Company Name: Mentor Income Fund, Inc.
Public Availability Date: September 7, 2000

Document Sections:

LETTER OF INQUIRY 1
APPENDIX
LETTER OF INQUIRY 2
LETTER OF INQUIRY 3
STAFF REPLY LETTER

[LETTER OF INQUIRY 1]
August 17, 2000

VIA FACSIMILE

Mr. Briccio S. Barrientos

Division of Investment Management

Securities and Exchange Commission

450 Fifth Street, NW

Washington, D.C. 20549

Re: Mentor Income Fund, Inc.

Dear Mr. Barrientos:

I am writing on behalf of the Mentor Income Fund, Inc. (the "Fund") in response to a letter dated August 15, 2000, sent to you by Ms. Sherry Flax, attorney for Karpus Management, Inc. d/b/a Karpus Investment Management ("Karpus"). In her letter, Ms. Flax argues that the Fund should be obligated to include in its proxy materials for an upcoming Shareholders Meeting a shareholder proposal submitted by Karpus. As discussed more fully below, the Fund properly excluded the Karpus proposal from its proxy materials.

FACTUAL BACKGROUND

The factual background of this matter is set forth in my earlier letter to you dated August 10, 2000. For your convenience, I have enclosed a copy of that letter. It appears that the only factual dispute raised by Ms. Flax is whether a copy of the Karpus proposal was included in the package received by the Fund on July 24, 2000. Mr. Leonard Davis, assistant to Mr. Douglas Munn, president of the Fund, personally opened the package and did not find the Karpus proposal in the package.1 Nevertheless, the disposition of this matter is not dependent upon a resolution of this factual dispute. Even if the Karpus proposal had been received on July 24, 2000, it was excludable both on substantive grounds and also on the basis of its untimeliness.

DISCUSSION

As discussed in my earlier letter, under Rule 14a-8(i) a company may exclude a proposal if, among other things, it relates to a special interest of the shareholder or it directly conflicts with one of the company's own proposals. The Karpus proposal may be excluded on both bases. In addition, Rule 14a-8(e) permits exclusion of a proposal that is not submitted a "reasonable time" before a company prints and mails its proxy materials. The Karpus proposal can be excluded on this basis as well.

A. Rule 14a-8(i)(4)

Rule 14a-8(i)(4) provides that a company may exclude a shareholder proposal from the company's proxy statement where the proposal is designed to result in a benefit to the shareholder, or to further a personal interest to the proposing shareholder, which is not shared by the company's other shareholders. The Commission has explained that the intention of this rule is to ensure that the Rule 14a-8 process would not be abused by proponents attempting to achieve personal ends that are not necessarily in the common interest of the company's shareholders generally. Release No. 34-20091 (Aug. 16, 1983). The Karpus proposal explicitly proposes to have Karpus hired as the Fund's adviser. Karpus would receive management fees from serving as adviser, a benefit not shared by the Fund's other shareholders. In Liberty All-Star Equity Fund (Mar. 6, 1990) and USLIFE Income Fund, Inc. (Oct. 29, 1999), the Commission staff permitted investment companies to exclude shareholder proposals that explicitly or implicitly sought to have an affiliate of the shareholder hired as the companies' advisers.

B. Rule 14a-8(i)(9)

Rule 14a-8(i)(9) permits a company to exclude a proposal that directly conflicts with one of company's own proposals. In this case, the Fund has proposed to shareholders that they approve a new investment advisory agreement between the Fund and U.S. Bank National Association. Clearly, the Karpus proposal, that the Fund enter into a new investment advisory agreement with Karpus, conflicts with the Fund's own proposal. Only one of the two entities may serve as the Fund's investment adviser. Moreover, including both proposals in the same proxy materials would generate considerable confusion. There is also a possibility that shareholders could approve both proposals, leaving it unclear which entity should act as adviser.

Accordingly, the Karpus proposal may be excluded under Rule 14a-8(i)(9). See Scudder New Europe Fund, Inc, (avail. Apr. 29, 1999) (an investment company could exclude a shareholder proposal requesting that the company conduct a no-fee in-kind tender offer prior to the company's conversion from a closed-end fund to an open-end fund where the company's own proposal would impose a 2% redemption fee during the first year after the conversion).

