity Growth
Theodore W. Price, CFA -- Managing Director, Chief Investment Officer
Mr. Price has over thirty years of investment management experience, with over
twenty-three years' tenure at Charter Asset Management, the predecessor to
Mentor Advisors. He has managed Mentor Growth Portfolio since its inception. He
earned both his undergraduate degree and masters of business administration from
the University of Virginia.
Linda A. Ziglar, CFA -- Portfolio Manager
Ms. Ziglar has seventeen years of investment management experience. Ms. Ziglar
joined Charter Asset Management, the predecessor to Mentor Advisors, from
Federated Investors, where she managed $300 million in equity assets. She holds
an undergraduate degree from Randolph-Macon Woman's College where she graduated
summa cum laude. She also holds a graduate degree in business administration
from the University of Pittsburgh.
B-29
<PAGE>
Jeffrey S. Drummond, CFA -- Vice President, Portfolio Manager
Mr. Drummond has eight years of investment management experience . Mr. Drummond
began his career as a portfolio analyst in the Investment Strategy Department at
Wheat First Butcher Singer, where he shared responsibility for directing $100
million in assets following the Strategic Sectors Portfolio. He received his
undergraduate degree in finance from the University of Richmond, where he
graduated cum laude.
Edward Rick IV
Mr. Rick has two years of investment management experience.
He received his undergraduate degree in finance from the University of Richmond,
where he graduated cum laude.
Tactical Asset Allocation
Don R. Hays -- Chief Investment Officer
Mr. Hays has over twenty-seven years of investment experience and is Director of
Investment Strategy for Wheat First Butcher Singer, Inc., a position he has held
since 1984. Mr. Hays began his career as an engineer with the Von Braun
rocket-development team in 1968. He is regarded as one of the country's leading
investment strategists and his market outlook is quoted regularly in the Wall
Street Journal, Investor's Business Daily, USA Today, and other major media. He
has been a guest on the PBS series Wall $treet Week with Louis Rukeyser and is
regularly featured by Dow Jones, Reuters and Bloomberg News Services.
Asa W. Graves VII, CFA -- Portfolio Manager
Mr. Graves has five years of investment management experience and works closely
with Mr. Hays to develop the analytical framework used in managing the Mentor
Strategy Portfolio. He earned his undergraduate degree from the University of
Richmond.
William P. Ryder -- Research Analyst
Mr. Ryder joined Wheat First Butcher Singer in 1991 as a member of its
Investment Strategy Group, working as a research analyst on its growth and
growth and income model portfolios. In 1995 he became part of the team
responsible for managing the Mentor Strategy Portfolio. In that capacity he
focuses primarily on conducting economic analysis, industry group studies, and
asset allocation modeling. Mr. Ryder attended Virginia Commonwealth University
and has five years' investment experience.
CUSTODIAN
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri, 64105, acts as the custodian for the Fund's portfolio securities and
cash. In this capacity, it maintains certain financial and accounting books and
records pursuant to agreements with the Fund.
B-30
<PAGE>
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, located at 99 High Street, Boston, Massachusetts
02110, are the Fund's independent accountants, providing audit services, tax
return review and other tax consulting services and assistance and consultation
in connection with the review of various Securities and Exchange Commission
filings. Prior to the 1997 fiscal year, Deloitte & Touche L.L.P., 707 East Main
Street, Richmond, Virginia 23219, served as the Fund's independent accountants.
RATINGS
The rating services' descriptions of corporate bonds are:
Moody's Investors Service, Inc.:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
B-31
<PAGE>
Standard & Poor's:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
A-1 and Prime-1 Commercial Paper Ratings
The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by S&P. Commercial paper rated A-1 by S&P has the following characteristics:
o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of
borrowing;
o basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances;
o typically, the issuer's industry is well established and the issuer
has a strong position within the industry; and
o the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by S&P to have overwhelming safety characteristics are designated
A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
B-32
<PAGE>
o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries and an
appraisal of speculative- type risks which may be inherent in certain
areas;
o evaluation of the issuer's products in relation to competition and
customer acceptance;
o liquidity;
o amount and quality of long-term debt;
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships which
exist with the issuer; and
o recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.
Note Ratings:
MIG1/VMIG1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A-1 - This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
B-33
<PAGE>
FINANCIAL STATEMENTS
The Report of Independent Auditors, financial highlights, and financial
statements in respect of the Fund, included in the Fund's Annual Report for the
fiscal year ended December 31, 1996, filed electronically on March 3, 1997 (File
No. 811-6549), are incorporated by reference into this Statement of Additional
Information.
B-34
<PAGE>
AMERICA'S UTILITY FUND, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Financial Statements:
(1) Report of Independent Auditors (b)
(2) Statement of Assets and Liabilities -- December 31,
1996 (b)
(3) Statement of Operations -- Year Ended December 31,
1996 (b)
(4) Statement of Changes in Net Assets -- Years Ended
December 31, 1996 and 1995 (b)
(5) Financial Highlights (a)
(6) Notes to Financial Statements (b)
Supporting Schedules:
Schedule I -- Portfolio of Investments -- December 31, 1996
(b) Schedule II through IX omitted because the required matter
is not present.
(a) Included in Part A.
(b) Included in Part B.
b. Exhibits
(1) Articles of Incorporation.*
(2) By-laws.*
(3) Inapplicable.
(4) Form of Enrollment Application.*
(5)
(A) Management Contract dated September 9,
1995.+
(B) Administrative Services Agreement dated
August 21, 1995.+
(6) Distribution Agreement, dated as of March 20, 1992,
between the Registrant and Project America, Inc.*
(7) Inapplicable.
(8)
(A) Custodian Agreement, dated as of
September 1, 1994, between the
Registrant and Mellon Bank, N.A.*
(B) Shareholder Service Agreement dated August
21, 1995.+
(C) Sub-Shareholder Service Agreement dated
August 21, 1995.+
-1-
<PAGE>
(D) Transfer Agency and Services Agreement dated
August 21, 1995.+
(E) Sub-Transfer Agency Agreement dated August
21, 1995.+
(F) Custody Agreement dated March 1, 1995.+
(9) Inapplicable.
(10) (A) Opinion of Counsel, including consent.*
(B) Opinion of Special Maryland Counsel, including
consent+
(11) Independent Auditor's Consent.+
(12) Inapplicable.
(13) Purchase Agreement, dated as of February 14, 1992,
between the Registrant and Dominion Resources, Inc.*
(14) Form of Registrant's IRA Documents.*
(15) Inapplicable.
(16) Schedule of Computation of Performance.+
(27) Financial Data Schedule +
* Previously filed.
+ Filed herewith.
Item 25: Persons Controlled by or Under Common Control with Registrant
As of February 1, 1997, approximately 5% of the Registrant's
outstanding shares of common stock is beneficially owned by
Dominion Resources, Inc., a corporation organized under the
laws of the Commonwealth of Virginia. Dominion Capital, Inc.
is a wholly-owned subsidiary of Dominion Resources, Inc., a
Virginia corporation. America's Utility Fund Service Company,
a Virginia corporation, and the Registrant's principal
distributor, Project America, Inc., a Virginia corporation,
are wholly-owned subsidiaries of Dominion Capital, Inc. and,
as such, are under common control with the Registrant.
Item 26: Number of Holders of Securities (as of February 1, 1997)
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Common Stock, par 36,845
value $.001 per share
Item 27: Indemnification
The information required by this item is incorporated herein
by reference from Post-Effective Amendment No. 4 to the
Registrant's Statement on Form N-1A (Reg. No. 33-45437) under
the Securities Act of 1933, filed on February 16, 1995.
-2-
<PAGE>
Item 28. Business or Other Connections of Investment Adviser
(a) The following is additional information with respect to
the directors and officers of Mentor Investment Advisors,
LLC:
The business and other connections of each director, officer,
or partner of Mentor Investment Advisors, LLC in which such director, officer,
or partner is or has been, at any time during the past two fiscal years, engaged
for his own account or in the capacity of director, officer, employee, partner,
or trustee are set forth in the following table.
Other Substantial
Position with the Business, Profession,
Name Investment Adviser Vocation or Employment*
- ---- ------------------ -----------------------
John G. Davenport Managing Director None
R. Preston Nuttall Managing Director Formerly, Senior Vice
President, Capitoline
Investment Services
Paul F. Costello Managing Director Managing Director,
Wheat First Butcher
Singer, Inc. and Mentor
Investment Group, LLC;
President, Mentor
Funds, Mentor Income
Fund, Inc., Cash
Resource Trust, and
Mentor Institutional
Trust; Executive Vice
President and Chief
Administrative Officer,
America's Utility Fund,
Inc.; Director, Mentor
Perpetual Advisors, LLC
and Mentor Trust
Company
Theodore W. Price Managing Director Formerly, President,
Charter Asset
Management, Inc.
-3-
<PAGE>
P. Michael Jones Managing Director Formerly, Managing
Director, Commonwealth
Investment Counsel,
Inc.
Thomas L. Souders Treasurer Managing Director and
Chief Financial
Officer,
Wheat, First
Securities, Inc.;
formerly, Manager of
Internal Audit, Heilig-
Myers; formerly,
Manager, Peat Marwick &
Mitchell & Company
Robert P. Wilson Assistant Treasurer Assistant Treasurer,
Mentor Distributors,
LLC
John M. Ivan Secretary Managing Director,
Senior Vice President
and Assistant General
Counsel, Wheat, First
Securities, Inc.;
Managing Director and
Assistant Secretary,
Wheat First Butcher
Singer, Inc.; Clerk,
Cash Resource Trust,
and Mentor
Institutional Trust;
Secretary, Mentor Funds
Howard T. Macrae, Jr. Assistant Secretary Assistant Secretary,
Mentor Distributors,
LLC
The address of each of the above-named entities (other than Capitoline
Investment Services) is 901 East Byrd Street, Richmond, VA 23219. The address of
Capitoline Investment Services is 919 East Main Street, Richmond, VA 23219.
Item 29. Principal Underwriters
(a) Project America, Inc., the Registrant's only current
principal underwriter, does not act as principal
underwriter to any other investment companies.
(b) The following is additional information with respect
to the directors and officers of Project America:
-4-
<PAGE>
(1) (2) (3)
Name and Principal Position and Offices Position and Offices
Business Address with Underwriters with Registrant
------------------ -------------------- --------------------
Glenna G. Bryant President & Treasurer Vice President -
901 East Byrd Street Administration
Richmond, VA 23219
(c) Not applicable.
Item 30. Location of Accounts and Records
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by the Fund or AUF
Service Company, the Registrant's sub-transfer agent, at 901
East Byrd Street, Richmond, Virginia 23219 or Boston Financial
Data Services, Inc., the Registrant's transfer agent, at 2
Heritage Drive, North Quincy, Massachusetts 02171. Records
relating to the duties of the Registrant's custodian are
maintained
by the Registrant's Custodian, Investors Fiduciary Trust
Company, 127 West 10th Street, Kansas City, Missouri 64105.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Richmond, and Commonwealth of Virginia, on the 30th day of April, 1997:
AMERICA'S UTILITY FUND, INC.
