<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
USLIFE Income Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------------
(4) Date filed:
-----------------------------------------------------------------------
<PAGE> 2
USLIFE INCOME FUND, INC.
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1997
TO THE SHAREHOLDERS:
An annual meeting of the shareholders of USLIFE Income Fund,
Inc. ("Fund") will be held at the principal executive offices of The Variable
Annuity Life Insurance Company ("VALIC"), 2929 Allen Parkway, Houston, Texas
77019, on September 24, 1997 at 11:00 a.m., Central time for the following
purposes:
1. To approve an interim investment advisory agreement
between the Fund and USLIFE Advisers, Inc.;
2. To approve a new investment advisory agreement
between the Fund and The Variable Annuity Life
Insurance Company;
3. To elect six (6) directors to hold office until their
successors are elected and qualified;
4. To ratify the selection of KPMG Peat Marwick LLP as
independent auditor of the Fund for the fiscal year
ending June 30, 1998;
5. To amend the fundamental investment restriction
prohibiting the Fund from investing in foreign
securities to permit the Fund to invest up to 20% of
its net assets in foreign securities; and
6. To transact such other business as may properly come
before the meeting or any adjournments thereof.
<PAGE> 3
You will be entitled to notice of, and to vote at, the meeting
and any adjournments thereof, if you owned shares of the Fund at the close of
business on August 6, 1997. If you attend the meeting, you may vote your
shares in person. IF YOU DO NOT EXPECT TO ATTEND THE MEETING PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
By Order of the Board of Directors
-----------------------------
Norman Jaskol
President
August 13, 1997
2929 Allen Parkway
Houston, Texas 77019
<PAGE> 4
USLIFE INCOME FUND, INC.
2929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
------------------------------------------
PROXY STATEMENT
------------------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors ("Board") of
USLIFE Income Fund, Inc. ("Fund") for use at the Annual Meeting ("Meeting") of
the Fund's shareholders on September 24, 1997. This meeting is being held to,
among other things, reflect and effectuate changes caused by the merger of
USLIFE Corporation ("USLIFE"), parent of the Fund's investment adviser, into
and with a wholly-owned subsidiary of American General Corporation ("American
General"), effective June 17, 1997. The Meeting will be held at the principal
executive offices of The Variable Annuity Life Insurance Company ("VALIC"), an
indirect wholly-owned subsidiary of American General, at 2929 Allen Parkway,
Houston, Texas 77019, at 11:00 a.m. Central time, for the purposes set forth in
the Notice of Meeting.
The Fund's shareholders of record as of the close of business
on August 6, 1997 ("Record Date"), are entitled to notice of and to vote at the
Meeting and any adjournment thereof. Each full share outstanding is entitled
to one vote, and each fractional share outstanding is entitled to the
corresponding proportion of one vote, with respect to each matter voted upon by
the shareholders of the Fund. As of the Record Date, the Fund had [5,643,768]
shares issued and outstanding. To the knowledge of the Fund's management, no
officer, director or nominee of the Fund beneficially owned, individually or as
a group, more than 1% of the outstanding shares of the Fund, and no person
owned beneficially 5% or more of the outstanding shares of the Fund as of that
date.
All costs associated with the Meeting, including the
solicitation of proxies, will be borne by USLIFE Advisers, Inc., the Fund's
investment adviser ("Adviser"). The solicitation of proxies will be made
primarily by mail but also may be made by telephone and/or personal contact by
directors and officers of the Fund and by regular employees of USLIFE or its
affiliates. THE FUND MAY ALSO RETAIN THE SERVICES OF [SOLICITOR] WHOSE FEES
AND EXPENSES, WHICH ARE ANTICIPATED TO APPROXIMATE [$X,000], WILL BE BORNE BY
VALIC.
The individuals named as proxies on the enclosed proxy card
will vote in accordance with your directions as indicated thereon if your proxy
is received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you properly execute your proxy card and give no voting
instructions, your shares will be voted in favor of the proposals described in
this Proxy Statement. You may revoke your proxy at any time prior to its
exercise at the Meeting by
<PAGE> 5
written notice to the Fund, by execution of a subsequent proxy or by voting in
person at the Meeting.
A quorum of a majority of the Fund's issued and outstanding
voting shares as of the close of business on the Record Date represented in
person or by proxy, must be present for the transaction of business at the
Meeting. In the absence of a quorum or in the event that a quorum is present
at the meeting but sufficient votes to approve the proposals are not received,
the persons named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of those shares represented at the Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the proposal in favor of
such an adjournment, and will vote those proxies required to be voted AGAINST
any such proposal against such adjournment.
If a shareholder participates in the Fund's Automatic Dividend
Investment Plan ("Plan") and holds shares in his or her name in addition to
the shares held in custody for the shareholder pursuant to the Plan, the proxy
to vote shares registered in the shareholder's name will serve as instructions
for voting shares held in custody for the shareholder pursuant to the Plan. If
a shareholder does not send a proxy to vote the shares registered in his or her
name, the shares held for the shareholder's account in the Plan will not be
voted.
Broker non-votes are shares held in street name for which the
broker indicates that instructions have not been received from the beneficial
owners or other persons entitled to vote and the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present for purposes of determining whether a quorum is
present but will not be voted for or against any adjournment or proposal.
Abstentions and broker non-votes also will not be counted as votes cast for
purposes of determining whether sufficient votes have been received to approve
a proposal. Accordingly, abstentions and broker non-votes effectively will be
a vote against adjournment or against any proposal where the required vote is a
percentage of the shares present.
The Notice and Proxy Statement are being mailed to
shareholders on or about August 13, 1997.
