A proxy battle is developing between fund executives and shareholder activists over who should become the new investment manager of the $105 million closed-end Mentor Income Fund.

The two sides are at odds over the pending sale of the fund's advisory contract to U.S. Banks' First American Asset Management unit. The fund is currently managed by Mentor Investment Advisors of Richmond, Va., a unit of First Union Corp. in Charlotte, N.C. The agreement to sell certain of Mentor's assets to U.S. Bank of Minneapolis, a division of U.S. Bancorp also of Minneapolis, was announced July 7. Terms of the deal were not disclosed.

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