C. Rule 14a-8(e)

Rule 14a-8(e) requires that, in order to be considered for inclusion in a company's proxy materials, a shareholder proposal must be received "a reasonable time before the company begins to print and mail its proxy materials."

The Commission staff has consistently declined to object to the exclusion of shareholder proposals where, as here, the proposal was submitted after the company had filed preliminary proxy materials for the meeting. See, e.g., Scudder New Europe Fund, Inc. (avail. Nov. 6, 1998) (proposal received the same day the company filed its preliminary proxy materials); Greyhound Lines, Inc. (avail. Jan. 9, 1999) (proposal received 14 days after the company filed its preliminary proxy materials); The United Kingdom Fund Inc. (avail. Jan 12, 1998) (proposal received 5 days after the company filed its preliminary proxy materials); Mass Mutual Mortgage and Realty Investors (avail. Apr. 19, 1985) (proposal received 1 day after the company filed its preliminary proxy materials).

Ms. Flax, in her letter, attempts to restate the standard as being a reasonable time after the shareholder becomes aware of the meeting. In none of the letters cited by Ms. Flax does the Commission staff accept such an interpretation.

****

For these reasons and for the reasons set forth in my August 10th letter to you, there is no basis for Ms. Flax's request that the Fund be required to revise and resubmit its proxy materials or delay its Shareholders Meeting. Please feel free to contact me if you would like any additional information concerning this matter.

Respectfully submitted,

David C. Mahaffey

Enclosures

cc: Sherry Flax, Esq.

-----FOOTNOTES-----

1 Mr. Davis would be prepared to submit an affidavit to that effect if you believe that is necessary. It should be noted that, in Rule 14a-8(e), the Commission recommends that a shareholder submit a proposal by electronic means, in order to permit the shareholder to prove the date of delivery. If Karpus had sent the proposal by facsimile, not only would there be no dispute as to when the proposal was received, but the Fund would have had four additional days to consider the proposal.

[APPENDIX]
July 20, 2000

Mr. Geoffry B. Sale, Secretary

Mentor Income Fund

Mentor Investment Advisors, LLC

Riverfront Plaza,

901 East Byrd Street

Richmond, Virginia 23219

Re: Mentor Income Fund

Dear Mr. Sale:

Karpus Management, Inc d/b/a Karpus Investment Management (KIM), is the beneficial owner of 6,550 shares of the Mentor Income Fund, Inc. (MRF). We have been the beneficial owners of shares valued of more than $1,000 for more than one year and expect to continue ownership through the date of the next meeting of the Fund be it an annual meeting or special meeting.

Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, we (KIM) are hereby submitting the following proposal and supporting statement for inclusion in proxy material at the next meeting of stockholders.

PROPOSAL

In the event that the existing investment advisory contract shall be terminated, is terminated, or assigned, the Fund shall enter into a new investment management contract with Karpus Investment Management.

SUPPORTING STATEMENT

Karpus Investment Management (KIM) is committed to enhancing the value of Fund's shares. KIM would recommend either, any, or all of the following: an aggressive share buy back program in the open market, a share repurchase offer at net asset value, or conversion of the Fund from the current closed end to an open ended format.

The discount to net asset value at which the Fund has historically traded has averaged -12.87% from July 3, 1997 through June 30, 2000. It is the opinion of KIM that the Fund's management should be making recommendations to the Board to close this wide discount. Shareholders of the Fund are entitled to have their investment trade at a market value closer to what it is actually worth (net asset value).

It is the opinion of KIM that the price performance of the Fund should not be acceptable to the shareholders. From June 30, 1997 through June 30, 2000 the simple price appreciation (depreciation) of the Fund has been an annual equivalent of -6.1866%. If dividends had be re-invested in the Fund the annual equivalent would be 2.5512%.

It is also the opinion of KIM that the net asset performance of the Fund should not be acceptable to the shareholders. From June 30, 1997 through June 30, 2000 the net asset value performance equaled an annual simple price depreciation equivalent of -3.8187% (with dividends reinvested in the Fund for the same time period equaled 3.8976%).

