<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
FILE NO. 33-16245
FILE NO. 811-5276
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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. 12 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 12 /X/
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VALUE LINE STRATEGIC ASSET MANAGEMENT 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 May 1, 1999 pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
--------------------------------
PROSPECTUS
MAY 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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TRUST SUMMARY
What is the Trust's goal? PAGE 2
What are the Trust's main investment strategies? PAGE
2
What are the main risks of investing in the Trust?
PAGE 2
How has the Trust performed? PAGE 3
What are the Trust's fees and expenses? PAGE 4
HOW WE MANAGE THE TRUST
Our investment strategies PAGE 5
The risks of investing in the Trust PAGE 6
WHO MANAGES THE TRUST
Investment Adviser PAGE 8
Management fees PAGE 8
Portfolio management PAGE 8
ABOUT YOUR ACCOUNT
How to buy and sell shares PAGE 9
Dividends, distributions and taxes PAGE 10
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 11
<PAGE>
TRUST SUMMARY
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WHAT IS THE TRUST'S GOAL?
The Trust's investment objective is to achieve a high
investment return consistent with reasonable risk. Although
the Trust will strive to achieve this goal, there is no
assurance that it will. Shares of the Trust are available to
the public only through the purchase of certain variable
annuity and variable life insurance contracts issued by The
Guardian Insurance & Annuity Company, Inc. ("GIAC").
WHAT ARE THE TRUST'S MAIN INVESTMENT STRATEGIES?
To achieve the Trust's goals, we invest in a broad range of
common stocks, bonds and money market instruments in
accordance with our asset allocation strategy. In selecting
securities for purchase or sale, we rely on the Value Line
Timeliness-TM- Ranking System or the Value Line
Performance-TM- Ranking System. These Ranking Systems compare
the Adviser's estimate of the probable market performance of
each stock during the next twelve months relative to all of
the approximately 3,500 stocks under review.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TRUST?
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 Trust shares will increase and decrease
according to changes in the value of the Trust's investments.
The Trust will be affected by changes in stock prices which
tend to fluctuate more than bond prices. An investment in the
Trust 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
6.
2
<PAGE>
HOW HAS THE TRUST PERFORMED?
This bar chart and table can help you evaluate the potential
risks of investing in the Trust. We show how returns for the
Trust'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 S&P 500-Registered Trademark-, and the Lehman Brothers
Government/Corporate Bond Index, which are broad based market
indexes. You should remember that unlike the Trust, these
indexes are unmanaged and do not include the costs of buying,
selling, and holding the securities. The Trust's past
performance is not necessarily an indication of how it will
perform in the future.
YEAR BY YEAR RETURNS (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C>
1989 25.55%
1990 -0.15%
1991 43.34%
1992 15.05%
1993 11.86%
1994 -4.88%
1995 28.54%
1996 15.87%
1997 15.66%
1998 27.45%
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q4 1998 +23.39%
WORST QUARTER: Q3 1990 (12.11%)
</TABLE>
AVERAGE ANNUAL RETURN AS OF 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
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TRUST 27.45% 15.87% 17.05%
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S&P 500-REGISTERED TRADEMARK- INDEX 28.58% 24.06% 19.21%
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LEHMAN GOVERNMENT/
CORPORATE BOND INDEX 9.47% 7.31% 9.33%
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</TABLE>
3
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WHAT ARE THE TRUST'S FEES AND EXPENSES?
These tables describe the fees and expenses you pay in
connection with an investment in the Trust.
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 Trust operating expenses are expenses that are
deducted from the Trust's assets.
ANNUAL TRUST OPERATING EXPENSES (% OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
<S> <C>
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MANAGEMENT FEES 0.50%
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DISTRIBUTION AND SERVICE (12B-1) FEES NONE
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OTHER EXPENSES 0.08%
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TOTAL ANNUAL TRUST OPERATING EXPENSES 0.58%
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</TABLE>
EXAMPLE
This example is intended to help you compare the cost of
investing in the Trust to the cost of investing in other
mutual funds. We show the cumulative amount of Trust 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> <C>
$59 $186 $324 $726
</TABLE>
4
<PAGE>
HOW WE MANAGE THE TRUST
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OUR INVESTMENT STRATEGIES
We analyze economic and market conditions, seeking to
identify the market sector or securities that we think make
the best investments. The following is a description of how
the Adviser pursues the Trust's objectives.
The Trust attempts to achieve its objective by following an
asset allocation strategy that enables the Adviser to
periodically shift the assets of the Trust among three types
of securities: (a) equity securities, (b) debt securities
with maturities of more than one year and (c) money market
instruments (debt securities with maturities of less than one
year). Allocation of the Trust's assets among these types of
securities will be determined by the Adviser and will be
based primarily on data derived from computer models for the
stock and bond markets which the Adviser has developed and
which the Adviser deems appropriate. There are no limits on
the percentage of the Trust's assets that can be invested in
equity, debt or money market securities. When the asset
allocation model indicates a preference for equity
securities, the percentage of the Trust's total assets
invested in equity securities will be increased. Similarly,
if the expected total return from equity securities is poor,
then a greater percentage of the Trust's assets will be
invested in debt or money market securities. The central
tendency is for 55% of the Trust's assets to be invested in
equity securities, 35% in debt securities and 10% in money
market instruments. Under unusual conditions, the Trust may
invest in money market instruments without limitation for
temporary defensive purposes.
INVESTMENT IN EQUITY SECURITIES. In selecting securities for
purchase or sale, the Adviser relies on the Value Line
Timeliness-TM- Ranking System or the Value Line
Performance-TM- Ranking System. The Value Line Timeliness
Ranking System has evolved after many years of research and
has been used in substantially its present form since 1965.
It is based upon historical prices and reported earnings,
recent earnings and price momentum and the degree to which
the last reported earnings deviated from estimated earnings,
among other factors. The Timeliness Rankings are published
weekly in the Standard Edition of The Value Line Investment
Survey for approximately 1,700 stocks. On a scale of 1
(highest) to 5 (lowest), the rankings compare an estimate of
the probable market performance of each stock during the
coming twelve months relative to all 1,700 stocks under
review. The Rankings are updated weekly to reflect the most
recent information.
The Value Line Performance Ranking System for common stocks
was introduced in 1995. It is a variation of the Value Line
Small-Capitalization Ranking System, which has been employed
in managing pension client assets since 1981, and in managing
the Value Line Small-Cap Growth Fund, Inc. since 1993. The
Performance Ranking System evaluates the approximately 1,800
stocks in the Expanded Edition of The Value Line Investment
Survey. This stock selection system relies on factors similar
to those found in the Value Line Timeliness
5
<PAGE>
Ranking System except that it does not rely on earnings
estimates. The Performance Ranks use a scale of 1 (highest)
to 5 (lowest) to compare the Adviser's estimate of the
probable market performance of each Expanded Edition stock
during the coming twelve months relative to all 1,800 stocks
under review in the Expanded Edition.
Neither the Value Line Timeliness Ranking System nor the
Value Line Performance Ranking System eliminates market risk,
but the Adviser believes that they provide objective
standards for determining whether the market is undervaluing
or overvaluing a particular security. The Trust will usually
invest in common stocks ranked 1 or 2 but it may also invest
in common stocks ranked 3. Reliance upon the rankings,
whenever feasible, is a fundamental policy of the Trust which
may not be changed without shareholder approval. The
utilization of these Rankings is no assurance that the Trust
will perform more favorably than the market in general over
any particular period.
INVESTMENT IN DEBT SECURITIES. The Trust invests primarily
in investment grade debt securities issued by U.S.
corporations rated within one of the four highest categories
of a nationally recognized rating organization and in debt
securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities.
INVESTMENT IN MONEY MARKET SECURITIES. The short-term
instruments in which the Trust invests are primarily U.S.
Government obligations and repurchase agreements.
PORTFOLIO TURNOVER
The Trust 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
Trust's performance.
THE RISKS OF INVESTING IN THE TRUST
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. The risks of investing in the Trust may
vary depending on the mix of equity securities, debt
securities and money market instruments. Therefore, before
you invest in this Trust you should carefully evaluate the
risks. Because of the nature of the Trust, 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.
Equity securities represent ownership in a corporation and
their prices fluctuate for a number of reasons. Debt
securities represent the contractual obligation of an issuer
to repay the principal upon maturity and are subject to
interest rate
6
<PAGE>
and credit risks. Interest rate risk is the decline in debt
securities that usually accompanies a rise in interest rates.
Credit risk refers to the possibility that a debt security
could have its credit downgraded or that the issuer will fail
to pay the principal or interest when due. The Trust's use of
the Value Line Ranking Systems involves the risk that over
certain periods of time the price of securities not covered
by the Ranking Systems, or lower ranked securities, may
appreciate to a greater extent than those securities in the
Trust's portfolio. Please see the Statement of Additional
Information for a further discussion of risks. Information on
the Trust's recent holdings can be found in the Trust's
current annual or semi-annual report.
YEAR 2000 RISKS
Like other mutual funds, the Trust could be adversely
affected if the computer systems used by the Adviser and the
Trust'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 TRUST
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The business and affairs of the Trust are managed by the
Trust's officers under the direction of the Trust's Board of
Trustees.
INVESTMENT ADVISER
Value Line, Inc. serves as the Trust's investment adviser and
manages the Trust's business affairs. Value Line also acts as
investment adviser to the other Value Line mutual funds and
furnishes investment counseling services to private and
institutional clients with combined assets of over $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. A subsidiary of the Adviser publishes The Value Line
Investment Survey and other publications.
