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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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. / /
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(CHECK APPROPRIATE BOX OR BOXES)
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VALUE LINE AMERICAN WORLDWIDE FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone Number, Including Area Code: (212) 907-1500
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David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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Copy to:
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich CT 06830
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, as amended, the Registrant hereby declares that it is herewith registering
an indefinite number of shares of common stock under the Securities Act of 1933.
The $500 fee required by such Rule is paid herewith.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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VALUE LINE AMERICAN WORLDWIDE FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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PART A (PROSPECTUS)
Item 1. Cover Page..................................... Cover Page
Item 2. Synopsis....................................... Summary of Fund Expenses
Item 3. Condensed Financial Information................ Summary of Fund Expenses; Financial Highlights
Item 4. General Description of Registrant.............. Cover Page; Investment Objective and Policies;
Investment Restrictions; Additional
Information
Item 5. Management of the Fund......................... Summary of Fund Expenses; Management of the
Fund; Additional Information
Item 6. Capital Stock and Other Securities............. Dividends, Distributions and Taxes; Additional
Information
Item 7. Purchase of Securities Being Offered........... How to Buy Shares; Calculation of Net Asset
Value; Investor Services
Item 8. Redemption or Repurchase....................... How to Redeem Shares
Item 9. Pending Legal Proceedings...................... Not Applicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
Item 10. Cover Page..................................... Cover Page
Item 11. Table of Contents.............................. Table of Contents
Item 12. General Information and History................ Additional Information (Part A)
Item 13. Investment Objective and Policies.............. Investment Objective and Policies; Investment
Restrictions
Item 14. Management of the Fund......................... Directors and Officers
Item 15. Control Persons and Principal Holders of
Securities................................... Management of the Fund (Part A); Directors and
Officers
Item 16. Investment Advisory and Other Services......... Management of the Fund (Part A); The Adviser
Item 17. Brokerage Allocation........................... Management of the Fund (Part A); Brokerage
Arrangements
Item 18. Capital Stock and Other Securities............. Additional Information (Part A)
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................ How to Buy Shares; How to Redeem Shares;
Calculation of Net Asset Value (Part A)
Item 20. Tax Status..................................... Taxes
Item 21. Underwriters................................... Not Applicable
Item 22. Calculation of Performance Data................ Performance Information (Part A); Performance
Data
Item 23. Financial Statements........................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
VALUE LINE
AMERICAN WORLDWIDE PROSPECTUS
FUND, INC. September 1,
1995
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
Value Line American Worldwide Fund, Inc. (the "Fund")
is a no-load investment company whose investment
objective is maximum total return. The Fund invests
primarily in common stocks of U.S. companies that have
significant earnings from international operations.
The Fund invests substantially all of its assets in
common stocks or securities convertible into common
stock. From time to time, a portion of the Fund's
assets may be invested in short-term indebtedness or
may be held in cash.
The Fund's investment adviser is Value Line, Inc. (the
"Adviser").
Shares of the Fund are offered at net asset value.
There are no sales charges or redemption fees.
This Prospectus sets forth concise information about the Fund that a
prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information about
the Fund is contained in a Statement of Additional Information, dated
September 1, 1995, which has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. A copy
of the Statement of Additional Information may be obtained at no charge
by writing or telephoning the Fund at the address or telephone numbers
listed above.
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street,
New York, NY 10017-5891
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases......................... None
Sales Load on Reinvested Dividends.............. None
Deferred Sales Load............................. None
Redemption Fees................................. None
Exchange Fee.................................... None
ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE
REIMBURSEMENTS*
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees................................. None
12b-1 Fees...................................... None
Other Expenses.................................. None
Total Fund Operating Expenses (before expenses
absorbed and fee waiver)....................... None
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EXAMPLE 1 YEAR 3 YEARS
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You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period and no voluntary waiver of fees and expenses:................. $ $
</TABLE>
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* The Adviser has voluntarily agreed to bear all expenses for the fiscal year
ending , . If the Adviser did not bear such expenses, the Fund's
total operating expenses would be % of average net assets (Management
Fees=.75%, 12b-1 Fees=.25% and Other Expenses= %).
The foregoing is based upon the annualized expenses for the period from
commencement of operations to , and is designed to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Because the Fund is a new fund and has not
completed a full fiscal year, "Other Expenses" is based upon amounts estimated
to be payable in the current fiscal year. ACTUAL EXPENSES IN THE FUTURE MAY BE
GREATER OR LESS THAN THOSE SHOWN. See "Management of the Fund" and "Service and
Distribution Plan."
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is maximum total return, consisting of
capital appreciation and dividend and interest income. The Fund will at all
times keep not less than 65% of the market value of its total assets invested in
stocks of U.S. companies that derive at least 25% of their sales or earnings
from outside of the United States. This is a fundamental policy of the Fund
which along with its investment objective cannot be changed without shareholder
approval. There can be no assurance that the Fund will achieve its investment
objective. There are risks in all investments, including any stock investment,
and in all mutual funds that invest in stocks.
BASIC INVESTMENT STRATEGY
The Fund seeks to achieve its investment objective by investing primarily in
U.S. "worldwide" stocks (i.e. common stocks or securities convertible into
common stocks). As used in this Prospectus, "worldwide" stocks refer to the
common stock of companies that derive at least 25% of their sales or earnings
from outside the United States. A goal of the Fund is to maintain an equity
portfolio with an aggregate share of at least 50% of sales or earnings from
outside the United States, although individual stocks may represent non-United
States sales or earnings of as little as 25%. When the Adviser deems it
appropriate in the light of economic or market conditions, up to 35% of the
Fund's total assets may be held from time to time in cash, U.S. Government
securities, or money-market instruments which are rated in the top two
categories by a nationally recognized rating organization. The Fund may also
write covered call options and enter into repurchase agreements.
In selecting securities for purchase or sale, the Adviser may rely on the
Value Line Timeliness-TM- Ranking System or the Value Line Performance-TM-
Ranking System, if a ranking is available for that particular stock. 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.
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 the Adviser's 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
Ranking System. 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 utilization of these
Rankings is no assurance that the Fund will perform more favorably than the
market in general over any particular period.
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MISCELLANEOUS INVESTMENT PRACTICES
COVERED CALL OPTIONS. The Fund may write covered call options on stocks
held in its portfolio ("covered options"). When the Fund writes a covered call
option, it gives the purchaser of the option the right to buy the underlying
security at the price specified in the option (the "exercise price") at any time
during the option period. If the option expires unexercised, the Fund will
realize income to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder at the
exercise price. By writing a covered option, the Fund foregoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price. The Fund will not write call options in an
aggregate amount greater than 25% of its net assets.
The Fund will purchase call options only to close out a position. When an
option is written on securities in the Fund's portfolio and it appears that the
purchaser of that option is likely to exercise the option and purchase the
underlying security, it may be considered appropriate to avoid liquidating the
Fund's position, or the Fund may wish to extinguish a call option sold by it so
as to be free to sell the underlying security. In such instances the Fund may
purchase a call option on the same security with the same exercise price and
expiration date which had been previously written. Such a purchase would have
the effect of closing out the option which the Fund has written. The Fund
realizes a gain if the amount paid to purchase the call option is less than the
premium received for writing a similar option and a loss if the amount paid to
purchase a call option is greater than the premium received for writing a
similar option. Generally, the Fund realizes a short-term capital loss if the
amount paid to purchase the call option with respect to a stock is greater than
the premium received for writing the option. If the underlying security has
substantially risen in value, it may be expensive to purchase the call option
for the closing transaction.
SHORT SALES. The Fund may from time to time make short sales of securities
in order to protect a profit or to attempt to minimize a loss with respect to
convertible securities. The Fund will only make a short sale of a security if it
owns other securities convertible into an equivalent amount of such securities.
No more than 10% of the value of the Fund's net assets taken at market may at
any one time be held as collateral for such sales.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
broker-dealers or institutional investors if as a result thereof the aggregate
value of all securities loaned does not exceed 33 1/3% of the total assets of
the Fund. The loans will be made in conformity with applicable regulatory
policies and will be 100% collateralized by cash, cash equivalents or U.S.
Treasury bills on a daily basis in an amount equal to the market value of the
securities loaned and interest earned. The Fund will retain the right to call,
upon notice, the loaned securities and intends to call loaned voting securities
in anticipation of any important or material matter to be voted on by
shareholders. While there may be delays in recovery or even loss of rights in
the collateral should the borrower fail financially, the loans will be made only
to firms deemed by the Adviser to be of good standing and will not be made
unless, in the judgment of the Adviser, the consideration which can be earned
from such loan justifies the risk. The Fund may pay reasonable custodian and
administrative fees in connection with the loans.
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week,
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but, on occasion, at a later time. The Fund will make payment for such
securities only upon physical delivery or evidence of book-entry transfer to the
account of the custodian or a bank acting as agent for the Fund. Repurchase
agreements may also be viewed as loans made by the Fund which are collateralized
by the securities subject to repurchase. The value of the underlying securities
will be at least equal at all times to the total amount of the repurchase
obligation, including the interest factor. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses, including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of
income and lack of access to income during this period; and (c) expenses of
enforcing its rights. The Board of Directors monitors the creditworthiness of
parties with which the Fund enters into repurchase agreements.
RISK FACTORS
Investors should be aware of the following:
- There are risks in all investments, including any stock investment, and in
all mutual funds. The Fund's net asset value will fluctuate to reflect the
investment performance of the securities held by the Fund.
- The value a shareholder receives upon redemption may be greater or lesser
than the value of such shares when acquired.
- The use of investment techniques such as investing in repurchase
agreements and lending portfolio securities involves greater risk than does an
investment in a fund that does not engage in these activities.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of investment restrictions which may not be
changed without shareholder approval. These are set forth in the Statement of
Additional Information and provide, among other things, that the Fund may not
(a) borrow in excess of 10% of the value of its total assets and then only
as a temporary measure;
(b) purchase securities (other than U.S. government securities) if the
purchase would cause the Fund, at the time, to have more than 5% of the value of
its total assets invested in the securities of any one company or to own more
than 10% of the outstanding voting securities of any one company; or
(c) invest 25% or more of the value of the Fund's total assets in securities
of issuers in one particular industry.
MANAGEMENT OF THE FUND
The management and affairs of the Fund are supervised by the Fund's Board of
Directors. The Fund's officers conduct and supervise the daily business
operations of the Fund. The Fund's investment decisions are made by an
investment committee of employees of the Adviser. The Fund's Annual Report will
contain a discussion on the Fund's performance, which will be made available
upon request and without charge.
THE ADVISER. The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co., Inc. ("AB&Co.").
The Adviser was formed as part of a
5
<PAGE>
reorganization of AB&Co., a sole proprietorship formed in 1931 which became a
New York corporation in 1946. AB&Co. currently 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, owns a majority
of the voting stock of AB&Co. All of the non-voting stock is owned by or for the
benefit of members of the Bernhard family and employees and former employees of
AB&Co. or the Adviser. The Adviser currently acts as investment adviser to the
other Value Line mutual funds and furnishes investment advisory services to
private and institutional accounts with combined assets in excess of $4 billion.
Value Line Securities, Inc., the Fund's distributor, is a subsidiary of the
Adviser. The Adviser manages the Fund's investments, provides various
administrative services and supervises the Fund's daily business affairs,
subject to the authority of the Board of Directors. The Adviser is paid an
advisory fee at an annual rate of 0.75% of the Fund's average daily net assets
during the year. Although this fee is higher than that paid by many other
investment companies, it is not unusually high for investment companies with a
similar investment objective. From time to time, the Adviser may voluntarily
assume certain expenses of the Fund and waive its advisory fee. This will have
the effect of lowering the overall expense ratio of the Fund. For more
information about the Fund's management fees and expenses, see the "Summary of
Fund Expenses" on page 2.
BROKERAGE. The Fund pays a portion of its total brokerage commissions to
Value Line Securities, Inc., which clears transactions for the Fund through
unaffiliated broker-dealers.
CALCULATION OF NET ASSET VALUE
The net asset value of the Fund's shares for purposes of both purchases and
redemptions is determined once daily as of the close of regular trading of the
first session of the New York Stock Exchange (currently 4:00 p.m., New York
time) on each day that the New York Stock Exchange is open for trading except on
days on which no orders to purchase, sell or redeem Fund shares have been
received. The New York Stock Exchange is currently closed on New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share is determined
by dividing the total value of the investments and other assets of the Fund,
less any liabilities, by the total outstanding shares. 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 Fund are valued at fair value as the Board of Directors 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.
HOW TO BUY SHARES
Shares of the Fund are sold at net asset value next calculated after receipt
of a purchase order. Minimum orders are $1,000 for an initial purchase and $100
for each subsequent purchase.
PURCHASE BY CHECK. To buy shares, send a check made payable to "NFDS-Agent"
and a completed and signed application form to Value Line Funds, c/o NFDS, P.O.
Box 419729, Kansas City, MO 64141-6729. For assistance in completing the
application and for information on pre-authorized telephone purchases, call
Value Line Securities at 1-800-223-0818 during New York business hours. Upon
receipt of the completed and signed purchase application and a check, National
Financial Data Services, Inc. ("NFDS"), the Fund's shareholder servicing agent,
will buy full
6
<PAGE>
and fractional shares (to three decimal places) at the net asset value next
computed after the funds are received and will confirm the investment to the
investor. Subsequent investments may be made by attaching a check to the
confirmation's "next payment" stub, by telephone or by federal funds wire.
Investors may also buy shares through broker-dealers other than Value Line
Securities. Such broker-dealers may charge investors a reasonable service fee.
Neither Value Line Securities nor the Fund receives any part of such fees when
charged (and which can be avoided by investing directly). If an order to
purchase shares is cancelled due to nonpayment or because the purchaser's check
does not clear, the purchaser will be responsible for any loss incurred by the
Fund or Value Line Securities by reason of such cancellation. If the purchaser
is a shareholder, Value Line Securities reserves the right to redeem sufficient
shares from the shareholder's account to protect the Fund against loss. The Fund
may refuse any order for the purchase of shares.
WIRE PURCHASE--$1,000 MINIMUM. An investor should call 1-800-243-2729 to
obtain an account number. After receiving an account number, instruct your
commercial bank to wire transfer "federal funds" via the Federal Reserve System
as follows:
State Street Bank and Trust Company, Boston, MA
ABA # 011000028
Attn: Mutual Fund Division
DDA # 99049868
Value Line American Worldwide Fund
A/C # ________________________
Shareholder's name and account information
Tax ID # ________________________
NOTE: A COMPLETED AND SIGNED APPLICATION MUST BE MAILED IMMEDIATELY AND
RECEIVED BY NFDS BEFORE IT CAN HONOR ANY WITHDRAWAL OR EXCHANGE TRANSACTIONS.
After your account has been opened, you may wire additional investments in
the same manner.
For an initial investment made by federal funds wire purchase, the wire must
include a valid social security number or tax identification number. Investors
purchasing shares in this manner will then have 30 days after purchase to
provide the certification and signed account application. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn on only U.S.
banks. Until receipt of the above, any distributions from the account will be
subject to withholding at the rate of 31%.
SUBSEQUENT TELEPHONE PURCHASES--$250 MINIMUM. Upon completion of the
telephone purchase authorization section of the account application,
shareholders who own Fund shares with a current value of $500 or more may also
purchase additional shares in amounts of $250 or more up to twice the value of
their shares by calling 1-800-243-2729 between 9:00 a.m. and 4:00 p.m. New York
time. Such orders will be priced at the closing net asset value on the day
received and payment will be due within three business days. If payment is not
received within the required time or a purchaser's check does not clear, the
order is subject to cancellation and the purchaser will be responsible for any
loss incurred by the Fund or Value Line Securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund distributes net investment income and any net realized capital
gains to shareholders at least annually. Income dividends and capital gains
distributions are automatically reinvested in
7
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additional shares of the Fund unless the shareholder has requested otherwise.
Because the Fund intends to distribute all of its net investment income and
capital gains to shareholders, it is not expected that the Fund will be required
to pay any federal income taxes. However, shareholders of the Fund normally will
have to pay federal income taxes, and any applicable state or local taxes, on
the dividends and capital gains distributions they receive from the Fund
(whether or not reinvested in additional Fund shares). Shareholders will be
informed annually of the amount and nature of the Fund's income and
distributions.
Mutual funds are required to withhold 31% for federal income tax purposes of
dividends, distributions of capital gains and redemption proceeds from accounts
without a valid social security or tax identification number. You must provide
this information when you complete the Fund's application and certify that you
are not currently subject to federal backup withholding. The Fund reserves the
right to close, by redemption, accounts for which the holder fails to provide a
valid social security or tax identification number.
PERFORMANCE INFORMATION
The Fund may from time to time include information regarding its total
return performance in advertisements or in information furnished to existing or
prospective shareholders. When information regarding total return is furnished,
it will be based upon changes in the Fund's net asset value, and will assume the
reinvestment of all capital gains distributions and income dividends. It will
take into account nonrecurring charges, if any, which the Fund may incur but
will not take into account income taxes due on Fund distributions.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc. and other industry or financial publications. The Fund may compare its
performance to that of other mutual funds with similar investment objectives and
to stock or other relevant indices. From time to time, articles about the Fund
regarding its performance or ranking may appear in national publications such as
Kiplinger's Personal Finance, Money Magazine, Financial World, Morningstar,
Personal Investors, Forbes, Fortune, Business Week, Wall Street Journal,
Investor's Business Daily, Donoghue, The Financial Times, The Economist, Worth,
Smart Money, Mutual Fund Forecaster, U.S. News and World Report and Barron's.
Some of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund. Reference to or reprints of such articles
may be used in the Fund's promotional literature.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after NFDS receives a request in proper form. The value of
shares of the Fund on redemption may be more or less than the shareholder's
cost, depending upon the market value of the Fund's assets at the time. A
shareholder holding certificates for shares must surrender the certificates
properly endorsed with signature guaranteed. A signature guarantee may be
executed by any "eligible" guarantor. Eligible guarantors include domestic
banks, savings associations, credit unions, member firms of a national
securities exchange, and participants in the New York Stock Exchange Medallion
Signature Program, the Securities Transfer Agents Medallion Program ("STAMP")
and the Stock Exchanges Medallion Program. A guarantee from a Notary Public is
not an
8
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acceptable source. The signature on any request for redemption of shares not
represented by certificates, or on any stock power in lieu thereof, must be
similarly guaranteed. In each case the signature or signatures must correspond
to the names in which the account is registered. Additional documentation may be
required when shares are registered in the name of a corporation, agent or
fiduciary. For further information, you should contact NFDS.
The Fund does not make a redemption charge, but shares redeemed through
brokers or dealers may be subject to a service charge by such firms. A check for
the redemption proceeds will be mailed within seven days following receipt of
all required documents. However, payment may be postponed under unusual
circumstances such as when normal trading is not taking place on the New York
Stock Exchange. In addition, shares purchased by check may not be redeemed for
up to 15 days following the purchase date.
If the Board of Directors determines that it is in the best interests of the
Fund, the Fund may redeem, upon prior written notice, at net asset value all
shareholder accounts which, due to redemptions, fall below $500 in net asset
value. In such event, an investor will have 30 days to increase the shares in
his account to the minimum level.
SERVICE AND DISTRIBUTION PLAN
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, for the payment of
certain expenses incurred by Value Line Securities, Inc. (the "Distributor") in
advertising, marketing and distributing the Fund's shares and for servicing the
Fund's shareholders at an annual rate of 0.25% of the Fund's average daily net
assets. Under the Plan, the Distributor may make payments to securities dealers,
banks, financial institutions and other organizations which render distribution
and administrative services with respect to the distribution of the Fund's
shares. Such services may include, among other things, answering investor
inquiries regarding the Fund; processing new shareholder account applications
and redemption transactions; responding to shareholder inquiries; and such other
services as the Fund may request to the extent permitted by applicable statute,
rule or regulation. The Plan also provides that the Adviser may make such
payments out of its advisory fee, its past profits or any other source available
to it. The fees payable to the Distributor under the Plan are payable without
regard to actual expenses incurred.
The Glass-Steagall Act and other applicable laws prohibit banks from
engaging in the business of underwriting, selling or distributing securities.
Generally, banks will be engaged to provide administrative services. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either Federal or State statutes or regulations relating to the
permissible activities of banks and their affiliates, could prevent a bank from
continuing to perform all or a part of its administrative services. In that
case, its shareholder clients would be permitted to remain shareholders of the
Fund and alternative means for continuing the servicing of such shareholders
would be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these consequences.
INVESTOR SERVICES
VALU-MATIC.-REGISTERED TRADEMARK- The Fund offers a free, pre-authorized
check service to its shareholders through which monthly investments of $25 or
more are automatically made into the shareholder's Fund account. Further
information regarding this service can be obtained from Value Line Securities by
calling 1-800-223-0818.
9
<PAGE>
THE VALUE LINE MONTHLY INVESTMENT PLAN (THE "MIP"). The Fund offers a free
service to its shareholders through which monthly investments may be made
automatically into the shareholder's Fund account. The MIP is similar to
Valu-Matic (see "Investor Services--Valu-Matic") in that the shareholder can
authorize the Fund to debit the shareholder's bank account monthly for the
purchase of Fund shares on or about the 3rd or 18th of each month. Under the
MIP, the Fund's minimum initial investment of $1,000 will be waived. The MIP
requires a minimum investment of $40 per month for the purchase of Fund shares.
