SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant o
Filed by a Party other than the Registrant x
Check the appropriate box:
x Preliminary Proxy Statement
o Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
USLIFE Income Fund, Inc.
(Name of Registrant as Specified in Its Charter)
Ernest Horejsi Trust No. 1B
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
o 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:
______________________________________________________________________
o Fee paid previously with preliminary materials.
o 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>
STEWART R. HOREJSI
200 SOUTH SANTA FE
SALINA, KANSAS 67401
Dear Fellow Shareholder:
The Ernest Horejsi Trust No. 1B (the "Trust") is the largest shareholder of
the USLIFE Income Fund, Inc. (the "Fund"). The Trust is concerned that the
Fund's present investment focus will not maximize value to shareholders and has
decided to attempt to change the Fund's investment focus.
In order to maximize value to shareholders, the Trust believes the
Fund's investment focus should include equity securities in addition to fixed
income securities. Toward this end, we are seeking your support in electing our
four nominees, Stewart R. Horejsi, John S. Horejsi, Richard I. Barr, and James
G. Duff to the Board of Directors of the Fund at the December 3, 1999 Annual
Meeting of Shareholders, and the adoption of our shareholders' proposal
described below.
We believe that the Fund's performance may improve by changing its
investment focus to a balanced approach in which the Fund continues to invest in
fixed income securities but also invests in other types of securities, including
common stock, that have a potential for greater after-tax return. We believe
that one of the Fund's investment objectives should be one of maximizing the
after-tax return you receive, particularly in view of the changes in the Federal
income tax code which lowered taxes on long term capital gains. To this end we
have submitted the proposal described below for adoption by the shareholders of
the Fund at the Annual Meeting.
Our Proposal reads as follows:
RESOLVED: The shareholders of USLIFE Income Fund, Inc. ("Fund")
recommend that the Fund's Board of Directors take proper actions that will
result in the Fund investing in equity securities as well as fixed income
securities.
While the Standard & Poors 500 Index increased at a compound annual
rate of approximately 20.98% for the year ended June 30, 1999, the total return
on net asset value of the Fund's shares during the same period under
management's direction was only 0.64%. During the year ended June 30, 1998, the
S&P 500 Index increased at a compound annual rate of approximately 29.07%, while
total return on net asset value of the Fund's shares was 13.57%. In 1997, the
story was much the same - the S&P 500 Index increased at a compound annual rate
of approximately 33.24%, while total return on net asset value of the Fund's
shares was 15.19%. Although we cannot assure you that the Fund's future
performance will equal or exceed the growth rate of the S&P 500 Index or the
Fund's historical total returns, we strongly believe that the Fund's results
could be better if new investment policies were followed, rather than those of
current management.
Mr. Stewart Horejsi, Mr. John Horejsi, Mr. Barr and Mr. Duff have
indicated that, if elected to the Board of Directors of the Fund, they will
try to cause the full Board of Directors of the Fund to consider
implementation of a new investment focus.
[Top of page 2]
You should be aware that, if the Fund alters its investment policy to a
more balanced approach that includes equity investments, you may see significant
changes in your investment. Historic dividends paid by the Fund are likely to
decrease. In addition, the discount of the market price of the Fund's shares
from their net asset value may increase while the changes in investment policy
are being debated and implemented. This could result in the price of your shares
declining. See "Possible Adverse Effects on You" in the accompanying proxy
statement.
You should also be aware that the implementation of our proposals will
take time. Even if our nominees are elected to the Board of Directors of the
Fund, they will constitute only four of the ten present members of the Board and
they may not be able to persuade other Board members to take any actions that
they propose. The terms of the Fund's directors are staggered and not all
directors are elected each year. Four directors are to be elected at the 1999
Annual Meeting, and the remaining members of the Board are to be elected at the
2000 Annual Meeting, or the 2001 Annual Meeting.
Even if the Board takes action to cause the Fund to invest in equity
securities as well as fixed income securities, the Fund will not be able to
implement the change in investment policy unless and until it is approved by
shareholders at a subsequent meeting. We do not anticipate that such a meeting
would be held for at least one year. Moreover, even if the change in investment
policy is approved by the Fund's shareholders and the Board takes action to
cause the Fund to invest in equity securities as well as fixed income
securities, we believe any changes in the Fund's assets should be made over time
in response to market conditions and investment opportunities.
It is important that you not return any proxy card sent to you by the
Fund if you wish to support our nominees and our Proposal. If you have returned
a proxy card sent to you by the Fund, you have the right to revoke that proxy
and vote for our nominees by signing, dating and mailing a later dated WHITE
proxy card in the envelope provided. You may vote for all proposals contained in
management's proxy card by using our WHITE proxy card, as explained below. If
you have any questions, please contact D.F. King & Co., Inc., who is assisting
us in the solicitation, toll-free at 1-800-***-****
There are three proposals scheduled to be voted upon at the Annual
Meeting:
(i) the election of four directors of the Fund;
(ii) the adoption of the Proposal recommending that the Board take
proper actions that will result in the Fund investing in equity securities as
well as fixed income securities; and
(iii) the ratification of the independent auditor of the Fund for the
current fiscal year.
