[AMERICA'S UTILITIES LOGO]
Dear Shareholder:
The first half of 1997, like 1996, has proven to be a difficult environment
for the utility sector. In spite of current low interest rates and the market's
anticipation that rates will remain low for the near future, utility stocks have
not performed in line with the broader market averages of the Dow Jones* and the
S&P 500.**
Wall Street analysts continue to focus their attention on the issue of
deregulation of electric companies and the demands that competition will place
on companies which in the past have functioned in a regulated environment. Those
analysts who cover the sector are most concerned with which companies have the
management structure and cost disciplines in place to be the winners in the
fast-approaching competitive arena.
The Board of Directors and management of America's Utility Fund continue to
focus on the diversification of your Fund away from its heavy exposure to
electric utility companies into areas that have the potential to provide greater
capital appreciation. This shift must happen in a prudent, orderly fashion. In a
market as highly valued as the current market, it takes patience to find stocks
which are not selling for more than the company's underlying fundamental value.
We will continue to diversify to the extent your Fund's investment objectives
and policies allow and to the extent the Fund's management feels is appropriate
relative to the overall market.
America's Utility Fund, with its steady dividend stream earned on the
investments held in the Fund, continues to have the potential to provide
shareholders with a good yield on their investment. As of June 30, 1997, the
date of this semi-annual report, the current SEC yield was 3.96%. This dividend
yield continues to be an important element of the Fund since the vast majority
of Fund shareholders reinvest those dividends, further adding to their
investment for the future.
I am pleased to report that our most recent marketing campaign added more
than 900 new shareholders to America's Utility Fund. And as always I would like
to thank our very loyal shareholders who continue to stay with the Fund and
maintain a long-term investment discipline.
Sincerely,
/s/ LINWOOD R. ROBERTSON
Linwood R. Robertson
CEO and President
*The Dow Jones Industrial Average is a price-weighted index of 30
large-capitalization stocks traded on the New York stock exchange. The Dow is
computed by adding the total value of the 30 stocks and dividing by a factor
that adjusts for distortions caused by stock splits over the years. It is
considered to be a barometer of how shares of the largest U.S. companies are
performing.
**The Standard & Poor's Index (S&P 500) is an unmanaged,
market-value-weighted index of 500 widely held domestic common stocks. An
unmanaged index does not reflect expenses and may not correspond to the
performance of a managed portfolio in which expenses are incurred. Investors
cannot invest in the S&P 500 Index.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
by John G. Davenport, CFA and Richard L. Rice, CFA,
Portfolio Managers
During the first half of 1997, America's Utility Fund provided a total return
of 5.1% including capital appreciation and dividend income. Your Fund's
performance continued to exceed that of utility stocks in general when, for
example, the Standard & Poor's Utility Index* reported a 2.3% six-month total
return. The utility sector, however, remains out of favor relative to the
broader market indexes, such as the S&P 500,** which gained 20.6% in the period.
Extraordinarily high returns in the broader market continue to be driven by
unusually favorable economic conditions. The economy continues to grow without
producing inflationary pressures or apparent imbalances which could "upset the
apple cart" -- an environment that supports the expectation of continued good
earnings growth and drives stock prices higher. These conditions have diverted
investor attention away from less economically-sensitive, higher-dividend-paying
utility stocks.
Meanwhile, electric utilities experienced difficult year-to-year earnings
comparisons in the first half as milder weather in most of the eastern
two-thirds of the U.S. resulted in lower customer demand for energy. Utility
investors have also been disappointed by the failure of several state
legislatures to pass electric utility deregulation legislation, adding to
overall concerns regarding industry restructuring and prospects for recovering
investments in regulated assets that could be devalued in the transition to a
competitive marketplace. Similar uncertainties exist for local and long-distance
telephone companies, as competitive barriers are gradually removed in their
respective markets.