The Fund reserves the right to close an account in the event that the MIP is
discontinued by the shareholder before the account reaches $1,000 in value, at
the then current net asset value. The shareholder will then have thirty days
after receipt of written notice to increase the account to the minimum required,
or to reactivate the MIP, in order to avoid having the account closed.
To establish the MIP option, complete the appropriate sections of the
Account Application, and include a voided, unsigned check from the bank account
to be debited.
The Fund reserves the right to discontinue offering the MIP at anytime.
EXCHANGE OF SHARES. Shares of the Fund may be exchanged for shares of the
other Value Line funds in any identically registered account on the basis of the
respective net asset values next computed after receipt of the exchange order.
No telephone exchanges can be made for less than $1,000. If shares of the Fund
are being exchanged for shares of The Value Line Cash Fund, Inc. or The Value
Line Tax Exempt Fund--Money Market Portfolio and the shares (including shares in
accounts under the control of one investment advisor) have a value in excess of
$500,000, then, at the discretion of the Adviser, the shares to be purchased
will be purchased at the closing price up to the seventh day following the
redemption of the shares being exchanged to allow the redeeming fund to utilize
normal securities settlement procedures in transferring the proceeds of the
redemption.
The exchange privilege may be exercised only if the shares to be acquired
may be sold in the investor's State. Prospectuses for the other funds may be
obtained from Value Line Securities by calling 1-800-223-0818. Each such
exchange involves a redemption and a purchase for tax purposes. Broker-dealers
are not prohibited from charging a commission for handling the exchange of Fund
shares. To avoid paying such a commission, send the request with signature
guaranteed to NFDS. The Fund reserves the right to terminate the exchange
privilege of any account making more than eight exchanges a year. (An exchange
out of The Value Line Cash Fund, Inc. or The Value Line Tax Exempt Fund--Money
Market Portfolio is not counted for this purpose.) The exchange privilege may be
modified or terminated upon sixty days' notice to shareholders, and any of the
Value Line funds may discontinue offering its shares generally or in any
particular state without prior notice. To make an exchange, call 1-800-243-2729.
Although it has not been a problem in the past, shareholders should be aware
that a telephone exchange may be difficult during periods of major economic or
market changes.
SYSTEMATIC CASH WITHDRAWAL PLAN. A shareholder who has invested a minimum
of $5,000 in the Fund, or whose shares have attained that value, may request a
transfer of his shares to a Value Line Systematic Cash Withdrawal Account which
NFDS will maintain in his name on the Fund's books. Under the Systematic Cash
Withdrawal Plan ("the Plan"), the shareholder will request that NFDS, acting as
his agent, redeem monthly or quarterly a sufficient number of shares to provide
for payment to him, or someone he designates, of any specified dollar amount
(minimum $25). All certificated shares must be placed on deposit under the Plan
and dividends and capital gains
10
<PAGE>
distributions, if any, are automatically reinvested at net asset value. The Plan
will automatically terminate when all shares in the account have been redeemed.
The shareholder may at any time terminate the Plan, change the amount of the
regular payment, or request liquidation of the balance of his account on written
notice to NFDS. The Fund may terminate the Plan at any time on written notice to
the shareholder.
TAX-SHELTERED RETIREMENT PLANS. Shares of the Fund may be purchased for
various types of retirement plans. For more complete information, contact Value
Line Securities, Inc. at 1-800-223-0818 during New York business hours.
ADDITIONAL INFORMATION
The Fund is an open-end, diversified management investment company
incorporated in Maryland in 1995. The Fund has 50 million authorized shares of
common stock, $.01 par value. Each share has one vote with fractional shares
voting proportionately. Shares have no preemptive rights, are freely
transferable, are entitled to dividends as declared by the Directors, and, if
the Fund were liquidated, would receive the net assets of the Fund.
INQUIRIES. All inquiries regarding the Fund should be directed to the Fund
at the telephone numbers or address set forth on the cover page of this
Prospectus. Inquiries from shareholders regarding their accounts and account
balances should be directed to National Financial Data Services, Inc., servicing
agent for State Street Bank and Trust Company, the Fund's transfer agent,
1-800-243-2729. Shareholders should note they may be required to pay a fee for
special requests such as historical transcripts of an account. Our Info-Line
provides the latest account information 24 hours a day, every day, and is
available to shareholders with pushbutton phones. The Info-Line toll-free number
is 1-800-243-2739.
WITHHOLDING. Mutual funds are required to withhold 31% of dividends,
distributions of capital gains and redemption proceeds from accounts without a
valid social security or tax identification number. You must provide this
information when you complete the Fund's application and certify that you are
not currently subject to backup withholding.
SHAREHOLDER MEETINGS. The Fund does not intend to hold routine annual
meetings of shareholders. However, special meetings of shareholders will be held
as required by law, for purposes such as changing fundamental policies or
approving an advisory agreement. Shareholders of record of not less than a
majority of the outstanding shares of the Fund may remove a Director by votes
cast in person or by proxy at a meeting called for that purpose. The Directors
are required to call a meeting of shareholders for the purpose of voting upon
the question of the removal of any Director when so requested by the
shareholders of record of not less than 10% of the Fund's outstanding shares.
11
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
- -------------------------------------------
1950--THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952--THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956--THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth of
capital by investing not less than 80% of its assets in "special situations". No
consideration is given to achieving current income.
1972--VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979--THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981--VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its net assets will be invested in issues of the U.S. government and its
agencies and instrumentalities.
1983--VALUE LINE CENTURION FUND seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance. The Fund is available to investors only through
the purchase of Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1984--THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund presently offers investors a choice of two portfolios: a Money Market
Portfolio and a High-Yield Portfolio.
1985--VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by The Value Line Convertible Ranking System.
1986--VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, low-rated, fixed-income corporate securities.
1987--VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal
individual income taxes while avoiding undue risk to principal.
1987--VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times. The Fund is available to investors only through the
purchase of Guardian Investor, a tax deferred variable annuity, or ValuePlus, a
variable life insurance policy.
1992--THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND seeks high
current income consistent with low volatility of principal by investing
primarily in adjustable rate U.S. Government securities.
1993--VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993--VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 E. 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
12
<PAGE>
(This page has been left blank intentionally.)
13
<PAGE>
INVESTMENT ADVISER
Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Fund Expenses................ 2
Financial Highlights....................
Investment Objective and Policies....... 3
Risk Factors............................ 5
Investment Restrictions................. 5
Management of the Fund.................. 5
Calculation of Net Asset Value.......... 6
How to Buy Shares....................... 6
Dividends, Distributions and Taxes......
Performance Information.................
How to Redeem Shares....................
Service and Distribution Plan...........
Investor Services....................... 10
Additional Information.................. 11
</TABLE>
- -------------------------------------------
PROSPECTUS
- -------------------
SEPTEMBER 1, 1995
VALUE LINE
AMERICAN
WORLDWIDE
FUND, INC.
(800) 223-0818
[LOGO]
<PAGE>
VALUE LINE AMERICAN WORLDWIDE FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 1, 1995
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and must be
read in conjunction with the Prospectus of Value Line American Worldwide Fund,
Inc. (the "Fund") dated September 1, 1995, a copy of which may be obtained
without charge by writing or telephoning the Fund.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Investment Objective and Policies................................................... B-1
Investment Restrictions............................................................. B-2
Directors and Officers.............................................................. B-3
The Adviser......................................................................... B-5
Brokerage Arrangements.............................................................. B-6
How to Buy Shares................................................................... B-6
How to Redeem Shares................................................................ B-7
Service and Distribution Plan....................................................... B-8
Taxes............................................................................... B-8
Performance Data.................................................................... B-9
Additional Information.............................................................. B-10
Financial Statements................................................................ B-10
</TABLE>
The Fund's investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT OBJECTIVE AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVE AND POLICIES" IN THE FUND'S PROSPECTUS)
The Fund will not concentrate its investments in any particular industry but
reserves the right to invest up to 25% of its total assets (taken at market
value) in any one industry. The Fund does not invest for the purposes of
management or control of companies whose securities the Fund owns. It
B-1
<PAGE>
is the policy of the Fund to purchase and hold securities which are believed to
have potential for long-term capital appreciation. The Fund generally does not
attempt to realize short-term trading profits.
The policies set forth in the Fund's Prospectus and in this Statement of
Additional Information and the policies set forth below under "Investment
Restrictions" are, unless otherwise indicated, fundamental policies of the Fund
and may not be changed without the affirmative vote of a majority of the
outstanding voting securities of the Fund. As used in this Statement of
Additional Information and in the Prospectus, a "majority of the outstanding
voting securities of the Fund" means the lesser of (1) the holders of more than
50% of the outstanding shares of capital stock of the Fund or (2) 67% of the
shares present if more than 50% of the shares are present at a meeting in person
or by proxy.
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Engage in arbitrage transactions, short sales except as set forth
in the Prospectus, purchases on margin or participate on a joint or
joint and several basis in any trading account in securities.
(2) Issue senior securities or borrow money in excess of 10% of the
value of its net assets and then only as a temporary measure to
meet unusually heavy redemption requests or for other extraordinary or
emergency purposes. Securities will not be purchased while borrowings are
outstanding. No assets of the Fund may be pledged, mortgaged or otherwise
encumbered, transferred or assigned to secure a debt.
(3) Engage in the underwriting of securities, except to the extent that
the Fund may be deemed an underwriter as to restricted securities
under the Securities Act of 1933 in selling portfolio securities.
(4) Invest in real estate, mortgages, illiquid securities of real
estate investment trusts, real estate limited partnerships or
interests in oil, gas or mineral leases although the Fund may purchase
securities of issuers which engage in real estate operations.
(5) Invest in commodities or commodity contracts.
(6) 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 securities that are illiquid or restricted by virtue of
the absence of a readily available market do not exceed 15% of the Fund's
net assets. The Fund may lend its portfolio securities to broker-dealers and
institutional investors if as a result thereof the aggregate value of all
securities loaned does not exceed 33 1/3% of the total assets of the Fund.
(7) Invest more than 5% of the value of its total assets in the
securities of any one issuer or purchase more than 10% of the
outstanding voting securities, or any other class of securities, of any one
issuer. For purposes of this restriction, all outstanding debt securities of
an issuer are considered as one class, and all preferred stock of an issuer
is considered as one class. This restriction does not apply to obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
B-2
<PAGE>
(8) Purchase securities of other registered investment companies,
except in mergers or other business combinations.
(9) Invest 25% or more of its total assets in securities of issuers in
any one industry.
(10) Invest more than 5% of its total assets in securities of issuers
having a record, together with predecessors, of less than three
years of continuous operation. The restriction does not apply to any
obligation issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(11) Purchase or retain the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and
of the Adviser, who each owns more than 0.5% of the outstanding securities
of such issuer, together own more than 5% of such securities.
(12) Invest more than 2% of the value of its total assets in warrants
(valued at the lower of cost or market), except that warrants
attached to other securities are not subject to these limitations.
(13) Purchase securities for the purpose of exercising control over
another company.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 60 of Directors, Officer of the Adviser and Value Line
President Publishing, Inc. Chairman of the Value Line
Funds and Value Line Securities, Inc.
Francis C. Oakley Director Professor of History, Williams College, 1961
936 Main Street to present and President Emeritus since 1994;
Williamstown, MA 01267 President of Williams College, 1985-1993;
Age 63 Director, Berkshire Life Insurance Company
Marion N. Ruth Director Proprietor, Ruth Realty (real estate bro-
5 Outrider Road ker).
Rolling Hills, CA 90274
Age 60
Frances T. Newton Director Assistant Programmer, Duke Power Company.
4921 Buckingham Drive
Charlotte, NC 28209
Age 54
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
F. Barry Nelson Vice President Editor, Value Line Options and Convertibles
Age 52 and Vice President, Value Line Convertible
Fund, Inc. since 1993; Securities Analyst,
Forbes, Walsh, Kelly & Co., Inc., 1992-1993;
Vice President, NatWest Securities
Corporation, Feb.-Oct. 1992; Senior Vice
President, Louis Nicoud & Associates,
1986-1992.
<S> <C> <C>
James D. von Riesemann Vice President Securities analyst with the Adviser since
Age 34 1994; prior thereto, student.
David T. Henigson Vice President, Compliance Officer and since 1992, Vice
Age 38 Secretary and President and Director of the Adviser. Di-
Treasurer rector and Vice President of the Distribu-
tor.
</TABLE>
- --------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors and certain officers of the Fund are also directors and officers
of other investment companies for which the Adviser acts as investment adviser.
Directors who are officers or employees of the Adviser receive no remuneration
from the Fund. The following table sets forth information regarding compensation
of Directors by the Fund and by the Fund and the two other Value Line Funds of
which each of the Directors is a director for the fiscal year ended
, 1995. Directors who are officers or employees of the Adviser do
not receive any compensation from the Fund or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED , 1995
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSON FROM FUND OF FUND EXPENSES RETIREMENT (2) FUNDS
- ------------------------------------------- -------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner............................ $ -0- N/A N/A $ -0-
Francis C. Oakley.......................... -0- N/A N/A 20,000
Marion N. Ruth............................. -0- N/A N/A 20,000
Frances T. Newton.......................... -0- 20,000
</TABLE>
As of the date of this Statement of Additional Information, the Adviser
owned 100% of the Fund's outstanding shares.
B-4
<PAGE>
THE ADVISER
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
The investment advisory agreement between the Fund and the Adviser dated
, 1995 provides for an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets during the year. The Adviser shall reimburse the
Fund for expenses (exclusive of interest, taxes, brokerage expenses,
distribution expenses and extraordinary expenses) which in any year exceed the
limits prescribed by any state in which shares of the Fund are qualified for
sale. Presently, the most restrictive limitation is 2.5% of the first $30
million of average daily net assets, 2% of the next $70 million and 1.5% of any
excess over $100 million.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal, audit
and Fund accounting expenses, fees and expenses in connection with qualification
under federal and state securities laws and costs of shareholder reports and
proxy materials. The Fund has agreed that it will use the words "Value Line" in
its name only so long as Value Line, Inc. serves as investment adviser to the
Fund.
The Adviser acts as investment adviser to 15 other investment companies
constituting The Value Line Family of Funds and furnishes investment advisory
services to private and institutional accounts with combined assets in excess of
$4 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Fund does not purchase or sell a security based solely on information
contained in any of the Value Line publications. The Adviser and/or its
affiliates, officers, directors and employees may from time to time own
securities which are also held in the portfolio of the Fund. The Adviser has
imposed rules upon itself and such persons requiring monthly reports of security
transactions for their respective accounts and restricting trading in various
types of securities in order to avoid possible conflicts of interest. The
Adviser may from time to time, directly or through affiliates, enter into
agreements to furnish for compensation special research or financial services to
companies, including services in connection with acquisitions, mergers or
financings. In the event that such agreements are in effect with respect to
issuers of securities held in the portfolio of the Fund, specific reference to
such agreements will be made in the "Schedule of Investments" in shareholder
reports of the Fund. As of the date of this Statement of Additional Information,
no such agreements exist.
B-5
<PAGE>
BROKERAGE ARRANGEMENTS
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. 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
services may include but are not limited to information as to the availability
of securities for purchase or sale; statistical or factual information or
opinions pertaining to investments; and appraisals or evaluations of portfolio
securities. Such allocation will be in such amounts and in such proportions as
the Adviser may determine. Orders may also be placed with brokers or dealers who
sell shares of the Fund or other funds for which the Adviser acts as investment
adviser, but this fact, or the volume of such sales, is not a consideration in
their selection. A portion of the Fund's brokerage commissions may be paid to
Value Line Securities. Value Line Securities, Inc. clears transactions for the
Fund through unaffiliated broker-dealers.
The Board of Directors has adopted procedures incorporating the standards of
Rule 17e-1 under the 1940 Act which requires that the commissions paid to Value
Line Securities, Inc. or any other "affiliated person" be "reasonable and fair"
compared to the commissions paid to other brokers in connection with comparable
transactions. The procedures require that the Adviser furnish reports to the
Directors with respect to the payment of commissions to affiliated brokers and
maintain records with respect thereto.
PORTFOLIO TURNOVER. It is not expected that the Fund's annual portfolio
turnover rate will exceed 100%. A rate of portfolio turnover of 100% would occur
if all of the Fund's portfolio were replaced in a period of one year. To the
extent that the Fund engages in short-term trading in attempting to achieve its
objective, it may increase portfolio turnover and incur higher brokerage
commissions and other expenses than might otherwise be the case.
HOW TO BUY SHARES
(SEE ALSO "CALCULATION OF NET ASSET VALUE", "HOW TO BUY SHARES",
"SERVICE AND DISTRIBUTION PLAN" AND "INVESTOR SERVICES" IN THE FUND'S
PROSPECTUS)
Shares of the Fund are purchased at net asset value next calculated after
receipt of a purchase order. Minimum orders are $1,000 for an initial purchase
and $100 for each subsequent purchase. The Fund reserves the right to reduce or
waive the minimum purchase requirements in certain cases, such as under the
Value Line Monthly Investment Plan and pursuant to payroll deduction plans,
etc., where subsequent and continuing purchases are contemplated.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor") pursuant to which the Distributor acts as
principal underwriter and distributor of the Fund for the sale and distribution
of its shares. The Distributor is a wholly-owned subsidiary of the Adviser. For
B-6
<PAGE>
its services under the agreement, the Distributor is not entitled to receive any
compensation. However, see "Service and Distribution Plan" for certain payments
to the Distributor. The Distributor also serves as distributor to the other
Value Line funds.
AUTOMATIC PURCHASES. The Fund offers two free services to its shareholders:
Valu-Matic and Value Line Monthly Investment Plan through which monthly
investments are automatically made into the shareholder's Value Line account.
The Fund's Transfer Agent debits via automated clearing house a draft each month
on the shareholder's checking account and invests the money in full and
fractional shares. The purchase is confirmed directly to the shareholder (who
will also receive debit information each month with his bank statement). The
required forms to enroll in these programs are available upon request from the
Distributor.
RETIREMENT PLANS. Shares of the Fund may be purchased as the investment
medium for various tax-sheltered retirement plans. Upon request, the Distributor
will provide information regarding eligibility and permissible contributions.
Because a retirement plan is designed to provide benefits in future years, it is
important that the investment objectives of the Fund be consistent with the
participant's retirement objectives. Premature withdrawals from a retirement
plan may result in adverse tax consequences. For more complete information,
contact Value Line Securities at 1-800-223-0818 during New York business hours.
HOW TO REDEEM SHARES
(SEE ALSO "HOW TO REDEEM SHARES" AND "INVESTOR SERVICES" IN THE FUND'S
PROSPECTUS)
The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period by the Fund under the following conditions
authorized by the 1940 Act: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday closing, or
(b) during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal by
the Fund of securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for the Fund to determine the fair value of its net assets;
(3) for such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time. Shareholders should note that if a loss has been realized on the sale of
shares of the Fund, the loss may be disallowed for tax purposes if shares of the
same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities or other property of the Fund. However, the Fund has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Fund's net assets
if that is less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing the net
asset value per share. Shareholders receiving such securities may incur
brokerage costs on their sales.
B-7
<PAGE>
SERVICE AND DISTRIBUTION PLAN
(SEE ALSO "SERVICE AND DISTRIBUTION PLAN" IN THE FUND'S PROSPECTUS)
The Service and Distribution Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, provides for the payment of certain expenses
incurred by Value Line Securities, Inc. in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets.
TAXES
(SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE FUND'S PROSPECTUS)
The Fund intends to qualify as a regulated investment company under the
United States Internal Revenue Code (the "Code"). By so qualifying, the Fund is
not subject to federal income tax on its net investment income or net realized
capital gains which are distributed to shareholders (whether or not reinvested
in additional Fund shares).
Distributions of investment income and of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income (whether or not reinvested in additional Fund shares).
Distributions of the excess of net long-term capital gain over net short-term
capital loss (net capital gains) are taxable to shareholders as long-term
capital gain, regardless of the length of time the shares of the Fund have been
held by such shareholders and regardless of whether the distribution is received
in cash or in additional shares of the Fund. It is expected that dividends from
domestic corporations will constitute most of the Fund's gross income and that a
substantial portion of the dividends paid by the Fund will qualify for the
dividends-received deduction for corporate investors. Upon request, the Fund
will advise investors of the amount of dividends which so qualify.
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
Options and futures contracts entered into by the Fund will be subject to
special tax rules. These rules may accelerate income to the Fund, defer Fund
losses, cause adjustments in the holding periods of Fund 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 Fund distributions.
A distribution by the Fund will result in a reduction in the Fund's net
asset value per share. Such a distribution is taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a return of capital. In particular,
investors should be careful to consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will then receive a return of capital upon the distribution
which nevertheless is taxable to them. All distributions, whether received in
cash or reinvested in shares, must be reported by each shareholder on his or her
federal income tax return. Under the Code, dividends declared by the Fund in
October, November and December of any calendar year,
B-8
<PAGE>
and payable to shareholders of record in such a month, shall be deemed to have
been received by the shareholder on December 31 of such calendar year if such
dividend is actually paid in January of the following calendar year.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date), or under special rules, an average cost. Under
certain circumstances, a loss on the sale or redemption of shares held for six
months or less may be treated as a long-term capital loss to the extent that the
Fund has distributed long-term capital gain dividends on such shares. Moreover,
a loss on sale or redemption of Fund shares will be disallowed to the extent the
shareholder purchases other shares of the Fund within 30 days before or after
the date the shares are sold or redeemed.
