Exhibit (g)
CUSTODIAN AGREEMENT
Dated as of:
Between
VALUE LINE ASSET ALLOCATION FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
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1. Bank Appointed Custodian ................................................1
2. Definitions .............................................................1
(a) Authorized Person .................................................1
(b) Security ..........................................................2
(c) Portfolio Security ................................................2
(d) Officers' Certificate .............................................2
(e) Book-Entry System and Depository...................................2
3. A. Proper Instructions ...............................................3
B. Bank's Communications with Fund ...................................4
4. Separate Accounts .......................................................5
5. Certification as to Authorized Persons ..................................5
6. Custody of Cash and Securities ..........................................6
A. Cash ..............................................................6
(a) Purchase of Securities ......................................6
(b) Redemptions .................................................7
(c) Distributions and Expenses of Fund ..........................7
(d) Payment in Respect of Securities ............................7
(e) Repayment of Cash ...........................................7
(f) Other Authorized Payments ...................................8
(g) Termination .................................................8
B. Securities ........................................................8
(a) Book-Entry System ..........................................10
(b) Use of Direct Paper System for Commercial Paper ............12
C. Options and Futures Transactions .................................14
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter ...........................................14
(b) Puts, Calls and Futures Traded on Commodities Exchanges ....15
(c) Segregated Account .........................................16
D. Segregated Account for "when issued", "forward commitment" and
Reverse Repurchase Agreement Transactions ........................17
7. Transfer of Securities .................................................18
8. Redemptions ............................................................20
9. Merger, Dissolution, etc. of Fund ......................................20
10. Actions of Bank Without Prior Authorization ............................21
11. Maintenance of Records and Confidentiality .............................23
12. Concerning the Bank ....................................................23
A. Performance of Duties ............................................23
B. Responsibility of Custodian ......................................24
C. No Duty of Bank ..................................................24
D. Fees and Expenses of Bank ........................................25
E. Advances by Bank .................................................26
13. Termination ............................................................26
14. Notices ................................................................28
15. Amendments .............................................................29
16. Parties ................................................................29
17. Governing Law ..........................................................29
CUSTODIAN AGREEMENT
AGREEMENT made as of this day of , 1993 between VALUE LINE ASSET
ALLOCATION FUND, INC., a corporation established under the laws of Maryland (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY ("Bank").
The Fund, an open-end management investment company, desires to place and
maintain its portfolio securities and cash in the custody of the Bank. The Bank
has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940 to act as custodian of the portfolio securities
and cash of the Fund, and has indicated its willingness to so act, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described, and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
(a) Authorized Person. Authorized person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of the Board of Directors.
(b) Security. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933 as
amended, including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or privilege on any
security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value thereof), or any
put, call, straddle, option, or privilege entered into on a national
securities exchange relating to a foreign currency, or, in general, any
interest or instrument commonly known as a "security", or any certificate
of interest or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to, or option
contract to purchase or sell any of the foregoing and futures, forward
contracts and options thereon.
(c) Portfolio Security. Portfolio security will mean any security
owned by the Fund.
(d) Officers' Certificate. Officers' Certificate will mean unless
otherwise indicated, any request, direction, instruction, or certification
in writing signed by any two Authorized Persons of the Fund.
(e) Book-Entry System and Depository. Book-Entry System shall mean
the Federal Reserve-Treasury Department Book Entry System for United
States government, instrumentality and agency securities operated by the
Federal Reserve Banks, its successor or successors and its nominee or
nominees. Depository shall mean the Depository
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Trust Company ("DTC"), a clearing agency registered with the Securities
and Exchange Commission under Section 17A of the Securities Exchange Act
of 1934, it successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to
act as a depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Fund's Directors.
3A. Proper Instructions. For purposes of this Agreement, "Proper
Instructions" shall mean (i) instructions regarding the purchase or sale
of securities for the portfolio of the Fund, and payments and deliveries
in connection therewith, given by an Authorized Person as designated in an
Officers' Certificate, such instructions to be given in such form and
manner as the Bank and the Fund shall agree upon from time to time, and
(ii) instructions (which may be continuing instructions) regarding other
matters signed or initialled by such one or more persons from time to time
designated in an Officers' Certificate as having been authorized by the
Directors of the Fund. Oral instructions given by a person whom the Bank
reasonably believes to be authorized to give such instructions with
respect to the transaction involved will be considered Proper Instructions
only if the Bank receives written instructions on Value Line Stationery
(which may be sent by telecopier) confirming such oral instructions,
provided however that if the Bank is notified by an Authorized Person of
the Fund that the Fund is unable to promptly confirm such oral
instructions in writing, then the Bank may act upon receipt of a second
oral instruction from the Chairman of the Board or Secretary confirming
such prior oral instruction. The Bank shall compare the original oral
instruction with any confirmatory written or oral instruction, as the case
may be, and shall report any discrepancy to the Fund immediately, and the
Bank shall be responsible for any expense incurred in taking any action,
including any reprocessing, necessary to correct any
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such discrepancy or error in Proper Instructions given by the Fund, to the
extent such expense is caused by the unreasonable delay of the Bank in
reporting such discrepancy to the Fund. Except as provided in the
preceeding sentence, the Fund shall be responsible, at the Fund's expense,
for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error in Proper Instructions given by the Fund,
and to the extent such action requires the Bank to act, the Fund shall
give the Bank specific Proper Instructions as to the action required. The
Bank shall act upon and comply with any subsequent Proper Instructions
which modifies a prior Proper Instruction. Upon receipt of an Officers'
Certificate as to the authorization by the Directors of the Fund
accompanied by a detailed description of procedures approved by the Fund,
Proper Instructions may include communication effected directly between
electro-mechanical or electronic devices provide that the Directors and
the Bank are satisfied that such procedures afford adequate safeguards for
the Fund's assets.
