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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
USLIFE INCOME FUND, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ERNEST HOREJSI TRUST NO. 1B
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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Explanatory Note:
Ernest Horejsi Trust No. 1B is filing the materials contained in this Schedule
14A with the Securities and Exchange Commission in connection with a
solicitation of proxies in opposition to approval of an investment advisory
contract between the USLIFE Income Fund, Inc. and The Variable Annuity Life
Insurance Company.
The following letter will be sent on October 16, 2001 to shareholders of USLIFE
Income Fund, Inc. as of August 2, 2001:
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STEWART R. HOREJSI
200 SOUTH SANTA FE
SALINA, KANSAS 67401
OCTOBER 16, 2001
Dear Fellow Shareholder:
I represent the Ernest Horejsi Trust No. 1B (the Trust) which is a
substantial shareholder in the USLife Income Fund, Inc. Over the past few weeks,
you have probably received solicitations from the Fund's management asking you
to vote for approval of a new investment advisory contract with the Fund's
current adviser, The Variable Annuity Life Insurance Company (VALIC).
I believe the Fund has performed miserably under VALIC's management, yet
management is asking shareholders to approve a continuation of the Fund's
advisory relationship with VALIC.'D' I URGE SHAREHOLDERS TO JOIN WITH ME IN
REJECTING MANAGEMENT'S PROPOSAL TO RETAIN VALIC. Following are a few details
about VALIC's poor performance in serving Fund shareholders:
1. ON SEPTEMBER 27, 2001, THE FUND'S SHARES SOLD AT AN ALL-TIME LOW OF
$7.70 PER SHARE.
2. THE FUND'S AVERAGE ANNUAL TOTAL RETURN ON NET ASSETS WAS ONLY 0.45%
FOR THE THREE-YEAR PERIOD ENDING JUNE 30, 2001.
3. THE FUND'S NET ASSET VALUE PER SHARE DECLINED FROM $10.75 TO $8.65
FOR THE SAME THREE-YEAR PERIOD, A DROP OF $2.10 PER SHARE OR 19.5%. During
this same 3-year period, shareholders received dividends totaling $2.22 per
share, for a total net positive return of only $0.12 per share over 3 years.
4. THE FUND LOWERED ITS QUARTERLY DIVIDEND TWICE IN THE LAST YEAR. These
two cuts amounted to a reduction in annual shareholder income of
approximately 10.5%, from $0.76 to $0.68 per share.
5. THE FUND'S OWN BENCHMARK PRODUCED A 50% GREATER RETURN THAN DID
VALIC'S MANAGEMENT FOR THE 12 MONTHS ENDING JUNE 30, 2001.'DD' THIS IS THE
THIRD YEAR IN A ROW THAT THE FUND HAS UNDERPERFORMED ITS OWN BENCHMARK INDEX
since VALIC took over as the adviser to the Fund in September 1997.
6. IN 1999, THE FUND'S TOTAL RETURN ON NET ASSET VALUE, AFTER EXPENSES
OF 1.12%, WAS 0.64%, WHILE THE TWO INDICES USED BY THE FUND TO COMPARE ITS
PERFORMANCE RETURNED 2.71% AND 0.94%. In its letter to shareholders that
year, Fund management reported that returns 'compared favorably' to these
benchmark indices. It's difficult to understand how getting beaten by a
chosen benchmark by more than four-fold can be viewed as 'favorable.'
Although the Fund's total return on 'market value' was 7.85% during the same
period, the Trust believes that the Fund's return on net asset value is a
better measure of an adviser's performance than the Fund's return on market
value.
7. OUT OF THE 138 ISSUERS WHOSE SECURITIES ARE CURRENTLY HELD BY THE
FUND, 7 HAVE DECLARED BANKRUPTCY OR CEASED INTEREST PAYMENTS ON THE
UNDERLYING BONDS. These 7 issuers represent 5.0% of the 138 issuers whose
securities are held by the Fund. The remaining value of the Fund's assets
attributable to these 7 issuers was only $201,000 on June 30, 2001, with an
indicated par value of $4,130,000. The
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'D' A shareholder vote is required because American International Group, Inc.
has acquired VALIC's parent corporation, American General Corporation.
