<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1999
FILE NO. 33-01575
FILE NO. 811-4471
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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. 14 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 14 /X/
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VALUE LINE AGGRESSIVE INCOME TRUST
(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)
/ / 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)
/X/ on June 1, 1999 pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
--------------------------------
PROSPECTUS
June 1, 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 risks of investing in the Fund PAGE 7
WHO MANAGES THE FUND
Investment Adviser PAGE 8
Management fees PAGE 8
Portfolio management PAGE 8
ABOUT YOUR ACCOUNT
How to buy shares PAGE 9
How to sell shares PAGE 11
Special services PAGE 12
Dividends, distributions and taxes PAGE 13
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 14
<PAGE>
FUND SUMMARY
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WHAT ARE THE FUND'S GOALS?
The Fund's primary investment objective is to maximize
current income. Capital appreciation is a secondary objective
which will only be sought when consistent with the Fund's
primary objective. Although the Fund will strive to achieve
these goals, there is no assurance that it will.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
To achieve the Fund's goals, we invest, under normal
conditions, at least 80% of the Fund's net assets in
high-yielding, lower rated fixed-income corporate securities
(also known as "junk bonds").
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.
High-yielding, lower rated securities have certain
speculative characteristics and involve greater investment
risk, including the possibility of default or bankruptcy,
than is the case with higher rated securities. An investment
in the Fund is not a complete investment program and you
should consider it just one part of your total investment
program. For a more complete discussion of risk, please turn
to page 7.
2
<PAGE>
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 Aggregate Bond Index, which is a broad
based market index. You should remember that unlike the Fund,
the index is unmanaged and does 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 AS OF 12/31 EACH YEAR (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1989 2.37%
<S> <C>
1990 -3.67%
1991 26.63%
1992 12.15%
1993 19.04%
1994 -4.10%
1995 20.01%
1996 19.75%
1997 14.10%
1998 -5.27%
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q1 1991 +12.46%
WORST QUARTER: Q3 1998 (8.91%)
</TABLE>
The Fund's year-to-date return for the one month ended
January 31, 1999, was 2.35%.
AVERAGE ANNUAL RETURN AS OF 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------
FUND -5.27% 8.30% 9.52%
- ---------------------------------------------------------------
LEHMAN BROS. AGGREGATE
BOND INDEX 8.69% 7.27% 9.26%
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</TABLE>
3
<PAGE>
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(% OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
<S> <C>
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MANAGEMENT FEES 0.66%
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DISTRIBUTION AND SERVICE (12B-1) FEES NONE
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OTHER EXPENSES 0.15%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.81%
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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>
$83 $259 $450 $1,002
</TABLE>
4
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HOW WE MANAGE THE FUND
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OUR INVESTMENT STRATEGIES
The investment objective of the Fund is to maximize current
income. Capital appreciation is a secondary objective but
only when consistent with the Fund's primary objective.
Capital appreciation may result, for example, from an
improvement in the credit standing of an issuer whose
securities are held in the Fund's portfolio or from a general
lowering of interest rates, or a combination of both. Capital
depreciation may result, for example, from a lowered credit
standing or a general rise in interest rates, or a
combination of both.
Under normal conditions, the Fund will invest at least 80% of
its net assets in high-yielding, fixed-income corporate
securities (i) issued by companies that are rated B++ or
lower for relative financial strength in either the Standard
or Expanded Editions of The Value Line Investment Survey
(generally, companies that are among the bottom half of the
companies followed) or (ii) issued by companies not followed
by either editions of The Value Line Investment Survey if the
Adviser believes that the financial condition of the issuers
of such securities or the protection afforded by the terms of
the securities themselves limit the risk to the Fund to a
degree comparable to that of securities issued by companies
with the Value Line financial strength ratings. The foregoing
may include preferred stocks and "convertible
securities"--that is, bonds, debentures, corporate notes,
preferred stocks or other securities which are convertible
into common stock. The balance of the Fund's portfolio may
include U.S. government securities, warrants, or common
shares when consistent with the Fund's primary objective or
acquired as part of a unit combining fixed-income and equity
securities.
In selecting securities for purchase or sale, the Adviser
will give consideration to the ratings for relative financial
strength contained in the Standard and Expanded Editions of
The Value Line Investment Survey for the approximately 3,500
companies followed therein. These ratings range from A++ to C
and are divided in nine categories. Companies that have the
best financial strength (relative to the other companies
followed in The Value Line Investment Survey) are given an
"A++" rating, indicating an ability to weather hard times
better than the vast majority of other companies. Those that
don't quite merit the top rating are given an "A+" grade, and
so on. Those rated "C+" are well below average, and "C" is
reserved for companies with very serious financial problems.
These ratings are based upon computer
5
<PAGE>
analysis of a number of key variables that measure financial
leverage, business risk, and company size. The ratings in the
Standard Edition of The Value Line Investment Survey also
reflect the judgment of the Adviser's analysts regarding
factors that cannot be quantified across-the-board for all
companies. The primary variables that are indexed and studied
include equity coverage of debt, equity coverage of
intangibles, "quick ratio," accounting methods, variability
of return, fixed charge coverage, and company size.
Although the Fund invests principally in securities issued by
companies that are rated B++, or lower (or companies not
covered by The Value Line Investment Survey but which, in the
opinion of the Adviser, are of comparable financial
condition), the Fund may purchase securities issued by
companies rated C when, in the Adviser's opinion, special
circumstances suggest that the financial condition of the
individual security is stronger than that of the company
issuing the security or the investment merits of the security
are stronger than implied by the company's financial strength
rating.
In addition, the Fund may purchase certain restricted
securities ("Rule 144A securities") for which there is a
secondary market of qualified institutional buyers, as
contemplated by Rule 144A under the Securities Act of 1933.
Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain
restricted securities to qualified institutional buyers. The
Fund may also lend its portfolio securities, enter into
repurchase agreements, write covered call options, purchase
"when issued" securities and enter into futures contracts.
TEMPORARY DEFENSIVE POSITION
From time to time in response to adverse market or other
conditions, we may invest a portion of the Fund's net assets
in cash, cash equivalents or U.S. Government securities for
temporary defensive purposes. This could help the Fund avoid
losses but may mean lost opportunities and lower yields than
on lower-rated fixed income securities.
PORTFOLIO TURNOVER
The Fund may engage in active and frequent trading of
portfolio securities in order to take advantage of better
investment opportunities to achieve its investment objectives
which would result in higher brokerage commissions and other
expenses. High portfolio turnover may negatively affect the
Fund's
6
<PAGE>
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. High yielding,
lower rated securities have certain speculative
characteristics, may be subject to greater market
fluctuations and involve greater investment risk, including
the possibility of default or bankruptcy, and risk of loss of
income and principal, than is the case with lower yielding,
higher-rated securities. Please see the Statement of
Additional Information for a further discussion of risks.
Information on the Fund's recent holdings can be found in the
Fund's current annual or semi-annual report.
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 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.
7
<PAGE>
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
Trustees.
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 resulting in combined assets under
management of over $5 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 has 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 0.75% on the first $100 million of the
Fund's average daily net assets and 0.50% of such additional
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.
8
<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/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 $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
9
<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 day that exchange is open for business. We calculate NAV
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. We
price securities 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 Trustees.
Fixed-income corporate securities are valued on the basis of
prices provided by an independent pricing service. 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.
10
<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 certain 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
before buying shares through an exchange. To execute an
exchange, call 800-243-2729.
11
<PAGE>
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.
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 Regular 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 declares dividends from its net investment income
daily, and distributes the accrued dividends to you each
month. Capital gains, if any, 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. 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 JANUARY 31,
- ------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $8.66 $8.21 $7.64 $6.80 $8.00
- ------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .78 .72 .75 .69 .68
Net gains or losses on securities (both
realized and unrealized) (1.21) .45 .57 .85 (1.20)
- ------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations (.43) 1.17 1.32 1.54 (.52)
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.78) (.72) (.75) (.70) (.68)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $7.45 $8.66 $8.21 $7.64 $6.80
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (5.13)% 14.97% 18.12% 23.79% (6.66)%
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $174,805 $146,712 $ 83,765 $ 41,776 $ 29,760
Ratio of expenses to average net assets .81%(1) .95%(1) 1.10%(1) 1.22%(1) 1.27%
Ratio of net income to average net assets 9.81% 8.60% 9.70% 9.67% 9.23%
Portfolio turnover rate 140% 251% 276% 284% 221%
</TABLE>
(1) After offset of custody credits. Excluding the custody
credits would not have changed the expense ratio.
- --------------------------------------------------------------------------------
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 June 1, 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 the prospectus
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. 811-4471
</TABLE>
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
www.valueline.com
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1999
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line Aggressive Income Trust
dated June 1, 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 1999 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.
