Exhibit (f)
CUSTODIAN AGREEMENT
Dated as of:
Between
THE VALUE LINE INCOME FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
----
1. Bank Appointed Custodian................................................1
2. Definitions.............................................................1
(a) Authorized Person...................................................1
(b) Security............................................................2
(c) Portfolio Security..................................................2
(d) Officers' Certificate...............................................2
(e) Book-Entry System and Depository....................................2
3. A. Proper Instructions.................................................3
B. Bank's Communications with Fund.....................................4
4. Separate Account........................................................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 Director Paper System for Commercial
Paper...........................................................12
C. Options and Futures Transactions....................................14
(a) Puts and Calls Traded on Securities
Exchanges, NASDAO 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 21 day of June, 1990 between THE VALUE LINE
INCOME 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. Authorised 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. Officer's Certificate will mean unless
otherwise indicated, any request, direction, instruction, or certification
in writing signed by any two Authorised 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
-2-
Trust Company ("DTC"), a clearing agency registered with the Securities
and Exchange Commission under Section 17A of the Securities Exchange act
of 1934, its 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 the purposes of this Agreement, "Proper
Instructions" shall mean (i) instructions regarding the purchase or sale of
securities for the portfolio of the Fund, and payments and deliveries in
connection therewith, given by an Authorized Person as designated in an
Officers' Certificate, such instructions to be given in such form and manner
as the Bank and the Fund shall agree upon from time to time, and
(ii) instructions (which may be continuing instructions) regarding other
matters signed or initialled by such one or more persons from time to time
designated in an Officers' Certificate as having been authorized by the
Directors of the Fund. Oral instructions given by a person whom the Bank
reasonably believes to be authorized to give such instructions with respect
to the transaction involved will be considered Proper Instructions only if
the Bank receives written instructions (which may be sent by telecopier)
confirming such oral instructions, provided however that if the Bank is
notified by an Authorized Person of the Fund that the Fund is unable to
promptly confirm such oral instructions in writing, then the Bank may act
upon receipt of a second oral instruction confirming such prior oral
instruction. The Bank shall compare the original oral instruction with any
confirmatory written or oral instruction, as the case may be, and shall
report any discrepancy to the Fund immediately, and the Bank shall be
responsible for any expense incurred in taking any action, including any
reprocessing, necessary to correct any
-3-
such discrepancy or error in Proper Instructions given by the Fund, to the
extent such expense is caused by the unreasonable delay of the Bank in
reporting such discrepancy to the Fund. Except as provided in the preceeding
sentence, the Fund shall be responsible, at the Fund's expense, for taking
any action, including any reprocessing, necessary to correct any such
discrepancy or error in Proper Instructions given by the Fund, and to the
extent such action requires the Bank to act, the Fund shall give the Bank
specific Proper Instructions as to the action required. The Bank shall act
upon and comply with any subsequent Proper Instructions which modifies a
prior Proper Instruction. Upon receipt of an Officers' Certificate as to the
authorization by the Directors of the Fund accompanied by a detailed
description of procedures approved by the Fund, Proper Instructions may
include communication effected directly between electro-mechanical or
electronic devices provide that the Directors and the Bank are satisfied that
such procedures afford adequate safeguards for the Fund's assets.
