<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 4, 1998
FILE NO. 2-71928
FILE NO. 811-03171
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 23 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 23 /X/
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VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone number, including Area Code: (212) 907-1500
David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
Peter D. Lowenstein
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
It is proposed that this filing will become effective (check
appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on January 4, 1999 pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
VALUE LINE
U.S. GOVERNMENT SECURITIES FUND, INC.
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PROSPECTUS
JANUARY 4, 1999
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[LOGO]
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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FUND SUMMARY
What are the Fund's goals? PAGE 2
What are the Fund's main investment strategies? PAGE
2
What are the main risks of investing in the Fund?
PAGE 2
How has the Fund performed? PAGE 3
What are the Fund's fees and expenses? PAGE 4
HOW WE MANAGE THE FUND
Our investment strategies PAGE 5
The securities in which we typically invest PAGE 5
The risks of investing in the Fund PAGE 6
WHO MANAGES THE FUND
Investment Adviser PAGE 7
Management fees PAGE 7
Portfolio management PAGE 7
ABOUT YOUR ACCOUNT
How to buy shares PAGE 8
How to sell shares PAGE 10
Special services PAGE 11
Dividends, distributions and taxes PAGE 12
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 14
<PAGE>
FUND SUMMARY
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WHAT ARE THE FUND'S GOALS?
The Fund primarily seeks maximum income without undue risk to
principal. Capital preservation and possible capital
appreciation are secondary objectives. Although the Fund will
strive to achieve these goals, there is no assurance that it
will.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
Under normal conditions, we invest at least 80% of the Fund's
net assets in securities issued or guaranteed by the U.S.
government and its agencies and instrumentalities including
mortgage-backed securities issued by government sponsored
enterprises. While we emphasize income from investments for
the Fund, we consider carefully security of principal,
duration, marketability, and diversity of investments. We are
looking for the best relative values among the universe of
government securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
Investing in any mutual fund involves risk, including the
risk that you may lose part or all of the money you invest.
The price of Fund shares will increase and decrease according
to changes in the value of the Fund's investments. An
investment in the Fund is not a complete investment program
and you should consider it just one part of your total
investment program. The principal risk you assume when
investing in the Fund is interest rate risk, the possibility
that as interest rates rise the value of some fixed income
securities may decrease. Mortgage-backed securities are also
subject to both credit and prepayment risk. For a more
complete discussion of risk, please turn to page 6.
2
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HOW HAS THE FUND PERFORMED?
This bar chart and table can help you evaluate the potential
risks of investing in the Fund. We show how returns for the
Fund's shares have varied over the past ten calendar years,
as well as the average annual returns of these shares for
one, five, and ten years all compared to the performance of
the Lehman Brothers Government Bond Index and the Lehman
Brothers Aggregate Bond Index, which are broad based market
indexes. You should remember that unlike the Fund, these
indexes are unmanaged and do not include the costs of buying,
selling, and holding the securities. The Fund's past
performance is not necessarily an indication of how it will
perform in the future.
YEAR BY YEAR RETURNS (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C>
1988 7.95%
1989 11.96%
1990 10.31%
1991 16.42%
1992 6.30%
1993 9.80%
1994 -10.67%
1995 14.44%
1996 3.93%
1997 9.22%
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q2 1989 +6.17%
WORST QUARTER: Q2 1994 (5.57%)
</TABLE>
As of September 30, 1998, the Fund had a year-to-date total
return of 8.05%.
AVERAGE ANNUAL RETURN AS OF 12/31/97
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
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U.S. GOVERNMENT SECURITIES FUND 9.22% 4.96% 7.71%
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LEHMAN GOVERNMENT BOND INDEX 9.59% 7.34% 8.88%
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LEHMAN AGGREGATE BOND INDEX 9.65% 7.48% 9.18%
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</TABLE>
3
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WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you pay in
connection with an investment in the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
<S> <C>
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MAXIMUM SALES CHARGES (LOAD) IMPOSED ON PURCHASES NONE
AS A PERCENTAGE OF OFFERING PRICE
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MAXIMUM DEFERRED SALES CHARGES (LOAD) AS A NONE
PERCENTAGE OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PRICE, WHICHEVER IS LOWER
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MAXIMUM SALES CHARGES (LOAD) IMPOSED ON REINVESTED
DIVIDENDS NONE
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REDEMPTION FEE NONE
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EXCHANGE FEE NONE
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MAXIMUM ACCOUNT FEE NONE
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</TABLE>
Annual Fund operating expenses are expenses that are deducted
from the Fund's assets.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
(% OF AVERAGE NET ASSETS)
<S> <C>
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MANAGEMENT FEES 0.50%
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DISTRIBUTION AND SERVICE (12b-1) FEES NONE
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OTHER EXPENSES 0.16%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.66%
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</TABLE>
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other
mutual funds. We show the cumulative amount of Fund expenses
on a hypothetical investment of $10,000 with an annual 5%
return over the time shown. This is an example only, and does
not represent future expenses, which may be greater or less
than those shown here.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
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U.S. GOVERNMENT SECURITIES
FUND $67 $211 $368 $822
</TABLE>
4
<PAGE>
HOW WE MANAGE THE FUND
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OUR INVESTMENT STRATEGIES
We analyze economic conditions and the outlook for interest
rates, seeking to identify the type of government securities
that we think make the best investments. The following is a
description of how the Adviser pursues the Fund's objectives.
We invest primarily in pursuit of a two-pronged investment
objective: maximum income and preservation of capital. We
blend a number of investment strategies to manage the Fund.
To seek current income and help preserve capital, we
generally invest at least 80% of the Fund in securities
issued by the U.S. government and its agencies and
instrumentalities known as U.S. government securities.
Typically, securities of medium maturities offer the highest
income without undue risk to capital. Accordingly, the
weighted average effective maturity of the bond portfolio
will generally be between 5 and 10 years. The weighted
average effective maturity for the bond portfolio as of
August 31, 1998 was 5.92 years.
THE SECURITIES IN WHICH WE TYPICALLY INVEST
The following is a description of the securities in which we
normally invest. Please see the Statement of Additional
Information for additional descriptions and risk information
on these and all the securities in which we invest.
Information on the Fund's recent holdings can be found in the
Fund's current annual or semiannual report.
U.S. GOVERNMENT SECURITIES: include U.S. Treasury bills,
notes and bonds, as well as securities issued or guaranteed
by U.S. government agencies or instrumentalities, such as the
Federal Farm Credit System, Federal Home Loan Banks, the
Tennessee Valley Authority, Farmers Home Administration, and
the Export-Import Bank.
MORTGAGE-BACKED SECURITIES: fixed-income securities which
represent pools of mortgages with investors receiving
principal and interest payments as the underlying mortgage
loans are paid back. We invest in those mortgage-backed
securities issued by certain government sponsored
enterprises, such as the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association and
the Government National Mortgage Association.
5
<PAGE>
TEMPORARY DEFENSIVE POSITION
From time to time in response to adverse market or other
conditions, we may invest up to 20% of the Fund's net assets
in cash or cash equivalents for temporary defensive purposes.
This may have the effect of reducing the Fund's income or
capital appreciation, or both.
PORTFOLIO TURNOVER
The Fund has engaged in active and frequent trading of
portfolio securities in order to take advantage of better
investment opportunities to achieve its investment objectives
which has resulted in higher trading costs and other
expenses. High portfolio turnover may increase the Fund's
transaction costs and negatively affect its performance.
Portfolio turnover may also result in capital gain
distributions that could raise your income tax liability.
THE RISKS OF INVESTING IN THE FUND
Investing in any mutual fund involves risk, including the
risk that you may receive little or no return on your
investment, and the risk that you may lose part or all of the
money you invest. Therefore, before you invest in this Fund
you should carefully evaluate the risks. Because of the
nature of the Fund, you should consider an investment in it
to be a long-term investment that will best meet its
objectives when held for a number of years. The chief risk
you assume when investing in this Fund is interest rate risk,
the possibility that as interest rates rise the value of some
fixed income securities, especially those securities with
longer maturities, may decrease. In addition, mortgage-backed
securities may be more volatile and less liquid than other
U.S. government securities and may be subject to credit and
prepayment risk. Prepayments of high interest rate
mortgage-backed securities during times of declining interest
rates will tend to lower the return of the Fund and could
result in losses to the Fund if some securities were acquired
at a premium. In addition, during periods of rising interest
rates, prepayments of motgage-backed securities may decline,
resulting in the extension of the Fund's average portfolio
maturity. As a result, the Fund's portfolio may experience
greater volatility during periods of rising interest rates
than under normal market conditions. With respect to U.S.
government securities supported only by the credit of the
issuing agency or an additional line of credit with the U.S.
Treasury, there is no guarantee that the U.S. Government will
provide support to such agencies and such securities may
involve risk of loss of
6
<PAGE>
principal and interest. Please see the Statement of
Additional Information for a further discussion of risks.
YEAR 2000 RISKS
Like other mutual funds, the Fund could be adversely affected
if the computer systems used by the Adviser and the Fund's
service providers do not properly process and calculate
date-related information and data from and after January 1,
2000. The Adviser is working to avoid such problems and to
obtain assurances from service providers that they are taking
similar steps.
WHO MANAGES THE FUND
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The business and affairs of the Fund are managed by the
Fund's officers under the direction of the Fund's Board of
Directors.
INVESTMENT ADVISER
Value Line, Inc. serves as the Fund's investment adviser and
manages the Fund's business affairs. Value Line also acts as
investment adviser to the other Value Line mutual funds and
furnishes investment counseling services to private and
institutional clients with combined assets of over $4
billion.
The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co.,
Inc. which with its predecessor had been in business since
1931. Value Line Securities, Inc., the Fund's distributor, is
a subsidiary of the Adviser. Another subsidiary of the
Adviser publishes The Value Line Investment Survey and other
publications.
MANAGEMENT FEES
For managing the Fund and its investments, the Adviser is
paid a yearly fee of 0.50% of the average daily net assets.
PORTFOLIO MANAGEMENT
A committee of employees of the Investment Adviser is jointly
and primarily responsible for the day-to-day management of
the Fund's portfolio.
7
<PAGE>
ABOUT YOUR ACCOUNT
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HOW TO BUY SHARES
/ / BY TELEPHONE
Once you have opened an account, you can buy additional
shares by calling 800-243-2729 between 9:00 a.m. and 4:00
p.m. New York time. You must pay for these shares within
three business days of placing your order.
/ / BY WIRE
If you are making an initial purchase by wire, you must call
us at 800-243-2729 so we can assign you an account number.
Request your bank to wire the amount you want to invest to
State Street Bank and Trust Company, ABA #011000028,
attention DDA # 99049868. Include your name, account number,
tax identification number and the name of the Fund in which
you want to invest.
/ / THROUGH A BROKER-DEALER
You can open an account and buy shares through a
broker-dealer, who may charge a fee for this service.
/ / BY MAIL
Complete the Account Application and mail it with your check
payable to NFDS, Agent, to Value Line Funds, c/o National
Financial Data Services, Inc., P.O. Box 419729, Kansas City,
MO 64141-6729. If you are making an initial purchase by mail,
you must include a completed Account Application, or an
appropriate retirement plan application if you are opening a
retirement account, with your check.
/ / MINIMUM INITIAL/ADDITIONAL INVESTMENTS
Once you have completed an application, you can open an
account with an initial investment of $1,000, and make
additional investments at any time for as little as $250. The
price you pay for shares will depend on when we receive your
purchase order.
/ / TIME OF PURCHASE
If we or an authorized agent receives your order before the
close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time) on a business day, you
will pay that day's closing share price which is based
8
<PAGE>
on the Fund's net asset value. If we receive your order after
the close of trading, you will pay the next business day's
price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject
any purchase order and to waive the initial and subsequent
investment minimums at any time.
/ / NET ASSET VALUE
We determine the Fund's net asset value (NAV) per share as of
the close of regular trading on the New York Stock Exchange
each business day. We calculate this value by adding the
market value of all the securities and assets in the Fund's
portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The
result is the net asset value per share. With assistance from
an independent pricing service, we price securities and other
assets for which market prices or quotations are available at
their market value. We price securities for which market
valuations are not available at their fair market value as
determined by the Board of Directors. Any investments which
have a maturity of less than 60 days we price at amortized
cost. The amortized cost method of valuation involves valuing
a security at its cost and accruing any discount or premium
over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the
security.
9
<PAGE>
HOW TO SELL SHARES
/ / BY MAIL
You can redeem your shares (sell them back to the Fund) by
mail by writing to: Value Line Funds, c/o National Financial
Data Services, Inc., P.O. Box 419729, Kansas City, MO
64141-6729. The request must be signed by all owners of the
account, and you must include a signature guarantee for each
owner. Signature guarantees are also required when redemption
proceeds are going to anyone other than the account holder(s)
of record. If you hold your shares in certificates, you must
submit the certificates properly endorsed with signature
guaranteed with your request to sell the shares. A signature
guarantee can be obtained from most banks or securities
dealers, but not from a notary public. A signature guarantee
helps protect against fraud.
/ / BY TELEPHONE OR WIRE
You can sell $1,000 or more of your shares by telephone or
wire, with the proceeds sent to your bank the next business
day after we receive your request.
/ / BY CHECK
You can sell $500 or more of your shares by writing a check
payable to the order of any person.
/ / THROUGH A BROKER-DEALER
You may sell your shares through a broker-dealer, who may
charge a fee for this service.
The Fund has authorized brokers to accept purchase and
redemption orders on behalf of the Fund. The Fund has also
authorized these brokers to designate others to accept
purchase and redemption orders on behalf of the Fund.
We treat any order to buy or sell shares that you place with
one of these brokers, or anyone they have designated, as if
you had placed it directly with the Fund. The shares that you
buy or sell through brokers or anyone they have designated
are priced at the next net asset value that is computed after
they accept your order.
/ / BY EXCHANGE
You can exchange all or part of your investment in the Fund
for shares in other Value Line funds. You may have to pay
taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to
get a copy of that fund's prospectus and read it carefully
10
<PAGE>
before buying shares through an exchange. To execute an
exchange, call 800-243-2729.
When you send us a properly completed request to sell or
exchange shares, you will receive the net asset value as
determined on the business day we receive your request. You
may have to pay taxes on the gain from your sale of shares.
We will pay you promptly, normally the next business day, but
no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to
15 days, before we send the proceeds to you.
11
<PAGE>
ACCOUNT MINIMUM
If as a result of redemption your account balance falls below
$500, the Fund may ask you to increase your balance within 30
days. If your account is not at the minimum by the required
time, the Fund may redeem your account, after first notifying
you in writing.
SPECIAL SERVICES
To help make investing with us as easy as possible, and to
help you build your investments, we offer the following
special services. You can get further information about these
programs by calling Shareholder Services at 800-223-0818.
/ / Valu-Matic-Registered Trademark- allows you to make
regular monthly investments of $25 or more automatically
from your checking account.
/ / Through our Systematic Cash Withdrawal Plan you can
arrange a regular monthly or quarterly payment from your
account payable to you or someone you designate. If your
account is $5,000 or more, you can have monthly or
quarterly withdrawals of $25 or more.
/ / You may buy shares in the Fund for your individual or
group retirement plan, including your Individual
Retirement Account (IRA) or Roth IRA. You may establish
your IRA account even if you already are a member of an
employer-sponsored retirement plan. Not all
contributions to an IRA account are tax deductible;
consult your tax advisor about the tax consequences of
your contribution.
12
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund pays dividends quarterly, while any capital gains
are distributed annually. We automatically reinvest all
dividends and any capital gains, unless you instruct us
otherwise in your application to purchase shares.
Tax laws are subject to change, so we urge you to consult
your tax adviser about your particular tax situation and how
it might be affected by current tax law. The tax status of
your dividends from the Fund is not affected by whether you
reinvest your dividends or receive them in cash.
Distributions from a fund's long-term capital gains are
taxable as capital gains, while dividends from short-term
capital gains and net investment income are generally taxable
as ordinary income. Any capital gains distributions may be
taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement by January 31 each year
detailing the amount and nature of all dividends and capital
gains that you were paid during the prior year.
13
<PAGE>
FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you
understand the Fund's financial performance for the past five
years. Certain information reflects financial results for a
single Fund share. The total returns in the table represent
the rate that an investor would have earned or lost on an
investment in the Fund assuming reinvestment of all dividends
and distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual
report, which is available upon request by calling
800-223-0818.
FINANCIAL HIGHLIGHTS
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<TABLE>
<S> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR:
YEAR ENDED AUGUST 31,
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1998 1997 1996 1995 1994
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NET ASSET VALUE, BEGINNING OF YEAR $11.04 $10.85 $11.28 $11.20 $13.44
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INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .69 .74 .77 .74 .82
Net gains or losses on securities (both
realized and unrealized) .41 .21 (.43) .04 (1.80)
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Total income (loss) from investment
operations 1.10 .95 .34 .78 (.98)
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LESS DISTRIBUTIONS:
Dividends from net investment income (.70) (.76) (.77) (.70) (.93)
Distributions from capital gains -- -- -- -- (.33)
- ------------------------------------------------------------------------------------------------------------
Total distributions (.70) (.76) (.77) (.70) (1.26)
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NET ASSET VALUE, END OF YEAR $11.44 $11.04 $10.85 $11.28 $11.20
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN 10.28% 9.01% 3.06% 7.37% (7.87)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $185,294 $185,004 $214,889 $256,004 $ 339,478
Ratio of expenses to average net assets .66%(1) .65%(1) .65%(1) .66% .63%
Ratio of net income to average net assets 6.07% 6.52% 6.74% 6.58% 6.58%
Portfolio turnover rate 159% 255% 158% 193% 100%
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</TABLE>
(1) Before offset of custody credits.
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14
<PAGE>
FOR MORE INFORMATION
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional
Information dated January 4, 1999, which we have filed
electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you
want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any
questions about investing in this Fund, you can write to us
at 220 East 42nd Street, New York, NY 10017-5891 or call
toll-free 800-223-0818. You may also obtain these reports at
no cost from our Internet site at http://www.valueline.com.
You can find reports and other information about the Fund on
the SEC Web site (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by
writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund,
including its Statement of Additional Information, can be
reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. You
can get information on operation of the public reference room
by calling the SEC at 1-800-SEC-0330.