By: /s/ LINWOOD R. ROBERTSON
------------------------------
Linwood R. Robertson
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated on the 30th day of April, 1997:
/s/ LINWOOD R. ROBERTSON Director, Chairman, and President
_____________________________________ (Principal Executive Officer)
(Linwood R. Robertson)
*
_____________________________________ Director
(Arch T. Allen, III)
*
_____________________________________ Director
(Robert P. Black)
*
_____________________________________ Director
(Peter W. Brown)
*
_____________________________________ Director
(Clifford A. Cutchins, IV)
*
_____________________________________ Director
(Louis W. Moelchert, Jr.)
-6-
<PAGE>
*
_____________________________________ Director
(Daniel J. Ludeman)
/s/ TERRY L. PERKINS
_____________________________________ Treasurer
(Terry L. Perkins) (Principal Financial and
Accounting Officer)
*By: /s/ LINWOOD R. ROBERTSON
_____________________________________ Attorney-in-fact
-7-
<PAGE>
INDEX TO EXHIBITS
(5)(A) Management Contract
(5)(B) Administrative Services Agreement
(8)(B) Shareholder Service Agreement
(8)(C) Sub-Shareholder Service Agreement
(8)(D) Transfer Agency Agreement
(8)(E) Sub-Transfer Agency Agreement
(8)(F) Custody Agreement
(10)(B) Opinion of Special Maryland Counsel, including consent.
(11) Independent Auditors' Consent
(16) Schedule of Computation of Performance
(27) Financial Data Schedule
-8-
<PAGE>
POWER OF ATTORNEY
We, the undersigned Directors of America's Utility Fund, Inc. (the
"Fund"), hereby severally constitute and appoint Linwood R. Robertson and James
L. Trueheart, and each of them singly, our true and lawful attorneys, with full
power to them and each of them, to sign for us, and in our names and in the
capacities indicated below, the Registration Statement on Form N-1A of the Fund
and any and all amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto our said attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in the premises, as fully to all intents and purposes as he might or
could do in person, and hereby ratify and confirm all that said attorneys or
either of them may lawfully do or cause to be done by virtue thereof.
WITNESS our hands and common seal on the date set forth below.
Signature Title Date
- --------- ----- ----
/s/ Arch T. Allen, III Director May 2, 1996
- ----------------------
Arch T. Allen, III
/s/ Robert P. Black Director May 2, 1996
- -------------------
Robert P. Black
/s/ Peter W. Brown Director May 2, 1996
- ------------------
Peter W. Brown
/s/ Clifford A. Cutchins, IV Director May 2, 1996
- ----------------------------
Clifford A. Cutchins, IV
/s/ David J. Ludeman Director May 2, 1996
- --------------------
David J. Ludeman
/s/ Louis W. Moelchert, Jr. Director May 2, 1996
- ---------------------------
Louis W. Moelchert, Jr.
/s/ Linwood R. Robertson Director, Chairman and May 2, 1996
- ------------------------
Linwood R. Robertson President
Exhibit (5)(A)
AMERICA'S UTILITY FUND, INC.
MANAGEMENT CONTRACT
This Management Contract dated as of September 9, 1995 between
AMERICA'S UTILITY FUND, INC., a Maryland corporation (the "Fund"), and
COMMONWEALTH INVESTMENT COUNSEL, INC., a Virginia corporation (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 market prices and
trends, the reputation, experience, and financial stability of the broker or
<PAGE>
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 Fund; for the next $100 million under management, .20% of the
average daily net assets in the
-2-
<PAGE>
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.
-3-
<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 COMMONWEALTH
INVESTMENT COUNSEL, INC., 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: /s/ Linwood R. Robertson
---------------------------------
COMMONWEALTH INVESTMENT COUNSEL, INC.
By: /s/ John G. Davenport
----------------------------------
-4-
Exhibit (5)(B)
AMERICA'S UTILITY FUND, INC.
901 East Byrd Street
Richmond, Virginia 23219
August 21, 1995
Mentor Investment Group, Inc.
901 East Byrd Street
Richmond, Virginia 23219
Re: Administrative Services Agreement
Dear Gentlemen:
America's Utility Fund, Inc., a Maryland corporation (the "Fund"), is
engaged in the business of a registered investment company. The Fund desires
that you act as administrator of the Fund, and you are willing to act as such
administrator and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Fund agrees with you as follows:
1. Delivery of Fund Documents. The Fund has furnished you with copies
properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Fund.
(b) By-Laws of the Fund as in effect on the date hereof.
(c) Resolutions of the Board of Directors of the Fund selecting
you as administrator and approving the form of this Agreement.
The Fund will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
2. Administrative Services. You will continuously provide business
management services to the Fund and will generally, subject to the general
oversight of the Board of Directors of the Fund and, except as provided in the
next following paragraph, manage all of the business and affairs of the Fund,
subject always to the provisions of the Fund's Articles of Incorporation and
By-Laws and of the Investment Company Act of 1940, as amended (the "1940 Act"),
and subject, further, to such policies and instructions as the Board of
Directors of the Fund may from time to time establish. You shall, except as
provided in the next
<PAGE>
following paragraph, advise and assist the officers of the Fund in taking such
steps as are necessary or appropriate to carry out the decisions of the Board of
Directors of the Fund and the appropriate committees of such Board of Directors
regarding the conduct of the business of the Fund. Without limiting the
generality of the foregoing, and subject in each case to the provisions of the
following paragraph, you will take all reasonable steps to coordinate and
oversee the preparation and filing of all amendments to the registration
statement of the Fund on Form N-1A as are required by the Securities Act of 1933
or the 1940 Act, and the preparation and mailing of all financial reports to
shareholders required by the 1940 Act; to coordinate and oversee the Fund's
compliance with the registration requirements of applicable state securities or
"Blue Sky" laws; to prepare and furnish all reports to the Board of Directors of
the Fund in respect of the Fund, including materials relating to any meeting of
the Board of Directors of the Fund, as may reasonably be requested by the Board
of Directors or the officers of the Fund; to oversee and perform certain agreed
tax-related functions for the Fund (including, without limitation, performance
of excise tax and income tax calculations for year-end dividend distributions to
shareholders, preparation of the income tax information footnote in year-end
financial statements, and preparation and filing of federal tax returns for the
Fund and Virginia and Maryland tax return forms); and otherwise to assist the
officers of the Fund in the performance of their duties. You will be fully
protected in complying with or relying on the instructions of the President or
any other officer of the Fund, or the advice of counsel for the Fund, in the
performance of your duties hereunder,.
Notwithstanding any provision of this Agreement, you will not at any
time provide, or be required to provide, to the Fund or to any person with
respect to the Fund, investment research, advice, or supervision, or in any way
advise the Fund or any person acting on behalf of the Fund as to the value of
securities or other investments or as to the advisability of investing in,
purchasing, or selling securities or other investments, nor shall you be
responsible for monitoring, determining, or advising as to the compliance of any
investment in or purchase or sale of securities or other investments with any
applicable law.
3. Allocation of Charges and Expenses. You will make available, without
expense to the Fund, the services of such of your directors, officers, and
employees as may duly be elected Directors or officers of the Fund, subject to
their individual consent to serve and to any limitations imposed by law. You
will provide, at your expense, all clerical services relating to the business of
the Fund. You will pay the compensation of such of your directors, officers, and
employees as may duly be elected Directors or officers of the Fund. You will not
be required to pay any expenses of the Fund other than those specifically
allocated to you in this paragraph 3. In particular, but without limiting the
generality of the foregoing, you will not be required to pay: clerical salaries
not relating to the services described in paragraph 2 above; fees and expenses
incurred by the Fund in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to a
pricing agent, if any; legal, auditing, or accounting expenses; taxes or
governmental fees; the fees and expenses of the transfer agent of the Fund; the
cost of preparing share certificates or any other expenses, including clerical
expenses, incurred in
-2-
<PAGE>
connection with the issue, sale, underwriting, redemption, or repurchase of
shares of the Fund; the expenses of and fees for registering or qualifying
securities for sale; the fees and expenses of Directors of the Fund who are not
affiliated with you; the cost of preparing and distributing reports and notices
to shareholders; public and investor relations expenses; or the fees or
disbursements of custodians of the Fund's assets, including expenses incurred in
the performance of any obligations enumerated by the Articles of Incorporation
or By-Laws of the Fund insofar as they govern agreements with any such
custodian.
4. Compensation. As compensation for the services performed and the
facilities furnished and expenses assumed by you, including the services of any
consultants retained by you, the Fund shall pay you, promptly (but in any event
within three business days) after the last day of each calendar month, a fee,
calculated daily, of 0.65 of 1% annually of the Fund's average daily net assets,
less the amount of any fees paid to Commonwealth Investment Counsel, Inc. for
such month under its Management Contract with the Fund dated as of August 21,
1995.
If this Agreement is terminated as of any date not the last day of a
calendar month, the fee payable to you 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 you under this
Agreement and the detailed computation thereof.
5. Limitation of Liability. You shall not be liable for any error of
judgement or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates except a loss resulting from
willful misfeasance, bad faith, or gross negligence on your part in the
performance of your duties, or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Fund shall
be deemed, when acting within the scope of his or her employment by the Fund, to
be acting in such employment solely for the Fund and not as your employee or
agent.
6. Duration and Termination of this Agreement. This Agreement shall
remain in force until August 21, 1997 and continue from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by the vote of a majority of the Directors who are not interested persons of you
or of the Fund, cast in person at a meeting called for the purpose of voting on
such approval and by a vote of the Board of Directors. This Agreement may, on 30
days notice, be terminated at any time without the payment of any penalty by
you, and, immediately upon notice, by the Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund. In interpreting the
provisions of
-3-
<PAGE>
this Agreement, the definitions contained in Section 2(a) of the 1940 Act, as
modified by rule 18f-2 under the Act (particularly the definitions of
"interested person" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation, or order.
7. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought, and no amendment of this Agreement shall be
effective as to the Fund until approved by the Board of Directors, including a
majority of the Directors who are not interested persons of you or of the Fund,
cast in person at a meeting called for the purpose of voting on such approval.
8. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract.
Yours very truly,
AMERICA'S UTILITY FUND, INC.
By: /s/ Linwood R. Robertson
------------------------------
The foregoing Agreement is hereby accepted as of the date thereof.
MENTOR INVESTMENT GROUP, INC.
By: /s/ Paul F. Costello
---------------------------------
-4-
Exhibit (8)(B)
SHAREHOLDER SERVICE AGREEMENT
This SHAREHOLDER SERVICE AGREEMENT is made as of August 21, 1995,
between AMERICA'S UTILITY FUND, INC., a Maryland corporation (the "Fund"), and
MENTOR INVESTMENT GROUP, INC., a Virginia corporation (the "Service Agent"). In
consideration of the mutual covenants hereinafter contained, it is hereby agreed
by and between the parties hereto as follows:
1. The Service Agent shall provide, either by itself or through
financial institutions as it may from time to time determine, administrative
support services approved by the Board of Directors of the Fund (the
"Directors") to the Fund and its shareholders. These administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities and various personnel, including
clerical, supervisory and computer personnel, as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions; answering routine shareholder inquiries regarding the
Fund; assisting shareholders in changing dividend options, account designations
and addresses; and providing such other services as the Fund may reasonably
request.