Under federal law, closing of this transaction resulted in an automatic
termination of VALIC's current advisory contract with the Fund. Because of
this automatic termination, management has asked shareholders to approve a
new advisory contract with VALIC.
'DD' According to the Fund's own Annual Report for the year ending June 30,
2001, the Fund's total return on net asset value (NAV) of 4.41% was soundly
beaten by its own stated benchmark, a blend of Merrill Lynch High Yield US
Corporate and US Government Indices, which returned 6.59%. This means that
matching the benchmark would have yielded 50% more to the Fund's
shareholders than VALIC's performance did.
remaining value of $201,000 represented .4% of the Fund's total net asset
value of $48,990,000 on June 30, 2001. These facts suggest a couple of
things to us -- either these issues were bought prior to the bankruptcies,
indicating poor credit analysis; or they were bought after the bankruptcies,
indicating that VALIC is risking shareholders' money investing in
speculative bankrupt issuers. Neither of these alternatives represents the
kind of management we think is appropriate for the Fund.
8. According to the Fund's most recent Annual Report, during the 2001
fiscal year APPROXIMATELY $1 MILLION OF CAPITAL LOSS CARRYFORWARDS EXPIRED.
This represents the permanent loss of a substantial shareholder asset. It is
alarming that over a seven year period the Fund has been unable to muster
enough gains to offset the Fund's losses. Moreover, additional valuable loss
carryforwards will continue to expire in future years if VALIC manages the
Fund as it has in the past.
9. NONE OF THE FUND'S DIRECTORS HAS INVESTED IN THE FUND. We believe
that all directors should have a personal financial investment in the Fund,
just as shareholders do. In our opinion, shareholders of the Fund may want
to take into account in their vote on the VALIC advisory contract that the
Fund's directors do not have a personal financial incentive to maximize the
Fund's returns.
I hope that if shareholders defeat management's proposal to retain VALIC,
the Board of Directors of the Fund would consider appointing Boulder Investment
Advisers, LLC, as adviser to the Fund. I am the portfolio manager for Boulder
Investment Advisers, LLC, which is the adviser to the Boulder Total Return Fund.
The Trust and various other entities affiliated with me beneficially own 42.22%
of the outstanding common shares of the Boulder Total Return Fund. I am also a
director of the Boulder Total Return Fund. Under my guidance as portfolio
manager, Boulder Total Return Fund achieved the #1 ranking for year 2000, based
on total return, in Lipper's closed-end fund standard category of 'Growth &
Income' funds, out of a total seven funds in that category. In the calendar
quarter ending June 30, 2001, the Boulder Total Return Fund was ranked second
out of six funds in Lipper's closed-end fund standard category of 'Value' funds.
These rankings within a particular fund category may not be indicative of a
fund's standing among equity funds overall. The ranking achieved by the Boulder
Total Return Fund does not indicate or provide any assurance that the Fund could
achieve a similar ranking if Boulder Investment Advisers, LLC were the adviser
to the Fund. The Boulder Total Return Fund has different investment objectives
from the Fund. The ranking indicates the relative success of the Boulder Total
Return Fund for the year 2000 in the defined category.
Voting against management's proposal will not result in Boulder Investment
Advisors, LLC becoming the adviser to the Fund. That would require the
preparation of a new advisory agreement, Board approval, and a separate vote by
the Fund's stockholders.
The upcoming vote presents shareholders with a unique opportunity to make an
impact on the direction and future performance of the Fund. Please join us and
say no to poor performance and management's recommendation to keep VALIC.
For additional information, please contact MacKenzie Partners, Inc., who is
assisting us in the solicitation, toll-free at 800-322-2885.
Sincerely,
STEWART R. HOREJSI
STEWART R. HOREJSI
IMPORTANT INFORMATION:
Ernest Horejsi Trust No. 1B (the 'Trust') urges all shareholders to read its
definitive proxy statement, which contains important information. The Trust's
definitive proxy statement was filed with the Securities and Exchange Commission
on September 20, 2001, and is available for free by contacting MacKenzie
Partners, Inc. toll-free at 800-322-2885, or from the SEC's website at
www.sec.gov.
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as......................................'D'
The double dagger symbol shall be expressed as..............................'DD'