--------------
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-10
Investment Advisory and Other Services.............................................. B-12
Brokerage Allocation and Other Practices............................................ B-14
Capital Stock....................................................................... B-14
Purchase, Redemption and Pricing of Shares.......................................... B-14
Taxes............................................................................... B-16
Performance Data.................................................................... B-17
Financial Statements................................................................ B-18
Description of Value Line Financial Strength Ratings................................ B-18
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
CLASSIFICATION. The Fund is an open-end, diversified management investment
company established as a Massachusetts business trust in 1985. The Fund's
investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT STRATEGIES AND RISKS. The primary investment objective of the
Fund is to maximize income. Capital appreciation is a secondary objective. The
Fund's investment objective cannot be changed without shareholder approval.
There can be no assurance that the Fund will achieve its investment objective.
There are risks in all investments, including any stock investment, and in all
mutual funds that invest in stocks.
In seeking its primary objective, the Fund will invest, under normal
conditions, at least 80% of its net assets in high-yielding, fixed-income
corporate securities (i) issued by companies that are rated B++ or lower for
relative financial strength in either the Standard or Expanded Editions of The
Value Line Investment Survey, or (ii) issued by companies not followed by either
editions of The Value Line Investment Survey if the Adviser believes that the
financial condition of the issuers of such securities or the protection afforded
by the terms of the securities themselves limit the risk to the Fund to a degree
comparable to that of securities issued by companies with the Value Line
financial strength ratings. The foregoing may include "convertible securities"
- --that is, bonds, debentures, corporate notes, preferred stocks or other
securities which are convertible into common stock. The balance of the Fund's
portfolio may include U.S. government securities, warrants, or common shares
when consistent with the Fund's primary objective or acquired as part of a unit
combining fixed-income and equity securities. Common shares received upon
conversion or exercise of warrants and securities remaining upon the breakup of
units or detachments of warrants may also be retained in the Fund's portfolio to
permit orderly disposition or to establish long-term holding periods for federal
income tax purposes. The Fund is not required to sell securities for the purpose
of assuring that 80% of its assets are invested in high-yielding, fixed-income
securities. The Fund may also lend its portfolio securities, enter into
repurchase agreements, write covered call options, purchase "when-issued"
securities, and enter into futures contracts.
In selecting securities for purchase or sale, the Adviser will give
consideration to the ratings for relative financial strength contained in the
Standard and Expanded Editions of The Value Line Investment Survey for the
approximately 3,500 companies followed therein. These ratings range from A++ to
C and are divided in nine categories. Companies that have the best financial
strength (relative to the other companies followed in the Value Line Investment
Survey) are given an "A++" rating, indicating an ability to weather hard times
better than the vast majority of other companies. Those that don't quite merit
the top rating are given an "A+" grade, and so on. Those rated "C+" are well
below average, and "C" is reserved for companies with very serious financial
problems. These ratings are based upon computer analysis of a number of key
variables that measure financial leverage, business risk, and company size. The
ratings in the Standard Edition of The Value Line Investment Survey also reflect
the judgment of the Adviser's analysts regarding factors that cannot be
quantified across-the-board for all companies. The primary variables that are
indexed and studied include equity coverage of debt, equity coverage of
intangibles, "quick ratio," accounting methods, variability of return, fixed
charge coverage, and company size. For a description of these ratings, see page
B-18.
B-2
<PAGE>
Although the Fund invests principally in securities issued by companies that
are rated B++, or lower (or companies not covered by The Value Line Investment
Survey but which, in the opinion of the Adviser, are of comparable financial
condition), the Fund may purchase securities issued by companies rated C when,
in the Adviser's opinion, special circumstances suggest that the financial
condition of the individual security is stronger than that of the company
issuing the security or the investment merits of the security are stronger than
implied by the company's financial strength rating. As of March 31, 1999, the
percentage of the Fund's net assets invested in each rating category was as
follows: Repurchase agreements = %; B+ = %; B= %; C++ = %; and nonrated =
%. In the Adviser's opinion the average credit quality of the Fund's nonrated
securities was equivalent to a C++.
INVESTMENT RISKS OF HIGH YIELDING SECURITIES. High yields are usually
available on securities that are lower rated, that is, on securities of
companies that the Adviser rates B++ or lower for financial strength (generally,
companies that are among the bottom half of the companies followed by The Value
Line Investment Survey), or on securities of companies that the Adviser
considers to be of equivalent creditworthiness. High-yielding, lower-rated
securities, also known as junk bonds, have certain speculative characteristics
and involve greater investment risk, including the possibility of default or
bankruptcy, than is the case with high-rated securities.
Since investors generally perceive that there are greater risks associated
with the lower-rated securities of the type in which the Fund may invest, the
yields and prices of such securities may tend to fluctuate more than those for
higher-rated securities. In the lower quality segments of the fixed-income
securities market, changes in perceptions of issuers' creditworthiness tend to
occur more frequently and in a more pronounced manner than do changes in higher
quality segments of the fixed-income securities market, resulting in greater
yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
though prices of fixed-income securities fluctuate in response to the general
level of interest rates the prices of high yield bonds have been found to be
less sensitive to interest rate changes than higher-rated instruments, but more
sensitive to adverse economic changes or individual corporate developments. An
economic downturn or increase in interest rates is likely to have a negative
effect on the high yield bond market and on the value of the high yield bonds in
the Fund's portfolio, as well as on the ability of the bond's issuers to repay
principal and interest.
Fluctuations in the prices of portfolio securities subsequent to their
acquisition will not affect cash income from such securities but will be
reflected in the Fund's net asset value. Lower-rated and comparable non-rated
securities tend to offer higher yields than higher-rated securities with the
same maturities because the historical financial conditions of the issuers of
such securities may not have been as strong as that of other issuers. Since
lower-rated securities generally involve greater risks of loss of income and
principal than higher-rated securities, investors should consider carefully the
relative risks associated with investments in securities which carry lower
ratings and in comparable non-rated securities.
An additional risk of high yield securities is the limited liquidity and
secondary market support and thus the absence of readily available market
quotations. As a result, the responsibility of the Fund's Trustees to value the
securities becomes more difficult and judgment plays a greater role in valuation
because there is less reliable, objective data available.
B-3
<PAGE>
Special tax considerations are associated with investing in high yield bonds
structured as zero coupon or pay-in-kind securities. The Fund accrues income on
these securities prior to the receipt of cash payments. However, a fund must
distribute substantially all of its income to its shareholders to qualify for
pass-through treatment under the tax law. Therefore, a fund may have to dispose
of its portfolio securities under disadvantageous circumstances to generate cash
to satisfy distribution requirements.
When changing economic conditions and other factors cause the yield
difference between lower-rated and higher-rated securities to narrow, the Fund
may purchase higher-rated securities which provide similar yields but have less
risk. In addition, under unusual market or economic conditions, the Fund may,
for defensive purposes, invest up to 100% of its assets in securities issued or
guaranteed by the U.S. government or its instrumentalities or agencies,
certificates of deposit, bankers' acceptances and other bank obligations, highly
rated commercial paper or other fixed-income securities deemed by the Adviser to
be consistent with a defensive posture, or may hold its assets in cash. The
yield on such securities may be lower than the yield on lower-rated fixed-income
securities.
MISCELLANEOUS INVESTMENT PRACTICES
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 10% 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 investment 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.
In addition, the Fund may purchase certain restricted securities ("Rule 144A
securities") for which there is a secondary market of qualified institutional
buyers, as contemplated by Rule 144A under the Securities Act of 1933. Rule 144A
provides an exemption from the registration requirements of the Securities Act
for the resale of certain restricted securities to qualified institutional
buyers. The Adviser, under the supervision of the Board of Trustees, will
consider whether securities purchased under Rule 144A are liquid or illiquid for
purposes of the Fund's limitation on investment in securities which are not
readily marketable or are illiquid. Among the factors to be considered are the
frequency of trades and quotes, the number of dealers and potential purchasers,
dealer undertakings to make a market and the nature of the security and the time
needed to dispose of it. To the extent that the liquid Rule 144A securities that
the Fund holds become illiquid, due to lack of sufficient qualified
institutional buyers or market or other conditions, the percentage of the Fund's
assets invested in illiquid assets would increase. The Adviser, under the
supervision of the Board of Trustees, will monitor the Fund's investments in
Rule 144A securities and will consider appropriate measures to enable the Fund
to maintain sufficient liquidity for operating purposes and to meet redemption
requests.
B-4
<PAGE>
COVERED CALL OPTIONS. The Fund may write covered call options on stocks
held in its portfolio ("covered options") in an attempt to earn additional
income on its portfolio or to partially offset an expected decline in the price
of a security. When the Fund writes a covered call option, it gives the
purchaser of the option the right to buy the underlying security at the price
specified in the option (the "exercise price") at any time during the option
period. If the option expires unexercised, the Fund will realize income to the
extent of the amount received for the option (the "premium"). If the option is
exercised, a decision over which the Fund has no control, the Fund must sell the
underlying security to the option holder at the exercise price. By writing a
covered option, the Fund foregoes, in exchange for the premium less the
commission ("net premium"), the opportunity to profit during the option period
from an increase in the market value of the underlying security above the
exercise price. The Fund will not write call options in an aggregate amount
greater than 25% of its net assets.