2. To compensate the Service Agent for the services it provides and the
expenses it bears hereunder, the Fund will pay the Service Agent a service fee
(the "Service Fee") accrued daily and paid monthly at the annual rate of 0.25 of
one percent (0.25%) of the Fund's average daily net assets. The Service Fee paid
under this Agreement is intended to qualify as a "service fee" as defined in
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (or any successor provision) as in effect from time to
time.
3. Quarterly in each year that the Service Agreement remains in effect,
the Service Agent shall provide the Fund for review by the Directors, and the
Directors shall review, a written report of the amounts expended under the
Service Agreement and the purposes for which such expenditures were made.
4. This Agreement shall continue in effect for one year from the date
of its execution, and thereafter for successive periods of one year if this
Agreement is approved at least annually by the Directors, including a majority
of the Directors who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of this Agreement (the
"Disinterested Directors").
5. Notwithstanding paragraph 4, this Agreement may be terminated as
follows:
(a) at any time, without the payment of any penalty, by the
vote of a majority of the Disinterested Directors or by a vote of a
majority of the outstanding voting securities of the Fund as defined in
the Investment Company Act of 1940 on not more
<PAGE>
than sixty (60) days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment
as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by giving
the other party at least sixty (60) days' written notice of its
intention to terminate.
6. This Agreement may be amended by the Fund from time to time by the
following procedure. The Fund will mail a copy of the amendment to the Service
Agent at 901 East Byrd Street, Richmond, Virginia 23219. If the Service Agent
does not object to the amendment within thirty (30) days after its receipt, the
amendment will become part of the Agreement. The Service Agent's objection must
be in writing and be received by the Fund within such thirty days.
7. This Agreement shall be construed in accordance with the Laws of
the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this Shareholder
Service Agreement to be executed by their officers thereunto duly authorized.
AMERICA'S UTILITY FUND, INC.
By: /s/ Linwood R. Robertson
--------------------------------
Title: President
MENTOR INVESTMENT GROUP, INC.
By: /s/ Paul F. Costello
--------------------------------
Title: Managing Director
-2-
<PAGE>
Exhibit (8)(C)
MENTOR INVESTMENT GROUP, INC.
901 East Byrd Street
Richmond, Virginia 23219
August 21, 1995
America's Utility Fund Service Company
901 East Byrd Street
Richmond, Virginia 23219
Re: Sub-Shareholder Service Agreement
Gentlemen:
Reference is made to the Shareholder Service Agreement dated as of
August 21, 1995 (the "Shareholder Service Agreement") between America's Utility
Fund, Inc., a Maryland corporation (the "Fund"), and the undersigned Mentor
Investment Group, Inc., a Virginia corporation, pursuant to which the
undersigned has agreed to provide, either through itself or through financial
institutions as it may from time to time determine, certain administrative
support services to the Fund and its shareholders. Pursuant to a Sub-Transfer
Agency Agreement dated August 21, 1995 (the "Sub-Transfer Agreement") between
you and State Street Bank and Trust Company, you are to provide certain transfer
agent and related services to the Fund. The undersigned desires to have you
provide certain administrative support services to the Fund and its
shareholders, in addition to the services you provide under the Sub-Transfer
Agreement, as the undersigned may from time to time instruct, it being the
intention of the parties that the services to be provided and the facilities
made available by you pursuant to the Sub-Transfer Agency Agreement and this
Agreement shall be in the aggregate at least as extensive as the services you
performed and the facilities you made available in respect of investors in the
Fund prior to this date. Such services and facilities shall include all services
the Fund may reasonably request in this regard, including without limitation,
your use for the benefit of the Fund of such software programs, processes, and
other systems as you utilized in providing shareholder services in respect of
the Fund prior to the date hereof in the same manner as that in which you used
them.
To compensate you for providing such services and facilities and the
expenses you incur in providing such services, the undersigned will pay to you a
fee accrued daily and paid monthly at the annual rate of 0.25 of one percent
(0.25%) of the Fund's average daily net assets in respect of which you provide
such services hereunder. The fee paid under this
<PAGE>
America's Utility Fund Services Company -2- August 21, 1995
Agreement is intended to qualify as a "service fee" as defined in Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (or any successor provision) as in effect from time to time.
This Agreement will terminate at such time as the Shareholder Service
Agreement expires or terminates.
This Agreement may be amended by written agreement of the parties.
This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Virginia.
Very truly yours,
MENTOR INVESTMENT GROUP, INC.
By: /s/ Paul F. Costello
----------------------------
Title: Managing Director
Accepted and agreed to by:
AMERICA'S UTILITY FUND
SERVICE COMPANY
By: /s/ Glenna G. Bryant
-----------------------
Title: President
<PAGE>
Exhibit (8)(D)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
AMERICA'S UTILITY FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Terms of Appointment: Duties of the Bank.................3
2. Fees and Expenses.........................................5
3. Representations and Warranties............................6
4. Representations and Warranties of the Fund................6
5. Data Access and Proprietary Information...................7
6. Indemnification ..........................................8
7. Standard of Care.........................................10
8. Covenants of the Fund and the Bank.......................10
9. Termination of Agreement.................................11
10. Assignment...............................................11
11. Amendment................................................11
12. Virginia Law to Apply....................................11
13. Force Majeure............................................12
14. Consequential Damages....................................12
15. Merger of Agreement......................................12
16. Counterparts.............................................12
-2-
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 21st day of August, 1995, by and between America's
Utility fund, Inc. a Maryland corporation, having its principal office and place
of business at 901 East Byrd Street, P.O. Box 26501, Richmond, Virginia
23261-6501 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent, dividend
disbursing agent, custodian of certain retirement plans and agent in connection
with certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Terms of Appointment: Duties of the Bank
1.1. Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Bank to act as, and the Bank
agrees to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $ .001 par value ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and
agent in connection with any accumulation, open-account or similar
plans provided to the shareholders of the Fund ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation
any periodic investment plan or periodic withdrawal program.
1.2. The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the custodian of the Fund's
portfolio securities and cash (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
-3-
<PAGE>
(iv) In respect to the transactions in items (i), (ii) and
(iii) above, the Bank shall execute transactions
directly with broker-dealers authorized by the Fund
who shall thereby be deemed to be acting on behalf of
the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory
to the Bank and protecting the Bank and the Fund, the
Bank, at its option and with the consent of the Fund,
may issue replacement certificates in place of
mutilated stock certificates upon presentation
thereof and without such indemnity;
(ix) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(x) Record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of Shares of the Fund which are
authorized, based upon data provided bo it by the
Fund, and issued and outstanding. The Bank shall
also provide the Fund on a regular basis with the
total number of Shares which are authorized and
issued and outstanding and shall have no obligation,
when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any
laws relating to the issue or sale of such Shares,
which functions shall be the sole responsibility of
the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent,
dividend disbursing agent, custodian of certain retirement
plans and, as relevant, agent in connection with accumulation,
open-account or similar plans (including without limitation
any periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing
proxies, mailing Shareholder reports and prospectuses to
current Shareholders,
-4-
<PAGE>
withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity
statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the
Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt
from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system
prior to activation and thereafter monitor the daily activity
for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the
initial establishment of transactions subject to blue sky
compliance by the Fund and the reporting of such transactions
to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Section 1 may be established from time to time by agreement
between the Fund and the Bank per the attached service
responsibility schedule. The Bank may at times perform only a
portion of these services and the Fund or its agent may
perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in
writing between the Fund and the Bank.
2. Fees and Expenses
2.1. For the performance by the Bank pursuant to this Agreement, the Fund
agrees to pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section
2.2 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.2. In addition to the fee paid under Section 2.1 above, the Fund agrees to
reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone,
microfilm, microfiche, tabulating proxies, records storage, or advances
incurred by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other expenses reasonably incurred by the Bank
at the request or with the consent of the Fund, will be reimbursed by
the Fund.
-5-
<PAGE>
2.3. The Fund agrees to pay all fees and reimbursable expenses within five
days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to the Bank by the Fund at
least seven (7) days prior to the mailing date of such materials.
3. Representations and Warranties
The Bank represents and warrants to the Fund that:
3.1. It is a trust company duly organized and existing in good standing
under the laws of the Commonwealth of Massachusetts.
3.2. It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3. It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1. It is a corporation duly organized and existing and in good standing
under the laws of Maryland.
4.2. It is empowered under applicable laws and by its Articles of
Incorporation and By- Laws to enter into and perform this Agreement.
4.3. All corporate proceedings required by said Articles of Incorporation
and By-Laws have been taken to authorize it to enter into and perform
this Agreement.
4.4. It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.5. A registration statement under the Securities act of 1933, as amended
is currently effective and will remain effective, and appropriate state
securities law filings have
-6-
<PAGE>
been made and will continue to be made, with respect to all Shares of
the Fund being offered for sale.
5. Data Access and Proprietary Information
5.1. The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of the
Fund's ability to access certain Fund-related data ("Customer Data")
maintained by the Bank on data bases under the control and ownership of
the Bank or other third part ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the
Bank or other such third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing Proprietary Information
acquired hereunder from being retransmitted to any other
computer facility or other location, except with the prior
written consent to the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright
law and under other federal or state law.
Notwithstanding the above, nothing in the agreement shall restrict the ability
of the Fund to obtain access to or make copies of, or otherwise use freely, all
Customer Data in the Bank's possession or control, or shall be read to derogate
from the Fund's sole legal ownership
-7-
<PAGE>
thereof. Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Section 5. The obligations of this Section
shall survive any earlier termination of this Agreement.
5.2. If the Fund notifies the Bank that any of the Data Access Services do
not operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make
no claim against the Bank arising out of the contents of such
third-party data, including, but not limited to, the accuracy thereof.
DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT
THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.3. If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event the Bank shall be
entitled to rely on the validity and authenticity of such instruction
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by the
Bank from time to time and agreed to in advance by the Fund.
6. Indemnification
6.1. The Bank shall not be responsible for, and the Fund shall indemnify and
hold the Bank harmless from and against, any and all losses, damages,
costs, charges, reasonable counsel fees, payments, expenses and
liability to the extent arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that
such actions are taken in good faith and without negligence or
willful misconduct.
(b) The Fund's bad faith, negligence or willful misconduct in
connection with the material breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services
which (i) are received by the Bank or its agents or
subcontractors, and (ii) have been prepared, maintained or
-8-
<PAGE>
performed by the Fund or any other person or firm on behalf of
the Fund (other than the Bank in any respect) including but
not limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop order
or other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
(f) All actions or omissions of America's Utility Fund Service
Company in the performance of its obligations under the
Sub-Transfer Agency Agreement dated as of August 21, 1995 by
and among the Fund, the Bank and America's Utility Fund
Service Company.