Karpus has gained national recognition in being ranked by "A Worlds Best Money Managers" according to Nelson Information. For U.S. Intermediate Duration Fixed Income, Karpus was ranked for the 40 quarters ending 3/31/00 8\th/ out of 94 managers. For the 20 quarters ending 3/31/00 Karpus was ranked 3\rd/ out of 148 managers and for the 12 quarters ending 3/31/00, Karpus was ranked 8\th/ out of 165 managers.

It is the opinion of Karpus that Fund shareholders' would benefit by the experience and superior performance that KIM could provide.

Karpus Investment Management is proposing that if approved as the new investment advisor to the Fund, management fees would be at the same current rate, however will be based on the lowest value of either net asset value or market price. This reduction in investment management fees could help increase shareholder returns. The manager would be rewarded based on market performance of the Fund. Since the Fund has historically traded at a discount, the present management in the opinion of KIM has been over-rewarded for inferior market price performance. Based on the current discount to NAV there would be a fee reduction of 12.01% (based on NAV 7/6/00 $8.95 and market price $7.875 7/5/00).

KIM is confident that it can significantly increase the value of the Fund's shares, while retaining the philosophy of protecting the interest of the shareholders. A vote [for] the Karpus proposal is a vote for increasing shareholder value, lowering management fees and improving performance.

END OF PROPOSAL

Should your Board of Directors recommend any new Investment Advisor contract be approved by the shareholders, this notice serves as our official proposal which should be included in any filings you make with the SEC and which should be included in any proxy materials.

Sincerely,

George W. Karpus

President/CEO

cc: NY Stock Exchange

cc: Brent Fields-SEC

[LETTER OF INQUIRY 2]
August 15, 2000

VIA FACSIMILE (202) 942-9659

Mr. Briccio S. Barrientos

Division of Investment Management

Securities and Exchange Commission

450 Fifth Street, NW

Washington, D.C. 20549

Re: Mentor Income Fund, Inc. (the "Fund")

Dear Mr. Barrientos:

I am writing on behalf of Karpus Investment Management ("KIM"), pursuant to Rule 14a-8(j) promulgated under the Securities Exchange Act of 1934, in response to a letter dated August 10, 2000 to you from David C. Mahaffey and Sullivan & Worcester LLP, on behalf of the Fund (the "Fund Counsel Letter"). Enclosed are six (6) copies of this letter of response.

KIM owns, directly or indirectly, 6,550 shares of the Fund, which constitute more than 1% of the issued and outstanding shares of the Fund and have a market value in excess of $2,000. KIM has owned these shares for at least one (1) year and intends to hold them through the next meeting of shareholders of the Fund.

On Thursday, July 20, 2000, KIM prepared and on Friday, July 21, 2000 KIM mailed by certified mail, postage pre-paid, and by Airborne overnight service four (4) copies of KIM's shareholder proposal to approve a new investment management contract with KIM (the "Proposal"), together with a written statement from U.S. Bank verifying that KIM had owned those shares for at least one (1) year. See Proposal and Written Statement of U.S. Bank dated July 20, 2000, attached as Exhibits A and B, respectively. Two copies of the Proposal were mailed to the Fund's secretary, Geoffry B. Sale, at the principal executive offices of the fund in Richmond, Virginia, as set forth in the Fund's last periodic report, one each by certified mail and Airborne overnight. As a precaution, a second pair of copies were mailed by identical means to the principal executive offices of the Fund's advisor, Evergreen Funds, in Boston, Massachusetts. The first two copies were received and signed for by the Fund in Richmond on July 24 and July 27, 2000, respectively. A third copy was received at Evergreen's executive offices in Boston on July 24, 2000.1 On August 2, 2000, the Fund, by letter from Douglas Munn, President of the Mentor Income Fund, Inc., to George Karpus (the "Munn Letter"), declined to consider the Proposal on the grounds that the Proposal was not submitted in a reasonable time before the Fund begins to print and mail its proxy materials.2 The Fund's position is reiterated in the Fund Counsel Letter.

FACTUAL BACKGROUND

On July 18, 2000, the Board of Directors of the Fund voted to approve a new investment advisory agreement between the Fund and U.S. Bank National Association ("U.S. Bank") and to submit the New Agreement to shareholders at a special meeting of shareholders. The Board also voted to submit four other actions to the shareholders at that meeting and to set the record date for the meeting on July 28, 2000. On July 19, 2000, the Fund issued a press release from Charlotte, North Carolina announcing the sale of certain assets to U.S. Bank (the "Press Release"). The Press Release referred to Mentor as "[b]ased in Richmond, Virginia." A copy of the Press Release is attached as Exhibit D.