Our stock selection continues to stress higher-quality, well-managed
companies that can adapt to changing industry fundamentals.*** In addition, to
raise the longer-term growth characteristics of the Fund, several stocks have
been added outside the traditional utility sector. These positions, including
foreign and domestic issues, accounted for about 13% of the Fund's holdings at
mid-year, double their year-end 1996 weighting. This percentage is rising,
largely at the expense of domestic electric utilities which have been brought
down to a 46% weighting. The process of re-positioning your Fund is being
carried out over time as we try to balance the need for further long-term
diversification with valuation disciplines in a broad market, trading at record
levels.
LOOKING AHEAD
We continue to be encouraged by a number of factors which should benefit
long-term investors in the Fund. First, broadening industry representation
outside the traditional utility sector should improve growth attributes of stock
holdings and, in turn, the Fund's long-term capital-appreciation potential.
Second, with low inflation in an aging economic expansion, long-term interest
rates could decline and tend to support higher prices for interest-sensitive
funds. An economic slowdown at some point would likely lead to corporate profit
disappointments in general, following several years of strong growth, and set
the stage for renewed interest in defensive investments such as utilities.
Finally, utility stocks are very attractively valued compared to the overall
market. For example, the dividend yield (i.e. dividend divided by price) of the
S&P Utility Index compared to the S&P 500 Index has reached record levels. This
valuation disparity should eventually be resolved to the benefit of patient
utility investors.****
*The S&P Utilities Index is one of four broad sectors in the S&P 500
Index and includes all the utility stocks in the S&P 500 Index. It is a market-
value weighted index (stock price times shares outstanding), with each stock
affecting the Index in proportion to its market value. This Index, calculated by
Standard & Poor's, is a total return index with dividends reinvested. Investors
may not invest in an index. The S&P Utilities Index is used as the benchmark for
the performance of America's Utility Fund (AUF) because it is identified by the
investment advisor as the index that most accurately reflects the management
style and portfolio composition of AUF.
**The Standard & Poor's Index (S&P 500) is an unmanaged, market-
value-weighted index of 500 widely held domestic common stocks. An unmanaged
index does not reflect expenses and may not correspond to the performance of a
managed portfolio in which expenses are incurred. Investors cannot invest in the
S&P 500 Index.
***While the portfolio managers will endeavor to manage the portfolio in
accordance with the investment process, there are no guarantees that they will
be successful.
****This material must be preceded or accompanied by a current Prospectus
for America's Utility Fund, which contains complete information regarding fees,
sales charges, and expenses. Please read it carefully before you invest or send
money.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 1997
ONE YEAR SINCE INCEPTION (5/5/92)*
8.83% 9.74%
SEC CURRENT YIELD AS OF JUNE 30, 1997 3.96**
[GRAPH]
<TABLE>
<CAPTION>
5/92 6/92 9/92 12/92 3/93 6/93 9/93 12/93 3/94
<S> <C>
AMERICA'S UTILITY FUND*** 10,000 10,170 10,892 11,190 12,235 12,642 13,198 12,679 11,290
S&P UTLITIES INDEX~ 10,000 10,136 10,935 11,211 12,421 12,715 13,605 12,830 11,770
<CAPTION>
6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96
<S> <C>
AMERICA'S UTILITY FUND*** 10,728 11,141 11,019 11,759 12,479 13,485 14,577 14,507 14,839
S&P UTLITIES INDEX~ 11,768 11,823 11,811 12,625 13,563 15,085 16,774 15,977 16,782
<CAPTION>
9/96 12/96 3/97 6/97
<S> <C>
AMERICA'S UTILITY FUND*** 14,340 15,373 15,158 16,149
S&P UTLITIES INDEX~ 16,217 17,298 16,716 17,697
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operation of America's Utility Fund from the date of inception
5/5/92 through 6/30/97.
** SEC current yield is calculated by dividing the net investment income
per share for the 30 days ended 6/30/97 by the offering price per share
on that date. The figure is then compounded and annualized.
*** Represents a hypothetical investment of $10,000 in America's Utility
Fund. Performance assumes the reinvestment of all dividends and
distributions.