6.2. At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with the Fund's legal counsel with
respect to any matter arising in connection with the services to be
performed by the Bank under this Agreement, and the Bank and its agents
or subcontractors shall not be liable and shall be indemnified by the
Fund for any action taken reasonably or omitted by it in reliance upon
such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records
or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means
authorized by the Fund, and reasonably believed to be genuine and to
have been originated by the proper person or persons, and shall not be
held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. The Bank, its agents
and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear
the proper manual or facsimile signatures of the officers of the Fund,
and the proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
6.3. In order that the indemnification provisions contained in this Section
6 shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund
of such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank in which
event the Fund
-9-
<PAGE>
shall have no further obligation to indemnify the Bank for any expenses
thereafter incurred by the Bank in connection with such defense. The
Bank shall in no case confess any claim or make any compromise in any
case in which the Fund may be required to indemnify the Bank except
with the Fund's prior written consent.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its
best efforts to insure the accuracy of all services performed under this
Agreement, but assumes no responsibility and shall not be liable for loss or
damage due to errors unless said errors are caused by its negligence, bad faith,
or willful misconduct or that of its employees.
8. Covenants of the Fund and the Bank
8.1. The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.2. The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices,
if any; and for the preparation or use, and for keeping account of,
such certificates, forms and devices.
8.3. The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable unless
otherwise agreed to by the Bank and the Fund. To the extent required
by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in
accordance with its request.
8.4. The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged
or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
-10-
<PAGE>
8.5. In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund
as to such inspection. The Bank reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its
counsel that it may beheld liable for the failure to exhibit the
Shareholder records to such person.
9. Termination of Agreement
9.1. This Agreement may be terminated by either party upon ninety (90) days
written notice to the other.
9.2. Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund.
10. Assignment
10.1. Except as provided in Section 10.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
10.2. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3. The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(1)"), (ii)
a BFDS subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(1) or (iii) a BFDS affiliate duly registered as a
transfer agent pursuant to Section 17A(c)(1); provided, however, that
the Bank shall be fully responsible to the Fund for the acts and
omissions of any subcontractor.
11. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of
the Board of Directors of the Fund.
12. Virginia Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth
of Virginia.
-11-
<PAGE>
13. Force Majeure
In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment
or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
14. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act
hereunder.
15. Merger of Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
16. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
AMERICA'S UTILITY FUND, INC.
BY: /s/ Linwood R. Robertson
------------------------------
ATTEST:
- --------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Randall E. Flynn
----------------------------------
ATTEST:
/s/ Francine Hayes
- --------------------------
-13-
Exhibit (8)(E)
SUB-TRANSFER AGENCY AGREEMENT
This AGREEMENT is made as of this 21st day of August, 1995, by and
among State Street Bank and Trust Company, a Massachusetts trust company ("State
Street"), AMERICA'S UTILITY FUND SERVICE COMPANY, a Virginia corporation (the
"Sub-Agent"), and AMERICA'S UTILITY FUND, INC., a Maryland corporation (the
"Fund");
WHEREAS, State Street and the Fund have entered into a Transfer Agency
and Service Agreement dated as of August 21, 1995 (the "Fund Agreement"),
pursuant to which State Street has agreed to provide certain transfer agent,
dividend disbursing agent and other services to the Fund; and
WHEREAS, State Street and the Fund desire that State Street appoint the
Sub-Agent to perform certain transfer agent, dividend disbursing agent and other
services to the Fund and its current shareholders and additional investors who
purchase shares of the Fund through facilities made available to Virginia Power
and North Carolina Power customers (such shareholders and additional investors
who purchase such shares through such facilities are referred to herein as
"Shareholders" and shares held by such Shareholders are referred to herein as
"Shares");
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Sub-Agent Services. The Sub-Agent agrees to provide such services as State
Street or the Fund may reasonably request to assist State Street in performing
its obligations under the Fund Agreement, which may include the following:
1.1. Purchase of Shares. Upon receipt by the Sub-Agent of any order for
the purchase of Shares from or on behalf of a Shareholder, the Sub-Agent shall
stamp such order with the date of receipt, promptly deposit all funds received
to the account of the Fund maintained with the entity then acting as custodian
for the portfolio securities and cash of the Fund (the "Custodian"), compute (to
the nearest three decimal places) the number of Shares to be purchased according
to the public offering price in effect for purchases made on the date of such
receipt as set forth in the Fund's current prospectus and/or statement of
additional information, notify the Fund and State Street daily of the deposit of
such funds to the Fund's account with the Custodian and the number of Shares
subscribed for, and prepare and mail quarterly statements reflecting such
purchases to the addresses specified by the persons making them. All such
actions are subject to any instructions which State Street, the Fund, or Project
America, Inc. (the "Distributor") may give to the Sub-Agent with respect to
acceptance of orders for Shares so received by it.
<PAGE>
All Shares purchased shall be credited to a book share account
maintained for the purchasing Shareholder by the Sub-Agent. No share
certificates for Shares shall be issued by the Fund.
1.2. Unpaid Checks. In the event that any check or other order for
payment of money with respect to any purchase of Shares is returned unpaid for
any reason, the Sub-Agent shall promptly notify State Street and the purchasing
Shareholder of such nonpayment, and take such other steps as State Street may
instruct.
1.3. Redemption of Shares. Upon receipt of any request for the
redemption of Shares from or on behalf of a Shareholder, the Sub-Agent shall
stamp such request with the date of receipt, determine whether such request
complies with all requirements for redemption set forth in the Fund's current
prospectus and/or statement of additional information, and if so, compute the
redemption price in the manner set forth therein. If such request does not
comply with such requirements for redemption, the Sub-Agent shall notify the
redeeming Shareholder of the respects in which compliance is lacking and effect
redemption at such time as all requirements for redemption are met.
The Sub-Agent shall notify State Street and the Fund daily of the
amount of funds required for payment upon redemption of Shares and the number of
Shares redeemed. Upon the receipt of such funds from State Street or the
Custodian, the Sub-Agent shall pay over or cause to be paid over the redemption
proceeds to redeeming Shareholders as instructed by them in the manner described
in the Fund's current prospectus and/or statement of additional information, and
prepare and mail notices of such redemptions.
1.4. Transfer of Shares. Upon receipt by the Sub-Agent of documentation
in proper form to effect a transfer of Shares, pursuant to instructions
contained in such documentation, the Sub-Agent shall register such transfer on
the Fund's shareholder records maintained by the Sub-Agent.
1.5. Administration of Plans. The Sub-Agent shall administer such plans
for the periodic purchase of Shares as are described in the prospectus and/or
statement of additional information of the Fund corresponding to the date of
this Agreement in accordance with the terms of such plans, or as the Sub-Agent
and the Fund may mutually agree from time to time.
1.6. Dividends and Distributions. Upon the declaration of any cash
dividend or distribution upon the Shares, State Street shall notify the
Sub-Agent of the date of payment of such dividend or distribution, the record
date as of which Shareholders entitled to payment thereof shall be determined,
and the amount payable per Share to Shareholders of record as of such record
date. The Sub-Agent shall notify the Fund and the Custodian of the amount of
cash required to pay the dividend or distribution so that the Fund may instruct
its Custodian to make sufficient funds available to the Sub-Agent for such
purpose on or before the payment date.
-2-
<PAGE>
Upon receipt of such funds from the Custodian, the Sub-Agent shall
prepare and mail to Shareholders, at their addresses as they appear on the
records maintained by the Sub-Agent or pursuant to any written order of a
shareholder on file with the Sub-Agent, checks representing any dividends and
distributions to which they are entitled. If a Shareholder is entitled to
receive additional Shares by reason of his decision to reinvest all or a portion
of a dividend or distribution, appropriate credits shall be made to his book
share account. The Sub-Agent shall notify such Shareholders of such dividends
and distributions by quarterly statements.
1.7. Tax Returns and Reports. The Sub-Agent shall prepare, file with
the Internal Revenue Service and with appropriate state or local agencies, and
mail to Shareholders such returns for reporting dividends, distributions and
redemptions as are required to be so prepared, filed and/or mailed, and withhold
from the accounts of shareholders such sums as are required to be withheld,
under applicable federal, state and local tax laws, rules and regulations in
effect from time to time.
1.8. Other Reports and Information. The Sub-Agent shall furnish to
State Street and the Fund such information, including shareholder lists, sales
information on a state by state basis and other statistical information, in such
form and at such intervals, which may be daily, as may be reasonably requested
by the Fund and supported by the Sub-Agent's system.
1.9. Record Keeping. The Sub-Agent shall keep records relating to the
services to be performed hereunder, in such form and manner as it may deem
advisable or State Street may reasonably require. The Sub-Agent agrees that all
such records prepared or maintained by the Sub-Agent relating to the services to
be performed by the Sub-Agent hereunder are the property of the Fund and will be
preserved, for the periods prescribed under Rule 31a-2 of said rules as
specifically noted below, maintained at the expense of the Fund, and made
available to State Street and the Fund upon the request of either of them. The
Sub-Agent shall forthwith upon State Street's or the Fund's demand surrender
promptly to State Street or the Fund and cease to retain in its files, records
and documents created and maintained by the SubAgent pursuant to this Agreement.
If not so turned over to State Street or the Fund, such records and documents
will be retained by the Sub-Agent for six years from the year of creation,
during the first two of which such documents will be in readily accessible form.
At the end of the six-year period, such records and documents will either be
turned over to State Street or the Fund or destroyed in accordance with the
Fund's authorization.
In the case of any requests or demands for the inspection of the
shareholder records of the Fund, the Sub-Agent shall endeavor to notify State
Street and the Fund and to secure instructions from an officer of the Fund as to
such inspection. The Sub-Agent reserves the right, however, to exhibit
shareholder records to any person whenever it is advised in writing by its
counsel, with a copy to the Fund, that it may be held liable for the failure to
do so.
-3-
<PAGE>
The Sub-Agent undertakes to maintain and preserve, as instructed by the
Fund, on behalf of the Distributor, the books and records required to be
maintained and preserved by the Distributor in respect of the Shares pursuant to
Securities and Exchange Commission Rules 17a-3 and 17a-4 under the Securities
Exchange Act of 1934, as amended. With respect to any books and records
maintained or preserved on behalf of the Distributor the Sub-Agent hereby
undertakes to permit examination of such books and records at any time or from
time to time during business hours by representatives or designees of the
Securities and Exchange Commission, and to promptly furnish to said Commission
or its designee true, correct, complete and current hard copy of any or all or
any part of such books and records.
2. Compensation. For the services to be performed by the Sub-Agent pursuant to
this Agreement, State Street agrees to pay the Sub-Agent a fee at the annual
rate of .10% of the average daily net assets attributable to Shares held by the
Shareholders. Such fee shall be payable in arrears on the 15th day of each month
and shall be payable out of fees received by State Street from the Fund, or as
otherwise agreed by the parties.
3. Indemnification.
3.1. The Sub-Agent shall indemnify and hold State Street and the Fund
harmless from and against any and all losses, damages, costs, charges,
reasonable attorney's fees, payments, expenses and liabilities arising out of or
attributable to the Sub-Agent's bad faith, negligence or willful misconduct in
the performance of its duties hereunder. For purposes of this Section 3.1, any
acts or omissions by any agent or subcontractor of the Sub-Agent shall be
considered those of the Sub-Agent.
