Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices 65829

in the exchange. Merrill Lynch also will

prepare and mail appropriate

confirmations or statements related to

the share exchange transactions.

8. The exchange arrangements for

MMF and each Participating Fund will

be described in general terms in MMF’s

prospectus, including the existence of

any administrative or redemption fees

charged (without necessarily identifying

the specific Funds available for

exchange). Each Participating Fund’s

prospectus will be required to disclose

the amount of any administrative or

redemption fees that will be imposed in

connection with an exchange to or from

MMF.

Applicants’ Legal Analysis

1. Section 11(a) of the Act prohibits

any offer by a registered open-end

management investment company or its

principal underwriter involving the

exchange of the company’s shares on

any basis other than the relative net

asset value of the securities to be

exchanged, unless the terms of the offer

have been approved in advance by the

SEC or meet the requirements of any

rules adopted to regulate exchange

offers.

2. Rule 11a–3 allows an investment

company or its principal underwriter to

make exchange offers to its shareholders

or to shareholders in another company

in the same group of investment

companies, and to charge a sales load,

redemption fee, administrative fee or

any combination thereof in connection

with the exchange, subject to

compliance with certain requirements.

Among other requirements, paragraph

(b)(6)(i) of the rule requires that the

prospectus of the offering company

disclose the amount of any

administrative or redemption fee

charged in connection with an

exchange.

3. Applicants request an order under

section 11(a) to permit the exchange of

shares of MMF for shares of

Participating Funds, and shares of

Participating Funds for shares of MMF,

at other than their respective net asset

values at the time of exchange.

Applicants state that these exchanges

would include, for example, (i)

exchanges of MMF shares for shares of

a Participating Fund sold with an FESL

or a CDSC (‘‘CDSC Shares’’), (ii)

exchanges of CDSC Shares of a

Participating Fund for MMF shares, and

(iii) the imposition of an

‘‘administrative’’ and/or ‘‘redemption’’

fee (as defined in rule 11a–3) in

connection with the exchanges.

4. Applicants state that each exchange

will comply with all the requirements of

rule 11a–3, except (a) the requirement

that the Participating Funds and MMF

be part of the same ‘‘group of

investment companies,’’ as that term is

defined in paragraph (a)(5) of the rule,

and (b) the requirement of paragraph

(b)(6)(i) that MMF’s prospectus disclose

the amount of any administrative or

redemption fee imposed on an exchange

transaction for its securities, provided

that MMF’s prospectus will disclose the

existence of these fees.

5. Applicants submit that the

Exchange Program would not create any

opportunity for improper gain by the

underwriters of the Participating Funds,

by MLFD, or by Merrill Lynch, and

would not raise the possibility of

inducing exchanges for the purpose of

exacting additional sales charges, the

abuse against which section 11(a) was

directed. Furthermore, if the exchanges

were always made at relative net asset

values, applicants believe that the

distribution systems of the Participating

Funds could be disrupted because an

investor could easily avoid applicable

FESLs by acquiring shares of MMF and

immediately exchanging those shares

for Participating Fund shares, or avoid

applicable CDSCs by exchanging CDSC

Shares for MMF shares and then

redeeming such shares without payment

of any otherwise applicable CDSC.

Applicants contend that the Exchange

Program would avoid these problems.

6. Applicants also contend that the

Exchange Program would benefit

exchanging shareholders by crediting

them for FESLs already paid, or, in the

case of CDSC Shares, for the time the

MMF shares are held or for distribution

fees paid with respect to MMF shares

under rule 12b–1 under the Act,

consistent with the requirements of rule

11a–3. Finally, applicants contend

Merrill Lynch is logically positioned to

implement the Exchange Program even

though members of different ‘‘groups of

investment companies’’ are involved

because it is the single entity with the

information needed to execute both the

redemption and purchase orders

involved in a share exchange.

7. Applicants believe there will be

such a wide variety of potential

exchange arrangements offered by

different families of Participating Funds

that it would be impractical for MMF’s

prospectus to state the amounts of

administrative or redemption fees

imposed on an exchange transaction.