<TABLE>
<S> <C>
INVESTMENT ADVISER SERVICE AGENT
Value Line, Inc. State Street Bank and Trust Company
220 East 42nd Street c/o NFDS
New York, NY 10017-5891 P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN DISTRIBUTOR
State Street Bank and Trust Company Value Line Securities, Inc.
225 Franklin Street 220 East 42nd Street
Boston, MA 02110 New York, NY 10017-5891
</TABLE>
<TABLE>
<S> <C>
Value Line Securities, Inc.
220 East 42nd Street, New York, NY 10017-5891 File no. 811-03171
</TABLE>
<PAGE>
VALUE LINE U.S. GOVERNMENT
SECURITIES FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
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STATEMENT OF ADDITIONAL INFORMATION
JANUARY 4, 1999
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This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line U.S. Government Securities
Fund, Inc. dated January 4, 1999, a copy of which may be obtained without charge
by writing or telephoning the Fund. The financial statements, accompanying notes
and report of independent auditors appearing in the Fund's 1998 Annual Report to
Shareholders are incorporated by reference in this Statement. A copy of the
Annual Report is available from the Fund upon request and without charge by
calling 800-223-0818.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Description of the Fund and Its Investments and Risks............................... B-2
Management of the Fund.............................................................. B-7
Investment Advisory and Other Services.............................................. B-9
Brokerage Allocation and Other Practices............................................ B-10
Capital Stock....................................................................... B-11
Purchase, Redemption and Pricing of Shares.......................................... B-11
Taxes............................................................................... B-12
Performance Data.................................................................... B-14
Financial Statements................................................................ B-15
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
CLASSIFICATION. The Fund is an open-end, diversified management investment
company incorporated in Maryland in 1981 as The Value Line Bond Fund, Inc. In
1986, the Fund's name was changed to Value Line U.S. Government Securities Fund,
Inc. The Fund's investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT STRATEGIES AND RISKS. The Fund has a fundamental policy that
under normal conditions at least 80% of the value of its net assets will be
invested in issues of the U.S. Government and its agencies and instrumentalities
("U.S. Government Securities"). The balance of the Fund's net assets may be
invested in repurchase agreements, commercial paper, convertible debentures,
short-term money market instruments, preferred stocks, common stocks, and bonds
at such times and in such amounts as in the opinion of the Adviser seem
appropriate to achieve the Fund's investment objective.
Among the investment strategies that may be used by the Adviser in managing
the Fund that are not principal strategies and the risks of such strategies are
the following:
RESTRICTED SECURITIES. On occasion the Fund may purchase securities which
would have to be registered under the Securities Act of 1933 if they were to be
publicly distributed. However, it will not do so if the value of such securities
and other securities which are not readily marketable (including repurchase
agreements maturing in more than seven days) would exceed 15% of the market
value of its net assets. It is management's policy to permit the occasional
acquisition of such restricted securities only if (except in the case of
short-term non-convertible debt securities) there is an agreement by the issuer
to register such securities, ordinarily at the issuer's expense, when requested
to do so by the Fund. The acquisition in limited amounts of restricted
securities is believed to be helpful toward the attainment of the Fund's
secondary objective of capital appreciation without unduly restricting its
liquidity or freedom in the management of its portfolio. However, because
restricted securities may only be sold privately or in an offering registered
under the Securities Act of 1933, or pursuant to an exemption from such
registration, substantial time may be required to sell such securities, and
there is greater than usual risk of price decline prior to sale. The Fund has no
present intention to purchase such securities.
STRUCTURED SECURITIES. The Fund may invest in structured notes, bonds or
debentures. The value of the principal of and/or interest on such securities is
determined by reference to changes in the value of specific currencies, interest
rates, commodities, indices or other financial indicators (the "Reference") or
the relative change in two or more References. The interest rate or the
principal amount payable upon maturity or redemption may be increased or
decreased depending upon changes in the applicable Reference. The terms of the
structured securities may provide that in certain circumstances no principal is
due at maturity and, therefore, may result in the loss of the Fund's investment.
Structured securities may be positively or negatively indexed, so the
appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, changes in
interest rates or the value of the security at maturity may be a multiple of
changes in the value of the Reference. Consequently, structured securities may
entail a greater degree of market risk than other types of fixed income
securities. Structured securities may also be more volatile, less liquid and
more difficult to price accurately than less complex securities.
B-2
<PAGE>
CUSTODIAL RECEIPTS. The Fund may acquire custodial receipts in respect of
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities, instrumentalities or sponsored
enterprises. Such custodial receipts evidence ownership of future interest
payments, principal payments or both on certain notes or bonds issued by the
U.S. Government or its agencies or instrumentalities. For certain securities law
purposes, custodial receipts are not considered obligations of the U.S.
Government.
INVERSE FLOATING RATE SECURITIES. The Fund may invest in inverse floating
rate securities. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher the degree of leverage of an inverse
floater, the greater the volatility of its market value.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to broker-dealers or institutional investors if as a result thereof the
aggregate value of all securities loaned does not exceed 33 1/3% of the total
assets of the Fund (including the loan collateral). The loans will be made in
conformity with applicable regulatory policies and will be 100% collateralized
by cash, cash equivalents or United States Treasury Bills on a daily basis in an
amount equal to the market value of the securities loaned and interest earned.
The Fund will retain the right to call, upon notice, the loaned securities and
intends to call loaned voting securities in anticipation of any important or
material matter to be voted on by shareholders. While there may be delays in
recovery or even loss of rights in the collateral should the borrower fail
financially, the loans will be made only to firms deemed by the Adviser to be of
good standing and will not be made unless, in the judgment of the Adviser, the
consideration which can be earned from such loans justifies the risk. The Fund
may pay reasonable custodian and administrative fees in connection with the
loans.
WHEN-ISSUED TRANSACTIONS. The Fund may from time to time purchase
securities on a "when-issued" basis. The price of such securities, which may be
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase. During the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the risk of
decline in value of the Fund's other assets. While when-issued securities may be
sold prior to the settlement date, the Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the commitment to purchase a security on a
when-issued basis is confirmed, the Fund will record the transaction and reflect
the value of the security in determining its net asset value.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities ("SMBS"), which are derivative multiclass mortgage
securities. Although the market for such securities is increasingly liquid,
certain SMBS may not be readily marketable and may be considered illiquid for
purposes of the Fund's limitation on investments in illiquid securities. The
market value of the class consisting entirely of principal payments generally is
unusually volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the
B-3
<PAGE>
interest from Mortgage Assets are generally higher than prevailing market yields
on other mortgage-backed securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
VARIABLE AND FLOATING RATE SECURITIES The interest rates payable on certain
securities in which the Fund may invest are not fixed and may fluctuate based
upon changes in market rates. A variable rate obligation has an interest rate
which is adjusted at predesignated periods in response to changes in the market
rate of interest on which the interest rate is based. Variable and floating rate
obligations are less effective than fixed rate instruments at locking in a
particular yield. Nevertheless, such obligations may fluctuate in value in
response to interest rate changes if there is a delay between changes in market
interest rates and the interest reset date for the obligation.
BANK OBLIGATIONS The Fund may invest in U.S. dollar denominated obligations
issued or guaranteed by U.S. banks. Bank obligations, including without
limitation time deposits, bankers' acceptances and certificates of deposit, may
be general obligations of the parent bank or may be limited to the issuing
branch by the terms of the specific obligations or by government regulation.
Banks are subject to extensive but different governmental regulations which
may limit both the amount and types of loans which may be made and interest
rates which may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of this industry.
ZERO COUPON BONDS The Fund's investments in fixed income securities may
include zero coupon bonds, which are debt obligations issued or purchased at a
significant discount from face value. The discount approximates the total amount
of interest the bonds would have accrued and compounded over the period until
maturity. Zero coupon bonds do not require the periodic payment of interest.
Such investments benefit the issuer by mitigating its need for cash to meet debt
service, but some also require a higher rate of return to attract investors who
are willing to defer receipt of such cash. Such investments may experience
greater volatility in market value than debt obligations which provide for
regular payments of interest. In addition, if an issuer of zero coupon bonds
held by the Fund defaults, the Fund may obtain no return at all on its
investment. The Fund will accrue income on such investments for tax and
accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Fund's distribution
obligations.
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The Fund will make payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
B-4
<PAGE>
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. The Fund has a fundamental
policy that it will not enter into repurchase agreements which will not mature
within seven days if any such investment, together with all other assets held by
the Fund which are not readily marketable, amounts to more than 15% of its net
assets. The Board of Directors monitors the creditworthiness of parties dealing
with the Fund in repurchase agreements and loans of the portfolio securities.
YEAR 2000. Like other mutual funds, the Fund could be adversely affected if
the computer systems used by the Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser
is taking steps that it believes are reasonably designed to address the Year
2000 Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact U.S. Government agencies and
instrumentalities and corporations, which may include issuers of portfolio
securities held by the Fund, to varying degrees based upon various factors,
including, but not limited to, the corporation's industry sector and degree of
technological sophistication. The Fund is unable to predict what impact, if any,
the Year 2000 Problem will have on issuers of the portfolio securities held by
the Fund.
FUND POLICIES.
(i)
The Fund may not issue senior securities except evidences of
indebtedness permitted under clause (ii) below.
(ii)
The Fund may not borrow money in excess of 10% of the value of its
assets and then only as a temporary measure to meet unusually heavy
redemption requests or for other extraordinary or emergency purposes.
Securities will not be purchased while borrowings are outstanding. No assets
of the Fund may be pledged, mortgaged or otherwise encumbered, transferred
or assigned to secure a debt.
(iii)
The Fund may not engage in the underwriting of securities except to
the extent that the Fund may be deemed an underwriter as to
restricted securities under the Securities Act of 1933 in selling portfolio
securities.
(iv)
The Fund may not invest 25% or more of its assets in securities of
issuers in any one industry. For this purpose, gas, electric, water
and telephone utilities will each be treated as a separate industry.
(v)
The Fund may not invest in real estate, mortgages or illiquid
securities of real estate investment trusts although the Fund may
purchase securities of issuers which engage in real estate operations.
B-5
<PAGE>
(vi)
The Fund may not lend money except in connection with the purchase
of debt obligations or by investment in repurchase agreements. The
Fund may lend its portfolio securities to broker-dealers and institutional
investors if as a result thereof the aggregate value of all securities
loaned does not exceed 33 1/3% of the total assets of the Fund (including
the loan collateral).
(vii)
The Fund may not engage in arbitrage transactions or in short sales,
except to the extent that it owns other securities convertible into
an equivalent amount of such securities and then only for the purpose of
protecting a profit or in attempting to minimize a loss with respect to
convertible securities. No more than 10% of the value of the Fund's assets
taken at market may at any one time be held as collateral for such sales.
(viii)
The Fund may not write, purchase or sell puts, calls or combinations
thereof, invest in commodities or commodity contracts or purchase
securities of other investment companies.
(ix)
The Fund may not invest more than 5% of the value of its total
assets in the securities of any one issuer or purchase more than 10%
of the outstanding voting securities, or any other class of securities, of
any one issuer. For purposes of this restriction, all outstanding debt
securities of an issuer are considered as one class, and all preferred stock
of an issuer is considered as one class. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
(x)
The Fund may not invest more than 5% of its total assets in
securities of issuers having a record, together with its
predecessors, of less than three years of continuous operation. This
restriction does not apply to any obligation issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(xi)
The Fund may not purchase securities for the purpose of exercising
control over another company.
(xii)
The Fund may not purchase securities on margin or participate on a
joint or a joint and several basis in any trading account in
securities or purchase oil, gas or other mineral type development programs
or leases, except that the Fund may invest in the securities of companies
which invest in or sponsor such programs.
(xiii)
The primary investment objective of the Fund is to obtain maximum
income without undue risk of principal. Capital preservation and
possible capital appreciation are secondary objectives. Under normal
conditions, at least 80% of the value of the Fund's net assets will be
invested in U.S. Government Securities.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
The policies set forth above may not be changed without the affirmative vote
of the majority of the outstanding voting securities of the Fund which means the
lesser of (1) the holders of more than 50% of the outstanding shares of capital
stock of the Fund or (2) 67% of the shares present if more than 50% of the
shares are present at a meeting in person or by proxy.
B-6
<PAGE>
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed by the Fund's officers
under the direction of the Board of Directors. Set forth below is certain
information regarding the Directors and Officers of the Fund.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 64 of Directors and Officer of the Adviser and Value Line Pub-
President lishing, Inc. Chairman and President of the
Value Line Funds and Value Line Securities,
Inc. (the "Distributor"); Chairman and
President of each of the 15 Value Line Funds.
John W. Chandler Director Consultant, Academic Search Consultation
2801 New Mexico Ave., N.W. Service, Inc. Trustee Emeritus and Chairman
Washington, DC 20007 (1993-1994) of Duke University; President
Age 75 Emeritus, Williams College.
*Leo R. Futia Director Retired Chairman and Chief Executive Officer
201 Park Avenue South of The Guardian Life Insurance Company of
New York, NY 10003 America and Director since 1970. Director
Age 79 (Trustee) of The Guardian Insurance & Annuity
Company, Inc., Guardian Investor Services
Corporation and the Guardian-sponsored mutual
funds.
David H. Porter Director President Emeritus, Skidmore College since
813 North Broadway January 1, 1999; President, Skidmore College,
Saratoga Springs, NY 12866 1987-1998; Director of Adirondack Trust
Age 62 Company.
Paul Craig Roberts Director Chairman, Institute for Political Economy;
505 S. Fairfax Street Director, A. Schulman Inc. (plastics).
Alexandria, VA 22320
Age 59
Nancy-Beth Sheerr Director Chairman, Radcliffe College Board of
1409 Beaumont Drive Trustees.
Gladwyne, PA 19035
Age 49
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
Bruce Alston Vice President Portfolio Manager with the Adviser since
Age 53 1997; Portfolio Manager with Dreyfus
Management, Inc., 1994-1996, and Prudential
Capital Markets Group, 1981-1994.
Nathan N.J. Grant Vice President Portfolio Manager with the Adviser since
Age 28 1996; Trader, Fixed Income Securities,
Blaylock & Partner, 1994-1996; Trader,
Donaldson, Lufkin, Jenrette, 1992-1994.
David T. Henigson Vice President, Director, Vice President and Compliance
Age 41 Secretary and Officer of the Adviser. Director and Vice
Treasurer President of the Distributor. Vice Presi-
dent, Secretary and Treasurer of each of the
15 Value Line Funds.
</TABLE>
- --------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors of the Fund are also directors/trustees of 11 other Value Line
Funds.
The following table sets forth information regarding compensation of
Directors by the Fund and by the Fund and the eleven other Value Line Funds of
which each of the Directors is a director or trustee for the fiscal year ended
August 31, 1998. Directors who are officers or employees of the Adviser do not
receive any compensation from the Fund or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSONS FROM FUND OF FUND EXPENSES RETIREMENT (12 FUNDS)
- ------------------------------------------- --------------- ------------------ ----------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner $ -0- N/A N/A $ -0-
John W. Chandler 2,968 N/A N/A 35,620
Leo R. Futia 2,968 N/A N/A 35,620
David H. Porter 2,037 N/A N/A 24,443
Nancy-Beth Sheer 2,968 N/A N/A 35,620
Paul Craig Roberts 2,968 N/A N/A 35,620
</TABLE>
As of August 31, 1998, no person owned of record or, to the knowledge of the
Fund, owned beneficially, 5% or more of the outstanding stock of the Fund other
than Guardian Insurance & Annuity Company, Inc., 201 Park Avenue South, New
York, NY 10003, which owned 873,347 shares of record or approximately 5.4%. The
Adviser and its parent, Arnold Bernhard & Co., Inc., owned
B-8
<PAGE>
781,710 shares (4.8%) and Jean B. Buttner, Chairman and CEO of the Adviser and
its parent and of the Fund owned 227,594 shares (1.40%). In addition, First
Union National Bank as Trustee of the Value Line, Inc. Profit Sharing and
Savings Plan owned 172,112 shares (1.06%). Certain other officers and directors
of the Fund as a group owned less than 1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Arnold Bernhard & Co., Inc., 220 East 42nd Street, New York, NY 10017, a
holding company, owns approximately 81% of the outstanding shares of the
Adviser's common stock. Jean Bernhard Buttner, Chairman, President and Chief
Executive Officer of the Adviser and Chairman and President of the Fund, owns
all of the voting stock of Arnold Bernhard & Co., Inc.
The Fund's investment adviser is Value Line, Inc. (the "Adviser"). The
investment advisory agreement between the Fund and the Adviser dated August 10,
1988 provides for an advisory fee payable monthly at a rate equal to 1/2 of 1%
of the Fund's average daily net assets during the year. During the fiscal years
ended August 31, 1996, 1997 and 1998, the Fund paid or accrued advisory fees of
$1,170,848, $991,099 and $932,396, respectively.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal and
accounting fees, fees and expenses in connection with qualification under
federal and state securities laws and costs of shareholder reports and proxy
materials. The Fund has agreed that it will use the words "Value Line" in its
name only so long as Value Line, Inc. serves as investment adviser to the Fund.
The agreement will terminate upon its assignment.
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment counseling
services to private and institutional accounts with combined assets in excess of
$4.5 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may
from time to time own securities which are also held in the portfolio of the
Fund. The Adviser has imposed rules upon itself and such persons requiring
monthly reports of security transactions for their respective accounts and
restricting trading in various types of securities in order to avoid possible
conflicts of interest. The Adviser may from time to time, directly or through
affiliates, enter into agreements to furnish for
B-9
<PAGE>
compensation special research or financial services to companies, including
services in connection with acquisitions, mergers or financings. In the event
that such agreements are in effect with respect to issuers of securities held in
the portfolio of the Fund, specific reference to such agreements will be made in
the "Schedule of Investments" in shareholder reports of the Fund. As of the date
of this Statement of Additional Information no such agreements exist.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor") whose address is 220 East 42nd Street, New
York, NY 10017, pursuant to which the Distributor acts as principal underwriter
and distributor of the Fund for the sale and distribution of its shares. The
Distributor is a wholly-owned subsidiary of the Adviser. For its services under
the agreement, the Distributor is not entitled to receive any compensation. The
Distributor also serves as distributor to the other Value Line funds. Jean
Bernhard Buttner is Chairman and President of the Distributor.
The Adviser has retained State Street Bank and Trust Company ("State
Street") to provide certain bookkeeping and accounting services for the Fund.