3B. Bank's Communications with Fund. For purposes of this Agreement,
all communications from the Bank to the Fund shall be in writing (which
may be sent by means of a telecopier) and any such writing reasonably
believed by the Fund to be from a person authorized to make such
communication on behalf of the Bank may be relied upon by the Fund. An
oral communication from a person whom the Fund reasonably believes to be
authorized to make such communication on behalf of the Bank with respect
to the transaction may be relied upon by the Fund only if the Fund
receives a written communication (which may be sent by telecopier)
confirming such oral communication, provided however, that if the Fund is
notified by such authorized person that the Bank is unable to promptly
confirm such oral communication in writing, then the Fund may act in
reliance upon receipt of a second oral communication confirming such prior
oral communication. The Fund shall compare the original oral communication
with any confirmatory written or oral
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communication, as the case may be, and shall report any discrepancy to the
Bank immediately, and the Fund shall be responsible for any expense
incurred in taking any action, including any reprocessing, necessary to
correct any such discrepancy or error in communications given by the Bank,
to the extent such expense is caused by the unreasonable delay of the Fund
in reporting such discrepancy to the Bank. Except as provided in the
preceding sentence, the Bank shall be responsible, at the Bank's expense,
for any action taken, including any reprocessing, necessary to correct any
such discrepancy or error in communications given by the Bank, and to the
extent such action requires the Bank to act, the Fund shall give the Bank
specific Proper Instructions as to the action required. The Fund may act
in reliance upon any subsequent communication from the Bank which modifies
a prior communication.
4. Separate Accounts. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of the Fund into a Separate
Account for each such series or portfolio containing the assets of such
series or portfolio (and all investment earnings thereon), all as directed
from time to time by Proper Instructions.
5. Certification as to Authorized Persons. The Secretary or
Assistant Secretary of the Fund will at all times maintain on file with
the Bank his certification to the Bank, in such form as may be acceptable
to the Bank, of the names and signatures of the Authorized Persons, it
being understood that upon the occurrence of any change in the information
set forth in the most recent certification on file (including without
limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or
Assistant Secretary of the Fund will sign a new or amended certification
setting forth the change and the new, additional or omitted names or
signatures. The Bank will be entitled to rely and act upon any Officers'
Certificate given to
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it by the Fund which has been signed by Officers named in the most recent
certification.
6. Custody of Cash and Securities. As custodian for the Fund, the
Bank will keep safely all of the portfolio securities delivered to the
Bank, and will deposit to the account of the Fund all of the cash of the
Fund delivered to the Bank, as set forth below.
A. Cash. The Bank will open and maintain a separate account or
accounts in the name of the Fund or in the name of the Bank, as custodian
of the Fund, subject only to draft or order by the Bank acting pursuant to
the terms of this Agreement. The Bank will hold in such account or
accounts as custodian, subject to the provisions hereof (including
sections 6(C) and 6(D), all cash received by it, for the account of the
Fund. Upon receipt by the Bank of Proper Instructions (which may be
continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of beneficial interest of the Fund,
notification from the Fund's transfer agent as provided in Section 8,
requesting such payment, designating the payee or the account or accounts
to which the Bank will release funds or deposit, and stating that is is
for a purpose permitted under the terms of this Section 6(A), specifying
the applicable subsection, or describing such purpose with sufficient
particularity to permit the Bank to ascertain the applicable subsection,
the Bank will make payments of cash held for the accounts of the Fund,
insofar as funds are available for that purpose, only as permitted in
(a)-(g) below.