3.2. The Sub-Agent shall not be responsible for, and the Fund shall
indemnify and hold the Sub-Agent harmless from and against, any and all losses,
damages, costs, charges, reasonable attorney's fees, payments, expenses and
liability arising out of or attributable to:
i. all actions of the Sub-Agent or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in
good faith and without negligence or willful
misconduct;
ii. the Fund's refusal or failure to comply with the
terms of this Agreement, or the Fund's lack of good
faith, negligence or willful misconduct, or the
breach of any representation or warranty of the Fund
hereunder;
iii. the reliance on or use by the Sub-Agent or its agents
or subcontractors of information, records or
documents which are received by the Sub-Agent or its
agents or subcontractors and furnished to it by or on
behalf of the Fund, and which have been prepared
and/or maintained by the Fund or any other person or
firm (other than the Sub-Agent or its agents or
subcontractors) on behalf of the Fund;
-4-
<PAGE>
iv. the reliance on, or the carrying out by the Sub-Agent
or its agents or subcontractors of, any instructions
or requests of the Fund; or
v. the offer or sale of Shares by the Fund in violation
of any requirement under the federal securities laws
or regulations or the securities laws or regulations
of any state that such Shares be registered in such
state, or in violation of any stop order or other
determination or ruling by any federal agency or any
state with respect to the offer or sale of such
Shares in such state.
3.3. At any time the Sub-Agent may apply to any officer of the Fund for
instructions, and may request, through an officer of the Fund, the opinion of
the Fund's legal counsel, with respect to any matter arising in connection with
the services to be performed by the Sub-Agent under this agreement, and the
Sub-Agent and its agents and subcontractors shall not be liable and shall be
indemnified as provided in Section 3.2 for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Sub-Agent, its agents and subcontractors shall be protected and indemnified in
acting in a reasonable manner upon any papers or documents furnished by or on
behalf of the Fund, any shareholder of the Fund or any representative of a
shareholder, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instructions, information, data, records
or documents provided the Sub-Agent or its agents or subcontractors by
telephone, in person, or by machine readable input, telex, CRT data entry or
similar means authorized by the Fund, and the Sub-Agent, its agents and
subcontractors shall not be held to have notice absent actual notice of any
change of authority of any person until receipt of written notice thereof from
the Fund. The Sub-Agent, its agents and subcontractors shall also be protected
under Section 3.2 in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
3.4. In the event any party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, interruption of
electrical power or other utilities, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable to the other for any damages resulting from such
failure to perform or otherwise from such causes. The Sub-Agent shall use
reasonable efforts to minimize the likelihood of all damage, loss of data,
delays and errors resulting from uncontrollable events, and should such damage,
loss of data, delays or errors occur, the Sub-Agent shall use its best efforts
to mitigate the effects of such occurrence.
3.5. No party to this Agreement shall be liable to the other parties
for consequential, special or incidental damages under any provision of this
Agreement or for any act or failure to act hereunder.
-5-
<PAGE>
3.6. In order that the indemnification provisions contained in this
Section 3 shall apply, upon the assertion of a claim for which a party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the indemnifying party of such assertion and shall keep such
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim and, at its option,
to assume the defense thereof (in which case, if the indemnifying party has
acknowledged in writing its obligation to indemnify, the indemnifying party
shall have no further obligation to indemnify the party seeking indemnification
for any expenses thereafter incurred by such party in connection with the
defense). The party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the indemnifying party may be
required to indemnify it, except with the indemnified party's prior written
consent.
4. Term and Termination.
4.1. This Agreement shall terminate immediately upon the termination
of the Fund Agreement.
4.2. This Agreement may be terminated by either party hereof upon 60
days prior written notice.
5. Assignment. Except as hereinafter provided, neither this Agreement nor any
rights or obligations hereunder may be assigned by a party without the written
consent of the other parties. This Agreement shall inure to the benefit of and
be binding upon the parties and their respective permitted successors and
assigns. The Sub-Agent may, without further consent on the part of State Street
or the Fund, subcontract for the performance hereof with third parties, or
subsidiaries or other affiliates of the Sub-Agent; provided, however, that the
Sub-Agent shall be as fully responsible to State Street and the Fund for the
acts and omissions of any subcontractor as it is for its own acts and omissions
and shall be responsible for its choice of subcontractor.
6. Amendment. This Agreement may not be amended or modified in any manner
except by a written instrument executed by the parties.
7. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute the entire Agreement among the parties hereto and
supersede any prior oral or written Agreement with respect to the subject matter
hereof, except the Fund Agreement.
-6-
<PAGE>
8. Notices. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed given if delivered or mailed by registered mail,
postage prepaid, (a) to the Sub-Agent at 901 East Byrd Street, Richmond,
Virginia 23219 , (b) to State Street at 225 Franklin Street, Boston,
Massachusetts 02110, and (c) to the Fund at 901 East Byrd Street, Richmond,
Virginia 23219.
9. Beneficiaries. The Distributor shall be a third-party beneficiary of this
Agreement and the Sub-Agent hereby acknowledges that the Distributor is relying
thereupon in respect of State Street's entering into this Agreement. The
Distributor shall be entitled to enforce against the Sub-Agent any obligations
of the Sub-Agent in respect of it as if the Distributor were a party hereto.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their officers thereunto duly authorized as of the date
first above written.
STATE STREET BANK AND
AND TRUST COMPANY
By:____________________________
Title:
AMERICA'S UTILITY FUND
SERVICE COMPANY
By: /s/ Glenna G. Bryant
-----------------------------
Title: President
AMERICA'S UTILITY FUND, INC.
By: /s/ Linwood R. Robertson
------------------------------
Title: President
-8-
Exhibit (8)(F)
CUSTODY AGREEMENT
THIS AGREEMENT made the 1st day of March, 1996, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and AMERICA'S UTILITY FUND, a Maryland
corporation having its principal office and place of business at 901 East Byrd
Street, Richmond, Virginia 23219 ("Fund").
WITNESSETH:
WHEREAS, Fund desired to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of the Fund's investment portfolio: and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints
Custodian as custodian of the assets of the Fund, which is to include:
A. Appointment as custodian of the securities and monies at any
time owned by the Fund; and
B. Appointment as agent to perform certain accounting and
recordkeeping functions required of a registered investment
company in compliance with applicable provisions of federal,
state and local laws, rules and regulations including, as may
be required:
1. Providing information necessary for Fund to file
required financial reports; maintaining and
preserving required books, accounts and records as
the basis for such reports; and performing certain
daily
<PAGE>
functions in connection with such accounts and
records;
2. Calculating weekly net asset value of Fund; and
3. Acting as liaison with independent auditors.
2. DELIVERY OF CORPORATE DOCUMENTS. Fund has delivered or will deliver to
Custodian prior to the effective date of this Agreement, copies of the
following documents and all amendments or supplements thereto, properly
certified or authenticated:
A. Resolutions of the Board of Directors of Fund appointing
Custodian as custodian hereunder and approving the form of
this Agreement; and
B. Resolutions of the Board of Directors of Fund designating
certain persons to give instructions on behalf of Fund to
Custodian and authorizing Custodian to rely upon written
instructions over their signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it or from
time to time coming into its possession during the time this
Agreement shall continue in effect, except in any case as
permitted by the Investment Company Act of 1940, as amended
(the "1940 Act"). Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies
not so delivered. All securities so delivered to Custodian
(other than bearer securities) shall be registered in the name
of Fund or its nominee, or of a nominee of Custodian in which
no assets in which the Custodian has any direct or indirect
beneficial interest are registered, or, if certificated
securities, shall be properly endorsed and in form for
transfer satisfactory to Custodian.
-2-
<PAGE>
B. Delivery of Accounts and Records
Fund shall, upon request of Custodian, turn over or cause to
be turned over to Custodian originals or copies of any of the
Fund's relevant accounts and records previously maintained
which are necessary to the proper performance of the
Custodian's duties hereunder. Custodian shall be entitled to
rely conclusively on the completeness and correctness of the
accounts and records turned over to it, and Fund shall
indemnify and hold Custodian harmless of and from any and all
expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other
deficiency of such accounts and records or in the failure of
Fund to provide, or to provide in a timely manner, any
accounts, records or information needed by the Custodian
knowledgeably to perform its function hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets
of Fund delivered to it from time to time and the assets of
the Fund segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any
person except as permitted by the provisions of this Agreement
or any agreement executed by it according to the terms of
Section 3.S. of this Agreement. Upon delivery of any such
assets to a subcustodian pursuant to Section 3.S. of this
Agreement, Custodian will create and maintain records
identifying those assets which have been delivered to the
subcustodian as belonging to the Fund. The Custodian is
responsible for the safekeeping of the securities and monies
of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this
Agreement, except for securities and monies transmitted to
subcustodians appointed under Section 3.S. of this Agreement,
for which Custodian remains responsible to the extent provided
in Section 3.S. hereof. Custodian may participate directly or
indirectly through a subcustodian in the Depository Trust
Company, Treasure/Federal Reserve Book Entry System,
Participant Trust Company, or
-3-
<PAGE>
other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17F-4(b)).
D. Registration of Securities
Custodian will hold stocks and other registerable portfolio
securities of Fund registered in the name of Fund or in the
name of any nominee of Custodian for whose fidelity and
liability Custodian will be fully responsible, or in street
certificate form, so-called, with or without any indication of
fiduciary capacity. Unless otherwise instructed, Custodian
will register all such portfolio securities in the name of its
authorized nominee. Notwithstanding the foregoing, the
Custodian shall not register in the name of such nominee any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers. All securities, and the
ownership thereof by Fund, which are held by Custodian
hereunder shall at all times be identifiable on the records of
the Custodian. The Fund agrees to hold Custodian and its
nominee harmless for any liability as a recordholder of
securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other
securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, conversion or
otherwise, and will deposit any such securities in accordance
with the terms of any reorganization or protective plan.
Without instructions, Custodian is authorized to exchange
securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par
value of the stock is changed, and, upon receiving payment
therefor, to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.
-4-
<PAGE>
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of
securities shall be made by it, deliver to Custodian
instructions which shall specify with respect to each such
purchase:
1. The name of the issuer and description of the
security;
2. The number of shares or the principal amount
purchased, and accrued interest, if any;
3. The trade date;
4. The settlement date;
5. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
6. The total amount payable upon such purchase; and
7. The name of the person from whom or the broker or
dealer through whom the purchase was made.
In accordance with such instructions, Custodian will pay for
out of monies held for the account of Fund, but only insofar
as monies are available therein for such purpose, and receive
the portfolio securities so purchase by or for the account of
Fund except that Custodian may in its sole discretion advance
funds to the Fund which may result in an overdraft because the
monies held by the Custodian on behalf of the Fund are
insufficient to pay the total amount payable upon such
purchase. Such payment will be made only upon receipt by
Custodian of the securities so purchased in form for transfer
satisfactory to Custodian.
