UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file Number 811-3171
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Value Line US Government Securities Fund,Inc.
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(Exact name of registrant as specified in charter)
220 East 42nd Street, New York, N.Y. 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-907-1500
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Date of fiscal year end: August 31, 2004
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Date of reporting period: August 31, 2004
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Item I. Reports to Stockholders.
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A copy of the Annual Report to Stockholders for the period ended
8/31/04 is included with this Form.
Item 2. Code of Ethics
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(a) The Registrant has adopted a Code of Ethics that applies to its
principal executive officer, and principal financial officer and principal
accounting officer.
(f) Pursuant to item 10(a),the Registrant is attaching as an exhibit a
copy of its Code of Ethics that applies to its principal executive officer, and
principal financial officer and principal accounting officer.
Item 3. Audit Committee Financial Expert.
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(a)(1)The Registrant has an Audit Committee Financial Expert serving on
it's Audit Committee.
(2) The Registrant's Board has designated John W. Chandler, a member
of the Registrant's Audit Committee, as the Registrant's Audit Committee
Financial Expert. Mr. Chandler is an independent director who is a senior
consultant with Academic Search Consultation Service. He spent most of his
professional career at Williams College, where he served as a faculty member,
Dean of the Faculty, and President (1973-85). He also served as President of
Hamilton
College (1968-73), and as President of the Association of American Colleges and
Universities (1985-90). He has also previously served as Trustee Emeritus and
Chairman of the Board of Trustees of Duke University.
A person who is designated as an "audit committee financial expert" shall not
make such person an "expert" for any purpose, including without limitation under
Section 11 of the Securities Act of 1933 or under applicable fiduciary laws, as
a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services
- ------- --------------------------------------
(a) Audit Fees 2004 - $28,891; Audit Fees 2003 - $28,724.
(b) Audit-Related fees - None.
(c) Tax Preparation Fees 2004 -$5,590; Tax Preparation Fees 2003 -
$6,840.
(d) All Other Fees - None.
(e) (1) Audit Committee Pre-Approval Policy.All services to be
performed for the Registrant by PricewaterhouseCoopers LLP
must be pre-approved by the audit committee. All services
performed during 2004 and 2003 were pre-approved by the
committee.
(e) (2) Not applicable.
(f) Not applicable.
(g) Aggregate Non-Audit Fees 2004 -$5,590; Aggregate Non-Audit
Fees 2003- $6,840.
(h) Not applicable.
Item 10. Controls and Procedures.
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(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's
disclosure controls and procedures (as defined in rule
30a-2(c) under the Act (17 CFR 270.30a-2(c) ) based on their
evaluation of these controls and procedures as of a date
within 90 days of the filing date of this report, are
appropriately designed to ensure that material information
relating to the registrant is made known to such officers and
are operating effectively.
(b) The registrant's principal executive officer and principal
financial officer have determined that there have been no
significant changes in the registrant's internal controls or
in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 11. Exhibits.
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(a) Code of Ethics for Principal Executive and Senior Financial
Officers attached hereto as Exhibit 100.COE
(b) (1) Certification pursuant to Rule 30a-2 under the Investment
Company Act of 1940 (17 CFR 270.30a-2) attached hereto as
Exhibit 99.CERT.
(2) Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit
99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By /s/ Jean B. Buttner
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Jean B. Buttner, President
Date: October 26, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jean B. Buttner
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Jean B. Buttner, President, Principal Executive Officer
By: /s/ David T. Henigson
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David T. Henigson, Vice President, Treasurer, Principal Financial Officer
Date: October 26, 2004
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INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o BFDS
P.O. Box 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
REGISTERED PUBLIC 300 Madison Avenue
ACCOUNTING FIRM New York, NY 10017
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Sound View Drive, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Marion N. Ruth
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Jeffrey D. Geffen
VICE PRESIDENT
Charles Heebner
VICE PRESIDENT
Bradley T. Brooks
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT,
SECRETARY/TREASURER
Joseph Van Dyke
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THIS REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A
CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE DISTRIBUTOR).
#531311
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ANNUAL REPORT
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AUGUST 31, 2004
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VALUE LINE
U.S. GOVERNMENT
SECURITIES
FUND, INC.