3B. BANK'S COMMUNICATIONS WITH FUND. For purposes of this Agreement,
all communications from the Bank to the Fund shall be in writing (which may
be sent by means of a telecopier) and any such writing reasonably believed by
the fund to be from a person authorized to make such communication on behalf
of the Bank may be relied upon the Fund. An oral communication from a person
whom the Fund reasonably believes to be authorized to make such
communication on behalf of the Bank with respect to the transaction may be
relied upon by the Fund only if the Fund receives a written communication
(which may be sent by telecopier) confirming such oral communication,
provided however, that if the Fund is notified by such authorized person that
the Bank is unable to promptly confirm such oral communication in writing,
then the Fund may act in reliance upon receipt of a second oral communication
confirming such prior oral communication. The Fund shall compare the
original oral communication with any confirmatory written or oral
-4-
communication, as the case may be, and shall report any discrepancy to the
Bank immediately, and the Fund shall be responsible for any expense incurred
in taking any action, including any reprocessing, necessary to correct any
such discrepancy or error in communications given by the Bank, to the extent
such expense is caused by the unreasonable delay of the Fund in reporting
such discrepancy to the Bank. Except as provided in the preceding sentence,
the Bank shall be responsible, at the Bank's expense, for any action taken,
including any reprocessing, necessary to correct any such discrepancy or
error in communications given by the Bank, and to the extent such action
requires the Bank to act, the Fund shall give the Bank specific Proper
Instructions as to the action required. The Fund may act in reliance upon
any subsequent communication from the Bank which modifies a prior
communication.
4. SEPARATE ACCOUNTS. If the fund has more than one series or
portfolio, the Bank will segregate the assets of the Fund into a Separate
Account for each such series or portfolio containing the assets of such
series or portfolio (and all investment earnings thereon), all as directed
from time to time by Proper Instructions.
5. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the Authorized Persons, it being understood that
upon the occurrence of any change in the information set forth in the most
recent certification on file (including without limitation any person named
in the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Fund will
sign a new or amended certification setting forth the change and the new,
additional or omitted names or signatures. The Bank will be entitled to rely
and act upon any Officers' Certificate given to
-5-
it by the Fund which has been signed by Officers named in the most recent
certification.
6. CUSTODY OF CASH AND SECURITIES. As custodian for the Fund, the Bank
will keep safely all of the portfolio securities delivered to the Bank, and
will deposit to the account of the Fund all of the cash of the Fund delivered
to the Bank, as set forth below.
A. CASH. The bank will open and maintain a separate account or
accounts in the name of the Fund or in the name of the Bank, as custodian of
the Fund, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. The Bank will hold in such account or accounts as
custodian, subject to the provisions hereof (including sections 6(C) and
6(D), all cash received by it, for the account of the Fund. Upon receipt by
the Bank of Proper Instructions (which may be continuing instructions) or in
the case of payments for redemptions and repurchases of outstanding shares of
beneficial interest of the Fund, notification from the Fund's transfer agent
as provided in Section 8, requesting such payment, designating the payee or
the account or accounts to which the Bank will release funds or deposit, and
stating that is is for a purpose permitted under the terms of this Section
6(A), specifying the applicable subsection, or describing such purpose with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, the Bank will make payments of cash held for the accounts of the
fund, insofar as funds are available for that purpose, only as permitted in
(a)-(g) below.
(a) PURCHASE OF SECURITIES: upon the purchase of securities for
the Fund, against contemporaneous receipt of such securities by the
Bank registered in the name of the Fund or in the name of, or properly
endorsed and in form for transfer to, the Bank, or a nominee of the Bank,
or receipt for the account of the Bank through use of (1) the
-6-
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 the 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;
-7-
(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
-8-
specific provisions in Subparagraphs (a), (b), and (c) relating to securities
that are not physically held by the Bank, the Bank will register all
portfolio securities (unless otherwise directed by Proper Instructions or an
Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, which nominee shall be exclusively assigned to
the Fund, and will execute and deliver all such certificates in connection
therewith as may be required by such laws or Regulations or under the laws of
any State. The Bank will ensure that the specific portfolio securities of the
Fund held by it hereunder will be at all times identifiable.
The Bank will use the same care with respect to the safekeeping of
portfolio securities and cash of the Fund held by it as it uses in respect of
its own similar property but it need not maintain any special insurance for
the benefit of the Fund.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
Neither the Bank nor any nominee of the Bank will vote any of the
portfolio securities held hereunder by or for the account of the Fund, except
in accordance with Proper Instructions of an Officers' Certificate.