G. Sales and Deliveries of Investments of the Fund - Other than
Options and Futures
Fund will, on each business day on which a sale of investment
securities of Fund has been made, deliver to Custodian
instructions specifying with respect to each such sale:
1. The name of the issuer and description of the
securities;
-5-
<PAGE>
2. The number of shares or principal amount sold, and
accrued interest, if any;
3. The date on which the securities sold were purchased
or other information identifying the securities sold
and to be delivered;
4. The trade date;
5. The settlement date;
6. The sale price per unit and the brokerage commission,
taxes or other expenses payable in connection with
such sale;
7. The total amount to be received by the Fund upon such
sale; and
8. The name and address of the broker or dealer through
whom or person to whom the sale was made. In
accordance with such instructions, Custodian will
deliver or cause to be delivered the securities thus
designated as sold for the account of Fund to the
broker or other person specified in the instructions
relating to such sale, such delivery to be made only
upon receipt of payment therefor in such form as is
satisfactory to Custodian, with the understanding
that Custodian may deliver or cause to be delivered
securities for payment in accordance with the customs
prevailing among dealers in securities.
H. Purchases or Sales of Security Options, Options on Indices
and Security Index Futures Contracts
Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it,
deliver to Custodian instructions which shall specify with
respect to each such purchase or sale:
1. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
-6-
<PAGE>
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
2. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
3. Security Index Futures Contracts
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
-7-
<PAGE>
e. The need for a segregated margin account (in
addition to instructions, and if not already
in the possession of Custodian, Fund shall
deliver a substantially complete and
executed custodial safekeeping account and
procedural agreement which shall be
incorporated by reference into this Custody
Agreement); and
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
4. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
i. The market on which the option is traded.
H.II. Deposit of Fund Assets in Securities Systems
The Custodian may, directly or through a subcustodian, deposit
and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, as
amended, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies (each referred to herein
as a "Securities System"), in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following
provisions:
-8-
<PAGE>
1. The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Securities System Account") of the Custodian or its
subcustodian in the Securities System which shall not include
any assets of the Custodian or its subcustodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2. The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3. The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Securities System Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment
and transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon (i)
receipt of advice from the Securities System that payment for
such securities have been transferred to the Securities
Systems Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment
for the account of the Fund. Copies of all advices from the
Securities System of transfers of securities for the account
of the Fund shall identify the Fund, be maintained for the
Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System
for the account of the Fund;
4. The Custodian shall provide to the Fund any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control, and procedures for safeguarding
securities deposited in the Securities System;
5. Subject to the terms of Section 3.S hereof, the Custodian
shall be liable to the Fund for any loss or damage to the Fund
resulting from use of a Securities
-9-
<PAGE>
System to the extent resulting from any negligence,
misfeasance or misconduct of the Custodian or its subcustodian
or of any of its or their employees, or from failure of the
Custodian or its subcustodian to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
H.III. Segregated Account
The Custodian shall upon receipt of instructions establish and
maintain a segregated account or accounts for and on behalf of
the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 3.H.II. hereof:
(i) in accordance with the provisions of any agreement among
the Fund, Custodian and broker-dealer registered under the
Securities Exchange Act of 1934, as amended and a member of
the National Association of Securities Dealers, Inc. (or any
futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or Commodity Futures Trading Commission
or any registered contract market), or any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund; (ii)
for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or
sold by the Fund; (iii) for the purposes of complying with the
procedures required by Investment Company Act Release No.
10666, or any subsequent releases by the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies; and (iv) for
other proper corporate purposes as instructed by the Fund.
-10-
<PAGE>
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund:
1. Upon receipt of instructions, Custodian will release
or cause to be released securities held in custody to
the pledgee designated in such instructions by way of
pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that the securities
shall be released only upon payment to Custodian of
the monies borrowed, except that in cases where
additional collateral is required to secure a
borrowing already made, further securities may be
released or caused to be released for that purpose
upon receipt of instructions. Upon receipt of
instructions, Custodian will pay, but only from funds
available for such purpose, any such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note
or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated
in such instructions; provided, however, that the
securities will be released only upon deposit with
Custodian of collateral in the form of cash or
eligible securities as specified in such
instructions, and that Fund will retain the right to
any dividends, interest or distribution on such
loaned securities. Upon receipt of instructions and
the loaned securities, Custodian will release the
cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time to
time by the Board of Directors of Fund.
-11-
<PAGE>
K. Deposit Account
Custodian will open and maintain one or more special purpose
deposit accounts in the name of Custodian in its capacity as
custodian for the Fund ("Accounts"), subject only to draft or
order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of the Fund
shall be deposited in the appropriate Account. Barring events
not in the control of the Custodian such as strikes, lockouts
or labor disputes, riots, war or equipment or transmission
failure or damage, fire, flood, earthquake or other natural
disaster, action or inaction of governmental authority or
other causes beyond its control, at 9:00 a.m., Kansas City
time, on the second business day after deposit of any check
into an Account, Custodian agrees to make Fed Funds available
to the Fund in the amount of the check. Deposits made by
Federal Reserve wire will be available to the Fund immediately
and ACH wires will be available to the Fund on the next
business day. Income earned on the portfolio securities will
be credited to the Fund based on the schedule attached as
Exhibit A. The Custodian will be entitled to reverse any
credited amounts where credits have been made and monies are
not finally collected. If monies are collected after such
reversal, the Custodian will credit the Fund in that amount.
Custodian may open and maintain Accounts in such other banks
or trust companies as may be designated by it or by properly
authorized resolution of the Board of Directors of Fund, such
Account, however, to be in the name of Custodian in its
capacity as such and subject only to its draft or order as
such.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the
account of Fund all income and other payments which
become due and payable on or after the effective date
of this Agreement with respect to the securities
deposited under this Agreement, and credit the
account of Fund in accordance with Section 3.K. and
the schedule attached hereto as Exhibit
-12-
<PAGE>
A. If, for any reason, the Fund is credited with
income that is not subsequently collected, Custodian
may reverse that credited amount.
2. Execute ownership and other certificates and
affidavits for all federal, state and local tax
purposes in connection with the collection of bond
and note coupons; and
3. Take such other action as may be necessary or proper
in connection with:
a. the collection, receipt and deposit of such
income and other payments, including but not
limited to the presentation for payment of:
(1) all coupons and other income items
requiring presentation; and
(2) all other securities which may
mature or be called, redeemed,
retired or otherwise become payable
and regarding which the Custodian
has actual knowledge, or should
reasonably be expected to have
knowledge; and
b. the endorsement for collection, in the name
of Fund, of all checks, drafts or other
negotiable instruments.
Custodian, however, will not be required to institute suit or
take other extraordinary action to enforce collection except
upon receipt of instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or
other actions. Custodian will receive, claim and collect all
stock dividends, rights and other similar items and will deal
with the same pursuant to instructions. Unless prior
instructions have been received to the contrary, Custodian
will, without further instructions, sell any rights held for
the account of Fund on the last trade date prior to the date
of expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on
the shares of capital stock of the Fund ("Fund Shares") by the
Board of Directors of Fund, Fund
-13-
<PAGE>
shall deliver to Custodian instructions with respect thereto,
including a copy of the resolution of said Board of Directors
certified by the Secretary or an Assistant Secretary of Fund
wherein there shall be set forth the record date as of which
shareholders entitled to receive such dividend or other
distribution shall be determined, the date of payment of such
dividend or distribution, and the amount payable per share on
such dividend or distribution. Except if the ex-dividend date
and the reinvestment date of any dividend are the same, in
which case funds shall remain in the Custody Account, on the
date specified in such resolution for the payment of such
dividend or other distribution, Custodian will pay out of the
monies held for the account of the Fund, insofar as the same
shall be available for such purposes, and credit to the
account of the Dividend Disbursing Agent for Fund, such amount
as may be necessary to pay the amount per share payable in
cash on Fund Shares issued and outstanding on the record date
established by such resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice, Custodian
shall charge such aggregate dollar amount to the account of
the Fund and either deposit the same in the account maintained
for the purpose of paying for the repurchase or redemption of
Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of
Fund Shares have been cancelled and removed from the
shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with Custodian the amount
received for such shares.
-14-
<PAGE>
Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added
to the proper shareholder account or accounts or that the
proper number of such shares have been added to the
shareholder records.
P. Proxies and Notices
The Custodian shall, with respect to securities held
hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of the Fund or a nominee of the
Fund, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to
the Fund such proxies, all proxy soliciting materials and all
notices, requests, or announcements relating to such
securities. Except as provided in this Agreement or pursuant
to instructions hereafter received by Custodian, neither it
nor its nominee will exercise any power inherent in any such
securities, including any power to vote the same, or execute
any proxy, power of attorney, or other similar instrument
voting any of such securities, or give any consent, approval
or waiver with respect thereto, or take any other similar
action.
Q. Disbursements
Custodian will pay or cause to be paid insofar as funds are
available for the purpose, bills, statements and other
obligations of Fund (including but not limited to obligations
in connection with the conversion, exchange or surrender of
securities owned by Fund, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal
fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
-15-
<PAGE>
R. Daily Statement of Accounts
Custodian will render to Fund daily a detailed statement of
the amounts received or paid and of securities received or
delivered for the account of Fund during each business day.
Custodian will render to Fund monthly a detailed statement of
the securities and monies held for Fund under this Agreement,
and Custodian will maintain such books and records as are
necessary to enable it to do so and will permit such persons
as are authorized by Fund including Fund's independent public
accountants, access to such records or, in the case of such
records maintained on any computer, computer system or
computer network, confirmation of the contents of such
records. If demanded by federal and state regulatory agencies
or upon receipt of instructions from Fund, Custodian will
permit such agencies to examine the securities, books and
records. Upon the written instructions of Fund or as demanded
by federal or state regulatory agencies, Custodian will
instruct any subcustodian to permit such persons as are
authorized by Fund, including Fund's independent public
accountants, access to such records or, in the case of such
records maintained on any computer, computer system or
computer network, confirmation of the contents of such records
and to permit such agencies to examine the books, records and
securities held by such subcustodian which relate to Fund.
S. Appointment of Subcustodian
1. Notwithstanding any other provisions of this
Agreement, all or any of the monies or securities of Fund may
be held in Custodian's own custody or in the custody of one or
more other banks or trust companies acting as subcustodians as
may be selected by Custodian. Custodian shall be responsible
for the actions of any subcustodian appointed by Custodian
(except any subcustodian appointed at the instruction of the
Fund as provided below and as provided in Section S.2. below)
to the same extent Custodian is responsible to the Fund under
Section 5. of this Agreement. Any such subcustodian selected
by the Custodian must have
-16-
<PAGE>
the qualifications required for custodian under the
1940 Act. Custodian is not responsible for DTC, the
Treasury/Federal Reserve Book Entry System, and PTC
except to the extent such entities are responsible to
Custodian; provided, however, that the foregoing
shall not relieve Custodian of its liability
hereunder to the extent attributable to its own
negligence or bad faith. Upon instruction of the
Fund, Custodian shall be willing to contract with
other subcustodians reasonably acceptable to the
Custodian for purposes of (i) effecting third-party
repurchase transactions with banks, brokers, dealers,
or other entities through the use of a common
custodian or subcustodian, or (ii) providing
depository and clearing agency services with respect
to certain variable rate demand note securities;
provided, however, that the Custodian will be
responsible to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting
from the actions or omissions of any such
subcustodian only to the same extent such
subcustodian is responsible to the Custodian; and
provided, further, however, that the foregoing shall
not relieve Custodian of its liability hereunder to
the extent attributable to its own negligence or bad
faith. The Fund shall be entitled to review
Custodian's contracts with any such subcustodian
appointed at the instruction of Fund.