~ The S&P Utilities Index is one of four broad sectors in the S&P 500
Index and includes all the utility stocks in the S&P 500 Index. It is a
market-value weighted index (stock price times shares outstanding), with
each stock affecting the Index in proportion to its market value. This
Index, calculated by Standard & Poor's, is a total return index with
dividends reinvested. Investors may not invest in an index. The S&P
Utilities Index is used as the benchmark for the performance of
America's Utility Fund (AUF) because it is identified by the investment
advisor as the index that most accurately reflects the management style
and portfolio composition of AUF.
This material must be preceded or accompanied by a current Prospectus for
America's Utility Fund, which contains complete information regarding fees,
sales charges, and expenses. Please read it carefully before you invest or send
money.
AMERICA'S UTILITY FUND, INC.
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Market Value
Shares Common Stocks 88.78% (Note 2)
-------- -------------------- -------------
<S> <C>
PUBLIC UTILITY - ELECTRIC -
63.26%
66,100 Allegheny Power Systems, Inc. $ 1,764,044
80,000 Bell Atlantic Corporation 6,070,000
5,000 Bemis Company 216,250
5,800 British Telecom PLC* 430,650
55,500 Chilgener S.A.* 1,554,000
47,800 CPT Telefonica Del Peru S.A. 1,251,762
211,000 DPL, Inc. 5,195,875
69,950 DQE, Inc. 1,976,088
125,400 DTE Energy Company 3,464,175
78,800 Duke Power Company 3,777,475
125,000 Eastern Utilities Associates
Company 2,281,250
20,500 Empressa Nacional Electric* 1,743,781
74,000 Enron Corporation 3,020,125
67,000 FPL Group, Inc. 3,086,187
95,500 GPU, Inc. 3,426,063
15,600 Grainger (W.W.), Inc. 1,219,725
187,700 LG&E Energy Corporation 4,141,131
113,800 NIPSCO Industries, Inc. 4,701,363
53,700 Nalco Chemical Company 2,074,162
75,400 Northern States Power Company 3,901,950
218,700 Ohio Edison Company 4,770,394
45,200 Pall Corporation 1,050,900
109,900 Potomac Electric Power Company 2,541,437
99,800 Public Service Company of
Colorado 4,141,700
89,700 SCANA Corporation 2,225,681
23,200 Schering-Plough 1,110,700
45,400 Sonoco Products Company 1,381,863
203,000 Southern Company 4,440,625
40,100 Sysco Corporation 1,463,650
175,200 TECO Energy, Inc. 4,478,550
17,000 Telefonica De Espana* 1,466,250
86,100 Tucson Electric Power Company 1,248,450
145,500 Western Resources, Inc. 4,719,656
----------
90,335,912
PUBLIC UTILITY - NATURAL GAS -
8.46%
93,000 Brooklyn Union Gas Company 2,662,125
78,000 Nicor, Inc. 2,798,250
94,900 Pacific Enterprises 3,191,013
85,000 Questar Corporation 3,431,875
----------
12,083,263
TELECOMMUNICATIONS - 17.06%
55,000 AT&T Corporation 1,928,438
83,000 Ameritech Corporation 5,638,812
106,000 GTE Corporation 4,650,750
72,200 MCI Communications 2,763,906
90,400 SBC Communicatons, Inc. 5,593,500
72,000 Sprint Corporation 3,789,000
-----------
24,364,406
Total Common Stocks
(cost $110,309,732) 126,783,581
</TABLE> -----------
<PAGE>
AMERICA'S UTILITY FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
Shares or
Principal Market Value
Amount (Note 2)
------- ----------
<S> <C>
PREFERRED STOCK - 0.35%
20,000 Bankamerica Trust (cost $500,000) $ 500,000
-----------
CORPORATE BONDS - 7.81%
$2,000,000 Appalachian Power Company, 7.38%,
8/15/02 2,012,332
1,250,000 Duke Power Company, 8.00%, 11/1/99 1,289,062
2,250,000 Pacificorp, 6.75%, 4/1/05 2,190,472
2,000,000 Texas Utilities Electric Company,
8.25%, 4/1/04 2,125,000
2,000,000 West Texas Utilities, 7.00%,
10/1/04 2,000,000
1,500,000 Wisconsin Public Service, 7.30%,
10/1/02 1,534,991
-----------
Total Corporate Bonds
(cost $11,299,047) 11,151,857
-----------
REPURCHASE AGREEMENT - 3.03%
Goldman Sachs & Company
Dated 6/30/97, 6.11%, due
7/1/97,
collateralized by $4,495,874
Federal Home Loan Mortgage
Corporation, 7.00%, 6/2/26,
market value $4,412,981
4,320,427 (cost $4,320,427) 4,320,427
-----------
TOTAL INVESTMENTS - 99.97%
(COST $126,429,206) 142,755,865
OTHER ASSETS LESS LIABILITIES -
0.03% 35,786
-----------
NET ASSETS 100.00% $142,791,651
============
</TABLE>
* American Depository Receipt.