The Adviser pays State Street $32,400 per annum for each Value Line fund for
which State Street provides these services. State Street, whose address is 225
Franklin Street, Boston, MA 02110, also acts as the Fund's custodian, transfer
agent and dividend-paying agent. As custodian, State Street is responsible for
safeguarding the Fund's cash and securities, handling the receipt and delivery
of securities and collecting interest and dividends on the Fund's investments.
As transfer agent and dividend-paying agent, State Street effects transfers of
Fund shares by the registered owners and transmits payments for dividends and
distributions declared by the Fund. National Financial Data Services, Inc., a
State Street affiliate, whose address is 1004 Baltimore, Kansas City, MO 64105,
provides certain transfer agency functions to the Fund as an agent for State
Street. PricewaterhouseCoopers LLP, whose address is 1177 Avenue of the
Americas, New York, NY 10036, acts as the Fund's independent accountants and
also perform certain tax preparation services.
BROKERAGE ALLOCATION AND OTHER PRACTICES
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Debt
securities are traded principally in the over-the-counter market on a net basis
through dealers acting for their own account and not as brokers. Purchases and
sales of securities which are not listed or traded on a securities exchange will
ordinarily be executed with primary market makers acting as principal, except
when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of the brokerage and research services provided. Such
allocation will be in such amounts and in such proportions as the Adviser may
determine. Orders may also be placed with brokers or dealers who sell shares of
the Fund or other funds for which the Adviser acts as investment adviser, but
this fact, or the volume of such sales, is not a consideration in their
selection. During the years ended August 31, 1996, 1997 and 1998, the Fund paid
brokerage commissions of $3,013, $9,414, and $1,094, respectively.
B-10
<PAGE>
CAPITAL STOCK
Each share of the Fund's common stock, $1 par value, has one vote with
fractional shares voting proportionately. Shares have no preemptive rights, are
freely transferable, are entitled to dividends as declared by the Directors and,
if the Fund were liquidated, would receive the net assets of the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES: Shares of the Fund are purchased at net asset value next calculated
after receipt of a purchase order. Minimum orders are $1,000 for an initial
purchase and $250 for each subsequent purchase. The Fund reserves the right to
reduce or waive the minimum purchase requirements in certain cases such as
pursuant to payroll deduction plans, etc., where subsequent and continuing
purchases are contemplated.
AUTOMATIC PURCHASES: The Fund offers a free service to its shareholders,
Valu-Matic, through which monthly investments of $25 or more may be made
automatically into the shareholder's Fund account. The required form to enroll
in this program is available upon request from the Distributor.
RETIREMENT PLANS: Shares of the Fund may be purchased as the investment medium
for various tax-sheltered retirement plans. Upon request, Value Line Securities,
Inc. will provide information regarding eligibility and permissible
contributions. Because a retirement plan is designed to provide benefits in
future years, it is important that the investment objectives of the Fund be
consistent with the participant's retirement objectives. Premature withdrawals
from a retirement plan may result in adverse tax consequences. For more complete
information, contact Shareholder Services at 1-800-223-0818.
REDEMPTION: The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period, by the Fund under the following
conditions authorized by the 1940 Act: (1) For any period (a) during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) For any period during which an emergency exists as a result of
which (a) disposal by the Fund of securities owned by it is not reasonably
practical, or (b) it is not reasonably practical for the Fund to determine the
fair value of its net assets; (3) For such other periods as the Securities and
Exchange Commission may by order permit for the protection of the Fund's
shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time. Shareholders should note that if a loss has been realized on the sale of
shares of the Fund, the loss may be disallowed for tax purposes if shares of the
same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities or other property of the Fund. However, the Fund has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Fund's net assets
if that is less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing the net
asset value per share. Shareholders receiving such securities may incur
brokerage costs on their sales.
B-11
<PAGE>
CALCULATION OF NET ASSET VALUE: The net asset value of the Fund's shares
for purposes of both purchases and redemptions is determined once daily as of
the close of regular trading on the New York Stock Exchange (currently 4:00
p.m., New York time) on each day that the New York Stock Exchange is open for
trading except on days on which no orders to purchase, sell or redeem Fund
shares have been received. The holidays on which the New York Stock Exchange is
closed currently are: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The net asset value per share is determined by dividing the
total value of the investments and other assets of the Fund, less any
liabilities, by the total outstanding shares. The Fund values mortgage-backed
securities other than GNMAs (Government National Mortgage Association) on the
basis of valuations provided by dealers in such securities. Some of the general
factors which may be considered by the dealers in arriving at such valuations
include the fundamental analytical data relating to the security and an
evaluation of the forces which influence the market in which these securities
are purchased and sold. Determination of values may involve subjective judgment,
as the actual market value of a particular security can be established only by
negotiations between the parties in a sales transaction. The values for GNMAs
are determined on the valuation date by reference to valuations obtained from an
independent pricing service which determines valuations for normal
institutional-size trading units of debt securities, without exclusive reliance
upon quoted prices. This service takes into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data in determining valuations. Securities not priced in this manner are valued
at the midpoint between the latest available and representative asked and bid
prices provided by market makers for such securities or, when stock exchange
valuations are used, at the latest quoted sale price as of the close of business
of the New York Stock Exchange on the day of valuation. If there is no such
reported sale, the midpoint between the latest available and representative
asked and bid prices will be used. Short-term instruments with maturities of 60
days or less at the date of purchase are valued at amortized cost, which
approximates market. Short-term instruments with maturities greater than 60
days, at date of purchase, are valued at the midpoint between the latest
available and representative asked and bid prices, and, commencing 60 days to
maturity, such securities are valued at amortized cost. Securities for which
market valuations are not readily available will be valued at fair value as the
Board of Directors may determine.
TAXES
The Fund intends to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). The Fund so
qualified during the Fund's last fiscal year. By so qualifying, the Fund is not
subject to Federal income tax on its net investment income or net realized
capital gains which are distributed to shareholders (whether or not reinvested
in additional Fund shares).
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
B-12
<PAGE>
For Federal income-tax purposes, the Fund had a net capital-loss carryover
at August 31, 1998, of $49,044,227 of which $37,238,382 will expire in 2003,
$8,976,510 will expire in 2004 and $2,829,335 will expire in 2005. Realized
losses incurred after October 31, if so elected by the Fund, are deemed to arise
on the first day of the following fiscal year. In the year ended August 31,
1998, the Fund did not incur such losses.
Distributions of net investment income and of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income. Distributions of the excess of net long-term capital gain over
net short-term capital loss (net capital gains) are taxable to the shareholders
as long-term capital gain, regardless of the length of time the shares of the
Fund have been held by such shareholders and regardless of whether the
distribution is received in cash or in additional shares of the Fund. The Fund
does not anticipate that any distributions will be eligible for the dividends
received deduction for corporate shareholders. Upon request, the Fund will
inform shareholders of the amounts of dividends which so qualify.
A distribution by the Fund will result in reduction in the Fund's net asset
value per share. Such a distribution is taxable to the shareholder as ordinary
income or capital gain as described above even though, from an investment
standpoint, it may constitute a return of capital. In particular, investors
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at that time (at the net asset
value per share) includes the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will then receive a return of capital
upon the distribution which will nevertheless be taxable to them. All
distributions, whether received in shares or cash, must be reported by each
shareholder on his Federal income tax return. Furthermore, under the Code,
dividends declared by the Fund in October, November or December of any calendar
year, and payable to shareholders of record in such a month, shall be deemed to
have been received by the shareholder on December 31 of such calendar year if
such dividend is actually paid in January of the following calendar year.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date). Under certain circumstances, a loss on the sale
or redemption of shares held for twelve months or less may be treated as a
long-term capital loss to the extent that the Fund has distributed long-term
capital gain dividends on such shares. Moreover, a loss on sale or redemption of
Fund shares will be disallowed if shares of the Fund are purchased within 30
days before or after the shares are sold or redeemed.
For shareholders who fail to furnish to the Fund their social security or
taxpayer identification numbers and certain related information or who fail to
certify that they are not subject to back-up withholding, dividends,
distributions of capital gains and redemption proceeds paid by the Fund will be
subject to a 31% Federal income tax withholding requirement. If the withholding
provisions are applicable, any such dividends or capital-gains distributions to
these shareholders, whether taken in cash or reinvested in additional shares,
and any redemption proceeds will be reduced by the amounts required to be
withheld.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents, domestic
corporations and partnerships, and certain trusts
B-13
<PAGE>
and estates) and is not intended to be a complete discussion of all Federal tax
consequences. Shareholders are advised to consult with their tax advisers
concerning the application of Federal, state and local taxes to an investment in
the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual compounded rate of return for the periods of one year,
five years and ten years, all ended on the last day of a recent calendar
quarter. The Fund may also advertise aggregate total return information for
different periods of time.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T) to the power of n = ERV
Where: P = a hypothetical initial purchase order of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the
hypothetical $1,000 purchase at the end
of the period.
The Fund's average annual total returns for the one, five and ten year
periods ending August 31, 1998 were 10.28%, 4.15% and 7.69%, respectively.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
The Fund may also quote its current yield in advertisements and investor
communications.
The yield computation is determined by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period and annualizing the resulting figure, according to
the following formula:
Yield = 2 [(a - b + 1)to the power of 6 -1)]
---
cd
Where: a = dividends and interest earned during the
period (calculated as required by the
Securities and Exchange Commission);
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on
the last day of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in advertising by the Fund.
B-14
<PAGE>
The Fund may also, from time to time, include a reference to its current
quarterly or annual yield in investor communications and sales literature
preceded or accompanied by a Prospectus, reflecting the amounts actually
distributed to shareholders which could include capital gains and other items of
income not reflected in the Fund's yield, as well as interest and dividend
income received by the Fund and distributed to shareholders (which is reflected
in the Fund's yield).
All calculations of the Fund's distribution rate are based on the
distributions per share which are declared, but not necessarily paid, during the
fiscal year. The distribution rate is determined by dividing the distributions
declared during the period by the maximum offering price per share on the last
day of the period and annualizing the resulting figure. In calculating its
distribution rate, the Fund has used the same assumptions that apply to its
calculation of yield. The distribution rate does not reflect capital
appreciation or depreciation in the price of the Fund's shares and should not be
considered to be a complete indicator of the return to the investor on his
investment.
The Fund's current yield, distribution rate and total return may be compared
to relevant indices, including U.S. domestic and international taxable bond
indices (such as the Lehman Government Bond Index and the Lehman Aggregate Bond
Index) and data from Lipper Analytical Services, Inc., or Standard & Poor's
Indices.
From time to time, evaluations of the Fund's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield, total return or
distribution rate for any period should not be considered as a representation of
what an investment may earn or what an investor's total return, yield or
distribution rate may be in any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended August 31, 1998,
including the financial highlights for each of the five fiscal years in the
period ended August 31, 1998, appearing in the 1998 Annual Report to
Shareholders and the report thereon of PricewaterhouseCoopers LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information.
B-15
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation and Articles of Amendment.
(b) By-laws, as amended.
(c) Instruments Defining Rights of Security Holders. Reference is made to
Article Fifth of the Articles of Incorporation filed as Exhibit (a)
hereto.
(d) Investment Advisory Agreement.
(e) Principal Underwriter and Distributor Agreement.
(f) Custodian Agreement and Amendment thereto.
(g) Legal Opinion.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 25. INDEMNIFICATION.
Incorporated by reference to Article Sixth (7) of Exhibit (a).
ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individuals, trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 27.
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- -------------------------- -------------------------------- ---------------------------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, President Chairman of the Board and Chief Executive Officer
and Chief Executive Officer of Arnold Bernhard & Co., Inc. and Chairman of the
Value Line Funds and the Distributor
Samuel Eisenstadt Senior Vice President and ---------------------------------------------
Director
David T. Henigson Vice President, Treasurer and Vice President and a Director of Arnold Bernhard &
Director Co., Inc. and the Distributor
Howard A. Brecher Vice President, Secretary and Vice President, Secretary, Treasurer and a Director
Director of Arnold Bernhard & Co., Inc.
Harold Bernard, Jr. Director Retired Administrative Law Judge
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison, attorneys,
One Market Plaza, San Francisco, CA 94105
Linda S. Wilson Director President, Radcliffe College, 10 Garden Street,
Cambridge, MA 02138
</TABLE>
C-1
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Value Line Securities, Inc., acts as principal underwriter for the
following Value Line funds, including the Registrant: The Value Line
Fund, Inc.; The Value Line Income Fund, Inc.; The Value Line Special
Situations Fund, Inc.; Value Line Leveraged Growth Investors, Inc.; The
Value Line Cash Fund, Inc.; Value Line U.S. Government Securities Fund,
Inc.; Value Line Centurion Fund, Inc.; The Value Line Tax Exempt Fund,
Inc.; Value Line Convertible Fund, Inc.; Value Line Aggressive Income
Trust; Value Line New York Tax Exempt Trust; Value Line Strategic Asset
Management Trust; Value Line Small-Cap Growth Fund, Inc.; Value Line
Asset Allocation Fund, Inc.; Value Line U.S. Multinational Company Fund,
Inc.
(b)
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
- ------------------------- ------------------ --------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Chairman of the
Board Board and President
David T. Henigson Vice President, Vice President,
Secretary, Secretary and
Treasurer and Treasurer
Director
Stephen LaRosa Asst. Vice Asst. Treasurer
President
</TABLE>
The business address of each of the officers and directors is 220 East
42nd Street, NY 10017-5891.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc.
220 East 42nd Street
New York, NY 10017
For records pursuant to:
Rule 31a-1(b)(4),(5),(6),(7),(10),(11)
Rule 31a-1(f)
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141
For records pursuant to Rule 31a-1(b)(2)(iv)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
For all other records
ITEM 29. MANAGEMENT SERVICES.
None.
C-2
<PAGE>
ITEM 30. UNDERTAKINGS.
None.
--------------
C-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 22 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 22, 1998, relating to the financial
statements and financial highlights appearing in the August 31, 1998 Annual
Report to Shareholders of Value Line U.S. Government Securities Fund, Inc.,
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the heading "Financial Highlights" in
the Prospectus and under the heading "Financial Statements" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
October 28, 1998
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 30 day of December, 1998.
VALUE LINE U.S. GOVERNMENT
SECURITIES FUND, INC.
By: /s/ DAVID T. HENIGSON
...................................
DAVID T. HENIGSON, VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
------------------------------------------ --------------------------------- -----------------------
<S> <C> <C> <C>
*JEAN B. BUTTNER Chairman and Director; President; December 30, 1998
(JEAN B. BUTTNER) Principal Executive Officer
*JOHN W. CHANDLER Director December 30, 1998
(JOHN W. CHANDLER)
*LEO R. FUTIA Director December 30, 1998
(LEO R. FUTIA)
*DAVID H. PORTER Director December 30, 1998
(DAVID H. PORTER)
*PAUL CRAIG ROBERTS Director December 30, 1998
(PAUL CRAIG ROBERTS)
*NANCY-BETH SHEERR Director December 30, 1998
(NANCY-BETH SHEERR)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial December 30, 1998
.......................................... and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
*By /s/ DAVID T. HENIGSON
.................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-5
<PAGE>
ARTICLES OF INCORPORATION
OF
THE VALUE LINE BOND FUND, INC.
THIS IS TO CERTIFY:
FIRST: We, the subscribers, Denis Jamison & Thomas Sexton, each of
whose post office address is 711 Third Avenue, New York, New York 10017 all
being of full legal age, do, under and by virtue of the General Laws of the
State of Maryland authorizing the formation of corporations, associate
ourselves with the intention of forming a corporation.
SECOND: The name of the corporation is The Value Line Bond Fund, Inc.
(hereinafter called the "Corporation").
THIRD: The purpose or purposes for which the Corporation is formed and
the business or objects to be transacted, carried on and promoted by it, are
as follows:
(1) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the conduct
of such operations.
(2) (a) To hold, invest and reinvest its funds, and in
connection therewith to hold part or all of its funds in cash, and to
purchase or otherwise acquire, hold for investment or otherwise, sell,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to
account or realize upon, securities (which term "securities") shall for the
purposes of these Articles of Incorporation, without limitation of the
generality thereof, be deemed to include, but is not limited to common and
preferred stocks, warrants, bonds, debentures, bills, time notes and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
government securities, and money market instruments including bank
certificates of deposit, commercial paper, bankers acceptances and all kinds
of repurchase agreements, of any corporation, company, trust, association,
firm or other business organization however established, and of any country,
state, municipality or other political subdivision, or of any other
governmental or quasi-governmental agency or
<PAGE>
-2-
instrumentality created or issued by any issuer (which term "issuer" shall for
the purposes of these Articles of Incorporation, without limitation of the
generality thereof, be deemed to include any persons, firms, associations,
corporations, syndicates, combinations, organizations, governments, or
subdivisions thereof); and to exercise as owner or holder of any securities, all
rights, powers and privileges in respect thereof; and to do any and all acts and
things for the perservation, protection, improvement and enhancement in value of
any or all such securities.
(b) To aid by further investment any corporation, company,
trust, association, firm or other business organization, any obligation of or
interest in which is held by the Corporation or in the affairs of which the
Corporation has any direct or indirect interest, and to do anything designed
to protect, preserve, improve or enhance the value of such obligation or
interest.
(c) To promote or aid the incorporation of any
organization or enterprise under the laws of any country, state, municipality
or other political subdivision, and to cause the same to be dissolved, wound
up, liquidated, merged or consolidated.
(3) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration (including, without limitation thereto,
securities) now or hereafter permitted by the laws of Maryland and by these
Articles of Incorporation, as its Board of Directors may determine; when
shares of the capital stock of the Corporation are issued for a consideration
consisting of or including securities, the actual value of such securities
shall for the purposes of Title II of the Corporations and Associations
Article of the Annotated Code of Maryland, be deemed to be an amount not
exceeding the fair market value thereof fixed on a date and in a manner
determined by the Board of Directors of the Corporation, and such
consideration shall, for such purposes, be deemed to be "securities".
(4) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner
and to the extent now or
<PAGE>
-3-
hereafter permitted by the laws of said State and by these Articles of
Incorporation.
(5) To conduct its business in all its branches at one or more
offices in Maryland and elsewhere in any part of the world, without
restriction or limit as to extent.