2. Notwithstanding any other provisions of this
Agreement, Fund's foreign securities (as defined in
Rule 17f-5(c)(1) under the 1940 Act) and Fund's cash
or cash equivalents, in amounts deemed by the Fund to
be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody
of one or more banks or trust companies acting as
subcustodians, according to Section 3.S.1; and
thereafter, pursuant to a written contract or
contracts as approved by Fund's Board of Directors,
may be transferred to an account maintained by such
subcustodian with an eligible foreign custodian (as
defined in Rule 17f-
-17-
<PAGE>
5(c)(2)) approved by the Fund's Board of Directors.
Custodian shall be responsible for the monies and
securities of the Fund held by eligible foreign
subcustodians or the domestic subcustodian
contracting with such eligible foreign subcustodians
only to the same extent such domestic subcustodian is
responsible to the Custodian.
T. Accounts and Records
Custodian with the direction and as interpreted by the Fund,
Fund's accountants and/or other tax advisors will prepare and
maintain, in complete, accurate and current form, all accounts
and records (i) required to be maintained by Fund with respect
to portfolio transactions under Rule 31a of the 1940 Act, (ii)
required to be maintained as a basis for calculation of the
Fund's net asset value, and (iii) as otherwise agreed upon
between the parties. Custodian will preserve said records in
the manner and for the periods prescribed in the 1940 Act or
for such longer period as is agreed upon by the parties.
Custodian relies upon Fund to furnish, in writing, accurate
and timely information to complete Fund's records and perform
weekly calculation of the Fund's net asset value, as provided
in Section 3.W. below. Custodian shall incur no liability and
Fund shall indemnify and hold harmless Custodian from and
against any liability arising from any failure of Fund to
furnish such information in a timely and accurate manner, even
if Fund subsequently provides accurate but untimely
information. It shall be the responsibility of Fund to furnish
Custodian with the declaration, record and payment dates and
amounts of any dividends or income and any other special
actions required concerning each of its securities when
Custodian may not reasonably be expected to have knowledge
thereof.
U. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the
property of Fund, and will be made available to Fund for
inspection or reproduction within a reasonable
-18-
<PAGE>
period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon
demand, any regulatory body, having jurisdiction over the Fund
or Custodian, in any requested review of Fund's accounts and
records but shall be reimbursed for all reasonable expenses
and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from Fund of
the necessary information, Custodian will supply necessary
data for Fund's completion of any necessary tax returns,
questionnaires, periodic reports to shareholders and such
other reports and information requests as Fund and Custodian
shall agree upon from time to time.
V. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as
they agree upon, and Custodian may conclusively assume that no
procedure approved by Fund, or directed by Fund, conflicts
with or violates any requirements of its prospectus, Articles
of Incorporation, Bylaws, or any rule or regulation of any
regulatory body or governmental agency applicable to Fund.
Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules or policies applicable to Fund
which might necessitate changes in Custodian's
responsibilities or procedures.
W. Calculation of Net Asset Value
Custodian will calculate the Fund's net asset value, in
accordance with Fund's prospectus, once weekly, as of such
time as Fund may specify. Custodian may for this purpose make
use of outside services normally used and contracted for this
purpose and designated by Fund; all other securities will be
evaluated in accordance with Fund's instructions. Custodian
will have no responsibility for the accuracy of the prices
quoted by these outside services of for the information
supplied by Fund or upon instructions; provided, however, that
the foregoing shall not relieve Custodian of its liability
hereunder to the extent attributable to its own negligence or
bad faith.
-19-
<PAGE>
X. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Fund which results in an overdraft because the
monies held by Custodian on behalf of the Fund are
insufficient to pay the total amount payable upon a purchase
of securities as specified in Fund's instructions or for some
other reason, the amount of the overdraft shall be payable by
the Fund to Custodian upon demand and shall bear the overdraft
charge rate set forth on the Fee Schedule attached hereto as
Exhibit B from the date advanced until the date of payment.
Custodian shall have a lien on the assets of the Fund in the
amount of any outstanding overdraft. Custodian shall be
entitled to charge against any monies held by it for the
account of the Fund the amount of any such overdraft and
accrued overdraft charges.
4. INSTRUCTIONS.
A. The term "instructions," as used herein, means written or oral
instructions to Custodian from a designated representative of
Fund. Certified copies of resolutions of the Board of
Directors of Fund naming one or more designated
representatives to give instructions in the name and on behalf
of Fund, may be received and accepted from time to time by
Custodian as conclusive evidence of the authority of any
designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will
be fully protected in acting in reliance thereon) until
receipt by Custodian of notice to the contrary. Unless the
resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone
else will first have been obtained, Custodian will be under no
obligation to inquire into the right of the person giving such
instructions to do so. Notwithstanding any of the foregoing
provisions of this Section 4. no authorizations or
instructions received by Custodian from Fund, will be deemed
to authorize or permit any trustee, officer, employee, or
agent of Fund to withdraw any of the securities or similar
-20-
<PAGE>
investments of Fund upon the mere receipt of such
authorization or instructions from such trustee, officer,
employee or agent.
B. No later than the next business day immediately following each
oral instruction, Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may record on tape, or otherwise, any
oral instruction whether given in person or via telephone,
each such recording identifying the parties, the date and the
time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall hold harmless and indemnify Fund from and
against any loss or liability arising out of Custodian's
failure to comply with the terms of this Agreement or arising
out of Custodian's negligence or bad faith; provided, however,
that Custodian shall not be liable for consequential, special
or punitive damages in any event. Custodian may request and
obtain the advice and opinion of counsel for Fund, or of its
own counsel with respect to questions or matters of law, and
it shall be without liability to Fund for any action
reasonably taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes
that it could not prudently act according to the instructions
of the Fund or the Fund's counsel, it may in its discretion,
with prior notice to the Fund, not act according to such
instructions.
B. Custodian may rely upon the advice of Fund and upon statements
of Fund's public accountants and other persons believed by it
in good faith to be expert in matters upon which they are
consulted, and Custodian shall not be liable for any actions
taken, reasonably and in good faith, upon such statements.
C. If Fund requires Custodian in any capacity to take, with
respect to any securities, any action which involves the
payment of money by Custodian, or which in Custodian's opinion
might make it or its nominee liable for payment of monies or
in any other way, Custodian, upon notice to Fund given prior
to such
-21-
<PAGE>
actions, shall be kept indemnified by Fund in an amount and
form satisfactory to Custodian against any liability on
account of such action.
D. Custodian shall be entitled to receive, and Fund agrees to pay
to Custodian, on demand, reimbursement for such reasonable
cash disbursements, costs and expenses as may be agreed upon
from time to time by Custodian and Fund.
E. Custodian shall be protected in acting as custodian hereunder
upon any instructions, advice, notice, request, consent,
certificate or other instrument or paper reasonably appearing
to it to be genuine and to have been properly executed and
shall, unless otherwise specifically provided herein, be
entitled to receive as conclusive proof of any fact or matter
required to be ascertained from Fund hereunder, a certificate
signed by the Fund's President, or other officer specifically
authorized for such purpose.
F. Without limiting the generality of the foregoing, Custodian
shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased
by or for Fund, the legality of the purchase thereof
or the legality of the evidence of ownership required
by Fund to be received by Custodian, or the propriety
of the decision to purchase or amount paid therefor;
2. The legality of the sale of any securities by or for
Fund, or the propriety of the amount for which the
same are sold;
3. The legality of the issue or sale of any Fund Shares,
or the sufficiency of the amount to be received
therefor;
4. The legality of the repurchase or redemption of any
Fund Shares, or the propriety of the amount to be
paid therefor; or
5. The legality of the declaration of any dividend by
Fund, or the legality of the issue of any Fund Shares
in payment of any stock dividend.
G. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft, wire
transfer, clearinghouse funds, uncollected funds, or
instrument for the payment of money received by it on behalf
of
-22-
<PAGE>
Fund, until Custodian actually receives such money, provided
only that it shall advise Fund promptly if it fails to receive
any such money in the ordinary course of business, and use its
best efforts and cooperate with Fund toward the end that such
money shall be received.
H. Except as provided under Section 3.S., Custodian shall not be
responsible for loss occasioned by the acts, neglects,
defaults or insolvency of any broker, bank, trust company, or
any other person with whom Custodian may deal; provided,
however, that the foregoing shall not relieve Custodian of its
liability hereunder to the extent attributable to its own
negligence or bad faith.
I. Custodian shall not be responsible or liable for the failure
or delay in performance of its obligations under this
Agreement, or those of any entity for which it is responsible
hereunder, to the extent arising out of or caused, directly or
indirectly, by circumstances beyond the affected entity's
control, including, without limitation: any interruption,
loss or malfunction of any utility, transportation, computer
(hardware or software) or communication service; inability to
obtain material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance,
rulings, regulations or direction; war, strike, riot,
emergency, civil disturbance, terrorism, vandalism,
explosions, labor disputes, freezes, floods, fires, tornados,
acts of God or public enemy, revolutions, or insurrection. For
purposes of this paragraph, no circumstances shall be deemed
to be within any entity's "control" if performance of the
affected obligation hereunder would require unreasonable
effort or expense.
6. COMPENSATION. Fund will pay to Custodian such compensation as is
stated in the Fee Schedule attached hereto as Exhibit B which may be
changed from time to time as agreed to in writing by Custodian and
Fund.
7. TERMINATION. Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the other
party hereto and received not less than sixty (60) days prior to the
date upon which such termination will take
-23-
<PAGE>
effect, provided, that the Fund may at any time by action of its Board
of Directors immediately terminate this Agreement in the event of the
bankruptcy or insolvency of or the appointment of a conservator or
receiver for the Custodian or upon the happening of a like event at the
director of an appropriate regulatory agency or court of competent
jurisdiction. Upon termination of this Agreement, Fund will pay to
Custodian such compensation for its reimbursable disbursements, costs
and expenses paid or incurred to such date and Fund will use its best
efforts to obtain a successor custodian. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian
hereunder, deliver to the successor custodian, at Custodian's office,
all securities then held by Custodian hereunder, duly endorsed and in
form for transfer, all funds and other properties of Fund deposited
with or held by Custodian hereunder, or will co-operate in effecting
changes in book-entries at the Depository Trust Company, Participants
Trust Company or in the Treasury/Federal Reserve Book-Entry System
pursuant to 31 CFR Sec. 306.118. In the event no written order
designating a successor custodian has been delivered to Custodian on or
before the date when such termination becomes effective, then Custodian
may deliver the securities, funds and properties of Fund to a bank or
trust company at the selection of Custodian and meeting the
qualifications for custodian, if any, set forth in the Bylaws of Fund
and having not less than Five Million Dollars ($5,000,000) aggregate
capital, surplus and undivided profits, as shown by its last published
report, or Custodian may make any other delivery of the securities,
funds and property of Fund which is permitted by the 1940 Act, Fund's
Articles of Incorporation and Bylaws then in effect or apply to a court
of competent jurisdiction for the appointment of a successor custodian.