For shareholders who fail to furnish to the Fund their social security or
taxpayer identification numbers and certain related information, or who fail to
certify that they are not subject to backup withholding, dividends,
distributions of capital gains and redemption proceeds paid by the Fund will be
subject to a 31% Federal income tax withholding requirement. If the withholding
provisions are applicable, any dividends or capital gains distributions to these
shareholders, whether taken in cash or reinvested in additional shares, and any
redemption proceeds will be reduced by the amounts required to be withheld.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents, domestic
corporations and partnerships, and certain trusts and estates) and is not
intended to be a complete discussion of all federal tax consequences.
Shareholders are advised to consult with their tax advisers concerning the
application of federal, state and local tax laws to an investment in the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual total return over the most recent four calendar quarters
and the period from the Fund's inception of operations. The Fund may also
advertise aggregate annual total return information over different periods of
time.
The Fund's average annual total 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:
T =#ERV/P - 1
n
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
B-9
<PAGE>
ADDITIONAL INFORMATION
EXPERTS
The financial statements of the Fund as of August , 1995, included in this
Statement of Additional Information have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in accounting and auditing.
CUSTODIAN
The Fund employs State Street Bank and Trust Company, Boston, MA as
custodian for the Fund. The custodian's responsibilities include safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Fund's
investments. The custodian does not determine the investment policies of the
Fund or decide which securities the Fund will buy or sell.
FINANCIAL STATEMENT
VALUE LINE AMERICAN WORLDWIDE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AUGUST , 1995
ASSETS
<TABLE>
<S> <C>
Cash......................................................................... $ 100,000
Deferred Organization Costs.................................................. 70,000
---------
Total Assets................................................................. $ 170,000
---------
---------
LIABILITIES
Deferred Organization Costs Payable.......................................... $ 70,000
---------
Net Assets................................................................... $ 100,000
---------
---------
Shares of $.01 par value Common Stock (authorized 350,000,000 shares)
Shares issued and outstanding............................................... 100,000
---------
Net Asset Value Per Share.................................................... $10.00
---------
---------
</TABLE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
NOTE 1 -- ORGANIZATION
Value Line American Worldwide Fund, Inc. (the "Fund") was formed as a
corporation under the laws of the State of Maryland on June , 1995 and is
registered as an open-end management investment company with the Securities and
Exchange Commission. The Fund has had no significant transactions other than the
issuance of an aggregate of 100,000 shares of common stock, to Value Line, Inc.,
representing the initial capital of the Fund, and those transactions relating to
organizational matters.
Costs incurred in connection with the Fund's organization and initial
registration, estimated to be $70,000, will be amortized over sixty months
beginning at the commencement of operations of the Fund. In the event any of the
initial shares of the Fund are redeemed by any holder thereof during
B-10
<PAGE>
the five-year amortization period, the redemption proceeds will be reduced by a
pro rata portion of any unamortized deferred organizational expenses in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
NOTE 2 -- INVESTMENT ADVISORY AGREEMENT
The Fund has executed an Investment Advisory Agreement with Value Line, Inc.
The compensation to be paid to the Investment Adviser is as set forth under "The
Adviser" in this Statement of Additional Information.
NOTE 3 -- SERVICE AND DISTRIBUTION PLAN
The Fund has adopted a Service and Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940. The compensation payable to the
Distributor is set forth under "Service and Distribution Plan" in this Statement
of Additional Information.
B-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors
of Value Line American Worldwide Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of Value Line
American Worldwide Fund, Inc. (the "Fund") at August , 1995, in conformity
with generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
August , 1995
B-12
<PAGE>
VALUE LINE AMERICAN WORLDWIDE FUND, INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements
To be supplied by amendment.
b. Exhibits
1. Articles of Incorporation dated --Exhibit 1
June , 1995.
2. By-Laws. --Exhibit 2
3. Not applicable.
4. Proposed Form of specimen stock --To be supplied by amendment.
certificate.
5. Proposed Form of Investment --Exhibit 5
Advisory Agreement between the
Registrant and Value Line, Inc.
6. Proposed Form of Distribution --Exhibit 6
Agreement between the Registrant
and Value Line Securities, Inc.
7. Not applicable.
8. Proposed Form of Custodian --To be supplied by amendment.
Agreement between the Registrant
and State Street Bank & Trust
Company.
9. Proposed Form of Transfer Agency --To be supplied by amendment.
Agreement between the Registrant
and State Street Bank & Trust
Company.
10. Opinion of Counsel. --To be supplied by amendment.
11. Not applicable.
12. Not applicable.
13. Form of Investment Letter from --To be supplied by amendment.
Value Line, Inc. to the
Registrant.
14. Model Retirement Plan. --Exhibit 14
15. Service and Distribution Plan. --Exhibit 15
16. Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Registrant is not controlled directly or indirectly by any person.
Information with respect to the Registrant's investment adviser is set forth
under the caption "The Adviser" in the Statement of Additional Information
forming Part B of the Registration Statement.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of August, 1995, Value Line, Inc. owned all of the outstanding shares of
common stock of the Registrant.
C-1
<PAGE>
ITEM 27. INDEMNIFICATION.
Article V of the Registrant's Bylaws is as follows:
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any person who was
or is a party or is threatened to be made a party in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, except that such indemnity shall not protect any
such person against any liability to the Corporation or any stockholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct").
SECTION 2. ADVANCES. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the full extent permissible under the Maryland General Corporation
Law, the Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force; provided, however, that the person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance unless it is ultimately determined that he is entitled to
indemnification, and provided further that at least one of the following
additional conditions is met: (1) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (2) the Corporation is insured against losses arising by reason of
the advance; or (3) a majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.
SECTION 3. PROCEDURE. At the request of any current or former director or
officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the Securities Act of 1933
and the Investment Company Act of 1940, as such statutes are now or hereafter in
force, whether the standards required by this Article V have been met; provided,
however, that indemnification shall be made only following: (1) a final decision
on the merits by a court or other body before whom the proceeding was brought
that the person to be indemnified was not liable by reason of disabling conduct
or (2) in the absence of such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified was not liable by
reason of disabling conduct, by (a) the vote of a majority of a quorum of
disinterested non-party directors or (b) an independent legal counsel in a
written opinion.
SECTION 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and agents
who are not officers or directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, in accordance
with the procedures set forth in this Article V to the extent
C-2
<PAGE>
permissible under the Investment Company Act of 1940, the Securities Act of 1933
and the Maryland General Corporation Law, as such statutes are now or hereafter
in force, and to such further extent, consistent with the foregoing, as may be
provided by action of the Board of Directors or by contract.
SECTION 5. OTHER RIGHTS. The indemnification provided by this Article V
shall not be deemed exclusive of any other right, in respect of indemnification
or otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of stockholders or disinterested
directors or otherwise, both as to action by a director or officer of the
Corporation in his official capacity and as to action by such person in another
capacity while holding such office or position, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
ITEM 28. 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 29.
<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
and Chief Executive Officer Officer of Arnold Bernhard & Co., Inc.; 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 Secretary and Director Secretary and Treasurer of Arnold Bernhard &
Co., Inc.
Harold Bernard, Jr. Director Administrative Law Judge
Arnold Van H. Bernhard Director Self-Employed
William S. Kanaga Director Retired Chairman of Arthur Young (now Ernst &
Young)
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison, attorneys
</TABLE>
ITEM 29. 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; The Value Line Adjustable Rate U.S. Government
Securities Fund, Inc.; Value Line Small-Cap Growth Fund, Inc.; Value Line
Asset Allocation Fund, Inc.
C-3
<PAGE>
(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, New York, NY 10017-5891.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc.
220 East 42nd Street
New York, NY 10017
For records pursuant to:
Rule 31a-1(b)(4),(5),(6),(7),(10),(11)
Rule 31a-1(f)
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141
For records pursuant to Rule 31a-1(b)(2)(iv)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
For all other records
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment including financial
statements which need not be certified, within six months from the effective
date of this Registration Statement.
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 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
June, 1995.
VALUE LINE AMERICAN WORLDWIDE FUND, INC.
By /s/ DAVID T. HENIGSON
------------------------------------------
David T. Henigson
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------------------ ----------------------------- -----------------
<S> <C> <C>
/s/ DAVID T. HENIGSON Chairman of the Board; June 22, 1995
------------------------------------------- President; Principal
David T. Henigson Executive Officer
/s/ STEPHEN LAROSA Treasurer; Principal June 22, 1995
------------------------------------------- Financial and Accounting
Stephen LaRosa Officer
</TABLE>
C-5
<PAGE>
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
VALUE LINE AMERICAN WORLDWIDE FUND, INC.
ARTICLE I
INCORPORATION
The undersigned, David T. Henigson, whose address is 220 East 42nd Street,
New York, New York 10017, being at least 18 years of age, does hereby act as an
incorporator and forms a corporation, under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is Value Line American Worldwide Fund, Inc.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed to conduct and carry on the business of an
investment company.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 1123
North Eutaw Street, Baltimore, Maryland 21201. The name and address of the
resident agent of the Corporation in the State of Maryland is The Prentice-Hall
Corporation System, Maryland, a Maryland Corporation, 1123 North Eutaw Street,
Baltimore, Maryland 21201.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation shall
have authority to issue is fifty million (50,000,000) shares, of the par value
of one cent ($.01) per share and of the aggregate par value of five hundred
thousand dollars ($500,000), all of which fifty million (50,000,000) shares are
designated Common Stock.
(2) The Corporation may issue fractional shares. Any fractional share
shall carry proportionately the rights of a whole share including, without
limitation, the right to vote and the right to receive dividends. A fractional
share shall not, however, have the right to receive a certificate evidencing it.
(3) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of this Charter and the By-Laws of the
Corporation.
1
<PAGE>
(4) No holder of stock of the Corporation by virtue of being such a holder
shall have any right to purchase or subscribe for any shares of the
Corporation's capital stock or any other security that the Corporation may issue
or sell (whether out of the number of shares authorized by this Charter or out
of any shares of the Corporation's capital stock that the Corporation may
acquire) other than a right that the Board of Directors in its discretion may
determine to grant.
(5) The Board of Directors shall have authority by resolution to classify
and reclassify any authorized but unissued shares of capital stock from time to
time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitation as to
dividends, qualifications of terms or conditions of redemption of the capital
stock.
(6) Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of a greater proportion of the votes of
all classes or of any class of stock of the Corporation, such actions shall be
effective and valid if taken or authorized by the affirmative vote of a majority
of the total number of votes entitled to be cast thereon, except as otherwise
provided in this Charter.
(7) The presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast (without regard to class) shall
constitute a quorum at any meeting of the stockholders, except with respect to
any matter which, under applicable statutes or regulatory requirements or the
Corporation's Charter, requires approval by a separate vote of one or more
classes of stock, in which case the presence in person or by proxy of the
holders of shares entitled to cast one-third of the votes entitled to be cast
separately on the matter shall constitute a
quorum.
(8) On each matter submitted to a vote of the stockholders, each holder of
a share of stock shall be entitled to one vote for each share standing in his
name on the books of the corporation irrespective of the class thereof. All
holders of shares of stock shall vote as a single class except as may otherwise
be required by law pursuant to any applicable order, rule or interpretation
issued by the Securities and Exchange Commission, or otherwise, or except with
respect to any matter which affects only one or more classes of stock, in which
case only the holders of shares of the class or classes affected shall be
entitled to vote.
ARTICLE VI
REDEMPTION
Each holder of shares of the Corporation's capital stock shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of the holder on the books of the
Corporation, and all shares of capital stock issued by the Corporation shall be
subject to redemption by the Corporation, at the net asset value of the shares
as in effect from time to time, subject to any redemption or liquidation charge,
contingent deferred service charge or other
2
<PAGE>
charge on redemption, all as may be determined by or pursuant to the direction
of the Board of Directors of the Corporation in accordance with the provisions
of Article VII, subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption or postpone the date of payment
of the redemption price in accordance with the provisions of applicable law.
Without limiting the generality of the foregoing, the Corporation shall, to the
extent permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of capital stock of the Corporation (i) if the
redemption is, in the opinion of the Board of Directors of the Corporation,
desirable in order to prevent the Corporation from being deemed a "personal
holding company" within the meaning of the Internal Revenue Code of 1986 or (ii)
if the value of the shares in the account maintained by the Corporation or its
transfer agent for any class of stock for the stockholder is $500 (five hundred
dollars) or less and the stockholder has been given at least 60 (sixty) days'
written notice of the redemption and has failed to make additional purchases of
shares in an amount sufficient to bring the value in his account to $500 (five
hundred dollars) or more before the redemption is effected by the Corporation.
Payment of the redemption price shall be made in cash by the Corporation at the
time and in the manner as may be determined from time to time by the Board of
Directors of the Corporation unless, in the opinion of the Board of Directors,
which shall be conclusive, conditions exist that make payment wholly in cash
unwise or undesirable; in such event the Corporation may make payment wholly or
partly by securities or other property included in the assets belonging or
allocable to the class of the shares redemption of which is being sought, the
value of which shall be determined as provided herein. The Board of Directors
may establish procedures for redemption of shares.
ARTICLE VII
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors shall be
one (1) or such other number as may be set forth in the By-laws or determined by
the Board of Directors pursuant to the By-laws. David T. Henigson is the
initial director of the Corporation and shall hold office until the first annual
meeting of stockholders or until his successor is elected and qualifies.
(2) In furtherance, and not in limitation, of the powers conferred by the
laws of the State of Maryland, the Board of Directors is expressly authorized:
(i) To make, alter or repeal the By-laws of the Corporation, except
where such power is reserved by the By-laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(ii) From time to time to determine whether and to what extent and at
what times and places and under what conditions and regulations the books and
accounts of the Corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholders. No stockholder shall have any
right to inspect any account of book or documents of the Corporation, except as
conferred by law or authorized by resolution of the Board of Directors.
3
<PAGE>
(iii) Without the assent or vote of the stockholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities convertible
into shares of stock of the Corporation of any class or classes, whether now or
hereafter authorized, for such consideration as the Board of Directors may deem
advisable.
(iv) Notwithstanding anything in this Charter to the contrary, to
establish in its absolute discretion the basis or method for determining the
value of the assets belonging to any class, the amount of the liabilities
belonging to any class and the net asset value of each share of any class of
the Corporation's stock.
(v) To determine what constitutes net profits, earnings, surplus or
net assets in excess of capital, and to determine what accounting periods shall
be used by the Corporation for any purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall determine and to abolish the
same; to declare and pay any dividends and distributions in cash, securities or
other property from surplus or any funds legally available therefor, at such
intervals as it shall determine; to declare dividends or distributions by means
of a formula or other method of determination, at meetings held not less
frequently than the established payment dates for dividends or any other
distributions on any basis, including dates occurring not less frequently than
the effectiveness of declaration thereof.
(3) Any determination made in good faith, and in accordance with accepted
accounting practices, if applicable, by or pursuant to the direction of the
Board of Directors, with respect to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which the reserves or
charges have been created has been paid or discharged or is then or thereafter
required to be paid or discharged), as to the value of any security owned by the
Corporation, the determination of the net asset value of shares of any class of
the Corporation's capital stock, or as to any other matters relating to the
issuance, sale or the acquisition or disposition of securities or shares of
capital stock of the Corporation, and any reasonable determination made in good
faith by the Board of Directors whether any transaction constitutes a purchase
of securities on "margin," a sale of securities "short," or an underwriting or
the sale of, or a participation in any underwriting or selling group in
connection with the public distribution of, any securities, shall be final and
conclusive, and shall be binding upon the Corporation and all holders of its
capital stock, past, present and future, and shares of the capital stock of the
Corporation are issued and sold on the condition and understanding, evidenced by
the purchase of shares of capital stock or acceptance of share certificates,
that any and all such determinations shall be binding as aforesaid. No
provision of this Charter of the Corporation shall be effective to (i) require a
waiver of compliance with any provision of the Securities Act of
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1933, as amended, or the Investment Company Act of 1940, as amended, or of any
valid rule, regulation or order of the Securities and Exchange Commission under
those Acts or (ii) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
ARTICLE VIII
LIABILITY AND INDEMNIFICATION
(1) To the full extent that limitations on the liability of directors and
officers are permitted by the Maryland General Corporation Law, no director or
officer of the Corporation shall have any liability to the Corporation or its
stockholders for money damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not that person is a director or officer at the time of
any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the full extent that indemnification of
directors and advancement of expenses is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and may do so to such further
extent as is consistent with law. The Board of Directors may by By-law,
resolution or agreement make further provision for indemnification of directors,
officers, employees and agents to the full extent permitted by the Maryland
General Corporation Law.
(3) No provision of this Article EIGHTH shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(4) Reference to the Maryland General Corporation law in this Article
EIGHTH are to that law as from time to time amended. No amendment to the
Charter of the Corporation shall affect any right of any person under this
Article EIGHTH based on any event, omission or proceeding prior to the
amendment.
ARTICLE IX
AMENDMENTS
The Corporation reserves the right from time to time to make any amendment
to its Charter, now or hereafter authorized by law, including any amendment that
alters the contract rights, as expressly set forth in this Charter, of any
outstanding stock.
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IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
By:
-------------------------
David T. Henigson
Incorporator
Dated the 7th day of June, 1995
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EXHIBIT 2
BY-LAWS
OF
VALUE LINE AMERICAN WORLDWIDE, INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. No annual meeting of the stockholders of the
Corporation shall be held in any year in which the election of directors is not
required to be acted upon under the Investment Company Act of 1940, as amended,
unless otherwise determined by the Board of Directors. An annual meeting may be
held at any place within the United States as may be determined by the Board of
Directors and as shall be designated in the notice of the meeting, and at the
time specified by the Board of Directors. Any business of the Corporation may
be transacted at an annual meeting without being specifically designated in the
notice unless otherwise provided by statute, the Corporation's Articles of
Incorporation or these By-Laws.
SECTION 2. SPECIAL MEETING. Special meetings of the stockholders for any
purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Articles of Incorporation, may be held at any place within the
United States, and may be called at any time by the Board of Directors or by the
President, and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors or at the request in writing of
stockholders entitled to cast at least 10 (ten) percent of the votes entitled to
be cast at the meeting upon payment by such stockholders to the Corporation of
the reasonably estimated cost of preparing and mailing a notice of the meeting
(which estimated cost shall be provided to such stockholders by the Secretary of
the Corporation). Notwithstanding the foregoing, unless requested by
stockholders entitled to cast a majority of the votes entitled to be cast at the
meeting, a special meeting of the stockholders need not be called at the request
of stockholders to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding 12 (twelve) months. A written request shall state the purpose or
purposes of the proposed meeting.
SECTION 3. NOTICE OF MEETINGS. Written or printed notice of the purpose or
purposes and of the time and place of every meeting of the stockholders shall be
given by the Secretary of the Corporation to each stockholder of record entitled
to vote at the meeting and to such other stockholders entitled to notice of the
meeting, by placing the notice in the mail at least 10 (ten) days, but not more
than 90 (ninety) days, prior to the date designated for the meeting addressed to
each stockholder at his address appearing on the books of the Corporation or
supplied by the stockholder to the Corporation for the purpose of notice. The
notice of any meeting of stockholders may be accompanied by a form of proxy
approved by the Board of Directors in favor of the actions or persons as the
Board of Directors may select. Notice of any meeting of stockholders shall be
deemed waived by any stockholder
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who attends the meeting in person or by proxy, or who before or after the
meeting submits a signed waiver of notice that is filed with the records of the
meeting.
SECTION 4. QUORUM. Except as otherwise provided by statute or by the
Corporation's Articles of Incorporation, the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least one-third of the votes
entitled to be cast without regard to class or, in the event a separate vote of
one or more classes is required, one-third of the votes entitled to be cast
separately, shall constitute a quorum at each meeting of the stockholders and
all questions shall be decided by a majority of the votes cast on the question
(except for the election of directors, which shall be by plurality vote). In
the absence of a quorum, the stockholders present in person or by proxy, by
majority vote and without further notice other than by announcement at the
meeting, may adjourn the meeting from time to time as provided in Section 5 of
this Article I until a quorum shall attend. The stockholders present at any
duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. The absence from any meeting in person or by proxy of holders of the
number of shares of stock of the Corporation in excess of the number that may be
required by the laws of the State of Maryland, the Investment Company Act of
1940, as amended, or other applicable statute, the Corporation's Articles of
Incorporation or these By-Laws, for action upon any given matter shall not
prevent action at the meeting on any other matter or matters that may properly
come before the meeting, so long as there are present, in person or by proxy,
holders of the number of shares of stock of the Corporation required for action
upon the other matter or matters.
SECTION 5. ADJOURNMENT. Any meeting of the stockholders may be adjourned
from time to time, without notice other than by announcement at the meeting at
which the adjournment is taken. At any adjourned meeting at which a quorum
shall be present any action may be taken that could have been taken at the
meeting originally called. A meeting of the stockholders may not be adjourned,
without further notice and the establishing of a new record date, to a date more
than 120 (one hundred twenty) days after the original record date.
SECTION 6. ORGANIZATION. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President, or
in his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the President and all the Vice
Presidents, a chairman chosen by the stockholders, shall act as Chairman of the
meeting. The Secretary, or in his absence or inability to act, a person
appointed by the chairman of the meeting, shall act as secretary of the meeting
and keep the minutes of the meeting.