[VALUE LINE LOGO]
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
To Our Value Line U.S. Government
- --------------------------------------------------------------------------------
To Our Shareholders:
The fiscal year was marked by strong economic growth, rising equity markets, and
healthy corporate profits. A weak U.S. dollar and strong global economies,
particularly in China and other parts of Asia, added to U.S. growth which had
been stimulated primarily by tax cuts and low interest rates. Housing markets
continued to be strong and labor markets improved.
During this period the Federal Reserve Board's expansionary monetary policy came
to an end. The policy, which had brought short term interest rates to their
lowest level in decades, accomplished its goals of rekindling growth and
avoiding deflation. Now with economic growth on a stronger track, the Board
became concerned that such growth, fueled by very low interest rates, could
create a rise in inflation. Therefore, starting in June, the Board reversed
their expansionary policy, raising short term rates. By the end of the period,
short term rates had risen 50 basis points with expectations for further
increases.
It was a difficult year for the bond market as strong economic growth, fear of
rising inflation, and a tighter monetary policy all contributed to a great deal
of interest rate volatility. Prices of short term bonds declined for the period
as interest rates rose. The 2-year Treasury note began the period at an interest
rate of 1.96% and ended at a rate of 2.40%, a rise of 44 basis points.
Intermediate and longer term bonds fared better, rising in price, as interest
rates declined 34 basis points from the beginning of the period to the end.
However, longer rates were subject to much volatility. The 10-year Treasury note
started the period at an interest rate of 4.46% and fell to a low rate of 3.68%
in March, before rising again to a 4.87% rate in June, an increase of 119 basis
points. From June until the end of the period, rates dropped again to 4.12%, or
75 basis points lower.
For the period, your Fund delivered a positive total return of 3.79%. Because
the Fund is concentrated in intermediate maturities and less exposed to shorter
maturities, it benefited from the better performance of the longer maturities,
in the 5-10 year range, and was less impacted by the weaker performance of the
shorter maturities, the 2-4 year maturity range. For the period ending August
31, 2004, the Fund's return of 3.79% compares to the 4.07% return of the
unmanaged Lehman Brothers Intermediate U.S. Government Bond Index(1), a proxy
for the Fund's government investment strategy.
Your Fund's long-term strategy is to generate high income consistent with safety
of principal by investing primarily in U.S. Government securities, representing
the highest level of safety. Additionally, we control risk by limiting the
portfolio's average maturity to a maximum of 10 years, and by maintaining a
well-diversified portfolio. These measures, we believe, will protect the fund
from the dramatic swings in value caused by gyrating interest rates and produce
more stable and consistent performance.
We continue to emphasize an intermediate-term maturity structure in our bond
selection to provide competitive performance going forward. We appreciate your
continued support.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
October 6, 2004
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(1) THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT BOND INDEX REPRESENTS THE
INTERMEDIATE MATURITIES (1-10 YEARS) OF THE U.S. TREASURY AND U.S. AGENCY
SEGMENT OF THE FIXED-INCOME MARKET. THE RETURNS FOR THE INDEX DO NOT REFLECT
CHARGES, EXPENSES, OR TAXES, AND IT IS NOT POSSIBLE TO DIRECTLY INVEST IN
THIS INDEX. A U.S. TREASURY SECURITY IS ISSUED BY THE TREASURY DEPARTMENT OF
THE U.S. GOVERNMENT. U.S. AGENCY SECURITIES ARE ISSUED BY OTHER GOVERNMENT
AGENCIES SUCH AS THE FEDERAL HOME LOAN BANK, FEDERAL NATIONAL MORTGAGE
ASSOCIATION AND FEDERAL HOME LOAN MORTGAGE CORPORATION.
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2
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Securities Fund Shareholders
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Economic Observations
The economic expansion, which proceeded at a vigorous pace from the middle of
2003 through the early months of 2004, showed definite signs of slowing during
the middle months of this year. More recently, though, reports point to a modest
improvement in the business outlook. The economy is hardly booming. However
housing, employment, and capital goods demand are all firming, if still
selectively, which suggests that the nation's gross domestic product, which rose
by a sluggish 2.8% in the second quarter, will expand by a somewhat stronger
3.5%, or so, over the final two quarters of this year and into the early part of
2005.
This continuing moderate, but likely sustainable, pace of growth and
accompanying modest inflation, have positive ramifications, as they will
probably encourage the Federal Reserve Board, which has raised interest rates
three times this year, to pursue a measured and cautious monetary tightening
program over the next several quarters to a year. Our sense is that the Fed will
increase borrowing costs sufficiently to keep inflation subdued, but not
aggressively enough to derail the business expansion.