The Fund will purchase call options only to close out a position. When an
option is written on securities in the Fund's portfolio and it appears that the
purchaser of that option is likely to exercise the option and purchase the
underlying security, it may be considered appropriate to avoid liquidating the
Fund's position, or the Fund may wish to extinguish a call option sold by it so
as to be free to sell the underlying security. In such instances the Fund may
purchase a call option on the same security with the same exercise price and
expiration date which had been previously written. Such a purchase would have
the effect of closing out the option which the Fund has written. The Fund
realizes a gain if the amount paid to purchase the call option is less than the
premium received for writing a similar option and a loss if the amount paid to
purchase a call option is greater than the premium received for writing a
similar option. Generally, the Fund realizes a short-term capital loss if the
amount paid to purchase the call option with respect to a stock is greater than
the premium received for writing the option. If the underlying security has
substantially risen in value, it may be difficult or expensive to purchase the
call option for the closing transaction.
LENDING 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. The loans will be made in conformity with applicable regulatory
policies and will be 100% collateralized by cash, cash equivalents or U.S.
Treasury bills on a daily basis in an amount equal to the market value of the
securities loaned and interest earned. The Fund retains the right to call the
loaned securities upon notice and intends to call loaned voting securities in
anticipation of any important or material matter to be voted on by stockholders.
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.
FINANCIAL FUTURES CONTRACTS. The Fund may invest in financial futures
contracts ("futures contracts") and related options thereon limited to 30% of
the Fund's assets. If the Adviser anticipates that interest rates will rise, the
Fund may sell a futures contract or a call option thereon or purchase a put
option on such futures contract to attempt to hedge against a decrease in the
value of the Fund's securities. If the Adviser anticipates that interest rates
will decline, the Fund may purchase a futures contract or a call option thereon
to protect against an increase in the prices of the securities the Fund intends
to purchase. These futures contracts and related options thereon will be used
only as a hedge against anticipated interest rate changes. A futures contract
sale creates an obligation on the
B-5
<PAGE>
part of the Fund, as seller, to deliver the specific type of instrument called
for in the contract at a specified price. A futures contract purchase creates an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specified future time at a specified price.
Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out a futures contract is effected by entering into an offsetting
purchase or sale transaction. An offsetting transaction for a futures contract
sale is effected by the Fund entering into a futures contract purchase for the
same aggregate amount of the specific type of financial instrument and same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is immediately paid the difference and thus realizes a gain.
If the purchase price of the offsetting transaction exceeds the sale price, the
Fund pays the difference and realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by the Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the Fund
realizes a gain, and if the offsetting sale price is less than the purchase
price, the Fund realizes a loss.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice, daily variations in gains and losses
on open contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.
Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury bills, bonds, and notes, certificates of the Government National
Mortgage Association and bank certificates of deposit. The Fund may invest in
futures contracts covering these types of financial instruments as well as in
new types of such contracts that become available in the future. The Fund will
only enter into financial futures contracts which are traded on national futures
exchanges, principally the Chicago Board of Trade and the Chicago Mercantile
Exchange.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the price of a futures contract may
move more or less than the price of the securities being hedged. There is also a
risk of imperfect correlation where the securities underlying futures contracts
have different maturities from the portfolio securities being hedged. Another
risk is that the Fund's Adviser could be incorrect in its expectations as to the
direction or extent of various interest rate movements or the time span within
which the movements takes place. For example, if the Fund sold futures contracts
for the sale of securities in anticipation of an increase in interest rates, and
then interest rates declined instead, causing bond prices to rise, the Fund
would lose money on the sale.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract. If the
holder decides not to enter into the contract, the premium paid for the option
is lost. Since the value of the option is fixed at the point of sale there are
no daily payments of cash in the nature of "variation" or "maintenance" margin
payments to reflect the change in the value of the underlying contract as there
are by a purchaser or seller of a futures contract. The value of the option does
change and is reflected in the net asset value of the Fund.
Put and call options on financial futures have characteristics similar to
those of other options. In addition to the risks associated with investing in
options on securities, there are particular risks
B-6
<PAGE>
associated with investing in options on futures. In particular, the ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. The Fund will enter
into an options on futures position only if there appears to be a liquid
secondary market therefor, although there can be no assurance that such a market
will actually develop or be maintained.
The Fund may not enter into futures contracts or related options thereon if
immediately thereafter the amount committed to margin plus the amount paid for
option premiums exceeds 5% of the value of the Fund's total assets. In instances
involving the purchase of futures contracts by the Fund, an amount equal to the
market value of the futures contract will be deposited in a segregated account
of cash and cash equivalents to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
WHEN-ISSUED SECURITIES. 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 Fund makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The Fund does not believe that its
net asset value or income will be adversely affected by its purchase of
securities on a when-issued basis. The Fund will maintain cash and high-quality
marketable securities equal in value to commitments for when-issued securities
in a segregated account. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
SHORT SALES. The Fund may from time to time make short sales of securities
or maintain a short position, provided that at all times when a short position
is open the Fund owns an equal amount of such securities or securities
convertible into or exchangeable for an equivalent amount of such securities. No
more than 10% of the value of the Fund's net assets taken at market may at any
one time be held as collateral for such sales. It is the present intention of
management to make such sales only for the purpose of deferring realization of
gain or loss for federal income tax purposes.
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
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.
B-7
<PAGE>
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 Board of
Trustees monitors the creditworthiness of parties with which the Fund enters
into repurchase agreements.
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 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 except in connection with the Fund's entering
into interest rate futures contracts.
(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.
(v)
The Fund may not purchase securities of other investment companies
or 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.
(vi)
The Fund may not lend money except in connection with the purchase
of debt obligations or by investment in repurchase agreements,
provided that repurchase agreements maturing in more than seven days when
taken together with other illiquid investments do not exceed
B-8
<PAGE>
10% of the Fund's assets. 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.
(vii)
The Fund may not engage in short sales, except to the extent that it
owns other securities convertible into or exchangeable for an
equivalent amount of such securities. Such transactions may only occur 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 net assets taken at market may at any one time be held as collateral
for such sales.
(viii)
The Fund may not purchase or sell any put or call options or any
combination thereof, except that the Fund may (a) purchase, hold and
sell options on contracts for the future delivey of debt securities and
warrants where the grantor of the warrants is the issuer of the underlying
securities, and (b) write and sell covered call option contracts on
securities owned by the Fund. The Fund may also purchase call options for
the purpose of terminating its outstanding obligations with respect to
securities upon which covered call option contracts have been written (i.e.,
"closing purchase transactions").
(ix)
The Fund may not invest more than 5% 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 invest more than 2% of the value of its total
assets in warrants (valued at the lower of cost or market), except
that warrants attached to other securities are not subject to these
limitations.
(xiii)
The Fund may not invest in commodities or commodity contracts except
that the Fund may enter into interest rate futures contracts.
(xiv)
The Fund may not purchase the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and
of the Adviser, who each owns more than 0.5% of the outstanding securities
of such issuer, together own more than 5% of such securities.
(xv)
The Fund may not purchase securities on margin except that it may
make margin deposits in connection with interest rate futures
contracts subject to restriction (xvii) below or participate on a joint or a
joint and several basis in any trading account in securities.
(xvi)
The Fund may not 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.
B-9
<PAGE>
(xvii)
The Fund may not enter into an interest rate futures contract if, as
a result thereof, (i) the then current aggregate futures market
prices of financial instruments required to be delivered under open futures
contract sales plus the then current aggregate purchase prices of financial
instruments required to be purchased under open futures contract purchases
would exceed 30% of the Fund's total assets (taken at market value at the
time of entering into the contract) or (ii) more than 5% of the Fund's total
assets (taken at market value at the time of entering into the contract)
would be committed to margin on such futures contracts plus premiums on
options on futures contracts.
(xviii)
The primary investment objective of the Fund is to maximize current
income. Capital appreciation is a secondary objective.
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.
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.
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*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
5 Birch Run Drive January 1, 1999; President, Skidmore College,
Saratoga Springs, NY 12866 1987-1998; Director of Adirondack Trust
Age 63 Company.
Paul Craig Roberts Director Chairman, Institute for Political Economy;
505 S. Fairfax Street Director, A. Schulman Inc. (plastics).
Alexandria, VA 22320
Age 60
Nancy-Beth Sheerr Director Chairman, Radcliffe College Board of
1409 Beaumont Drive Trustees.
Gladwyne, PA 19035
Age 49
Nathan N.J. Grant Vice President Portfolio Manager with the Adviser since
Age 29 1996; Trader, Fixed Income Securities,
Blaylock & Partner, 1994-1996.
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.
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
January 31, 1999. Directors who are officers or employees of the Adviser do not
receive any compensation from the Fund or any of the Value Line Funds.