-2-
<PAGE> 6
BACKGROUND
USLIFE Advisers, Inc. ("Adviser"), has served as the Fund's
investment adviser from August 4, 1976 through June 17, 1997 pursuant to an
investment advisory agreement ("Advisory Agreement") dated August 4, 1976. On
June 17, 1997, the parent company of the Adviser, USLIFE Corporation
("USLIFE"), merged with and into a wholly-owned subsidiary of American General
Corporation ("American General") and the Adviser became an indirect,
wholly-owned subsidiary of American General. For purposes of the Investment
Company Act of 1940, as amended ("1940 Act"), this merger ("Merger") caused a
change of control of the Adviser that constituted an assignment and thereby
effected an automatic termination of the Advisory Agreement on June 17, 1997.
To provide for continuity in connection with the provision of
investment advisory services to the Fund, the Board of Directors of the Fund
("Board") has approved, subject to shareholder approval, an interim investment
advisory agreement between the Fund and the Adviser ("Interim Advisory
Agreement") pursuant to which the Adviser will provide investment advisory
services to the Fund from the date of the Merger, June 17, 1997, until the date
of the Meeting, September 24, 1997. The Board also has approved, and has
recommended that the shareholders of the Fund approve, a new investment
advisory agreement ("New Advisory Agreement") with The Variable Annuity Life
Insurance Company ("VALIC"), an indirect wholly-owned subsidiary of American
General, which provides that VALIC shall provide investment advisory services
to the Fund for a two-year period commencing upon shareholder approval of the
New Advisory Agreement and thereafter so long as its continuance is
specifically approved at least annually by the Board or by majority vote of the
Fund's shareholders, as described further below. Accordingly, Proposal 1
requests shareholder ratification and approval of the Interim Advisory
Agreement and Proposal 2 requests shareholder ratification and approval of the
New Advisory Agreement.
PROPOSAL 1
TO APPROVE THE INTERIM INVESTMENT ADVISORY AGREEMENT
BETWEEN THE FUND AND USLIFE ADVISERS, INC.
THE ADVISORY AGREEMENT
Under the Advisory Agreement, the Adviser has provided an
investment program for the Fund and has been responsible for the investment and
reinvestment of the Fund's assets, including the placement of orders for the
purchase and sale of portfolio securities. With respect to the placement of
purchase and sale orders for portfolio securities, the Advisory Agreement
provided for the Adviser to obtain the best price and execution of each
transaction. Under the Advisory Agreement, the Adviser has, at its own expense,
performed research, statistical analysis and continuous supervision of the
Fund's investment portfolio and has furnished office
-3-
<PAGE> 7
space, equipment and personnel for managing the day-to-day operations of the
Fund. In accordance with the Advisory Agreement, the Adviser has borne the
cost of the fees, salaries and other remuneration of directors and officers of
the Fund who also serve as directors, officers or employees of the Adviser.
However, the Fund has paid the compensation and expenses attributable to the
Fund's Secretary and Treasurer and personnel operating under their direction,
regardless of their affiliation with the Adviser, in an amount of up to $50,000
per year.
As compensation for the Adviser's services under the Advisory
Agreement, the Fund paid the Adviser, each month, an amount equal to: (i)
.04167% of the net asset value of the Fund less net investment income for such
month as of the close of business on the last business day of the month; plus
(ii) 2.5% of the sum of (a) the Fund's dividend and interest income; minus (b)
interest on borrowed funds during such month. In the event that fees payable
to the Adviser under the Agreement, excluding interest, taxes, brokerage fees
and extraordinary expenses, in any fiscal year exceeded expense limitations
imposed by a state securities administrator, the Adviser agreed to reimburse
the Fund any such extra amount. For purposes of computing the advisory fee,
the net asset value was calculated on an accrual basis in accordance with
generally accepted accounting principles ("GAAP"). Dividend and interest
income was defined as the net income of the Fund calculated in accordance with
GAAP, but excluded: (i) amortization of premiums or accrual of discounts except
for original issue discounts which were to be accrued consistent with federal
income tax regulations; and (b) capital gains or losses. Advisory fees were
payable as soon as practicable after the last day of each month. For the
Fund's fiscal year ended June 30, 1997, the Fund paid the Adviser advisory fees
in the amount of $385,982.
The Advisory Agreement provided that the Adviser would not be
liable to the Fund, or any Fund shareholder, for any act or failure to act in
connection with the rendering of services under the Advisory Agreement or for
any losses that may be sustained in the purchase, holding or sale of any
security in the absence of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties by the Adviser. By its terms, the
Advisory Agreement terminated automatically unless its continuance was approved
annually (i) by the vote of a majority of the directors who are not parties to
the Agreement or interested persons within the meaning of the 1940 Act, of any
such party ("Independent Directors") or by (ii) the vote of the holders of a
majority of the outstanding voting securities of the Fund. The Advisory
Agreement also was terminable without penalty, by either party upon 60 days'
written notice. Termination had to be authorized by the Board or by the vote
of a majority of the outstanding voting securities of the Fund. The Advisory
Agreement terminated automatically on June 17, 1997, by operation of law upon
its assignment.
The Advisory Agreement was initially approved by the Fund's
shareholders on August 4, 1976. The Board, consisting only of Independent
Directors, most recently approved the continuance of the Advisory Agreement on
May 8, 1996.
SEC EXEMPTIVE ORDER
The 1940 Act requires that the shareholders of an investment
company approve an
-4-
<PAGE> 8
investment advisory agreement prior to its effectiveness. Upon announcement
of the Merger agreement between USLIFE and American General, the Fund's
management (with Board approval) requested the Securities and Exchange
Commission ("SEC") to grant exemptive relief from this requirement for prior
shareholder approval, to allow the Fund to enter into the Interim Advisory
Agreement with the Adviser, subject to subsequent shareholder ratification and
approval. This relief was necessary because of (i) the uncertainty regarding
the closing date of the Merger; (ii) the time required to solicit proxies of
Fund shareholders; and (iii) the desire for continuity in management of the
Fund. The Fund filed its application for exemptive relief on May 12, 1997, the
SEC published notice of the requested relief on May 16, 1997, and the SEC
granted the requested relief by order on June 11, 1997.