Applicants also submit that

shareholders will be fully informed of

the fees and charges applicable to any

exchange, because each Participating

Fund’s prospectus will include the

information required by rule 11a–3.

Finally, applicants note that MMF’s

prospectus will include general

information about the Exchange

Program and refer shareholders to their

financial consultants for more detailed

information.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. Merrill Lynch will be responsible

for tracking the payment of sales loads,

administrative fees and redemption fees

by shareholders of investment

companies or portfolios covered by the

application, and otherwise will conduct

share exchanges in accordance with the

applicants’ representations.

2. Offers of exchange pursuant to the

applicants’ Exchange Program will be

conducted in accordance with rule 11a–

3 under the Act, except that:

(a) An offering company will not be

limited to making an exchange offer

only to the holder of a security of the

offering company, or of another openend investment company within the

same group of investment companies as

the offering company;

(b) MMF’s prospectus will describe

the existence (but not the amount) of

any administrative or redemption fees

imposed on an exchange pursuant to the

Exchange Program.

3. Merrill Lynch will maintain and

enforce internal control procedures that

are designed to assure the Exchange

Program’s compliance with all

applicable provisions of rule 11a–3

under the Act.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32749 Filed 12–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22937; 811–5517]

Heartland Technology, Inc. (Formerly

Milwaukee Land Company); Notice of

Application

December 10, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

deregistration under section 8(f) of the

Investment Company Act of 1940 (the

‘‘Act’’).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

Filing Dates: The application was

filed on June 20, 1997, and amended on
65830 Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices

December 2, 1997. Applicant has agreed

to file an amendment during the notice

period, the substance of which is

included in this notice.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

December 30, 1997, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street, N.W., Washington, DC 20549.

Applicant, 547 West Jackson Blvd.,

Chicago, IL 60661.

FOR FURTHER INFORMATION CONTACT: Lisa

McCrea, Attorney Adviser, at (202) 942–

0562, or Nadya B. Roytblat, Assistant

Director, at (202) 942–0564 (Division of

Investment Management, Office of

Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch, 450 5th Street,

N.W., Washington, DC 20549 (tel. 202–

942–8090).

Applicant’s Representations

1. Milwaukee Land Company is a

registered closed-end management

investment company organized as a

Delaware corporation. On October 31,

1997, Milwaukee Land Company

amended its charter to change its name

to Heartland Technology, Inc. (the

‘‘Company’’). That charter amendment

was approved by shareholders on

September 17, 1997.

2. From its date of incorporation in

1881 until 1989, the Company was a

subsidiary of the Chicago, Milwaukee,

St. Paul and Pacific Railroad (the

‘‘Railroad’’). The Company was formed

for the purpose, among other things, of

acquiring and managing land used in

the Railroad’s operations. Immediately

prior to November 30, 1989, the

Company was a wholly-owned

subsidiary of CMC Real Estate

Corporation (‘‘CMC Real Estate’’), the

successor to the Railroad, which was in

turn a wholly-owned subsidiary of

Chicago Milwaukee Corporation

(‘‘CMC’’). CMC filed a notification of

registration under the Act in March,

1988, and as a result, the Company and

CMC Real Estate each registered under

the Act in March, 1988. CMC Real Estate

was liquidated on November 30, 1989,

and the Company became a whollyowned subsidiary of CMC.

3. In 1991, the real estate assets held

by the Company and certain other assets

and liabilities were contributed by the

Company and CMC to two newlyorganized partnerships, Heartland

Partners, L.P. (‘‘Heartland’’) and CMC

Heartland Partners (‘‘CMC Heartland’’).

Heartland is a publicly traded limited

partnership in which the Company is

the general partner and holds a class B

limited partner interest. CMC Heartland

is a general partnership in which the

Company and Heartland are the general

partners and the Company is the

managing general partner. Through

Heartland and CMC Heartland, the

Company is engaged in the business of

developing real estate, including the

properties formerly owned by the

Company. In 1993, CMC distributed the

Company’s common stock to CMC’s

shareholders, spinning off the Company

as a separate publicly-held company.