B-11
<PAGE>
COMPENSATION TABLE
FISCAL YEAR ENDED JANUARY 31, 1999
<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 2,718 N/A N/A 32,620
David H. Porter 2,968 N/A N/A 35,620
Paul Craig Roberts 2,718 N/A N/A 32,620
Nancy-Beth Sheer 2,968 N/A N/A 35,620
</TABLE>
As of January 31, 1999, 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 Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA
94104 which owned 5,425,648 shares or approximately 23.1% of the shares
outstanding, Pershing Division of Donaldson Lufkin Jenrette Securities Corp.,
POB 2052 Jersey City, NJ 07303, which owned 2,921,355 shares (12.5%), and
National Financial Services Co., 200 Liberty Street, New York, NY 10281, which
owned 4,600,453 shares (19.6%). The Adviser and its affiliates owned 1,003,765
shares of record or approximately 4.3% of the outstanding shares. Officers and
directors of the Fund as a group owned less than 1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund's investment adviser is Value Line, Inc. (the "Adviser"). 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 investment advisory agreement between the Fund and the Adviser, dated
August 10, 1988, provides for a monthly advisory fee at an annual rate of 3/4 of
1% on the first $100 million of the Fund's average daily net assets during the
year and 1/2 of 1% of such net assets in excess thereof. During the fiscal years
ended January 31, 1997, 1998 and 1999, the Fund paid or accrued to the Adviser
advisory fees of $424,802, $786,852 and $1,049,295, 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.
B-12
<PAGE>
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 resulting in combined assets
under management in excess of $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 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 330 W. 9th Street, 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 performs certain tax preparation services.
B-13
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
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 fiscal year ended January 31, 1997, 1998 and 1999, the
Fund paid brokerage commissions of $3,000, $2,000 and $2,500, respectively.
The Board of Trustees has adopted procedures incorporating the standards of
Rule 17e-1 under the 1940 Act which requires that the commissions paid to any
"affiliated person" be "reasonable and fair" compared to the commissions paid to
other brokers in connection with comparable transactions.
PORTFOLIO TURNOVER. The Fund's annual portfolio turnover rate may exceed
100%. A rate of portfolio turnover of 100% would occur if all of the Fund's
portfolio were replaced in a period of one year. To the extent that the Fund
engages in short-term trading in attempting to achieve its objective, it may
increase portfolio turnover and incur higher brokerage commissions and other
expenses than might otherwise be the case. The Fund's portfolio turnover rate
for recent fiscal years is shown under "Financial Highlights" in the Fund's
Prospectus.
CAPITAL STOCK
Each share of beneficial interest of the Fund, $.01 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 Trustees
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.
B-14
<PAGE>
RETIREMENT PLANS: Shares of the Fund may be purchased as the investment medium
for various tax-sheltered retirement plans. Upon request, the Distributor 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.
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 (generally 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 New York Stock Exchange is currently closed on New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day and on the
preceding Friday or subsequent Monday if one of those days falls on a Saturday
or Sunday, respectively. 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. Fixed-income corporate securities
are valued on the basis of prices provided by an independent pricing service
approved by the Trustees. In valuing such securities, the pricing service
generally takes into account appropriate factors such as institutional size
trading characteristics and other market data. Securities not priced in this
manner are valued at the midpoint between the latest available bid and asked
prices in the principal market (last sales price if the principal market is an
exchange) in which such securities are normally traded. Other assets and
securities for which market valuations are not readily available are valued at
their fair
B-15
<PAGE>
value as the Trustees or persons acting at their direction may determine.
Short-term instruments with maturities of 60 days or less at the date of
purchase are valued at amortized cost, which approximates market.
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.
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
January 31, 1999, 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. Because a
portion of the Fund's income will consist of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund will be eligible for
the corporate dividends-received deduction. The Fund will inform shareholders of
the amounts of qualifying dividends.
A distribution by the Fund will reduce 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) may
include 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.
B-16
<PAGE>
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 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 December 31, 1998 were -5.27%, 8.30% and 9.52%, respectively.
The Fund's total return may be compared to relevant indices and data from
Lipper Analytical Services, Inc., Morningstar or Standard & Poor's Indices.
B-17
<PAGE>
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 January 31, 1999,
including the financial highlights for each of the five fiscal years in the
period ended January 31, 1999, appearing in the 1999 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.
DESCRIPTION OF VALUE LINE FINANCIAL STRENGTH RATINGS
Value Line ranks the companies followed by the Standard and Expanded Edition
of The Value Line Investment Survey into nine categories as follows:
<TABLE>
<S> <C>
A++ Greatest relative financial strength. Companies among the very strongest
of the approximately 3,500 followed by The Value Line Investment Survey.
A+ Excellent relative financial strength. Companies with very high
financial strength, but not quite the highest among the Value Line
3,500.
A High-grade relative financial strength.
B++ Above average relative financial strength among the Value Line 3,500.
B+ Very good relative financial strength; approximately average among the
large, strong companies that dominate the Value Line 3,500.
B Good relative financial strength, although somewhat below the average of
all 3,500 Value Line companies.
C++ Satisfactory relative financial strength.
C+ Significantly below average relative financial strength.
C Weakest relative financial strength.
</TABLE>
The Value Line ratings are based upon computer analysis of a number of key
variables that measure (a) financial leverage, (b) business risk and (c) company
size plus, in the Standard Edition of The Value Line Investment Survey, the
judgment of senior analysts regarding factors that cannot be quantified
across-the-board for all securities. The primary variables that are indexed and
studied include equity coverage of debt, equity coverage of intangibles, "quick
ratio," accounting methods, variability of return, quality of fixed charge
coverage, stock price stability, and company size.
B-18
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Declaration of Trust.
(b) By-laws.
(c) Not applicable.
(d) Investment Advisory Agreement.
(e) Distribution Agreement.
(f) Not applicable.
(g) Custodian Agreement.
(h) Not applicable.
(i) Legal Opinion.
(j) Consent of independent accountants.
(k) Not applicable.
(l) Not applicable.
(m) Not applicable.
(27) Financial data schedule.
(o) Not applicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 25. INDEMNIFICATION.
Incorporated by reference to Section 4.3 of the Declaration of Trust filed
as Exhibit (a) hereto.
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.
ITEM 30. UNDERTAKINGS.
None.
--------------
C-2
<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. 14 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated March 17, 1999, relating to the financial
statements and financial highlights appearing in the January 31, 1999 Annual
Report to Shareholders of Value Line Aggressive Income Trust, 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
March 19, 1999
C-3
<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 19th day of March, 1999.
VALUE LINE AGGRESSIVE INCOME TRUST
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; March 19, 1999
(JEAN B. BUTTNER) Principal Executive Officer
*JOHN W. CHANDLER Director March 19, 1999
(JOHN W. CHANDLER)
*LEO R. FUTIA Director March 19, 1999
(LEO R. FUTIA)
*DAVID H. PORTER Director March 19, 1999
(DAVID H. PORTER)
*PAUL CRAIG ROBERTS Director March 19, 1999
(PAUL CRAIG ROBERTS)
*NANCY-BETH SHEERR Director March 19, 1999
(NANCY-BETH SHEERR)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial March 19, 1999
............................................ and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
*By /s/ DAVID T. HENIGSON
.................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-4
<PAGE>
DECLARATION OF TRUST
OF
VALUE LINE AGGRESSIVE INCOME TRUST
DATED NOVEMBER 12, 1985
DECLARATION OF TRUST made November 12, 1985 by the Trustees (together with
all other persons from time to time duly elected, qualified and serving as
Trustees in accordance with the provisions of Article II hereof, the
"Trustees");
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the "Value Line
Aggressive Income Trust".
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8 hereof, as from
time to time amended.
(b) The terms "Commission" and "Interested Person", have the meanings given
them in the 1940 Act. Except as otherwise defined by the Trustees in conjunction
with the establishment of any series of Shares, the term "vote of a majority of
the Shares outstanding and entitled to vote" shall have the same meaning as the
term "vote of a majority of the outstanding voting securities" given it in the
1940 Act.
(c) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by 17(f) of the 1940 Act, but does not include a
system for the central handling of securities described in said 17(f).
<PAGE>
(d) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(e) "Distributor" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(f) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(g) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(h) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(i) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(j) "Shareholder" means a record owner of Outstanding Shares.
(k) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time, including
the Shares of any and all series which may be established by the Trustees, and
includes fractions of Shares as well as whole Shares. "Outstanding" Shares means
those Shares shown from time to time on the books of the Trust or its Transfer
Agent as then issued and outstanding, but shall not include Shares which have
been redeemed or repurchased by the Trust and which are at the time held in the
Treasury of the Trust.
(1) "Transfer Agent" means any one or more Persons other than the Trust who
maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(m) The "Trust" means the Value Line Aggressive Income Trust.
(n) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(o) The "Trustees" means the person who has signed this Declaration, so
long as he shall continue in office in accor-
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dance with the terms hereof, and all other persons who may from time to time be
duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in this capacity or their
capacities as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 2.2. Investments. The Trustees shall have the power:
(a) 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.
(b) To invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; warrants; bonds, debentures, bills, time
notes arid all other evidences of indebtedness; negotiable or non-negotiable
instruments; government securities, including securities of any state,
municipal-
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ity or other political subdivision thereof, or any governmental or
quasi-governmental agency or instrumentality; and money market instruments
including bank certificates of deposit, finance paper, 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 any
governmental or quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend, and to pledge any such securities and repurchase
agreements.