(a) Purchase of Securities: upon the purchase of securities
for the Fund, against contemporaneous receipt of such securities by
the Bank registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a
nominee of the Bank, or receipt for the account of the Bank through
use of (1) the
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Book-Entry System pursuant to Section 6(B)(a)(3) below, (2) a
Depository pursuant to 6(B)(b) below, or (3) Book Entry Paper
pursuant to Section 6(B)(c) below, each such payment to be made at
the purchase price shown on a broker's confirmation (or transaction
report in the case of Book Entry Paper) of purchase of the
securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before
payment is made;
(b) Redemptions: in such amount as may be necessary for the
repurchase or redemption of shares of beneficial interest of the
Fund offered for repurchase or redemption in accordance with Section
8 of this Agreement;
(c) Distributions and Expenses of Fund: for the payment on the
account of the Fund of dividends or other distributions to
shareholders as may from time to time be declared by the Directors
of the Fund, interest, taxes, management or supervisory fees,
distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and liabilities of the Bank as
provided hereunder, fees of any transfer agent, fees for legal,
accounting, and auditing services, or other operating expenses of
the Fund;
(d) Payment in Respect of Securities: for payments in
connection with the conversion, exchange or surrender of portfolio
securities or securities subscribed to by the Fund held by or to be
delivered to the Bank;
(e) Repayment of Cash: to repay the cash delivered to the Fund
for the purpose of collateralizing the obligation to return to the
Fund certificates borrowed from the Trust representing portfolio
securities, but only upon redelivery to the Bank of such borrowed
certificates;
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(f) Other Authorized Payments: for other authorized
transactions of the Fund, or other obligations of the Fund incurred
for proper Fund purposes; provided that before making any such
payment the Bank will also receive a certified copy of a resolution
of the Directors signed by an Authorized Person of the Fund (other
than the Person certifying such resolution) and certified by its
Clerk or Assistant Clerk, naming the person or persons to whom such
payment is to be made, and either describing the transaction for
which payment is to be made and declaring it to be an authorized
transaction of the Fund, or specifying the amount of the obligation
for which payment is to be made, setting forth the purpose for which
such obligation was incurred and declaring such purpose to be a
proper corporate purpose; and
(g) Termination: upon the termination of this Agreement as
hereinafter set forth pursuant to Section 9 and Section 13 of this
Agreement.
The Bank is hereby authorized to endorse for collection and collect
on behalf of and in the name of the Fund all checks, drafts, or other
negotiable or transferrable instruments or other orders for the payment of
money received by it for the account of the Fund.
B. Securities. Except as provided in subsections (a), (b) and
(c) of this Section 6(B), and in Sections 6(C) and 6(D), the Bank as
custodian, will receive and hold pursuant to the provisions hereof, in a
separate account or accounts and physically segregated at all times from
those of other persons, any and all portfolio securities which may now or
hereafter be delivered to it by or for the account of the Fund. All such
portfolio securities will be held or disposed of by the Bank for, and
subject at all times to, the instructions of the Fund pursuant to the
terms of this Agreement. Subject to the
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specific provisions in Subparagraphs (a), (b), and (c) relating to
securities that are not physically held by the Bank, the Bank will
register all portfolio securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, which nominee
shall be exclusively assigned to the Fund, and will execute and deliver
all such certificates in connection therewith as may be required by such
laws or Regulations or under the laws of any State. The Bank will ensure
that the specific portfolio securities of the Fund held by it hereunder
will be at all times identifiable.
The Bank will use the same care with respect to the safekeeping of
portfolio securities and cash of the Fund held by it as it uses in respect
of its own similar property but it need not maintain any special insurance
for the benefit of the Fund.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which
it may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
Neither the Bank nor any nominee of the Bank will vote any of the
portfolio securities held hereunder by or for the account of the Fund,
except in accordance with Proper Instructions of an Officers' Certificate.
The Bank will execute and deliver, or cause to be executed and
delivered, to the Fund all notices, proxies and proxy soliciting materials
with respect to such securities, such proxies to be executed by the
registered holder of such securities (if registered otherwise than in the
name of the Fund), but without indicating the manner in which such proxies
are to be voted.
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(a) Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Directors of the Fund
specifically approving deposits of the Fund assets in the Book-Entry
System, indicating that, and (ii) for each year following such
approval, the Directors of the Fund has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the
Bank indicating that it has withdrawn its approval:
1. The Bank may keep Securities of the Fund in the
Book-Entry System provided that such securities are
represented in an account ("Account") of the Bank (or its
agent) in such System which shall not include any assets of
the Bank (or such agent) other than assets held as a
fiduciary, custodian, or otherwise for customers.
2. The records of the Bank (and any such agent) with
respect to the Fund's participation in the Book-Entry System
through the Bank (or any such agent) will identify by book
entry securities belonging to the Fund which are included with
other securities deposited in the Account and shall at all
times during the regular business hours of the Bank (or such
agent) be open for inspection by duly authorized officers,
employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by
book entry or otherwise, identify as belonging to the Fund a
quantity of securities in fungible bulk of securities (i)
registered in the name of the Bank or its nominee, or (ii)
shown on the Bank's account on the books of the Federal
Reserve Bank.