(6) To carry out all or any of the foregoing objects and
purposes as principal or agent, and alone or with associates or, to the
extent now or hereafter permitted by the laws of Maryland, as a member of, or
as the owner or holder of any stock of, or shares of interest in, any firm,
association, corporation, trust or syndicate; and in connection therewith to
make or enter into such deeds or contracts with any persons, firms,
associations, corporations, syndicates, governments or subdivisions thereof,
and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
(7) To do any and all such further acts and things and to
exercise any and all such further powers as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment,
carrying out or attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Article of
these Articles of Incorporation, and shall each be regarded as independent, and
construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms of the general powers of the
Corporation now or hereafter conferred by the laws of the State of Maryland, nor
shall the expression of one thing be deemed to exclude another, though it be of
like nature, not expressed; provided, however, that the Corporation shall not
have power to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an ordinary
business corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state,
<PAGE>
-4-
territory, district or country except to the extent that the same may lawfully
be carried on or exercised under the laws thereof.
FOURTH: The post office address of the place at which the
principal office of the Corporation in the State of Maryland will be located
is 929 North Howard Street, Baltimore City, Maryland 21201, c/o The
Prentice-Hall Corporation System, Maryland.
The Corporation's resident agent is The Prentice-Hall Corporation
System, Maryland, whose post office address is 929 North Howard Street,
Baltimore City, Maryland, 21201. Said resident agent is a corporation of the
State of Maryland.
FIFTH: (1) The total amount of authorized capital stock of the
Corporation and the number and par value of its shares is $100,000,000
consisting of 100,000,000 shares of the par value of $1.00 each, all of one
class.
(2) At all meetings of stockholders each stockholder of the
Corporation shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation. Any fractional share, if any such
fractional shares are outstanding, shall carry proportionately all the rights
of a whole share, including the right to vote and the right to receive
dividends. The presence in person or by proxy of the holders of a majority of
the shares of capital stock of the Corporation outstanding and entitled to
vote thereat shall constitute a quorum at any meeting of the shareholders. If
at any meeting of the shareholders there shall be less than a quorum present,
the shareholders present at such meeting may, without further notice, adjourn
the same from time to time until a quorum shall attend, but no business shall
be transacted at any such adjourned meeting except such as might have been
lawfully transacted had the meeting not been adjourned.
(3) All shares of the capital stock of the Corporation now or
hereafter authorized shall be subject to redemption and redeemable, in the
sense used in the General Laws of the State of Maryland authorizing the
formation of corporations, at the redemption price for any such shares,
determined in the manner set out in these Articles of Incorporation. In the
absence of any specification as to the purposes for which shares of the
capital stock of the Corporation are redeemed or purchased by it, all shares
so redeemed or purchased shall be deemed to be acquired for retirement in the
sense contemplated by the
<PAGE>
-5-
laws of the State of Maryland and the number of the authorized shares of the
capital stock of the Corporation shall not be reduced by the number of any
shares redeemed or purchased by it.
(4) Notwithstanding any provisions of law requiring any action
to be taken or authorized by the affirmative vote of the holders of a
majority or other designated proportion of the shares, or to be otherwise
taken or authorized by a vote of the stockholders, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding and entitled
to vote thereon pursuant to the provisions of these Articles of Incorporation.
(5) No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of the capital
stock of the Corporation which it may issue or sell (whether out of the
number of shares authorized by these Articles of Incorporation, or out of any
shares of the capital stock of the Corporation acquired by it after the issue
thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(6) All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of these Articles of
Incorporation.
SIXTH: (1) The number of Directors of the Corporation shall be nine
and the names of those who shall act as such until the first annual meeting
or until their successors are duly chosen and qualified are as follows:
Arnold Bernhard
George W. Anderson
Harold Benjamin
Shelby Cullom Davis
Charles E. Reed
Ruxton M. Ridgely
Edmund F. Mansure
Mark K. Tavel
Denis P. Jamison
However, the By-Laws of the Corporation may fix the
<PAGE>
-6-
number of Directors at a number greater or less than that named in these
Articles of Incorporation and may authorize the Board of Directors, by the vote
of a majority of the entire Board of Directors, to increase or decrease the
number of Directors fixed by these Articles of Incorporation or by the By-Laws
within a limit specified in the By-Laws, provided that in no case shall the
number of Directors be less than three, and to fill the vacancies created by any
such increase in the number of Directors. Unless otherwise provided by the
By-Laws of the Corporation, the Directors of the Corporation need not be
stockholders therein.
(2) The By-Laws of the Corporation may divide the Directors of
the Corporation into classes and prescribe the tenure of office of the
several classes, but no class shall be elected for a period shorter than that
from the time of the election following the division into classes until the
next annual meeting and thereafter for a period shorter than the interval
between annual meetings or for a longer period than five years, and the term
of office of at least one class shall expire each year.
(3) Any officer elected or appointed by the Board of Directors
or by any committee of said Board or by the stockholders or otherwise, may be
removed at any time with or without cause, in such lawful manner as may be
provided in the By-Laws of the Corporation.
(4) If the By-Laws so provide, the Board of Directors of the
Corporation shall have power to hold their meetings, to have an office or
offices and, subject to the provisions of the laws of Maryland, to keep the
books of the Corporation outside of said State at such places as may from
time to time be designated by them.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the Board of Directors may exercise
all such powers and do all such acts and things as may be exercised or done
by the corporation, subject, nevertheless, to the express provisions of the
laws of Maryland, of these Articles or Incorporation and of the By-Laws of
the Corporation.
(6) Shares of stock in other corporations shall be voted by the
<PAGE>
-7-
President or a Vice-President, or such officer or officers of the Corporation or
such other person or persons as the Board of Directors shall designate for the
purpose, or by a proxy or proxies thereunto duly authorized by the Board of
Directors, except as otherwise ordered by vote of the holders of a majority of
the shares of the capital stock of the Corporation outstanding and entitled to
vote in respect thereto.
(7) Each director and officer (and his heirs, executors and
administrators) shall be indemnified by the Corporation against reasonable
costs and expenses incurred by him in connection with any action, suit or
proceeding to which he is made a party by reason of his being or having been
a director or officer of the Corporation, except in relation to any action,
suit or proceeding in which he has been adjudged liable because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. In the absence of an adjudication,
which expressly absolves the director or officer of liability to the
Corporation or its stockholders for willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, or in the event of a settlement, each director and officer (and his
heirs, executors and administrators) shall be indemnified by the Corporation
against payments made, including reasonable costs and expenses, provided that
such indemnity shall be conditioned upon the prior determination by a
resolution of a majority of a quorum of those members of the Board of
Directors of the Corporation who are not involved in the action, suit or
proceeding and are not an interested person of the Corporation, as defined in
Section 2(a)(19) of the Investment Company Act of 1940, that the director or
officer has no liability by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, and provided further, that if a majority of the members of the Board
of Directors of the Corporation are involved in the action, suit or
proceeding, such determination shall have been made by a written opinion of
independent counsel. The indemnity provided herein shall, in the event of the
settlement of any such action, suit, or proceeding, not exceed the costs and
expenses (including attorneys' fees) which would reasonably have been
incurred if such action, suit or proceeding had been litigated to a final
conclusion.
<PAGE>
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Such determination by resolution of the Board of Directors or by independent
counsel and the payment of amounts by the Corporation on the basis thereof shall
not prevent a stockholder from challenging such indemnification by appropriate
legal proceeding on the grounds that the officer or director was liable because
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The foregoing rights and
indemnifications shall be exclusive of any other right to which the officers and
directors may be entitled according to law.
SEVENTH: The following provisions are hereby adopted for the purpose
of defining and regulating the powers of the Corporation and of the Directors
and stockholders.
SECTION I
ISSUE OF THE CORPORATION'S SHARES
1.01 GENERAL. The Board of Directors may from time to time issue and
sell or cause to be issued and sold any of the Corporation's authorized
shares, including any additional shares hereafter authorized and any shares
redeemed or repurchased by the Corporation, except that only shares
previously contracted to be sold may be issued during any period when the
determination of net asset value is suspended pursuant to the provisions of
Section III hereof. All such authorized shares, when issued in accordance
with the terms of this Section I, shall be fully paid and nonassessable.
1.02 PRICE. No shares of the Corporation shall be issued or sold by
the Corporation, except as a stock dividend distributed to shareholders, for
less than an amount which would result in proceeds to the Corporation, before
taxes payable by the Corporation in connection with such transaction, of at
least the net asset value per share determined as set forth in Section III
hereof as of such time as the Board of Directors shall have by resolution
theretofore prescribed by not earlier than the close of business on the
business day (which term, as used herein, shall mean a day on which the New
York Stock Exchange is open all or part of the day for unrestricted trading)
next preceding the date of receipt of an unconditional purchase order for
such shares. In the absence of a resolution of the Board of
<PAGE>
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Directors applicable to the transaction, such net asset value shall be that next
determined after receipt of such purchase order. For this purpose, the time of
receipt of such an unconditional order shall be the time it is first received by
the principal underwriter or by the custodian or depository of the Corporation's
assets or by another agent of the Corporation designated for the purpose.
1.03 ON MERGER OR CONSOLIDATION. In connection with the acquisition
of all or substantially all the assets or stock of another investment company
or investment trust, the Board of Directors may issue or cause to be issued
shares of the Corporation and accept in payment therefor, in lieu of cash,
such assets at their market value, or such stock at the value of the assets
held by such investment company or investment trust as determined by the
Board of Directors pursuant to the provisions of Section 3.04(b)(2)(iii) of
this Article SEVENTH, either with or without adjustment for contingent costs
or liabilities, provided that the funds of the Corporation are permitted by
law to be invested in such assets or stock.
1.04 FRACTIONAL SHARES. The Board of Directors may issue and sell
fractions of shares having pro rata all the rights of full shares, including,
without limitation, the right to vote and to receive dividends.
SECTION II
REDEMPTION AND REPURCHASE OF
THE CORPORATION'S SHARES
2.01 REDEMPTION OF SHARES. The Corporation shall redeem its shares,
subject to the conditions and at the price determined as hereinafter set
forth, upon proper application of the record holder thereof at such office or
agency as may be designated from time to time for that purpose by the Board
of Directors. Any such application must be accompanied by the certificate or
certificates, if any, evidencing such shares, duly endorsed or accompanied by
a proper instrument of transfer. The Board of Directors shall have power to
determine from time to time the form and the other accompanying documents
which shall be necessary to constitute a proper application for redemption.
2.02 PRICE. Such shares shall be redeemed at their net asset value
determined as set forth in Section III hereof as of such time as the Board of
<PAGE>
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Directors shall have theretofore prescribed by resolution, which time shall not
be later than the close of business on the next business day succeeding, and not
earlier than the close of business on the next business day preceding, the date
on which proper application is made for redemption. In the absence of such
resolution, the redemption price of shares deposited shall be the net asset
value of such shares next determined as set forth in Section III hereof after
receipt of such application.
2.03 PAYMENT. Payment for such shares shall be made to the
shareholders of record with seven days after the date upon which proper
application is received, subject to the provisions of Section 2.04 hereof.
Such payment shall be made in cash or other assets of the Corporation or
both, as the Board of Directors shall prescribe. For the purposes of such
payment for shares redeemed, the value of assets delivered shall be
determined as set forth in Section III hereof as of the same time of which
the per share net asset value of such shares is determined.
2.04 EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE. If,
pursuant to Section 3.03 hereof, the Board of Directors shall declare a
suspension of the determination of net asset value, the rights of
shareholders (including those who shall have applied for redemption pursuant
to Section 2.01 hereof, but who shall not yet have received payment) to have
shares redeemed and paid for by the Corporation shall be suspended until the
termination of such suspension is declared. Any record holder whose
redemption right is so suspended may, during the period of such suspension,
by appropriate written notice of revocation to the office or agency where
application was made, revoke his application and withdraw any share
certificates which accompanied such application. The redemption price of
shares for which redemption applications have not been revoked shall be the
net asset value of such shares next determined as set forth in Section III
after the termination of such suspension, and payment shall be made within
seven days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.
2.05 REPURCHASE BY AGREEMENT. The Corporation may repurchase shares
of the Corporation directly, or through its principal underwriter or other
agent designated for the purpose, by agreement with the owner thereof at a
price not
<PAGE>
-11-
exceeding the net asset value per share determined as of the time when the
purchase or contract of purchase is made or the net asset value as of any time
which may be later determined pursuant to Section III hereof, provided payment
is not made for the shares prior to the time as of which such net asset value is
determined.
2.06 CORPORATION'S OPTION TO REDEEM SHARES
(a) The Corporation shall have the right at any time and without
prior notice to the shareholder to redeem all shares in any account for their
then-current net asset value per share if all shares in the account have an
aggregate net asset value of less than $1,000, or such lesser amount as the
Board of Directors may from time to time determine.
(b) The Corporation shall have the right at any time and without
prior notice to the shareholder to redeem shares in any account for their
than-current net asset value per share if and to the extent it shall be
necessary to reimburse the Corporation for any loss sustained by the
Corporation by reason of the failure of the shareholder in whose name such
account is registered to make full payment for shares of the Corporation
purchased by such shareholder.
(c) The right of redemption provided by each of the foregoing
subsections of this Section 2.06 shall be subject to such terms and
conditions as the Board of Directors may from time to time approve, and
subject to the Corporation's giving general notice of its intention to avail
itself of such right, either by publication in the Corporation's prospectus
or by such means as the Board of Directors shall determine.
SECTION III
NET ASSET VALUE OF SHARES
3.01 BY WHOM DETERMINED. The Board of Directors shall have the power
and duty to determine from time to time the net asset value per share of the
outstanding shares of the Corporation. It may delegate such power and duty to
one or more of the directors and officers of the Corporation, to the
custodian or depository of the Corporation's assets, or to another agent of
the Corporation
<PAGE>
-12-
appointed for such purpose. Any determination made pursuant to this Section by
the Board of Directors or its delegate shall be binding on all parties
concerned.
3.02 WHEN DETERMINED. The net asset value shall be determined at such
times as the Board of Directors shall prescribe by resolution, provided that
such net asset value shall be determined at least once each week as of the
close of business on a business day. In the absence of a resolution of the
Board of Directors, the net asset value shall be determined as of the close
of trading on the New York Stock Exchange on each business day.
3.03 SUSPENSION OF DETERMINATION OF NET ASSET VALUE. The Board of
Directors may declare a suspension of the determination of net asset value
for the whole or any part of any period (a) during which the New York Stock
Exchange is closed, other than customary weekend amid holiday closing, (b)
during which trading on the New York Stock Exchange is restricted, (c) during
which an emergency exists as a result of which disposal by the Corporation of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Corporation fairly to determine the value of its net
assets, or (d) during which a governmental body having jurisdiction over the
Corporation may by order permit for the protection of the security holders of
the Corporation. Such suspension shall take effect at such time as the Board
of Directors shall specify, which shall not be later than the close of
business on the business day next following the declaration, and thereafter
there shall be no determination of net asset value until the Board of
Directors shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which (a) the condition
giving rise to the suspension shall have ceased to exist, and (b) no other
condition exists under which suspension is authorized under this Section
3.03. Each declaration by the Board of Directors pursuant to this Section
3.03 shall be consistent with such official rules and regulations, if any,
relating to the subject matter thereof as shall have been promulgated by the
Securities and Exchange Commission or any other governmental body having
jurisdiction over the Corporation as shall be in effect at the time. To the
extent not inconsistent with such official rules and regulations, the
determination of the Board of Directors shall be conclusive.
<PAGE>
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3.04 COMPUTATION OF PER SHARE NET ASSET VALUE
(a) NET ASSET VALUE PER SHARE. The net asset value of each
share as of any particular time shall be the quotient obtained by dividing
the value of the net assets of the Corporation by the total number of shares
outstanding.
(b) VALUE OF CORPORATION'S NET ASSETS. The value of the
Corporation's net assets as of any particular time shall be the value of the
Corporation's assets less its liabilities, determined and computed as follows:
(1) CORPORATION'S ASSETS. The Corporation's assets shall
be deemed to include: (A) all cash on hand or on deposit, including any
interest accrued thereon, (B) all bills and demand notes and accounts
receivable, (C) all securities owned or contracted for by the Corporation,
(D) all stock and cash dividends and cash distributions payable to but not
yet received by the Corporation (when the valuation of the underlying
security is being determined ex-dividend), (E) all interest accrued on any
interest-bearing securities owned by the Corporation (except accrued interest
included in the valuation of the underlying security), (F) all repurchase
agreements, and (G) all other property of every kind and nature, including
prepaid expenses.
(2) VALUATION OF ASSETS. The value of such assets is to
be determined as follows:
(i) CASH AND PREPAID EXPENSES. The value of any
cash on hand and of any prepaid expenses shall be deemed to be their full
amount.
(ii) OTHER CURRENT ASSETS. The value of any cash on
deposit, bills, demand notes, accounts receivable, and cash dividends and
interest declared or accrued as aforesaid and not yet received shall be
deemed to be the full amount thereof, unless the Board of Directors shall
determine that any such item is not worth its full amount. In such case, the
value of the item shall be deemed to be its reasonable value, as determined
by the Board of Directors.
(iii) SECURITIES. Securities for which
representative market quotations are readily available are valued at the most
recent bid price or yield equivalent as quoted by one or more dealers who
make markets in such securities. Other securities are appraised at values
deemed best to reflect their fair value as
<PAGE>
-14-
determined in good faith by or under the supervisions of officers of the
Corporation specifically authorized by the Board of Directors.
(3) THE CORPORATION'S LIABILITIES. The Corporation's
liabilities shall not be deemed to include outstanding shares and surplus.
They shall be deemed to include: (A) all bills and accounts payable, (B) all
administrative expenses accrued, (C) all contractual obligations for the
payment of money or property, including the amount of any declared but unpaid
dividends upon the Corporation's shares, (D) all reserves authorized or
approved by the Board of Directors for taxes or contingencies, and (E) all
other liabilities of whatsoever kind and nature except any liabilities
represented by the Corporation's outstanding shares and surplus.
3.05 INTERIM DETERMINATIONS. Any determination of net asset value
other than as of the close of trading on the New York Stock Exchange may be
made either by appraisal or by calculation or estimate. Any such calculation
or estimate shall be based on changes in the market value of representative
or selected securities or on changes in recognized market averages since the
last closing appraisal and made in a manner which, in the opinion of the
Board of Directors or its delegate, will fairly reflect the changes in the
net asset value.