SECTION 7. ORDER OF BUSINESS. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
SECTION 8. VOTING. Except as otherwise provided by the Corporation's
Articles of Incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be
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entitled at each meeting of the stockholders to one vote for every share of
stock standing in his name on the records of the Corporation as of the record
date determined pursuant to Section 9 of this Article I. Each stockholder
entitled to vote at any meeting of stockholders may authorize another person or
persons to act for him by a proxy signed by the stockholder or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven months
from the date thereof, unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the stockholder executing it, except in
those cases in which the proxy states that it is irrevocable and in which an
irrevocable proxy is permitted by law. If a vote shall be taken on any question
other than the election of directors, which shall be by written ballot, then
unless required by statute or these By-Laws, or determined by the chairman of
the meeting to be advisable, any such vote need not be by ballot. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
and shall state the number of shares voted.
SECTION 9. FIXING OF RECORD DATE. The Board of Directors may set a record
date for the purpose of determining stockholders entitled notice of and to vote
at any meeting of the stockholders. The record date for a particular meeting
shall be not more than 90 (ninety) nor fewer than 10 (ten) days before the date
of the meeting. All persons who were holders of record of shares as of the
record date of a meeting, and no others, shall be entitled to notice of and to
vote at such meeting and any adjournment thereof.
SECTION 10. INSPECTORS. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting or
at any adjournment of the meeting. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting may,
and on the request of any stockholder entitled to vote at the meeting shall,
appoint inspectors. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath to execute faithfully the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors shall determine the number of shares outstanding
and the voting power of each share, the number of shares represented at the
meeting, the existence of a quorum and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do those acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be stockholders of
the Corporation.
SECTION 11. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as
otherwise provided by statute or the Corporation's Articles of Incorporation,
any action required to be taken at any meeting of stockholders, or any action
that may be taken at any meeting of the stockholders, may be taken without a
meeting,
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without prior notice and without a vote, if the following are filed with the
records of stockholders' meetings: (i) a unanimous written consent that sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote at the
meeting.
SECTION 12. NOTICE OF STOCKHOLDER BUSINESS.
(a) At any Annual or Special Meeting of the Stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an Annual or Special Meeting business
must be (A) (i) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(iii) subject to the provisions of Section 13 of this Article I, otherwise
properly brought before the meeting by a Stockholder and (B) a proper subject
under applicable law for Stockholder action.
(b) For business to be properly brought before an Annual or Special Meeting
by a Stockholder, the Stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, any such notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation not later than 60 days prior to the date of the meeting; provided,
however, that if less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to Stockholders, any such notice by a
Stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which notice of the date of the
Annual or Special Meeting was given or such public disclosure was made.
(c) Any such notice by a Stockholder shall set forth as to each matter the
Stockholder proposes to bring before the Annual or Special Meeting (i) a brief
description of the business desired to be brought before the Annual or Special
Meeting and the reasons for conducting such business at the Annual or Special
Meeting, (ii) the name and address, as they appear on the Corporation's books,
of the Stockholder proposing such business, (iii) the class and number of shares
of the capital stock of the Corporation which are beneficially owned by the
Stockholder, and (iv) any material interest of the Stockholder in such business.
(d) Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at any Annual or Special Meeting except in accordance with
the procedures set forth in this Section 12. The Chairman of the Annual or
Special Meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 12, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before the
meeting shall not be considered or transacted.
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SECTION 13. STOCKHOLDER BUSINESS NOT ELIGIBLE FOR CONSIDERATION.
(a) Notwithstanding anything in these By-Laws to the contrary, any proposal
that is otherwise properly brought before an Annual or Special Meeting by a
Stockholder will not be eligible for consideration by the Stockholders at such
Annual or Special Meeting if such proposal is substantially the same as a matter
properly brought before such Annual or Special Meeting by or at the direction of
the Board of Directors of the Corporation. The Chairman of such Annual or
Special Meeting shall, if the facts warrant, determine and declare that a
Stockholder proposal is substantially the same as a matter properly brought
before the meeting by or at the direction of the Board of Directors, and, if he
should so determine, he shall so declare to the meeting and any such Stockholder
proposal shall not be considered at the meeting.
(b) This Section 13 shall not be construed or applied to make ineligible
for consideration by the Stockholders at any Annual or Special Meeting any
Stockholder proposal required to be included in the Corporation's proxy
statement relating to such meeting pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, or any successor rule thereto.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. Except as otherwise provided in the
Corporation's Articles of Incorporation, the business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors except as conferred on or reserved to the stockholders by law, by the
Corporation's Articles of Incorporation or by these By-Laws.
SECTION 2. NUMBER OF DIRECTORS. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the entire Board of Directors; provided, however, that the number of directors
shall in no event be fewer than the number permitted by Maryland law nor more
than fifteen. Any vacancy created by an increase in Directors may be filled in
accordance with Section 6 of this Article II. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless the director is specifically removed pursuant
to Section 5 of this Article II at the time of the decrease. A director need
not be a stockholder of the Corporation, a citizen of the United States or a
resident of the State of Maryland.
SECTION 3. ELECTION AND TERM OF DIRECTORS. The term of office of each
director shall be from the time of his election and qualification until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these
By-laws, or as otherwise provided by statute or the Corporation's Articles of
Incorporation.
SECTION 3.1 DIRECTOR NOMINATIONS.
(a) Only persons who are nominated in accordance with the
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procedures set forth in this Section 3.1 shall be eligible for election or
re-election as Directors. Nominations of persons for election or re-election to
the Board of Directors of the Corporation may be made at a meeting of
Stockholders by or at the direction of the Board of Directors or by any
Stockholder of the Corporation who is entitled to vote for the election of such
nominee at the meeting and who complies with the notice procedures set forth in
this Section 3.1.
(b) Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice delivered in writing
to the Secretary of the Corporation. To be timely, any such notice by a
Stockholder must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 days prior to the
meeting; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Stockholders, any such
notice by a Stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which notice of the date
of the meeting was given or such public disclosure was made.
(c) Any such notice by a Stockholder shall set forth (i) as to each person
whom the Stockholder proposes to nominate for election or re-election as a
Director, (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the class
and number of shares of the capital stock of the Corporation which are
beneficially owned by such person and (D) any other information relating to such
person that is required to be disclosed in solicitations of proxies for the
election of Directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934 or any successor regulation thereto (including without limitation
such persons' written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected and whether any person intends to seek
reimbursement from the Corporation of the expenses of any solicitation of
proxies should such person be elected a Director of the Corporation); and (ii)
as to the Stockholder giving the notice (A) the name and address, as they appear
on the Corporation's books, of such Stockholder and (B) the class and number of
shares of the capital stock of the Corporation which are beneficially owned by
such Stockholder. At the request of the Board of Directors any person nominated
by the Board of Directors for election as a Director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
Stockholder's notice of nomination which pertains to the nominee.
(d) If a notice by a Stockholder is required to be given pursuant to this
Section 3.1, no person shall be entitled to receive reimbursement from the
Corporation of the expenses of a solicitation of proxies for the election as a
Director of a person named in such notice unless such notice states that such
reimbursement will be sought from the Corporation. No person shall be eligible
for election as a Director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 3.1. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
By-Laws, and if he should so determine, he shall so declare to the
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meeting and the defective nomination shall be disregarded for all purposes.
SECTION 4. RESIGNATION. A director of the Corporation may resign at any
time by qiving written notice of his resignation to the Board of Directors or
the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be
necessary to make it effective unless the resignation states otherwise.
SECTION 5. REMOVAL OF DIRECTORS. Any director of the Corporation may be
removed by the stockholders with or without cause at any time by a vote of a
majority of the votes entitled to be cast for the election of directors.
SECTION 6. VACANCIES. Subject to the provisions of the Investment Company
Act of 1940, as amended, any vacancies in the Board of Directors, whether
arising from death, resignation, removal or any other cause except an increase
in the number of directors, shall be filled by a vote of the majority of the
Board of Directors then in office even though that majority is less than a
quorum, provided that no vacancy or vacancies shall be filled by action of the
remaining directors if, after the filling of the vacancy or vacancies, fewer
than two-thirds of the directors then holding office shall have been elected by
the stockholders of the Corporation. A majority of the entire Board in office
prior to the increase may fill a vacancy which results from an increase in the
number of directors. In the event that at any time a vacancy exists in any
office of a director that may not be filled by the remaining directors, a
special meeting of the stockholders shall be held as promptly as possible and in
any event within 60 (sixty) days, for the purpose of filling the vacancy or
vacancies. Any director elected or appointed to fill a vacancy shall hold
office until a successor has been chosen and qualifies or until his earlier
resignation or removal.
SECTION 7. PLACE OF MEETINGS. Meetings of the Board may be held at any
place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at the time and place determined by the Board of
Directors.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by two or more directors of the Corporation or by the Chairman of the
Board or the President.
SECTION 10. NOTICE OF SPECIAL MEETINGS. Notice of each special meeting of
the Board of Directors shall be given by the Secretary as hereinafter provided.
Each notice shall state the time and place of the meeting and shall be delivered
to each director, either personally or by telephone or other standard form of
telecommunication, at least 24 (twenty-four) hours before the time at which the
meeting is to be held, or by first-class mail, postage prepaid, addressed to the
director at his residence or
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usual place of business, and mailed at least 3 (three) days before the day on
which the meeting is to be held.
SECTION 11. WAIVER OF NOTICE OF MEETINGS. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice that is filed with the records of the meeting or
who shall attend the meeting.
SECTION 12. QUORUM AND VOTING. One-third of the members of the entire
Board of Directors shall be present in person at any meeting of the Board in
order to constitute a quorum for the transaction of business at the meeting,
provided that a quorum shall be no less than two Directors, except where the
Board consists of only one Director, a quorum shall be one Director, and except
as otherwise expressly required by statute, the Corporation's Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or
any other applicable statute, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present may adjourn the meeting to another time and place until a quorum shall
be present. Notice of the time and place of any adjourned meeting shall be
given to the directors who were not present at the time of the adjournment and,
unless the time and place were announced at the meeting at which the adjournment
was taken, to the other directors. At any adjourned meeting at which a quorum
is present, any business may be transacted that might have been transacted at
the meeting as originally called.
SECTION 13. ORGANIZATION. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate a Chairman of the Board,
who shall preside at each meeting of the Board. In the absence or inability of
the Chairman of the Board to act, the President, or, in his absence or inability
to act, another director chosen by a majority of the directors present, shall
act as chairman of the meeting and preside at the meeting. The Secretary, or,
in his absence or inability to act, any person appointed by the chairman, shall
act as secretary of the meeting and keep the minutes thereof.
SECTION 14. COMMITTEES. The Board of Directors may designate one or more
committees of the Board of Directors, each consisting of 2 (two) or more
directors. To the extent provided in the resolution, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers that may
require it. Any committee or committees shall have the name or names determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep reqular minutes of its meetings and report the same to the
Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member.
SECTION 15. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Subject to
the provisions of the Investment Company Act
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of 1940, as amended, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee of the Board may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
SECTION 16. TELEPHONE CONFERENCE. Members of the Board of Directors or any
committee of the Board may participate in any Board or committee meeting (other
than a meeting at which the investment advisory agreement is approved) by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at the meeting.
SECTION 17. COMPENSATION. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by
the Corporation for all reasonable expenses incurred in traveling to and from
the place of a Board or committee meeting.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation shall
be a President, a Secretary and a Treasurer, each of whom shall be elected by
the Board of Directors. The Board of Directors may elect or appoint one or more
Vice Presidents and may also appoint any other officers, agents and employees it
deems necessary or proper. Any two or more offices may be held by the same
person, except the offices of President and Vice President, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity.
Officers shall be elected by the Board of Directors each year at its first
meeting held after the annual meeting of stockholders, each to hold office until
the meeting of the Board following the next annual meeting of the stockholders
and until his successor shall have been duly elected and shall have qualified,
or until his death, or until he shall have resigned or have been removed, as
provided in these By-Laws. The Board of Directors may from time to time elect,
or designate to the President the power to appoint, such officers (including one
or more Assistant Vice Presidents, one or more Assistant Treasurers and one or
more Assistant Secretaries) and such agents as may be necessary or desirable for
the business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. Acceptance of
a resignation shall not be necessary to make it effective unless the resignation
states otherwise.
9
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SECTION 3. REMOVAL OF OFFICER, AGENT OR EMPLOYEE. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office that shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to the office.
SECTION 5. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. BONDS OR OTHER SECURITY. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in an amount and with any surety or sureties
as the Board may require.
SECTION 7. PRESIDENT. The President shall be the chief executive officer of
the Corporation. In the absence or inability of the Chairman of the Board (or
if there is none) to act, the President shall preside at all meetings of the
stockholders and of the Board of Directors. The President shall have, subject
to the control of the Board of Directors, general charge of the business and
affairs of the Corporation, and may employ and discharge employees and agents of
the Corporation, except those elected or appointed by the Board, and he may
delegate these powers.
SECTION 8. VICE PRESIDENT. Each Vice President shall have the powers and
perform the duties that the Board of Directors or the President may from time to
time prescribe.
SECTION 9. TREASURER. Subject to the provisions of any contract that may be
entered into with any custodian pursuant to authority granted by the Board of
Directors, the Treasurer shall have charge of all receipts and disbursements of
the Corporation and shall have or provide for the custody of the Corporation's
funds and securities; he shall have full authority to receive and give receipts
for all money due and payable to the Corporation, and to endorse checks, drafts
and warrants, in its name and on its behalf and to give full discharge for the
same; he shall deposit all funds of the Corporation, except those that may be
required for current use, in such banks or other places of deposit as the Board
of Directors may from time to time designate; and, in general, he shall perform
all duties incident to the office of Treasurer and such other duties as may from
time to time be assigned to him by the Board of Directors or the President.
SECTION 10. SECRETARY. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the purpose,
the minutes of all meetings of the Board of Directors,
10
<PAGE>
the committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
of Directors or the President.
SECTION 11. DELEGATION OF DUTIES. In case of the absence of any officer of
the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.
ARTICLE IV
STOCK
SECTION 1. STOCK CERTIFICATES. Each holder of stock of the Corporation
shall be entitled upon specific written request to such person as may be
designated by the Corporation to have a certificate or certificates, in a form
approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the Chairman,
the President or a Vice President and by the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer and sealed with the seal of the
Corporation. Any or all of the signatures or the seal on the certificate may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in office at the date of issue.
SECTION 2. BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. There shall be kept
at the principal executive office of the Corporation correct and complete books
and records of account of all the business and transactions of the Corporation.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer
11
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clerk, and on surrender of the certificate or certificates, if issued, for the
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of stockholders as the owner
of the share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions and to vote as the owner, and
the Corporation shall not be bound to recognize any equitable or legal claim to
or interest in any such share or shares on the part of any other person.
SECTION 4. REGULATIONS. The Board of Directors may make any additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
SECTION 5. STOLEN, LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its theft, loss, destruction or mutilation
and the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been stolen, lost or
destroyed or that shall have been mutilated. The Board may, in its discretion,
require the owner (or his legal representative) of a stolen, lost, destroyed or
mutilated certificate: to give to the Corporation a bond in a sum, limited or
unlimited, and in a form and with any surety or sureties, as the Board in its
absolute discretion shall determine, to indemnify the Corporation against any
claim that may be made against it on account of the alleged theft, loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board of Directors, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Maryland.
SECTION 6. FIXING OF RECORD DATE FOR DIVIDENDS, DISTRIBUTIONS, ETC. The
Board may fix, in advance, a date not more than 90 (ninety) days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
SECTION 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder of the
Corporation or his agent may inspect and copy during the Corporation's usual
business hours the Corporation's By-Laws, minutes of the proceedings of its
stockholders, annual
12
<PAGE>
statements of its affairs and voting trust agreements on file at its principal
office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any person who was or
is a party or is threatened to be made a party in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, except that such indemnity shall not protect any
such person against any liability to the Corporation or any stockholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct").
SECTION 2. ADVANCES. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the full extent permissible under the Maryland General Corporation
Law, the Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force; provided however, that the person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance unless it is ultimately determined that he is entitled to
indemnification, and provided further that at least one of the following
additional conditions is met: (1) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (2) the Corporation is insured against losses arising by reason of
the advance; or (3) a majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.
13
<PAGE>
SECTION 3. PROCEDURE. At the request of any current or former director or
officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the Securities Act of 1933
and the Investment Company Act of 1940, as such statutes are now or hereafter in
force, whether the standards required by this Article V have been met; provided,
however, that indemnification shall be made only following: (1) a final decision
on the merits by a court or other body before whom the proceeding was brought
that the person to be indemnified was not liable by reason of disabling conduct
or (2) in the absence of such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified was not liable by
reason of disabling conduct, by (a) the vote of a majority of a quorum of
disinterested non-party directors or (b) an independent legal counsel in a
written opinion.
SECTION 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and agents
who are not officers or directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, in accordance
with the procedures set forth in this Article V to the extent permissible under
the Investment Company Act of 1940, the Securities Act of 1933 and the Maryland
General Corporation Law, as such statutes are now or hereafter in force, and to
such further extent, consistent with the foregoing, as may be provided by action
of the Board of Directors or by contract.
SECTION 5. OTHER RIGHTS. The indemnification provided by this Article V
shall not be deemed exclusive of any other right, in respect of indemnification
or otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of stockholders or disinterested
directors or otherwise, both as to action by a director or officer of the
Corporation in his official capacity and as to action by such person in another
capacity while holding such office or position, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
SECTION 6. INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, against any liability asserted against and incurred by
him in any such capacity, or arising out of his status as such, provided that no
insurance may be obtained by the Corporation for liabilities against which it
would not have the power to indemnify him under this Article V or applicable
law.
SECTION 7. CONSTITUENT, RESULTING OR SURVIVING CORPORATIONS. For the
purposes of this Article V, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a director,
officer,
14
<PAGE>
employee or agent of a constituent corporation or is or was serving at
the request of a constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under this Article V with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and shall bear the
name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall be fixed by the Directors.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the Investment Company Act of
1940, as amended.
15
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EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the ____ day of _______, 1995, between VALUE LINE
AMERICAN WORLDWIDE FUND, INC. a Maryland corporation (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 herein.
NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. DUTIES. The Company shall provide the Fund with such investment research,
data advice and supervision as the latter may from time to time consider
necessary for proper supervision of its funds. The Company shall act as manager
and investment adviser of the Fund and, as such, shall furnish continuously an
investment program and shall determine from time to time what securities shall
be purchased or sold by the Fund, and what portion of the assets of the Fund
shall be held uninvested, subject always to the provisions of the Fund's
Articles of Incorporation and By-Laws, to the Fund's fundamental investment
policies as in effect from time to time, and to the control and review by the
Fund's Board of Directors. The Company shall take, on behalf of the Fund, all
actions which it deems necessary to carry into effect the investment policies
determined as provided above, and to that end the Company may designate a person
or persons who are to be authorized by the Fund as the representative or
representatives of the Fund, to give instructions to the Custodian of the assets
of the Fund as to deliveries of securities and payments of cash for the account
of the Fund.
2. ALLOCATION OF CHARGES AND EXPENSES; BROKERAGE. The Company shall furnish
at its own expense all administrative services, office space, equipment and
administrative and clerical personnel necessary for managing the affairs of the
Fund. The Company shall also provide persons satisfactory to the Fund's Board
of Directors to act as officers and employees of the Fund and shall pay the
salaries and wages of all officers and employees of the Fund who are also
officers and employees of the Company or of an affiliated person (as defined in
the Investment Company Act of 1940) other than the Fund. All other costs and
expenses not expressly assumed by the Company under this Agreement, or to be
paid by the Distributor or Distributors of the shares of the Fund, shall be paid
by the Fund, including (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities; (iii)
insurance premiums for fidelity and other coverage requisite to its operations;
(iv) compensation and expenses of its directors other than those affiliated with
the Company; (v) legal, audit and
<PAGE>
fund accounting expenses; (vi) custodian and shareholder servicing agent fees
and expenses; (viii) expenses incident to the issuance of its shares against
payment therefor by or on behalf of the subscribers thereto, including printing
of stock certificates; (ix) fees and expenses incident to the registration under
the Securities Act of 1933 or under any state securities laws of shares of the
Fund for public sale and fees imposed on the Fund under the Investment Company
Act of 1940; (x) expenses of printing and mailing prospectuses, reports and
notices and proxy material to shareholders of the Fund; (xi) all other expenses
incidental to holding meetings of the Fund's shareholders; (xii) a pro rata
share, based on relative net asset value of the Fund and other investment
companies for which the Company also acts as manager and investment adviser, of
50% of the fees or dues of the Investment Company Institute; (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 directors with respect thereto.
The Company shall place purchase and sale orders for portfolio transactions of
the Fund with brokers and/or dealers including, where permitted by law, the
Fund's Distributor or affiliates thereof or of the Company, which, in the
judgment of the Company, are able to execute such orders as expeditiously as
possible and at the best obtainable price. Purchases and sales of securities
which are not listed or traded on a securities exchange shall ordinarily be
executed with primary market makers acting as principal except when it is
determined that better prices and executions may otherwise be obtained,
provided, that the Company may cause the Fund to pay a member of a securities
exchange, broker or dealer an amount of commission 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 or 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 thereunder by the
Securities and Exchange Commission. It is understood that, consistent with the
Company's fiduciary duty to the Fund, it is the intent of this Agreement to
allow the Company the widest discretion permitted by law in determining the
manner and means by which portfolio securities' transactions can be affected in
the best interests of the Fund.
3. COMPENSATION. (a) For its services and for the facilities to be furnished
as provided herein, the Fund shall pay to the Company an advisory fee payable
monthly, computed at the annual rate of .75% of the Fund's average daily net
assets during the year, pro rated for any portion of a year during which the
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
<PAGE>
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 shall continue in effect for a period
of more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually in accordance with the
Investment Company Act of 1940. This Agreement may be terminated on sixty days
written notice by either party. This Agreement shall terminate automatically in
the event of its assignment as defined in the Investment Company Act of 1940.