The Company’s stock has not otherwise

been offered to the public, and the

Company has never filed a registration

statement under the Securities Act of

1933.

4. Since its spin-off from CMC in

1993, the Company has represented to

its stockholders that it has been engaged

in a search for one or more acquisitions

of operating businesses. The Company

disclosed to its stockholders and to the

investing public that such an

acquisition would likely result in the

Company ceasing to be an investment

company and would therefore require

stockholder approval. The Company

disclosed in its proxy statement to

shareholders that deregistration would

result in shareholders no longer having

the benefit of the regulatory protections

afforded by the Act. The Company states

that it communicated to its

shareholders, in the Company’s

semiannual report for the period ending

June 30, 1997, that it no longer holds

itself out as being engaged in the

business of investing, reinvesting, or

trading in securities within the meaning

of section 3(a)(1)(A) of the Act.

Applicant states that it communicated

to shareholders that the Company’s

assets would be better used to acquire

an operating business that would be

managed by the Company.

5. On April 4, 1997, the board of

directors of the Company (the ‘‘Board’’),

including those directors who are not

‘‘interested persons’’ of the Company

under the Act, considered and approved

for submission to the Company’s

shareholders a proposal for the

Company and a new wholly-owned

subsidiary of the Company called PG

Newco Corp. (‘‘PG Newco’’) to purchase

substantially all the assets and assume

certain liabilities of PG Design

Electronics, Inc. (‘‘PG Design’’). PG

Design is a company engaged in the

business of contract design and

manufacture of printed circuit boards

for computer products. Proxy materials

that were sent to shareholders were filed

with the SEC on April 28, 1997. On May

27, 1997, the shareholders of the

Company approved the acquisition of

PG Design, certain changes in the

Company’s investment policies

necessary to permit the acquisition, and

the deregistration of the Company under

the Act.

6. In determining that it was in the

best interests of the Company and its

shareholders that the Company cease to

be an investment company, the Board

considered the following factors: (a) The

difficulty of managing operating

businesses under the Act; (b) the limits

on the Company’s capital structure

imposed by section 18 of the Act, which

constrain the Company’s ability to

borrow and otherwise manage its capital

structure in ways the Board believes

prudent for an operating company, but

prohibited for a registered investment

company; and (c) the prohibitions on

transactions with affiliates under

section 17 of the Act, which prohibit

many types of incentive-based

compensation the Board considers

reasonable and necessary to attract and

retain the best-qualified persons to

manage the Company’s businesses. The

Company believes that ceasing to be

registered under the Act would result in

the potential for greater long-term

capital appreciation through its

investment in PG Newco and potential

further expansion into other operating

businesses.

7. The acquisition of PG Design was

completed on May 30, 1997, and PG

Newco’s name has since been changed

to P.G. Design Electronics, Inc. (‘‘PG

Design Electronics’’). The Company

intends to continue investment in and

expansion of the business of PG Design

Electronics, specifically, the contract

design and manufacture of printed

circuit boards and other components for

computer products, and, if and when

feasible, entry into other operating

businesses. The Company intends to

maintain its interest in Heartland and

CMC Heartland and through those

entities continue to engage in the

business of real estate development.

However, the Company expects that it

will focus its efforts and resources in the
Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices 65831

1 Investment securities are defined in section

3(a)(2) of the Act to include all securities except (A)

Government securities, (B) securities issued by

employees’ securities companies, and (C) securities

issued by majority owned subsidiaries of the owner

which are not investment companies, and are not

relying on the exception from the definition of

investment company in sections 3(c)(1) or 3(c)(7) of

the Act.

business of PG Design Electronics and

other potential operations.

8. On September 30, 1997, the

Company entered into a letter of intent

to acquire all of the outstanding

common stock of Solder Station One,

Inc. (‘‘Solder Station One’’), a service

provider to the circuit board industry.