3.06 MISCELLANEOUS. For the purposes of Section III
(a) Shares of the Corporation sold shall be deemed to be
outstanding as of the time an unconditional purchase order therefor has been
received by the Corporation (directly or through one of its agents) or by one
of its underwriters and the sale price in currency has been determined. When
the sale is reported to the Corporation or to its agent for determining net
asset value, the sale price thereof to the Corporation (less commission, if
any, and less any stamp or other tax payable by the Corporation in connection
with the issue and sale thereof) shall thereupon be deemed to be an asset of
the Corporation.
(b) Shares of the Corporation for which an application for
redemption has been made or which are subject to repurchase by the
Corporation shall be deemed to be outstanding up to and including the time as
of which the redemption or repurchase price is determined. After such time,
they shall be
<PAGE>
-15-
deemed to be no longer outstanding and the price until paid shall be deemed to
be a liability of the Corporation.
(c) Funds on deposit and contractual obligations payable to the
Corporation in foreign currency and liabilities and contractual obligations
payable by the Corporation in foreign currency shall be taken at the current
rate of exchange as nearly as practicable at the time as of which the net
asset value is computed.
SECTION IV
COMPLIANCE WITH INVESTMENT COMPANY ACT OF 1940
Notwithstanding any of the foregoing provisions of this Article SEVENTH,
the Board of Directors may prescribe, in its absolute discretion, such other
bases and times for determining the per share net asset value of the
Corporation's shares as it shall deem necessary or desirable to enable the
Corporation to comply with any provision of the Investment Company Act of 1940,
or any rule or regulation thereunder, including any rule or regulation adopted
pursuant to Section 22 of the Investment Company Act of 1940 by the Securities
and Exchange Commission or any securities association registered under the
Securities Act of 1934, all as in effect now or as hereafter amended or added.
SECTION V
MISCELLANEOUS
5.01 INSPECTION OF CORPORATION'S BOOKS. The Board of Directors shall
have power from time to time to determine whether and to what extent, and at
what times and places and under what conditions and regulations the accounts
and books of the Corporation (other than the stock ledger) or any of them
shall be open to the inspection of shareholders; and no shareholder shall
have any right of inspecting any account, book or document of the Corporation
except as at the time conferred by statute, unless authorized by a resolution
of the shareholders or the Board of Directors.
5.02 NAME. The Corporation acknowledges that it is utilizing its
corporate name pursuant to contract with Arnold Bernhard & Co., Inc., a New
York
<PAGE>
-16-
corporation, and that Arnold Bernhard & Co., Inc. reserves the right to withdraw
its permission to utilize such name upon the expiration of any such contract or
successor contract, and further agrees that Arnold Bernhard & Co., Inc. reserves
to itself and any successor to its business the right to grant and withdraw the
non-exclusive right to use the name "Value Line" or any similar name to any
other corporation or entity, including, but not limited to, any investment
company of which Arnold Bernhard & Co., Inc. or any subsidiary or affiliate
thereof, or any successor to the business of any thereof, shall be the
investment adviser.
5.03 DETERMINATION OF NET PROFITS, ETC.; DIVIDENDS. The Board of
Directors is expressly authorized to determine in accordance with generally
accepted accounting principles and practices what constitutes net profits,
earnings, surplus or net assets in excess of capital, and to determine what
accounting periods shall be used by the Corporation for any purpose, whether
annual or any other period, including daily; to set apart out of any funds of
the Corporation such reserves for such purposes as it shall determine and to
abolish the same; to declare and pay dividends and distributions in cash,
securities or other property from surplus or any funds legally available
therefor, at such intervals (which may be as frequently as daily) or on such
other periodic basis, as it shall determine; to declare such dividends or
distributions by means of a formula or other method of determination, at
meetings held less frequently than the frequency of the effectiveness of such
declarations; to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently than
the effectiveness of the declaration thereof; and to provide for the payment
of declared dividends on a date earlier than the specified payment date in
the case of stockholders of the Corporation redeeming their entire ownership
of shares of the Corporation.
5.04 CONTRACTS. The Board of Directors may, in its discretion, from
time to time authorize the Corporation to enter into exclusive or
non-exclusive underwriting contracts or distribution agreements providing for
the sale of the shares of capital stock of the Corporation at prices computed
in accordance with Section 1.02 of Article SEVENTH hereof, whereby the
Corporation may either agree to sell the shares to the other party to the
contract or appoint such other party its sales
<PAGE>
-17-
agent for such shares (such other party being herein sometimes called the
"underwriter"), and in either case on such terms and conditions as may be
prescribed in the By-Laws, if any, and such further terms and conditions as the
Board of Directors may, in its discretion, determine not inconsistent with the
provisions of Article SEVENTH hereof or of the By-Laws; and such contract may
also provide for the repurchase of shares of the Corporation by such other party
as agent of the Corporation.
The Board of Directors may, in its discretion, from time to time authorize
the Corporation to enter into an investment advisory or management contract
whereby the other party to such contract shall undertake to furnish to the
Corporation such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and all
upon such terms and conditions, as the Board of Directors may, in its
discretion, determine.
Any contract of the character described in the paragraphs above or for
services as custodian, transfer agent or disbursing agent or related services
may be entered into with any corporation, firm, trust or association or any
subsidiary or affiliate of such corporation, firm, trust or association,
although one or more of the directors or officers of the Corporation may be an
officer, director, trustee, shareholder or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship, nor shall any person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Corporation under, or by reason of, said contract or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract, when entered into, was reasonable and fair and not
inconsistent with the provisions of this Section 5.03. The same person
(including a firm, corporation, trust or association) may be the other party to
contracts entered into pursuant to the above paragraphs, and any individual may
be financially interested or otherwise affiliated with persons who are parties
to any or all of the contracts mentioned in this paragraph.
Any contract entered into pursuant to the first two paragraphs of this
Section 5.03 shall be consistent with and subject to the requirements of the
<PAGE>
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Investment Company Act of 1940 (including any amendment thereof or other
applicable Act of Congress hereafter enacted) with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
EIGHTH: From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including any amendment
which changes the terms of any of the outstanding stock classification,
reclassification or otherwise), upon the vote of the holders of a majority of
the shares of capital stock of the Corporation at the time outstanding and
entitled to vote, and other provisions which might under the statutes of the
State of Maryland at the time in force be lawfully contained in Articles of
Incorporation, may be added or inserted upon such a vote and all rights at
any time conferred upon the stockholders of the Corporation by these Articles
of Incorporation are granted subject to the provisions of this Article EIGHTH.
The term "these Articles of Incorporation" as used herein and in the
By-Laws of the Corporation shall be deemed to mean these Articles of
Incorporation as from time to time amended and restated.
IN WITNESS WHEREOF, we have signed these Articles of Incorporation on this
28 day of January 1981.
/s/ Denis P. Jamison
------------------------------
THE VALUE LINE BOND FUND, INC.
Denis Jamison, President
/s/ Thomas Sexton
------------------------------
Thomas Sexton, Vice President
/s/ Harold Benjamin
------------------------------
Harold Benjamin, Treasurer
WITNESS:
/s/ Dorothy A. Berry
- ------------------------------
Dorothy A. Berry, Secretary
<PAGE>
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STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
This is to certify that on this 28 day of January 1981, before me, the
subscriber, a Notary Public of the State of New York, personally appeared Denis
Jamison and Thomas Sexton and severally acknowledged the foregoing Articles of
Incorporation to be their act.
Witness my hand and Notarial Seal the day and year last above written.
/s/ Kenneth M. Newcomb
------------------------
Notary Public
[SEAL]
KENNETH M. NEWCOMB
NOTARY PUBLIC, State of New York
No. 30-2875520
Qualified in Nassau County
Cert. filed in New York County
Commission Expires March 30, 1981
<PAGE>
The Value Line Bond Fund, Inc.
ARTICLES OF AMENDMENT
The Value Line Bond Fund, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking
out Article SECOND and inserting in lieu thereof the following:
SECOND: The name of the corporation is Value Line U.S. Government
Securities Fund, Inc. (hereinafter called the "Corporation").
SECOND: The amendment of the charter of the Corporation as hereinabove
set forth has been duly advised by the board of directors and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, The Value Line Bond Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President or one of
its Vice Presidents and attested by its Secretary on the 9th day of April, 1986.
The Value Line Bond Fund, Inc.
By /s/ F. Barry Nelson
--------------------------
F. Barry Nelson
President
Attest:
/s/ Peter D. Lowenstein
- --------------------------
Peter D. Lowenstein
Secretary
[STAMP ILLEGIBLE]
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
FORMERLY
THE VALUE LINE BOND FUND, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. PLACE OF MEETING. All meetings of the stockholders shall
be held at the principal office of the Corporation in the State of Maryland
or at such other place within or without the State of Maryland as may from
time to time be designated by the Board of Directors and stated in the notice
of meeting.
Section 2. ANNUAL MEETINGS. No annual meeting of the stockholders of
the Corporation shall be held unless required by applicable law or otherwise
determined by the Board of Directors. Any annual meeting of stockholders held
pursuant to the foregoing sentence shall be held at such time and place as
may be determined by the Board of Directors and shall be designated in the
notice of meeting.
Section 3. SPECIAL OR EXTRAORDINARY MEETINGS. Special or
extraordinary meetings of the stockholders for any purpose or purposes may be
called by the Chairman of the Board of Directors, if any, or by the President
or by a majority of the Board of Directors who are not interested persons, as
that term is defined in the Investment Company Act of 1940 (the "1940 Act")
of the Corporation or of the Corporation's investment adviser, and shall be
called by the Secretary upon receipt of the request in writing signed by
stockholders holding not less than one quarter in amount of the entire
capital stock issued and outstanding and entitled to vote thereat. Such
request shall state the purpose or purposes of the proposed meeting.
<PAGE>
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Section 4. NOTICE OF MEETINGS OF STOCKHOLDERS. Not less than ten
days' and not more than ninety days' written or printed notice of every
meeting of stockholders, stating the time and place thereof (and the general
nature of the business proposed to be transacted at any special or
extraordinary meeting), shall be given to each stockholder entitled to vote
thereat by leaving the same with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to him at his
address as it appears upon the books of the Corporation.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by proxy
or to any stockholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.
Section 5. CLOSING OF TRANSFER BOOKS: RECORD DATES. The Board of
Directors may fix the time, not exceeding twenty days preceding the date of
any meeting of stockholders, or dividend payment date or any date for the
allotment of rights, during which the books of the Corporation shall be
closed against transfers of stock. If such books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of providing for the closing of the books
against transfers of stock as aforesaid, the Board of Directors may fix, in
advance, a date, not exceeding sixty days and not less than ten days
preceding the date of any meeting of stockholders, and not exceeding sixty
days preceding any dividend payment date or any date for the allotment of
rights, as a record date for the determination of the stockholders entitled
to notice of and to vote at such meeting, or entitled to receive such
dividends or rights, as the case may be; and only stockholders of record on
such
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date shall be entitled to notice of and to vote at such meeting or to receive
such dividends or rights, as the case may be.
Section 6. QUORUM, ADJOURNMENT OF MEETINGS. The presence in person or
by proxy of the holders of record of a majority of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote thereat,
shall constitute a quorum at all meetings of the stockholders. If at any
meeting of the stockholders there shall be less than a quorum present, the
stockholders present at such meeting may, without further notice, adjourn the
same from time to time until a quorum shall attend, but no business shall be
transacted at any such adjourned meeting except such as might have been
lawfully transacted had the meeting not been adjourned.
Section 7. VOTING AND INSPECTORS. At all meetings of stockholders
every stockholder of record entitled to vote thereat shall be entitled to one
vote for each share of stock standing in his name on the books of the
Corporation (and such stockholders of record holding fractional shares, if
any, shall have proportionate voting rights as provided in the Articles of
Incorporation) on the date for the determination of stockholders entitled to
vote at such meeting either in person or by proxy appointed by instrument in
writing subscribed by such stockholder or his duly authorized attorney. No
proxy which is dated more than three months before the meeting at which it is
offered shall be accepted, unless such proxy shall, on its face, name a
longer period for which it is to remain in force.
All elections shall be had and all questions decided by a majority
of the votes cast at a duly constituted meeting, except as otherwise provided in
the Articles of Incorporation or in these By-Laws or by specific
<PAGE>
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statutory provision superseding the restrictions and limitations contained in
the Articles of Incorporation or in these By-Laws.
At any election of Directors, the Board of Directors prior thereto
may, or, if they have not so acted, the Chairman of the meeting may, and upon
the request of the holders of ten percent (10%) of the stock entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall, after the election, make a certificate of the result of the
vote taken. No candidate for the office of Director shall be appointed such
Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request of
the holders of ten percent (10%) of the stock entitled to vote on such election
or matter.
Section 8. CONDUCT OF STOCKHOLDERS' MEETINGS. The meetings of the
stockholders shall be presided over by the Chairman of the Board of
Directors, if any, or, if he shall not be present, by the President or, if he
shall not be present, by a Vice-President, or, if neither Chairman of the
Board of Directors, the President nor any Vice-President is present, by a
chairman to be elected at the meeting. The Secretary of the Corporation, if
present, shall act as Secretary of such meetings, or, if he is not present,
an Assistant Secretary shall so act; if neither the Secretary nor an
Assistant Secretary is present, then the meeting shall elect its secretary.
Section 9. CONCERNING VALIDITY OF PROXIES, BALLOTS, ETC. At every
meeting of the stockholders, all proxies shall be received and taken charge
of and all ballots shall be received and canvassed by the secretary of the
meeting, who
<PAGE>
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shall decide all questions touching the qualification of voters, the validity of
the proxies, and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed as provided in Section 7, in which event such
inspectors of election shall decide all such questions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. NUMBER AND TENURE OF OFFICE. The business and property of
the Corporation shall be conducted and managed by a Board of Directors
consisting of nine Directors, which number may be increased or decreased as
provided in Section 2 of this Article. Each Director shall hold office until
the annual meeting of stockholders of the Corporation next succeeding his
election or until his successor is duly elected and qualified. Directors need
not be stockholders.
Section 2. INCREASE OR DECREASE IN NUMBER OF DIRECTORS. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of Directors to a number not exceeding fifteen, and may elect
Directors to fill the vacancies created by any such increase in the number of
Directors until the next annual meeting or until their successors are duly
elected and qualify. Vacancies occurring other than by reason of any such
increase shall be filled as provided by the Maryland General Corporation Law.
The Board of Directors, by the vote of a majority of the entire Board, may
likewise decrease the number of Directors to a number not less than three.
Section 3. PLACE OF MEETING. The Directors may hold their meetings,
have one or more offices, and keep the books of the Corporation outside the
State of Maryland, at any office or offices of the Corporation or at any
other place as
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they may, from time to time, by resolution determine, or, in the case of
meetings, as they may, from time to time, by resolution determine or as shall be
specified or fixed in the respective notices or waivers of notice thereof.
Section 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and on such notice, if any, as the
Directors may, from time to time, determine.
The annual meeting of the Board of Directors shall be held as soon
as practicable after the annual meeting of the stockholders for the election of
Directors.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held from time to time upon call of the Chairman of the
Board of Directors, if any, the President or two or more of the Directors, by
oral, telegraphic or written notice duly served on, sent or mailed to each
Director not less than one day before such meeting. No notice need be given
to any Director who attends in person or to any Director who, in writing
executes and files with the records of the meeting either before or after the
holding thereof, waiver of such notice. Such notice or waiver of notice need
not state the purpose or purposes of such meeting.
Section 6. QUORUM. One third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been
obtained. The act of the majority of the Directors present at any meeting at
which there is a quorum shall
<PAGE>
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be the act of the Directors, except as may be otherwise specifically provided by
law, by the Articles of Incorporation or by these By-Laws.
Section 7. EXECUTIVE COMMITTEE. The Board of Directors may, by the
affirmative vote of a majority of the entire Board, elect from the Directors
an Executive Committee to consist of such number of Directors as the Board
may, from time to time, determine. The Board of Directors by such affirmative
vote shall have power at any time to change the members of such Committee and
may fill vacancies in the Committee by election from the Directors. When the
Board of Directors is not in session, the Executive Committee shall have and
may exercise any or all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation (including the
power to authorize the seal of the Corporation to be affixed to all papers
which may require it) except as provided by law and except the power to
increase or decrease the size of, or fill vacancies on the Board. The
Executive Committee may fix its own rules of procedure, and may meet, when
and as provided by such rules or by resolution of the Board of Directors, but
in every case the presence of a majority of the Executive Committee shall be
necesary to constitute a quorum. In the absence of any member of the
Executive Committee, the members thereof present at any meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors
to act in the place of such absent member.
Section 8. OTHER COMMITTEES. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members (not
less than two) and shall have and may exercise such powers as the Board may
determine in the resolution appointing them. A majority of all members of any
such committee may determine
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- 8 -
its action, and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have power at
any time to change the members and powers of any such committee, to fill
vacancies, and to discharge any such committee.
Section 9. INFORMAL ACTION BY DIRECTORS AND COMMITTEES. To the extent
permitted by law, any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken without a
meeting, if a written consent to such action is signed by all members of the
Board, or of such committee, as the case may be.
Section 10. COMPENSATION OF DIRECTORS. No Director shall receive any
stated salary or fees from the Corporation for his services as such Director
if such Director is, otherwise than by reason of being such Director,
affiliated (as such term is defined in the l940 Act) with the Corporation or
with any investment adviser of the Corporation. Except as provided in the
preceding sentence, Directors shall be entitled to receive such compensation
from the Corporation for their services as may, from time to time, be voted
by the Board of Directors.
ARTICLE III
OFFICERS
Section 1. EXECUTIVE OFFICERS. The Executive Officers of the
Corporation shall be chosen by the Board of Directors as soon as may be
practicable after the annual meeting of the stockholders. These may include a
Chairman of the Board of Directors, and shall include a President, one or
more Vice-Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer. The Chairman of the Board of
Directors, if any, and the President shall
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be selected from among the Directors. The Board of Directors may also, in its
discretion, appoint Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and perform such
duties as the Board or the Executive Committee may determine. The Board of
Directors may fill any vacancy which may occur in any office. Any two officers,
except those of President and Vice-President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law or these By-Laws to be
executed, acknowledged or verified by two or more officers.
Section 2. TERM OF OFFICE. The term of office of all officers shall
be one year and until their respective successors are chosen and qualify,
subject, however, to any provision for removal contained in the Articles of
Incorporation. Any officer may be removed from office at any time with or
without cause by the vote of a majority of the entire Board of Directors.