5. NAME OF FUND. The Company consents to the use by the Fund of the name
"Value Line American Worldwide Fund, Inc." so long, and only so long, as this
Agreement (or any agreement with any organization which has succeeded to the
business of the Company) or any extension, renewal or amendment thereof, remains
in effect. The Fund agrees that if and when no such agreement is in effect, (a)
it will cease to use said name or any name indicating or suggesting that the
Fund is advised by or otherwise connected with the Company and (b) it will not
thereafter refer to the former association between the Company and the Fund.
6. COMPANY MAY ACT FOR OTHERS. Nothing herein contained shall limit the
freedom of the Company or any affiliated person of the Company to render
investment supervisory or corporate administrative services to other investment
companies, to act as investment adviser or investment counselor to other
persons, firms or corporations, and to engage in other business activities.
7. AMENDMENT OF AGREEMENT. This Agreement may not be amended except pursuant
to a direction given by the vote of the holders of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of the Fund.
8. LIABILITY. The Company shall not be liable for any error of judgment, or
mistake of law, or any loss suffered by the Fund, in connection with the matters
to which this Agreement relates, except for loss resulting from willful
misfeasance, bad faith or gross negligence of the Company in the performance of
its duties or from
<PAGE>
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 AMERICAN WORLDWIDE FUND, INC
By:
----------------------
VALUE LINE, INC.
By:
----------------------
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
Between
VALUE LINE AMERICAN WORLDWIDE FUND, INC.
and
VALUE LINE SECURITIES, INC.
____________, 1995
Value Line Securities, Inc.
220 East 42nd Street
New York, N.Y. 10017
Dear Sirs:
VALUE LINE AMERICAN WORLDWIDE FUND, INC. (the "Fund"), a Maryland
corporation, is registered as an Investment Company under the Investment Company
Act of 1940 and has registered an indefinite number of shares of common stock
under the Securities Act of 1933, Registration Number 33-__________, to be
offered continuously for sale to the public in accordance with terms and
conditions set forth in the Prospectus included in such Registration Statement
as it may be amended from time to time.
In this connection, the Fund desires that your firm act as principal
underwriter and distributor (herein "distributor") of the Fund for the sale and
distribution of shares which have been registered as described above and any
additional shares which may become registered during the term of this Agreement.
You have advised the Fund that you are willing to act as distributor, and it is,
accordingly, agreed between us as follows:
1. The fund hereby appoints you distributor for the sale of its shares,
pursuant to the aforesaid continuous public offering in connection with any
sales made to Fund investors in any states and/or jurisdictions in which you are
or shall from time to time become qualified as a broker/dealer, or through
securities dealers with whom you have entered into sales agreements.
2. You hereby accept such appointment and agree to use your best efforts
to sell such shares, provided, however, that when requested by the Fund at any
time because of market or other economic considerations or abnormal
circumstances of any kind, you will suspend such efforts. The Fund may also
withdraw the offering of the shares at any time when required by the provisions
of any statute, order, rule or regulation of any governmental body having
jurisdiction. It is understood that you do not undertake to sell all or any
specific portion of the shares of the Fund.
3. The shares shall be sold by you at net asset value as determined in
the Fund's Prospectus effective at the time of sale. Shares may be sold
directly to prospective purchasers or through securities dealers who have
entered into sales agreement with you. However, in no event will shares be
issued prior to the receipt by us of full payment for such shares.
<PAGE>
4. You agree that the Fund shall have the right to accept or reject
orders for the purchase of shares of the Fund. Any consideration which you may
receive in connection with a rejected purchase order will be returned promptly.
In the event that any cancellation of a share purchase order, cancellation of a
redemption order or error in the timing of the acceptance of purchase or
redemption orders shall result in a gain or loss, you agree promptly to
reimburse the Fund for any amount by which losses shall exceed gains so arising;
to retain any net gains so arising for application against losses so arising in
future periods and, on the termination of this Agreement, to pay over to the
Fund the amount of any such net gains which may have accumulated. The Fund
shall register or cause to be registered all shares sold by you pursuant to the
provisions hereof in such name or names and amounts as you may request from time
to time, and the Fund shall issue or cause to be issued certificates evidencing
such shares for delivery to you or pursuant to your direction if, and to the
extent that, the shareholder requests issuance of such share certificate.
5. The Fund has delivered to you a copy of its initial Prospectus dated
as of the effective date of its Registration Statement pursuant to the
Securities Act of 1933. It agrees that it will use its best efforts to continue
the effectiveness of the Registration Statement under the Securities Act of
1933. The Fund further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data in order to
comply with the Securities Act of 1933.
6. The Fund is registered under the Investment Company Act of 1940 as an
investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of said Act.
7. You agree:
(a) That neither you nor any of your officers will take any short
position in the shares of the Fund.
(b) To furnish to the Fund any pertinent information required to be
included with respect to you as distributor within the meaning of the Securities
Act of 1933 in any reports or registration required to be filed with any
governmental authority.
(c) You will not give any information or make any representations
other than as contained in the Registration Statement or Prospectus filed under
the Securities Act of 1933, as in effect from time to time, or in any
supplemental sales literature authorized by the Fund for use in connection with
the sale of shares.
8. You shall pay all usual expenses of distribution, including
advertising and the costs of printing and mailing of Prospectuses, other than
those furnished to existing shareholders.
<PAGE>
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 Directors, including the vote of majority of the
Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act of 1940) of any such persons
cast in person at a meeting called for the purpose of voting on such approval or
by vote of the holders of a majority of the outstanding voting securities of the
Fund and by such vote of the Board of Directors.
(b) You shall have notified the Fund in writing at least sixty days
prior to the termination date that you shall not desire such continuation.
(c) We shall not have notified you in writing at least sixty days
prior to the termination date that we do not desire your continuation.
10. This Agreement may not be amended or changed except in writing and
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, but this Agreement shall not be assigned by either
party and shall automatically terminate upon its assignment.
If the foregoing is in accordance with your understanding, kindly so
indicate by signing in the space provided below.
VALUE LINE AMERICAN
WORLDWIDE FUND, INC.
By:
---------------------------
Accepted:
Value Line Securities, Inc.
- ----------------------------------
<PAGE>
EXHIBIT 14
July 1, 1993
Dear Investor,
Thank you for your interest in the Value Line Funds Individual Retirement
Account (IRA). Before reading the enclosed material please take a minute or
two to review the following highlights:
IRA REQUIREMENTS
The Tax Reform Act of 1986 changes the deductibility rules for IRA
contributions. Please refer to the disclosure statement for guidance.
- - In general, anyone who is under age 70 1/2 and gainfully employed may open
an IRA.
- - Contributions may be 100% of income or $2,000, whichever is less. The
limit on spousal IRAs is $2,250 which may be divided between the spouses'
IRAs in any manner so long as neither IRA receives more than $2,000.
- - You may contribute to your IRA between January 1 of the taxable year and
the time for filing your taxes, usually April 15, of the following year.
- - If you are a participant in another retirement plan, you may also
establish an IRA. However, your contribution may, or may not be partially or
fully tax deductible. See Disclosure Statement.
TAX DEDUCTIONS AND DEFERRALS
As a result of your tax deductible contributions, you pay no current taxes
on the amount you place in your IRA. Moreover, earnings on your IRA
contributions, both deductible and non-deductible, compound free of current
income taxes. You are only taxed when you withdraw money from an IRA,
presumably after retirement when your tax bracket should be lower.
INVESTMENT FLEXIBILITY
You can select from a variety of funds that offer growth, income, or both.
You can even use a combination of funds as part of your unique strategy. And,
should your objectives change, you may easily change investments any time,
without charge, or tax effect.
NO SALES CHARGES; LOW COSTS
There are no sales or back-end load charges. Thus, the full amount of your
contribution will be put to work building assets for the future. What's more,
our calendar year maintenance fee is substantially lower than many other plans.
VALUE LINE FUNDS
We invite you to review the past performance of our funds from the
enclosed materials.
In conclusion, the Value Line funds offer superior performance,
low-expense ratios, flexibility of choice, and the privilege of no-charge
exchangeability among funds. This makes them a logical choice for IRA plans.
Again thank you for your interest in Value Line Funds IRA.
------------------------------------------
For further information call toll-free
1-800-223-0818
------------------------------------------
<PAGE>
HOW TO ESTABLISH YOUR IRA PLAN
1. Read the Disclosure Statement, the Custodial Agreement, IRS Form 5305-A
(contained in this booklet), and the prospectus(es) for the fund(s) in which
you are interested in investing your IRA contributions.
------------------------------------------
SEE BACK COVER FOR TABLE OF CONTENTS
------------------------------------------
2. For each plan being established (each spouse must establish a separate
plan), complete the enclosed Application (form A), IRS Form 5305-A, and
Beneficiary Designation (form B). If you require extra forms, you may make
photostatic copies or request them by calling Value Line Securities, Inc.
3. For each new IRA plan established you must pay a maintenance fee. The fee
may be paid with a separate check (for better record keeping) or you can add
the fee to your contribution check. The present calendar year maintenance fee
is $10.00.
4. To transfer from an existing IRA to a Value Line Funds IRA complete the
Value Line Funds IRA Transfer Authorization (form C).
5. Mail your completed, dated and signed forms along with your contribution
and custodial fee checks (payable to National Financial Data Services (NFDS),
Agent) in the enclosed reply envelope.
6. NFDS Agent will establish an IRA plan for you which will be registered
under your name and social security number. (EXCEPT FOR FORM 5305-A, YOU WILL
NOT RECEIVE EXECUTED COPIES OF YOUR FORMS FROM THE CUSTODIAN; PLEASE KEEP
COPIES FOR YOUR RECORDS.) IRA contributions will be invested by the custodian
in accordance with the instructions contained in your application. You will
receive confirmation statements for each transaction you make, directly from
each fund in which you have invested.
7. For further information call Value Line Securities, Inc. at:
1-800-223-0818
2
<PAGE>
VALUE LINE FUNDS
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
*****
It is required that you be given this Disclosure Statement for the purpose
of insuring that you are informed and understand the nature of an Individual
Retirement Account ("IRA").
An IRA which is established on the date of receipt of a Disclosure
Statement, or less than seven days thereafter, may be revoked at any time
within seven days after the date the account is established. An IRA
established seven days or more after the date of receipt of a Disclosure
Statement may not be revoked. A revocation can be effected by mailing or
delivering a notice of revocation no later than the seventh day after the
establishment of the Account. If revoked, you are entitled to a return of the
entire amount paid for the account. A proper revocation may be mailed or
delivered to the following address:
Value Line Funds
c/o NFDS
P.O. Box 419730
Kansas City MO 64141-6730
PRINCIPAL TAX ADVANTAGES
If you qualify, each year you may contribute to your IRA as much as $2,000, or
100% of your earnings, whichever is less. An amount greater than $2,000 may
be contributed (but not deducted) if you qualify for a "Rollover
contribution" (explained in Question 11 below). Your contributions are wholly
tax deferred until withdrawn so long as you comply with all applicable IRA
laws and requirements.
Any investment gains on amounts you contribute to an IRA also accumulate
on a tax sheltered basis, if your IRA continues to qualify, until you retire
(no earlier than age 59 1/2) and unless you die sooner or become disabled.
In order for you to better understand IRAs please read the following
questions and answers. This question and answer format complies with the
Internal Revenue Service (IRS) requirement that the custodian provide you
with a Disclosure Statement describing restrictions and limitations
applicable to IRAs.
1. WHAT IS AN IRA?
The Employee Retirement Income Security Act of 1974 ("ERISA") enacted
September 2, 1974 permits any eligible individual wage earner to establish a
retirement plan solely for himself and to enjoy a tax deferred investment
program for his retirement. Such a plan is the Individual Retirement Account
("IRA"). An individual may now set aside "tax deductible" amounts in a trust
or custodial account with a financial institution which must be invested in
certain restricted investments, including mutual funds. The Value Line Funds
IRA program is designed to afford you an opportunity to invest in one or more
of the Value Line mutual funds. The Deficit Reduction Act of 1984 (DRA)
changed the rules for distributions, time for making contributions, Divorced
Individuals IRA, and Federal Estate Taxes. The changes apply to tax years
after December 31, 1984. The Tax Reform Act of 1986 (TRA-86) changed the
contribution and distribution rules for tax years after December 31, 1986.
2. WHO MAY ESTABLISH AN IRA?
Any individual (including a self-employed person, a sole proprietor or a
partner in a partnership) who receives wages or who has earnings from
personal services may establish an IRA. (However you cannot make
contributions during or after the year you reach 70 1/2.)
3
<PAGE>
3. MAY AN EMPLOYER CONTRIBUTE TO AN IRA ON BEHALF OF AN EMPLOYEE?
Yes, an employer can sponsor or arrange for an IRA program. This may be done
by bringing our program to the attention of his employees. An employer may
facilitate the program by offering a payroll deduction plan (or may make
regular contributions on behalf of participating employees).
An employer may contribute (and the employee may deduct) amounts higher
than the usual IRA limits by establishing a Simplified Employee Pension (SEP)
Plan. (The maximum contribution for a SEP is 15% of compensation to a maximum
of $30,000 per year. See IRS Form 5305-SEP.)
4. MAY HUSBAND AND WIFE ESTABLISH SEPARATE IRAs?
Yes, if both have wages or earnings from personal service, each may establish
his or her own IRA. There can be no joint IRA between husband and wife.
Thus, a husband and wife both working could each contribute up to $2,000 per
year to separate plans.
Spousal IRA
A married person who is eligible to make contributions to his own individual
retirement plan (see above) may also make contributions to an individual
retirement plan for a spouse who has earned $250, or less, during the taxable
year. In order to make a contribution to an IRA for your spouse you must also
contribute to an IRA for yourself. The maximum combined contribution is the
lesser of $2,250 or an amount equal to the compensation includible in the
working spouse's gross income for the taxable year. Remember, you cannot make
contributions to your IRA for the year you reach age 70 1/2 or any later
year. However, for any year you have compensation, you can continue to make
contributions of up to $2,000 to a spousal IRA until the year your spouse
reaches age 70 1/2.
5. CAN I HAVE MORE THAN ONE IRA?
Yes, provided that your total contributions to all the accounts do not exceed
the applicable limits (described below).
6. WHAT ARE THE CONTRIBUTION LIMITS FOR AN IRA?
Individual IRA
Your total maximum annual contribution during the tax year to this account
and to any other IRA plan is your total compensation (earned income in the
case of a self-employed person), or $2,000, whichever is less. Such
contributions are subject to the following limitations.
A contribution made on account of the tax year of the contributing
individual may be made in that year. Contributions to existing or new plans
may be made and new plans may be established as late as the time when the
individual's tax return for the year is due (EXCLUDING EXTENSIONS).
No contribution is allowed for any taxable year if you attain age 70 1/2
before the close of that taxable year. Also, no deduction is allowed for any
rollover (or transfer) contributions from another IRA plan, nor for a
rollover or distribution from any tax-favored retirement plan.
Contributions in excess of the amount deductible are called "excess
contributions". You will have to pay a 6% excise tax on any excess
contribution. If the amount of such excess contribution plus earnings on it
are refunded to you during the time allowed for filing your tax return, there
is no 6% tax on the excess contribution. A written request by the
participant for a withdrawal of excess contributions must be sent to NFDS
Agent, stating the amount of the excess contribution.
4
<PAGE>
Spousal IRA
If you are employed and your spouse is not, then you may create a Spousal IRA
whereby a separate IRA is maintained for you and a separate IRA is maintained
for your spouse. Your total contribution to the two IRAs may not exceed the
lesser of the following (a, b, or c):
(a) The working spouse's total compensation for the year.
(b) $2,250
(c) You may allocate the $2,250 between the two accounts in any proportion
as long as the contribution for either spouse does not exceed $2,000.
(d) No contribution may be made to a Spousal IRA for any year in which
your spouse has more than $250 of earned income. In this case your spouse can
set up an individual IRA (see above).
(e) No deduction is allowed for a rollover contribution to a Spousal IRA.
(f) You and your spouse must file a joint tax return.
Divorced Individuals IRA
Alimony is considered earned income for purposes of IRA contributions.
SEP-IRA
If a Simplified Employee Pension (SEP) is established (refer to "Form
5305-SEP" and the "Value Line Funds Simplified Employee Pension-Individual
Retirement Account--SEP-IRA" disclosure statement for details) 15% to a
maximum of $30,000 may be contributed and deducted. EMPLOYER CONTRIBUTIONS
MADE ON ACCOUNT OF A CALENDAR YEAR OR AN EMPLOYER'S TAXABLE YEAR MAY BE MADE
AS LATE AS THE DUE DATE (PLUS EXTENSIONS) OF THE EMPLOYER'S TAX RETURN FOR
SUCH YEAR AND BE TREATED AS IF CONTRIBUTED ON THE LAST DAY OF THAT YEAR.
6A. WHAT CHANGES WERE MADE TO IRAS BY THE TAX REFORM ACT OF 1986 (THE ACT)?
Generally, the Act limits the deductibility of IRA contributions for
certain individuals.
The Internal Revenue Service has issued a non-technical explanation
of the changes.
GENERAL DESCRIPTION OF THE TAX REFORM ACT OF 1986. PROVISIONS
AFFECTING INDIVIDUAL RETIREMENT ARRANGEMENTS.
Announcement 86-121 IRB 1986-50, dated 12-15-86
This announcement highlights some of the changes made by the Tax Reform
Act of 1986 (the Act) with respect to Individual Retirement Arrangements
(IRAs). The announcement is intended to be a non-technical explanation,
rather than a comprehensive statement of the new rules concerning IRAs.
For a non-technical explanation of the rules in effect before the new Act,
as well as an explanation of the new law, see Internal Revenue Service
Publication 590.
This announcement may be used by a master or prototype IRA sponsor to
update its disclosure statement, required by Treasury Regulations at section
1.408-6.
The service expects to publish technical guidance concerning the Act
changes to IRAs in the near future.
The non-technical explanation follows:
The Tax Reform of 1986 (which we will call the Act) makes a number of
major changes to the law governing the deductibility of contributions to
Individual Retirement Arrangements (IRAs).
5
<PAGE>
The changes made by the Act became effective January 1, 1987.
ELIGIBILITY
Under the Act, if neither you, or your spouse, is an active participant
(see A. below) you may make a contribution of up to the lesser of $2,000 (or
$2,250 in the case of a spousal IRA) or 100% of compensation and take a
deduction for the entire amount contributed. If you are an active participant
but have an adjusted gross income (AGI) below a certain level (see B. below),
you may make a deductible contribution as under current law. If, however, you
or your spouse is an active participant and your combined AGI is above the
specified level, the amount of the deductible contribution you may make to an
IRA is phased down and eventually eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a
retirement plan. You are covered by a "retirement plan" for a year if your
employer or union has a retirement plan under which money is added to your
account or you are eligible to earn retirement credits. For example, if you
are covered under a profit-sharing plan, certain government plans, a salary
reduction arrangement (such as a tax sheltered annuity arrangement or a
401(k) plan), a simplified employee pension plan (SEP) or a plan which
promises you a retirement benefit which is based upon the number of years of
service you have with the employer, you are likely to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or
voluntary employee contributions to a retirement plan, you are an active
participant. In certain plans you may be an active participant even if you
were only with the employer for part of the year.
You are not considered an active participant if you are covered in a plan
only because of your service as 1) an Armed Forces Reservist, for less than
90 days of active service, or 2) a volunteer firefighter covered for
firefighting service by a government plan whose accrued benefit under that
plan is not more than an annual benefit of $1,800. Of course, if you are
covered in any other plan, these exceptions do not apply.
If you are married but file a separate tax return and live apart at all
times during the taxable year, your spouse's active participation does not
affect your ability to make deductible contributions.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross
Income ("AGI") for the year (if you and your spouse file a joint tax return
you use your combined AGI) to determine whether you can make a deductible IRA
contribution. Your tax return will show you to calculate your AGI for this
purpose. If you are at or below a certain AGI level, called the Threshold
Level, you are treated as if you were not an active participant and can make
a deductible contribution under the same rules as a person who is not an
active participant.
If you are single, your threshold AGI level is $25,000. The Threshold
Level if you are married and file a joint tax return is $40,000, and if you
are married but file a separate tax return, the threshold level is $0.
If your AGI is less than $10,000 above your threshold level, you will
still be able to make a deductible contribution but it will be limited in
amount. The amount by which your AGI exceeds your Threshold Level
(AGI--Threshold Level) is called your Excess AGI. The maximum allowable
deduction is $2,000
6
<PAGE>
(or $2,250 for a Spousal IRA). You can estimate your Deduction Limit using the
Deduction Limit Table, or calculate it as follows:
(Your Deduction Limit may be slightly higher if you
use this formula rather than the Table)
$10,000 - Excess AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$10,000
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an
AGI of $31,619. She calculated her deductible IRA contribution as follows:
Her AGI is $31,619
Her Threshold Level is $25,000
Her Excess AGI is (AGI -- Threshold Level) or $31,619 - $25,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
---------------- x $2,000 = $676 (rounded to $680)
$10,000
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns more
than $2,000 and one is an active participant. They have a combined AGI of
$44,255. They may each contribute to an IRA and calculate their deductible
contributions to each IRA as follows:
Their AGI is $44,255
Their Threshold Level is $40,000
Their Excess AGI is (AGI - Threshold Level) or ($44,255 - $40,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So each spouse may compute his or her IRA deduction limit as follows:
$10,000 - $4,255
---------------- x $2,000 = $1,149 (rounded to $1,150)
$10,000
EXAMPLE 3: If, in example 2, Mr. Young did not earn any compensation, or elected
to be treated as earning no compensation, Mrs. Young could establish a Spousal
IRA (consisting of an account for herself and one for her husband). The amount
of deductible contributions which could be made to the two IRAs is calculated
using a Maximum Allowable Deduction of $2,250 rather than $2,000.