Subject to certain adjustments, the

purchase price is expected to be

$7,250,000. The Company expects to

form a new wholly-owned subsidiary

which will serve as the acquisition

vehicle. The Company expects to invest

$1,500,000 in cash in that subsidiary, all

of which the Company expects to obtain

from repayment of debt owned to the

Company by PG Design Electronics. The

new subsidiary then expects to borrow

against the receivables and equipment

of Solder Station One to raise additional

cash, and to pay the shareholders of

Solder Station One: (i) $5,250,000 in

cash at closing, and (ii) notes to be

issued by the new subsidiary in the

aggregate amount of $2,000,000, bearing

interest at 8% annually. The close of the

Solder Station One acquisition is

currently scheduled for January 2, 1998.

9. A predecessor of the Company was

petitioner in a suit in the U.S. Court of

Federal Claims for refund of claimed

overpaid railroad retirement taxes. That

claim was transferred to the Company as

part of the Company’s spin-off from its

former parent corporation, CMC. A

judgment adverse to the Company was

entered in the trial court on April 26,

1996. The Company appealed to the

U.S. Court of Appeals for the Federal

Circuit, and is awaiting decision. The

Company is not a party to any other

litigation or administrative proceeding.

10. The Company states that it is not

now operating and will not in the future

operate its business so as to be an

investment company required to be

registered under the Act. The Company

states that it does not now and will not

in the future hold itself out as being

engaged primarily in the business of

investing, reinvesting or trading in

securities.

Applicant’s Legal Analysis

1. The Company asserts that it no

longer holds itself out as being engaged

in the business of investing, reinvesting,

or trading in securities within the

meaning of section 3(a)(1)(A) of the Act.

For example, in the Company’s

semiannual report to shareholders for

the period ended June 30, 1997, the

Company stated: ‘‘During the second

quarter of 1997, the Company liquidated

its entire non-affiliated investment

portfolio. Most of the resulting cash was

used on May 30, 1997 to acquire the

assets, subject to certain liabilities, of

PG Design. Shortly after the successful

acquisition of PG Design, the Company

applied for deregistration under the

Act.’’

2. Section 3(a)(1)(C) of the Act defines

an investment company as any issuer

which ‘‘is engaged in the business of

investing, reinvesting, owning, holding,

or trading in securities, and owns or

proposes to acquire investment

securities having a value exceeding forty

percent of the value of such issuer’s

total assets (exclusive of Government

securities and cash items) on an

unconsolidated basis.’’ 1 The Company

asserts that it no longer meets the

definition of an investment company

under section 3(a)(1)(C) because it does

not own, and does not propose to

acquire ‘‘investment securities’’ having

a value exceeding 40% of the value of

its total assets.

3. The Company asserts that because

PG Design Electronics is a whollyowned subsidiary of the Company, its

common stock owned by the Company

is not an ‘‘investment security’’ within

the meaning of section 3(a)(2) of the Act.

The Company states that, at September

30, 1997, its ‘‘investment securities’’ for

purposes of section 3(a)(1)(C),

represented 32.6% of its total assets,

excluding cash and Government

securities.

4. The Company’s total assets at

September 30, 1997, totaled

$24,087,022. The Company’s interests in

Heartland and CMC Heartland were

valued at $7,589,129 and the Company’s

investment in PG Design Electronics

was valued at $15,085,543. The

Company’s accounts payable and

accrued liabilities at September 30, 1997

consisted of liabilities of a predecessor

corporation, accrued federal income

taxes, and other liabilities.

5. The Company states that its income

from the date of the close of the

acquisition of PG Design has consisted

primarily of income generated by PG

Design Electronics, and less than 5% of

the Company’s income during the

period June 1, 1997 through September

30, 1997 was derived from ‘‘investment

securities.’’ The Company states that it

anticipates receiving income from PG

Design Electronics, the amount of which

will be within the Company’s control

but limited by PG Design Electronics’

net income. PG Design’s 1996 revenues

totaled $25,022,000, resulting in net

income of $1,255,000. For the period

June 1, 1997 through September 30,

1997, PG Design Electronics had net

income of approximately $1,727,974.

The Company anticipates similar

revenues and income for PG Design

Electronics for the coming year although

there can be no assurance that such

levels will be achieved.