Section 3. POWERS AND DUTIES. The officers of the Corporation shall
have such powers and duties as generally pertain to their respective offices,
as well as such powers and duties as may, from time to time, be conferred by
the Board of Directors or the Executive Committee.
ARTICLE IV
CAPITAL STOCK
Section 1. CERTIFICATES OF SHARES. Each stockholder of the
Corporation shall be entitled to a certificate or certificates for the full
shares of stock of the Corporation owned by him in such form as the Board of
Directors may, from time to time, prescribe.
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Section 2. TRANSFER OF SHARES. Shares of the Corporation shall be
transferable on the books of the Corporation at the request of the holder
thereof in person or by his duly authorized attorney or legal representative,
upon surrender and cancellation of certificates, if any, for the same number
of shares, duly endorsed or accompanied by proper instruments of assignment
and transfer, with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require. In the case of shares not
represented by certificates, the similar requirements may be imposed by the
Board of Directors.
Section 3. STOCK LEDGERS. The stock ledgers of the Corporation,
containing the name and address of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a transfer agent, at the offices
of the transfer agent of the Corporation.
Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
Directors may determine the conditions upon which a new certificate of stock
of the Corporation of any class may be issued in place of a certificate which
is alleged to have been lost, stolen or destroyed; and may, in their
discretion, require the owner of such certificate or his legal representative
to give bond, with sufficient surety to the Corporation and the transfer
agent, if any, to indemnify it and such transfer agent against any and all
loss or claims which may arise by reason of the issue of a new certificate in
place of the one so lost, stolen or destroyed.
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ARTICLE V
CORPORATE SEAL
The Board of Directors shall provide a suitable corporate seal, in such
form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of
Directors.
ARTICLE VII
MISCELLANEOUS
Section 1. INDEMNIFICATION. Each Director and Officer (and his heirs,
executors and administrators) shall be indemnified by the Corporation to the
extent set forth in the Articles of Incorporation.
Section 2. ADVISORY CONTRACT. Any advisory or management contract to
which the Corporation shall be a party shall not be amended, without the
affirmative vote or the written consent of the holders of a majority (as
defined in the 1940 Act) of all the shares of the capital stock of the
Corporation at the time outstanding and entitled to vote.
Section 3. CUSTODIANSHIP. All cash and securities owned by the
Corporation shall be held by a bank or trust company of good standing, having
a capital, surplus and undivided profits aggregating not less than two
million dollars ($2,000,000), provided such bank or trust company is ready
and willing to act. Upon resignation or inability to serve of any such bank
or trust company, the Corporation
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shall (i) use its best efforts to obtain a qualified successor, and (ii) require
the cash and securities of the Corporation held by such bank or trust company to
be delivered directly to the successor. Upon such resignation or inability to
serve, such bank or trust company may deliver any assets of the Corporation held
by it to a qualified bank or trust company selected by it and acceptable to the
Corporation, such assets to be held subject to the terms of the agreement which
governed such retiring bank or trust company, pending action by the Corporation
as set forth in this Section 3. Nothing herein contained, however, shall prevent
the termination of any agreement between the Corporation and any such bank or
trust company by the Corporation at the discretion of the Board of Directors,
and any such agreement shall be terminated upon the affirmative vote of the
holders of a majority of all the shares of the capital stock of the Corporation
at the time outstanding and entitled to vote.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Except as set forth below, the By-Laws of the Corporation may be altered,
amended, added to or repealed by the stockholders or by majority vote of the
entire Board of Directors; but any such alteration, amendment, addition or
repeal of the By-Laws by action of the Board of Directors may be altered or
repealed by the stockholders. Sections 2 and 3 of Article VII may be altered,
amended or repealed only by the stockholders.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 10 day of Aug. 1988, between VALUE LINE U.S.
GOVERNMENT SECURITIES FUND, INC., a Maryland corporation (hereinafter called
"the Fund"), and VALUE LINE, INC., a New York corporation (hereinafter called
"the Company");
W I T N E S S E T H:
WHEREAS, the Fund desires to have the Company Act as its investment
adviser and provide it with investment research, advice, supervision and
management; and
WHEREAS, the Company is willing to undertake the same upon the terms and
conditions set forth.
NOW, THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. DUTIES. The Company shall provide the Fund with such investment
research, data, advice and supervision as the latter may from time to time
consider necessary for proper supervision of its funds. The company shall act as
manager and investment adviser of the Fund and, as such, shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased or sold by the Fund, and what portion of the
assets of the Fund shall be held uninvested, subject always to the provisions of
the Fund's Articles of Incorporation and By-Laws, to the Fund's fundamental
investment policies as in effect from time to time, and to the control and
review by the Fund's Board of Directors. The Company shall take, on behalf of
the Fund, all actions which it deems necessary to carry into effect the
investment policies determined as provided above, and to that end the Company
may designate a person or persons who are to be authorized by the Fund as the
representative or representatives of the Fund, to give instructions to the
Custodian of the assets of the Fund as to deliveries of securities and payments
of cash for the account of the Fund.
2. ALLOCATION OF CHARGES AND EXPENSES; BROKERAGE. The Company shall
furnish at its own expense all administrative services, office space, equipment
and administrative, bookkeeping and clerical personnel necessary for managing
the affairs of the Fund. The Company shall also provide persons satisfactory to
the Fund's Board of Directors to act as officers and employees of the Fund and
shall pay the salaries and wages of all officers and employees of the Fund who
are also officers and employees of the Company or of an affiliated person (as
defined in the Investment Company Act of 1940) other than the Fund. All other
costs and expenses not expressly assumed by the Company under this Agreement, or
to be paid by the Distributor or Distributors of the shares of the Fund, shall
be paid by the Fund, including (i) interest and taxes; (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities; (iii) insurance premiums for fidelity and other coverage requisite
to its operations; (iv) compensation and expenses of its directors other than
those affiliated with the Company; (v) legal and audit expenses; (vi) custodian
and shareholder servicing agent fees and expenses; (vii) expenses incident to
the redemption of its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto,
including printing of stock certificates; (ix) fees and expenses incident to the
registration under the Securities Act of 1933 or under any state securities laws
of shares of the Fund for public sale and fees imposed on the Fund under the
Investment Company Act of 1940; (x) expenses of printing and mailing
prospectuses, reports and notices and proxy
A-1
<PAGE>
material to shareholders of the Fund; (xi) all other expenses incidental to
holding meetings of the Fund's shareholders; (xii) a pro rata share, based on
relative net asset value of the fund and other investment companies for which
the Company also act as manager and investment adviser, of 50% of the fees or
dues of the Investment Company Institute; (xiii) fees and expenses in connection
with registration of the Fund or qualification of its shares under the
securities laws of states and foreign jurisdictions and (xiv) such non-recurring
expenses as may arise, including actions, suits or proceedings to which the Fund
is a party and the legal obligation which the Fund may have to indemnify its
officer and directors with respect thereto.
The Company shall place purchase and sale orders for portfolio
transactions of the Fund with brokers and/or dealers including, where permitted
by law, the Fund's Distributor or affiliates thereof or of the Company, which,
in the judgment of the Company, are able to execute such orders as expeditiously
as possible and at the best obtainable price. Purchases and sales of securities
which are not listed or traded on a securities exchange shall ordinarily be
executed with primary market makers acting as principal except when it is
determined that better prices and executions may otherwise be obtained,
provided, that the Company may cause the Fund to pay a member of a securities
exchange, broker or dealer an amount of commission for effecting a purchase or
sale order for a portfolio transaction in excess of the amount of commission
another member of an exchange, broker or dealer would have charged for effecting
that transaction if the Company determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such member, broker, dealer, viewed in terms of that
particular transaction or the Company's overall responsibilities. As used
herein, "brokerage and research services" shall have the same meaning as in
Section 28(e)(3) of the Securities Exchange Act of 1934, as such Section may be
amended from time to time, and any rules or regulations promulgated by the
Securities and Exchange Commission. It is understood that, consistent with the
Company's fiduciary duty to the Fund, it is the intent of this Agreement to
allow the Company the widest discretion permitted by law in determining the
manner and means by which portfolio securities' transactions can be effected in
the best interests of the Fund.
3. COMPENSATION. (a) For its services and for the facilities to be
furnished as provided herein, the Fund shall pay to the Company an advisory fee
payable monthly, computed at the annual rate of 1/2 of 1% of the Fund's average
net assets during the year pro rated for any portion of a year during which this
Agreement is in effect. For this purpose, the value of the Fund's net assets
shall be determined in the same manner as for the purchase and redemption of
Fund shares as described in the Fund's current Prospectus.
(b) If the Fund's Distributor receives fees in connection with the tender
of portfolio securities of the Fund, the gross amount of the advisory fee
computed in accordance with the preceding paragraph 3(a) shall be reduced by the
amount of tender fees received; if the amount of such tender fees exceeds the
amount of advisory fees computed in accordance with paragraph 3(a), the excess
shall be paid by the Company to the Fund.
(c) In the event that the total expenses of the Fund, excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceeds in any fiscal
year the lowest applicable percentage limitation prescribed by any state in
which shares of the Fund are sold, the compensation of the Company, computed in
accordance with the preceding two paragraphs 3(a) and 3(b), shall be reduced by
the amount of such excess.
4. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective on the date set forth above and will continue in effect from year to
year thereafter only so long as such continuance is specifically approved at
least annually in accordance with the Investment Company Act of 1940. This
Agreement may be terminated on sixty days written notice by either party. This
Agreement shall terminate automatically in the event of its assignment as
defined in the Investment Company Act of 1940.
A-2
<PAGE>
5. NAME OF FUND. The Company consents to the use by the Fund of the name
"Value Line U.S. Government Securities Fund, Inc." so long, and only so long, as
this Agreement (or any agreement with any organization which has succeeded to
the business of the Company) or any extension, renewal or amendment thereof,
remains in effect. The Fund agrees that if and when no such agreement is in
effect, (a) it will cease to use said name or any name indicating or suggesting
that the Fund is advised by or otherwise connected with the Company and (b) it
will not thereafter refer to the former association between the Company and the
Fund.
6. COMPANY MAY ACT FOR OTHERS. Nothing herein contained shall limit the
freedom of the Company or any affiliated person of the Company to render
investment supervisory or corporate administrative services to other investment
companies, to act as investment adviser or investment counselor to other
persons, firms or corporations, and to engage in other business activities.
7. AMENDMENT OF AGREEMENT. This Agreement may not be amended except
pursuant to a direction given by the vote of the holders of a majority (as
defined in the Investment Company Act of 1940) of the outstanding shares of the
Fund.
8. LIABILITY. The Company shall not be liable for any error of judgment,
or mistake of law, or any loss suffered by the Fund, in connection with the
matters to which this Agreement relates, except for loss resulting in the
performance of its duties or from reckless disregard by the Company of its
obligations and duties hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
VALUE LINE U.S. GOVERNMENT
SECURITIES FUND, INC.
By /s/ Thomas J. Sexton
------------------------
VALUE LINE, INC.
By /s/ [ILLEGIBLE]
------------------------
A-3
<PAGE>
PRINCIPAL UNDERWRITER AND DISTRIBUTOR AGREEMENT
Between
THE VALUE LINE BOND FUND, INC.
and
VALUE LINE SECURITIES, INC.
January 2, 1981
VALUE LINE SECURITIES, INC.
711 Third Avenue
New York, New York 10017
Dear Sirs:
THE VALUE LINE BOND FUND, INC. (the "Fund"), a Maryland corporation, is
registered as an Investment Company under the Investment Company Act of 1940
and an indefinite number of shares of its capital stock have been registered
under the Securities Act of 1933 to be offered continuously for sale to the
public in accordance with terms and conditions set forth in the Prospectus
included in such Registration Statement as it may be amended from time to time.
In this connection, the Fund desires that your firm act as Principal
Underwriter and Distributor of the Fund for the sale and distribution of shares
which have been registered as described above and any additional shares which
may become registered during the term of this Agreement. You have advised the
Fund that you are willing to act as Principal Underwriter and Distributor, and
it is, accordingly, agreed between us as follows:
1. The Fund hereby appoints you as Principal Underwriter and Distributor
for the sale of its shares, pursuant to the aforesaid continuous public offering
in connection with any sales made to Fund investors in any states and/or
jurisdictions in which you are or shall from time to time become qualified as a
broker/dealer, or through securities dealers with whom you have entered into
sales agreements.
2. You hereby accept such appointment and agree to use your best efforts
to sell such shares, provided, however, that when requested by the Fund at any
time because of market or other economic considerations or abnormal
circumstances of any kind, you will suspend such efforts. The Fund may also
withdraw the offering of the shares at any time when required by the provisions
of any statute, order, rule or regulation of any governmental body having
jurisdiction. It is understood that you do not undertake to sell all or any
specific portion of the shares of the Fund.
<PAGE>
-2-
3. The shares shall be sold by you at net asset value plus the applicable
sales charge approved by the Board of Directors of the Fund and set forth in the
Prospectus effective at the time of sale. Shares may be sold directly to
prospective purchasers or through securities dealers who have entered into sales
agreements with you. However, in no event will shares be issued prior to the
receipt by us of full payment for such shares.
4. You agree that the Fund shall have the right to accept or reject orders
for the purchase of shares of the Fund. Any consideration which you may receive
in connection with a rejected purchase order will be returned promptly. In the
event that any cancellation of a share purchase order, cancellation of a
redemption order or error in the timing of the acceptance of purchase or
redemption orders shall result in a gain or loss, you agree promptly to
reimburse the Fund for any amount by which losses shall exceed gains so arising;
to retain any net gains so arising for application against losses so arising in
future periods and, on the termination of this Agreement, to pay over to the
Fund the amount of any such net gains which may have accumulated. The Fund shall
register or cause to be registered all shares sold by you pursuant to the
provisions hereof in such name or names and amounts as you may request from time
to time, and the Fund shall issue or cause to be issued certificates evidencing
such shares for delivery to you or pursuant to your direction if, and to the
extent that, the shareholder requests issuance of such share certificates.
5. The Fund has delivered to you a copy of its initial Prospectus dated on
the effective date of its Registration Statement pursuant to the Securities Act
of 1933. It agrees that it will use its best efforts to continue the
effectiveness of the Registration Statement under the Securities Act of 1933.
The Fund further agrees to prepare and file any amendments to its Registration
Statement as may be necessary and any supplemental data in order to comply with
the Securities Act of 1933.
6. The Fund is registered under the Investment Company Act of 1940 as an
investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of said Act.
7. You agree:
(a) That neither you nor any of your officers will take any short
position in the shares of the Fund.
(b) To furnish to the Fund any pertinent information required to be
included with respect to you as Underwriter within the meaning of the Securities
Act of 1933 in any reports or registration required to be filed with any
governmental authority.
(c) You will not give any information or make any representations
other than as contained in the Registration Statement or Prospectus filed under
the Securities Act of 1933, as in effect from time to time, or in any
supplemental sales literature authorized by the Fund for use in connection with
the sale of shares.
<PAGE>
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8. (a) We shall pay the cost of registering shares for sale under federal
securities laws.
(b) You shall pay all usual expenses of distribution, including
advertising and the costs of printing and mailing of the Prospectus, other than
those furnished to existing shareholders.
9. This Agreement shall remain in effect until January 2, 1982, and shall
continue in effect from year to year thereafter provided:
(a) Such continuation shall be specifically approved at least
annually by the Board of Directors, including the vote of a majority of the
Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act of 1940) of any such persons
cast in person at a meeting called for the purpose of voting on such approval or
by a vote of the holders of a majority of the outstanding voting securities of
the Fund and by such a vote of the Board of Directors.
(b) You shall not have notified the Fund in writing at least sixty
days prior to the termination date that you shall not desire such continuation.
(c) We shall not have notified you in writing at least sixty days
prior to the termination date that we do not desire your continuation.
10. This Agreement may not be amended or changed except in writing and
shall be binding upon and shall enure to the benefits of the parties hereto and
their respective successors, but this Agreement shall not be assigned by either
party and shall automatically terminate upon assignment.
If the foregoing is in accordance with your understanding, kindly so
indicate by signing in the space provided below.
THE VALUE LINE BOND FUND, INC.
By /s/ [ILLEGIBLE]
----------------------------
Accepted:
VALUE LINE SECURITIES, INC.
By /s/ Thomas J. Sexton
------------------------
Approved:
By
------------------------
<PAGE>
CUSTODIAN AGREEMENT
Dated as of:
Between
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Bank Appointed Custodian ........................................ 1
2. Definitions ..................................................... 1
(a) Authorized Person .......................................... 1
(b) Security ................................................... 2
(c) Portfolio Security ......................................... 2
(d) Officers' Certificate ...................................... 2
(e) Book-Entry System and Depository ........................... 2
3. A. Proper Instructions ........................................ 3
B. Bank's Communications with Fund ............................ 4
4. Separate Accounts ............................................... 5
5. Certification as to Authorized Persons .......................... 5
6. Custody of Cash and Securities .................................. 6
A. Cash ....................................................... 6
(a) Purchase of Securities ............................... 6
(b) Redemptions .......................................... 7
(c) Distributions and Expenses of Fund ................... 7
(d) Payment in Respect of Securities ..................... 7
(e) Repayment of Cash .................................... 7
(f) Other Authorized Payments ............................ 8
(g) Termination .......................................... 8
B. Securities ................................................. 8
(a) Book-Entry System .................................... 10
(b) Use of Direct Paper System for Commercial Paper ...... 12
C. Options and Futures Transactions ........................... 14
(a) Puts and Calls Traded on Securities
Exchanges, NASDAQ or Over-the-Counter ................ 14
(b) Puts, Calls and Futures Traded on
Commodities Exchanges ................................ 15
(c) Segregated Account ................................... 16
D. Segregated Account for "when issued", "forward
commitment" and Reverse Repurchase Agreement
Transactions ............................................... 17
7. Transfer of Securities .......................................... 18
8. Redemptions ..................................................... 20
9. Merger, Dissolution, etc. of Fund. .............................. 20
10. Actions of Bank Without Prior Authorization ..................... 21
11. Maintenance of Records and Confidentiality ...................... 23
<PAGE>
12. Concerning the Bank ............................................. 23
A. Performance of Duties ...................................... 23
B. Responsibility of Custodian ................................ 24
C. No Duty of Bank ............................................ 24
D. Fees and Expenses of Bank .................................. 25
E. Advances by Bank ........................................... 26
13. Termination ..................................................... 26
14. Notices ......................................................... 28
15. Amendments ...................................................... 29
16. Parties ......................................................... 29
17. Governing Law ................................................... 29
</TABLE>
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 21st day of June, 1990 between VALUE LINE U.S.