We recommend that you vote FOR each of these proposals on the WHITE
proxy card.
All of the proposals scheduled to be voted upon at the Annual Meeting
are included in our WHITE proxy card. If you wish to vote for our nominees, you
may do so by completing and returning a WHITE proxy card.
A WHITE proxy card that is returned to us or our agent will be voted as
the shareholder indicates thereon. If a WHITE proxy card is returned without a
vote indicated thereon, the shares represented thereby will be voted FOR the
election of our nominees, FOR adoption of the shareholder Proposal and FOR the
ratification of the independent auditor.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD IN THE
POSTAGE-PREPAID ENVELOPE THAT HAS BEEN PROVIDED.
Sincerely yours,
Stewart R. Horejsi
<PAGE>
4
PRELIMINARY COPY
PROXY STATEMENT IN OPPOSITION TO
THE SOLICITATION BY THE BOARD OF DIRECTORS OF
USLIFE INCOME FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS
To be held on December 3, 1999
To Our Fellow Shareholders:
This Proxy Statement and the enclosed WHITE proxy card are being
furnished to holders of record on September 7, 1999 (the "Record Date") of
shares of common stock, par value $1.00 per share (the "Common Stock"), of
USLIFE Income Fund, Inc., a Maryland corporation (the "Fund"), by the Ernest
Horejsi Trust No. 1B (the "Trust") in connection with the solicitation of
proxies by the Trust for use at the Annual Meeting of shareholders of the Fund
(the "Annual Meeting") scheduled to be held on Friday, December 3, 1999 at 2:00
a.m., Central Time, and any and all adjournments or postponements thereof. The
Annual Meeting will be held in Meeting Room 3 of The Variable Annuity Life
Insurance Company, Plaza Level, The Woodson Tower, 2919 Allen Parkway, Houston,
Texas 77019. It is estimated that this Proxy Statement and the accompanying
WHITE proxy card will first be sent to shareholders of the Fund on or about * *,
1999.
There are three matters scheduled to be voted upon at the Annual
Meeting:
(i) the election of four directors of the Fund;
(ii) the adoption of the Trust's proposal (the "Proposal"), as follows:
RESOLVED: The shareholders of USLIFE Income Fund, Inc. ("Fund")
recommend that the Fund's Board of Directors take proper actions that will
result in the Fund investing in equity securities as well as fixed income
securities; and
(iii) the ratification of the independent auditor of the Fund.
The Trust is soliciting your proxy in support of the adoption of the
Proposal and the election of its four nominees to the Board of Directors of the
Fund (the "Board") so that the Board will consider taking action to change the
Fund's investment focus to, among other things, invest a part of the Fund's
assets in equity securities so as to maximize value to shareholders. However,
you should read carefully the section below titled "Possible Adverse Effects on
You."
SUPPORTING STATEMENT REGARDING THE PROPOSAL
Since 1982, US equity markets have witnessed astounding returns in the
most aggressive and long-lived bull market in history. Despite this fact, the
Fund's advisor, The Variable Annuity Life Insurance Company (the "Adviser") and
Fund management appear content to remain invested entirely in fixed income
securities, thus yielding only a fraction of the profits otherwise recognized in
the market. Moreover, the bulk of the Fund's returns have been taxed to
shareholders at ordinary income tax rates rather than the more favorable capital
gains rate. As the Fund's largest shareholder, the Trust believes the Adviser
and Fund management should seek to maximize total return and should take action
to modify the Fund's investment objective so as to take advantage of the
market's extraordinary growth.
The Fund's objective should be to maximize after-tax return. Although
investing in common stocks necessarily results in a more volatile net asset
value, the Trust believes the surest way to achieve greater total return is to
focus not just on fixed income securities, as the Adviser has done exclusively
in the past, but to implement a balanced approach in which the Fund invests in
other types of securities, including common stock, that have a potential for
greater after-tax return. While your vote may not itself cause the Fund to
change its current investment objective, the Trust hopes a strong turnout in
favor of the Proposal will send a message to the Adviser to seek enhanced
after-tax return by investing in a balanced portfolio which includes equity as
well as fixed income securities.
As of October 26, 1999, the Trust owned approximately 7% of the Fund's
shares and was increasing its position. If the Proposal is not enacted, the
Trust intends to consider increasing its ownership until it is able to
effectively influence the Board to implement the Proposal. The Trust invested in
the Fund for the "long-haul" and suggests that shareholders not having a similar
investment objective may be better served in a different mutual fund. The Trust
is part of a group of affiliated entities that recently successfully took
control of another closed-end fund, Preferred Income Management Fund (now
Boulder Total Return Fund), and thus the group has experience in bringing such
changes to bear.