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at market value --
identified cost $126,429,206 (Note 2) $142,755,865
Receivables
Dividends and interest receivable 593,336
Capital shares sold 110,115
-----------
Total assets 143,459,316
-----------
LIABILITIES
Payables
Investments purchased 210,975
Capital shares redeemed 143,324
Accrued expenses 313,366
-----------
Total liabilities 667,665
-----------
NET ASSETS $142,791,651
=============
Net Assets
Additional paid-in capital $123,705,890
Undistributed net investment income 49,245
Accumulated net realized gain on investment
transactions 2,709,857
Net unrealized appreciation of investments 16,326,659
------------
Net Assets $142,791,651
Shares outstanding 5,527,030
Net Asset Value Per Share $ 25.84
</TABLE>
<PAGE>
AMERICA'S UTILITY FUND, INC.
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of withholding taxes $20,283) $2,828,455
Interest 549,406
----------
Total investment income (Note 2) 3,377,861
----------
EXPENSES
Administrative service fees (Note 4) 291,821
Transfer agent fees (Note 4) 197,619
Shareholder services fees (Note 4) 173,703
Investment advisor fees (Note 4) 159,807
Directors' fees 34,276
Shareholder reports 24,452
Legal fees 16,858
Custody fees 14,463
Registration fees 7,867
Audit fees 6,181
Other 7,867
---------
Total expenses 934,914
---------
Deduct
Expenses assumed by administrative services
company (Note 4) (84,625)
---------
Net expenses 850,289
---------
Net investment income 2,527,572
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 2,119,504
Change in unrealized appreciation
(depreciation) of investments 2,255,776
---------
Net realized and unrealized gain on
investments 4,375,280
---------
Net increase in net assets resulting from
operations $6,902,852
==========
</TABLE>
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
6/30/97 Year Ended
(Unaudited) 12/31/96
----------- ----------
<S> <C>
NET DECREASE IN NET ASSETS
OPERATIONS
Net investment income $ 2,527,572 $ 5,849,419
Net realized gain on investments 2,119,504 5,267,015
Change in unrealized
appreciation (depreciation) of
investments 2,255,776 (4,116,828)
------------ ------------
Increase in net assets resulting
from operations 6,902,852 6,999,606
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (2,648,983) (5,725,433)
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE
5)
Net proceeds from sale of shares 6,182,606 15,469,548
Reinvested distributions 2,433,188 5,280,490
Cost of shares redeemed (14,493,970) (40,438,611)
------------ ------------
Change in net assets from
capital
share transactions (5,878,176) (19,688,573)
------------ ------------
Decrease in net assets (1,624,307) (18,414,400)
Net Assets
Beginning of period 144,415,958 162,830,358
------------ ------------
End of period $142,791,651 $144,415,958
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year Year
6/30/97 Ended Ended Ended Ended
(Unaudited) 12/31/96 12/31/95 12/31/94 12/31/93
---------- -------- -------- -------- --------
<S> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.07 $ 24.72 $ 19.50 $ 23.54 $ 21.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.46 0.98 0.96 0.96 0.91
Net realized and unrealized gain (loss) on investments 0.79 0.33 5.22 (4.04) 2.00
------- ------- ------- ------- -------
Total from investment operations 1.25 1.31 6.18 (3.08) 2.91
LESS DISTRIBUTIONS
Dividends from net investment income (0.48) (0.96) (0.96) (0.96) (0.92)
Distributions from net realized capital gains 0.00 0.00 0.00 0.00 (0.40)
------- ------- ------- ------- -------
Total distributions (0.48) (0.96) (0.96) (0.96) (1.32)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 25.84 $ 25.07 $ 24.72 $ 19.50 $ 23.54
======= ======= ======= ======= =======
Total Return 5.05% 5.46% 32.30% (13.10%) 13.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $142.79 $144.42 $162.83 $125.01 $133.53
Ratio of expenses to average net assets 1.21% (b) 1.27% 1.21% 1.21% 1.21%
Ratio of expenses to average net assets before expense