THE INTERIM ADVISORY AGREEMENT
On May 14, 1997, the Board, including a majority of the
Independent Directors, approved the Interim Advisory Agreement subject to
shareholder approval. The terms and conditions of the Interim Advisory
Agreement are identical to the terms and conditions of the Advisory Agreement,
except as to the effective and termination dates and with the addition of
escrow provisions described below. Under the Interim Advisory Agreement, the
Adviser is entitled to receive advisory fees that are identical to the fees the
Adviser received under the Advisory Agreement. The duties that the Adviser is
required to perform under the Interim Advisory Agreement are identical to those
performed by the Adviser under the Advisory Agreement. Accordingly, the Fund is
currently receiving the same advisory services at the same fee levels under the
Interim Advisory Agreement as it received under the Advisory Agreement.
In no event will fees be paid to the Adviser under the Interim
Advisory Agreement unless that Agreement is approved by shareholders at the
Meeting. The escrow provisions of the Interim Advisory Agreement provide for
the Fund to pay advisory fees to an escrow agent, pending shareholder approval
of the Interim Advisory Agreement. If approved by shareholders, the advisory
fees held in the escrow account (including interest earned on such paid-in
fees) will be paid to the Adviser. In the absence of such shareholder
approval, amounts in the escrow account will be paid to the Fund. The Fund has
entered into an escrow arrangement with The Chase Manhattan Bank, as escrow
agent, to implement the escrow provisions of the Interim Advisory Agreement.
A copy of the Interim Advisory Agreement is attached to this
Proxy Statement as Exhibit A.
USLIFE ADVISERS, INC.
USLIFE Advisers, Inc., the Fund's investment adviser, is a New
York corporation organized in 1972. As of June 17, 1997, its principal
business address is 2929 Allen Parkway, Houston, Texas 77019. The Adviser is a
wholly-owned subsidiary of USLIFE, a New York corporation located at 125 Maiden
Lane, New York, NY 10038. As a result of the Merger, USLIFE became a
wholly-owned subsidiary of American General, located at 2929 Allen
-5-
<PAGE> 9
Parkway, Houston, Texas 77019. American General was incorporated as a
business corporation in Texas in 1980 and is the successor to American General
Insurance Company, an insurance company organized in Texas in 1926. American
General is one of the nation's largest diversified financial services
organizations. American General's operating subsidiaries are leading providers
of retirement services, consumer loans and life insurance.
The directors and principal executive officers of the Adviser,
since June 17, 1997, are listed below. Norman Jaskol, the Chairman of the
Board, President, and Chief Executive Officer of the Adviser, also serves as
President of the Fund. The business address of each director and the principal
executive officer of the Adviser is 2929 Allen Parkway, Houston, Texas 77019.
The prior directors and principal executive officers of the Adviser resigned,
effective June 17, 1997, in connection with the Merger.
-6-
<PAGE> 10
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS
OF USLIFE ADVISERS, INC.
<TABLE>
<CAPTION>
POSITION(s) HELD PRINCIPAL OCCUPATION(s)
NAME AND ADDRESS WITH ADVISER DURING PAST 5 YEARS
- ---------------- ---------------- -----------------------
<S> <C> <C>
Craig R. Rodby Director, since VALIC, Vice Chairman of the Board, since April
6/17/97 1997; ReliaStar Financial Corp., Senior Vice
President-Financial Management, 1994-97;
Northern Life Insurance Company (a division of
ReliaStar), President and CEO,1990-94.
Norman Jaskol Chairman of the USLIFE Income Fund, Inc., President, since June
Board of Directors, 1997; VALIC, Vice President and Managing
President and Chief Director-Investments, since 1988; American General
Executive Officer, Series Portfolio Company (investment company),
since 6/17/97 Vice President and Senior Investment Officer,
since 1988.
Peter V. Tuters Director, since VALIC, Vice President, Chief Investment Officer
6/17/97 and Director, since 1993; American General, Senior
Vice President, since 1992 and Chief Investment
Officer, since 1993; American General Series
Portfolio Company (investment company), Director,
since 1992.
</TABLE>
The Adviser does not serve as investment adviser or investment
sub-adviser to any investment companies with similar investment objectives to
the Fund.
-7-
<PAGE> 11
1940 ACT REQUIREMENTS
In connection with the Merger and the resulting change in the
ownership of the Adviser, affiliates of the Adviser may be deemed to have
received a benefit. Section 15(f) of the 1940 Act provides that when a change
in control of an investment adviser occurs that results in an assignment of the
adviser's investment advisory agreement with an investment company, the
investment adviser or any of its affiliated persons may receive any amount or
benefit in connection therewith as long as two conditions are satisfied.
First, there can be no "unfair burden" imposed on the investment company as a
result of the transaction relating to the change of control, or any express or
implied terms, conditions or understandings applicable to the transaction. The
term "unfair burden," as defined in the 1940 Act includes any arrangement
during the two-year period after the change in control whereby an investment
adviser, (or predecessor or successor adviser), or any interested person of any
such adviser, receives or is entitled to receive any compensation directly or
indirectly, from the investment company or its shareholders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from,
or on behalf of the investment company (other than fees for bona fide principal
underwriting services). No such compensation arrangements with the Fund have
occurred or are contemplated in connection with the Merger.
The second condition is that during the three-year period
immediately following consummation of the transaction, at least 75% of the
investment company's board of directors must not be "interested persons" of the
adviser or predecessor adviser within the meaning of the 1940 Act. As a result
of this requirement, all "interested persons" of the Adviser who previously sat
on the Fund's Board resigned on June 18, 1997, and the remaining five members
all are independent of the Adviser and any of its affiliates. In addition,
five of the six members of the Board (or 83%) proposed for election in Proposal
3, below, are not "interested persons" as defined in the 1940 Act. The sixth,
Craig R. Rodby, also serves as Vice Chairman and Vice President of VALIC and,
therefore, is an "interested person" of VALIC.