Implementing the Proposal is likely to significantly reduce the Fund's
historic dividend. However, the Trust is confident that the Proposal will better
serve all shareholders in the long-haul. We hope you will join with us in voting
to request that the Board consider taking proper actions that will result in the
Fund investing in equity securities as well as fixed income securities.
INVESTING IN EQUITY SECURITIES INVOLVES SUBSTANTIAL RISK OF PERMANENT
LOSS OF CAPITAL, IS NOT APPROPRIATE FOR ALL INVESTORS AND IS NOT A SUITABLE
INVESTMENT STRATEGY FOR INVESTORS WHO DESIRE CURRENT INCOME.
POSSIBLE ADVERSE EFFECTS ON YOU
The changes in the Fund's investment policy that might result from
adoption of the Proposal may significantly alter the nature of your investment
in the Fund. If you have invested in the Fund seeking a steady return of income,
you are likely to find that the Fund's historic dividend rate decreases
significantly. Traditionally, balanced funds pay a lower dividend rate than
funds investing in fixed income securities.
In addition, you should consider carefully whether you need liquidity
in your investment in the Fund. The discount of the Fund's net asset value from
the market price may increase significantly while these changes in investment
policy are being debated, whether or not they are implemented. When we
implemented a similar change in investment policy at another closed end mutual
fund, Preferred Income Management Fund (now Boulder Total Return Fund), changing
its focus from fixed income securities to a more balanced approach, the discount
increased significantly. In February 1998, when Mr. Stewart Horejsi announced to
the Board of Directors of Preferred Income Management Fund that he planned to
solicit proxies to support a change in investment policy from fixed income
securities to investment in equity securities, the discount of the net asset
value of Preferred Income Management's shares from their market value was
approximately 4.75%. In the twelve months preceding Mr. Horejsi's announcement
to Preferred Income Management's Board, the discount had never been greater than
7%. By August 1999, the discount had increased to approximately 22%.
If the discount to net asset value of the Fund's common stock increases
and you sell your shares in the Fund at a time when the Fund's discount to net
asset value is larger than when you purchased your shares, you could realize a
loss on your investment in the Fund's shares, even if the net asset value of the
Fund has increased since you purchased your shares.
Because equity securities are inherently more risky than fixed income
securities, the risk associated with the Fund's shares would increase in the
event that the contemplated changes are in fact implemented. Thus,
the change in risk would affect the risk level in your overall portfolios.
Finally, if you do not believe that the change in investment strategy
is appropriate or in your best interest, you should consider whether continuing
to hold your shares is advisable. If you continue to own shares you may find the
nature of your investment changed if a new investment strategy is adopted and
implemented. In addition, the liquidity of the Fund's shares may be adversely
affected by a new investment strategy, which could result in an adverse effect
on the price of your shares.
REASONS FOR THE SOLICITATION
The Trust has owned the Fund's Common Stock since June 29, 1998, and
has invested more than $3.5 million in 393,400 shares of the Fund. As a result,
the Trust has a strong financial incentive to improve the Fund's performance. By
contrast, according to filings with the SEC made by the Fund's directors, the
directors of the Fund hold no shares of the Fund. Each of the twelve directors
as of the Fund's 1998 Annual Meeting violated SEC rules by filing their required
disclosure forms late.
After reviewing the Fund's recent performance in light of the
performance of the stock market, the Trust concluded that the Fund should
consider changing its investment focus to include equity securities in the
investments held by the Fund. Among other things, holding equity securities will
allow you to take advantage of the lower federal income tax rates on capital
gains as compared with dividends.
The Fund has resisted the Trust's efforts to present the proposed
resolution to the Fund's shareholders. The Fund has addressed letters, prepared
at the Fund's expense by a large New York City law firm, to the SEC that sought
to exclude the Proposal from the Fund's proxy statement. The Fund has not
disclosed the total amount of the Fund's resources that the Fund spent in
attempting to stifle your participation in this decision to urge the Board to
consider changes that might improve the Fund's performance.
As you may know, the Fund reports its performance in its Annual Report
to Shareholders. For the year ended June 30, 1999 the Fund described its net
asset value return as comparing "favorably" with what it characterized as
"relevant benchmarks." But a comparison with those benchmarks, which were chosen
by the Fund, reveals that the Fund's net asset value return was only 24% of the
return on the Merrill Lynch Corporate Government Index and was only 68% of the
return on the Merrill Lynch High Yield Bond Index.
A comparison of the market price return on the Fund's shares similarly
shows the Fund's poor performance. The market price return on the Fund's shares
for the year ended June 30, 1999 was 0.64%, a decline of 95% from the prior
year. A comparison to the market return represented by the Standard & Poors 500
Index, which was 20.98% for the year ended June 30, 1999, likewise demonstrates
that the Fund's shareholders may have achieved better returns through
alternative investments in a balanced portfolio.
Despite this poor performance, the Board has not indicated it was
considering an alternative investment strategy, perhaps one that would better
serve your interests. Including equity securities in the "mix" of investment
opportunities available to the Fund might increase the likelihood of achieving a
more favorable return.