reductions 1.33% (b) 1.36% 1.34% 1.33% 1.41%
Ratio of net investment income to average net assets 3.60% (b) 3.90% 4.40% 4.66% 4.19%
Portfolio turnover rate 12.24% 24.05% 27.77% 28.85% 21.20%
Average commission rate on portfolio transactions $0.0687 $0.0680
<CAPTION>
Period
Ended
12/31/92(a)
-----------
<S> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.54
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.63
Net realized and unrealized gain (loss) on investments 1.80
-------
Total from investment operations 2.43
LESS DISTRIBUTIONS
Dividends from net investment income (0.67)
Distributions from net realized capital gains (0.35)
-------
Total distributions (1.02)
-------
NET ASSET VALUE, END OF PERIOD $ 21.95
=======
Total Return 18.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 43.67
Ratio of expenses to average net assets 1.21%
Ratio of expenses to average net assets before expense
reductions 1.41%
Ratio of net investment income to average net assets 4.99%
Portfolio turnover rate 24.16%
Average commission rate on portfolio transactions
</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.
(b) Annualized.
See notes to financial statements.
<PAGE>
AMERICA'S UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
NOTE 1: ORGANIZATION
America's Utility Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund was organized as a Maryland corporation on January 28, 1992. On
February 14, 1992 (initial investment date), the Fund sold 500,000 shares of
common stock to Dominion Resources, Inc., the ultimate parent of America's
Utility Fund Service Company ("AUFSC"), for $10,000,000. The Fund commenced
sales to the public on May 5, 1992.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles which
required management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Fund.
SECURITY VALUATION. Investments in securities traded on a national securities
exchange and over-the-counter securities quoted on the NASDAQ National Market
System are valued at the last reported sales price or, lacking any sales, at the
mean between the bid and asked prices. If a mean cannot be determined, then the
securities are valued at the best available current bid price. Securities traded
in the over-the-counter market, other than those quoted on the NASDAQ National
Market System, are valued at the last available bid price. Short-term
investments with remaining maturities of 60 days or less are carried at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith under procedures approved by the Board of Directors.
REPURCHASE AGREEMENTS. It is the policy of the Fund to require that repurchase
agreement investments be fully collateralized at all times. Procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's underlying securities to ensure the existence of a proper
level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by the
Fund's advisor to be creditworthy pursuant to guidelines established by the
Fund's Board of Directors. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly, the
Fund could receive less than the repurchase price on the sale of collateral
securities.
FEDERAL INCOME TAXES. No provision for federal income taxes has been made since
it is the Fund's policy to comply with the provisions applicable to regulated
investment companies under the Internal Revenue Code and to distribute to its
shareholders within the allowable time limit substantially all taxable income
and realized capital gains.
DISTRIBUTIONS. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Accordingly, periodic
reclassifications are made within the Fund's capital accounts to reflect income
and gains available for distribution under income tax regulations.
DIVIDENDS. Dividends to shareholders are recorded on the ex-dividend date.
Dividends from net investment income are declared and paid quarterly.
Distributions of capital gains, if any, are made annually.
SECURITY TRANSACTIONS. The Fund records security transactions on the trade date.