GOVERNMENT SECURITIES FUND, INC., a corporation established under the laws of
Maryland (the "Fund"), and STATE STREET BANK AND TRUST COMPANY ("Bank").
The Fund, an open-end management investment company, desires to place and
maintain its portfolio securities and cash in the custody of the Bank. The Bank
has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940 to act as custodian of the portfolio securities
and cash of the Fund, and has indicated its willingness to so act, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described, and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will
have the following meaning:
(a) AUTHORIZED PERSON. Authorized person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of the Board of Directors.
<PAGE>
(b) SECURITY. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933 as
amended, including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or privilege on any
security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value thereof), or any
put, call, straddle, option, or privilege entered into on a national
securities exchange relating to a foreign currency, or, in general, any
interest or instrument commonly known as a "security", or any certificate
of interest or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to, or option
contract to purchase or sell any of the foregoing and futures, forward
contracts and options thereon.
(c) PORTFOLIO SECURITY. Portfolio security will mean any security
owned by the Fund.
(d) OFFICERS' CERTIFICATE. Officers' Certificate will mean unless
otherwise indicated, any request, direction, instruction, or certification
in writing signed by any two Authorized Persons of the Fund.
(e) BOOK-ENTRY SYSTEM AND DEPOSITORY. Book-Entry System shall mean
the Federal Reserve-Treasury Department Book Entry System for United
States government, instrumentality and agency securities operated by the
Federal Reserve Banks, its successor or successors and its nominee or
nominees. Depository shall mean the Depository
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<PAGE>
Trust Company ("DTC"), a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of 1934, it
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Directors.
3A. PROPER INSTRUCTIONS. For purposes of this Agreement, "Proper
Instructions" shall mean (i) instructions regarding the purchase or sale of
securities for the portfolio of the Fund, and payments and deliveries in
connection therewith, given by an Authorized Person as designated in an
Officers' Certificate, such instructions to be given in such form and manner
as the Bank and the Fund shall agree upon from time to time, and (ii)
instructions (which may be continuing instructions) regarding other matters
signed or initialled by such one or more persons from time to time designated
in an Officers' Certificate as having been authorized by the Directors of the
Fund. Oral instructions given by a person whom the Bank reasonably believes
to be authorized to give such instructions with respect to the transaction
involved will be considered Proper Instructions only if the Bank receives
written instructions (which may be sent by telecopier) confirming such oral
instructions, provided however that if the Bank is notified by an Authorized
Person of the Fund that the Fund is unable to promptly confirm such oral
instructions in writing, then the Bank may act upon receipt of a second oral
instruction confirming such prior oral instruction. The Bank shall compare
the original oral instruction with any confirmatory written or oral
instruction, as the case may be, and shall report any discrepancy to the Fund
immediately, and the Bank shall be responsible for any expense incurred in
taking any action, including any reprocessing, necessary to correct any
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<PAGE>
such discrepancy or error in Proper Instructions given by the Fund, to the
extent such expense is caused by the unreasonable delay of the Bank in reporting
such discrepancy to the Fund. Except as provided in the preceeding sentence, the
Fund shall be responsible, at the Fund's expense, for taking any action,
including any reprocessing, necessary to correct any such discrepancy or error
in Proper Instructions given by the Fund, and to the extent such action requires
the Bank to act, the Fund shall give the Bank specific Proper Instructions as to
the action required. The Bank shall act upon and comply with any subsequent
Proper Instructions which modifies a prior Proper Instruction. Upon receipt of
an Officers' Certificate as to the authorization by the Directors of the Fund
accompanied by a detailed description of procedures approved by the Fund, Proper
Instructions may include communication effected directly between
electro-mechanical or electronic devices provide that the Directors and the
Bank are satisfied that such procedures afford adequate safeguards for the
Fund's assets.
3B. BANK'S COMMUNICATIONS WITH FUND. For purposes of this Agreement,
all communications from the Bank to the Fund shall be in writing (which may
be sent by means of a telecopier) and any such writing reasonably believed by
the Fund to be from a person authorized to make such communication on behalf
of the Bank may be relied upon the Fund. An oral communication from a person
whom the Fund reasonably believes to be authorized to make such communication
on behalf of the Bank with respect to the transaction may be relied upon by
the Fund only if the Fund receives a written communication (which may be sent
by telecopier) confirming such oral communication, provided however, that if
the Fund is notified by such authorized person that the Bank is unable to
promptly confirm such oral communication in writing, then the Fund may act in
reliance upon receipt of a second oral communication confirming such prior
oral communication. The Fund shall compare the original oral communication
with any confirmatory written or oral
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<PAGE>
communication, as the case may be, and shall report any discrepancy to the Bank
immediately, and the Fund shall be responsible for any expense incurred in
taking any action, including any reprocessing, necessary to correct any such
discrepancy or error in communications given by the Bank, to the extent such
expense is caused by the unreasonable delay of the Fund in reporting such
discrepancy to the Bank. Except as provided in the preceding sentence, the Bank
shall be responsible, at the Bank's expense, for any action taken, including any
reprocessing, necessary to correct any such discrepancy or error in
communications given by the Bank, and to the extent such action requires the
Bank to act, the Fund shall give the Bank specific Proper Instructions as to the
action required. The Fund may act in reliance upon any subsequent communication
from the Bank which modifies a prior communication.
4. SEPARATE ACCOUNTS. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of the Fund into a Separate
Account for each such series or portfolio containing the assets of such
series or portfolio (and all investment earnings thereon), all as directed
from time to time by Proper Instructions.
5. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the Authorized Persons, it being understood that
upon the occurrence of any change in the information set forth in the most
recent certification on file (including without limitation any person named
in the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Fund will
sign a new or amended certification setting forth the change and the new,
additional or omitted names or signatures. The Bank will be entitled to rely
and act upon any Officers' Certificate given to
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<PAGE>
it by the Fund which has been signed by Officers named in the most recent
certification.
6. CUSTODY OF CASH AND SECURITIES. As custodian for the Fund, the
Bank will keep safely all of the portfolio securities delivered to the Bank,
and will deposit to the account of the Fund all of the cash of the Fund
delivered to the Bank, as set forth below.
A. CASH. The Bank will open and maintain a separate account or
accounts in the name of the Fund or in the name of the Bank, as custodian of
the Fund, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. The Bank will hold in such account or accounts as
custodian, subject to the provisions hereof (including sections 6(C) and
6(D), all cash received by it, for the account of the Fund. Upon receipt by
the Bank of Proper Instructions (which may be continuing instructions) or in
the case of payments for redemptions and repurchases of outstanding shares of
beneficial interest of the Fund, notification from the Fund's transfer agent
as provided in Section 8, requesting such payment, designating the payee or
the account or accounts to which the Bank will release funds or deposit, and
stating that is is for a purpose permitted under the terms of this Section
6(A), specifying the applicable subsection, or describing such purpose with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
(a)-(g) below.
(a) PURCHASE OF SECURITIES: upon the purchase of securities for
the Fund, against contemporaneous receipt of such securities by the Bank
registered in the name of the Fund or in the name of, or properly endorsed
and in form for transfer to, the Bank, or a nominee of the Bank, or
receipt for the account of the Bank through use of (1) the
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<PAGE>
Book-Entry System pursuant to Section 6(B)(a)(3) below, (2) a Depository
pursuant to 6(B)(b) below, or (3) Book Entry Paper pursuant to Section
6(B)(c) below, each such payment to be made at the purchase price shown on
a broker's confirmation (or transaction report in the case of Book Entry
Paper) of purchase of the securities received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the
Bank before payment is made;
(b) REDEMPTIONS: in such amount as may be necessary for the
repurchase or redemption of shares of beneficial interest of the Fund
offered for repurchase or redemption in accordance with Section 8 of this
Agreement;
(c) DISTRIBUTIONS AND EXPENSES OF FUND: for the payment on the
account of the Fund of dividends or other distributions to shareholders as
may from time to time be declared by the Directors of the Fund, interest,
taxes, management or supervisory fees, distribution fees, fees of the Bank
for its services hereunder and reimbursement of the expenses and
liabilities of the Bank as provided hereunder, fees of any transfer agent,
fees for legal, accounting, and auditing services, or other operating
expenses of the Fund;
(d) PAYMENT IN RESPECT OF SECURITIES: for payments in connection
with the conversion, exchange or surrender of portfolio securities or
securities subscribed to by the Fund held by or to be delivered to the
Bank;
(e) REPAYMENT OF CASH: to repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund
certificates borrowed from the Trust representing portfolio securities,
but only upon redelivery to the Bank of such borrowed certificates;
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<PAGE>
(f) OTHER AUTHORIZED PAYMENTS: for other authorized transactions
of the Fund, or other obligations of the Fund incurred for proper Fund
purposes; provided that before making any such payment the Bank will also
receive a certified copy of a resolution of the Directors signed by an
Authorized Person of the Fund (other than the Person certifying such
resolution) and certified by its Clerk or Assistant Clerk, naming the
person or persons to whom such payment is to be made, and either
describing the transaction for which payment is to be made and declaring
it to be an authorized transaction of the Fund, or specifying the amount
of the obligation for which payment is to be made, setting forth the
purpose for which such obligation was incurred and declaring such purpose
to be a proper corporate purpose; and
(g) TERMINATION: upon the termination of this Agreement as
hereinafter set forth pursuant to Section 9 and Section 13 of this
Agreement.
The Bank is hereby authorized to endorse for collection and collect on
behalf of and in the name of the Fund all checks, drafts, or other negotiable or
transferrable instruments or other orders for the payment of money received by
it for the account of the Fund.
B. SECURITIES. Except as provided in subsections (a), (b) and (c) of
this Section 6(B), and in Sections 6(C) and 6(D), the Bank as custodian, will
receive and hold pursuant to the provisions hereof, in a separate account or
accounts and physically segregated at all times from those of other persons,
any and all portfolio securities which may now or hereafter be delivered to
it by or for the account of the Fund. All such portfolio securities will be
held or disposed of by the Bank for, and subject at all times to, the
instructions of the Fund pursuant to the terms of this Agreement. Subject to
the
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<PAGE>
specific provisions in Subparagraphs (a), (b), and (c) relating to securities
that are not physically held by the Bank, the Bank will register all portfolio
securities (unless otherwise directed by Proper Instructions or an Officers'
Certificate), in the name of a registered nominee of the Bank as defined in the
Internal Revenue Code and any Regulations of the Treasury Department issued
thereunder, which nominee shall be exclusively assigned to the Fund, and will
execute and deliver all such certificates in connection therewith as may be
required by such laws or Regulations or under the laws of any State. The Bank
will ensure that the specific portfolio securities of the Fund held by it
hereunder will be at all times identifiable.
The Bank will use the same care with respect to the safekeeping of
portfolio securities and cash of the Fund held by it as it uses in respect of
its own similar property but it need not maintain any special insurance for the
benefit of the Fund.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any securities which it may hold
for the account of the Fund and which may from time to time be registered in the
name of the Fund.
Neither the Bank nor any nominee of the Bank will vote any of the
portfolio securities held hereunder by or for the account of the Fund, except in
accordance with Proper Instructions of an Officers' Certificate.
The Bank will execute and deliver, or cause to be executed and delivered,
to the Fund all notices, proxies and proxy soliciting materials with respect to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
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<PAGE>
(a) BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a
certified copy of a resolution of the Directors of the Fund specifically
approving deposits of the Fund assets in the Book-Entry System, indicating
that, and (ii) for each year following such approval, the Directors of the
Fund has reviewed and approved the arrangement and has not delivered an
Officer's Certificate to the Bank indicating that it has withdrawn its
approval:
1. The Bank may keep Securities of the Fund in the Book-Entry
System provided that such securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall
not include any assets of the Bank (or such agent) other than assets
held as a fiduciary, custodian, or otherwise for customers.
2. The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the
Bank (or any such agent) will identify by book entry securities
belonging to the Fund which are included with other securities
deposited in the Account and shall at all times during the regular
business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where
securities are transferred to the Fund's account, the Bank shall
also, by book entry or otherwise, identify as belonging to the Fund
a quantity of securities in fungible bulk of securities (i)
registered in the name of the Bank or its nominee, or (ii) shown on
the Bank's account on the books of the Federal Reserve Bank.
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<PAGE>
3. The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the
return of securities loaned by the Fund upon (i) receipt of advice
from the Book-Entry System that such Securities have been
transferred to the Account, and (ii) the making of an entry on the
records of the Bank (or its agent) to reflect such payment and
transfer for the account of the Fund. The Bank (or its agent) shall
transfer securities sold or loaned for the account of the Fund upon
(a) receipt of advice from the Book-Entry System that
payment for Securities sold or payment of the initial cash
collateral against the delivery of securities loaned by the
Fund has been transferred to the Account, and
(b) the making of an entry on the records of the Bank
(or its agent) to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Book-Entry
System of transfers of Securities for the account of the Fund
shall identify the Fund, be maintained for the Fund by the
Bank and shall be provided to the Fund at its request. The
Bank shall send the Fund a confirmation, as defined by Rule
17f-4 under the Investment Company Act of 1940, of any
transfers to or from the account of the Fund.
4. The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's
accounting system, internal accounting control and procedures for
safeguarding Securities deposited in the Book-Entry System. The
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<PAGE>
Bank will provide the Fund and cause any such agent to provide, at
such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities,
including Securities deposited in the Book-Entry System, relating to
the services provided by the Bank or such agent under the Agreement.
5. Anything to the contrary in the Agreement notwithstanding,
the Bank shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the Book-Entry System by reason of any
gross negligence, wilful misfeasance or bad faith of the Bank or any
of its agents or of any of its or their employees or from any
reckless disregard by the Bank or any such agent of its duty to
enforce effectively such rights as it may have against the
Book-Entry System; at the election of the Fund, it shall be entitled
to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a
consequence of any such loss or damage if and to the extent that the
Fund has not been made whole for any loss or damage.
(b) USE OF DIRECT PAPER SYSTEM FOR COMMERCIAL PAPER. Provided (i)
the Bank has received a certified copy of a resolution of the Fund's
Directors specifically approving participation in a system maintained by
the Bank for the holding of commercial paper in direct paper form ("Direct
Paper") and (ii) for each year following such approval the Directors of
the Fund have received and approved the arrangements, upon receipt of
Proper Instructions and upon receipt of confirmation from an Issuer (as
defined below) that the Fund has purchased such Issuer's Direct Paper,
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the Bank shall issue and hold in direct paper form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
direct paper agreement (the "Issuers"). In maintaining its Direct Paper
System, the Bank agrees that:
1. the Bank will maintain all Direct Paper held by the Fund
in an account of the Bank that includes only assets held by it for
customers;
2. the records of the Bank with respect to the Fund's
purchase of Direct Paper through the Bank will identify, by book
entry, Commercial Paper belonging to the Fund which is included in
the Direct Paper System and shall at all times during the regular
business hours of the Bank be open for inspection by duly authorized
officers, employees or agents of the Fund.
3. (a) The Bank shall pay for Direct Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from
the Issuer that such sale of Direct Paper has been effected, and
(ii) the making of an entry on the records of the Bank to reflect
such payment and transfer for the account of the Fund.
(b) The Bank shall cancel such Direct Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice
that payment for such Direct Paper has been transferred to the Fund,
and (ii) the making of an entry on the records of the Bank to
reflect such payment for the account of the Fund.
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<PAGE>
4. the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Direct Paper for the account of the
Fund on the next business day following the transaction;
5. the Bank will send to the Fund such reports on its system
of internal accounting control as the Fund may reasonably request
from time to time;
C. OPTIONS AND FUTURES TRANSACTIONS.
(a) PUTS AND CALLS TRADED ON SECURITIES EXCHANGES, NASDAQ OR
OVER-THE-COUNTER.
1. The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions between the Bank, any broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc., and, if necessary, the Fund
relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or
of any similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has
deposited or is maintaining adequate margin, if required, with any
broker in connection with any option, nor shall the Bank be under
any duty or obligation to present such option to the broker for
exercise unless it receives Proper Instructions from the Fund. The
Bank shall have no
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responsibility for the legality of any put or call purchased or sold
on behalf of the Fund, the propriety of any such purchase or sale,
or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a
Segregated Account as described in sub-paragraph c of this Section
6(C). The Bank specifically, but not by way of limitation, shall not
be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held
in a Segregated Account as described in sub-paragraph (c) of this
Section 6(C) is sufficient to protect such broker of the Fund
against any loss; (ii) effect the return of any collateral delivered
to a broker; or (iii) advise the Fund that any option it holds, has
or is about to expire. Such duties or obligations shall be the sole
responsibility of the Fund.
(b) PUTS, CALLS AND FUTURES TRADED ON COMMODITIES EXCHANGES.
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement among the Fund, the Bank and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
Futures, puts and calls traded on commodities exchanges, any Futures
Commission Merchant
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account and the Segregated Account shall be limited as set forth in
sub-paragraph (a)(2) of this Section 6(C) as if such sub-paragraph
referred to Futures Commission Merchants rather than brokers, and
Futures and puts and calls thereon instead of options.
(c) SEGREGATED ACCOUNT.
The Bank shall upon receipt of Proper Instructions establish and
maintain a Segregated Account or Accounts for and on behalf of the Fund,
into which Account or Accounts may be transferred cash and/or securities
including securities maintained in an Account by the Bank pursuant to
Section 6(B) hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Bank and a broker-dealer registered under
the Exchange Act and a member of the NASD or any Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange or the Commodity Futures Trading
Commission or any registered Contract Market, or of any similar
organization or organizations regarding escrow or other arrangements in
connection with transactions by the Fund, and (ii) for the purpose of
segregating cash or securities in connection with options purchased or
written by the Fund, or commodity futures purchased or written by the
Fund, and (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered
investment companies and (iv) for other proper corporate purposes, BUT
ONLY, in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Directors of the
Fund signed by an officer of the Fund and
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certified by the Clerk of an Assistant Clerk, setting forth the purpose or
purposes of such Segregated Account and declaring such purposes to be
proper corporate purposes.