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3. The Bank (or its agent) shall pay for securities
purchased for the account of the Fund or shall pay cash
collateral against the return of securities loaned by the Fund
upon (i) receipt of advice from the Book-Entry System that
such Securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of
the Fund. The Bank (or its agent) shall transfer securities
sold or loaned for the account of the Fund upon
(a) receipt of advice from the Book-Entry System
that payment for Securities sold or payment of the
initial cash collateral against the delivery of
securities loaned by the Fund has been transferred to
the Account, and
(b) the making of an entry on the records of the
Bank (or its agent) to reflect such transfer and payment
for the account of the Fund. Copies of all advices from
the Book-Entry System of transfers of Securities for the
account of the Fund shall identify the Fund, be
maintained for the Fund by the Bank and shall be
provided to the Fund at its request. The Bank shall send
the Fund a confirmation, as defined by Rule 17f-4 under
the Investment Company Act of 1940, of any transfers to
or from the account of the Fund.
4. The Bank will promptly provide the Fund with any
report obtained by the Bank or its agent on the Book-Entry
System's accounting system, internal accounting control and
procedures for safeguarding Securities deposited in the
Book-Entry System. The
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Bank will provide the Fund and cause any such agent to
provide, at such times as the Fund may reasonably require,
with reports by independent public accountants on the
accounting system, internal accounting control and procedures
for safeguarding securities, including Securities deposited in
the Book-Entry System, relating to the services provided by
the Bank or such agent under the Agreement.
5. Anything to the contrary in the Agreement
notwithstanding, the Bank shall be liable to the Fund for any
loss or damage to the Fund resulting from use of the
Book-Entry System by reason of any gross negligence, wilful
misfeasance or bad faith of the Bank or any of its agents or
of any of its or their employees or from any reckless
disregard by the Bank or any such agent of its duty to enforce
effectively such rights as it may have against the Book-Entry
System; at the election of the Fund, it shall be entitled to
be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any loss or
damage.
(b) Use of Direct Paper System for Commercial Paper. Provided
(i) the Bank has received a certified copy of a resolution of the
Fund's Directors specifically approving participation in a system
maintained by the Bank for the holding of commercial paper in direct
paper form ("Direct Paper") and (ii) for each year following such
approval the Directors of the Fund have received and approved the
arrangements, upon receipt of Proper Instructions and upon receipt
of confirmation from an Issuer (as defined below) that the Fund has
purchased such Issuer's Direct Paper,
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the Bank shall issue and hold in direct paper form, on behalf of the
Fund, commercial paper issued by issuers with whom the Bank has
entered into a direct paper agreement (the "Issuers"). In
maintaining its Direct Paper System, the Bank agrees that:
1. the Bank will maintain all Direct Paper held by the
Fund in an account of the Bank that includes only assets held
by it for customers;
2. the records of the Bank with respect to the Fund's
purchase of Direct Paper through the Bank will identify, by
book entry, Commercial Paper belonging to the Fund which is
included in the Direct Paper System and shall at all times
during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of
the Fund.
3. (a) The Bank shall pay for Direct Paper purchased for
the account of the Fund upon contemporaneous (i) receipt of
advice from the Issuer that such sale of Direct Paper has been
effected, and (ii) the making of an entry on the records of
the Bank to reflect such payment and transfer for the account
of the Fund.
(b) The Bank shall cancel such Direct Paper
obligation upon the maturity thereof upon contemporaneous (i)
receipt of advice that payment for such Direct Paper has been
transferred to the Fund, and (ii) the making of an entry on
the records of the Bank to reflect such payment for the
account of the Fund.
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4. the Bank shall transmit to the Fund a transaction
journal confirming each transaction in Direct Paper for the
account of the Fund on the next business day following the
transaction;
5. the Bank will send to the Fund such reports on its
system of internal accounting control as the Fund may
reasonably request from time to time;
C. Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges. NASDAQ or
Over-the-Counter.
1. The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the
Fund regarding escrow or other arrangements (i) in accordance
with the provisions of any agreement entered into upon receipt
of Proper Instructions between the Bank, any broker-dealer
registered under the Securities Exchange Act of 1934 and a
member of the National Association of Securities Dealers,
Inc., and, if necessary, the Fund relating to the compliance
with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations.
2. Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund
has deposited or is maintaining adequate margin, if required,
with any broker in connection with any option, nor shall the
Bank be under any duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions
from the Fund. The Bank shall have no
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responsibility for the legality of any put or call purchased
or sold on behalf of the Fund, the propriety of any such
purchase or sale, or the adequacy of any collateral delivered
to a broker in connection with an option or deposited to or
withdrawn from a Segregated Account as described in
sub-paragraph c of this Section 6(C). The Bank specifically,
but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Fund that
the amount of such collateral held by a broker or held in a
Segregated Account as described in sub-paragraph (c) of this
Section 6(C) is sufficient to protect such broker of the Fund
against any loss; (ii) effect the return of any collateral
delivered to a broker; or (iii) advise the Fund that any
option it holds, has or is about to expire. Such duties or
obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges.
1. The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in
accordance with the provisions of any agreement among the
Fund, the Bank and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission and/or
any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Fund.
2. The responsibilities and liabilities of the Bank as
to Futures, puts and calls traded on commodities exchanges,
any Futures Commission Merchant
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account and the Segregated Account shall be limited as set
forth in sub-paragraph (a)(2) of this Section 6(C) as if such
sub-paragraph referred to Futures Commission Merchants rather
than brokers, and Futures and puts and calls thereon instead
of options.
(c) Segregated Account.
The Bank shall upon receipt of Proper Instructions establish
and maintain a Segregated Account or Accounts for and on behalf of
the Fund, into which Account or Accounts may be transferred cash
and/or securities including securities maintained in an Account by
the Bank pursuant to Section 6(B) hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Bank and a
broker-dealer registered under the Exchange Act and a member of the
NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the
Options Clearing Corporation and of any registered national
securities exchange or the Commodity Futures Trading Commission or
any registered Contract Market, or of any similar organization or
organizations regarding escrow or other arrangements in connection
with transactions by the Fund, and (ii) for the purpose of
segregating cash or securities in connection with options purchased
or written by the Fund, or commodity futures purchased or written by
the Fund, and (iii) for the purposes of compliance by the Fund with
the procedures required by Investment Company Act Release No. 10666,
or any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of Segregated Accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Directors of the Fund signed by an officer of the Fund and
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certified by the Clerk of an Assistant Clerk, setting forth the
purpose or purposes of such Segregated Account and declaring such
purposes to be proper corporate purposes.
D. Segregated Account for "when-issued", "forward commitment"
and reverse repurchase agreement transactions. Notwithstanding the
provisions of Section 6(A), 6(B) and 6(C) hereof, the Bank will maintain a
segregated account (the "Segregated Account") in the name of the Fund (i)
for the deposit of liquid assets, such as cash, U.S. Government securities
or other high grade debt obligations, having a market value (marked to the
market on a daily basis) at all times equal to not less than the aggregate
purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of portfolio securities and all the Fund's then outstanding
commitments under reverse repurchase agreements entered into with
broker-dealer firms, and (ii) for the deposit of any portfolio securities
which the Fund has agreed to sell on a forward commitment basis, all in
accordance with Securities and Exchange Commission Release No. IC-10666.
No assets shall be deposited in the Segregated Account except pursuant to
Proper Instructions. Assets may be withdrawn from the segregated account
pursuant to Proper Instructions only (a) for sale or delivery to meet the
Fund's obligations under outstanding firm commitment or when-issued
agreements for the purchase of portfolio securities and under reverse
repurchase agreements, (b) for exchange for other liquid assets of equal
or greater value deposited in the Segregated Account, (c) to the extent
that the Fund's outstanding forward commitment or when-issued agreements
for the purchase of portfolio securities or reverse repurchase agreements
are sold to other parties or the Fund's obligations thereunder are met
from assets of the Fund other than those in the Segregated Account, or (d)
for delivery upon settlement of a forward commitment agreement for the
sale of portfolio securities.
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7. Transfer of Securities. The Bank will transfer, exchange, deliver
or release portfolio securities held by it hereunder, insofar as such
securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this Section
7, specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain
the applicable subsection, only
(a) upon sales of portfolio securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment
therefor in full, each such payment to be in the amount of the sale
price shown in a broker's confirmation of sale of the portfolio
securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before
such payment is made, provided however, that portfolio securities
may be delivered to the broker selling the same for examination in
accordance with "street delivery" custom;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan or merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise;
(c) upon conversion of portfolio securities pursuant to their
terms into other securities;
(d) upon exercise of subscription, purchase or sale or other
similar rights represented by such portfolio securities;
-18-
(e) for the purpose of redeeming in kind shares of beneficial
interest of the Fund upon authorization from the Fund;
(f) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(g) when such portfolio securities are called, redeemed or
retired or otherwise become payable;
(h) for the purpose of releasing certificates representing
portfolio securities of the Fund, against contemporaneous receipt by
the Bank of the fair market value of such security, as set forth in
Proper Instructions received by the Bank before such payment is
made;
(i) for the purpose of tendering shares pursuant to a tender
offer therefor;
(j) for the purpose of delivering securities lent by the Fund
to a bank or broker-dealer, but only against receipt in accordance
with street delivery custom, except as otherwise provided in
Subsections 6(B)(a) and (b) hereof, of adequate collateral as agreed
upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such
securities entered into by the Fund;
(k) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such
transfer, the Bank will also receive a certified copy of resolution
of the Directors of the Fund, signed by an authorized officer of the
Fund (other than the officer certifying such resolution) and
certified by its Secretary or Assistant Secretary, specifying the
portfolio securities to be delivered, setting forth the transaction
-19-
in or purpose for which such delivery is to be made, declaring such
transaction to be an authorized transaction of the Fund or such
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made; and
(1) upon termination of this Agreement as hereinafter set
forth pursuant to Section 9 and Section 13 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a),
(b), (c), (d), (f), (g), (h), (i) and (j) securities or cash receivable in
exchange therefor shall be delivered to the Bank.
8. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding shares of beneficial interest, the Bank will rely on
notification by the Fund's transfer agent if receipt of a request for
redemption and certificates, if issued, in proper form for redemption
before such payment is made. Payment shall be made in accordance with the
Articles of Incorporation of the Fund, from assets available for said
purposes.
9. Merger, Dissolution, etc. of Fund. In the case of the following
transactions not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company, the sale by the Fund of all, or substantially all of its assets
to another investment company, or the liquidation or dissolution of the
Fund and distribution of its assets, the Bank will deliver the portfolio
securities held by it under this Agreement and disburse cash only upon the
order of the Fund set forth in an Officers' Certificate, accompanied by a
certified copy of a resolution of the Fund's Directors authorizing any of
the foregoing
-20-
transactions. Upon completion of such delivery and disbursement and the
payment of the fees, disbursements and expenses of the Bank due to the
Bank pursuant to Section 12E hereof, this Agreement will terminate.
10. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, it will without prior authorization
or instruction of the Fund or the transfer agent:
(a) Receive and hold for the account of the Fund hereunder and
deposit in the account or accounts referred to in Section 6 hereof,
all income, dividends, interest and other payments or distribution
of cash with respect to the portfolio securities held thereunder;
(b) Present for payment all coupons and other income items
held by it for the account of the Fund which call for payment upon
presentation and hold the cash received by it upon such payment for
the account of the Fund in the account or accounts referred to in
Section 6 hereof;
(c) Receive and hold for the account of the Fund hereunder and
deposit in the account or accounts referred to in Section 6 hereof
all securities received as a distribution on portfolio securities as
a result of a stock dividend, share split-up, reorganization,
recapitalization, merger, consolidation, readjustment, distribution
of rights and similar securities issued with respect to any
portfolio securities held by it hereunder.
(d) Execute as agent on behalf of the Fund all necessary
ownership and other certificates and affidavits required by the
Internal Revenue Code or the regulations of the Treasury Department
issued thereunder, or by the laws
-21-
of any state, now or hereafter in effect, inserting the Fund's name
on such certificates as the owner of the securities covered thereby,
to the extent it may lawfully do so and as may be required to obtain
payment in respect thereof. The Bank will execute and deliver such
certificates in connection with portfolio securities delivered to it
or by it under this Agreement as may be required under the
provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any
State;
(e) Present for payment all portfolio securities which are
called, redeemed, retired or otherwise become payable, and hold cash
received by it upon payment for the account of the Fund in the
account or accounts referred to in Section 6 hereof; and
(f) Exchange interim receipts or temporary securities for
definitive securities.
The Bank will use all diligence to collect any funds which may to
its knowledge become collectible arising from such securities, including
dividends, interest and other income, and to transmit to the Fund notice
actually received by it of any call for redemption, offer of exchange,
right of subscription, reorganization or other proceedings affecting such
securities.
If portfolio securities upon which such income is payable are in
default or payment is refused after due demand or presentation, the Bank
will immediately notify the Fund by telecopier of any default or refusal
to pay no later than one business day from the day on which it receives
knowledge of such default or refusal. In addition, the Bank will send the
Fund a written report once each month showing any income on any portfolio
security held by it which is more than ten days overdue on the date of
such report and which has not previously been reported.
-22-
11. Maintenance of Records. The Bank will maintain records with
respect to transactions for which the Bank is responsible pursuant to the
terms and conditions of this Agreement and in compliance with the
applicable rules and regulations under the Investment Company Act of 1940
as amended, and will furnish the Fund daily with a statement of condition
of the Fund. The Bank will furnish to the Fund at the end of every month,
and at the close of each quarter of the Fund's fiscal year, a list of the
portfolio securities and the aggregate amount of cash held by it for the
Fund. The books and records of the Bank pertaining to its actions under
this Agreement and reports by the Bank or its independent accountants
concerning its accounting system, procedures for safeguarding securities
and internal accounting controls will be open to inspection and audit at
reasonable times by officers of or auditors employed by the Fund and will
be preserved by the Bank in the manner and in accordance with the
applicable rules and regulations under the Investment Company Act of 1940.