The Fund's poor performance was aggravated by the fees paid to the
investment advisor. These expenses of the Fund greatly reduce the returns to the
Fund's shareholders. The 1999 Annual Report stated that the increase in net
assets resulting from operations for the year ended June 30, 1999 was $460,507.
This figure is only slightly greater than the total fees of $404,470 paid to the
investment advisor during the same period.
The Fund's Board appears to have little personal incentive to achieve
greater returns for the Fund's shareholders. The preliminary proxy statement
relating to the 1999 annual meeting of shareholders revealed that none of the
Board members--and in fact none of the Fund' officers--own any of the Fund's
shares. Simply put, your directors and officers have invested none of their
money in your Fund.
In addition, every one of the Fund's directors also served as a
director or trustee of another fund or company which is advised by the Fund's
investment advisor. The Fund does not disclose how much the directors receive in
fees from these other funds and companies, but our research has shown that the
directors receive thousands of dollars in fees for much of the same work that
they perform for the Fund. As a result, these directors potentially have greater
loyalty to the Fund's investment advisor than to the Fund. We believe the Fund
should disclose this information so that you can make your own judgment about
where the directors' priorities lie.
An advisory group of the Investment Company Institute, which is an
independent industry think tank, has recommended that boards of directors of
investment companies meet certain standards. However, the reality at your Fund
is different:
o Recommendation: at least two-thirds of the directors of an
investment company should be independent directors.
o Reality for your Fund: Every one of the current directors of the
Fund also served as an officer of the Fund or had a relationship with the
Fund's investment advisor, other companies related to the Fund's investment
advisor, or other funds with a relationship with the Fund's investment
advisor.
o Recommendation: the investment company board should establish an
audit committee composed entirely of independent directors, the audit
committee should meet with the fund's independent auditors at least once a
year outside the presence of management representatives, the audit
committee should secure from the auditor an annual representation of its
independence from management, and the audit committee should have a written
charter spelling out its duties and powers.
o Reality for your Fund: The proxy statement related to the Fund's
1998 Annual Meeting of Shareholders revealed that each of the five members
of the Fund's Audit Committee also serves as director of American General
Series Portfolio Company and as a Trustee of American General Series
Portfolio Company 2 and American General Series Portfolio Company 3. Each
of those companies also has the Fund's investment advisor as its investment
advisor. The Fund's Audit Committee met only two times during the year
ended June 30, 1998, and only three times during the year ended June 30,
1999.
The Trust has determined to undertake this proxy solicitation because
it believes that its nominees will be committed to causing the full Board of the
Fund to consider action to change the Fund's investment focus as outlined in the
Proposal. If the Proposal is not enacted, the Trust intends to consider
increasing its ownership until it is able to effectively influence the Board to
implement the Proposal and attempt to elect a majority of the Fund's directors
who favor the Proposal. Implementing this goal may take several years.
IMPLEMENTATION OF THE PROPOSAL
In considering whether to support the Trust's nominees and adopt our
Proposal, shareholders of the Fund should consider the following.
Even if the full Board of Directors of the Fund determines to implement
the Proposal, there can be no assurance that the Proposal will ultimately be
implemented. In addition, the Proposal entails costs and difficulties that may
impede or delay its implementation.
The adoption of the Proposal would require the Fund to change its
investment objective, its concentration policy and one or more of its
fundamental investment restrictions, and, as a result, would likely require the
prior approval of the holders of a majority of the Fund's outstanding voting
securities. Certain changes would likely require the approval of 75% of the
shareholders of the Fund. There can be no assurance that this shareholder
approval could be obtained. Moreover, the Fund might incur significant costs in
preparing a proxy statement relating to such proposals and holding a
shareholders' meeting to vote on such proposals.
You should note that even if the Trust's nominees are elected to the
Board of Directors of the Fund, they would constitute only four of the ten
present members of the Board of Directors. For these and other reasons, there
can be no assurance that, even if the Trust's nominees are elected, the Fund's
investment focus will be changed or that the Board of Directors will take any
action in response to the Proposal. Even if the Fund's investment focus is
changed, the Trust's nominees will not advocate a sudden change but rather a
gradual transition.
PROXY CARDS AND VOTING
All of the proposals scheduled to be voted upon at the Annual Meeting
are included on the Trust's WHITE proxy card. If you wish to vote for the
Trust's nominees, you may do so by completing and returning a WHITE proxy card.
A WHITE proxy card that is returned to the Trust or its agent will be voted as
you indicate on the card. If a WHITE proxy card is returned without a vote
indicated, the shares represented thereby will be voted FOR the election of the
Trust's nominees, FOR the adoption of the Proposal, and FOR the ratification of
the independent auditor.
Discretionary authority is provided in the proxy sought hereby as to
other business as may properly come before the meeting, of which the Trust is
not aware as of the date of this Proxy Statement, and matters incident to the
conduct of the Annual Meeting, which discretionary authority will be exercised
in accordance with Rule 14a-4 promulgated by the SEC pursuant to the Securities
Exchange Act of 1934, as amended.