MANAGEMENT FEES
For managing the Trust and its investments, the Adviser is
paid a yearly fee of 0.50% of the Trust's average daily net
assets.
PORTFOLIO MANAGEMENT
A committee of employees of the Investment Adviser is jointly
and primarily responsible for the day-to-day management of
the Trust's portfolio.
8
<PAGE>
ABOUT YOUR ACCOUNT
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HOW TO BUY AND SELL SHARES
You may invest in the Trust only by purchasing certain
variable annuity and variable insurance contracts
("Contracts") issued by GIAC. The Trust continuously offers
its shares to GIAC's separate accounts at the net asset value
per share next determined after a proper purchase request has
been received by GIAC. GIAC then offers to owners of the
Contracts ("Contractowners") units in its separate accounts
which directly correspond to shares in the Trust. GIAC
submits purchase and redemption orders to the Trust based on
allocation instructions for premium payments, transfer
instructions and surrender or partial withdrawal requests
which are furnished to GIAC by such Contractowners.
Contractowners can send such instructions and requests to
GIAC at P.O. Box 26210, Lehigh Valley, Pennsylvania 18002 by
first class mail or 3900 Burgess Place, Bethlehem,
Pennsylvania 18017 by overnight or express mail. The Trust
redeems shares from GIAC's separate accounts at the net asset
value per share next determined after receipt of a redemption
order from GIAC.
THE ACCOMPANYING PROSPECTUS FOR A GIAC VARIABLE ANNUITY OR
VARIABLE LIFE INSURANCE POLICY DESCRIBES THE ALLOCATION,
TRANSFER AND WITHDRAWAL PROVISIONS OF SUCH ANNUITY OR POLICY.
/ / NET ASSET VALUE
We determine the Trust'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 Trust'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. Any investments which have a maturity of less than
60 days we price at amortized cost. The amortized cost method
of valuation involves valuing a security at its cost and
accruing any discount or premium over the period until
maturity, regardless of the impact of fluctuating interest
rates on the market value of the security.
9
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Trust intends to pay dividends from its net investment
income and distribute any capital gains that it has realized
annually. All dividends and capital gains distributions will
be automatically reinvested, at net asset value, by GIAC's
separate accounts in additional shares of the Trust.
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 prospectus for
GIAC's variable annuities and variable life insurance
policies describe the federal income tax treatment of
distributions from such contracts to Contractowners.
10
<PAGE>
FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you
understand the Trust's financial performance for the past
five years. Certain information reflects financial results
for a single Trust share. The total returns in the table
represent the rate that an investor would have earned or lost
on an investment in the Trust assuming reinvestment of all
dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along
with the Trust's financial statements, is included in the
Trust's annual report, which is available upon request by
calling 800-221-3253.
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 DECEMBER 31,
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1998 1997 1996 1995 1994
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NET ASSET VALUE,
BEGINNING OF YEAR $22.13 $21.90 $20.27 $16.13 $17.01
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INCOME (LOSS) FROM
INVESTMENT
OPERATIONS:
Net investment income .30 .65 .53 .39 .26
Net gains or losses
on securities (both
realized and
unrealized) 5.43 2.65 2.56 4.17 (1.09)
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Total income (loss)
from investment
operations 5.73 3.30 3.09 4.56 (.83)
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LESS DISTRIBUTIONS:
Dividends from net
investment income (.68) (.53) (.37) (.26) (.01)
Distributions from
capital gains (1.96) (2.52) (1.09) (.16) (.04)
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Total distributions (2.64) (3.07) (1.46) (.42) (.05)
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NET ASSET VALUE, END OF
YEAR $25.22 $22.13 $21.90 $20.27 $16.13
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TOTAL RETURN* 27.45% 15.66% 15.87% 28.54% (4.88)%
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RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $1,414,254 $1,196,589 $1,072,785 $876,509 $662,721
Ratio of expenses to
average net assets .58%(1) .59%(1) .58%(1) .60% .60%
Ratio of net income to
average net assets 1.25% 3.08% 2.70% 2.18% 1.65%
Portfolio turnover rate 106% 58% 71% 63% 100%
</TABLE>
(1) After offset of custody credits. Excluding the custody
credits would not have changed the expense ratio.
* Total returns do not reflect the effect of charges,
deducted under the terms of GIAC's variable contracts.
Including such charges would reduce the total returns for
all periods shown.
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11
<PAGE>
FOR MORE INFORMATION
Additional information about the Trust's investments is
available in the Trust's annual and semi-annual reports to
shareholders. In the Trust's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Trust's performance during
its last fiscal year. You can find more detailed information
about the Trust in the current Statement of Additional
Information dated May 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 Trust, you can write to the
Fund, c/o GIAC, 201 Park Avenue South, New York, NY 10003 or
call toll-free 800-221-3253.
You can find reports and other information about the Trust 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 Trust,
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 CUSTODIAN
Value Line, Inc. State Street Bank and Trust Company
220 East 42nd Street 225 Franklin Street
New York, NY 10017-5891 Boston, MA 02110
</TABLE>
File no. 811-5276
<PAGE>
VALUE LINE STRATEGIC
ASSET MANAGEMENT TRUST
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
www.valueline.com
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
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This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line Strategic Asset Management
Trust dated May 1, 1999, a copy of which may be obtained without charge by
writing or telephoning the Trust. The financial statements, accompanying notes
and report of independent auditors appearing in the Trust's 1998 Annual Report
to Shareholders are incorporated by reference in this Statement. A copy of the
Annual Report is available from the Trust 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 Trust and Its Investments and Risks.............................. B-2
Management of the Trust............................................................. B-13
Investment Advisory and Other Services.............................................. B-15
Brokerage Allocation and Other Practices............................................ B-16
Capital Stock....................................................................... B-17
Purchase, Redemption and Pricing of Shares.......................................... B-17
Taxes............................................................................... B-18
Performance Data.................................................................... B-19
Financial Statements................................................................ B-19
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS
CLASSIFICATION. The Trust is a Massachusetts business trust organized in
1987. The Trust's investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT STRATEGIES AND RISKS. The primary investment objective of the
Trust is to achieve a high total investment return consistent with reasonable
risk. The Trust's investment objective cannot be changed without shareholder
approval. There can be no assurance that the Trust will achieve its investment
objective. There are risks in all investments, including any stock investment,
and in all mutual funds that invest in stocks.
Under normal conditions, the Trust will attempt to achieve its objective by
following an asset allocation strategy that enables the Adviser to periodically
shift the assets of the Trust among three types of securities: (a) equity
securities, (b) debt securities with maturities of more than one year, and (c)
money market instruments (debt securities with maturities of less than one
year). Allocation of the Trust's assets among these types of securities will be
determined by the Adviser and will be based primarily on data derived from
computer models for the stock and bond markets which the Adviser has developed
and other factors which the Adviser deems appropriate.
There are no limits on the percentage of the Trust's assets that can be
invested in equity, debt or money market securities. Thus, at any given time,
the Trust may invest entirely in equity, debt or money market securities or any
combination thereof.
When the stock market model indicates a preference for equity securities,
the percentage of the Trust's total assets invested in equity securities will be
increased. Similarly, if the expected total return from equity securities is
poor, then a greater percentage of the Trust's assets will be invested in debt
or money market securities as indicated by the Adviser's bond market model. The
central tendency is for 55% of the Trust's assets to be invested in equity
securities, 35% in debt securities and 10% in money market instruments
(including cash). The Trust is typically weighted towards equity securities over
debt and money market securities. The Trust may also write covered call options
on its portfolio securities, invest in repurchase agreements and in financial
futures contracts and related options. See "Miscellaneous Investment Practices"
below.
INVESTMENT IN DEBT SECURITIES. The Trust may invest in a broad variety of
debt securities, including debt securities issued by U.S. companies rated within
one of the four highest grades assigned by Standard & Poor's Corporation ("S&P")
or Moody's Investors Service, Inc. ("Moody's") or, if unrated, judged by the
Adviser to be of comparable quality, and debt securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities ("U.S. Government
Securities"). It is the Trust's current intention to limit its investments in
debt securities to those rated within the three highest grades.
U.S. Government Securities include direct obligations of the U.S. Treasury
(such as Treasury bills, Treasury notes and Treasury bonds) or securities issued
or guaranteed by U.S. Government agencies or instrumentalities. These
obligations, including those which are guaranteed by Federal agencies or
instrumentalities, may or may not be backed by the "full faith and credit" of
the United States. Agencies and instrumentalities which issue or guarantee
securities include: the Federal Farm Credit System and the Federal Home Loan
Banks, the Tennessee Valley Authority, the Federal
B-2
<PAGE>
National Mortgage Association, the Federal Home Loan Mortgage Corporation, the
United States Postal Service, the Government National Mortgage Association,
Farmers Home Administration, and the Export-Import Bank.
INVESTMENT IN MONEY MARKET SECURITIES. The Trust may invest in short-term
instruments (maturing in one year or less), including the following:
(1) U.S. Government obligations such as U.S. Treasury bills, notes or
bonds, and obligations of agencies or instrumentalities of the Federal
Government such as the Federal Home Loan Banks, the Federal Land Banks, or
the Federal National Mortgage Association.
(2) Obligations (including certificates of deposit and bankers
acceptances) of: (a) banks or savings and loan associations subject to
regulation by the U.S. Government (including foreign branches of such
banks), generally limited to institutions with a net worth of at least
$100,000,000 and to banks where the bank or its holding company carries a
Value Line financial strength rating of at least "A" (the third highest of
nine rating groups) of (b) U.S. branches of foreign banks, limited to
institutions having total assets of not less than $1 billion or its
equivalent.