The Bank agrees to treat all records and other information relative
to the Fund and its shareholders as confidential, except it may disclose
such information after prior notification to and approval in writing by
the Fund, which approval shall not be unreasonably withheld. Nothing in
this Section 11 shall prevent the Bank from divulging information to bank
or securities regulatory authorities or where the Bank may be exposed to
civil or criminal contempt proceedings for failure to comply.
12. Concerning the Bank.
A. Performance of Duties.
(1) The Bank and the Fund shall each exercise reasonable
care in the performance of their respective duties and
functions under this Agreement.
-23-
(2) In its dealings with the Fund, the Bank shall be
entitled to rely upon any Officers' Certificate, Proper
Instructions, resolution of the Directors, telegram, facsimile
communication, written notice, or certificate.
B. Responsibility of Custodian. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by
it pursuant to this Contract and shall beheld harmless in acting
upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held harmless and be protected by
the Fund and shall be held to the exercise of reasonable care in
carrying out the Proper Instructions of the Fund. It shall be
entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) or mutually acceptable to both parties on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
C. No Duty of Bank. The Bank will be under no duty or
obligation to inquire into and will not be liable for:
(a) the validity of the issue of any portfolio
securities purchased by or for the Fund, the legality of the
purchases thereof or the propriety of the price incurred
therefor;
-24-
(b) the legality of any sale of any portfolio securities
by or for the Fund or the propriety of the amount for which
the same are sold;
(c) the legality of an issue or sale of any shares of
common stock of the Fund or the sufficiency of the amount to
be received therefor provided that it reflects the net asset
value as provided by the Fund;
(d) the legality of the repurchase of any shares of
common stock of the Fund or the propriety of the amount to be
paid therefor provided that it reflects the net asset value as
provided by the Fund;
(e) the legality of the declaration of any dividend by
the Fund or the legality of the distribution of any portfolio
securities as payment in kind of such dividend; or
(f) any property or moneys of the Fund unless and until
received by it, except as otherwise provided in Section 10
hereof, and any such property or moneys delivered or paid by
it pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any portfolio securities at any time delivered to or
held by it for the account of the Fund are such as may properly be held by
the Fund under the provisions of its Agreement and Declaration of Fund or
By-Laws, any federal or state statutes or any rule or regulation of any
governmental agency.
D. Fees and Expenses of Bank. The Fund will pay or reimburse
the Bank from time to time for any transfer taxes payable upon
transfer of portfolio securities made hereunder, and for the Bank's
normal disbursements,
-25-
expenses and charges made or incurred by the Bank in the performance
of this Agreement (including any duties listed on any Schedule
hereto, if any). For the services rendered by the Bank hereunder,
the Fund will pay to the Bank such compensation or fees at such rate
and at such times as shall be agreed upon in writing by the parties
from time to time. The Bank will also be entitled to reimbursement
by the Fund for normal industry costs for securities transfers and
services incurred in conjunction with termination of this Agreement
by the Fund.
E. Advances by Bank. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by
this Agreement upon receipt of Proper Instructions as required by
this Agreement for such payments by the Fund. Should such a payment
or payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any
other reason) any such related indebtedness shall be deemed a loan
made by the Bank to the Fund payable on demand and bearing interest
at the current rate charged by the Bank for such loans unless the
Fund shall provide the Bank with agreed-upon compensating balances.
The Fund authorizes the Bank, in its sole discretion, at any time to
charge any overdraft or indebtedness, together with interest due
thereon, against any balance of account standing to the credit of
the Fund on the Bank's books.
13. Termination.
(a) This Agreement may be terminated at any time without
penalty upon ninety days written notice delivered by either party to
the other by means of registered mail, and upon the expiration of
such ninety days this Agreement will terminate; provided, however,
that the effective date of such termination may be postponed to a
date of delivery
-26-
of such notice (i) by the Bank in order to prepare for the transfer
by the Bank of all of the assets of the Fund held hereunder, and
(ii) by the Fund in order to give the Fund an opportunity to make
suitable arrangements for a successor custodian. At any time after
the termination of this Agreement, the Fund will, at its request,
have access to the records of the Bank relating to the performance
of its duties as custodian.
(b) In the event of the termination of this Agreement, the
Bank will immediately upon receipt or transmittal, as the case may
be, of notice of termination, commence and prosecute diligently to
completion the transfer of all cash and the delivery of all
portfolio securities duly endorsed and all records maintained under
Section 11 to the successor custodian when appointed by the Fund.