Our current economic forecast, meantime, excludes allowances for a further
escalation in global military conflict, a new incidence of global terrorism, or
an additional significant runup in oil prices, none of which can be predicted
with any degree of accuracy as to scope or timing.
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3
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
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The following graph compares the performance of the Value Line U.S. Government
Securities Fund, Inc. to that of the Lehman Brothers Aggregate Bond Index and
the Lehman Brothers Intermediate U.S. Government Bond Index. The Value Line
U.S. Government Securities Fund, Inc. is a professionally managed mutual fund,
while the indices are not available for investment and are not managed. The
comparison is shown for illustrative purposes only.
Comparison of a Change in Value of a $10,000 Investment in the Value Line
U.S. Government Securities Fund, Inc., the Lehman Brothers Aggregate Bond
Index**, and the Lehman Brothers Intermediate U.S. Government Bond Index**
[GRAPH APPEARS HERE]
FROM 9/1/94 TO 8/31/04
Performance Data:*
AVERAGE
GROWTH OF AN ASSUMED ANNUAL
INVESTMENT OF $10,000 TOTAL RETURN
----------------------- -------------
1 year ended 08/31/04 .......... $10,379 3.79%
5 years ended 08/31/04 ......... $13,774 6.61%
10 years ended 08/31/04 ......... $18,292 6.23%
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE
OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE PERFORMANCE DATA AND GRAPH DO
NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. CALL 1-800-243-2729 TO
OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END.
** THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS REPRESENTATIVE OF THE BROAD
FIXED-INCOME MARKET. IT INCLUDES GOVERNMENT, INVESTMENT-GRADE CORPORATE,
AND MORTGAGE-BACKED BONDS. THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT
BOND INDEX REPRESENTS THE INTERMEDIATE MATURITY (1-10 YEAR) OF THE U.S.
TREASURY AND U.S. AGENCY SEGMENT OF THE FIXED-INCOME MARKET. THE RETURNS
FOR THE INDICES DO NOT REFLECT EXPENSES WHICH ARE DEDUCTED FROM THE FUND'S
RETURNS.
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4
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
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FUND EXPENSES:
Example
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other Fund expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (March 1, 2004 through August 31, 2004).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example an $8,600
account value divided by $1,000=8.6), then multiply the result by the number in
the first line under the heading "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
EXPENSES*
PAID DURING
BEGINNING ENDING PERIOD
ACCOUNT ACCOUNT 3/1/04
VALUE VALUE THRU
3/1/04 8/31/04 8/31/04
-------------- -------------- ------------
Actual ........................................... $ 1,000.00 $ 1,003.10 $ 4.98
Hypothetical (5% return before expenses) ......... $ 1,000.00 $ 1,020.16 $ 5.03
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF .99% MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 184/366 TO REFLECT
THE ONE-HALF PERIOD.
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5
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Schedule of Investments
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PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- ------------- ------------- ----------- -------------
U.S. TREASURY OBLIGATIONS (8.8%)
$ 1,000,000 U.S. Treasury Notes .................................. 2.75% 6/30/06 $ 1,007,774
2,000,000 U.S. Treasury Notes .................................. 6.50 10/15/06 2,166,642
2,000,000 U.S. Treasury Notes .................................. 6.25 2/15/07 2,175,392
1,000,000 U.S. Treasury Notes .................................. 4.38 5/15/07 1,044,922
1,000,000 U.S. Treasury Notes .................................. 5.75 8/15/10 1,117,110
1,000,000 U.S. Treasury Notes .................................. 5.00 2/15/11 1,076,602
1,000,000 U.S. Treasury Notes .................................. 5.00 8/15/11 1,075,899
1,000,000 U.S. Treasury Notes .................................. 4.25 11/15/13 1,012,696
- ------------ -----------
10,000,000 TOTAL U.S. TREASURY OBLIGATIONS (COST $10,518,065) ... 10,677,037