$10,000 - $4,225
---------------- x $2,250 = $1,293 (rounded to $1,300)
$10,000
The $1,300 can be divided between the two accounts, but neither IRA may receive
a deductible contribution of more than $1,150.
EXAMPLE 4: Mr. Jones, a married person, files a separate tax return and is an
active participant. He has $1,500 of compensation and wishes to make a
deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
7
<PAGE>
His Excess AGI is (AGI -- Threshold Level) or ($1,500 - $0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500
---------------- x $2,000 = $1,700
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr. Jones
may not deduct an amount in excess of his compensation, so, his actual
deduction is limited to $1,500.
Please note that the IRA deduction limit is $0 if: (1) you are single and your
AGI is above $35,000; (2) you are married, file a joint return, and your
combined AGI is $50,000; or (3) you are married, file separately, and your AGI
is above $10,000.
SPOUSAL IRAs
As noted in Example 3 above, under the Act you may contribute to a Spousal IRA
even if your spouse has earned some compensation during the year. Provided your
spouse does not make a contribution to an IRA, you may set up a Spousal IRA
consisting of an account for your spouse as well as an account for yourself. The
maximum deductible amount for the Spousal IRA is the lesser of $2,250 or 100% of
compensation.
NONDEDUCTIBLE CONTRIBUTIONS TO IRAs
Even if you are above the Threshold Level and thus may not make a deductible
contribution of $2,000 ($2,250 for a Spousal IRA), you may still contribute up
to the lesser of 100% of compensation or $2,000 to an IRA ($2,250 for a Spousal
IRA). The amount of your contribution which is not deductible will be a
nondeductible contribution to the IRA. You may also choose to make a
contribution non-deductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution, whether from
deductible or nondeductible contributions, will not be taxed until taken out of
your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year on IRS Form 8606.
You may make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000 without having to know how
much will be deductible. When you fill out your tax return you may then figure
out how much is deductible.
You may withdraw an IRA contribution made for a year any time before
April 15 of the following year. If you do so, you must also withdraw the
earnings attributable to that portion and report the earnings as income for
the year for which the contribution was made. If some portion of your
contribution is not deductible, you may decide either to withdraw the
nondeductible amount, or to leave it in the IRA and designate that portion as
a nondeductible contribution on your tax return.
IRA DISTRIBUTIONS
Because nondeductible IRA contributions are made using income which has already
been taxed (that is, they are not deductible contributions), the portion of the
IRA distributions consisting of non-deductible contributions will not be taxed
again when received by you. If you make any nondeductible IRA contributions,
each distribution from your IRAs will consist of a nontaxable portion (return of
non-deductible contributions) and a taxable portion (return of deductible
contributions, if any, and account earnings).
8
<PAGE>
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year:
<TABLE>
<S> <C> <C> <C> <C>
Remaining
Nondeductible Contributions X Total Distributions = Nontaxable Distributions
- ----------------------------------- (for the year) (for the year)
Year-end total IRA account balances
</TABLE>
To figure the year-end total IRA account balance you treat all of your IRAs
as a single IRA. This includes all regular IRAs, as well as Simplified Employee
Pension (SEP) IRAs, and Rollover IRAs. You also add back the distributions
taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRAs:
Year Deductible Nondeductible
---- ---------- -------------
1983 $2,000
1984 1,800
1987 1,000 $1,000
1989 600 1,400
------ ------
$5,400 $2,400
Deductible Contributions: $5,400
Nondeductible Contributions: 2,400
Earnings on IRAs: 1,200
------
Total Account Balance of IRAs as of 12/31/91: $9,000
(including distributions in 1991)
In 1991 the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/91, plus 1991 distributions, is $9,000. The
nontaxable portion of the distributions for 1991 is figured as follows:
Total nondeductible contributions
$2,400
------ X $3,000 = $800
Total account balance in the IRAs $9,000
plus distributions
Thus, $800 of the $3,000 distribution in 1991 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1991.
NOTE, THIS DISTRIBUTION CAN BE TAKEN OUT OF ANY OF YOUR IRAS IN THE
PROPORTIONS YOU CHOOSE.
ROLLOVER IRA RULES
After December 31, 1992, if you receive an "eligible rollover distribution"
from an employer's pension plan, then you may deposit that amount into a
Rollover IRA. Generally, an "eligible rollover distribution" is defined as any
distribution made to an employee of all or any portion of the balance to the
credit of the employee. Any distribution that is part of a series of
substantially equal payments made over your life expectancy or the joint life
expectancies of you and your spouse, any distribution made for a specified
period of ten years or more and any minimum required distribution is NOT an
"eligible rollover distribution." There are additional types of distributions
which also do not qualify as "eligible rollover distributions." You should check
with your attorney, accountant or other qualified tax advisor regarding taxation
as it applies to your particular situation. Information is also available from
IRS Publication 590, "Tax Information on Individual Retirement Arrangements."
9
<PAGE>
DEDUCTION LIMIT TABLE
---------------------
If your Maximum Allowable Deduction if $2,000, use this table to estimate
the amount of your contribution which will be deductible.
<TABLE>
<CAPTION>
EXCESS AGI DEDUCTION EXCESS AGI DEDUCTION EXCESS AGI DEDUCTION EXCESS AGI DEDUCTION
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 2,000.00 2,550.00 1,490.00 5,050.00 990.00 7,550.00 490.00
50.00 1,990.00 2,600.00 1,480.00 5,100.00 980.00 7,600.00 480.00
100.00 1,980.00 2,650.00 1,470.00 5,150.00 970.00 7,650.00 470.00
150.00 1,970.00 2,700.00 1,460.00 5,200.00 960.00 7,700.00 460.00
200.00 1,960.00 2,750.00 1,450.00 5,250.00 950.00 7,750.00 450.00
250.00 1,950.00 2,800.00 1,440.00 5,300.00 940.00 7,800.00 440.00
300.00 1,940.00 2,850.00 1,430.00 5,350.00 930.00 7,850.00 430.00
350.00 1,930.00 2,900.00 1,420.00 5,400.00 920.00 7,900.00 420.00
400.00 1,920.00 2,950.00 1,410.00 5,450.00 910.00 7,950.00 410.00
450.00 1,910.00 3,000.00 1,400.00 5,500.00 900.00 8,000.00 400.00
500.00 1,900.00 3,050.00 1,390.00 5,550.00 890.00 8,050.00 390.00
550.00 1,890.00 3,100.00 1,380.00 5,600.00 880.00 8,100.00 380.00
600.00 1,880.00 3,150.00 1,370.00 5,650.00 870.00 8,150.00 370.00
650.00 1,870.00 3,200.00 1,360.00 5,700.00 860.00 8,200.00 360.00
700.00 1,860.00 3,250.00 1,350.00 5,750.00 850.00 8,250.00 350.00
750.00 1,850.00 3,300.00 1,340.00 5,800.00 840.00 8,300.00 340.00
800.00 1,840.00 3,350.00 1,330.00 5,850.00 830.00 8,350.00 330.00
850.00 1,830.00 3,400.00 1,320.00 5,900.00 820.00 8,400.00 320.00
900.00 1,820.00 3,450.00 1,310.00 5,950.00 810.00 8,450.00 310.00
950.00 1,810.00 3,500.00 1,300.00 6,000.00 800.00 8,500.00 300.00
1,000.00 1,800.00 3,550.00 1,290.00 6,050.00 790.00 8,550.00 290.00
1,050.00 1,790.00 3,600.00 1,280.00 6,100.00 780.00 8,600.00 280.00
1,100.00 1,780.00 3,650.00 1,270.00 6,150.00 770.00 8,650.00 270.00
1,150.00 1,770.00 3,700.00 1,260.00 6,200.00 760.00 8,700.00 260.00
1,200.00 1,760.00 3,750.00 1,250.00 6,250.00 750.00 8,750.00 250.00
1,250.00 1,750.00 3,800.00 1,240.00 6,300.00 740.00 8,800.00 240.00
1,300.00 1,740.00 3,850.00 1,230.00 6,350.00 730.00 8,850.00 230.00
1,350.00 1,730.00 3,900.00 1,220.00 6,400.00 720.00 8,900.00 220.00
1,400.00 1,720.00 3,950.00 1,210.00 6,450.00 710.00 8,950.00 210.00
1,450.00 1,710.00 4,000.00 1,200.00 6,500.00 700.00 9,000.00 200.00
1,500.00 1,700.00 4,050.00 1,190.00 6,550.00 690.00 9,050.00 200.00
1,550.00 1,690.00 4,100.00 1,180.00 6,600.00 680.00 9,100.00 200.00
1,600.00 1,680.00 4,150.00 1,170.00 6,650.00 670.00 9,150.00 200.00
1,650.00 1,670.00 4,200.00 1,160.00 6,700.00 660.00 9,200.00 200.00
1,700.00 1,660.00 4,250.00 1,150.00 6,750.00 650.00 9,250.00 200.00
1,750.00 1,650.00 4,300.00 1,140.00 6,800.00 640.00 9,300.00 200.00
1,800.00 1,640.00 4,350.00 1,130.00 6,850.00 630.00 9,350.00 200.00
1,850.00 1,630.00 4,400.00 1,120.00 6,900.00 620.00 9,400.00 200.00
1,900.00 1,620.00 4,450.00 1,110.00 6,950.00 610.00 9,450.00 200.00
1,950.00 1,610.00 4,500.00 1,100.00 7,000.00 600.00 9,500.00 200.00
2,000.00 1,600.00 4,550.00 1,090.00 7,050.00 590.00 9,550.00 200.00
2,050.00 1,590.00 4,600.00 1,080.00 7,100.00 580.00 9,600.00 200.00
2,100.00 1,580.00 4,650.00 1,070.00 7,150.00 570.00 9,650.00 200.00
2,150.00 1,570.00 4,700.00 1,060.00 7,200.00 560.00 9,700.00 200.00
2,200.00 1,560.00 4,750.00 1,050.00 7,250.00 550.00 9,750.00 200.00
2,250.00 1,550.00 4,800.00 1,040.00 7,300.00 540.00 9,800.00 200.00
2,300.00 1,540.00 4,850.00 1,030.00 7,350.00 530.00 9,850.00 200.00
2,350.00 1,530.00 4,900.00 1,020.00 7,400.00 520.00 9,900.00 200.00
2,400.00 1,520.00 4,950.00 1,010.00 7,450.00 510.00 9,950.00 200.00
2,450.00 1,510.00 5,000.00 1,000.00 7,500.00 500.00 10,000.00 0.00
2,500.00 1,500.00
</TABLE>
Excess AGI = Your AGI minus your Threshold Level:
if you are single, your Threshold Level is $25,000.
If you are married, your Threshold Level is $40,000. If you
are married and file a separate tax form, your Excess AGI = your AGI.
10
<PAGE>
7. HOW IS THE MONEY I CONTRIBUTE TO MY IRA INVESTED?
According to your directions. The contributions you make are invested in one
or more of the funds distributed by Value Line Securities Inc. and fully
described in the prospectuses contained in this kit. At your discretion, you
may change selection and/or reallocate percentages allocated to each fund in
your account.
8. ARE THERE ANY TAX BENEFITS DERIVED FROM ESTABLISHING AN IRA?
Yes, all, or part, of your contributions to your IRA may be tax deductible
(see paragraph 6A., above). You may take this deduction on your federal
income tax return even if you do not itemize deductions. However, you cannot
deduct amounts contributed during a tax year if you have reached age 70 1/2
before the close of that year.
Each fund's dividends from net investment income and distributions from
realized capital gains, if any, are automatically reinvested in additional
shares in your account. The amounts paid as dividends and capital gains are
tax sheltered under your plan and no taxes are payable on them until
distributions are made from your plan. (Dividends are paid from dividends
and interest income accumulated from the funds' portfolio securities after
deduction for expenses. Capital gains are derived from sales of the funds'
portfolio securities which result in a net realized gain.) Additional
information on dividends and capital gains distributions is in the
prospectus.
9. ARE THERE ANY LIMITATIONS ON THE INVESTMENT OF MY IRA ACCOUNT?
Yes, no part of any IRA may be invested in life insurance contracts, or
"collectibles": art works, rugs, antiques, metals, gems, stamps, coins
(except for certain United States Treasury issues), alcoholic beverages and
certain other tangible personal property.
10. WILL MY IRA ASSETS BE MIXED OR COMMINGLED WITH OTHER PROPERTY?
No, the Custodian bank will purchase one or more of the Value Line mutual
funds selected by you and hold all investments in a separate account solely
for your benefit.
11. WHAT IS A ROLLOVER, OR ROLLOVER CONTRIBUTION? WHAT ARE ITS TAX EFFECTS?
A rollover or rollover contribution is a transfer of certain kinds of
distributions from qualified plans, tax sheltered annuities and individual
retirement plans following the rules set out in the IRS Code and Regulations.
Distributions which are rolled over according to these rules are not included
in gross income until receipt at some time in the future. The rules for the
rollover of distributions from qualified retirement plans and tax sheltered
annuities received prior to 1993 differ from the rules for the rollover of
distributions from these plans received after 1992. Once property is rolled
over to another retirement plan it is subject to the tax treatment given that
plan. Thus by rolling over a lump sum distribution from a qualified plan to
an individual retirement plan, the employee loses the special tax treatment
afforded lump sum distributions from qualified plans. However, if a
distribution is rolled into another qualified plan, the benefit of special
lump sum treatment becomes available again in the event of another lump sum
distribution.
- -------------------------------------------------------------------------------
IMPORTANT: Since the tax laws are always subject to changes and
interpretations, we recommend that you refer to the latest version of
Internal Revenue Publication 590, "Tax Information on Individual Retirement
Arrangements" for the most current information on rollover contributions.
- -------------------------------------------------------------------------------
An individual has 60 days from his receipt of the distribution to make his
rollover contribution. Where a lump sum or terminating distribution is
received in installments, receipt is deemed to occur on the day that the last
payment completing the distribution is received. However, amounts received
11
<PAGE>
as portions of a lump sum distribution may be immediately rolled over so long
as the final payment is rolled over on or before the 60th day after the day
on which it was received.
The maximum amount of the distribution which may be rolled over is the
fair market value of all the money and property received, reduced by amounts
deemed to be non-deductible employee contributions. You may roll over
tax-free the part of the distribution that is due to your deductible
voluntary payments to the plan. However, a participant does not need to roll
over the maximum amount. A participant may make a partial rollover; that is,
he may roll over any part up to the maximum amount. Any amount not rolled
over will be taxed as a distribution from the plan without special lump sum
distribution tax treatment.
Rollover contributions may be divided among several individual retirement
plans. These may be either existing plans or plans newly created to receive
the rollover. A rollover may be made from a qualified plan even though the
participant is an active participant in another plan.
An individual who has attained age 70 1/2 may make a rollover to an
individual retirement plan. Such rollovers may be made to individual
retirement accounts so long as the distribution requirements set forth in the
regulations are met.
KEOGH PLANS AND ROLLOVERS. You may roll over a lump-sum distribution from
a Keogh plan into an IRA. To qualify, you must have reached 59 1/2 or be
permanently disabled.
If you are under 59 1/2 and are not disabled, a distribution from your
Keogh plan is not a lump-sum distribution. You therefore cannot roll it over
to an IRA. However, if you end your Keogh plan, you may take the complete
distribution and roll it over to an IRA tax-free even though you are under
59 1/2 and not disabled.
If your IRA contains assets that were rolled over from a Keogh Plan (and
you were self-employed) you may not later roll over these assets into a
qualified pension plan.
ROLLOVER FROM A TAX-SHELTERED ANNUITY. You may roll over all or part of a
lump-sum distribution from a tax-sheltered annuity, but not a distribution on
account of termination of the contract if you are not 59 1/2, did not leave
your job, or the distribution is not account of death or disability.
ROLLING OVER A DISTRIBUTION BACK INTO ANOTHER PLAN. If you receive a
distribution from your employer's plan and roll it over to an IRA, you may
later roll over those assets into a new similar type employer's plan. You
must roll over these assets within 60 days of the date of your receipt of the
IRA distribution. Your IRA serves as a holding area or conduit for those
assets. However, you may roll over those assets into another qualified
employer's plan only if they are made up of funds received from the first
employer's plan and earnings on these funds, and you did not mix regular
payments or funds from other sources with them.
12. HOW OFTEN MAY I MAKE A ROLLOVER FROM ONE IRA INTO ANOTHER IRA?
Only one rollover from any individual retirement account or annuity to any
other individual retirement plan may be made in any 1-year period. Where
the trustee of an IRA transfers the account to a second trustee at the
request of the owner, no distribution takes place and therefore no rollover
contribution has been made to a second IRA. Similarly, the trustee-to-trustee
transfer of funds in an ordinary IRA to an IRA which was part of a simplified
employee pension is not a rollover.
13. WHAT ARE THE VARIOUS CIRCUMSTANCES AND REQUIREMENTS FOR DISTRIBUTION?
Normal Distributions
The law permits distributions to be made from a Regular IRA, Spousal or
SEP-IRA anytime after the covered individual attains age 59 1/2 and requires
that distributions commence no later than April 1 following the year in which
the participant reaches age 70 1/2. Distribution may be in the form of a
single
12
<PAGE>
payment or in substantially equal monthly, quarterly, or annual payments over
a period not extending beyond the individual's life expectancy or the life
expectancy of the individual and the individual's spouse.
Distribution of Funds in the Event of the Covered Individual's Death
If the covered individual dies before the entire fund has been
distributed, or if the individual's spouse is receiving payments and dies
before the entire fund has been distributed, the remaining funds in the
account must either be distributed within five (5) years after the death of
the individual or the individual's spouse or in annual amounts over the life
of the designated beneficiary or over a period not extending beyond the life
expectancy of the designated beneficiary. All distributions are taxed at
ordinary income rates in the year received.
Premature Distributions
An IRA is intended to provide income for the covered individual upon
retirement. Accordingly, the law generally imposes a penalty on premature
distributions. If the individual for whose benefit a Regular IRA, Spousal
IRA or SEP-IRA is established receives a taxable distribution from his or her
account before reaching age 59 1/2, it will be taxed as ordinary income and
will also be subject to an additional 10% penalty tax. The 10% additional
tax does not apply in the case of a qualifying rollover distribution or where
an excess contribution is timely withdrawn.
Minimum Distribution Requirement
If after the covered individual attains age 70 1/2 the amount distributed
to such individual is less than the minimum amount required by law to be
distributed, a 50% excise tax may be imposed on any such deficiency. The
Internal Revenue Service may waive this penalty if the deficiency was due
to a reasonable error and reasonable steps are being taken to correct the
deficiency.
14. WHAT ARE THE PENALTIES FOR PROHIBITED TRANSACTIONS AND PLEDGING FOR
COLLATERAL OR BORROWING AGAINST AN IRA?
Prohibited Transactions
If during any taxable year you engage in a so-called "prohibited
transaction" with respect to your regular IRA, Spousal IRA or SEP-IRA, the
account will lose its tax-exempt status. In this event, the fair market
value of all account assets, valued as of the first day of such taxable year,
will be deemed distributed to you and includible in your gross income. These
prohibited transactions would include borrowing money from your account or
pledging your account on any portion thereof as security for a loan. If you
pledge your account or any portion thereof as security for a loan, such
pledge portion will be deemed distributed to you and includible in your fross
income. If you have not yet attained age 59 1/2, an additional excise tax
equal to 10% of the amount pledged will be imposed on such funds includible
in gross income. Similarly, if your spouse engages in a prohibited
transaction with respect to his or her account, it will result in the same
consequences because he or she is the individual for whose benefit the
account was established.
15. ARE IRAS SUBJECT TO FEDERAL ESTATE AND GIFT TAXES?
Distributions under a Regular IRA, Spousal IRA or SEP-IRA to a beneficiary
other than a spouse are not exempt from federal estate taxes. An election
under a Regular IRA, Spousal IRA or SEP-IRA to have a distribution payable to
a beneficiary on the death of the covered individual will not be treated as a
gift subject to gift tax. (Also see Question 17A, below.)
16. IS THERE ANY WAY I CAN FORFEIT MY IRA?
You may not transfer ownership of your IRA plan without disqualifying it.
You have a vested interest in your entire account which is total, immediate
and nonforfeitable. (See 14, above.)
13
<PAGE>
17. WHEN DO I PAY TAX ON MY IRA? CAN I OBTAIN A "QUALIFIED" LUMP SUM
DISTRIBUTION?
Contributions to your IRA and the earnings thereon are not taxed until you
actually or constructively receive payment from the account. If you receive
the entire amount in a lump sum, you include this amount as ordinary income
in your tax return for the year of receipt. Current regulations (relating to
taxes on "qualified" lump sum distributions and permitting 10 year income
averaging and/or capital gains treatment and 5 year averaging) are not
applicable to IRA distributions. If you elect to receive installment
distributions, you pay taxes only on the installment received each year.