On Thursday, July 20, 2000, only one day after the Press Release, KIM prepared its Proposal and on Friday, July 21, 2000 KIM mailed its proposal in four (4) separate packages to the Fund. See Affidavit of DeCarolis at Exhibit C. Also on July 20, 2000, the Fund filed its preliminary proxy materials with the Commission and its staff. On Monday, July 24, 2000, the Fund acknowledged receipt of the Proposal in Boston and in Richmond by signing for the Airborne packages. A copy of the Boston and Richmond Airborne confirmations are attached as Exhibits E and F, respectively. On July 26, 2000, the staff provided comments on the preliminary proxy materials to the Fund. On July 27, 2000, the Fund receives the second Richmond package by certified mail and it is signed for in Richmond. A copy of the Richmond certified mail return receipt is attached as Exhibit G. On August 1, 2000, a KIM representative contacted the Fund to inquire as to the status of the Proposal. After being told that the Fund did not receive the Proposal in Boston, but only the U.S. Bank Statement, KIM faxed a copy of the Proposal to the Fund in Boston on August 2, 2000.

Also on August 2, 2000, the Fund responded to the Proposal with the Munn Letter. On August 3, 2000, KIM responds to the Munn Letter by letter, a copy of which is attached as Exhibit H. On July 10, 2000, Sullivan & Worcester filed the Fund Counsel Letter with the Commission and the staff. The Fund Counsel Letter noted that when the Fund filed its preliminary proxy material with the Commission it expected to mail the proxy material on or about August 9, 2000 and that in order to do so, the Fund would be required to begin printing on or about August 4, 2000. The definitive proxy statement, filed with the Commission on or about August 9, 2000, contained a notice of special meeting dated August 11, 2000. On August 11, 2000, with this dispute pending before the Commission, the Fund apparently mailed the proxy materials to holders of record as of July 28, 2000.

As of the date of this letter, the Fund is apparently unaware of the whereabouts of either Richmond package.

LEGAL STANDARDS

Rule 14a-8(g) provides in pertinent part that: "the burden is on the [Fund] to demonstrate that it is entitled to exclude a proposal."

Rule 14a-8(f) provides in pertinent part:

The [Fund] may exclude your proposal, but only after it has notified you of the problem, and you have failed adequately to correct it. Within 14 calendar days of receiving your proposal, the [Fund] must notify you of any procedural or eligibility deficiencies, as well as the time frame for your response. Your response must be postmarked or transmitted electronically, no later than 14 days from the date you receive the [Fund's] notification. A [Fund] need not provide you such a notice of a deficiency if the deficiency cannot be remedied, such as if you fail to submit a proposal by the [Fund's] properly determined deadline.

Rule 14a-8(e)(3) provides in its entirety that:

If you are submitting your proposal for a meeting of shareholders other than a regularly scheduled annual meeting, the deadline is a reasonable time before the [Fund] begins to print and mail its proxy materials.

DISCUSSION

The issuance of the Press Release on Wednesday, July 19, 2000 presents the earliest possible time that KIM knew or could have known that a special meeting would be called.3 KIM did not delay when it learned of the Fund's intentions. It acted the very next day, preparing the Proposal on Thursday, July 20, 2000, and mailing it to the Fund in four (4) separate packages, the following day, Friday, July 21, 2000. Indeed, the Fund acknowledges receipt of the KIM package the following Monday, July 24, 2000. See Fund Counsel Letter at 2. Given the circumstances, KIM could not have acted with any greater reasonableness, or prudence, by preparing and sending the Proposal immediately.