The obligation of the Bank to deliver and transfer over the assets
of the Fund held by it directly to such successor custodian will
commence as soon as such successor is appointed and will continue
until completed as aforesaid. If the Fund does not select a
successor custodian within ninety days from the date of delivery of
notice of termination the Bank may, subject to the provisions of
subsection (c) of this Section 13, deliver the portfolio securities
and cash of the Fund held by the Bank to a bank or trust company of
its own selection which meets the requirements of Section 17(f)(1)
of the Investment Company Act of 1940 and has a reported capital,
surplus and undivided profits aggregating not less than $2,000,000,
to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such bank or trust
company so selected by the Bank will become the successor custodian
of such assets of the Fund with the same effect as though selected
by the Directors of the Fund.
-27-
(c) Prior to the expiration of ninety days after notice of
termination has been given, the Fund may furnish the Bank with an
order of the Fund advising that a successor custodian cannot be
found willing and able to act upon reasonable and customary terms
and that there has been submitted to the shareholders of the Fund
the question of whether the Fund will be liquidated or will function
without a custodian for the assets of the Fund held by the Bank. In
that event the Bank will deliver the portfolio securities and cash
of the Fund held by it, subject as aforesaid, in accordance with one
of such alternatives which may be approved by the requisite vote of
shareholders, upon receipt by the Bank of a copy of the minutes of
the meeting of shareholders at which action was taken, certified by
the Fund's Secretary.
14. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to
it at its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
c/o Value Line Inc.
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Treasurer
(b) In the case of notices sent to the Bank to:
State Street Bank and Trust Company
Mutual Fund Services
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
-28-
or at such other place as such party may from time to time
designate in writing.
15. Amendments. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties, and in the case of
the Fund, such alteration or amendment will be authorized and approved by
its Directors.
16. Parties. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be assignable by
the Fund without the written consent of the Bank or by the Bank without
the written consent of the Fund, authorized and approved by its Directors;
and provided further that termination proceedings pursuant to Section 13
hereof will not be deemed to be an an assignment within the meaning of
this provision.
17. Governing Law. This Agreement and all performance hereunder will
be governed by the laws of the Commonwealth of Massachusetts.
-29-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate and their respective corporate seals to be affixed hereto
as of the date first above written by their respective officers thereunto duly
authorized.
VALUE LINE ASSET ALLOCATION FUND, INC.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
ATTEST:
/s/ Xxxxx X. Menigson
-------------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
ATTEST:
/s/ [Illegible]
-------------------------------
-30-
AMENDMENT TO CUSTODIAN CONTRACT
AMENDMENT made by and between STATE STREET BANK AND TRUST COMPANY (the
"Custodian") each Fund listed on Appendix A (the "Fund").
WHEREAS, the Custodian and each Fund are parties to a Custodian Contract,
as amended (each a "Custodian Contract") governing the terms and conditions
under which the Custodian maintains custody of the securities and other assets
of the Fund; and
WHEREAS, the Custodian and each Fund desires to amend the relevant
Custodian Contract;
NOW THEREFORE, the Custodian and each Fund hereby amend and revise in its
entirety the defined term "Authorized person" in Section 2(a) of the Custodian
Contract as follows:
"Authorized person" of a Fund shall mean any of the persons duly
authorized to give Proper Instructions or otherwise act with respect to
such Fund on behalf of the Board of Trustees/Directors of such Fund by
appropriate resolution of such Board of Trustees/Directors, it being
understood that the signatures of two Authorized persons of a Fund shall
be required for the release of the assets of the Fund.
1
Except as specifically superseded or modified herein, the terms and provisions
of the Custodian Contract shall continue to apply with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
1st day of October, 1997.
STATE STREET BANK AND TRUST COMPANY
By /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx
Executive Vice President
Attest: /s/ Xxxxxx X. Xxxx
----------------------------
Xxxxxx X. Xxxx
Vice President
EACH FUND LISTED ON APPENDIX A
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chairman/President
Attest: /s/ Xxxxx X. Menigson
----------------------------
Name: Xxxxx X. Menigson
Title: Secretary
2
APPENDIX A
LIST OF FUNDS
Value Line Aggressive Income Trust
Value Line Asset Allocation Fund, Inc.,
Value Line Cash Fund, Inc., (The)
Value Line Centurion Fund, Inc.
Value Line Convertible Fund, Inc.
Value Line Fund, Inc. (The)
Value Line Income Fund, Inc., (The)
Value Line Leveraged Growth Investors, Inc.
Value Line New York Tax Exempt Trust
Value Line Small-Cap Growth Fund, Inc.
Value Line Special Situations Fund, Inc.
Value Line Strategic Asset Management Trust
Value Line Tax-Exempt Fund, Inc. (The)
Value Line U.S. Government Securities Fund, Inc.
Value Line U.S. Multi-National Company Fund, Inc.
3