(3) Instruments fully secured or collateralized by the type of
obligation described in the preceding paragraphs.
(4) Commercial paper issued by corporations maturing within one year
from the day of purchase and rated Prime-2 or better by Moody's or A-2 or
better by S&P, or issued by corporations having unsecured debt outstanding
which is rated at least Aa by Moody's or AA by S&P.
(5) Other debt instruments issued by corporations maturing within one
year from the day of purchase and rated at least Aa by Moody's or AA by S&P.
Investments in obligations of a foreign branch of a U.S. bank and in U.S.
branches of a foreign bank may subject the Trust to additional investment risks.
These risks may include international and political developments, foreign
government restrictions, foreign withholding taxes or possible seizure or
nationalization of foreign deposits. In addition, foreign branches of domestic
banks and foreign banks are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting and record keeping.
The Adviser uses its best judgment in selecting money market investments,
taking into consideration rates, terms and marketability of obligations as well
as the capitalization, earnings, liquidity and other indicators of the financial
condition of their issuers in arriving at investment decisions.
MISCELLANEOUS INVESTMENT PRACTICES
RESTRICTED SECURITIES. On occasion, the Trust 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
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an agreement by the issuer to register such securities, ordinarily at the
issuer's expense, when requested to do so by the Trust. The acquisition in
limited amounts of restricted securities is believed to be helpful toward the
attainment of the Trust's investment objective 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 Trust 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 Directors, will consider
whether securities purchased under Rule 144A are liquid or illiquid for purposes
of the Trust'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 Trust holds
become illiquid, due to lack of sufficient qualified institutional buyers or
market or other conditions, the percentage of the Trust's assets invested in
illiquid assets would increase. The Adviser, under the supervision of the Board
of Directors, will monitor the Trust's investments in Rule 144A securities and
will consider appropriate measures to enable the Trust to maintain sufficient
liquidity for operating purposes and to meet redemption requests.
COVERED CALL OPTIONS. The Trust 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 Trust 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 Trust 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 Trust has no control, the Trust must sell
the underlying security to the option holder at the exercise price. By writing a
covered option, the Trust 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 Trust will not write call options in an aggregate amount
greater than 25% of its net assets.
The Trust will purchase call options only to close out a position. When an
option is written on securities in the Trust'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
Trust's position, or the Trust may wish to extinguish a call option sold by it
so as to be free to sell the underlying security. In such instances the Trust
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 Trust has written. The Trust
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
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premium received for writing a similar option. Generally, the Trust 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.
STOCK INDEX FUTURES CONTRACTS AND OPTIONS THEREON. The Trust may trade in
stock index futures contracts and in options on such contracts. Such contracts
will be entered into on exchanges designated by the Commodity Futures Trading
Commission ("CFTC").
The Trust's futures and options on futures transactions must constitute bona
fide hedging or other risk management purposes pursuant to regulations
promulgated by the CFTC. In addition, the Trust may not engage in such
activities generally if the sum of the amount of initial margin deposits and
premiums paid for unexpired commodity options would exceed 5% of the fair market
value of the Trust's net assets, after taking into account unrealized profits
and unrealized losses on such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. In instances
involving entering into long futures or options contracts by the Trust, an
amount equal to the market value of the futures contract will be deposited in a
segregated account with the Trust's custodian of cash and liquid debt securities
to collateralize the position and thereby insure that the use of such futures
contract is unleveraged. No more than 25% of the Trust's net assets may be
deposited in such segregated account.
There can be no assurance of the Trust's successful use of stock index
futures as a hedging device. Hedging transactions involve certain risks. One
risk arises because of the imperfect correlation between movements in the price
of the stock index future and movements in the price of the securities which are
the subject of the hedge. The risk of imperfect correlation increases as the
composition of the Trust's securities portfolio diverges from the securities
included in the applicable stock index. In addition to the possibility that
there may be an imperfect correlation, or no correlation at all, between
movements in the stock index future and the portion of the portfolio being
hedged, the price of stock index futures may not correlate perfectly with the
movement in the stock index due to certain market distortions. Increased
participation by speculators in the futures market also may cause temporary
price distortions. Due to the possibility of price distortions in the futures
market and because of the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by the Adviser still may not result in a successful
hedging transaction.
For example, should the Trust anticipate a decrease in the value of its
portfolio securities, it could enter into futures contracts to sell stock
indexes thereby partially hedging its portfolio against the anticipated losses.
Losses in the portfolio, if realized, should be partially offset by gains on the
futures contracts. Conversely, if the Trust anticipated purchasing additional
portfolio securities in a rising market, it could enter into futures contracts
to purchase stock indexes thereby locking in a price. The implementation of
these strategies by the Trust should be less expensive and more efficient than
buying and selling the individual securities at inopportune times.
A stock index future obligates the seller to deliver (and the purchaser to
take) an amount of cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of the last trading day
of the contract and the price at which the contract is entered into. There can
be no assurance of the Trust's successful use of stock index futures as a
hedging device.
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The contractual obligation is satisfied by either a cash settlement or by
entering into an opposite and offsetting transaction on the same exchange prior
to the delivery date. Entering into a futures contract to deliver the index
underlying the contract is referred to as entering into a short futures
contract. Entering into a futures contract to take delivery of the index is
referred to as entering into a long futures contract. An offsetting transaction
for a short futures contract is effected by the Trust entering into a long
futures contract for the same date, time and place. If the price of the short
contract exceeds the price in the offsetting long, the Trust is immediately paid
the difference and thus realizes a gain. If the price of the long transaction
exceeds the short price, the Trust pays the difference and realizes a loss.
Similarly, the closing out of a long futures contract is effected by the Trust
entering into a short futures contract. If the offsetting short price exceeds
the long price, the Trust realizes as a gain, and if the offsetting short price
is less than the long price, the Trust realizes a loss.
No consideration will be paid or received by the Trust upon entering into a
futures contract. Initially, the Trust will be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1% to 10% of
the contract amount. This amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may charge a
higher amount. This amount is known as "initial margin" and is in the nature of
a performance bond or good faith deposit on the contract which is returned to
the Trust upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price of the index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market."
The Trust may also purchase put and call options on stock index futures
contracts on commodity exchanges or write covered options on such contracts. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, while a put option gives the purchaser the right to sell and the writer
the obligation to buy. Unlike a stock index futures contract, which requires the
parties to buy and sell the stock index on a set date, an option on a stock
index futures contract entitles its holder to decide on or before a future date
whether to enter into such a futures 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, the purchase of an option
does not require daily payments of cash in the nature of "variation" or
"maintenance" margin payments to reflect the change in the value of the
underlying contract. The value of the option purchased by the Trust does change
and is reflected in the net asset value of the Trust. The writer of an option,
however, must make margin payments on the underlying futures contract. Exchanges
provide trading mechanisms so that an option once purchased can later be sold
and an option once written can later be liquidated by an offsetting purchase.
Successful use of stock index futures by the Trust also is subject to the
Adviser's ability to predict correctly movements in the direction of the market.
If the Adviser's judgment about the several directions of the market is wrong,
the Trust's overall performance may be worse than if no such contracts had been
entered into. For example, if the Trust has hedged against the possibility of a
decline in the market adversely affecting stocks held in its portfolio and stock
prices increase instead, the Trust will lose part or all of the benefit of the
increased value of its stock which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if
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the Trust has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Trust
may have to sell securities at a time when it may be disadvantageous to do so.
When stock index futures are purchased to hedge against a possible increase in
the price of stocks before the Trust is able to invest its cash (or cash
equivalents) in stocks in an orderly fashion, it is possible that the market may
decline instead; if the Trust then concludes not to invest in stocks at that
time because of concern as to possible further market decline or for other
reasons, the Trust will realize a loss on the futures contract that is not
offset by a reduction in the price of securities purchased.
Use of options on stock index futures entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. The Trust will not purchase these options unless its
investment adviser is satisfied with the development, depth and liquidity of the
market and the investment adviser believes the options can be closed out.
Options and futures contracts entered into by the Trust will be subject to
special tax rules. These rules may accelerate income to the Trust, defer Trust
losses, cause adjustments in the holding periods of Trust securities, convert
capital gain into ordinary income and convert short-term capital losses into
long-term capital losses. As a result, these rules could affect the amount,
timing and character of Trust distributions. However, the Trust anticipates that
these investment activities will not prevent the Trust from qualifying as a
regulated investment company.
REPURCHASE AGREEMENTS. The Trust may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Trust, 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 Trust 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
Trust. Repurchase agreements may also be viewed as loans made by the Trust 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. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Trust
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 Trust 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 Trust enters into repurchase
agreements.
LENDING PORTFOLIO SECURITIES. The Trust 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 Trust. 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 Trust will retain the right to
call, upon notice, the loaned securities and intends to call loaned voting
securities in anticipation of any important or material matter to be voted on by
shareholders. While there may be delays in recovery or even loss of rights in
the collateral should the borrower fail financially, the loans will be made only
to firms deemed by the Adviser to be of good standing and
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will not be made unless, in the judgment of the Adviser, the consideration which
can be earned from such loan justifies the risk. The Trust may pay reasonable
custodian and administrative fees in connection with the loans.
WHEN-ISSUED SECURITIES. The Trust 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 Trust to
the issuer and no interest accrues to the Trust. 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 Trust's other assets. While when-issued securities may be sold prior to the
settlement date, the Trust intends to purchase such securities with the purpose
of actually acquiring them unless a sale appears desirable for investment
reasons. At the time the commitment to purchase a security on a when-issued
basis is confirmed, the Trust will record the transaction and reflect the value
of the security in determining its net asset value. The Trust 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 Trust will maintain cash and high quality
marketable securities equal in value to commitments for when-issued securities
in a segregated account.