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities and repurchase agreements included in the Trust Property,
including the right to vote thereon and otherwise act with respect thereto and
to do all acts for the preservation, protection, improvement and enhancement in
value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of any obligation or engagement of any other Person and to lend
Trust Property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing
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incidental or appurtenant to or growing out of or connected with the aforesaid
business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property, including
the property of any series of the Trust, shall be vested in the trustees as
joint tenants except that the Trustees shall have power to cause legal title to
any Trust Property to be held by or in the name of one or more of the Trustees,
or in the name of the Trust, or in the name of any other Person as nominee, on
such terms as the Trustees may determine, provided that the interest of the
Trust therein is deemed appropriately protected. The right, title and interest
of the Trustees in the Trust Property and the property of each series of the
Trust shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office, resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property or the property of any series of the
Trust, and the right, title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
Section 2.4. Issuance and Repurchase of Securities. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular series of the
Trust with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in
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the name of the Trust or the names of the Trustees or otherwise as the Trustees
may deem expedient, to the same extent as such delegation is permitted by the
1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided herein
or in the By-laws, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt By-laws not inconsistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
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partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent and selected dealers, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions not permitted
by the 1940 Act or rules and regulations adopted by the Commission, the Trustees
may, on behalf of the Trust, buy any securities from or sell any securities to,
or lend any assets of the Trust to, any Trustee or officer of the Trust or any
firm of which any such Trustee or officer is a member acting as principal, or
have any such dealings with the Investment Adviser, Distributor or transfer
agent or with any Interested Person of such Person; and the Trust may employ any
such Person, or firm or company in which such Person is an Interested Person, as
broker, legal counsel, registrar, transfer agent, dividend disbursing agent or
custodian upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall initially be
one (1), and thereafter shall be such number as shall be fixed from time to time
by a written instrument signed by a majority of the Trustees, provided, however,
that the number of Trustees shall in no event be less than one (1) nor more than
fifteen (15).
Section 2.12. Election and Term. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section
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2.14 hereof, the Trustees shall be elected by the Shareholders owning of record
a plurality of the Shares voting at the annual meeting of Shareholders or
special meeting in lieu thereof. Except in the event of resignation or removals
pursuant to Section 2.13 hereof, each Trustee shall hold office until the next
annual meeting of Shareholders or special meeting in lieu thereof and until his
successor is elected and qualified.
Section 2.13. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than one) with cause, by the
action of two-thirds of the remaining Trustees. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property or
property of any series of the Trust held in the name of the resigning or removed
Trustee. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the Trustees
then in office. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regard-
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less of their number, shall have all the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by the Declaration. A
written instrument certifying the existence of such vacancy signed by a majority
of the Trustees in office shall be conclusive evidence of the existence of such
vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Underwriting Contract. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of the Shares to net the Trust not less than
the amount provided for in Section 7.1 of Article VII hereof, whereby the
Trustees may either agree to sell the Shares to the other party to the contract
or appoint such other party their sales agent for the Shares, 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 Trustees may in their discretion
determine not inconsistent with the provisions of this Article III or of the
By-laws; and such contract may also provide for the repurchase of the Shares by
such other party as agent of the Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into an investment advisory or management
contract whereby the other party to such contract shall undertake to furnish to
the Trust 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 Trustees may in their discretion
determine, including the grant of authority to such other party to determine
what securities shall be purchased or sold by the Trust and what portion of its
assets shall be uninvested, which authority shall include the power to make
changes in the Trust's investments.
Section 3.3. Affiliations of Trustees or Officers, Etc. The fact that:
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(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser or distributor of or for any partnership, corporation, trust,
association or other organization or of or for any parent or affiliate of
any organization, with which a contract of the character described in
Sections 3.1 or 3.2 above or for services as Custodian, Transfer Agent or
disbursing agent or for related services may have been or may hereafter be
made, or that any such organization, or any parent or affiliate thereof, is
a Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in Sections
3.1 or 3.2 above or for services as Custodian, Transfer Agent or disbursing
agent or for related services may have been or may hereafter be made also
has any one or more of such contracts with one or more other partnerships,
corporations, trusts, associations or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to this Trust or its
Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered into pursuant
to Sections 3.1 or 3.2 shall be consistent with and subject to the requirements
of Section 15 of the 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.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence
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or reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability, provided that any such expenses shall be paid
solely out of the funds and property of the series of the Trust with respect to
which such Shareholder's Shares are issued. The rights accruing to a Shareholder
under this Section 4.1 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust
shall be indemnified by the Trust to the fullest extent permitted by law against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
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amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust or the Shareholders by reason
of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not involving
a final adjudication as provided in paragraph (b)(i) resulting in a payment
by a Trustee or officer, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office:
(A) by the court or other body approving the settlement or other
dispostion; or
(B) based upon a review of readily available facts (as opposed to
a full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a majority
of the Disinterested Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced
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by the Trust prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification under this Section 4.3,
provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), or (ii) involved in the claim, action, suit or
proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder. Any officer, agent or employee of the Trust may be required to give
bond for the faithful discharge of his duties, in such sum and of such character
as the Trustees may from time to time prescribe.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking made or issued by the Trustees may recite that the same is executed
or made by them not individually, but as Trustees under the Declaration,
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and that the obligations of the Trust under any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest, all
of one class, except as provided in Section 5.11 hereof, with $.01 par value.
The number of shares of beneficial interest authorized hereunder is unlimited.
All Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property
and the property of each series of the Trust of every description and the right
to conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits, rights or interests
of the Trust nor can they be called upon to share or assume any losses of the
Trust or suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the rights in this
Declaration specifically set forth.
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The Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any series of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance or Shares. The Trustees in their discretion may, from
time to time without vote of the Shareholders, issue Shares, in addition to the
then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares and Shares held in the treasury. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or l/l,OOOths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the principal
office of the Trust or an office of the Transfer Agent which shall contain the
names and addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
By-laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
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Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 5.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage pre- paid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.12; (ii) with respect
to any investment advisory or management contract entered into pursuant to
Section 3.2; (iii) with respect to termination of the Trust as provided in
Section 8.2; (iv) with respect to any amendment of this Declaration to the
extent and as provided in Section 8.3; (v) with respect to any merger,
consolidation or sale of assets as provided in Section 8.4; (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 8.5; (vii)
to the same extent as the stockholders of Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained
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derivatively or as a class action on behalf of the Trust or the Shareholders;
and (viii) with respect to such additional matters relating to the Trust as may
be required by this Declaration, the By-laws or any registration of the Trust
as an investment company under the 1940 Act with the Commission (or any
successor agency) or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote, except that the Trustees may, in conjunction with the
establishment of any series of Shares, establish conditions under which the
several series shall have separate voting rights or no voting rights. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders'
votes and meetings and related matters.
Section 5.10. Meetings of Shareholders. An annual meeting of the
Shareholders shall be held beginning in 1986 and in each year thereafter on such
day and at such hour as the Trustees may from time to time determine, either at
the principal office of the Trust, or at such other place as may be designated
by the Trustees, for the purpose of electing new Trustees in place of and to
succeed those whose terms of office expire at that time and for such other
purposes as may be specified by the Trustees. If such annual meeting shall not
be held as above provided, a special meeting may be held in lieu thereof at any
time and any business which might have been transacted at such annual meeting
may be transacted at such special meeting and for all purposes hereof such
special meeting shall be deemed to be an annual meeting duly held as herein
provided.
Section 5.11. Series Designation. The Trustees, in their discretion, may
authorize the division of Shares into two or more series, and the different
series shall be established and designated, and the variations in the relative
rights and preferences as between the different series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different series as
to investment objective, purchase price, right of redemption, special and
relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several series shall have separate voting rights. All
references to Shares in this Declaration shall be deemed to be shares of any or
all series as the context may require.
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If the Trustees shall divide the Shares of the Trust into two or more
series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally to each
series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of each series
that may be issued shall be unlimited. The Trustees may classify or reclassify
any unissued Shares or any Shares previously issued and reacquired of any series
into one or more series that may be established and designated from time to
time. The Trustees may hold as treasury shares (of the same or some other
series), reissue for such consideration and on such terms as they may determine,
or cancel any Shares of any series reacquired by the Trust at their discretion
from time to time.
(c) All consideration received by the Trust for the issue or sale of Shares
of a particular series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that series for
all purposes, subject only to the rights of creditors of such series and except
as may otherwise be required by applicable laws, and shall be so recorded upon
the books of account of the Trust. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular series, the Trustees
shall allocate them among any one or more of the series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the shareholders of all series for all
purposes.
(d) The assets belonging to each particular series shall be charged with
the liabilities of the Trust in respect of that series and all expenses, costs,
charges and reserves attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular series shall be allocated and
charged by the Trustees to and among any one or more of the series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
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shall be conclusive and binding upon the holders of all series for all purposes.
The Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders. The assets of
a particular series of the Trust shall, under no circumstances, be charged with
liabilities attributable to any other series of the Trust. All persons extending
credit to, or contracting with or having any claim against a particular series
of the Trust shall look only to the assets of that particular series for payment
of such credit, contract or claim.
(e) Each Share of a series of the Trust shall represent a beneficial
interest in the net assets of such series. Each holder of Shares of a series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such series. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being or having been a
Shareholder of a series, such shareholder shall be paid solely out of the funds
and property of such series of the Trust. Upon liquidation or termination of a
series of the Trust, Shareholders of such series shall be entitled to receive a
pro rata share of the net assets of such series. A Shareholder of a particular
series of the Trust shall not be entitled to participate in a derivative or
class action on behalf of any other series or the Shareholders of any other
series of the Trust.
(f) Notwithstanding any other provision hereof, on any matter submitted to
vote of Shareholders of the Trust, all Shares then entitled to vote shall be
voted by individual series, except that (1) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual series, and (2)
when the Trustees have determined that the matter affects only the interests of
Shareholders of a limited number of series, then only the Shareholders of such
series shall be entitled to vote thereon. The establishment and designation of
any series of Shares shall be effective upon the execution by a majority of the
then Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of such series, or as otherwise provided
in such instrument. At any time that there are no Shares outstanding of any
particular series previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that series and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
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ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as hereinafter
set forth, upon the appropriately verified written application of the record
holder thereof (or upon such other form of request as the Trustees may
determine) at such office or agency as may be designated from time to time for
that purpose in the Trust's then effective prospectus under the Securities Act
of 1933. The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of 1933.
Section 6.2. Price. Shares shall be redeemed at their net asset value
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. 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 7.1 hereof after
receipt of such application.
Section 6.3. Payment. Payment for such Shares shall be made in cash or in
property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective prospectus under the Securities Act of 1933, subject to
the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 6.9 hereof, the Trustees 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 6.1 hereof but who
shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on deposit.
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
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forth in Section 7.1 after the termination of such suspension, and payment shall
be made within seven (7) 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.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not 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 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trust shall have the
right at any time without prior notice to the shareholder to redeem Shares of
any shareholder for their then current net asset value per Share if at such time
the shareholder owns Shares having an aggregate net asset value of less than
$1,000 subject to such terms and conditions as the Trustees may approve, and
subject to the Trust's giving general notice to all shareholders of its
intention to avail itself of such right, either by publication in the Trust's
prospectus, if any, or by such other means as the Trustees may determine.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify any series of the Trust as a regulated
investment company under the Internal Revenue Code, then the Trustees shall have
the power by lot or other means deemed equitable by them (i) to call for
redemption by any such Person a number, or principal amount, of Shares or other
securities of the Trust sufficient to maintain or bring the direct or indirect
ownership of Shares or other securities of the Trust into conformity with the
requirements for such qualification and (ii) to refuse to transfer or issue
Shares or other securities of the Trust to any Person whose acquisition of the
Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem
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necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
pursuant to the provisions of Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary week-end and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment on redemption
until the Trust shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which said stock
exchange shall have reopened or the period specified in (ii) or (iii) shall have
expired (as to which in the absence of an official ruling by the Commission, the
determination of the Trust shall be conclusive). In the case of a suspension of
the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of any series of the
Trust shall be determined by appraisal of the securities allocated to such
series, such appraisal to be on the basis of the amortized cost of such
securities in the case of money market securities, market value in the case of
other
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securities, or by such other method as shall be deemed to reflect the fair value
thereof, determined in good faith by or under the direction of the Trustees.
From the total value of said assets, there shall be deducted all indebtedness,
interest, taxes, payable or accrued, including estimated taxes on unrealized
book profits, expenses and management charges accrued to the appraisal date, net
income determined and declared as a distribution and all other items in the
nature of liabilities attributable to such series which shall be deemed
appropriate. The resulting amount which shall represent the total net assets of
the series shall be divided by the number of Shares of such series outstanding
at the time and the quotient so obtained shall be deemed to be the net asset
value of the Shares. The net asset value of the Shares shall be determined at
least once on each business day, as of the close of trading on the New York
Stock Exchange or as of such other time or times as the Trustees shall
determine. The power and duty to make the daily calculations may be delegated by
the Trustees to the Investment Adviser, the custodian, the Transfer Agent or
such other Person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
Section 7.2. Distributions to Shareholders. The Trustees shall from time to
time distribute ratably among the Shareholders of a series such proportion of
the net profits, surplus (including paid-in surplus), capital, or assets of such
series held by the Trustees as they may deem proper. Such distributions may be
made in cash or property (including without limitation any type of obligations
of such series or any assets thereof), and the Trustees may distribute ratably
among the Shareholders additional Shares of such series issuable hereunder in
such manner, at such times, and on such terms as the Trustees may deem proper.
Such distributions may be among the Shareholders of record at the time of
declaring a distribution or among the Shareholders of record at such other date
or time or dates or times as the Trustees shall determine. The Trustees may in
their discretion determine that, solely for the purposes of such distributions,
Outstanding Shares shall exclude Shares for which orders have been placed
subsequent to a specified time on the date the distribution is declared or on
the next preceding day if the distribution is declared as of a day on which
Boston banks are not open for business, all as described in the then effective
prospectus under the Securities Act of 1933. The Trustees may always retain from
the net profits such amount as they may deem necessary to pay the debts or
expenses of the series or to meet obligations of the series, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.
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Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the series to avoid or reduce liability for taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. With respect to a series the investment policy
of which is normally to invest at least 80% of its assets in debt securities
maturing in thirteen months or less, the net income of the series may consist of
(i) all interest and dividend income accrued on portfolio assets of the series,
less (ii) all actual and accrued liabilities determined in accordance with
generally accepted accounting principles and plus or minus (iii) net realized
gains and losses on the assets of the series. Interest income may include
discount earned (including both original issue and market discount) on discount
paper accrued ratably to the date of maturity or determined in such other manner
as the Trustees may determine. Expenses of the series, including the advisory or
management fee shall be accrued each day. Such net income may be determined by
or under the direction of the Trustees as of the close of trading on the New
York Stock Exchange on each day on which such market is open or as of such other
time or times as the Trustees shall determine, and, except as provided herein,
all the net income of the Trust, so determined, may be declared as a dividend on
the Outstanding Shares. If, for any reason, the net income of the series
determined at any time is a negative amount, the Trustees shall have the power
(i) to offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, or (ii) to reduce the number of
Outstanding Shares of the series by reducing the number of Shares in the account
of such Shareholder by that number of full and fractional Shares which
represents the amount of such excess negative net income, or (iii) to cause to
be recorded on the books of the series an asset account in the amount of such
negative net income, which account may be reduced by the amount, provided that
the same shall thereupon become the property of the series and shall not be paid
to any Shareholder, of dividends declared thereafter upon the Outstanding Shares
on the day such negative net income is experienced, until such asset account is
reduced to zero; or (iv) to combine the methods described in clauses (i) and
(ii) and (iii) of this sentence, in order to cause the net asset value per Share
of the series to remain at a constant amount per Outstanding Share immediately
after each such determination and declaration. The Trustees shall also have the
power to fail to declare a dividend out of net income for the purpose of
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causing the net asset value per Share of the series to be increased to a
constant amount. The Trustees shall not be required to adopt, but may at any
time adopt, discontinue or amend the practice of maintaining the net asset value
per Share of a series at a constant amount.
Section 7.4. Allocation Between Principal and Income. The Trustees shall
have full discretion to determine whether any cash or property received shall be
treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made in
good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.5. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the series' Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable. Without limiting the generality of the foregoing, the Trustees may
establish several series of Shares in accordance with Section 5.11, and declare
dividends thereon in such manner as they shall determine.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust. (a) The Trust or any series of the Trust
may be terminated by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote, at any meeting of
Shareholders or by an instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series of Shares. Upon the termination of the Trust
or any series of the Trust,
(i) The Trust or any series of the Trust shall carry on no business
except for the purpose of winding up its affairs.
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(ii) The Trustees shall proceed to wind up the affairs of the Trust or
any series of the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or any series of
the Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or series, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Property or property of the series of the Trust to
one or more persons at public or private sale for consideration which may
consist in whole or in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and do all other acts appropriate
to liquidate its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially all the
Trust Property or property of the series of the Trust shall require
Shareholder approval in accordance with Section 8.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or property of the series of the
Trust, in cash or in kind or partly each, among the Shareholders according
to their respective rights.
(b) After termination of the Trust or any series of the Trust and
distribution to the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust or series an instrument
in writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders of the Trust or series of the Trust
shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended by a
vote of the holders of a majority of the Shares outstanding and entitled to vote
or by any instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of a majority of the Shares outstanding
and entitled to vote. The Trustees may also amend this Declaration without the
vote or consent of Shareholders if they deem it necessary to conform this
Declaration to the requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code (including those provisions of such Code relating to the retention
of the exemption from federal income tax with respect to dividends paid by the
Trust out of interest income received on Municipal Bonds), but the Trustees
shall not be liable for failing so to do.