Nonetheless, counsel to the Fund takes the position that "[e]ven if the Fund had received the [Proposal] when Karpus intended to submit it (July 24, 2000), it would have been received only after the Fund had prepared and filed its proxy materials and only 11 calendar days before the fund intended to print its proxy materials. Eleven days is clearly not enough time for the Fund to convene a meeting of the Board of Directors to consider inclusion of the proposal, and then to either (1) prepare a response to the proposal ... or (2) to prepare and file a submission with the Commission requesting that the Fund be permitted to exclude the proposal." Fund Counsel Letter at 3. Counsel to the Fund would have the staff believe that the standard is whether the Fund will have enough time to react to a proposal, when it is the Fund that controls the timing, and, indeed, that is pushing for expedited timing. Adequate time is not determined by whether the Fund has "enough time;" but, rather, by whether the proponent made his proposal within a "reasonable time" under the circumstances.4

Fund counsel continues: "Moreover, it cannot have been the Commission's intention that Karpus' submission of [the Proposal] after the Fund had filed its preliminary proxy materials cause the Fund to delay printing and mailing its proxy materials and, in all likelihood, to postpone the Shareholders Meeting." Fund Counsel Letter at 4. It is the Fund, and not the shareholder, that is controlling the timing of the proposed special meeting. More fundamentally, however, if a shareholder who acts at the first instant he or she becomes aware of or could have become aware of a proposed meeting has not acted in a reasonable time within the meaning of Rule 14a-8(e)(3), then that Rule is virtually meaningless. It cannot have been the Commission's intention to promulgate a Rule that has no meaning or effect. Counsel to the Fund's interpretation creates just that result because funds and companies, controlling the timing as they do, could structure their transactions so that proposals could never be made at meetings other than annual meetings. If that was the Commission's intention, it could have stated that shareholders have no right to submit proposals other than at regularly scheduled annual meetings.

Since Rule 14a-8 was revised and became effective on June 29, 1998, only six no action letters have addressed the meaning of a reasonable time in Rule 14a-8(e)(3).5 In two of those cases, the Company avoided the Rule 14a-8(e)(3) issue by opting to hold an annual meeting instead of a special meeting. See Captec Net Lease Realty, Inc., 2000 SEC No-Act. LEXIS 687 (avail. June 15, 2000) and Bull & Bear U.S. Government Securities Fund, Inc., 1998 SEC No-Act. LEXIS 931 (avail. Oct. 8, 1998). In the remaining four cases, the proponents each waited between 25 and 43 days after they should have known a special meeting was likely to be called before making their proposals. See Allied Signal, Inc., 1999 SEC No-Act. LEXIS 645 (avail. July 22, 1999)(proponent knew or should have known of the need for a meeting 25 days before proponent mailed proposal); Interlinq Software Corporation, 1999 SEC No-Act. LEXIS 453 (avail. April 20, 1999)(proponent knew or should have known of the need for a meeting 27 days before company submitted preliminary proxy materials and 41 days before proponent mailed proposal); Greyhound Lines, Inc., 1999 SEC No-Act. LEXIS 15 (avail. Jan. 8 1999)(proponent knew or should have known of the need for a meeting 28 days before company submitted preliminary proxy materials and 43 days before proponent mailed proposal); Scudder New Europe Fund, Inc., 1998 SEC No-Act. LEXIS 1003 (avail. November 10, 1998)(proponent knew or should have known of the need for a meeting six weeks before the proponent mailed proposal). In no case did the proponent act even in a matter of a week,6 let alone within two days.

For these reasons, KIM respectfully requests that the Commission require the Fund to revise and resubmit the Fund's proxy materials, provide KIM with a reasonable opportunity to formulate a revised proposal to be included in the Fund's revised materials, mail the revised proxy materials, and delay the proposed September 27, 2000 special meeting.

If you have any questions, please call me.

Very truly yours,

Sherry H. Flax

cc: George Karpus

David C. Mahaffey, Esq.

-----FOOTNOTES-----

1 KIM vehemently disputes the Fund's claim that the July 20, 2000 letter signed for by the Fund on July 24, 2000 in Boston omitted the Proposal. Attached as Exhibit C is an Affidavit of Patricia A. DeCarolis confirming that she personally placed the Proposal in all four envelopes. Indeed, KIM suspects that, with all of the office moving and position changing (KIM was told at various times during the July 20-24 time frame that Mr. Munn was taking over for Mr. Sale as Secretary of the Fund and that Mr. Leonard Davis was taking over as Secretary) as Evergreen, that Evergreen likely misplaced the "hot potato" Proposal. Finally, with respect to the contents of the July 20, 2000 envelope, the burden is on the Fund to demonstrate that it is entitled to exclude the Proposal. Rule 14a-8(g).