BOARD CONSIDERATION OF THE INTERIM ADVISORY AGREEMENT
At a meeting held on May 14, 1997, the directors, including a
majority of the Independent Directors, approved the Interim Advisory Agreement
and recommended that the Interim Advisory Agreement be submitted to Fund
shareholders for approval. The directors approved the Interim Advisory
Agreement because they believed that continuing the Fund's arrangement with the
Adviser during the interim period would permit the Fund to operate prior to
shareholder approval. The factors that the Board considered most important
were continuity in both the level of management services provided and the level
of the advisory fees charged, including the fact that the advisory fees would
be held in escrow pending shareholder approval.
On July 2, 1997, additionally, the Board, consisting only of
Independent Directors, determined that there would be no diminution in the
scope or quality of the services provided by the Adviser under the Interim
Advisory Agreement in connection with the change in advisory
-8-
<PAGE> 12
personnel resulting from the change in the ownership of the Adviser. Among
other things, the Board considered the experience of the new officers and
directors of Adviser and recognized that the principal investment manager for
the Fund would be retained as consultant under the Interim Advisory Agreement,
until September 24, 1997.
REQUIRED VOTE
Approval of the Interim Advisory Agreement requires the
affirmative vote of the holders of the lesser of: (i) 67% of the shares of the
Fund present at the Meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy at the Meeting; or (2) more than 50%
of the outstanding shares of the Fund entitled to vote at the Meeting. If the
Interim Advisory Agreement is not approved, the advisory fees paid thereunder
during the interim period will revert to the Fund, and the Board will take such
actions as it deems appropriate.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
FUND'S SHAREHOLDERS VOTE "FOR" THE INTERIM ADVISORY AGREEMENT
PROPOSAL 2
TO APPROVE THE NEW INVESTMENT ADVISORY AGREEMENT
BETWEEN THE FUND AND THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
THE NEW ADVISORY AGREEMENT
The terms and conditions of the New Advisory Agreement are
substantially similar to the terms and conditions of the Advisory Agreement.
Under the New Advisory Agreement, VALIC would provide the same investment
advisory services provided by the Adviser under the Advisory Agreement with the
same advisory fee structure.
The New Advisory Agreement also contains certain additional
provisions not contained in the Advisory Agreement. Under the terms of the New
Advisory Agreement, VALIC will maintain a trading desk to place all orders for
the purchase and sale of the Fund's portfolio investments with brokers or
dealers selected by VALIC. Under the New Advisory Agreement, VALIC also is
required to use its best efforts to obtain any tender and exchange offer
solicitation fees, other fees and similar payments available in connection with
the portfolio transactions of the Fund. VALIC is also required to remit
promptly to the Fund any commissions, tender and exchange offer solicitation
fees, other fees or similar payments received by VALIC, or any affiliated
person of VALIC in connection with any of the Fund's portfolio transactions,
less the amount of any direct expenses incurred by VALIC or any affiliated
person of VALIC in obtaining such commissions, fees or payments. In addition,
under the New Advisory Agreement, VALIC may, when appropriate, aggregate orders
for its other customers together
-9-
<PAGE> 13
with any securities of the same type to be sold or purchased for the Fund in
order to obtain best execution and lower brokerage commissions, provided that
VALIC allocates the shares and expenses in an equitable manner.
The New Advisory Agreement differs from the Advisory Agreement
in certain other respects as well. Subject to prior authorization by the
Fund's Board of Directors of appropriate policies and procedures, the New
Advisory Agreement permits VALIC to pay a broker a commission for effecting a
portfolio transaction in excess of the commission another broker would have
charged for effecting the same transaction, if the first broker provided
brokerage and/or research services, including statistical data, to VALIC. In
connection with purchases and sales of portfolio securities, the New Advisory
Agreement prohibits VALIC, its officers and its employees from acting as
principal or agent for any party other than the Fund or receiving any
commissions. In addition, the New Advisory Agreement would authorize VALIC to
make use of its affiliated companies and their employees in connection with the
rendering of investment advisory services to the Fund. The New Advisory
Agreement also contains certain nonmaterial conforming changes.
If the New Advisory Agreement is approved by shareholders, it
will become effective immediately for an initial two-year period. Thereafter,
the New Advisory Agreement will continue in effect for successive periods of
up to one year, provided that such continuance is specifically approved at
least annually by the Board, including a majority of the Independent
Directors, or by a vote of a majority of the outstanding shares of the Fund. If
the New Advisory Agreement is not approved by shareholders at the Meeting, the
Board intends to continue the interim relationship with the Adviser until it is
able to evaluate and obtain necessary approval of alternative advisory
arrangements.
A copy of the New Advisory Agreement is attached to this Proxy
Statement as Exhibit B.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
VALIC is a stock life insurance company that was organized on
May 1, 1969 under the Texas Insurance Code, as the successor to The Variable
Annuity Life Insurance Company of America, a District of Columbia insurance
company organized in 1955. VALIC has been in the investment advisory business
since 1960 and has rendered investment advisory services to the American
General Series Portfolio Company ("AGSPC") mutual funds since 1985. VALIC is
primarily engaged, however, in offering fixed and variable retirement annuity
contracts (and combinations thereof).
VALIC is wholly-owned by American General Life Insurance
Company, which is itself a wholly-owned subsidiary of AGC Life Insurance
Company, a wholly-owned subsidiary of American General. VALIC, American
General, AGC Life Insurance Company and American General Life Insurance Company
are located at 2929 Allen Parkway, Houston, Texas 77019.
-10-
<PAGE> 14
Listed below are VALIC's directors and principal executive
officers and their principal occupations. VALIC's directors and its principal
executive officers are currently neither officers, directors nor shareholders
of the Fund, although Craig R. Rodby is standing for election to the Board of
the Fund in Proposal 3, below. The business address of each director and
principal executive officer of VALIC is 2929 Allen Parkway, Houston, Texas
77019.