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(b) No amendment may be made under this Section 8.3 which would change any
rights with respect to any Shares of the Trust by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with the vote or consent of the holders
of two-thirds of the Shares outstanding and entitled to vote, or by such other
vote as may be established by the Trustees with respect to any series of Shares.
Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
Shares or by such other vote as may be established by the Trustees with respect
to any series of Shares; provided, however, that, if such merger, consolidation,
sale, lease or exchange is recommended by the Trustees, the vote or written
consent of the holders of a majority of the Shares outstanding and entitled to
vote, or such other vote or written consent as may be established by the
Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.
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Section 8.5. Incorporation. With the approval of the holders of a majority
of the Shares outstanding and entitled to vote, or by such other vote as may be
established by the Trustees with respect to any series of Shares, the Trustees
may cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the Shares or securities thereof or
otherwise, and to lend money to, subscribe for the Shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire shares or any
other interest. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus, of
the transactions of the Trust, including financial statements which shall at
least annually be certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that
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such action was duly taken in a manner provided herein, and unless such
amendment or such certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its filing. A restated
Declaration, integrating into a single instrument all of the provisions of the
Declaration which are then in effect and operative, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may hereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State.
Section 10.3. Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
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(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 12th
day of November, 1985.
/s/ Ernest V. Klein
-------------------------------
Ernest V. Klein
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COMMONWEALTH OF MASSACHUSETTS
COMMONWEALTH OF MASSACHUSETTS MASSACHUSETTS
COUNTY OF SUFFOLK November 12, 1985
Then personally appeared the above-named Ernest V. Klein, who acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Judith B. Bonaffini
-------------------------------
Notary Public
My commission expires:
Oct 1, 1987
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BY-LAWS
OF
VALUE LINE AGGRESSIVE INCOME TRUST
ARTICLE I
DEFINITIONS
The terms "Commission", "Custodian", "Declaration", "Distributor",
"Investment" Adviser", "1940 Act", "Shareholder", "Shares", "Transfer Agent",
"Trust", "Trust Property", "Trustees", and "vote of a majority of the Shares
outstanding and entitled to vote", have the respective meanings given them in
the Declaration of Trust of Value Line Aggressive Income Trust dated November
12, 1985, as amended from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal
office of the Trust shall be 711 Third Avenue, New York, New York 10017, and the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other places
without as well as within the Commonwealth as the Trustees may from time to time
determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be held as provided
in the Declaration at such place within or without the Commonwealth of
Massachusetts as the Trustees shall designate. The holders of a one-third of
outstanding Shares present in person or by proxy shall constitute a quorum at
any meeting of the Shareholders, unless otherwise required by the Investment
Company Act of 1940.
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder at his address as recorded on the register
of the Trust mailed at least (10) days and not more than sixty (60) days before
the meeting shall be considered at such meeting. Any adjourned meeting may be
held as adjourned without further
<PAGE>
notice. No notice need be given to any Shareholder who shall have failed to
inform the Trust of his current address or if a written waiver of notice,
executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose of
determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
sixty (60) days prior to the date of any meeting of Shareholders or distribution
or other action as a record date for the determinations of the persons to be
treated as Shareholders of record for such purposes, except for dividend
payments which shall be governed by the Declaration.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such share is a minor or a person of unsound mind, and subject to
guardianship or the the legal control of any other person as regards the charge
or management of such Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
Section 5. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
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Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, or by any one
of the Trustees, at the time being in office. Notice of the time and place of
each meeting other than regular or stated meetings shall be given by the
Secretary or an Assistant Secretary or by the officer or Trustee calling the
meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone conference meeting shall constitute presence in person at such
meeting. Any action required or permitted to be taken at any meeting of the
Trustees may be taken by the Trustees without a meeting if all the Trustees
consent to the action in writing and the written consents are filed with the
records of the Trustees meetings. Such consents shall be treated as a vote for
all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees shall be
present in person at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as other-
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<PAGE>
wise required by law, the Declaration of these By-Laws) the act of a majority
of the Trustees present at any such meeting, at which a quorum is present, shall
be the act of the Trustees In the absence of a quorum, a majority of the
Trustees present may adjourn the meeting from time to time until a quorum shall
be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Declaration or these By-Laws they are prohibited from
delegating. The Trustees may also elect from their own number other Committees
from time to time, the number composing such Committees, the powers conferred
upon the same (subject to the same limitations as with respect to the Executive
Committee) and the term of membership on such Committees to be determined by the
Trustees. The Trustees may designate a chairman of any such Committee. In the
absence of such designation the Committee may elect its own Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the Office of the Trust.
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<PAGE>
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may
delegate to any officer or committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided
by law, the Declaration or these By-Laws, the President, the Treasurer and the
Secretary shall each hold office until his successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. The Secretary and Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall hold no other office. Except
as above provided, any two offices may be held by the same person. Any officer
may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer without cause, by a vote of a majority of the
Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and to the control of any Committees of the Trustees, within their
respective spheres, as provided by the Trustees, he shall at all times exercise
a general supervision and direction over the affairs of the Trust. He shall have
the power to employ attorneys and counsel for the Trust and to employ such
subordinate officers, agents, clerks and employees as he may find necessary to
transact the business of the Trust. He shall also have the power to grant,
issue, execute or sign such powers of attorney, proxies or other documents as
may be deemed advisable or necessary in furtherance of the interests of the
Trust. The President shall have such other powers and duties, as from time to
time may be conferred upon or assigned to him by the Trustees.
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<PAGE>
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust which may come into his hands to such Custodian as the
Trustees may employ pursuant to Article X of these By-Laws. He shall render a
statement of condition of the finances of the Trust to the Trustees as often as
they shall require the same and he shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required so to do by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he shall have custody of the seal of the Trust; he
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of the Transfer Agent. He shall attend to the giving and
serving of all notices by the Trust in accordance with the provisions of these
By-Laws and as required by law; and subject to these By-Laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such -other duties as from
time to time may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if required so to do
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Section 9. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary.
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<PAGE>
Each Assistant Secretary shall perform such other duties as from time to time
may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the thirty-first day of December in each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instructions that it be telegraphed, cabled or wirelessed.
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<PAGE>
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust Property. The Custodian (and any sub-custodian) shall be a bank having not
less than $2,000,000 aggregate capital, surplus and undivided profits and shall
be appointed from time to time by the Trustees, who shall fix its remuneration.
Section 2. Action Upon Termination of Custodian Agreement. Upon termination
of a Custodian Agreement or inability of the Custodian to continue to serve, the
trustees shall promptly appoint a successor custodian, but in the event that no
successor custodian can be found who has the required qualifications and is
willing to serve, the Trustees shall call as promptly as possible a special
meeting of the Shareholders to determine whether the Trust shall function
without a custodian or shall be liquidated. If so directed by vote of the
holders of a majority of the outstanding voting securities, the Custodian shall
deliver and pay over all Trust Property held by it as specified in such vote.
Section 3. Provisions of Custodian Contract. The following provisions shall
apply to the employment of a Custodian and to any contract entered into with the
Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all securities
included in the Trust Property or to which the Trust may become entitled,
and shall order the same to be delivered by the Custodian only in
completion of a sale, exchange, transfer, pledge, loan of portfolio
securities to another person, or other disposition thereof, all as the
Trustees may generally or from time to time require or approve or to a
successor Custodian; and the Trustees shall cause all funds included in the
Trust Property or to which it may become entitled to be paid to the
Custodian, and shall order the same disbursed only for investment against
delivery of the securities acquired, or the return of cash held as
collateral for loans of portfolio securities, or in payment of expenses,
including management compensation, and liabilities of the Trust, including
distributions to shareholders, or to a successor Custodian.
Section 4. Central Certificate System. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the Custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central
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<PAGE>
handling of securities established by a national securities exchange or a
national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commissioner or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
Section 5. Acceptance of Receipts in Lieu of Certificates. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted by (a) vote of a majority of the Shares outstanding and
entitled to vote or (b) by the Trustees, provided, however, that no By-Law may
be amended, adopted or repealed by the Trustees if such amendment, adoption or
repeal requires, pursuant to law, the Declaration or these By-Laws, a vote of
the Shareholders.
ARTICLE XII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustees of the Trust and
no partner, officer, director or shareholder of the Investment Adviser of the
Trust (as that term is defined in the Investment Company Act of 1940) or of the
underwriter of the Trust, and no Investment Adviser or underwriter of the Trust,
shall take long or short positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent the underwriter from
purchasing Shares from the Trust if such purchases are limited (except for
reasonable allowances for
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<PAGE>
clerical errors, delays and errors of transmission and cancellation of
orders) to purchase for the purpose of filling order for such Shares
received by the underwriter, and provided that orders to purchase from the
Trust are entered with the Trust or the Custodian promptly upon receipt by
the underwriter of purchase orders for such Shares, unless the underwriter
is otherwise instructed by its customer.