The Fund currently has a total of ten directors divided into three
classes. There are three Class I directors, whose terms expire in 1999; three
Class II directors, whose terms expire in 2000; and four Class III directors,
whose terms expire in 2001. Three of the four directors to be elected at the
Annual Meeting are Class I directors, with terms that will expire in 2002; the
remaining director to be elected at the Annual Meeting is a Class III director,
with a term ending in 2001. The Trust proposes Stewart R. Horejsi as a Class III
director and John S. Horejsi, Richard I. Barr and James G. Duff as Class I
directors to be elected at the Annual Meeting. WHITE proxy cards that are
properly signed, dated and returned will be voted in a manner consistent with
this proposal.
Voting, Quorum
Only shareholders of record on the Record Date will be entitled to vote
at the Annual Meeting. According to information contained in the Fund's 1999
Preliminary Proxy Statement, there were 5,643,768 shares of Common Stock issued
and outstanding as of the Record Date, September 7, 1999. Holders of record on
the Record Date will be entitled to cast one vote on each matter for each share
of Common Stock held by them. Shares of Common Stock do not have cumulative
voting rights. Directors of the Fund are elected by a plurality of the votes
cast. Adoption of the Proposal requires a majority of votes cast. The Trust
recommends that shareholders vote FOR the election of its nominees, Messrs.
Stewart Horejsi, John Horejsi, Barr and Duff, FOR the adoption of the Proposal,
and FOR the ratification of KPMG LLP as the independent auditor of the Fund.
A proxy which is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter). Proxies that reflect abstentions or broker non-votes (collectively,
"abstentions") will be counted as shares that are present and entitled to vote
on the matter for purposes of determining the presence of a quorum. Under
Maryland law, abstentions do not constitute a vote "for" or "against" a matter
and will be disregarded in determining "votes cast" on an issue.
Under the By-Laws of the Fund, a quorum for the transaction of business
is constituted by the presence in person or by proxy of a majority of the
outstanding shares of the Fund entitled to vote at the meeting.
Revocation of Proxies
You may revoke any proxy given in connection with the Annual Meeting
(whether given to the Fund or to the Trust) at any time prior to the voting
thereof at the Annual Meeting by delivering a written revocation of your proxy
to the Secretary of the Fund or with the presiding officer at the Annual
Meeting, by executing and delivering a later dated proxy to the Trust or the
Fund or their solicitation agents, or by voting in person at the Annual Meeting.
Attendance at the Annual Meeting will not in and of itself revoke a proxy.
There is no limit on the number of times that you may revoke your proxy
prior to the Annual Meeting. Only the latest dated, properly signed proxy card
will be counted.
IF YOU HAVE ALREADY SENT A PROXY CARD TO THE BOARD OF DIRECTORS OF THE
FUND, YOU MAY REVOKE THAT PROXY AND VOTE FOR THE NOMINEES OF THE TRUST BY
SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE
PROVIDED.
THE WHITE PROXY CARD CONTAINS ALL OF THE PROPOSALS SCHEDULED TO BE
VOTED UPON AT THE ANNUAL MEETING. IF YOU WISH TO VOTE FOR THE TRUST'S NOMINEES,
YOU MAY DO SO BY COMPLETING AND RETURNING A WHITE PROXY CARD. A WHITE PROXY CARD
THAT IS RETURNED TO THE TRUST OR ITS AGENT WILL BE VOTED AS YOU INDICATE
THEREON. IF A WHITE PROXY CARD IS RETURNED WITHOUT A VOTE INDICATED THEREON, IT
WILL BE VOTED IN FAVOR OF ELECTION OF THE TRUST'S NOMINEES, IN FAVOR OF ADOPTION
OF THE SHAREHOLDER PROPOSAL, AND IN FAVOR OF THE RATIFICATION OF THE INDEPENDENT
AUDITOR.
INFORMATION CONCERNING THE TRUST
As of September 7, 1999 (the Record Date), the Trust held 348,000
shares of Common Stock, representing approximately 6.2% of the outstanding
shares of the Fund. The Trust is an irrevocable grantor trust that was organized
under the laws of Kansas for the benefit of Ernest Horejsi's children and
grandchildren. Stewart Horejsi is Ernest Horejsi's son and serves from time to
time as an investment advisor to the Trust. The three trustees of the Trust are
Badlands Trust Company ("Badlands"), Ms. Susan Ciciora, and Mr. Larry Dunlap.
Ms. Ciciora is Stewart Horejsi's daughter, and John Horejsi, one of the nominees
for directors hereunder, is Stewart Horejsi's son. The business address of the
Trust is 122 South Phillips Avenue, Suite 220, Sioux Falls, South Dakota 57104.