SHORT SALES. The Trust 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 Trust 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 Trust's net assets taken at market may at any
one time be held as collateral for such sales.
FUTURES AND OPTIONS ON FUTURES. The Trust may trade in financial futures
contracts including stock index futures and in options on such financial futures
contracts. Currently, financial futures contracts can be entered into for
interest rate sensitive debt securities such as U.S. Treasury bills, bonds and
notes, certificates of the Government National Mortgage Association and bank
certificates of deposit ("interest rate futures"). These contracts are
principally traded on the Chicago Board of Trade and the Chicago Mercantile
Exchange. Futures on stock indexes are currently traded on the Chicago
Mercantile Exchange, the New York Futures Exchange and the Kansas City Board of
Trade. The Trust may enter into futures contracts on these instruments and
indexes as well as on new instruments and indexes as they become available on
national futures exchanges.
Financial futures contracts are contracts entered into on a commodity
exchange which provide for the future delivery of an underlying instrument or
index on a specified date, time and place. The contractual obligations may be
satisfied by either taking or making physical delivery of the underlying
commodity (or cash settlement in the case of stock index futures and certain
other financial futures contracts) or by entering into an opposite and
offsetting transaction on the same exchange prior to the delivery date. Entering
into a futures contract to deliver the instrument or index underlying the
contract is referred to as entering into a short futures contract. Entering into
a futures contract to take delivery of the instrument or index is referred to as
entering into a long futures contract. An offsetting transaction for a short
futures contract is effected by the Trust entering into a long futures contract
for the same date, time and place. If the price of the short contract exceeds
the price in the offsetting long, the Trust is immediately paid the difference
and thus realizes a gain. If the price of the long transaction exceeds the short
price, the Trust pays the difference and realizes a loss. Similarly,
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the closing out of a long futures contract is effected by the Trust entering
into a short futures contract. If the offsetting short price exceeds the long
price, the Trust realizes a gain, and if the offsetting short price is less than
the long price, the Trust realizes a loss.
No consideration will be paid or received by the Trust upon entering into a
futures contract. Initially, the Trust will be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1 to 10% of
the contract amount. This amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may charge a
higher amount. This amount is known as "initial margin" and is in the nature of
a performance bond or good faith deposit on the contract which is returned to
the Trust upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price of the index or
securities underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market."
The Trust may also purchase put and call options on financial futures
contracts on commodity exchanges or write covered options on such contracts.
Unlike a futures contract, which requires the parties to buy and sell a
commodity 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, the
purchase of an option does not require daily payments of cash in the nature of
"variation" or "maintenance" margin payments to reflect the change in the value
of the underlying contract. The value of the option purchased by the Trust does
change and is reflected in the net asset value of the Trust. The writer of an
option, however, must make margin payments on the underlying futures contract.
Exchanges provide trading mechanisms so that an option once purchased can later
be sold and an option once written can later be liquidated by an offsetting
purchase.
The Trust's commodities transactions must constitute bona fide hedging or
other non-speculative transactions pursuant to regulations promulgated by the
Commodity Futures Trading Commission. In addition, the Trust may not engage in
such activities generally if the sum of the amount of initial margin deposits
and premiums paid for unexpired commodity options would exceed 5% of the fair
market value of the Trust's net assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%. In
instances involving entering into long futures or options contracts by the
Trust, an amount equal to the market value of the commodity 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 commodity contract is
unleveraged.
Interest rate futures contracts may be entered into in order to hedge the
Trust's portfolio of debt securities against anticipated interest rate changes.
If the Adviser anticipates that interest rates will rise, the Trust may enter
into a short interest rate futures contract or write a call option or purchase a
put option on such futures contract to attempt to hedge against a decrease in
the value of the Trust's securities. If the Adviser anticipates that interest
rates will decline, the Trust may enter into a long interest rate futures
contract or purchase a call option thereon to protect against an increase in the
prices of the securities the Trust intends to purchase.
The Trust may enter into stock index futures for the purpose of hedging
against changes in values of the Trust's portfolio securities or options on
stock indexes. A stock index future obligates
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the seller to deliver (and the purchaser to take) an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the contract is entered into. There can be no assurance of the Trust's
successful use of stock index futures as a hedging device.
When futures are purchased to hedge against a possible increase in the price
of stocks before the Trust is able to invest its cash (or cash equivalents) in
stocks in an orderly fashion, it is possible that the market may decline
instead; if the Trust then concludes not to invest in stocks at that time
because of concern as to possible further market decline or for other reasons,
the Trust will realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
OPTIONS ON SECURITIES. The Trust may purchase and write listed put and call
options on equity and debt securities when deemed appropriate and consistent
with the Trust's investment objective. The Trust will engage in option
transactions to realize profits through the receipt of premiums, to protect
unrealized gains or to avoid realizing losses and to hedge securities positions
held by the Trust.
The Trust will write call options only if they are secured. A call option is
"secured" if the Trust owns the securities underlying the call, if the Trust
holds a call at the same exercise price for the same exercise period and on the
same securities as the call written, or if the Trust establishes with its
custodian at the time it writes the call, and maintains for the term of the
option, a segregated account consisting of cash, U.S. Government Securities or
other high-grade debt securities equal to the fluctuating market value of the
optioned securities. The segregated account will be adjusted at least daily to
reflect changes in the market value of the optioned securities.
The Trust will write put options only if they are secured. A put option is
"secured" if the Trust holds a put at the same exercise price, for the same
exercise period and on the same underlying security as the put written, or if
the Trust places cash, U.S. Government Securities or other high-grade debt
securities with a value equal to the exercise price of the put in a segregated
account with the Trust's custodian. The segregated account will be adjusted
daily to reflect the current value of the put.
The Trust may enter into "closing purchase transactions" or "closing sale
transactions" to terminate its obligations with respect to an option prior to
the expiration of the option. As the writer of an option, the Trust may effect a
closing purchase transaction by buying an option of the same series and exercise
price as the option previously written. As the purchaser of an option, the Trust
may liquidate its position by selling the option previously purchased.
The Trust may realize a profit or loss upon entering into a closing purchase
or sale transaction. The Trust will realize a profit if the cost of a closing
purchase transaction is less than the premium received upon writing the original
option and will incur a loss if the cost of a closing purchase transaction
exceeds the premium received upon writing the original option. Whether the Trust
realizes a profit or loss on a closing sale transaction will depend on whether
the amount received in the closing sale transaction is more or less than the
premium the Trust initially paid for the original option plus the related
transaction costs.
The Trust will not (1) sell listed put or call options to the extent that,
immediately after a sale, the aggregate value of the securities underlying the
calls or obligations securing the puts would exceed 25% of the Trust's net
assets or (2) purchase listed put or call options if, immediately after a
purchase, the premiums paid for all the options owned at that time would exceed
10% of the Trust's net assets.
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YEAR 2000. Like other mutual funds, the Trust 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 Trust'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 Trust.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Trust, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Trust is unable to
predict what impact, if any, the Year 2000 Problem will have on issuers of the
portfolio securities held by the Trust.
TRUST POLICIES.
(i)
The Trust may not issue senior securities except evidences of
indebtedness permitted under clause (ii) below.
(ii)
The Trust 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 Trust may be pledged, mortgaged or otherwise encumbered, transferred
or assigned to secure a debt except in connection with the Trust's entering
into stock index futures.
(iii)
The Trust may not engage in the underwriting of securities except to
the extent that the Trust may be deemed an underwriter as to
restricted securities under the Securities Act of 1933 in selling portfolio
securities.
(iv)
The Trust may not invest 25% or more of its assets in securities of
issuers in any one industry. For the purpose of this restriction,
gas, electric, water and telephone utilities will each be treated as a
separate industry.
(v)
The Trust may not purchase securities of other investment companies
or invest in real estate, mortgages or illiquid securities of real
estate investment trusts although the Trust may purchase securities of
issuers which engage in real estate operations.
(vi)
The Trust 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 10% of the
Trust's assets. The Trust 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 Trust.
(vii)
The Trust may not engage in arbitrage transactions, short sales,
purchases on margin or participate on a joint or joint and several
basis in any trading account in securities except that these prohibitions
will not apply to futures contracts or options on futures contracts entered
into by the Trust for permissible purposes or to margin payments made in
connection with such contracts.
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(viii)
The Trust may not purchase or sell any put or call options or any
combination thereof, except that the Trust may write and sell
covered call option contracts on securities owned by the Trust. The Trust
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").
The Trust may also purchase and sell put and call options on stock index
futures contracts.
(ix)
The Trust 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 Trust 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 Trust may not purchase securities for the purpose of exercising
control over another company.
(xii)
The Trust may not invest in commodities or commodity contracts
except that the Trust may invest in stock index futures contracts
and options on stock index futures contracts.
(xiii)
The Trust may not purchase oil, gas or other mineral type
development programs or leases, except that the Trust may invest in
the securities of companies which invest in or sponsor such programs.
(xiv)
The Trust may not purchase the securities of any issuer if, to the
knowledge of the Trust, those officers and trustees of the Trust 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 primary investment objective of the Trust is to achieve a high
total investment return consistent with reasonable risk.
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 Trust 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 Trust which means
the lesser of (1) the holders of more than 50% of the outstanding shares of
capital stock of the Trust or (2) 67% of the shares present if more than 50% of
the shares are present at a meeting in person or by proxy.