Naturally, if you receive payments during your retirement years, you will
probably pay less taxes than you would have paid if your contributions were
saved and invested in a non-tax sheltered savings account or other
investments. Generally, a retired person has less income during his
retirement years; therefore, the income he receives is taxed at a lower rate
than income earned during pre-retirement years. Further, there is an
additional personal exemption for an individual over age 65.
17A. ARE THERE ANY OTHER TAXES ON RETIREMENT PLAN DISTRIBUTIONS?
EXCISE TAX. A 15% excise tax will be imposed on "excess" distributions (all
"retirement distributions" i.e., all amounts received during the taxable
year, from any (a) qualified plan (b) tax deferred annuity, (c) IRA, or
(d) SEP plan exceeding the greater of (1) $150,000 or (2) $112,500, as indexed
($144,551 for 1993).
Lump sum qualified plan distributions are also subject to the tax. If the
lump sum received qualifies for favorable long term capital gains or
favorable income averaging, only the portion of the lump sum in excess of
$562,500 will be subject to the tax (technically the ceiling is five times
the annual limit, whatever that amount is).
A special grandfather rule, which must have been elected, can remove
amounts accrued prior to August 1, 1986 from the tax on excess distributions.
The election was allowed only if the accrued benefit on August 1, 1986
exceeded $562,500. The election must be made on a tax return for a year
beginning no later than January 1, 1988. If a timely election was not made or
if a participant on August 1, 1986 had an accrued benefit of less than
$562,500, he or she will have a $150,000 exemption.
ESTATE TAX. Effective with respect to estates of decedents dying after
December 31, 1986, an additional estate tax is imposed. This 15% tax is
imposed on an individual's "excess retirement accumulation." An excess
retirement accumulation is the excess-if-any-of-all-the-decedent's interests
in any (1) qualified plan, (2) tax deferred annuity, and (3) IRA over the
present value of the greater of (1) $150,000 or (2) $112,500, as indexed
(again, for 1993 the limit is $144,551) X the individual's life expectancy
actuarially measured immediately before death.
18. MUST THE IRS APPROVE MY IRA UNDER THE VALUE LINE FUNDS PROGRAM?
No, because the Value Line Funds IRA utilizes the model IRS Individual
Retirement Custodial Account Form (5305-A), which does not require further
approval and may be used by an eligible individual who desires to adopt our
IRA plan without the necessity of submitting an adoption form for IRS
approval. The IRS approval is a determination only as to the form and does
not represent a determination of the merits of the investment of the IRA
account.
19. WHAT IRS FILING REQUIREMENTS MUST BE MET BY AN INDIVIDUAL RETIREMENT
PLAN PARTICIPANT?
An individual who establishes an individual retirement plan does not need
to file a Form 5329 in a year beginning when there is no plan activity other
than making contributions (including rollover contributions) and permissible
distributions. He does need to file the return if there is a tax due because
of a premature distribution, excess distribution, excess contribution, or
excess accumulation. (However, an individual making a rollover contribution
from his pension plan to an individual retirement plan must report the
rollover on his Form 1040 tax return.)
14
<PAGE>
20. ARE THERE ANY FEES OR CHARGES IN CONNECTION WITH ESTABLISHING AN IRA
ACCOUNT WITH VALUE LINE FUNDS IRA?
The Custodian Bank's fees are presently as set forth in the schedule
below. You may enclose a separate check for the initial fees; otherwise, they
will be deducted from your first contribution. After the first year the Bank
takes its annual maintenance fee by liquidating sufficient full and/or
fractional mutual fund shares from your account.
For the establishment of each new IRA account, a check in the amount of
$10.00 should accompany the application form to cover the calendar year's
maintenance fee. If you itemize deductions you may be able to deduct this
maintenance fee in addition to your maximum $2,000 contribution. Please
consult your tax advisor.
----------------------------------------
CUSTODIAN BANK FEES AMOUNT
Calendar Year Maintenance $10.00
Each Non-Periodic Withdrawal 5.00
Each Periodic Withdrawal 1.50
----------------------------------------
All of the Value Line Funds are "no-load," that is, there are no sales
charges. In addition there are no charges to switch (exchange) from fund to
fund. However, there are management fees and other costs which are explained
in the Value Line Funds' prospectuses.
21. HOW DO I ESTABLISH AN IRA ACCOUNT?
Complete the Application, Beneficiary and 5305-A forms contained in this
IRA Kit. Make sure you provide all the information requested (including
investment directions) and sign where indicated. (You will not receive back
copies of the Application or Beneficiary forms).
You will receive confirmation of your investments and the IRS form 5305-A,
countersigned by the custodian. Refer to "How to Establish Your IRA Plan" on
page 2 of this booklet.
22. HOW DO I MAKE SUBSEQUENT PAYMENTS AND FUND EXCHANGES ONCE MY IRA PLAN IS
ESTABLISHED?
You must send checks and clear investment instructions to the custodian.
Send check (made payable to NFDS Agent), with your instructions and complete
account information to:
--------------------------
Value Line Funds
c/o NFDS
P.O. Box 419730
Kansas City, MO 64141-6730
--------------------------
You may make exchanges (switches) among the Value Line funds by making a
written request to the Custodian (no signature guarantee is required). Refer
to the "Investor Services" or "Exchanges of Shares ($1,000 minimum)" section
of the current fund prospectuses for details.
15
<PAGE>
You may also make fund exchanges by making telephone requests if you have
checked the "Telephone/Telegram Exchange" box (section 4) on the Application
(form A). To make exchanges call NFDS before 4:00 P.M., New York time at:
USA and Canada: 1-800-243-2729
23. WILL I RECEIVE OTHER INFORMATION EXPLAINING THE DETAILS AND CHANGES IN MY
IRA? HOW ARE ANNUAL EARNINGS ALLOCATED TO MY IRA ACCOUNT?
You will be given statements which describe, in understandable language,
any amendments made to the IRA Plan within 30 days after such changes are
adapted. Also, each year you will receive an account statement informing you
of the exact amount of contributions, earnings, distributions and total value
of your account at the end of the year.
The year-end net asset value of each selected Value Line mutual fund is
the value of the Fund's assets less liabilities computed on each December 31
in the manner described in the Fund's current prospectus. The net asset value
per share is the amount computed as above divided by the number of shares
outstanding. As with all mutual funds, growth in the value of your account
cannot be projected or guaranteed. Any dividends, capital gains and other
distributions paid by each Fund are automatically reinvested at net asset
value in full and fractional Fund shares computed to the third decimal place.
24. WHAT INFORMATION MUST BE PROVIDED TO ME BEFORE I ESTABLISH AN IRA
ACCOUNT? HOW MUCH TIME AM I PERMITTED TO REVOKE A PLAN?
A "disclosure statement" and a copy of the governing instrument must be
furnished to the individual at least 7 days before the plan is purchased or
established, whichever is earlier, if the individual is permitted to revoke
the plan within at least 7 days. An individual revoking his plan is entitled
to return of the full amount he paid without adjustment for administrative
expenses, or fluctuation in market value.
- --------------------------------------------------------------------------------
CAUTION: VALUE LINE SECURITIES INC., AND NFDS, DO NOT GIVE LEGAL OR TAX
ADVICE. THE COMMENTS IN THIS BROCHURE ON TAX TREATMENT SIMPLY REFLECT
OUR UNDERSTANDING OF CURRENT INTERPRETATIONS OF THE TAX LAWS AS THEY
RELATE TO IRAS. SINCE THE TAX LAWS ARE ALWAYS SUBJECT TO
INTERPRETATION AND POSSIBLE CHANGES IN THE FUTURE, WE RECOMMEND THAT
YOU SEEK THE COUNSEL OF YOUR ATTORNEY, ACCOUNTANT, OR OTHER QUALIFIED
TAX ADVISOR REGARDING TAXATION AS IT APPLIES TO YOUR PARTICULAR
SITUATION. YOU MAY ALSO OBTAIN INFORMATION FROM ANY DISTRICT OFFICE
OF THE INTERNAL REVENUE SERVICE AND/OR IRA PUBLICATION 590, "TAX
INFORMATION ON INDIVIDUAL RETIREMENT ARRANGEMENTS."
16
<PAGE>
Form 5305-A DO NOT FILE
(Rev. October 1992) INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT WITH THE
Department of the Treasury (UNDER SECTION 408(a) OF THE INTERNAL
Internal Revenue Service INTERNAL REVENUE CODE) REVENUE
SERVICE
- -------------------------------------------------------------------------------
Name of depositor Date of birth of depositor Identifying number
(see instructions)
- -------------------------------------------------------------------------------
Address of depositor
Check if Amendment -----
- -------------------------------------------------------------------------------
Name of custodian Address or principal place of business
of custodian
STATE STREET BANK & TRUST CO. P.O. BOX 2213 BOSTON MA. 02107
- -------------------------------------------------------------------------------
The Depositor whose name appears above is establishing an individual
retirement account under section 408(a) to provide for his or her retirement
and for the support of his or her beneficiaries after death.
The Custodian named above has given the Depositor the disclosure statement
required under Regulations section 1.408-6.
The Depositor assigned the custodial account ..................... dollars
($ .................... ) in cash.
The Depositor and the Custodian make the following agreement:
- -------------------------------------------------------------------------------
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including
the incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor lives
of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with paragraph
3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary
or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
- -------------------------------------------------------------------------------
17 Form 5305-A (Rev. 10-92)
<PAGE>
Form 5305-A (Rev. 10-92) Page 2
- -------------------------------------------------------------------------------
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial
account as of the close of business on December 31 of the preceding year by
the life expectancy of the Depositor (or the joint life and last survivor
expectancy of the Depositor and the Depositor's designated beneficiary, or
the life expectancy of the designated beneficiary, whichever applies). In the
case of distributions under paragraph 3, determine the initial life
expectancy (or joint life and last survivor expectancy) using the attained
ages of the Depositor and designated beneficiary as of their birthdays in the
year the Depositor reaches age 70 1/2. In the case of a distribution in
accordance with paragraph 4(b)(ii), determine life expectancy using the
attained age of the designated beneficiary as of the beneficiary's birthday
in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section
408(i) and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
- -------------------------------------------------------------------------------
NOTE: THE FOLLOWING SPACE (ARTICLE VIII) MAY BE USED FOR ANY OTHER
PROVISIONS YOU WANT TO ADD. IF YOU DO NOT WANT TO ADD ANY OTHER
PROVISIONS, DRAW A LINE THROUGH THIS SPACE. IF YOU DO ADD PROVISIONS,
THEY MUST COMPLY WITH APPLICABLE REQUIREMENTS OF STATE LAW AND THE
INTERNAL REVENUE CODE.
- -------------------------------------------------------------------------------
ARTICLE VIII
- -------------------------------------------------------------------------------
Depositor's signature .................................. Date .................
Custodian's signature .................................. Date .................
Witness .......................................................................
(Use only if signature of the Depositor or the Custodian is required
to be witnessed.)
- -------------------------------------------------------------------------------
GENERAL INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE UNLESS OTHERWISE NOTED.)
PURPOSE OF FORM
Form 5305-A is a model custodial account agreement that meets the
requirements of section 408(a) and has been automatically approved by the
IRS. An individual retirement account (IRA) is established after the form is
fully executed by both the individual (Depositor) and the Custodian and must
be completed no later than the due date of the individual's income tax return
for the tax year (without regard to extensions). This account must be created
in the United States for the exclusive benefit of the Depositor or his or her
beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get
from your custodian, get Pub. 590, Individual Retirement Arrangements (IRAs).
DEFINITIONS
CUSTODIAN.--The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to
act as custodian.
DEPOSITOR.--The Depositor is the person who establishes the custodial account.
IDENTIFYING NUMBER
The depositor's social security number will serve as the identification
number of his or her IRA. An employer identification number is required only
for an IRA for which a return is filed to report unrelated business taxable
income. An employer identification number is required for a common fund
created for IRAs.
IRA FOR NONWORKING SPOUSE
Form 5305-A may be used to establish the IRA custodial account for a
nonworking spouse.
Contributions to an IRA custodial account for a nonworking spouse must be
made to a separate IRA custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV.--Distributions made under this article may be made in a single
sum, periodic payment, or a combination of both. The distribution option
should be reviewed in the year the Depositor reaches age 70 1/2 to ensure
that the requirements of section 408(a)(6) have been met.
ARTICLE VIII.--Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
NOTE: FORM 5305-A MAY BE REPRODUCED AND REDUCED IN SIZE FOR ADOPTION TO
PASSBOOK PURPOSES.
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18
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Form 5305-A DO NOT FILE
(Rev. October 1992) INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT WITH THE
Department of the Treasury (UNDER SECTION 408(a) OF THE INTERNAL
Internal Revenue Service INTERNAL REVENUE CODE) REVENUE
SERVICE
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Name of depositor Date of birth of depositor Identifying number
(see instructions)
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Address of depositor
Check if Amendment -----
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Name of custodian Address or principal place of business
of custodian
STATE STREET BANK & TRUST CO. P.O. BOX 2213 BOSTON MA. 02107
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The Depositor whose name appears above is establishing an individual
retirement account under section 408(a) to provide for his or her retirement
and for the support of his or her beneficiaries after death.
The Custodian named above has given the Depositor the disclosure statement
required under Regulations section 1.408-6.
The Depositor assigned the custodial account ..................... dollars
($ .................... ) in cash.
The Depositor and the Custodian make the following agreement:
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ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including
the incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor lives
of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with paragraph
3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary
or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
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19 Form 5305-A (Rev. 10-92)
<PAGE>
Form 5305-A (Rev. 10-92) Page 2
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5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial
account as of the close of business on December 31 of the preceding year by
the life expectancy of the Depositor (or the joint life and last survivor
expectancy of the Depositor and the Depositor's designated beneficiary, or
the life expectancy of the designated beneficiary, whichever applies). In the
case of distributions under paragraph 3, determine the initial life
expectancy (or joint life and last survivor expectancy) using the attained
ages of the Depositor and designated beneficiary as of their birthdays in the
year the Depositor reaches age 70 1/2. In the case of a distribution in
accordance with paragraph 4(b)(ii), determine life expectancy using the
attained age of the designated beneficiary as of the beneficiary's birthday
in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section
408(i) and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
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NOTE: THE FOLLOWING SPACE (ARTICLE VIII) MAY BE USED FOR ANY OTHER
PROVISIONS YOU WANT TO ADD. IF YOU DO NOT WANT TO ADD ANY OTHER
PROVISIONS, DRAW A LINE THROUGH THIS SPACE. IF YOU DO ADD PROVISIONS,
THEY MUST COMPLY WITH APPLICABLE REQUIREMENTS OF STATE LAW AND THE
INTERNAL REVENUE CODE.
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ARTICLE VIII
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Depositor's signature .................................. Date .................
Custodian's signature .................................. Date .................
Witness .......................................................................
(Use only if signature of the Depositor or the Custodian is required
to be witnessed.)
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GENERAL INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE UNLESS OTHERWISE NOTED.)
PURPOSE OF FORM
Form 5305-A is a model custodial account agreement that meets the
requirements of section 408(a) and has been automatically approved by the
IRS. An individual retirement account (IRA) is established after the form is
fully executed by both the individual (Depositor) and the Custodian and must
be completed no later than the due date of the individual's income tax return
for the tax year (without regard to extensions). This account must be created
in the United States for the exclusive benefit of the Depositor or his or her
beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get
from your custodian, get Pub. 590, Individual Retirement Arrangements (IRAs).
DEFINITIONS
CUSTODIAN.--The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to
act as custodian.
DEPOSITOR.--The Depositor is the person who establishes the custodial account.
IDENTIFYING NUMBER
The depositor's social security number will serve as the identification
number of his or her IRA. An employer identification number is required only
for an IRA for which a return is filed to report unrelated business taxable
income. An employer identification number is required for a common fund
created for IRAs.
IRA FOR NONWORKING SPOUSE
Form 5305-A may be used to establish the IRA custodial account for a
nonworking spouse.
Contributions to an IRA custodial account for a nonworking spouse must be
made to a separate IRA custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV.--Distributions made under this article may be made in a single
sum, periodic payment, or a combination of both. The distribution option
should be reviewed in the year the Depositor reaches age 70 1/2 to ensure
that the requirements of section 408(a)(6) have been met.
ARTICLE VIII.--Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
NOTE: FORM 5305-A MAY BE REPRODUCED AND REDUCED IN SIZE FOR ADOPTION TO
PASSBOOK PURPOSES.
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20
<PAGE>
APPENDIX "A" INCORPORATED INTO ARTICLE VIII OF IRS FORM 5305-A AGREEMENT
FOR VALUE LINE FUNDS IRA BETWEEN CUSTODIAN AND DEPOSITOR
1. THIS ARTICLE IS PART OF IRS FORM 5305-A.
DEPOSITOR'S SELECTION OF MUTUAL FUND
Depositor directs Custodian to invest all custodial funds in investment
shares issued by the Mutual Fund designated by Depositor until Depositor
hereafter gives Custodian contrary instructions pursuant to Article VIII,
paragraph ("para.") 6 below, which governs investment of the custodial account
in "Mutual Fund" shares.
3. OPENING CONTRIBUTION
(a) INITIAL PERIODIC CONTRIBUTION. Initial contributions hereunder shall be
in cash and are to be invested under this Agreement, which Depositor intends to
be tax-deductible. Depositor contemplates future periodic contributions within
the tax-deductible limits and in accordance with the rules for tax-deductibility
specified in the Internal Revenue Code. Depositor assumes full and sole
responsibility for making sure that the sum of periodic contributions during a
single taxable year of Depositor do not exceed those limits or violate those
rules. Depositor should not contribute after the custodial account ceases to be
exempt by reason of either section 408(e) or 415(g) of the Internal Revenue
Code.
(b) ROLLOVER CONTRIBUTION. A rollover contribution by Depositor shall be a
one-time deposit in cash to be invested under this Agreement. DEPOSITOR AGREES
THAT NO ADDITIONAL CONTRIBUTIONS WILL BE MADE, EXCEPT AS OTHERWISE PERMITTED BY
VALUE LINE SECURITIES INC., AND, AS TO ANY SUCH ADDITIONAL CONTRIBUTIONS,
DEPOSITOR WARRANTS:
(1) that the entire such amount is a "rollover contribution" received within
sixty (60) days prior to reinvestment hereunder by Depositor as an eligible
rollover distribution within one taxable year from an employees' trust, an
employee annuity, an annuity contract, another individual retirement account or
individual retirement annuity, a qualified bond purchase plan, or a U.S.
retirement bond, as described in Internal Revenue Code Sections 402(a)(5),
402(a)(7), 403(a)(4), 403(b)(8), 405(d)(3), 408(d)(3), 409(b)(3)(C), or other
applicable law. With regard to rollover contributions made on or after January
1, 1993, Depositor warrants that the entire such amount is a rollover
contribution as described in Internal Revenue Code Sections 402(c), 403(a)(4),
403(b)(8), 403(d)(3), or an employer contribution to a pension as described in
Section 408(k);
(2) that in the case of a rollover from an employees' trust or employee
annuity, only the excess of the lump-sum distribution over amounts
contributed thereto by Depositor makes up this rollover contribution, and no
part of such distribution to Depositor consisted of property other than cash;
(3) within one (1) year of receiving such distribution, Depositor did not
receive another distribution thereof which in turn constituted a "rollover"
referred to in Code section 408(d)(3)(B); and
(4) the contribution as made satisfies all the requirements for rollover
contributions as set forth under the Internal Revenue Code.
If permitted by Value Line Securities Inc., rollover contributions may be
received under this Agreement with respect to qualified voluntary employee
contributions as defined in Code section 219(e)(2) and such contributions shall
thereafter be held and administered hereunder by the Custodian in accordance
with all applicable law with respect to accumulated deductible employee
contributions as defined in Code section 72(o)(5)(8).
4. TAX AND OTHER LEGAL MATTERS
DEPOSITOR ACKNOWLEDGES HAVING READ THE SECTIONS ENTITLED "INSTRUCTIONS"
AT BOTTOM OF PAGE 2 OF I.R.S. FORM 5305-A (of which this is a part), which
describe some of the tax and other matters important to Depositor.
5. CUSTODIAN'S FEES
(a) Custodian shall be entitled to receive such reasonable fees with
respect to the establishment and administration of this custodial account as are
established by it from time to time. The present fee schedule is given in
Section 5, of the application.
(b) Upon thirty (30) days' prior written notice, Custodian may change its
fee schedule.
Custodian's fees, any income, gift, estate and inheritance taxes and other
taxes of any kind whatsoever, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the custodial account, that
may be levied or assessed in respect to such assets, and all other
administrative expense incurred by Custodian in the performance of its
duties including fees for legal services rendered to Custodian, may be
charged to the custodial account, with the right to liquidate Mutual Fund
shares for this purpose, or (at Custodian's option) to the Depositor.
6. CUSTODIAL ACCOUNT
(a) This Agreement shall take effect only which accepted and signed by
Custodian. As directed, Custodian shall then open and maintain a separate
custodial account for Depositor and invest the initial contribution hereunder
in shares of the Mutual Fund designated by Depositor in the IRA application.
"Mutual Fund" means a regulated investment company as defined in Internal
Revenue Code section 851(a).
(b) Every subsequent contribution shall be invested in accordance with
instructions authorized by Depositor indicating Depositor's choice of the Mutual
Fund named in the applicable list available from the distributor of the shares
of any Mutual Fund invested in hereunder either originally or thereafter.
Depositor agrees that the listing shall not be construed as an endorsement by
Custodian of the Mutual Funds in which contributions may be invested, final
choice of which is in the sole discretion of Depositor. The Custodian does not
undertake to render any investment advice whatsoever to Depositor; its sole
duties are those prescribed in Article VIII, para. 8(c).