-11-
<PAGE> 15
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
POSITION(s) HELD PRINCIPAL OCCUPATION(s)
NAME WITH VALIC DURING PAST 5 YEARS
- ---- -------------- -----------------------
<S> <C> <C>
Robert M. Devlin Senior Chairman American General, Chairman of the Board of Directors,
of the Board of since April 1997, CEO, since October 1996, President,
Directors since October 1995, Vice Chairman of the Board, 1993-95;
American General Life Insurance Company, President and
CEO, 1986-93.
John P. Newton Vice Chairman of American General, Vice Chairman of the Board of
the Board of Directors, since 1995, Senior Vice President, 1993-95,
Directors General Counsel, 1993-April 1997; Clark, Thomas, Winters
& Newton (attorneys), Partner, 1985-93.
Stephen D. Bickel Chairman of the American General Series Portfolio Company (investment
Board of Directors company), President and Chairman of the Board of
and Chief Directors, since 1988; The Variable Annuity Marketing
Executive Officer Company, Chairman of the Board of Directors, since 1988;
VALIC, Chairman of the Board, since 1994, President,
Chief Executive Officer and Director, 1988-94.
Thomas L. West, Jr. Director and American General Series Portfolio Company (investment
President company), Director, since 1994; VALIC, President, since
1994; Aetna Life & Casualty Co., Senior Vice
President-Annuity Operations, 1991-94.
Craig R. Rodby Vice Chairman of VALIC, Vice Chairman of the Board, since April 1997;
the Board ReliaStar Financial Corp., Senior Vice
President-Financial Management, 1994-97; Northern Life
Insurance Company (a division of ReliaStar), President
and CEO, 1990-94.
</TABLE>
-12-
<PAGE> 16
<TABLE>
<S> <C> <C>
Joe C. Osborne Director and American General Series Portfolio Company (investment
Senior Vice company), Director, since 1992; The Variable Annuity
President - Marketing Company, President and Director, since 1983;
Marketing VALIC, Senior Vice President-Marketing, since 1983.
Peter V. Tuters Director, Vice VALIC, Vice President, Chief Investment Officer and
President and Director, since 1993; American General, Senior Vice
Chief Investment President, since 1992, and Chief Investment Officer,
Officer since 1993; American General Series Portfolio Company
(investment company), Director, since 1992.
Sam E. Magee Director and VALIC, Senior Vice President - Operations, since 1983;
Senior Vice Prudential Insurance Company, Manager, 1968-83.
President -
Operations
Brent C. Nelson Director, Senior VALIC, Director, since 1995, Senior Vice President since
Vice President and 1994, Vice President 1987-94, and Controller, since
Controller 1987.
James S. D'Agostino Jr. Vice Chairman of American General, President, since April 1997, Director,
the Board of since 1996; American General Life and Accident Insurance
Directors Company, Chairman and CEO, since 1995, President & CEO,
1993-95; American General, Executive Vice President,
1993, Senior Vice President, 1991-93.
Donald L. Sharps Director and VALIC, Director, since April 1997, Senior Vice
Senior Vice President-Systems, since 1996; Curtin Matheson
President - Scientific, Inc., Vice President - Systems Support 1984-
Systems 96.
</TABLE>
-13-
<PAGE> 17
VALIC currently acts as investment adviser to the following
mutual funds that have similar investment objectives to the Fund:
<TABLE>
<CAPTION>
ANNUAL RATE OF NET ASSETS AS OF
FUND COMPENSATION MAY 31, 1997
- ---- ------------ ------------
<S> <C> <C>
American General
Series Portfolio Company
Capital Conservation Fund 0.50% $ 66,747,000
American General Series
Portfolio Company Government
Securities Fund 0.50% 83,827,000
American General
Series Portfolio Company
International Government
Bond Fund 0.50% 177,709,000
</TABLE>
VALIC's agreement with each of the AGSPC funds, the Capital
Conservation Fund, the Government Securities Fund, and the International
Government Bond Fund, provides for VALIC's advisory fee to be reduced by any
commission, tender and exchange offer, solicitation fees and other fees, or
similar payments (less any direct expenses incurred) received by VALIC or its
affiliates in connection with the purchase or sale of portfolio investments of
the fund.
As discussed above, under Section 15(f) of the 1940 Act, no
more than 25% of the Fund's Board may be "interested persons" of VALIC during
the three-year period following the Merger. As described in Proposal 3, below,
the proposed Chairman of the Board of the Fund, Craig R. Rodby, also serves as
Vice Chairman of VALIC and, therefore, is an "interested person" of VALIC.
BOARD CONSIDERATION OF THE NEW ADVISORY AGREEMENT
At the July 2, 1997 meeting of the Fund's Board, the
Directors, consisting only of Independent Directors, requested, and VALIC
furnished, all information reasonably necessary for the Board to evaluate the
New Advisory Agreement. After completing its evaluation of the information
provided by VALIC, the Board, consisting only of Independent Directors,
approved the New Advisory Agreement and recommended that the New Advisory
Agreement be submitted to shareholders for approval. This determination was
predicated on VALIC's investment advisory experience in managing the AGSPC
mutual funds, the positive performance of the AGSPC mutual funds with
investment objectives similar to those of the Fund under VALIC's management,
and the qualifications of VALIC advisory personnel. In addition, the Board
recognized that the advisory fees under the New Advisory Agreement will be the
same as under the Advisory Agreement.
-14-
<PAGE> 18
REQUIRED VOTE
Approval of the New Advisory Agreement requires the
affirmative vote of the holders of the lesser of: (i) 67% of the shares of the
Fund present at the Meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy at the Meeting; or (2) more than 50%
of the outstanding shares of the Fund entitled to vote at the Meeting. If the
New Advisory Agreement is not approved by shareholders at the Meeting, the
Board will take such action as it deems appropriate.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
FUND'S SHAREHOLDERS VOTE "FOR" THE NEW ADVISORY AGREEMENT
PROPOSAL 3
ELECTION OF DIRECTORS
The Fund currently has five Directors, all of whom have
indicated that they will resign effective September 24, 1997 and will not stand
for reelection. Six other individuals have been approved by the Board of
Directors to stand for election to the Board of Directors to hold office until
their successors are elected and qualified. None of these nominees currently
serves as a Director of the Fund; however, each, except Craig R. Rodby, has
served as Director of the AGSPC.