Since the Trust will be used as an investment vehicle for variable annuity
contracts and variable life insurance policies issued by The Guardian Insurance
& Annuity Company, Inc. ("GIAC") its investments may be subject in the future to
further restrictions under the insurance laws and regulations of the states in
which such contracts or policies are offered for sale.
B-12
<PAGE>
MANAGEMENT OF THE TRUST
The business and affairs of the Trust are managed by the Trust's officers
under the direction of the Board of Trustees. Set forth below is certain
information regarding the Trustees and Officers of the Trust.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH TRUST PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 64 of Directors and Officer of the Adviser and Value Line Pub-
President lishing, Inc. Chairman and President of the
Value Line Funds and Value Line Securities,
Inc. (the "Distributor"); Chairman and
President of each of the 15 Value Line Funds.
John W. Chandler Director Consultant, Academic Search Consultation
2801 New Mexico Ave., N.W. Service, Inc. Trustee Emeritus and Chairman
Washington, DC 20007 (1993-1994) of Duke University; President
Age 75 Emeritus, Williams College.
*Leo R. Futia Director Retired Chairman and Chief Executive Officer
201 Park Avenue South of The Guardian Life Insurance Company of
New York, NY 10003 America and Director since 1970. Director
Age 79 (Trustee) of The Guardian Insurance & Annuity
Company, Inc., Guardian Investor Services
Corporation and the Guardian-sponsored mutual
funds.
David H. Porter Director President Emeritus, Skidmore College since
791 North Broadway 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
Stephen Grant Vice President Portfolio Manager with the Adviser.
Age 45
</TABLE>
B-13
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH TRUST PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
Bruce Alston Vice President Portfolio Manager with the Adviser since
Age 53 1997; Portfolio Manager with Dreyfus
Management, Inc. 1994-1996, and Prudential
Capital Markets Group, 1981-1994.
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.
Trustees of the Trust are also directors/trustees of 11 other Value Line
Funds.
The following table sets forth information regarding compensation of
Trustees by the Trust and by the Trust and the eleven other Value Line Funds of
which each of the Trustees is a director or trustee for the fiscal year ended
December 31, 1998. Trustees who are officers or employees of the Adviser do not
receive any compensation from the Trust or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM TRUST
AGGREGATE BENEFITS BENEFITS AND TRUST
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSONS FROM TRUST 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 the date of this Statement of Additional Information, The Guardian
Insurance & Annuity Company, Inc., a Delaware corporation, owned all of the
outstanding shares of the Trust. Such shares are allocated to one or more
Guardian separate accounts, which are registered as unit investment trusts under
the 1940 Act. The address of The Guardian Insurance & Annuity Company, Inc. is
201 Park Avenue South, New York, New York 10003. It is a subsidiary of The
Guardian Life Insurance Company of America, a mutual life insurance company
organized under the laws of the State of New York.
B-14
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust'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 Trust, owns all of the
voting stock of Arnold Bernhard & Co., Inc.
The investment advisory agreement between the Trust and the Adviser, dated
August 10, 1988, provides for an advisory fee at an annual rate of 0.50% of the
Trust's average daily net assets during the year. During 1996, 1997 and 1998,
the Trust paid or accrued to the Adviser advisory fees of $4,947,837, $5,718,843
and $6,293,798, respectively.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Trust including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Trust. The Trust 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 agents, 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. In addition, the Trust has agreed to reimburse GIAC for certain
administrative and shareholder servicing expenses incurred by GIAC on behalf of
the Trust. See note 4 of the notes to the Trust's financial statements for the
year ended December 31, 1998. The Trust 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 Trust. The agreement will terminate upon its assignment.
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment counseling
services to private and institutional accounts with combined assets in excess of
$5 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Trust and certain investments may be appropriate for the Trust 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 Trust. In other cases, however, it is
believed that the ability of the Trust to participate, to the extent permitted
by law, in volume transactions will produce better results for the Trust.
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
Trust. 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
B-15
<PAGE>
to issuers of securities held in the portfolio of the Trust, specific reference
to such agreements will be made in the "Schedule of Investments" in shareholder
reports of the Trust. As of the date of this Statement of Additional Information
no such agreements exist.
The Trust 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 Trust 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 Trust 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.
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 Trust 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 1996, 1997 and 1998, the Trust paid brokerage commissions of
$743,211, $748,334 and $1,460,070, respectively, of which $461,211 (62%),
$427,025 (57%) and $859,104 (59%), respectively, was paid to Value Line
Securities, Inc., the Trust's distributor and a subsidiary of the Adviser. Value
Line Securities, Inc. clears transactions for the Trust through unaffiliated
broker-dealers.
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 Value
Line Securities or any other "affiliated person" be "reasonable and fair"
compared to the commissions paid to other brokers in
B-16
<PAGE>
connection with comparable transactions. The procedures require that the Adviser
furnish reports to the Trustees with respect to the payment of commissions to
affiliated brokers and maintain records with respect thereto. During 1998,
$1,151,988 (79%) of the Trust's brokerage commissions were paid to brokers or
dealers solely for their services in obtaining the best prices and executions;
the balance, or $308,082 (21%), went to brokers or dealers who provided
information or services to the Adviser and, therefore, indirectly to the Trust
and to shareholders of the Value Line funds. The information and services
furnished to the Adviser include the furnishing of research reports and
statistical compilations and computations and the providing of current
quotations for securities. The services and information were furnished to the
Adviser at no cost to it; no such services or information were furnished
directly to the Trust, but certain of these services might have relieved the
Trust of expenses which it would otherwise have had to pay. Such information and
services are considered by the Adviser, and brokerage commissions are allocated
in accordance with its assessment of such information and services, but only in
a manner consistent with the placing of purchase and sale orders with brokers
and/or dealers, which, in the judgment of the Adviser, are able to execute such
orders as expeditiously as possible and at the best obtainable price. The Trust
is advised that the receipt of such information and services has not reduced in
any determinable amount the overall expenses of the Adviser.
PORTFOLIO TURNOVER. The Trust's annual portfolio turnover rate may exceed
100%. A rate of portfolio turnover of 100% would occur if all of the Trust's
portfolio were replaced in a period of one year. To the extent that the Trust
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 Trust's portfolio turnover rate
for recent fiscal years is shown under "Financial Highlights" in the Trust's
Prospectus.
CAPITAL STOCK
Each share of beneficial interest of the Trust, $.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 Trust were liquidated, would receive the net assets of the Trust.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES: Shares of the Trust are purchased at net asset value next calculated
after receipt of a purchase order. Shares of the Trust are available to the
public only through the purchase of certain contracts issued by GIAC. There are
no minimum investment requirements.
REDEMPTION: The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period, by the Trust 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 Trust of securities owned by it is not reasonably
practical, or (b) it is not reasonably practical for the Trust 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 Trust's
shareholders.
B-17
<PAGE>
The value of shares of the Trust on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Trust's assets at the
time.
NET ASSET VALUE. The net asset value of the Trust'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 Trust 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 Trust, less any
liabilities, by the total outstanding shares. Securities listed on a securities
exchange and over-the-counter securities traded on the NASDAQ national market
are valued at the closing sales price on the date as of which the net asset
value is being determined. In the absence of closing sales prices for such
securities and for securities traded in the over-the-counter market, the
security is valued at the midpoint between the latest available and
representative asked and bid prices. Securities for which market quotations are
not readily available or which are not readily marketable and all other assets
of the Trust are valued at fair value as the Board of Trustees or persons acting
at their direction may determine in good faith. 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 Trust intends to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). The Trust so
qualified during the Trust's last fiscal year. By so qualifying, the Trust is
not subject to Federal income tax on its net investment income or net realized
capital gains which are distributed to GIAC's separate accounts. The Trust's net
investment income is made up of dividends and interest less expenses. The
computation of net capital gains takes into account any capital loss carry
forward of the Trust.
Federal tax regulations require that mutual funds that are offered through
insurance company separate accounts must meet certain diversification
requirements to preserve the tax-deferral benefits provided by the variable
contracts which are offered in connection with such separate accounts. The
Adviser intends to diversify the Trust's investments in accordance with those
requirements. The prospectuses for GIAC's variable annuities and variable life
insurance policies describe the federal income tax treatment of distributions
from such contracts to Contractowners.
B-18
<PAGE>
PERFORMANCE DATA
From time to time, the Trust 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 Trust will be accompanied by information
on the Trust'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 Trust may also advertise aggregate total return information for
different periods of time.
The Trust'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 Trust's average annual total returns for the one, five and ten year
periods ending December 31, 1998 were 27.45%, 15.87% and 17.05%, respectively.
The Trust's total return may be compared to relevant indices and data from
Lipper Analytical Services, Inc., Morningstar or Standard & Poor's Indices.
From time to time, evaluations of the Trust's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Trust.
Investors should note that the investment results of the Trust will
fluctuate over time, and any presentation of the Trust'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 Trust's financial statements for the year ended December 31, 1998,
including the financial highlights for each of the five fiscal years in the
period ended December 31, 1998, appearing in the 1998 Annual Report to
Shareholders and the report thereon of PricewaterhouseCoopers LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information.
B-19
<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) Agreement with The Guardian Insurance & Annuity Company, Inc.
(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.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- -------------------------- -------------------------------- ---------------------------------------------------
<S> <C> <C>
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>
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)
C-2
<PAGE>
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-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 12 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 9, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Report to Shareholders of Value Line Strategic Asset Management 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
February 22, 1999
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 22nd day of February, 1999.