Information regarding purchases of shares of Common Stock by the Trust
during the last two years is set forth on Exhibit 1 attached hereto. During that
period, the Trust has not sold any shares of the Fund. The trustees of the Trust
(Badlands, Ms. Ciciora, and Mr. Dunlap) may be deemed to control the Trust and
may be deemed to possess indirect beneficial ownership of the shares held by the
Trust. However, none of the trustees, acting alone, can vote or exercise
dispositive authority over shares held by the Trust. Accordingly, Badlands, Ms.
Ciciora, and Mr. Dunlap disclaim beneficial ownership of the shares of Common
Stock beneficially owned, directly or indirectly, by the Trust.
Badlands is a South Dakota corporation organized to act as a private
trust company to administer the Trust as well as other affiliated trusts.
Badlands is wholly owned by the Stewart Horejsi Trust No.2, an irrevocable trust
organized by Mr. Stewart Horejsi for the benefit of his issue. The business
address of Badlands is 122 South Phillips Avenue, Suite 220, Sioux Falls, South
Dakota 57104. The business address of Ms. Ciciora is 2911 Oak Brook Hills Road,
Oak Brook, Illinois 60523. The business address of Mr. Dunlap is 223 N. Santa
Fe, P.O. Box 121, Salina, Kansas 67401.
By virtue of the relationships described above, Mr. Stewart
Horejsi may be deemed to possess indirect beneficial ownership of the shares
of Common Stock held by the Trust. However, Mr. Stewart Horejsi disclaims
such beneficial ownership of the shares of Common Stock beneficially
owned, directly or indirectly, by the Trust. The business address of Mr.
Stewart Horejsi is 200 South Santa Fe, P.O. Box 6043, Salina, Kansas 67401.
THE NOMINEES
WHITE proxy cards which are signed, dated and returned to the Trust or its
agent, ** ("*"), will be voted in favor of the election of Stewart R. Horejsi,
John S. Horejsi, Richard I. Barr and James G. Duff. Messrs. Stewart Horejsi,
John Horejsi, Barr and Duff have furnished the Trust with the following
information concerning their employment history and certain other matters:
Stewart R. Horejsi, age 61, was principally employed as Manager of
Brown Welding Supply L.L.C., from April 1994 until the sale of that business in
June 1999. Mr. Horejsi has also served as President or Manager of various
subsidiaries of Horejsi, Inc. since January 1992. Mr. Horejsi has served as a
director of the Boulder Total Return Fund (formerly Preferred Income Management
Fund), a nondiversified investment company, since July 1997, and serves as a
director of Sunflower Bank. Mr. Horejsi is presently the Investment Manager of
Stewart Investment Advisers, Ltd., a registered investment advisor who acts as a
sub-advisor to Boulder Total Return Fund with respect to its equities portfolio
and its capital allocation.
John S. Horejsi, age 32, has been employed during the last five years
in connection with Horejsi family investments.
Richard I. Barr, age 61, has been Manager of Advantage Sales and
Marketing, Inc. since 1963. He is a director of Boulder Total Return Fund.
James G. Duff, age 61, acted as Chairman and Chief Executive Officer of
USL Capital Inc., a commercial financing company ("USL Capital"), from April
1991 until his retirement in December 1996, as President and Chief Executive
Officer of USL Capital from January 1990 to April 1991, and as President and
Chief Operating Officer of USL Capital from February 1988 to April 1990. From
January 1990 until retirement in December 1996, Mr. Duff also served as Chairman
and Chief Executive Officer of Air Lease Ltd., a New York Stock Exchange-listed
master limited partnership ("Air Lease"). Mr. Duff was an Executive Vice
President of Ford Motor Credit Company, an automotive financing company, from
May 1980 to January 1988 and prior to that time held various positions at Ford
Motor Company. Mr. Duff also served on the boards of directors of Air Lease, USL
Capital, Ford Motor Credit Company, US Fleet Leasing Inc. and US Fleet Leasing
International, Inc. He is a director of Boulder Total Return Fund.
Each of Messrs. Stewart Horejsi, John Horejsi, Barr and Duff is a
United States citizen. By virtue of the relationships discussed above under
"Information Concerning the Trust," Mr. Stewart Horejsi may be deemed to
indirectly beneficially own the shares of Common Stock held by the Trust and, if
elected, could be deemed to be an "interested director" within the meaning of
the Investment Company Act. None of the Trust's nominees for election as
director currently owns, beneficially or of record, any shares of Common Stock.
See "Beneficial Ownership of Common Stock." The business address of Mr. John
Horejsi is 20 Linda Isle, Newport Beach, California 92663. The address of Mr.
Barr is 2502 E. Solano Drive, Phoenix, Arizona 85016. The address of Mr.
Duff is 6325 N. Yucca Road, Paradise Valley, Arizona 85253.
Each of the nominees listed above has consented to being named in this
Proxy Statement and has agreed to serve as a director of the Fund if elected.
None of such nominees has ever been an officer, employee, director, general
partner or shareholder of The Variable Annuity Life Insurance Company, the
Fund's current investment advisor, or an affiliate thereof, nor has any of such
nominees had any other material direct or indirect interest in such investment
advisor or any of its affiliates.