It is the intention of the persons named in the accompanying
Proxy to vote for the election of the persons named below. Each nominee has
indicated a willingness to serve if elected. If any nominee should not be
available for election due to unforseen circumstances, it is the intention of
the persons named in the accompanying Proxy to vote for such other persons as
the Directors may recommend.
-15-
<PAGE> 19
DIRECTOR/NOMINEE INFORMATION
<TABLE>
<CAPTION>
Name, Age, Business Experience Common Stock
During Past Five Years and Other Director Beneficially Held
Relevant Information Since As of July 15, 1997(1)
- -------------------------------- ----- ----------------------
<S> <C> <C>
Dr. Norman Hackerman, Age: 85 N/A None
AGSPC, Director, since 1984; Van Kampen
American Capital Exchange Fund, former
Managing General Partner, 1979-96;
certain Van Kampen American Capital Funds,
Trustee, 1993-96; The Robert A. Welch
Foundation, Scientific Advisory Board,
Chairman, since 1983; Electrosource, Inc.,
Director, since 1993; Scientific Measurement
Systems, Inc., Director, since 1988; Radian
Corporation, Director, 1969-96; Electric
Power Research Institute, Strategic Research
and Development Advisory Board, Member,
since 1993; National Research Council,
Committee on Undergraduate Science
Education, Member, since 1993;
Rice University, Houston, TX, President,
1970-85; University of Texas at Austin,
Vice Chancellor of Academic Affairs,
1962-67, and President, 1967-70.
Dr. John W. Lancaster, Age: 74 N/A None
AGSPC, Director, since 1984; First Presby-
terian Church, Houston, TX, Pastor, 1961-90;
Austin Presbyterian Theological Seminary,
Board Member, 1959-72; Chairman of the Board,
1962-65, 1966-72; Outreach Foundation of
the Presbyterian Church (USA), Chairman
of the Board, 1979-86.
</TABLE>
- ------------------------------------------
(1) Percentages of share ownership is not indicated because no nominee owned
more than one percent of the Fund's outstanding shares.
-16-
<PAGE> 20
<TABLE>
<CAPTION>
Name, Age, Business Experience Common Stock
During Past Five Years and Other Director Beneficially Held
Relevant Information Since As of July 15, 1997(1)
- -------------------------------- ----- ----------------------
<S> <C> <C>
Dr. F. Robert Paulsen, Age: 75 N/A None
AGSPC, Director, since 1985; Van Kampen
American Capital Exchange Fund, Managing
General Partner, 1978-97; certain Van
Kampen American Capital Funds, Trustee,
1975-97; College of Higher Education,
University of Arizona, Tucson, AZ,
Dean Emeritus and Professor.
.
Dr. R. Miller Upton, Age: 80 N/A None
AGSPC, Director, since 1984; Van Kampen
American Capital Exchange Fund,
Managing General Partner, 1991-96; certain
Van Kampen American Capital Funds,
Trustee, 1975-96; Household
International, Inc., Director, 1965-89;
Home Life Insurance Company of New
York, Director, 1965-88; Beloit
College, Wisconsin, President, 1954-75.
Ben H. Love, Age: 66 N/A None
AGSPC, Director, since 1991; Utica National
Life Insurance Companies, Director, 1983-87
Boy Scouts of America, Irving, TX,
Chief Executive, 1985-93.
</TABLE>
- ------------------------------------------
(1) Percentages of share ownership is not indicated because no nominee owned
more than one percent of the Fund's outstanding shares.
-17-
<PAGE> 21
<TABLE>
<CAPTION>
Name, Age, Business Experience Common Stock
During Past Five Years and Other Director Beneficially Held
Relevant Information Since As of July 15, 1997(1)
- -------------------------------- ----- ----------------------
<S> <C> <C>
Craig R. Rodby,* Age: 48 N/A None
VALIC, Vice Chairman of the Board, since
April 1997; ReliaStar Financial Corp.,
Senior Vice President-Financial Management,
1994-1997; Northern Life Insurance Company
(a division of ReliaStar), President and CEO,
1990-94.
</TABLE>
- -----------------------------------------
(1) Percentages of share ownership is not indicated because no nominee owned
more than one percent of the Fund's outstanding shares.
(*) Considered an "interested person"of the Fund, as defined in Section
2(a)(19) of the 1940 Act by reason of his association with VALIC.
- ------------------------------------------
BOARD OF DIRECTORS' COMMITTEES
The Board has appointed an Audit Committee, but has not
appointed a Nominating Committee or a Compensation Committee. To date, the
functions of a Nominating Committee have been performed by the entire Board.
There is no Compensation Committee.
The Audit Committee selects, and recommends for approval by
the Board and the shareholders, the audit firm to be retained as independent
auditor by the Fund. The Audit Committee consults with the Fund's independent
auditor regarding the plan and scope of the audit, the adequacy of the Fund's
internal accounting procedures and controls and all matters relevant to the
audit services provided to the Fund. The Audit Committee also reviews the fees
charged by the auditor and the results of the audit.
The Audit Committee is currently comprised of the Fund's five
Independent Directors. The Board will elect the Members of the Audit Committee
following the election of new Directors on September 24, 1997.
-18-
<PAGE> 22
BOARD COMPENSATION
Members of the Board of Directors receive an annual retainer
of $4500 and $470 for each Board meeting attended. Audit Committee members
receive an additional $470 for each Audit Committee meeting attended.
Directors who are officers of the Fund are not compensated for their service on
the Board.
During the fiscal year ended June 30, 1997, the Board met
seven (7) times at regularly scheduled meetings. The Audit Committee meets
only on call. During the year ended June 30, 1997, the Audit Committee met two
(2) times. There are no incumbent members of the Board who, during the last
fiscal year of the Fund, attended fewer than 75% of the aggregate meetings of
the Board of Directors or its committees.