VALUE LINE STRATEGIC ASSET MANAGEMENT
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 Trustee; President; February 22, 1999
(JEAN B. BUTTNER) Principal Executive Officer
*JOHN W. CHANDLER Trustee February 22, 1999
(JOHN W. CHANDLER)
*LEO R. FUTIA Trustee February 22, 1999
(LEO R. FUTIA)
*DAVID H. PORTER Trustee February 22, 1999
(DAVID H. PORTER)
*PAUL CRAIG ROBERTS Trustee February 22, 1999
(PAUL CRAIG ROBERTS)
*NANCY-BETH SHEERR Trustee February 22, 1999
(NANCY-BETH SHEERR)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial February 22, 1999
................................................ and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
*By /s/ DAVID T. HENIGSON
...................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-5
<PAGE>
Exhibit 99(a)
DECLARATION OF TRUST
OF
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
DATED MAY 14, 1987
DECLARATION OF TRUST made May 14, 1987 by the undersigned Trustee
(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 Trustee desires to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustee desires that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustee declares 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 Strategic Asset Management 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>
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
incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
<PAGE>
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 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.
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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 Trustee 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, 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
<PAGE>
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 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.
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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, regardless 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
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period not exceeding six (6) months at any one time to any other Trustees 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
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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 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:
(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
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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 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
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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 expectations
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, 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;
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<PAGE>
(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 disposition; 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 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
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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
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, 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
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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. 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.
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<PAGE>
SECTION 5.4. ISSUANCE OF 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 1/1,000ths 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.
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,
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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 prepaid, 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 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
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further provisions for Shareholders' votes and meetings and related matters.
SECTION 5.10. MEETING OF SHAREHOLDERS. An annual meeting of the
Shareholders shall be held beginning in 1988 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.
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.
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<PAGE>
(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 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
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<PAGE>
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 any
amendment to this Declaration.
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
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<PAGE>
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 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
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<PAGE>
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 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 RIGHTS 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
of redemption; provided that applicable rules and regulations of the
commission shall govern as to whether
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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 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
<PAGE>
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.
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
<PAGE>
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
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 Trustee 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 Trustee 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' Share or net income, or the
declaration and payment of dividends and distributions as they may deem
necessary or desirable. Without limiting the generality
<PAGE>
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.
(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, assignments, 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
<PAGE>
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 Shareholder 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.
(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 Trustee 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,
<PAGE>
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.
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.
<PAGE>
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 of 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 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,
<PAGE>
(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 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.
(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
14th day of May, 1987.
/s/ David M. Elwood
----------------------
David M. Elwood
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COMMONWEALTH OF MASSACHUSETTS MASSACHUSETTS
COUNTY OF SUFFOLK May 14, 1987
Then personally appeared the above-named David M. Elwood, who
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Janice M. Mahoney
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Notary Public
My commission expires:
JANICE M. MAHONEY, Notary Public
My Commission Expires January 7, 1994
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Exhibit 99(b)
BY-LAWS
OF
VALUE LINE STRATEGIC ASSET MANAGEMENT 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 Strategic Asset management
Trust dated May 14, 1987, as amended from time to time.
ARTICLES 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 notice. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his current address or if a
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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 of 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 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 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 otherwise required by law, the Declaration of these
By-Laws) the act
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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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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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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. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
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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 March in
each year and shall end on the last day of February 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.
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,
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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 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
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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 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.
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(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 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
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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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Exhibit 99(d)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 10 day of August 1988, between VALUE LINE
STRATEGIC ASSET MANAGEMENT TRUST, a Massachusetts trust (hereinafter
called "the fund"), and VALUE LINE, INC., a New York corporation
(hereinafter called "the Company");
WITNESSETH:
WHEREAS, the Fund desires to have the Company act as its investment
adviser and provide it with investment research, advice, supervision and
management; and
WHEREAS, the Company is willing to undertake the same upon the terms and
conditions set forth.
NOW, THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. DUTIES. The Company shall provide the Fund with such investment
research, data, advice and supervision as the latter may from time to time
consider necessary for proper supervision of its funds. The Company shall act
as manager and investment adviser of the Fund and, as such, shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased or sold by the Fund, and what portion of the
assets of the Fund shall be held uninvested, subject always to the provisions
of the Fund's 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 of 1940)
other than the Fund. All other costs and expenses not expressly assumed by
the Company under this Agreement, or to be paid by the Distributor or
Distributors of the shares of the Fund, shall be paid by the Fund, including
(i) interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities; (iii) insurance premiums
for fidelity and other coverage requisite to its operations; (iv)
compensation and expenses of its 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 share 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
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material to shareholders of the Fund; (xi) all other expenses incidental to
holding meetings of the Fund's shareholders; (xii) a pro rata share, based on
relative net asset value of the fund and other investment companies for which
the Company also act as manager and investment adviser, of 50% of the fees or
dues of the Investment Company Institute; (xiii) fees and expenses in
connection with registration of the Fund or qualification of its shares under
the securities laws of states and foreign jurisdictions and (xiv) such
non-recurring expenses as may arise, including actions, suits or proceedings
to which the Fund is a party and the legal obligation which the Fund may have
to indemnify its 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 Company's overall responsibilities. As used herein,
"brokerage and research services" shall have the same meaning as in Section
28(e)(3) of the Securities Exchange Act of 1934, as such Section may be
amended from time to time, and any rules or regulations promulgated by the
Securities and Exchange Commission. It is understood that, consistent with
the Company's fiduciary duty to the Fund, it is the intent of this Agreement
to allow the Company the widest discretion permitted by law in determining
the manner and means by which portfolio securities transactions can be
effected in the best interests of the Fund.
3. COMPENSATION. (a) For its services and for the facilities to be
furnished as provided herein, the Fund shall pay to the Company an advisory
fee payable monthly, computed at the annual rate of 1/2 of 1% of the Fund's
average net assets during the year, pro rated for any portion of a year
during which this Agreement is in effect. For this purpose, the value of the
Fund's net assets shall be determined in the same manner as for the purchase
and redemption of Fund shares as described in the Fund's current Prospectus.
(b) If the Fund's Distributor receives fees in connection with the
tender of portfolio securities of the Fund, the gross amount of the advisory
fee computed in accordance with the preceding paragraph 3(a) shall be reduced
by the amount of tender fees received; if the amount of such tender fees
exceeds the amount of advisory fees computed in accordance with paragraph
3(a), the excess shall be paid by the Company to the Fund.
(c) In the event that the total expenses of the Fund, excluding
interest, taxes, brokerage commissions and extraordinary expenses, exceeds in
any fiscal year the lowest applicable percentage limitation prescribed by any
state in which shares of the Fund are sold, the compensation of the Company,
computed in accordance with the preceding two paragraphs 3(a) and 3(b), shall
be reduced by the amount of such excess.
4. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective on the date set forth above and will continue in effect from year
to year thereafter only so long as such continuance is specifically approved
at least annually in accordance with the Investment Company Act of 1940. This
Agreement may be terminated on sixty days written notice by either party.
This Agreement shall terminate automatically in the event of its assignment
as defined in the Investment Company Act of 1940.
A-2
<PAGE>
5. NAME OF FUND. The Company consents to the use by the Fund of the name
"Value Line Strategic Asset Management Trust" so long, and only so long, as
this Agreement (or any agreement with any organization which has succeeded to
the business of the Company) or any extension, renewal or amendment thereof,
remains in effect. the Fund agrees that if and when no such agreement is in
effect, (a) it will cease to use said name or any name indicating or
suggesting that the Fund is advised by or otherwise connected with the
Company and (b) it will not thereafter refer to the former association
between the Company and the Fund.
6. COMPANY MAY ACT FOR OTHERS. Nothing herein contained shall limit the
freedom of the Company or any affiliated person of the Company to render
investment supervisory or corporate administrative services to other
investment companies, to act as investment adviser or investment counselor to
other persons, firms or corporations, and to engage in other business
activities.
7. AMENDMENT OF AGREEMENT. This Agreement may not be amended except
pursuant to a direction given by the vote of the holders of a majority (as
defined in the Investment Company Act of 1940) of the outstanding shares of
the Fund.
8. LIABILITY. The Company shall not be liable for any error of judgment,
or mistake of law, or any loss suffered by the Fund, in connection with the
matters to which this Agreement relates, except for loss resulting in the
performance of its duties or from reckless disregard by the Company of its
obligations and duties hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
VALUE LINE STRATEGIC ASSET
MANAGEMENT TRUST
By /s/ Thomas J. Sexton
------------------------------------
VALUE LINE, INC.
By /s/ Jean S. Suttner
------------------------------------
A-3
<PAGE>
Exhibit 99(e)
DISTRIBUTION AGREEMENT
Between
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
and
VALUE LINE SECURITIES, INC.
September 16, 1987
VALUE LINE SECURITIES, INC.
711 Third Avenue
New York, New York 10017
Dear Sirs:
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST (the "Trust") established
under the laws of the Commonwealth of Massachusetts by Declaration of Trust
dated May 14, 1987, 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 Trust desires that your firm act as principal
underwriter and distributor (herein "distributor") of the Trust 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 Trust that you are willing to act as
distributor, and it is, accordingly, agreed between us as follows:
1. The Trust hereby appoints you distributor for the sale of its shares,
pursuant to the aforesaid continuous public offering in connection with any
sales made to Trust 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.
1
<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 Trust at
any time because of market or other economic considerations or abnormal
circumstances of any kind, you will suspend such efforts. The Trust 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 Trust.
3. The shares shall be sold by you at net asset value as determined in
the Trust'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 Trust shall have the right to accept or reject
orders for the purchase of shares of the Trust. 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 Trust 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 Trust the amount of any such net gains which
may have accumulated. The Trust 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 Trust 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 Trust 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 Trust 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.