Other than fees payable by the Fund to its directors, none of the
Trust's nominees has any arrangement or understanding with any person with
respect to any future employment by the Fund or its affiliates. According to the
Fund's 1999 Preliminary Proxy Statement, each director of the Fund receives a
fee of $2,000 per annum, plus $500 for each in-person meeting and $250 for each
telephone meeting. Audit and Nominating Committee members receive an additional
$250 for each committee meeting attended on a date other than the date the Board
of Directors meets. Committee chairs receive an additional $250 for each meeting
chaired. Directors who are officers of the Fund are not compensated for their
service on the Board.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of September 7,
1999, regarding the beneficial ownership of shares of Common Stock by (i) each
beneficial owner of more than 5% of the outstanding shares of Common Stock
(based upon information contained in filings with the Commission), (ii) each of
the Trust's nominees for director, (iii) the current executive officers and
directors of the Fund (based on information contained in the 1999 Proxy
Statement of the Fund), and (iv) all directors and executive officers as a
group.
Common Stock
Beneficially
Name and Address Position with the Fund Owned Percent
- ---------------- ---------------------- ----- -------
Ernest Horejsi Trust No. 1B --- 348,000 6.2%
122 South Phillips Avenue
Suite 220
Sioux Falls, South Dakota 57104
Directors and Officers as a group --- --- --
- -------------------
The current directors and executive officers of the Fund do not own
any shares of the Fund, according to the 1999 Proxy Statement of the Fund.
None of the Trust's nominees for director owns any shares of the Fund.
Mr. Stewart Horejsi may be deemed to beneficially own the shares owned by
the Trust as of the date of this proxy statement. Mr. Horejsi disclaims all
such beneficial ownership.
THE SOLICITATION
Proxies will be solicited by mail and, if necessary to obtain the
requisite shareholder representation, by telephone, personal interview or by
other means. Certain officers, directors or employees of entities related to the
Trust may solicit proxies.
Banks, brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward this Proxy Statement and the accompanying WHITE
proxy card to the beneficial owner of shares of Common Stock for whom they hold
of record and the Trust will reimburse them for their reasonable out-of-pocket
expenses.
The expenses related to this proxy solicitation will be borne by the
Trust. The Trust estimates that the total amount of expenses to be incurred by
it in this proxy solicitation will be approximately $75,000. Expenses to date
have been approximately $25,000. The Trust intends to seek reimbursement from
the Fund for expenses incurred in connection with the solicitation of proxies
for the election of Messrs. Stewart Horejsi, John Horejsi, Barr and Duff as
directors. The Trust does not, however, intend to submit the question of such
reimbursement to a vote of the Fund's shareholders.
If you have any questions concerning this Proxy Solicitation or the
procedures to be followed to execute and deliver a proxy, please contact D.F.
King & Co., Inc. at:
***-***-****
Call Toll-Free: 1-800-***-****
Dated: _______, 1999
<PAGE>
Exhibit 1
ALL SECURITIES OF THE FUND PURCHASED OR SOLD
WITHIN THE PAST TWO YEARS BY THE TRUST
Except as disclosed in this Proxy Statement, neither the Trust nor its
nominees for election to the Board of Directors of the Fund has, or had, any
interest, direct or indirect, by security holdings or otherwise, in the Fund.
The following table sets forth certain information with respect to direct
purchases and dispositions of shares of Common Stock by the Trust. None of Mr.
Stewart Horejsi, Mr. John Horejsi, Mr. Barr or Mr. Duff currently owns any
shares of Common Stock. Neither the Trust nor any of its nominees for election
to the Board of Directors of the Fund has sold any shares of Common Stock in the
last two years.