2 We do not address in this response the merits of the Fund's claims that the Proposal would have been excludable under either Rule 14a-8(i)(4) or Rule 14a-8(i)(9). Had the Fund been relying on either of those bases in excluding the Proposal, the Fund would have been required, under Rule 14a-8(f): (i) to provide KIM with notice of these procedural or eligibility defects within fourteen (14) days of receiving the Proposal; (ii) to permit KIM fourteen (14) days to respond to the defect, including an opportunity to correct the defect; (iii) and to notify KIM in writing of the time for its response. The Munn Letter, while noting that the Fund would have moved to exclude the Proposal under Rule 14a-8(i)(9) had it been timely, relied only on Rule 14a-8(e) to exclude the Proposal and failed to notify KIM of any date for response or opportunity to correct any alleged defects. Moreover, the Fund's claim that the Proposal would have been excludable under Rule 14a-8(i)(4) was not asserted until the Fund Counsel Letter, more than fourteen days after the July 24, 2000 receipt by the Fund of the Proposal. As a result, KIM respectfully requests the staff to find that the Fund has waived its rights to object to the Proposal under either Rule 14a-8(i)(4) or 14a-8(i)(9) for failing to comply with Rule 14a-8(f).

3 Nowhere do the Fund or counsel to the Fund suggest that KIM should have known about the need for a special meeting before July 19, 2000.

4 Ironically, counsel to the Fund submitted a request to the Commission for permission to exclude the Proposal in only a few days and requested that the Commission waive the requirement that such a submission be filed at least 80 days prior to the filing of the definitive proxy materials, noting "[c]ompliance with that deadline would have been impossible...."

5 Based upon a Lexis database search of federal administrative interpretations and no-action letters in the securities area for "14a-8(e)(3)" and "reasonable time" as of August 14, 2000.

6 In one case, Bull & Bear U.S. Government Securities Fund, Inc, 1998 SEC No-Act. LEXIS 931 (avail. Oct. 8, 1998), the proponent did act within six days, but that proposal was treated as one made within Rule 14a-8(e)(2) when that fund cancelled its plans for a special meeting.

[LETTER OF INQUIRY 3]
August 10, 2000

VIA FACSIMILE

Mr. Briccio S. Barrientos

Division of Investment Management

Securities and Exchange Commission

450 Fifth Street, NW

Washington, D.C. 20549

Re: Mentor Income Fund, Inc.

Dear Mr. Barrientos:

I am writing on behalf of the Mentor Income Fund, Inc. (the "Fund") in response to your inquiry concerning a shareholder proposal submitted to the Fund by Karpus Management, Inc. d/b/a Karpus Investment Management ("Karpus"). As discussed more fully below, the Fund declined, pursuant to Rule 14a-8(e) under the Securities Exchange Act of 1934, to consider the Karpus shareholder proposal for inclusion in the Fund's proxy statement for a shareholder meeting to be held September 27, 2000 (the "Shareholders Meeting") on the grounds that the proposal was not submitted in a reasonable time before the Fund began to print and mail its proxy materials.

FACTUAL BACKGROUND

The Fund is a Virginia corporation that is registered as a closed-end management investment company under the Investment Company Act of 1940 (the "1940 Act"), and its shares are traded on the New York Stock Exchange. Mentor Investment Advisors, LLC ("Mentor"), a registered investment adviser and a wholly-owned subsidiary of First Union National Bank, serves as investment adviser to the Fund pursuant to an advisory agreement dated January 31, 1992.

At a meeting of the Board of Directors of the Fund held July 18, 2000, the Directors voted to approve a new investment advisory agreement (the "New Agreement") between the Fund and U.S. Bank National Association ("U.S. Bank") and to submit the New Agreement to shareholders at the Shareholders Meeting. The Board also voted to submit four other proposals to shareholders at the same meeting: (1) election of directors; (2) approval of an amendment to the Fund's Articles of Incorporation to change the Fund's name to "American Income Fund Inc."; (3) an amendment to the Fund's Articles of Incorporation to delete a provision that restricts certain transfers of Fund shares; and (4) ratification of accountants. The Board set the record date for the meeting as July 28, 2000.