During the fiscal year ended June 30, 1997, the Fund paid
$50,000 to the Adviser in reimbursement of compensation and other expenses
attributable to the offices of the Fund's Secretary and Treasurer as provided
under the Advisory Agreement. The aggregate compensation earned by all
officers and directors of the Fund as a group in the fiscal year ended June 30,
1997, exclusive of fees paid for the services of Secretary and Treasurer, was
$43,650.
On June 18, 1997, the members of the Board of Directors who
were also employees of USLIFE resigned as officers and directors of the Fund,
leaving a Board consisting of five (5) Independent Directors.
Under a Deferred Compensation Plan adopted by the Board in
1979, Directors who receive fees for their services may elect to defer all or
part of the payment of their compensation until the termination of their
service as Directors. Deferred amounts currently accrue at an interest
equivalent calculated at the quarterly rate of 1.4375%. This rate is reviewed
annually and subject to change by the Board of Directors. Participating
Directors may elect to receive distributions of deferred fees and accrued
interest in one payment or in equal annual installments (not to exceed ten)
after ceasing to be a Director of the Fund.
-19-
<PAGE> 23
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension Or
Retirement Total Compensation
Aggregate Benefits Accrued From Fund and
Name of Person, Compensation As Part of Fund Fund Complex Paid
Position (1) From Fund Expenses to Directors
-------- --------- -------- ------------
<S> <C> <C> <C>
Dr. Kalman J. Cohen, 8,730 (2) -0- 8,730 (2)
Director
Richard L. Ellis, 8,730 -0- 8,730
Director
John M. Kingsley, Jr., 8,730 -0- 8,730
Director
William M.R. Mapel, 8,730 -0- 8,730
Director
Ralph F. Peters, Director 8,730 -0- 8,730
</TABLE>
- ---------------------------
(1) None of the current directors is standing for re-election.
(2) Dr. Cohen has accumulated a total of $247,508.11 under the Fund's
Deferred Compensation Plan.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
<TABLE>
<CAPTION>
Positions with Fund Business Experience
Name and Age and Term During Past Five Years
- ------------ ------------------- ----------------------
<S> <C> <C>
Craig R. Rodby Proposed Chairman VALIC, Vice Chairman of the
Age: 48 of the Board Board, since April 1997; ReliaStar
Financial Corp., Senior Vice
President-Financial Management,
1994-97; Northern Life Insurance
Company, a division of ReliaStar,
1990-94.
Norman Jaskol President USLIFE Income Fund, Inc.,
President, Age: 63 since 6/18/97 since June 1997; VALIC, Vice
President and Managing Director -
</TABLE>
-20-
<PAGE> 24
<TABLE>
<S> <C> <C>
Investments, since 1988; American
General Series Portfolio Company
(investment company), Vice
President and Senior Investment
Officer, since 1988.
Leon Olver Vice President and VALIC, Portfolio Manager, since
Age: 46 Investment Officer 1995; First Heights Bank, Vice
since 6/18/97 President/Treasurer, 1994-95;
First Heights Bank, Vice President,
Assistant Treasurer, 1991-94; Pulte
Financial Companies, Assistant Vice
President, 1984-91.
Linda Miller Treasurer USLIFE Advisers, Inc., Treasurer,
Age: 44 since 11/10/93 since 1993; USLIFE Income Fund,
Inc., Treasurer, since 1994; USLIFE
Equity Sales Corporation, Senior
Vice President, Secretary and
Treasurer, since 1994, Vice
President, 1990-94, Secretary and
Treasurer, since 1990.
[To be determined] Secretary
</TABLE>
REQUIRED VOTE
The election of Directors requires the affirmative vote of a majority
of the shareholders present at the Meeting in person or by proxy and entitled
to vote, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
FUND'S SHAREHOLDERS VOTE "FOR" ALL NOMINEES TO THE BOARD
-21-
<PAGE> 25
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITORS
The Board, including a majority of the Independent Directors, has
selected KPMG Peat Marwick LLP to continue to serve as independent auditors of
the Fund for the fiscal year ending June 30, 1998, subject to ratification by
the Fund's shareholders. KPMG Peat Marwick LLP has served as the Fund's
independent auditor since 1972 and has no direct financial interest or material
indirect financial interest in the Fund. Representatives of KPMG Peat Marwick
LLP are not expected to attend the meeting, but have been given the opportunity
to make a statement if they so desire, and will be available should any matters
arise requiring their presence.
KPMG Peat Marwick LLP's audit services for the fiscal year ended June
30, 1997 included: auditing the Fund's annual financial statements; reviewing
the Fund's federal and state income tax returns; reviewing the Fund's federal
excise tax return; consulting with the Fund's Audit Committee; engaging in
routine consultations on financial accounting and reporting matters.
The Audit Committee authorized all services performed by KPMG Peat
Marwick LLP on behalf of the Fund. In addition, the Audit Committee reviews
the scope of services to be provided by KPMG Peat Marwick LLP annually and
considers the effect, if any, that performance of any non-audit services might
have on audit independence.
REQUIRED VOTE
The ratification of the selection of independent auditors requires
the affirmative vote of a majority of the shareholders present at the Meeting
in person or by proxy and entitled to vote, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
FUND'S SHAREHOLDERS VOTE "FOR" KPMG PEAT MARWICK LLP
PROPOSAL 5
TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
TO PERMIT THE FUND TO INVEST UP TO 20% OF
ITS ASSETS IN FOREIGN SECURITIES
The Fund's fundamental investment restrictions currently provide that
the Fund may not "invest in foreign securities, except that the Fund may invest
not more than 25% of the value of its total assets in securities of, or
guaranteed by, the Government of Canada or of a Province of Canada or any
instrumentality or political subdivision thereof." This fundamental investment
-22-
<PAGE> 26
restriction may be changed only upon the approval of the Fund's shareholders.