2
<PAGE>
6. The Trust 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 Trust.
(b) To furnish to the Trust 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 Trust 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 Trust 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 Trust and by such a vote of the Board of Trustees.
(b) You shall not have notified the Trust 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 STRATEGIC ASSET MANAGEMENT TRUST
By /s/ Illegible
------------------------------------------
Accepted:
VALUE LINE SECURITIES, INC.
By /s/ Thomas J. Sexton
-----------------------------
4
<PAGE>
Exhibit 99(g)
CUSTODIAN AGREEMENT
Dated as of:
Between
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Bank Appointed Custodian .......................................... 1
2. Definitions ....................................................... 1
(a) Authorized Person ............................................ 1
(b) Security ..................................................... 2
(c) Portfolio Security ........................................... 2
(d) Officers' Certificate ........................................ 2
(e) Book-Entry System and Depository ............................. 2
3. A. Proper Instructions .......................................... 3
B. Bank's Communications with Fund .............................. 4
4. Separate Accounts ................................................. 5
5. Certification as to Authorized Persons ............................ 5
6. Custody of Cash and Securities .................................... 6
A. Cash ......................................................... 6
(a) Purchase of Securities .................................. 6
(b) Redemptions ............................................. 7
(c) Distributions and Expenses of Fund ...................... 7
(d) Payment in Respect of Securities ........................ 7
(e) Repayment of Cash ....................................... 7
(f) Other Authorized Payments ............................... 8
(g) Termination ............................................. 8
B. Securities ................................................... 8
(a) Book-Entry System ....................................... 10
(b) Use of Direct Paper System for Commercial Paper ......... 12
C. Options and Futures Transactions ............................. 14
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter .............................. 14
(b) Puts, Calls and Futures Traded on Commodities
Exchanges ............................................... 15
(c) Segregated Account ...................................... 16
D. Segregated Account for "when issued", "forward commitment"
and Reverse Repurchase Agreement Transactions ................ 17
7. Transfer of Securities ............................................ 18
8. Redemptions ....................................................... 20
9. Merger, Dissolution, etc. of Fund ................................. 20
10. Actions of Bank Without Prior Authorization ....................... 21
11. Maintenance of Records and Confidentiality ........................ 23
<PAGE>
<S> <C>
12. Concerning the Bank .............................................. 23
A. Performance of Duties ....................................... 23
B. Responsibility of Custodian ................................. 24
C. No Duty of Bank ............................................. 24
D. Fees and Expenses of Bank ................................... 25
E. Advances by Bank ............................................ 26
13. Termination ...................................................... 26
14. Notices .......................................................... 28
15. Amendments ....................................................... 29
16. Parties .......................................................... 29
17. Governing Law .................................................... 29
</TABLE>
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 21 day of June, 1990 between VALUE LINE
STRATEGIC ASSET MANAGEMENT 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 17(f)(1)
of the Investment Company Act of 1940 to act as custodian of the portfolio
securities and cash of the Fund, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described, and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
(a) AUTHORIZED PERSON. Authorized person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of the Board of 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 on 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
-2-
<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
instructions confirming such prior oral instruction. The Bank shall compare
the original oral instruction with any confirmatory written or oral
instruction, as the case may be, and shall report any discrepancy to the
Fund immediately, and the Bank shall be responsible for any expense incurred
in taking any action, including any reprocessing, necessary to correct any
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<PAGE>
such discrepancy or error in Proper Instructions given by the Fund, to the
extent such expense is caused by the unreasonable delay of the Bank in
reporting such discrepancy to the Fund. Except as provided in the preceeding
sentence, the Fund shall be responsible, at the Fund's expense, for taking
any action, including any reprocessing, necessary to correct any such
discrepancy or error in Proper Instructions given by the Fund, and to the
extent such action requires the Bank to act, the Fund shall give the Bank
specific Proper Instructions as to the action required. The Bank shall act
upon and comply with any subsequent Proper Instructions which modifies a
prior Proper Instruction. Upon receipt of an Officer's 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 it is for a purpose permitted under the terms of this Section
6(A), specifying the applicable subsection, or describing such purpose with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
(a)-(g) below.
(a) PURCHASE OF SECURITIES: upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank
registered in the name of the Fund or in the name of, or properly endorsed
and in form for transfer to, the Bank, or a nominee of the Bank, or
receipt for the account of the Bank through use of (1) the
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<PAGE>
Book-Entry System pursuant to Section 6(B)(a)(3) below, (2) a Depository
pursuant to 6(B)(b) below, or (3) Book Entry Paper pursuant to Section
6(B)(c) below, each such payment to be made at the purchase price shown
on a broker's confirmation (or transaction report in the case of Book
Entry Paper) of purchase of the securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by
the Bank before payment is made;
(b) REDEMPTIONS: in such amount as may be necessary for the
repurchase or redemption of shares of beneficial interest of the Fund
offered for repurchase or redemption in accordance with Section 8 of this
Agreement;
(c) DISTRIBUTIONS AND EXPENSES OF FUND: for the payment on the
account of the Fund of dividends or other distributions to shareholders as
may from time to time be declared by the 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 District 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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4. the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Direct Paper for the account of the
Fund on the next business day following the transaction;
5. the Bank will send to the Fund such reports on its system
of internal accounting control as the Fund may reasonably request
from time to time;
C. Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions between the Bank, any broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc., and, if necessary, the
Fund relating to the compliance with the rules of the Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that the Fund has deposited or
is maintaining adequate margin, if required, with any broker in
connection with any option, nor shall the Bank be under any duty or
obligation to present such option to the broker for exercise unless
it receives Proper Instructions from the Fund. The Bank shall have no
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responsibility for the legality of any put or call purchased or
sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a
Segregated Account as described in sub-paragraph c of this Section
6(C). The Bank specifically, but not by way of limitation, shall
not be under any duty or obligation to: (i) periodically check or
notify the Fund that the amount of such collateral held by a broker
or held in a Segregated Account as described in sub-paragraph (c)
of this Section 6(C) is sufficient to protect such broker of the
Fund against any loss; (ii) effect the return of any collateral
delivered to a broker; or (iii) advise the Fund that any option it
holds, has or is about to expire. Such duties or obligations shall
be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges.
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement among the Fund, the Bank and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
Futures, puts and calls traded on commodities exchanges, any
Futures Commission Merchant
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account and the Segregated Account shall be limited as set forth in
sub-paragraph (a)(2) of this Section 6(C) as if such sub-paragraph
referred to Futures Commission Merchants rather than brokers, and
Futures and puts and calls thereon instead of options.
(c) Segregated Account.
The Bank shall upon receipt of Proper Instructions establish and
maintain a Segregated Account or Accounts for and on behalf of the Fund,
into which Account or Accounts may be transferred cash and/or securities
including securities maintained in an Account by the Bank pursuant to
Section 6(B) hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Bank and a broker-dealer registered under
the Exchange Act and a member of the NASD or any Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange or the Commodity Futures Trading
Commission or any registered Contract Market, or of any similar
organization or organizations regarding escrow or other arrangements in
connection with transactions by the Fund, and (ii) for the purpose of
segregating cash or securities in connection with options purchased or
written by the Fund, or commodity futures purchased or written by the
Fund, and (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered
investment companies and (iv) for other proper corporate purposes, but
only, in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Trustees of the
Fund signed by an officer of the Fund and
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certified by the Clerk of an Assistant Clerk, setting forth the purpose
or purposes of such Segregated Account and declaring such purposes to be
proper corporate purposes.
D. Segregated Account for "when-issued", "forward commitment" and
reverse repurchase agreement transactions. Notwithstanding the provisions of
Section 6(A), 6(B) and 6(C) hereof, the Bank will maintain a segregated
account (the "Segregated Account") in the name of the Fund (i) for the
deposit of liquid assets, such as cash, U.S. Government securities or other
high grade debt obligations, having a market value (marked to the market on a
daily basis) at all times equal to not less than the aggregate purchase price
due on the settlement dates of all the Fund's then outstanding forward
commitment or "when-issued" agreements relating to the purchase of portfolio
securities and all the Fund's then outstanding commitments under reverse
repurchase agreements entered into with broker-dealer firms, and (ii) for the
deposit of any portfolio securities which the Fund has agreed to sell on a
forward commitment basis, all in accordance with Securities and Exchange
Commission Release No. IC-10666. No assets shall be deposited in the
Segregated Account except pursuant to Proper Instructions. Assets may be
withdrawn from the segregated account pursuant to Proper Instructions only
(a) for sale or delivery to meet the Fund's obligations under outstanding firm
commitment or when-issued agreements for the purchase of portfolio securities
and under reverse repurchase agreements, (b) for exchange for other liquid
assets of equal or greater value deposited in the Segregated Account, (c) to
the extent that the Fund's outstanding forward commitment or when-issued
agreements for the purchase of portfolio securities or reverse repurchase
agreements are sold to other parties or the Fund's obligations thereunder are
met from assets of the Fund other than those in the Segregated Account, or
(d) for delivery upon settlement of a forward commitment agreement for the
sale of portfolio securities.