(c) The Custodian shall invest subsequent contributions as directed.
However, if any such instructions authorized by Depositor are not received as
required, or if received, are in the opinion of Custodian unclear, or if the
accompanying contribution exceeds $2,000, Custodian may hold or return all or a
portion of the contribution uninvested without liability for loss of income or
appreciation or for other loss, and without liability for interest, pending
receipt of written instructions or clarification.
(d) All dividends and capital gain distributions received on shares of a
Mutual Fund held in the custodial account shall (unless received in additional
such shares) be reinvested in shares of that Mutual Fund, if available, which
shall be credited to the account. If any distribution on such shares may be
received at the election of the shareholder in additional such shares or in cash
or other property, Custodian shall elect to receive it in additional such
shares.
(e) All Mutual Fund shares acquired by Custodian hereunder shall be
registered in the name of Custodian (with or without identifying Depositor) or
of its nominee.
21
<PAGE>
Custodian shall deliver, or cause to be executed and delivered to Depositor
all notices, prospectuses, financial statements, proxies, and proxy soliciting
materials relating to such Mutual Fund shares held in the custodial account.
Custodian shall not vote any such Mutual Fund shares except in accordance with
any written instructions received from Depositor.
7. DISTRIBUTIONS
(This paragraph 7 supplements Article IV of IRS form 5305-A and must be read
in conjunction with it.)
(1) Distribution of the custodial account assets in accordance with Article
IV shall be made in a manner set forth in subparagraph (c)(1) or (2), whichever
applies, except as Article IV otherwise requires and at such time as Depositor
(or Depositor's Beneficiary if Depositor is deceased) shall elect by written
order to Custodian, provided that distribution (except for distribution on
account of Depositor's disability or death, return of an "excess contribution"
referred to in subparagraph (d), or a "rollover" from this account), must be no
earlier than age 59 1/2 if Depositor wants to avoid an "early distribution
additional tax" under Code section 408(f) or other applicable law. For that
purpose, Depositor will be considered disabled if Depositor can prove, as
provided in Code section 72(m)(7), that Depositor is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or be of long-
continued and indefinite duration. Depositor (or Depositor's Beneficiary if
Depositor is deceased) will order distribution in the manner and at the time
permitted or required by Article IV and this paragraph. Custodian assumes no
responsibility for the tax treatment of any distribution from the custodial
account; such responsibility accrues solely to the person ordering the
distribution.
(b) Custodian assumes (and shall have) no responsibility to make any
distribution on order of Depositor (or Depositor's Beneficiary if Depositor is
deceased) unless and until such order specifies the occasion for such
distribution and the elected manner of distribution. Also, before making any
such distribution or before honoring any assignment of the custodial account,
Custodian shall be furnished with any and all applications, certificates, tax
waivers, signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by Custodian, but
Custodian shall not be responsible for complying with an order which appears on
its face to be genuine, or for refusing to comply if not satisfied it is
genuine, and assumes no duty of further inquiry.
(c) Upon receipt of a proper written order as required above, Custodian
shall distribute the assets of the custodial account in cash or kind as follows:
(1) If the distribution order calls for the custodial account to be paid to
Depositor under paragraph 3 of Article IV, then distribution shall be made in
one or more of the following ways as specified in the order
(A) in a lump sum.
(B) in installments pursuant to a cash withdrawal plan, provided that such
a plan suitable for pre-arranging the distributions described in this
subparagraph (B) is available for Custodian's use under the rules of the
Mutual Fund whose shares are held in the custodial account, pursuant to
which some of such shares will be liquidated periodically to yield the
cash to pay each installment, and which as implemented hereunder provides
for distribution in such installments either (i) ratably over a period
not to exceed ten (10) years from the date such distributions commence,
or (ii) over a period not longer than the life expectancy of Depositor
or the joint life and the last survivor expectancy of Depositor and
Depositor's spouse. The life expectancies referred to in this Agreement
shall be determined (1) by using applicable Internal Revenue Service
tables, and (2) first, when installment payments commence, and thereafter
at least as of when Depositor attains age 70 1/2. If the period is
measured by one or more such expectancies, then beginning with the year
Depositor attains age 70 1/2 the amount distributed each year shall be at
least equal to the quotient obtained by dividing the entire custodial
account remaining at the beginning of that year by the life expectancy
of Depositor and Depositor's spouse (whichever is applicable), determined
as of when Depositor attains age 70 1/2 reduced by the number of whole
years elapsed since Depositor attained said age; provided, however, that
no distribution need be made in any year, or a lesser amount may
be distributed during such year, if the aggregate amounts distributed
through the end of such year are at least equal to the aggregate of the
minimum amounts required by this subparagraph (B) to have been so
distributed. Moreover, during Depositor's lifetime the entire custodial
amount remaining for distribution at any time under this subparagraph (B)
may, pursuant to a proper supplementary written order as specified above,
be distributed to Depositor.
(C) By the purchase and distribution of a single premium contract meeting
the requirements of Code section 408(b)(1), (3), (4) and (5) applicable to
an "individual retirement annuity".
(2) If Custodian receives a proper written order for distribution on account
of an event described in Article IV, para. 2, Custodian shall distribute the
then-remaining custodial account to Depositor's Beneficiary in a manner
described in Article VIII, para. 7(c)(1) (excluding subpara. 7(c)(1)(B)
except when Depositor's Beneficiary is Depositor's spouse). The term
"Depositor's Beneficiary" means the person or persons designated as such by
the designating person, and filed with the Custodian in accordance with this
subparagraph (2). The form may name persons or estates to take upon the
contingency of survival. However, the term "depositor's beneficiary" means
the designating person's estate to the extent no such designation on such a
form effectively disposes of the custodial account as of when such
distribution is to commence. Moreover, a form shall not become effective for
that purpose until it is filed with the Custodian during the lifetime of the
designating person. The form last accepted by Custodian before such
distribution is to commence, upon becoming effective during the designating
person's lifetime, shall be controlling and, whether or not fully
dispositive of the custodial account, thereupon shall revoke all such
forms previously filed by that person. The term "designating person" means
Depositor; after Depositor's death, it also means the person or persons
(other than Depositor's estate) who begin to receive a portion of the
custodial account pursuant to such a designation by Depositor, and
designations by such a person shall relate solely to the balance of that
portion remaining in the custodial account as of when distribution pursuant
to a designation by that person is to commence. The Custodian shall accept
all such forms in the State of Massachusetts, or such other state as the
Custodian may designate, and they shall be considered part of this Agreement
for purposes of Article VIII, para. 13(c).
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<PAGE>
(3) Any annuity which Custodian is to purchase and distribute under this
Agreement may be fixed or variable, but Custodian shall not be
required to distribute in that manner unless the premium for that
annuity is at least $1,000.
(4) Depositor's Beneficiary shall not have the right or power to
anticipate any part of the custodial account or to sell, assign,
transfer, pledge or hypothecate any part thereof. The custodial
account shall not be liable for the debts of Depositor's Beneficiary
or subject to any seizure, attachment, execution or other legal process
in respect thereto.
(d) If during a taxable year under Article 1 a total amount is
contributed which exceeds the amount deductible for that year, either because
such amount exceeds the tax-deductible limits specified in the Internal
Revenue Code, or because of attainment of age 70 1/2 in that year, or for
some other reason, then upon receiving written notice specifying the year in
question, the amount of the excess, the reason it is an excess, and the
amount of net income in the custodial account attributable to such
excess--Custodian shall distribute cash to Depositor in an amount equal to the
sum of such excess and earnings. If the excess contribution did not arise
because of attainment of age 70 1/2, then (in Custodian's discretion unless
otherwise instructed by Depositor) in lieu of being distributed, said sum
shall be treated by Depositor as a contribution in the then current or a
succeeding taxable year, in accordance with applicable law.
8. ADDITIONAL PROVISIONS REGARDING THE CUSTODIAN
(a) When and after distributions of the custodial account to Depositor's
Beneficiary commence, all rights and obligations assigned to Depositor by
provisions of this Agreement shall inure to, and be enjoyed and exercised by,
Depositor's Beneficiary instead of Depositor. Until such distributions
commence to such a person, the Custodian shall not be responsible for
treating such person's predecessor to such rights and obligations as still
possessing the same.
(b) Custodian shall keep adequate records of transactions it is required
to perform hereunder. Not later than sixty (60) days after the close of
each calendar year or after the Custodian's resignation or removal pursuant
to Article VIII, para. 10(a), Custodian shall render to Depositor a
written report or reports reflecting the transactions effected by it during
such period and the assets of the custodial account at the close of the
period. Sixty (60) days after rendering such report(s), Custodian shall be
forever released and discharged from all liability and accountability to
anyone with respect to its acts and transactions shown in or reflected by
such report(s), except, with respect to those as to which the recipient of
such report(s) shall have filed written objections with the Custodian within
the latter such sixty-day period.
(c) Custodian shall be an agent for Depositor to receive and invest
contributions as authorized by Depositor, hold and distribute such
investments, and keep adequate records and report thereon, all in accordance
with this Agreement. The parties do not intend to convey any fiduciary duties
on Custodian, and none shall be implied. Custodian may perform any of its
administrative duties through other persons designated by Custodian from time
to time, except that Mutual Fund shares must be registered as stated in
para. 6(e) of this Article VIII, but no such delegation of future
change therein shall be considered as an amendment of this Agreement.
Custodian shall not be liable (and assumes no responsibility) for the
collection of contributions, the deductibility of any contribution or its
propriety under this Agreement, or the purpose or propriety of any
distribution ordered in accordance with Article VIII, para. 7, or made
in accordance with Article VIII, para. 12, which matters are the sole
responsibility of Depositor and Depositor's Beneficiary.
(d) Depositor shall always fully indemnify Custodian and save it harmless
from any and all liability whatsoever which may arise either (1) in
connection with this Agreement and matters which it contemplates, except that
which arises due to Custodian's negligence or willful misconduct, or (2)
with respect to making or failing to make any distribution, other than for
failure to make distribution in accordance with an order therefor which is in
full compliance with both Article IV and para. 7(a) and (b) of
Article VIII. Custodian shall not be obligated or expected to commence or
defend any legal action or preceeding in connection with this Agreement or
such matters unless agreed upon by Custodian and Depositor, and unless fully
indemnified for so doing to Custodian's satisfaction.
(e) Custodian may conclusively rely upon and shall be protected in acting
upon any written order from or authorized by Depositor or Depositor's
Beneficiary or any other notice, request, consent, certificate or other
instrument, paper, or other communication believed by it to be genuine and to
have been issued in proper form and with proper authority, and, so long as it
acts in good faith, in taking or omitting to take any other action in
reliance thereon.
9. AMENDMENT
(This paragraph 9 supplements Article VII of IRS form 5305-A and
must be read in conjunction with it).
(a) Depositor retains the right to amend this Agreement in any respect at
any time, effective on a stated date which shall be at least sixty (60)
days after giving written notice of the amendment (including its exact terms)
to Custodian by registered or certified mail unless Custodian waives such
notice as to that amendment. If Custodian does not wish to continue serving
in that capacity under this Agreement as so amended, it may resign in
accordance with Article VIII, para. 10. Depositor also delegates to the
distributor (principal underwriter) of a plurality of the Mutual Funds
described in Article VIII, para. 6(b), Depositor's right so to amend,
including retroactively, as necessary or appropriate in the opinion of
counsel satisfactory to the distributor, in order to conform with pertinent
provisions of the Code and other laws or successor provisions of law or to
obtain a governmental ruling that such requirements are met, to adopt a
prototype or master plan (when one becomes available) for investment in
shares of such Mutual Funds, or as otherwise may be advisable in the opinion
of such counsel, provided the distributor amends in the same manner all
agreements comparable to this one, having the same Custodian, permitting
investment in shares of such Mutual Funds, and under which such power has
been delegated to it. Such an amendment by the distributor shall be
communicated in writing to Depositor and Custodian, and Depositor shall be
deemed to have consented thereto unless, within thirty (30) days after
such communication to Depositor is mailed. Depositor either (1) gives
Custodian a proper written order for a lump-sum distribution of the custodial
account, or (2) removes Custodian and simultaneously appoints a Successor
Custodian under Article VIII, para. 10.
(b) This paragraph 9 shall not be construed to restrict Custodian's
freedom to agree with distributors of Mutual Fund shares, or others, upon the
terms by which shares of additional Mutual Funds may be chosen for investment
as contemplated in Article VIII, para. 6(b), or Custodian's freedom to
change fee schedules in the manner provided by Article VIII, para. 5(b)
and no such agreement or change shall be deemed to be an amendment of this
Agreement.
10. RESIGNATION OR REMOVAL OF CUSTODIAN
(a) Custodian may resign at any time upon at least thirty (30) days
prior notice in writing to Depositor,
23
<PAGE>
and may be removed by Depositor at any time upon at least thirty (30) days
prior notice in writing to Custodian. Upon such resignation or removal,
Depositor shall appoint a Successor Custodian to serve under the Agreement.
Upon receipt by Custodian of written acceptance of such appointment by the
Successor Custodian, Custodian shall transfer to such Successor the assets of
the custodial account and all necessary records (or copies thereof)
pertaining thereto, provided that (if so requested by Custodian) any
Successor Custodian agrees not to dispose of any such records without
Custodian's consent. Custodian is authorized, however, to reserve such a
portion of such assets as it may deem advisable for payment of all its fees,
compensation, costs, and expenses, or for payment of any other liabilities
constituting a charge on or against the assets of the custodial account on or
against Custodian, with any balance of such reserve remaining after the
payment of all such items to be paid over to the Successor Custodian.
(b) If within thirty (30) days after Custodian's resignation or removal
or such longer time as Custodian may agree to, Depositor has not appointed a
Successor Custodian which has accepted such appointment, Custodian shall
terminate the custodial account pursuant to Article VIII, para. 11,
unless within that time the distributor referred to in Article VIII,
para. 9(a), appoints such Successor and gives written notice thereof to
Depositor and Custodian.
(c) Custodian shall not be liable for the acts or omissions of such
Successor.
(d) The Custodian, and every Successor Custodian appointed to serve under
this Agreement, must be a bank as defined in Code section 401(d)(1) or such
other person who qualifies to serve in the manner prescribed by Code section
408(a)(2) and satisfies the Depositor, distributor, or Custodian, upon
request, as to such qualification.
(e) After Custodian has transferred the custodial account assets
(including any reserve balance as contemplated above) to the Successor
Custodian, Custodian shall be relieved of all further liability with respect
to this Agreement, the custodial account, and the assets thereof.
11. TERMINATION OF ACCOUNT
(a) Custodian shall terminate the custodial account if, within the time
specified in Article VIII, para. 10(b), after Custodian's resignation
or removal, neither Depositor nor the distributor has appointed a Successor
Custodian which has accepted such appointment. Termination of the custodial
account shall be effected by distributing all assets thereof in a lump sum in
cash or in kind to Depositor, subject to Custodian's right to reserve funds
as provided in Article VIII, para. 10(a).
(b) Upon termination of the custodial account, this Agreement shall
terminate and have not further force and effect, and Custodian shall be
relieved from all further liability with respect to this Agreement, the
custodial account, and all assets thereof so distributed.
12. LIQUIDATION OF ACCOUNT
(1) Notwithstanding anything contained in this Agreement to the contrary,
Value Line Securities, Inc. shall have the right to direct Custodian by
written order to Custodian, to liquidate the custodial account if the value
of the account at the time of such written order is less than a minimum value
established on a non-discriminatory basis from time to time by Value Line
Securities, Inc., and upon receipt of such written order (which Value Line
Securities, Inc. shall have no duty to make and which, if made, may be made
with respect to any specified accounts as to which it may be made applicable
as a group). Custodian shall forthwith proceed to liquidate the custodial
account by distributing all assets thereof in a lump sum in cash or in kind
to Depositor, subject to Custodian's right to reserve such a portion of such
assets as it may deem advisable for payment of all its fees, compensation,
costs, and expenses, or for payment of any other liabilities constituting a
charge on or against the assets of the custodial account or on or against
Custodian, with any balance of such reserve remaining after the payment of
all such items to be paid over to Depositor.
(b) Neither Value Line Securities, Inc. nor Custodian shall be liable for,
or in any way responsible with respect to, any penalty or any other loss
incurred by any person with respect to a distribution made hereunder and upon
liquidation of the custodial account as aforesaid, this Agreement shall
terminate and have no further force and effect, and Custodian and Value Line
Securities, Inc. shall be relieved from all further liability with respect to
this Agreement, the custodial account, and all assets thereof so distributed.
13. MISCELLANEOUS
(a) References herein to the "Internal Revenue Code" or "Code" and
sections thereof shall mean the same as amended from time to time hereafter,
including successors to such sections.
(b) Except where otherwise specifically required in this Agreement, any
notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on Custodian's records.
(c) This agreement is accepted by Custodian in, and shall be construed and
administered in accordance with the laws of, the State of Massachusetts or
such other state as the Custodian may designate. This Agreement is intended
to qualify under section 408 of the Code as an Individual Retirement
Account and for the Retirement Savings deduction under section 219 of the
Code, and if any provision hereof is subject to more than one interpretation
or any term used herein is subject to more than one construction, such
ambiguity shall be resolved in favor of that interpretation or construction
which is consistent with that intent. However, neither the Custodian, nor any
Mutual Fund (or company associated therewith), shall be responsible for
whether or not such intentions are achieved through use of this Agreement,
and Depositor is referred to Depositor's attorney for any such assurances.
24
<PAGE>
NATIONAL DISTRIBUTOR:
Value Line Securities, Inc.
711 Third Ave., IRA
New York, New York 10017 PLAN AND
CUSTODIAL
1-800-223-0818 / 212-687-3965 AGREEMENT
CUSTODIAN BANK:
State Street Bank and Trust Company
SHAREHOLDER SERVICES AGENT:
N.F.D.S.
P.O. Box 419730
Kansas City, MO 64141-6730
1-800-243-2729
TABLE OF CONTENTS
PAGE
How to Establish your IRA Plan........... 2
Disclosure Statement..................... 3
5305-A Forms............................. 17
Custodial Agreement...................... 21
[Logo]
Value Line Securities-Registered Trademark-, Inc. VALUE
LINE
711 3rd Avenue
NO-LOAD
New York NY 10017-4064 MUTUAL FUNDS
IRAB - 7/93
<PAGE>
EXHIBIT 15
Value Line American Worldwide Fund, Inc.
Service and Distribution Plan (the "Plan")
The Plan is adopted as of this ______ day of ________, 1995, by the Board
of Directors of Value Line American Worldwide Fund, Inc., a Maryland corporation
(the "Fund").
1. The Plan is adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act") so as to allow the Fund to make payments as contemplated
herein, in conjunction with the distribution of shares of Common Stock of the
Fund ("Shares"). Payments also may be made by Value Line, Inc., the Fund's
investment adviser, out of its fees, its past profits or any other source
available to it.
2. The Plan is designed to finance activities of Value Line Securities, Inc.
("VLS") principally intended to result in sale of the Shares and to include the
following: (a) to provide incentive to securities dealers to sell Shares and to
provide administrative support services to the Fund and its shareholders; (b) to
compensate other participating financial institutions and organizations
(including individuals) for providing administrative support services to the
Fund and its shareholders; (c) to pay for costs incurred in conjunction with
advertising and marketing of Shares including expenses of preparing, printing
and distributing prospectuses and sales literature to prospective shareholders,
securities dealers and others, and for servicing the accounts of shareholders
and (d) other costs incurred in the implementation and operation of the Plan.
<PAGE>
3. As compensation for the services to be provided under this Plan, VLS shall
be paid a fee at the annual rate of ______% of the Fund's average daily net
assets.
4. All payments to securities dealers, participating financial institutions
and other organizations shall be made pursuant to the terms of a Distribution
Agreement between VLS and such dealer, institution or organization.
5. The Board of Directors shall be provided, at least quarterly, with a
written report of all amounts expended pursuant to the Plan and the purpose for
which the amounts were expended.
6. The Plan will become effective immediately upon approval by (a) a majority
of the outstanding shares of Common Stock of the Fund and (b) a majority of the
Board of Directors who are not "interested persons" (as defined in the Act) of
the Fund and have no direct or indirect financial interest in the operation of
the Plan or in any agreements entered into in connection with the Plan, pursuant
to a vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
7. The Plan shall continue for a period of one year from its effective date,
unless earlier terminated in accordance with its terms, and thereafter shall
continue automatically for successive annual periods, provided such continuance
is approved at least annually in the manner provided by the Act.
8. The plan may be amended at any time by the Board of Directors provided that
(a) any amendment to increase materially the costs which the Fund may bear
pursuant to the Plan shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of the Fund and (b) any material
amendments of the terms of the Plan shall become effective only upon approval as
provided in paragraph 6 (b) hereof.
<PAGE>
9. The Plan is terminable without penalty at any time by (a) vote of a
majority of the Board of Directors of the Fund, including a majority of the
Directors who are not "interested persons" (as defined in the Act) of the Fund
and have not direct or indirect financial interest in the operation of the Plan
or in any agreements entered into in connection with the Plan, or (b) vote of a
majority of the outstanding voting securities on the Fund.
10. While the Plan is in effect, the selection and nomination of Directors who
are not "interested persons" (as defined in the Act) of the Fund shall be
committed to the discretion of the Directors who are not "interested persons."
11. The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to paragraph 5 hereof, for a period not less than six
years from the date thereof, the first two years in an easily accessible place.