(2) The foregoing provision shall not prevent the underwriter from
purchasing Shares of the Trust as agent for the account of the Trust.
(3) The foregoing provisions shall not prevent the purchase from the
Trust or from the underwriter of Shares issued by the Trust, by any
officer, or Trustee of the Trust or by any partner, officer, director or
shareholder of the Investment Adviser of the Trust or of the underwriter of
the Trust at the price available to the public generally at the moment of
such purchase, or as described in the then currently effective Prospectus
of the Trust.
(4) The foregoing shall not prevent the Investment Adviser, or any
affiliate thereof, of the Trust from purchasing Shares prior to the
effectiveness of the first registration statement relating to the Shares
under the Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any officer or Trustee
of the Trust, or to any partner, officer, director or shareholder of, or person
financially interested in, the Investment Adviser of the Trust, or the
underwriter of the Trust, or to the Investment Adviser of the Trust or to the
underwriter of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer of the
Shares of the Trust except as provided in the Declaration, but this requirement
shall not prevent the charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the Trust, or any
partner, officer or director of the Investment Adviser or underwriter of the
Trust to deal for or on behalf of the Trust with himself as principal or agent,
or with any partnership, association or corporation in which he has a financial
interest; provided that the foregoing provisions shall not prevent (a) officers
and Trustees of the Trust or partners, officers or directors of the Investment
Adviser or underwriter of the Trust from buying, holding or selling shares in
the Trust, or from being partners, officers or directors or otherwise
financially interested in the Investment Adviser or underwriter of the Trust;
(b) purchases or sales of securities
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<PAGE>
or other property by the Trust from or to an affiliated person or to the
Investment Advisers or underwriters of the Trust if such transaction is exempt
from the applicable provisions of the 1940 Act; (c) purchases of investments for
the portfolio of the Trust or sales of investments owned by the Trust through a
security dealer who is, or one or more of whose partners, shareholders, officers
or directors is, an officer or Trustee of the Trust, or a partner, officer or
director of the Investment Adviser or underwriter of the Trust, if such
transactions are handled in the capacity of broker only and commissions charged
do not exceed customary brokerage charges for such services; (d) employment of
legal counsel, registrar, Transfer Agent, dividend disbursing agent or Custodian
who is, or has a partner, shareholder, officer, or director who is, an officer
or Trustee of the Trust, or a partner, officer or director of the Investment
Adviser or underwriter of the Trust, if only customary fees are charged for
services to the Trust; (e) sharing statistical research, legal and management
expenses and office hire and expenses with any other investment company in which
an officer or Trustee of the Trust, or a partner, officer or director of the
Investment Adviser or underwriter of the Trust, is an officer or director or
otherwise financially interested.
END OF BY-LAWS
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INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the 19th day of February, 1986, between VALUE LINE
AGGRESSIVE INCOME TRUST, established under the laws of the Commonwealth of
Massachusetts by Declaration of Trust dated November 12, 1985, (hereinafter
called "the Fund") and VALUE LINE, INC., a New York corporation (hereinafter
called "the Company").
WITNESSETH:
WHEREAS, the Fund desired 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 Declaration of Trust 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 Trustees. 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 Trustees 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
<PAGE>
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 (1)
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 trustees 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
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 acts as manager and investment adviser, of 50% of the fees or
dues of the Investment Company Institute and of the No Load Mutual Funds
Association, Inc.; (xiii) fees and expenses in connection with registration of
the Fund or qualification of its shares under the securities laws of states or
foreign jurisdiction; 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 officers and trustees
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 Com-
-2-
<PAGE>
pany'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 affected 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 a monthly
advisory fee equal to one-twelfth of 3/4 of 1% on the first $100 million of the
Fund's average daily net assets during the year and 1/2 of 1% on average net
assets in excess thereof, prorated for any portion of a year that 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, exceed 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 for a period
of two years and 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.
5. Name of Fund. The Company consents to the use by the Fund of the name
"Value Line Aggressive Income Trust" so long, and only so long, as this
Agreement (or any agreement with any
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<PAGE>
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. Nothing herein contained shall limit the freedom of the Company or any
affiliated person of the Company to render investment supervisory and 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 to 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. 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 AGGRESSIVE INCOME TRUST
By /s/ [ILLEGIBLE]
----------------------------------
VALUE LINE, INC.
By /s/ THOMAS J. SEXTON
----------------------------------
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<PAGE>
DISTRIBUTION AGREEMENT
Between
VALUE LINE AGGRESSIVE INCOME TRUST
and
VALUE LINE SECURITIES, INC.
February 19, 1986
VALUE LINE SECURITIES, INC.
711 Third Avenue
New York, New York 10017
Dear Sirs:
VALUE LINE AGGRESSIVE INCOME TRUST (the "Fund") established under the laws
of the Commonwealth of Massachusetts by Declaration of Trust dated November 12,
1985, is registered as an Investment Company under the Investment Company Act of
1940 and an indefinite number of shares of beneficial interest 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 (herein "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 distributor, and it is,
accordingly, agreed between us as follows:
1. The Fund hereby appoints you 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.
<PAGE>
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.
3. The shares shall be sold by you at net asset value as determined in the
Fund's 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.
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<PAGE>
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 distributor 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.
8. 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 will continue in effect for a period of two years 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 Trustees, including the vote of a majority of the Trustees
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 vote of the holders of a majority of the outstanding voting securities
of the Fund and by such a vote of the Board of Trustees.
(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.
-3-
<PAGE>
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 undertaking, kindly so indicate
by signing in the space provided below.
VALUE LINE AGGRESSIVE INCOME TRUST
By /s/ [ILLEGIBLE]
-----------------------------------
Accepted:
VALUE LINE SECURITIES, INC.
By /s/ THOMAS J. SEXTON
------------------------------------
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<PAGE>
CUSTODIAN AGREEMENT
Dated as of:
Between
VALUE LINE AGGRESSIVE INCOME TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
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
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 21 day of June, 1990 between VALUE LINE
AGGRESSIVE INCOME TRUST, a business trust established under the laws of
Massachusetts (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 l7(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 Trustees.
<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 Trustees.
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 Trustees 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
-3-
<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 Trustees 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 Trustees 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
-4-
<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
-5-
<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
-6-
<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 Trustees 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;
-7-
<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 Trustees 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
-8-
<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.
-9-
<PAGE>
(a) Book-Entry System. Provided (i) the Bank has received a certified copy
of a resolution of the Trustees 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 Trustees 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.
-10-
<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 Trustees
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 Trustees 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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<PAGE>
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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<PAGE>
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 net 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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<PAGE>
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
Trustees of the Fund signed by an officer of the Fund and
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<PAGE>
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.
-17-
<PAGE>
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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<PAGE>
(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 Trustees 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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<PAGE>
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 Declaration of Trust 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 Trustees authorizing any of the foregoing
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<PAGE>
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 Trustees, 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 l7(f)(l) 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 Trustees
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 Aggressive Income Trust
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 Trustees.
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 Trustees; 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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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 AGGRESSIVE INCOME TRUST
By: /s/ Jean S. Suttner
-----------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ---------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Joseph L. Hooley
-----------------------------------
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/ Jean B. Buttner
-----------------------------------
Name: Jean B. Buttner
Title: Chairman/President
Attest: /s/ David T. Merigson
--------------------------------
Name: David T. Merigson
Title: Secretary
2
<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.
3
<PAGE>
PETER D. LOWENSTEIN
ATTORNEY AT LAW
TWO GREENWICH PLAZA, SUITE 100
GREENWICH, CONNECTICUT 06830
203 622-3932
FAX 203 622-0321
March 23, 1999
Value Line Aggressive Income Trust
220 East 42nd Street
New York, NY 10017
Gentlemen:
I have acted as special counsel to Value Line Aggressive Income Trust, a
trust organized in compliance with the laws of the Commonwealth of Massachusetts
(the "Trust"), in connection with certain matters, including the issuance of
shares of beneficial interest, $.01 par value, of the Trust.
As special counsel for the Trust, I am familiar with its Declaration of
Trust and By-laws. I have examined the prospectus included in Post-Effective
Amendment No. 14 to its Registration Statement on Form N-lA, File No. 33-01575
(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 Secretary of State of the Commonwealth of Massachusetts to
the effect that the Trust is duly organized and existing under the laws of the
Commonwealth of Massachusetts and is in good standing and duly authorized to
transact business in the Commonwealth of Massachusetts.
I have also examined and relied upon such records of the Trust 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 Trust is a trust with transferable shares of beneficial interest,
organized in compliance with the laws of the Commonwealth of
Massachusetts.
2. The shares of beneficial interest of the Trust to be offered for sale
pursuant to the Prospectus, 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.
<PAGE>
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
<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.14 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated March 17, 1999, relating to the financial
statements and financial highlights appearing in the January 31, 1999 Annual
Report to Shareholders of Value Line Aggressive Income Trust, 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
March 19, 1999
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<PAGE>
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<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
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<INVESTMENTS-AT-VALUE> 171,144
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