Upon delivery to a successor custodian, Custodian will have no further
obligations or liabilities under this Agreement, other than such as may
have arisen prior to, or in respect of events occurring prior to, such
delivery. Thereafter such successor will be the successor custodian
under this Agreement and will be entitled to reasonable compensation
for its services. In the event that securities, funds and other
properties remain in the possession of the Custodian after the date of
termination hereof owing to
-24-
<PAGE>
failure of the Fund to appoint a successor Custodian, the Custodian
shall be entitled to compensation in accordance with the then-current
fee schedule for its services during such period as the Custodian
retains possession of such securities, funds and other properties and
the provisions of this Agreement relating to the duties and obligations
of the Custodian shall remain in full force and effect. In addition to
the obligations of the Custodian under this Agreement, upon termination
of this Agreement, all records maintained by the Custodian in machine
readable form relating to the services to be performed by the Custodian
under this Agreement shall upon request be surrendered to the Fund or
its agent in machine readable form, and for reasonable compensation as
agreed to by the parties, the Custodian shall reasonably assist in the
conversion of such records to the recordkeeping system of the successor
to the Custodian and shall provide other information relating to its
services provided hereunder which is reasonably needed to effect such
conversion; provided, however, that the foregoing shall not require
disclosure of any proprietary information, trade secrets or other
confidential information of Custodian or any subcustodian, nor shall it
require Custodian or any subcustodian to reformat or alter any data or
to perform or develop any changes in programming or other alterations
in any recordkeeping system.
8. NOTICES. Notices, requests, instructions and other writings addressed
to Fund at 901 East Byrd Street, Richmond, Virginia 23219 or at such
other address as Fund may have designated to Custodian in writing, will
be deemed to have been properly given to Fund hereunder; and notices,
requests, instructions and other writings addressed to Custodian at its
offices at 127 West 10th Street, Kansas City, Missouri 64105,
Attention: Custody Department or to such other address as it may have
designated to Fund in writing, will be deemed to have been properly
given to Custodian hereunder.
9. REPORTS. The Custodian shall provide the Fund annually reports by
independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this
Agreement; such reports shall be of sufficient scope and in sufficient
detail to provide
-25-
<PAGE>
reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, shall so
state. The Custodian shall take all reasonable action, as the Fund may
from time to time request, to obtain from year to year favorable
opinions from the Fund's independent accountants with respect to its
activities hereunder to the extent such activities involve the creation
and maintenance of records used by the Fund in connection with the
preparation of the Fund's registration statement and amendments
thereto, the Fund's Form N-2, and Form N-SAR or other annual reports to
the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
10. CONFIDENTIALITY. The Custodian, its employees and officers, shall not
disclose or use any records or information obtained pursuant to this
Agreement in any manner whatsoever except as expressly authorized in
this Agreement, will keep confidential any information obtained
pursuant to the arrangement under this Agreement and will disclose such
information only if the Fund has authorized such disclosure, or if such
disclosure is required by applicable law or federal or state regulatory
authorities.
11. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights
and liabilities of the parties hereto shall be governed by,
the laws of the State of Missouri.
B. All terms and provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
C. The representations and warranties, and the indemnifications
extended hereunder, if any, are intended to and shall continue
after and survive the expiration, termination or cancellation
of this Agreement.
D. No provisions of the Agreement may be amended or modified in
any manner except by a written agreement properly authorized
and executed each party hereto.
-26-
<PAGE>
E. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
F. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
H. This Agreement may not be assigned by either party hereto
without prior written consent of the other party.
I. Neither the execution nor performance of this Agreement shall
be deemed to create a partnership or joint venture by and
between Custodian and Fund.
J. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by either
party hereunder shall not affect any rights or obligations of
the other party hereunder.
K. If any provision of this Agreement, whether in its present
form or as amended from time to time, limits, qualifies or
conflicts with the 1940 Act or the rules and regulations
promulgated thereunder, the latter shall be deemed to control
and supersede such provision without nullifying or terminating
the remainder of this Agreement.
L. The Custodian will not release the identity of the Fund to an
issuer which requests such information pursuant to the
Shareholder Communications Act of 1985 for the specific
purpose of direct communications between such issuer and the
Fund unless the Fund directs the Custodian otherwise.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: ______________________________
Title: ___________________________
AMERICA'S UTILITY FUND
By: ______________________________
Title: ___________________________
-28-
Exhibit (10)(B)
OPINION OF SPECIAL MARYLAND COUNSEL
April 30, 1997
America's Utility Fund, Inc.
901 East Byrd Street
Richmond, Virginia 23219
RE: Sale of 815,122 Shares of Common Stock, Par Value $0.001 Per Share, of
America's Utility Fund, Inc.
Ladies and Gentlemen:
As special Maryland counsel for America's Utility Fund, Inc., a
Maryland corporation (the "Fund"), we have been requested to render this
opinion in connection with the proposed issuance and sale of 815,122 shares
of Fund common stock, $0.001 par value per share (the "Shares"), for cash
at the net asset value per share, determined in accordance with the Articles
of Incorporation of the Fund, dated January 27, 1992 (the "Articles") and
accepted and approved for record by the Maryland State Department of
Assessments and Taxation (the "SDAT"), which Shares are in addition to Fund
shares of common stock, $0.001 par value per share, which the Fund has
previously offered and sold or which the Fund is currently offering.
We have examined copies, certified to our satisfaction to be complete
and accurate, of the Articles, which provide for 500,000,000 authorized
shares of common stock, $0.001 par value per share; the Bylaws of the Fund,
as amended to date and currently in effect; extracts from the minutes of the
Board of Directors' meeting held on February 13, 1992, authorizing the issuance
and sale by the Fund of the Shares; a Certificate of Good Standing for the Fund
dated April 25, 1997 issued by the SDAT; and such other certificates,
receipts, records and documents relating to the Fund and the authorization
of the Shares as we considered necessary for the purposes of rendering this
opinion.
In conducting our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals
and the conformity to originals of all documents submitted to us as certified
or reproduced copies. As to matters of fact which have not been independently
established, we have relied upon representations of officers of the Fund.
We have not independently verified any factual matters or reviewed any
documents other than the documents referred to above, and accordingly, we
do not express any opinion as to matters that might have been disclosed
by independent verification or review.
<PAGE>
America's Utility Fund, Inc.
April 30, 1997
Page 2
In rendering the opinions set forth herein, we also have assumed that
appropriate actions will be taken to register or qualify the sale of the Shares
under all applicable state and federal laws regulating the offerings and
sales of securities and that at the time of issuance of the Shares, the Fund
will have a sufficient number of shares authorized to make such issuance.
We are attorneys admitted to practice in the State of Maryland. We
express no opinion concerning the laws of any jurisdiction other than the
laws of the State of Maryland.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland and is
currently authorized to issue the Shares.
2. Upon the issuance of any of the Shares for cash at net asset
value, and the receipt of such cash as provided in the Fund's
Articles, any Shares so issued will be validly issued, fully paid
and non-assessable shares of common stock of the Fund.
We understand that the opinions set forth in this letter are to be
used in connection with the registration of the Shares for offering and sale
pursuant to the Securities Act of 1933, as amended, and the provisions of Rule
24e-2 under the Investment Company Act of 1940, as amended. We consent to the
filing of this letter with and as part of Post-Effective Amendment No. 6
to the Fund's Registration Statement (No. 33-45437). The opinions set
forth herein are rendered solely for your use in connection with the issuance
and sale of the Shares and may not be relied upon by you for any other
purpose, or furnished to, quoted to, or relied upon by, in whole or in part,
any other person, firm or corporation for any purpose, without our prior
written consent. Notwithstanding the preceding sentence, Ropes & Gray may
rely on the opinions set forth herein in providing their opinion rendered
in connection with the issuance and sale of the Shares.
Very truly yours,
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.
Exhibit (11)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 6 to Registration
Statement No. 33-45437 of America's Utility Fund, Inc. of our report dated
February 4, 1997 incorporated by reference in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
reference to us under the heading "Financial Highlights" appearing in the
Prospectus, which also is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Richmond, Virginia
April 30, 1997
Exhibit (16)
AMERICA'S UTILITY FUND, INC.
Schedule of Computation of Performance
(1) Average Annual Total Returns Pursuant to SEC Standardized Formula
SEC Formula:
P(1+T)^n=ERV
where:
P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of 1, 5 or 10 year periods at the end of such periods
Average Annual Total Return for the period
1/1/96 through 12/13/96:
P(1+T)^n=ERV
P = $1,000
n = 1
ERV = $1,055
T = 5.46%
Average Annual Total Return for the period
5/5/92 through 12/13/96:
P(1+T)^n=ERV
P = $1,000
n = 4.660273973
ERV = $1,538
T = 9.67%
<PAGE>
(2) Cumulative Total Return Pursuant to Non-Standardized Formula
Formula:
CTR + (ERV-P)/P
P = initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of 1, 5 or 10 year periods at the end of such periods
CTR = aggregate total return of the investment over the specified period
Cumulative Total Return for the period 5/5/92 through 12/31/96:
CTR = (ERV-P)/P
P = $1,000
ERV = $1,538
CTR = 53.75%
(3) Yield Pursuant to SEC Standardized Formula
SEC Formula:
YIELD = 2*[((a-b)/cd+1)^6-1]
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Yield for the 30-day Period Ended December 31, 1996
YIELD = 2*[((a-b)/cd+1)^6-1]
a = 603,301
b = 136,726
c = 5,525,276
d = 25.07
YIELD = 4.08%
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 130,550,138
<INVESTMENTS-AT-VALUE> 144,621,021
<RECEIVABLES> 916,786
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 145,537,807
<PAYABLE-FOR-SECURITIES> 445,488
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 676,361
<TOTAL-LIABILITIES> 1,121,849
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,584,065
<SHARES-COMMON-STOCK> 5,760,478
<SHARES-COMMON-PRIOR> 6,586,756
<ACCUMULATED-NII-CURRENT> 170,657
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 590,353
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,070,883
<NET-ASSETS> 144,415,958
<DIVIDEND-INCOME> 6,354,982
<INTEREST-INCOME> 1,393,653
<OTHER-INCOME> 0
<EXPENSES-NET> (1,899,216)
<NET-INVESTMENT-INCOME> 5,849,419
<REALIZED-GAINS-CURRENT> 5,267,015
<APPREC-INCREASE-CURRENT> (4,116,828)
<NET-CHANGE-FROM-OPS> 6,999,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,725,433
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 631,957
<NUMBER-OF-SHARES-REDEEMED> (1,674,189)
<SHARES-REINVESTED> 215,954
<NET-CHANGE-IN-ASSETS> (18,414,400)
<ACCUMULATED-NII-PRIOR> 46,671
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 352,144
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,043,309
<AVERAGE-NET-ASSETS> 150,034,546
<PER-SHARE-NAV-BEGIN> 24.72
<PER-SHARE-NII> 0.98
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> 0.96
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 25.07
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