The Fund's Board has concluded that it would be in the best interests
of the Fund and its shareholders to give the Fund the ability to invest assets
of the Fund in foreign securities to a limited extent. Thus, the Board
recommends amending the existing fundamental investment restriction to provide
that the Fund may not "invest more than 20% of its net assets in foreign
securities." Adoption of this proposal would enable the Fund to be in a
position to take advantage of investment opportunities that are currently
unavailable to it.
REQUIRED VOTE
Amendment of this investment restriction requires the affirmative
vote of the holders of the lesser of: (i) 67% of the shares of the Fund present
at the Meeting, if the holders of more than 50% of the outstanding shares are
present or represented by proxy at the Meeting; or (2) more than 50% of the
outstanding shares of the Fund entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
FUND'S SHAREHOLDERS VOTE "FOR" AMENDING THE FUND'S
FUNDAMENTAL RESTRICTION TO PERMIT INVESTMENTS
IN FOREIGN SECURITIES
INFORMATION ABOUT THE FUND
USLIFE Income Fund, Inc. is a closed-end, diversified management
investment company organized as a Maryland corporation on October 17, 1972.
The Fund's shares are listed for trading on the New York Stock Exchange, Inc.
The Fund seeks to provide a high level of current income to
shareholders through investment in a diversified portfolio composed primarily
of fixed income securities which management considers to be suitable. In
meeting its objective, the Fund invests at least 50% of its total assets in
straight debt securities which are rated at the time of purchase within the
four highest grades by Moody's Investors Service, Inc. or Standard & Poor's
Ratings Service, a division of the McGraw-Hill Companies, Inc., or which are
considered by the Fund's management to be of comparable quality. The balance
of the Fund's assets are invested in other fixed income securities, including
straight and convertible debt securities, preferred stock and other securities
with equity features. Of the Fund's total assets, not more than 30% may be
invested in privately placed securities which are not readily marketable. The
Fund may also borrow money to obtain investment leverage. The relative size of
the Fund's investments in any grade or type of securities will vary from time
to time depending upon a number of factors, including yields, market supplies
and economic outlook.
-23-
<PAGE> 27
CUSTODIAN, TRANSFER AGENT
The Chase Manhattan Bank ("CMB") serves as custodian for the Fund's
portfolio, and ChaseMellon Shareholder Services ("CSS") acts as transfer agent,
dividend paying agent and registrar for the Fund's shares. The principal
business address of CMB is Four New York Plaza, 4th Floor, New York, New York
10004, and the principal business address of CSS is 450 West 33rd Street, New
York, NY 10001. The Fund currently does not employ a principal underwriter or
administrator.
GENERAL INFORMATION
OTHER MATTERS
The Fund's management does not know of any matters to be presented to
the Meeting other than the matters set forth in this statement. If other
business should properly come before the Meeting, the proxyholders will vote
thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
The Meeting is an Annual Meeting of shareholders. The Fund is
required to hold an annual meeting of its shareholders. When such a meeting is
called, any shareholder who wishes to submit a proposal for consideration at
the meeting should submit the proposal promptly to the Fund.
ANNUAL REPORT
The Fund will furnish to shareholders, without charge, a copy of the
most recent Annual Report for the Fund, upon request. Requests for Annual
Report should be made by writing to the Fund at 2929 Allen Parkway, Houston, TX
77019 (1-800- ). Enclosed herewith is a self-addressed,
postage paid card for requesting the Annual Report.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
--------------------------------
Norman Jaskol
President
August 13, 1997
-24-
<PAGE> 28
USLIFE INCOME FUND, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Norman Jaskol, Leon Olver and Cynthia
Toles as proxies, each with the powers to act alone and to appoint his or her
substitute, and hereby authorizes them to represent and vote, as designated
herein, all the shares of Common Stock of USLIFE Income Fund, Inc. which the
undersigned is entitled to vote as of August 6, 1997, the record date, at the
Annual Meeting of Shareholders to be held September 24, 1997, or any
adjournment thereof.
THIS PROXY IS CONTINUED ON THE REVERSE.
PLEASE SIGN ON THE REVERSE AND RETURN PROMPTLY
USLIFE INCOME FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, SEPTEMBER 24, 1997
11:00 A.M.
2929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
<PAGE> 29
<TABLE>
<S> <C>
This proxy when propery executed will be voted in the manner directed herein by the undersigned shareholder. If Please mark
no direction is made, this Proxy will be voted FOR the approval of the Advisory Agreement, FOR the approval of your vote as
the New Advisory Agreement, FOR the Nominees named in Item 3, FOR the selection of the auditors named in item indicated in
4 and FOR the Proposal in Item 5. this example
X
</TABLE>
Item 1 - Proposal to approve the interim investment advisory agreement between
the Fund and USLIFE Advisers, Inc.
For Against Abstain
[ ] [ ] [ ]
Item 2 - Proposal to approve the new investment advisory agreement between the
Fund and The Variable Annuity Life Insurance Company.
For Against Abstain
[ ] [ ] [ ]
<TABLE>
<S> <C>
Item 3 - Election of the following nominees as Director: Dr. Norman Hackerman, Dr. John W. Lancaster,
Dr. Robert Paulsen, Dr. R. Miller Upton and
Craig R. Rodby
</TABLE>
<TABLE>
<S> <C> <C>
For Against Withhold for the following only (Write the name of the nominee(s) in the space below).
[ ] [ ]
--------------------------------------------------------------------------------------
</TABLE>
Item 4 - Proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditor of the Fund
For Against Abstain
[ ] [ ] [ ]
Item 5 - Proposal to amend the Fund's fundamental investment restrictions to
permit the Fund to invest up to 20% of its total assets in foreign
securities.
For Against Abstain
[ ] [ ] [ ]
<PAGE> 30
Item 6 - In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
Please sign as name appears herein. Joint owners
should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
Dated: , 1997
---------------------------------------
----------------------------------------------------
Signature
----------------------------------------------------
Signature
Please sign, date and mail your
proxy card promptly!