The Bank will execute and deliver, or cause to be executed and
delivered, to the Fund all notices, proxies and proxy soliciting materials
with respect to such securities, such proxies to be executed by the
registered holder of such securities (if registered otherwise than in the
name of the Fund), but without indicating the manner in which such proxies
are to be voted.
-9-
(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.
-10-
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
-11-
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,
-12-
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.
-13-
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
-14-
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
-15-
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 the Proper Instructions, a certified copy of a
resolution of the Directors of the Fund signed by an officer of the
Fund and
-16-
certified by the Clerk of an Assistant Clerk, setting forth the
purpose or purposes of such Segregated Account and declaring such
purposes to be proper corporate purposes.
D. SEGREGATED ACCOUNT FOR "WHEN-ISSUED", "FORWARD COMMITMENT" AND
REVERSE REPURCHASE AGREEMENT TRANSACTIONS. Notwithstanding the provisions of
Section 6(A), 6(B) and 6(C) hereof, the Bank will maintain a segregated account
(the "Segregated Account") in the name of the Fund (i) for the deposit of liquid
assets, such as cash, U.S. Government securities or other high grade debt
obligations, having a market value (marked to the market on a daily basis) at
all times equal to not less than the aggregate purchase price due on the
settlement dates of all the Fund's then outstanding forward commitment or
"when-issued" agreements relating to the purchase of portfolio securities and
all the Fund's then outstanding commitments under reverse repurchase agreements
entered into with broker-dealer firms, and (ii) for the deposit of any portfolio
securities which the Fund has agreed to sell on a forward commitment basis, all
in accordance with Securities and Exchange Commission Release No. IC-10666. No
assets shall be deposited in the Segregated Account except pursuant to Proper
Instructions. Assets may be withdrawn from the segregated account pursuant to
Proper Instructions only (a) for sale or delivery to meet the Fund's obligations
under outstanding firm commitment or when-issued agreements for the purchase of
portfolio securities and under reverse repurchase agreements, (b) for exchange
for other liquid assets of equal or greater value deposited in the Segregated
Account, (c) to the extent that the Fund's outstanding forward commitment or
when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Fund's obligations
thereunder are met from assets of the Fund other than those in the Segregated
Account, or (d) for delivery upon settlement of a forward commitment agreement
for the sale of portfolio securities.
-17-
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
transactions 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), (e), (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
wit portfolio securities delivered to it or by it under this Agreement as
may be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws
of any State;
(e) Present for payment all portfolio securities which are called,
redeemed, retired or totherwise become payable, and hold cash received by
it upon payment for the account of the Fund in the account or accounts
referred of 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 actulally received
by it of any call for redemption, offer of exchange, right of subscription,
reorganization or other proceedings affecting such securities.
If portfolio securities upon which such income is payable are in default or
payment is refused after due demand or presentation, the Bank will notify the
Fund by telecopier of any default or refusal to pay no later than one business
day from the day on which it receives knowledge of such default or refusal. In
addition, the Bank will send the Fund a written report once each month showing
any income on any portfolio security held by it which is more than ten days
overdue on the date of such report and which has not previously been reported.
-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 appplicable 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)(l) of the Investment Company Act of 1940
and has a reported capital, surplus and undivided profits aggregating not less
than $2,000,000, to be held as the property of the Fund under terms similar to
those on which they were held by the Bank, whereupon such bank or trust company
so selected by the Bank will become the successor custodian of such assets of
the Fund with the same effect as though selected by the 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 take, 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:
The Value Line Income Fund, Inc.
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.
THE VALUE LINE INCOME FUND, INC.
By:/s/ illegible
-----------------------------
ATTEST:
/s/ illegible
--------------------------------
STATE STREET BANK AND TRUST COMPANY
By:/s/ illegible
-----------------------------
ATTEST:
/s/ illegible
--------------------------------
-30-
Exhibit (f)
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 releases of the assets of the Fund.
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/ not legible
---------------------------
Name: not legible
Title: Secretary
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.