D. SEGREGATED ACCOUNT FOR "WHEN-ISSUED", "FORWARD COMMITMENT"
AND REVERSE REPURCHASE AGREEMENT TRANSACTIONS. Notwithstanding the
provisions of Section 6(A), 6(B) and 6(C) hereof, the Bank will maintain a
segregated account (the "Segregated Account") in the name of the Fund (i) for
the deposit of liquid assets, such as cash, U.S. Government securities or
other high grade debt obligations, having a market value (marked to the
market on a daily basis) at all times equal to not less than the aggregate
purchase price due on the settlement dates of all the Fund's then outstanding
forward commitment or "when-issued" agreements relating to the purchase of
portfolio securities and all the Fund's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer firms, and (ii)
for the deposit of any portfolio securities which the Fund has agreed to sell
on a forward commitment basis, all in accordance with Securities and Exchange
Commission Release No. IC-10666. No assets shall be deposited in the
Segregated Account except pursuant to Proper Instructions. Assets may be
withdrawn from the segregated account pursuant to Proper Instructions only
(a) for sale or delivery to meet the Fund's obligations under outstanding
firm commitment or when-issued agreements for the purchase of portfolio
securities and under reverse repurchase agreements, (b) for exchange for
other liquid assets of equal or greater value deposited in the Segregated
Account, (c) to the extent that the Fund's outstanding forward commitment or
when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Fund's obligations
thereunder are met from assets of the Fund other than those in the Segregated
Account, or (d) for delivery upon settlement of a forward commitment
agreement for the sale of portfolio securities.
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7. TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver
or release portfolio securities held by it hereunder, insofar as such
securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this Section 7,
specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection, only
(a) upon sales of portfolio securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full,
each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale of the portfolio securities received by the
Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made, provided however, that
portfolio securities may be delivered to the broker selling the same for
examination in accordance with "street delivery" custom;
(b) in exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan or merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise;
(c) upon conversion of portfolio securities pursuant to their terms
into other securities;
(d) upon exercise of subscription, purchase or sale or other
similar rights represented by such portfolio securities;
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(e) for the purpose of redeeming in kind shares of beneficial
interest of the Fund upon authorization from the Fund;
(f) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(g) when such portfolio securities are called, redeemed or retired
or otherwise become payable;
(h) for the purpose of releasing certificates representing
portfolio securities of the Fund, against contemporaneous receipt by the
Bank of the fair market value of such security, as set forth in Proper
Instructions received by the Bank before such payment is made;
(i) for the purpose of tendering shares pursuant to a tender offer
therefor;
(j) for the purpose of delivering securities lent by the Fund to a
bank or broker-dealer, but only against receipt in accordance with street
delivery custom, except as otherwise provided in Subsections 6(B)(a) and
(b) hereof, of adequate collateral as agreed upon from time to time by the
Fund and the Bank, and upon receipt of payment in connection with any
repurchase agreement relating to such securities entered into by the Fund;
(k) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolution of the Directors of
the Fund, signed by an authorized officer of the Fund (other than the
officer certifying such resolution) and certified by its Secretary or
Assistant Secretary, specifying the portfolio securities to be delivered,
setting forth the transaction
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in or purpose for which such delivery is to be made, declaring such
transaction to be an authorized transaction of the Fund or such purpose to
be a proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made; and
(l) upon termination of this Agreement as hereinafter set forth
pursuant to Section 9 and Section 13 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (d), (f), (g), (h), (i) and (j) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
8. REDEMPTIONS. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding shares of beneficial interest, the Bank will rely on notification
by the Fund's transfer agent if receipt of a request for redemption and
certificates, if issued, in proper form for redemption before such payment is
made. Payment shall be made in accordance with the Articles of Incorporation
of the Fund, from assets available for said purposes.
9. MERGER, DISSOLUTION, ETC. OF FUND. In the case of the following
transactions not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company, the sale by the Fund of all, or substantially all of its assets to
another investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the portfolio securities
held by it under this Agreement and disburse cash only upon the order of the
Fund set forth in an Officers' Certificate, accompanied by a certified copy
of a resolution of the Fund's Directors authorizing any of the foregoing
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transactions. Upon completion of such delivery and disbursement and the payment
of the fees, disbursements and expenses of the Bank due to the Bank pursuant to
Section 12E hereof, this Agreement will terminate.
10. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, it will without prior authorization or
instruction of the Fund or the transfer agent:
(a) Receive and hold for the account of the Fund hereunder and
deposit in the account or accounts referred to in Section 6 hereof, all
income, dividends, interest and other payments or distribution of cash
with respect to the portfolio securities held thereunder;
(b) Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation
and hold the cash received by it upon such payment for the account of the
Fund in the account or accounts referred to in Section 6 hereof;
(c) Receive and hold for the account of the Fund hereunder and
deposit in the account or accounts referred to in Section 6 hereof all
securities received as a distribution on portfolio securities as a result
of a stock dividend, share split-up, reorganization, recapitalization,
merger, consolidation, readjustment, distribution of rights and similar
securities issued with respect to any portfolio securities held by it
hereunder.
(d) Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue
Code or the regulations of the Treasury Department issued thereunder, or
by the laws
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<PAGE>
of any state, now or hereafter in effect, inserting the Fund's name on
such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so and as may be required to obtain payment in
respect thereof. The Bank will execute and deliver such certificates in
connection wit portfolio securities delivered to it or by it under this
Agreement as may be required under the provisions of the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder, or
under the laws of any State;
(e) Present for payment all portfolio securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by
it upon payment for the account of the Fund in the account or accounts
referred to in Section 6 hereof; and
(f) Exchange interim receipts or temporary securities for
definitive securities.
The Bank will use all diligence to collect any funds which may to its
knowledge become collectible arising from such securities, including dividends,
interest and other income, and to transmit to the Fund notice actually received
by it of any call for redemption, offer of exchange, right of subscription,
reorganization or other proceedings affecting such securities.
If portfolio securities upon which such income is payable are in default
or payment is refused after due demand or presentation, the Bank will notify the
Fund by telecopier of any default or refusal to pay no later than one business
day from the day on which it receives knowledge of such default or refusal. In
addition, the Bank will send the Fund a written report once each month showing
any income on any portfolio security held by it which is more than ten days
overdue on the date of such report and which has not previously been reported.
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<PAGE>
11. MAINTENANCE OF RECORDS. The Bank will maintain records with
respect to transactions for which the Bank is responsible pursuant to the
terms and conditions of this Agreement and in compliance with the applicable
rules and regulations under the Investment Company Act of 1940 as amended,
and will furnish the Fund daily with a statement of condition of the Fund.
The Bank will furnish to the Fund at the end of every month, and at the close
of each quarter of the Fund's fiscal year, a list of the portfolio securities
and the aggregate amount of cash held by it for the Fund. The books and
records of the Bank pertaining to its actions under this Agreement and
reports by the Bank or its independent accountants concerning its accounting
system, procedures for safeguarding securities and internal accounting
controls will be open to inspection and audit at reasonable times by officers
of or auditors employed by the Fund and will be preserved by the Bank in the
manner and in accordance with the applicable rules and regulations under the
Investment Company Act of 1940.
The Bank agrees to treat all records and other information relative to the
Fund and its shareholders as confidential, except it may disclose such
information after prior notification to and approval in writing by the Fund,
which approval shall not be unreasonably withheld. Nothing in this Section 11
shall prevent the Bank from divulging information to bank or securities
regulatory authorities or where the Bank may be exposed to civil or criminal
contempt proceedings for failure to comply.
12. CONCERNING THE BANK.
A. PERFORMANCE OF DUTIES.
(1) The Bank and the Fund shall each exercise reasonable care
in the performance of their respective duties and functions under
this Agreement.
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<PAGE>
(2) In its dealings with the Fund, the Bank shall be entitled
to rely upon any Officers' Certificate, Proper Instructions,
resolution of the Directors, telegram, facsimile communication,
written notice, or certificate.
B. RESPONSIBILITY OF CUSTODIAN. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any property or
evidence of title thereto received by it or delivered by it pursuant to
this Contract and shall beheld harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of
a three-party futures or options agreement. The Custodian shall be held
harmless and be protected by the Fund and shall be held to the exercise of
reasonable care in carrying out the Proper Instructions of the Fund. It
shall be entitled to rely on and may act upon advice of counsel (who may
be counsel for the Fund) or mutually acceptable to both parties on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
C. NO DUTY OF BANK. The Bank will be under no duty or obligation
to inquire into and will not be liable for:
(a) the validity of the issue of any portfolio securities
purchased by or for the Fund, the legality of the purchases thereof
or the propriety of the price incurred therefor;
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<PAGE>
(b) the legality of any sale of any portfolio securities by
or for the Fund or the propriety of the amount for which the same
are sold;
(c) the legality of an issue or sale of any shares of common
stock of the Fund or the sufficiency of the amount to be received
therefor provided that it reflects the net asset value as provided
by the Fund;
(d) the legality of the repurchase of any shares of common
stock of the Fund or the propriety of the amount to be paid therefor
provided that it reflects the net asset value as provided by the
Fund;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any portfolio securities
as payment in kind of such dividend; or
(f) any property or moneys of the Fund unless and until
received by it, except as otherwise provided in Section 10 hereof,
and any such property or moneys delivered or paid by it pursuant to
the terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any portfolio securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Agreement and Declaration of Fund or By-Laws, any federal or
state statutes or any rule or regulation of any governmental agency.
D. FEES AND EXPENSES OF BANK. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of
portfolio securities made hereunder, and for the Bank's normal
disbursements,
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<PAGE>
expenses and charges made or incurred by the Bank in the performance of
this Agreement (including any duties listed on any Schedule hereto, if
any). For the services rendered by the Bank hereunder, the Fund will pay
to the Bank such compensation or fees at such rate and at such times as
shall be agreed upon in writing by the parties from time to time. The Bank
will also be entitled to reimbursement by the Fund for normal industry
costs for securities transfers and services incurred in conjunction with
termination of this Agreement by the Fund.
E. ADVANCES BY BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of Proper Instructions as required by this
Agreement for such payments by the Fund. Should such a payment or
payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other
reason) any such related indebtedness shall be deemed a loan made by the
Bank to the Fund payable on demand and bearing interest at the current
rate charged by the Bank for such loans unless the Fund shall provide the
Bank with agreed-upon compensating balances. The Fund authorizes the Bank,
in its sole discretion, at any time to charge any overdraft or
indebtedness, together with interest due thereon, against any balance of
account standing to the credit of the Fund on the Bank's books.
13. TERMINATION.
(a) This Agreement may be terminated at any time without penalty
upon ninety days written notice delivered by either party to the other by
means of registered mail, and upon the expiration of such ninety days this
Agreement will terminate; provided, however, that the effective date of
such termination may be postponed to a date of delivery
-26-
<PAGE>
of such notice (i) by the Bank in order to prepare for the transfer by the
Bank of all of the assets of the Fund held hereunder, and (ii) by the Fund
in order to give the Fund an opportunity to make suitable arrangements for
a successor custodian. At any time after the termination of this
Agreement, the Fund will, at its request, have access to the records of
the Bank relating to the performance of its duties as custodian.
(b) In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of
notice of termination, commence and prosecute diligently to completion
the transfer of all cash and the delivery of all portfolio securities
duly endorsed and all records maintained under Section 11 to the
successor custodian when appointed by the Fund. The obligation of the
Bank to deliver and transfer over the assets of the Fund held by it
directly to such successor custodian will commence as soon as such
successor is appointed and will continue until completed as aforesaid.
If the Fund does not select a successor custodian within ninety days
from the date of delivery of notice of termination the Bank may,
subject to the provisions of subsection (c) of this Section 13, deliver
the portfolio securities and cash of the Fund held by the Bank to a
bank or trust company of its own selection which meets the requirements
of Section 17(f)(1) of the Investment Company Act of 1940 and has a
reported capital, surplus and undivided profits aggregating not less
than $2,000,000, to be held as the property of the Fund under terms
similar to those on which they were held by the Bank, whereupon such
bank or trust company so selected by the Bank will become the successor
custodian of such assets of the Fund with the same effect as though
selected by the Directors of the Fund.
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<PAGE>
(c) Prior to the expiration of ninety days after notice of
termination has been given, the Fund may furnish the Bank with an order of
the Fund advising that a successor custodian cannot be found willing and
able to act upon reasonable and customary terms and that there has been
submitted to the shareholders of the Fund the question of whether the Fund
will be liquidated or will function without a custodian for the assets of
the Fund held by the Bank. In that event the Bank will deliver the
portfolio securities and cash of the Fund held by it, subject as
aforesaid, in accordance with one of such alternatives which may be
approved by the requisite vote of shareholders, upon receipt by the Bank
of a copy of the minutes of the meeting of shareholders at which action
was taken, certified by the Fund's Secretary.
14. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it
at its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
Value Line U.S. Government Securities Fund, Inc.
c/o Value Line Inc.
711 3rd Avenue
New York, New York 10017
Attn: Treasurer
(b) In the case of notices sent to the Bank to:
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive
North Quincy, MA 02171
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<PAGE>
or at such other place as such party may from time to time designate in
writing.
15. AMENDMENTS. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties, and in the case of the
Fund, such alteration or amendment will be authorized and approved by its
Directors.
16. PARTIES. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be assignable by the
Fund without the written consent of the Bank or by the Bank without the
written consent of the Fund, authorized and approved by its Directors; and
provided further that termination proceedings pursuant to Section 13 hereof
will not be deemed to be an an assignment within the meaning of this
provision.
17. GOVERNING LAW. This Agreement and all performance hereunder will
be governed by the laws of the Commonwealth of Massachusetts.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate and their respective corporate seals to be affixed hereto
as of the date first above written by their respective officers thereunto duly
authorized.
VALUE LINE U.S. GOVERNMENT SECURITIES
FUND, INC.
By: /s/ [ILLEGIBLE]
------------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ----------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ [ILLEGIBLE]
------------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ----------------------------
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<PAGE>
AMENDMENT TO CUSTODIAN CONTRACT
AMENDMENT made by and between STATE STREET BANK AND TRUST COMPANY (the
"Custodian") each Fund listed on Appendix A (the "Fund").
WHEREAS, the Custodian and each Fund are parties to a Custodian Contract,
as amended (each a "Custodian Contract") governing the terms and conditions
under which the Custodian maintains custody of the securities and other assets
of the Fund; and
WHEREAS, the Custodian and each Fund desires to amend the relevant
Custodian Contract;
NOW THEREFORE, the Custodian and each Fund hereby amend and revise in its
entirety the defined term "Authorized person" in Section 2(a) of the Custodian
Contract as follows:
"Authorized person" of a Fund shall mean any of the persons duly
authorized to give Proper Instructions or otherwise act with respect to
such Fund on behalf of the Board of Trustees/Directors of such Fund by
appropriate resolution of such Board of Trustees/Directors, it being
understood that the signatures of two Authorized persons of a Fund shall
be required for the release of the assets of the Fund.
<PAGE>
Except as specifically superseded or modified herein, the terms and provisions
of the Custodian Contract shall continue to apply with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
1st day of October, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
------------------------------------
Ronald E. Logue
Executive Vice President
Attest: /s/ Thomas M. Lenz
------------------------------------
Thomas M. Lenz
Vice President
EACH FUND LISTED ON APPENDIX A
By: /s/ [ILLEGIBLE]
----------------------------
Name: [ILLEGIBLE]
Title: Chairman & President
Attest: /s/ [ILLEGIBLE]
----------------------------
Name: [ILLEGIBLE]
Title: Secretary
<PAGE>
APPENDIX A
LIST OF FUNDS
Value Line Aggressive Income Trust
Value Line Asset Allocation Fund, Inc.,
Value Line Cash Fund, Inc., (The)
Value Line Centurion Fund, Inc.
Value Line Convertible Fund, Inc.
Value Line Fund, Inc. (The)
Value Line Income Fund, Inc., (The)
Value Line Leveraged Growth Investors, Inc.
Value Line New York Tax Exempt Trust
Value Line Small-Cap Growth Fund, Inc.
Value Line Special Situations Fund, Inc.
Value Line Strategic Asset Management Trust
Value Line Tax-Exempt Fund, Inc. (The)
Value Line U.S. Government Securities Fund, Inc.
Value Line U.S. Multi-National Company Fund, Inc.
<PAGE>
PETER D. LOWENSTEIN
ATTORNEY AT LAW
TWO GREENWICH PLAZA, SUITE 100
GREENWICH, CONNECTICUT 06830
203 622-3932
FAX 203 622-0321
December 28, 1998
Value Line U.S. Government Securities Fund, Inc.
220 East 42nd Street
New York, NY 10017
Gentlemen:
I have acted as special counsel to Value Line U.S. Government Securities
Fund, a Maryland corporation (the "Fund"), in connection with certain matters,
including the issuance of shares of its common stock, $1 par value (the "Common
Stock").
As special counsel for the Fund, I am familiar with its Charter and
By-laws. I have examined the prospectus included in Post-Effective Amendment
No. 23 to its Registration Statement on Form N-1A, File No. 2-71928 (the
"Registration Statement"), substantially in the form in which it is to become
effective (the "Prospectus"). I have further examined and relied upon a
certificate of the Maryland State Department of Assessments and Taxation to the
effect that the Fund is duly incorporated and existing under the laws of the
State of Maryland and is in good standing and duly authorized to transact
business in the State of Maryland.
I have also examined and relied upon such corporate records of the Fund and
other document and certificates with respect to factual matters as I have deemed
necessary to render the opinion expressed herein. I have assumed, without
independent verification, the genuineness of all signatures, the authenticity of
all documents submitted to me as originals and the conformity with originals of
all documents submitted to me as copies.
Based on such examination, I am of the opinion and so advise you that:
1. The Fund is duly organized and validly existing as a
corporation in good standing under the laws of the State of
Maryland.
<PAGE>
2. The shares of Common Stock of the Fund to be offered for
sale pursuant to the Prospectus are to the extent of the
number of shares authorized to be issued, duly authorized
and, when sold, issued and paid for as contemplated by the
Prospectus, will have been validly and legally issued and
will be fully paid and nonassessable.
I am a member of the bars of the States of Connecticut and New York and I
do not purport to be an expert in, and express no opinion with respect to, the
laws of any jurisdiction other than the federal laws of the United States and
the laws of the States of Connecticut and New York.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Peter D. Lowenstein
Peter D. Lowenstein
PDL:psp
2