The Fund filed preliminary proxy materials with the Commission pursuant to Rule 14a-6(a) on July 20, 2000. The Fund received comments from the Commission staff on or about July 26, 2000. As stated in the preliminary proxy materials, the Fund expected to mail proxy materials to shareholders on or about August 9, 2000, approximately six weeks before the Shareholders Meeting. Mailing by that date required that printing of the proxy materials begin on or about August 4, 2000. The Fund believes that this six week solicitation period (which is the standard timeframe used by investment companies) is particularly necessary in this instance in order to obtain the required vote for the New Agreement (which requires a "majority vote," as that term is used in the 1940 Act) and for the two amendments to the Fund's Articles of Incorporation (each of which requires the vote of a majority of the outstanding shares pursuant to state law).

Meanwhile, on or about July 24, 2000, the Fund received an overnight package from Karpus. Apparently, the package should have contained a copy of the Karpus proposal; however, the package contained only a letter dated July 20, 2000 from U.S. Bank certifying that Karpus owned 6,550 shares of the Fund. On or about August 1, 2000, Sharon Thornton of Karpus called concerning the Fund's preliminary proxy materials. In the course of that conversation, she inquired whether the Fund had received a shareholder proposal from Karpus. Upon being told that the Fund had not received such a proposal, Ms. Thornton faxed a copy of the proposal to the Fund's office on August 2, 2000. (The Karpus proposal is enclosed as Enclosure A.)

Douglas Munn, President of the Fund, replied to Karpus by letter dated August 3, 2000. (A copy of Mr. Munn's letter is enclosed as Enclosure B.) As Mr. Munn's letter states, the Fund determined that the Karpus proposal had not been submitted in time to be considered for inclusion in the Fund's proxy statement.

DISCUSSION

Rule 14a-8 sets forth the regulatory framework concerning inclusion of shareholder proposals in management proxy materials. Paragraph (e) provides, in relevant part, as follows:

The proposal must be received at the company's principal executive offices not less than 120 calendar days before the date of the company's proxy statement released to shareholders in connection with the previous year's annual meeting. However,... if the date of this year's annual meeting has been changed by more than 30 days from the date of the previous meeting, then the deadline is a reasonable time before the company begins to print and mail its proxy materials....

If you are submitting your proposal for a meeting of shareholders other than a regularly scheduled annual meeting, the deadline is a reasonable time before the company begins to print and mail its proxy materials.

Thus, the general rule is that shareholders must submit their proposals at least 120 days before the expected mailing date for a company's proxy materials; however, when, as in this instance, a shareholders meeting will be held on a date that is more than 30 days from the anniversary of last year's meeting, shareholders must submit their proposals within a "reasonable time."

In this instance, Karpus did not submit its proposal within a reasonable time. Even if the Fund had received the Karpus proposal when Karpus intended to submit it (July 24, 2000), it would have been received only after the Fund had prepared and filed its proxy materials and only 11 calendar days before the Fund intended to print its proxy materials. Eleven days is clearly not enough time for the Fund to convene a meeting of its Board of Directors to consider inclusion of the proposal, and then to either (1) prepare a response to the proposal (which might have required a resubmission to the Commission of preliminary proxy materials) or (2) prepare and file a submission with the Commission requesting that the Fund be permitted to exclude the proposal.1 Presumably, the Commission's determination that the general rule is 120 days indicates that a "reasonable time" is a comparable period, not 11 days.2 Moreover, it cannot have been the Commission's intention that Karpus' submission of a shareholder proposal after the Fund had filed its preliminary proxy materials cause the Fund to delay printing and mailing its proxy materials and, in all likelihood, to postpone the Shareholders Meeting.

For these reasons, the Fund determined that the Karpus proposal had not been timely submitted. Accordingly, the Fund excluded the proposal pursuant to Rule 14a-8(f).

Moreover, because the Karpus proposal was excluded on a procedural deficiency and the deficiency could not be corrected, the Fund believed that it was not required to make a submission to the Commission pursuant to Rule 14a-8(j). If, however, such a submission is required in this case, the Fund requests that this letter be treated as the required submission. The Fund requests that the Commission waive the requirement that such a submission be filed with the Commission at least 80 calendar days before the Fund's filing of its definitive materials. Compliance with that deadline would have been impossible because Karpus submitted its proposal less than 80 days before the Shareholders Meeting.