Gains and losses on securities sold are determined on the first-in, first-out
(FIFO) method. Discounts and premiums on securities purchased are amortized over
the life of the respective securities.
INVESTMENT INCOME. Dividend income is recognized on the ex-dividend date, and
interest income is recognized daily on an accrual basis.
NOTE 3: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term securities)
were $16,709,291 and $23,463,085, respectively. Net unrealized appreciation at
June 30, 1997, based on the cost of securities for federal income tax purposes
of $126,429,206 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $18,550,103
Gross unrealized depreciation (2,223,444)
-------------
Net unrealized appreciation $16,326,659
=============
</TABLE>
NOTE 4: ADMINISTRATIVE SERVICES FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Mentor Investment Advisors, LLC ("Mentor Advisors") serves as investment manager
to the Fund under a Management Contract dated September 9, 1995. Mentor Advisors
is a wholly owned subsidiary of Mentor Investment Group, LLC, ("Mentor") which
in turn is a subsidiary of Wheat First Butcher Singer, Inc. EVEREN Capital
Corporation has a 20% ownership in Mentor Investment Group. Pursuant to this
agreement, Mentor Advisors receives for its services an annual investment
management fee expressed as a percentage of the average daily net assets of the
Fund as follows: 0.75% of the first $5 million of average daily net assets,
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% of the average daily net
assets in excess of $300 million.
Mentor provides administrative personnel and services to the Fund under an
Administrative Services Agreement dated August 21, 1995. Pursuant to the
Agreement, the Fund pays Mentor a fee at the 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, the Fund paid fees to AUFSC under an Administrative
Services and Transfer Agency Agreement. Pursuant to which AUFSC provided
administrative, transfer agency and dividend disbursing agency services. The
Fund paid fees under that Agreement at an annual rate of 1.00% of the Fund's
average daily net assets less the amount of any fees payable to the Fund's
investment advisor.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund has entered into a Shareholder Services Agreement with Mentor dated
August 21, 1995, pursuant to which Mentor, itself, through AUFSC, or through
other financial institutions, provides shareholder support services to the Fund
and its shareholders. The Fund pays fees to Mentor under that Agreement at an
annual rate of 0.25% of the Funds average daily net assets. Pursuant to a
Sub-Shareholder Services Agreement between Mentor and AUFSC, Mentor in turn pays
fees to AUFSC at the same annual rate of the Fund's assets in respect of which
AUFSC provides specified shareholder services.
AUFSC also receives fees from the Fund's transfer agent for services performed
under a Sub-Transfer Agency Agreement dated August 21, 1995. Pursuant to that
Agreement, the transfer agent pays AUFSC a fee at the annual rate of 0.10% of
the Fund's average daily net assets attributable to shares held by the
shareholders to whom the AUFSC provides such sub-transfer agency services.
Mentor 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. As a
result of this expense limitation, Mentor incurred expenses of $84,625 during
the six months ended June 30, 1997.
NOTE 5: CAPITAL SHARE TRANSACTIONS
As of June 30, 1997 there were 500,000,000 shares of $0.0001 par value capital
stock authorized. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
6/30/97 12/31/96
------- ----------
<S> <C>
Shares sold 246,425 631,957
Shares issued upon reinvestment
of dividends 96,978 215,954
Shares redeemed (576,851) (1,674,189)
--------- -----------
(233,448) (826,278)
========= ===========
</TABLE>
As of June 30, 1997, Dominion Resources, Inc. and subsidiaries owned 168,016
shares of capital stock, representing 3.04% of the total shares (market value
$4,341,533).
Income Tax Information
Of the ordinary income distributions paid during the six months ended June 30,
1997, the Fund is designating 100% as eligible for the dividends-received
exclusion for corporations.
This material must be preceded or accompanied by a current Prospectus for
America's Utility Fund. It contains complete information regarding fees and
expenses. Please read it carefully before investing or sending money.
Project America, Inc., Distributors
To receive more information and to obtain a prospectus call 800-487-3863.
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JUNE 30, 1997