6. If the planned acquisition of Solder

Station One is consummated, the

Company anticipates that it will receive

income from that company. The amount

will be within the Company’s control,

but limited by Solder Station One’s net

income. Solder Station One’s revenues

for the nine months ended September

30, 1997 were approximately $5,941,000

and net income before taxes was about

$1,399,000. The Company anticipates

similar revenues and net income for

Solder Station One after consummation

of the acquisition although there can be

no assurance that such levels will be

achieved.

7. The Company states that it receives

an annual management fee of $425,000

from CMC Heartland, and that it does

not anticipate receiving any significant

income other than the management fee

from Heartland or CMC Heartland.

8. The Company states that it

currently intends to continue to develop

and expand its operating business. The

Company believes that the percentage of

its total assets represented by its

interests in Heartland and CMC

Heartland will decline. Giving effect to

the planned Solder Station One

acquisition, the Company’s investment

securities would be 32.6% of the

Company’s total assets. The Company

states that it has no intention to increase

the number of investment securities it

holds. The Company does not expect to

invest its net income in investment

securities within the meaning of section

3(a)(2) of the Act, except as discussed

below. The Company expects that it

may invest in short-term securities as a

cash management tool when

accumulation of cash is necessary or

appropriate to meet the Company’s

requirements, including pending

payment of dividends, to make

additional investments in the

Company’s subsidiaries or to acquire

other companies or businesses, or to

repay borrowings. In addition, the

Company expects that it may invest in

longer-term debt securities to offset

particular Company liabilities. The

Company intends to manage its cash

and its investments in such a way as to

avoid again coming within the

definition of investment company under

the Act.
65832 Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices

1Mentor Funds is comprised of eleven portfolios:

Mentor Growth Portfolio, Mentor Capital Growth

Portfolio, Mentor Strategy Portfolio, Mentor Income

and Growth Portfolio, Mentor Perpetual Global

Portfolio, Mentor Quality Income Portfolio, Mentor

Municipal Income Portfolio, Mentor Short-Duration

Income Portfolio, Mentor Balanced Portfolio,

Mentor Institutional Money Market Portfolio, and

Mentor Institutional U.S. Government Money

Market Portfolio. Mentor Institutional Trust is

comprised of five portfolios: Mentor U.S.

Government Cash Management Portfolio, Mentor

Intermediate Duration Portfolio, Mentor FixedIncome Portfolio, Mentor Perpetual International

Portfolio, and SNAP Fund. Cash Resource Trust is

comprised of five funds: Cash Resource Money

Market Fund, Cash Resource U.S. Government

Money Market Fund, Cash Resource Tax-Exempt

Money Market Fund, Cash Resource California TaxExempt Money Market Fund, and Cash Resource

New York Tax-Exempt Money Market Fund. Each

of America’s Utility Fund, Inc. and Mentor Income

Fund, Inc. constitutes a single portfolio.

2 In each of the foregoing cases, whether acting as

investment adviser or subadviser, each Advisor and

Sub-Advisor is acting as an investment adviser

within the meaning of section 2(a)(20) of the Act.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32775 Filed 12–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

22936; 812–10882]

Mentor Funds, et al.; Notice of

Application

December 10, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) from section 15(a) of the Act.

SUMMARY OF APPLICATION: Applicants

seek an order to permit the

implementation, without shareholder

approval, of new investment advisory

agreements (‘‘New Agreements’’)

between Mentor Funds, Mentor

Institutional Trust, Cash Resource Trust

(collectively, the ‘‘Trusts’’), America’s

Utility Fund, Inc., and Mentor Income

Fund, Inc. (collectively with the Trusts,

the ‘‘Funds’’); and one or more of

Mentor Investment Advisors, LLC

(‘‘Mentor Advisors’’), Mentor Perpetual

Advisors, LLC (‘‘Mentor Perpetual’’)

(each, an ‘‘Advisor’’); Van Kampen

American Capital Management, Inc.