ERNEST HOREJSI TRUST NO. 1B
Date Number of Shares Purchased
6/29/98 3,000
8/12/98 4,500
8/13/98 2,000
8/17/98 2,000
8/19/98 3,200
8/19/98 6,000
8/19/98 1,000
8/20/98 5,300
8/20/98 1,500
8/21/98 3,000
8/21/98 11,100
8/24/98 4,000
8/26/98 6,000
8/26/98 7,000
8/26/98 10,000
8/27/98 11,000
8/27/98 1,500
8/28/98 24,300
8/28/98 1,500
8/28/98 1,500
9/03/98 11,500
9/03/98 9,000
9/04/98 13,200
9/15/98 4,000
9/17/98 2,000
9/17/98 1,000
9/18/98 2,000
9/23/98 1,000
9/30/98 6,000
10/1/98 4,000
10/1/98 2,500
10/5/98 2,500
10/9/98 24,000
4/20/99 3,000
4/27/99 1,000
4/28/99 1,000
5/05/99 1,000
5/05/99 6,000
5/07/99 1,000
5/11/99 6,000
5/19/99 3,000
5/19/99 3,000
5/19/99 3,000
5/19/99 2,000
5/20/99 7,500
5/24/99 6,000
5/26/99 2,000
5/26/99 2,000
5/26/99 2,100
5/26/99 2,000
5/26/99 4,000
5/27/99 2,000
5/27/99 7,000
6/28/99 12,000
7/16/99 3,800
7/16/99 3,500
7/16/99 3,000
7/16/99 3,000
7/19/99 4,600
7/19/99 6,500
7/20/99 6,000
7/21/99 9,000
7/23/99 2,000
8/6/99 5,000
8/9/99 5,000
8/10/99 6,000
8/10/99 2,000
8/12/99 2,000
8/16/99 2,000
8/16/99 6,900
9/16/99 2,000
9/16/99 3,000
9/20/99 2,000
9/21/99 800
9/22/99 400
9/23/99 1,100
9/24/99 100
9/27/99 2,300
9/28/99 700
9/29/99 1,300
9/30/99 2,000
10/1/99 7,500
10/4/99 2,400
10/5/99 1,700
10/6/99 1,200
10/7/99 300
10/14/99 700
10/15/99 1,800
10/18/99 6,100
10/19/99 2,100
10/19/99 200
10/20/99 2,700
10/21/99 1,600
10/22/99 1,400
- --------------------------------------------------------------------------------
The total amount of funds required by the Trust to purchase the shares
listed above was $3,804,795.45. Such funds were provided by the Trust's cash on
hand and from intertrust advances from the Lola Brown Trust No. 1B. Such
advances bear interest at short term applicable federal rates and are due
monthly.
<PAGE>
PROXY CARD
THIS PROXY IS SOLICITED IN OPPOSITION TO THE BOARD OF DIRECTORS
OF USLIFE INCOME FUND, INC. BY THE
ERNEST HOREJSI TRUST NO. 1B
Proxy for the December 3, 1999 Annual Meeting of Shareholders
of
USLIFE Income Fund, Inc.
The undersigned holder of shares of Common Stock of USLIFE Income Fund,
Inc., a Maryland corporation (the "Fund"), hereby appoints Stewart R. Horejsi,
John S. Horejsi, Richard I. Barr, James G. Duff and Stephen C. Miller, and each
of them, as attorneys and proxies for the undersigned, with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of Common Stock that the undersigned is entitled
to vote at the Annual Meeting of Shareholders of the Fund to be held in Meeting
Room 3 of The Variable Annuity Life Insurance Company, Plaza Level, The Woodson
Tower, 2919 Allen Parkway, Houston, Texas 77019, on Friday, December 3, 1999 at
2:00 p.m. Central Time, and any adjournments or postponements thereof. The
undersigned hereby acknowledges receipt of the Proxy Statement in Opposition of
the Trust and hereby instructs said attorneys and proxies to vote said shares as
indicated hereon. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Meeting. A majority of the
proxies present and acting at the Meeting in person or by substitute (or, if
only one shall be so present, than that one) shall have and may exercise all of
the power and authority of said proxies hereunder. The undersigned hereby
revokes any proxy previously given.
IMPORTANT:
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF ALL NOMINEES NAMED IN PROPOSAL 1 BELOW, FOR THE ADOPTION OF PROPOSAL 2, AND
FOR THE RATIFICATION OF THE FUND'S INDEPENDENT AUDITOR NAMED IN PROPOSAL 3
BELOW.
Please refer to the Proxy Statement in Opposition for a discussion of the
shareholders' Proposal.
1. ELECTION OF DIRECTORS
FOR all nominees listed below ___________
(except as marked to the contrary below)
WITHHOLD AUTHORITY
to vote for all nominees listed below __________
Stewart R. Horejsi
John S. Horejsi
Richard I. Barr
James G. Duff
(Instruction: To withhold authority for any individual, write his or her name
on the line below):
_______________________________________________________________________________
2. TO ADOPT THE FOLLOWING PROPOSAL:
RESOLVED: THAT THE SHAREHOLDERS OF USLIFE INCOME FUND, INC. ("FUND")
RECOMMEND THAT THE FUND'S BOARD OF DIRECTORS TAKE PROPER ACTIONS THAT
WILL RESULT IN THE FUND INVESTING IN EQUITY SECURITIES AS WELL AS
FIXED INCOME SECURITIES.
FOR __________
AGAINST __________
ABSTAIN __________
3. To ratify the selection of KPMG LLP as independent auditor of the Fund
FOR THE FISCAL YEAR ENDING JUNE 30, 2000.
FOR __________
AGAINST __________
ABSTAIN __________
The Trust recommends that the shareholders vote FOR the election of all nominees
named in Proposal 1, FOR the adoption of Proposal 2, and FOR the ratification of
the independent auditor of the Fund.
IMPORTANT:
Please sign exactly as name appears hereon or on the proxy card previously sent
to you. When shares are held by joint tenants, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by the
President or other duly authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATE: _____________________ ________________________________
Signature(s)
________________________________
Title (if applicable)
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
<PAGE>
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