Please feel free to call me if you have any questions or require further information.

Very truly yours,

David C. Mahaffey

DCM:mh

Enclosures

cc: George Karpus

-----FOOTNOTES-----

1 Based upon precedent, it appears that the Commission would have concluded, if asked, that the proposal could be excluded pursuant to Rule 14a-8(i)(9) on the grounds that the proposal (that Fund shareholders approve an advisory agreement with Karpus) conflicted with one of management's proposals (that Fund shareholders approve the New Agreement with U.S. Bank). See Scudder New Europe Fund, Inc. (avail. Apr. 29, 1999) (an investment company could exclude a shareholder proposal requesting that the company conduct a no-fee in-kind tender offer prior to the company's conversion from a closed-end fund to an open-end fund where the company had a proposal to impose a 2% fee on shareholder redemptions during the first year after the conversion). The Karpus proposal would likely also be excludable under Rule 14a-8(i)(4) as providing a special benefit to Karpus. See USLIFE Income Fund, Inc. (avail. Oct. 29, 1999) (an investment company could exclude a shareholder proposal to change its investment objective where the proposal was part of the shareholder's plan to have the shareholder's affiliate selected as adviser to the company).

2 In fact, because the Fund did not actually receive the proposal until August 2, 2000, the Fund was only 2 days away from its planned printing date and 7 days away from its planned mailing date.

[STAFF REPLY LETTER]
September 7, 2000

David C. Mahaffey, Esq.

Sullivan & Worcester LLP

1025 Connecticut Avenue, N.W.

Washington, D.C. 20036

Re: Mentor Income Fund, Inc.

File No.: 811-5642

Shareholder Proposal of Karpus Investment Management

Dear Mr. Mahaffey:

In a letter dated August 17, 2000, you notified the Securities and Exchange Commission of the intent of Mentor Income Fund, Inc. to omit from its proxy soliciting materials for the special meeting of the fund's shareholders scheduled for September 27, 2000 a proposal and supporting statement submitted by Karpus Investment Management (the "proponent"). The proposal states: "In the event that the existing investment advisory contract shall be terminated, is terminated, or assigned, the fund shall enter into a new investment management contract with Karpus Investment Management." In support of this proposal, the proponent submitted a supporting statement.

You request our assurance that we would not recommend enforcement action if the fund omits the proposal in reliance on Rules 14a-8(e), 14a-8(i)(4), and 14a-8(i)(9) under the Securities Act of 1934.1

There appears to be some basis for your view that the subject proposal and supporting statement may be omitted from the fund's proxy materials under Rule 14a-8(i)(4) under the Exchange Act.2 You state that, if the proposal were adopted, the proponent would receive management fees from serving as adviser, a benefit not shared by the fund's other shareholders. Under these circumstances, we will not recommend any enforcement action to the Commission if the fund omits the subject proposal from its proxy material.3 In reaching this conclusion, we have not found it necessary to reach your alternative bases for omission.

The staff notes that the fund did not file its statement of objection(s) to the proposal at least 80 days prior to the date on which definitive materials will be filed as required under Rule 14a-8(j)(1). Noting the circumstances of the delay, the staff grants the fund's request that the 80-day requirement be waived.

Attached is a description of the informal procedures followed by the Division in responding to shareholder proposals. If you have any questions or comments concerning this matter, please call me at (202) 942-0620.

Sincerely,

Briccio B. Barrientos

Senior Accountant

Office of Disclosure and Review

-----FOOTNOTES-----

1 In connection with this request, we also have received and considered letters from Sullivan & Worcester dated August 10, 2000 and Saul, Ewing, Weinberg & Green, counsel for the proponent, dated August 15, 2000.

2 Rule 14a-8(i)(4) provides that a proposal may be excluded if it "relates to the redress of a personal claim or grievance against the company or any other person, or if it is designed to result in a benefit to you, or to further a personal interest, which is not shared by the other shareholders at large."

3 See Liberty All-Star Equity Fund (pub. avail. Mar. 6, 1990).