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7. TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver or
release portfolio securities held by it hereunder, insofar as such securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
Instructions requesting such transfer, exchange or delivery stating that it
is for a purpose permitted under the terms of this Section 7, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of portfolio securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment
therefor in full, each such payment to be in the amount of the sale
price shown in a broker's confirmation of sale of the portfolio
securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such
payment is made, provided however, that portfolio securities may be
delivered to the broker selling the same for examination in
accordance with "street delivery" custom;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan or merger,
consolidation, reorganization share split-up, change in par-value,
recapitalization or readjustment or otherwise;
(c) upon conversion of portfolio securities pursuant to their
terms into other securities;
(d) upon exercise of subscription, purchase sale or other
similar rights represented by such portfolio securities;
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(e) for the purpose of redeeming in kind shares of beneficial
interest of the Fund upon authorization from the Fund;
(f) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(g) when such portfolio securities are called, redeemed or
retired or otherwise become payable;
(h) for the purpose of releasing certificates representing
portfolio securities of the Fund, against contemporaneous receipt by
the Bank of the fair market value of such security, as set forth in
Proper Instructions received by the Bank before such payment is made;
(i) for the purpose of tendering shares pursuant to a tender
offer therefore;
(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 therefore 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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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 with 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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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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(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 be held 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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(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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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
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of such notice (i) by the Bank in order to prepare for the transfer by
the Bank of all of the assets of the Fund held hereunder, and (ii) by the
Fund in order to give the Fund an opportunity to make suitable
arrangements for a successor custodian. At any time after the
termination of this Agreement, the Fund will, at its request, have access
to the records of the Bank relating to the performance of its duties as
custodian.
(b) In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of
notice of termination, commence and prosecute diligently to completion
the transfer of all cash and the delivery of all portfolio securities
duly endorsed and all records maintained under Section 11 to the
successor custodian when appointed by the Fund. The obligation of the
Bank to deliver and transfer over the assets of the Fund held by it
directly to such successor custodian will commence as soon as such
successor is appointed and will continue until completed as aforesaid.
If the Fund does not select a successor custodian within ninety days
from the date of delivery of notice of termination the Bank may, subject
to the provisions of subsection (c) of this Section 13, deliver the
portfolio securities and cash of the Fund held by the Bank to a bank or
trust company of its own selection which meets the requirements of
Section 17(f)(1) of the Investment Company Act of 1940 and has a
reported capital, surplus and undivided profits aggregating not less
than $2,000,000, to be held as the property of the Fund under terms
similar to those on which they were held by the Bank, whereupon such
bank or trust company so selected by the Bank will become the successor
custodian of such assets of the Fund with the same effect as though
selected by the Trustees of the Fund.
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(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 notice sent to the Fund to:
Value Line Strategic Asset Management 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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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 STRATEGIC ASSET MANAGEMENT
TRUST
By: /s/ [Illegible]
--------------------------
ATTEST:
/s/ [Illegible]
- -------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ [Illegible]
--------------------------
ATTEST:
/s/ [Illegible]
- -------------------
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Exhibit (g)
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 and 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.
1
<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: David T. Henigson
--------------------------
Name: David T. Henigson
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>
Exhibit 99(h)
AGREEMENT
AGREEMENT made this 1st day of May, 1993 by and between VALUE LINE
STRATEGIC ASSET MANAGEMENT TRUST, a Massachusetts Business Trust, having its
principal office and place of business at 711 Third Avenue, New York, New
York 10017 (the "Fund"), and THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.,
a Delaware insurance company, having its principal office and place of
business at 201 Park Avenue South, New York, New York 10003 ("GIAC").
WHEREAS, the Fund is offered as an underlying investment option with
respect to certain variable contracts which are issued by GIAC; and
WHEREAS, GIAC performs certain administrative and shareholder services
and incurs certain expenses related thereto on behalf of the Fund; and
WHEREAS, GIAC and the Fund desire to establish an arrangement to
compensate GIAC for the performance of such administrative and shareholder
services and to reimburse GIAC for such expenses it incurs on behalf of the
Fund;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints GIAC, and GIAC accepts such appointment, to
perform certain services on behalf of GIAC variable contractowners who have
allocated premium amounts to the Fund and to incur expenses related thereto,
including but not limited to:
(a) performing administrative and internal accounting functions in
connection with the accounts established with respect to each GIAC variable
contractowner who has allocated premium amounts to the Fund and the ongoing
maintenance of such accounts, including but not limited to the allocation,
but not the declaration, of dividends and distributions to such accounts and
the processing of transfers made by contractowners into and out of the Fund;
(b) printing and distribution of annual and semi-annual shareholder
reports for the Fund and any other Fund reports and documents distributed
pursuant to the Investment Company Act of 1940 to all GIAC contractowners who
have allocated variable contract premiums to the Fund; and
(c) providing ongoing shareholder servicing functions to all GIAC
contractowners who have allocated variable contract
<PAGE>
premiums to the Fund, including responsibility for responding to telephone
and written shareholder inquiries, transactions and complaints. Service costs
shall not include marketing expenses.
2. As compensation for the services provided hereunder, the Fund shall
pay GIAC an amount equal to the sum of (i) all direct administrative and
shareholder servicing costs (which do not include marketing costs) incurred
by GIAC attributable to the Fund such as printing and postage, plus (ii) a
pro rata portion of the aggregate costs incurred by GIAC in performing
identical administrative and shareholder servicing functions for all the
investment options which underlie the variable contracts which GIAC issues
(the "Total Costs"). The subsection (ii) amount shall be calculated by
multiplying the Total Costs by a fraction, the numerator of which shall be
the total number of contractowner accounts for the Fund at the end of the
applicable quarter and the denominator of which shall be the total number of
contractowner accounts for all the investment options which underlie the
variable contracts issued by GIAC which offer the Fund as an investment
option at the end of such quarter. The payments will be made quarterly based
on the average number of contractowners each quarter, calculated by adding
the total number of contractowners at the beginning of the quarter and at the
end of the quarter and dividing by 2.
3. Beginning with the quarter ending June 30, 1993, within 12 business
days after the end of each calendar quarter, GIAC shall submit to the Fund
an invoice for the amount to be paid to GIAC pursuant to Section 2 hereof for
such quarter. GIAC shall include with each such invoice (i) a report
detailing the direct costs incurred by GIAC on behalf of the Fund during such
quarter and setting forth the calculation of the amount to be paid to GIAC in
accordance with Section 2(ii) above for such quarter and (ii) a certification
from a financial officer of GIAC that the invoice has been prepared in
accordance with the methodologies set forth in the Exhibits to the letter
addressed to the Board of the Fund from Price Waterhouse, dated December 16,
1992. As reasonably necessary to verify the accurateness of the submitted
invoice, GIAC hereby authorizes the officers, employees and agents of the
Fund, including outside auditors, to interview the appropriate financial
personnel of GIAC and to review the work papers and back-up materials
utilized by GIAC personnel to prepare the invoice under review. Expenses of
such review (including professional service fees incurred by GIAC at the
request of the Fund) shall be paid by the Fund except that the costs of
compensation of GIAC personnel or other professional service fees incurred by
GIAC shall be GIAC's responsibility. Subject to the next sentence, the Fund
agrees to pay to GIAC the amount invoiced within thirty calendar days of
receipt. The Fund shall not be obligated to make payment of, and GIAC will
promptly refund any previously-made payments of, invoiced amounts which the
Fund can demonstrate in writing, either prior to the time of
2
<PAGE>
its obligation to pay or at the time of its request for a refund, to exceed
the correct amounts due pursuant to this Agreement as a result of
mathematical miscalculations or an incorrect application of the agreed-upon
methodologies. The fee for the quarter ending June 30, 1993 shall be
pro-rated from the date of this Agreement to June 30, 1993.
4. The maximum aggregate annual amount of compensation paid by the Fund
to GIAC pursuant to this Agreement shall not exceed the multiple of: the
average number of contractowner accounts for the Fund for such year times
(a) in the calendar years 1993 and 1994, $18.00; and
(b) in the calendar years 1995 and thereafter, $18.00 plus a cumulative
annual increase of 4% per year.
The average number of contractowner accounts for the Fund for each calendar
year shall be calculated by adding the average number of contractowner
accounts for the Fund for each of the four quarters in such year (as
determined pursuant to Section 2 above) and dividing by 4.
5. The Fund acknowledges that it has reviewed the methodologies used by
GIAC in determining its costs associated with performing administrative and
shareholder servicing functions for the Fund and the other investment options
underlying the variable contracts issued by GIAC and agrees that GIAC shall
be entitled to continue to use such methodologies in calculating the amounts
to be invoiced to the Fund pursuant to Section 2(ii) hereof. GIAC agrees that
it will not change such methodologies without the prior written approval and
consent of the Fund.
6. This Agreement shall not be amended without the express written
consent of both parties hereto.
7. If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
8. This Agreement may be terminated by either party upon ninety days
written notice for the calendar years 1993 and 1994 and thereafter upon
thirty days written notice. All obligations incurred pursuant to this
Agreement prior to the date of termination shall survive the termination of
this Agreement.
9. This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of
3
<PAGE>
the State of New York.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
as of the date first written above.
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
By: /s/ John M. Smith
------------------------------------------
John M. Smith
Executive Vice President
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
By: /s/ Jean B. Buttner
------------------------------------------
Jean B. Buttner
Chairman
4
<PAGE>
Exhibit 99(i)
PETER D. LOWENSTEIN
ATTORNEY AT LAW
TWO GREENWICH PLAZA, SUITE 100
GREENWICH, CONNECTICUT 06830
203 622-3932
FAX 203 622-0321
February 19, 1999
Value Line Strategic Asset Management Trust
220 East 42nd Street
New York, NY 10017
Gentlemen:
I have acted as special counsel to Value Line Strategic Asset Management
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. 12 to its Registration Statement on Form N-1A, File No.
33-16245 (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
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
<PAGE>
Exhibit 99(j)
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. 12 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 9, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Report to Shareholders of Value Line Strategic Asset Management 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
February 22, 1999
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<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1,000
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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<DISTRIBUTIONS-OF-INCOME> 35370
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