(‘‘Van Kampen’’), and Wellington,

Management Company, LLP

(‘‘Wellington’’) (each, a ‘‘Sub-advisor’’),

for a period of up to 60 days following

the date of consummation of a merger

(but in no event later than March 31,

1998) (the ‘‘Interim Period’’). The order

also would permit the Advisors and

Sub-advisors to receive all fees earned

under the New Agreements following

shareholder approval.

Applicants: Funds, Advisors, and

Sub-advisors.

FILING DATES: The application was filed

on November 20, 1997. Applicants have

agreed to file an amendment during the

notice period, the substance of which is

included in this notice.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

December 30, 1997, and should be

accompanied by proof of service on

applicants in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants: Mentor Funds, Mentor

Institutional Trust, Cash Resource Trust,

America’s Utility Fund, Inc., Mentor

Income Fund, Inc., Mentor Advisors,

and Mentor Perpetual, 901 East Byrd

Street, Richmond, VA 23219; Van

Kampen, One Parkview Plaza, Oakbrook

Terrace, IL 60181; Wellington, 75 State

Street, Boston, MA 02109.

FOR FURTHER INFORMATION CONTACT:

John K. Forst, Attorney Advisor, at (202)

942–0569, or Christine Y. Greenlees,

Branch Chief, at (202) 942–0564 (Office

of Investment Company Regulation,

Division of Investment Management).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, D.C. 20549

(tel. 202–942–8090).

Applicants’ Representations

1. The Trusts, each a Massachusetts

business trust, are registered under the

Act as open-end management

investment companies. America’s

Utility Fund, Inc., a Maryland

corporation, is registered under the Act

as an open-end management investment

company. Mentor Income Fund, Inc., a

Virginia corporation, is registered under

the Act as a closed-end management

investment company. The Funds

currently offer twenty-three portfolios.1

2. The Advisors, investment advisers

registered under the Investment

Advisers Act of 1940 (the ‘‘Advisers

Act’’), serve as investment adviser for

the Funds pursuant to existing

investment advisory agreements that

comply with section 15 of the Act (with

existing sub-advisory agreements, the

‘‘Existing Agreements’’). Mentor

Perpetual serves as investment adviser

to Mentor Perpetual Global Portfolio

and Mentor Perpetual International

Portfolio. Mentor Advisors serves as

investment adviser to each of the other

Funds. The Sub-advisors, investment

advisers registered under the Advisers

Act, serve as sub-advisers for certain of

the Funds pursuant to the Existing

Agreements. Van Kampen serves as Subadvisor to the Mentor Municipal Income

Portfolio. Wellington serves as Subadvisor to the Mentor Income and

Growth Portfolio.2

3. On August 20, 1997, Wheat First

Butcher Singer, Inc. (‘‘Wheat First’’), the

Advisors’ parent, entered into an

agreement and plan of merger with First

Union Corporation (‘‘First Union’’),

under which Wheat First will be merged

into First Union (the ‘‘Merger’’). Upon

consummation of the Merger (expected

to occur on December 31, 1997), First

Union will become the owner of a

majority of the beneficial interest in

Mentor Advisors and of one-half of the

beneficial interest in Mentor Perpetual.

4. Applicants believe that the Merger

will result in an assignment of the

Existing Agreements. Applicants request

an exemption to permit: (a) The

implementation during the Interim

Period, prior to obtaining shareholder

approval, of the New Agreements; and

(b) the Advisors and Sub-advisors to

receive from each Fund, upon approval

of that Fund’s shareholders of the

relevant New Agreement, any and all

fees earned under the New Agreement

during the applicable Interim Period.

Applicants state that the New

Agreements will have substantially the

same terms and conditions as the

respective Existing Agreements, except

in each case for the effective date,

termination date, and escrow

provisions.

5. The boards of trustees of the Trusts

and the boards of directors of Mentor

Income Fund, Inc. and America’s Utility

Fund, Inc. (collectively, the ‘‘Boards’’),

met on October 14, 1997, September 10,

1997, and November 19, 1997,

respectively, to discuss the Merger and

its implications for the Funds. At the

meetings, the Boards, including a

majority of the members who are not

‘‘interested persons’’ of any Fund, as