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U.S. GOVERNMENT AGENCY OBLIGATIONS (83.5%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (48.1%)
5,427,652 Federal National Mortgage Association Pool #313032 ... 7.06 7/01/06 5,603,718
1,000,000 Federal National Mortgage Association ................ 2.00(1) 11/09/06 1,000,015
4,000,000 Federal National Mortgage Association ................ 4.75 1/02/07 4,171,044
9,641,859 Federal National Mortgage Association Pool #375667 ... 6.02 2/01/08 10,299,145
10,000,000 Federal National Mortgage Association Pool #380188 ... 6.45 4/01/08 10,645,310
127,955 Federal National Mortgage Association Pool #254243 ... 6.00 2/01/09 131,546
247,871 Federal National Mortgage Association Pool #254273 ... 5.00 3/01/09 254,190
1,000,000 Federal National Mortgage Association ................ 6.38 6/15/09 1,117,594
891,910 Federal National Mortgage Association Pool #254956 ... 4.00 11/01/10 890,123
2,682,317 Federal National Mortgage Association Pool #255325 ... 4.50 7/01/11 2,718,919
1,000,000 Federal National Mortgage Association ................ 5.00 4/16/15 1,000,626
314,244 Federal National Mortgage Association Pool #511823 ... 5.50 5/01/16 326,172
706,187 Federal National Mortgage Association Pool #622373 ... 5.50 12/01/16 732,991
247,085 Federal National Mortgage Association Pool #615289 ... 5.50 12/01/16 256,464
524,780 Federal National Mortgage Association Pool #623503 ... 6.00 2/01/17 551,778
273,123 Federal National Mortgage Association Pool #631328 ... 5.50 2/01/17 283,440
40,712 Federal National Mortgage Association Pool #643277 ... 5.50 4/01/17 42,249
37,120 Federal National Mortgage Association Pool #638247 ... 5.50 5/01/17 38,522
595,924 Federal National Mortgage Association Pool #669613 ... 5.00 10/01/17 609,048
740,971 Federal National Mortgage Association Pool #685183 ... 5.00 3/01/18 756,761
696,723 Federal National Mortgage Association Pool #254684 ... 5.00 3/01/18 711,570
819,971 Federal National Mortgage Association Pool #695828 ... 5.00 4/01/18 837,445
767,930 Federal National Mortgage Association Pool #703936 ... 5.00 5/01/18 784,295
787,036 Federal National Mortgage Association Pool #713379 ... 5.00 7/01/18 803,808
1,000,099 Federal National Mortgage Association Pool #790984 ... 5.00 7/01/19 1,020,690
999,900 Federal National Mortgage Association Pool #786915 ... 5.00 8/01/19 1,020,174
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6
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
August 31, 2004
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PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- ------------- ---------- ---------- -------------
$ 822,873 Federal National Mortgage Association REMIC Trust Series
2003-28 Class KA .............................................. 4.25% 3/25/22 $ 809,428
716,040 Federal National Mortgage Association REMIC Trust Series
2003-38 Class TC .............................................. 5.00 3/25/23 727,623
459,893 Federal National Mortgage Association Pool #412682 ............ 6.00 3/01/28 478,317
232,779 Federal National Mortgage Association Pool #424691 ............ 6.50 4/01/28 245,598
198,715 Federal National Mortgage Association Pool #425239 ............ 6.50 4/01/28 209,659
1,000,000 Federal National Mortgage Association ......................... 7.25 5/15/30 1,251,312
1,000,000 Federal National Mortgage Association ......................... 6.63 11/15/30 1,166,692
158,212 Federal National Mortgage Association Pool #571090 ............ 7.50 1/01/31 170,016
4,135 Federal National Mortgage Association Pool #568625 ............ 7.50 1/01/31 4,443
8,798 Federal National Mortgage Association Pool #573935 ............ 7.50 3/01/31 9,454
1,126,837 Federal National Mortgage Association Pool #626440 ............ 7.50 2/01/32 1,209,660
154,366 Federal National Mortgage Association Pool #629297 ............ 6.50 2/01/32 162,673
235,111 Federal National Mortgage Association Pool #254383 ............ 7.50 5/01/32 252,391
136,296 Federal National Mortgage Association Pool #634996 ............ 6.50 5/01/32 143,640
1,216,161 Federal National Mortgage Association Pool #254476 ............ 5.50 9/01/32 1,239,580
873,277 Federal National Mortgage Association Pool #650386 ............ 5.00 7/01/33 869,612
829,840 Federal National Mortgage Association Pool #726889 ............ 5.50 7/01/33 845,215
468,589 Federal National Mortgage Association Pool #763393 ............ 5.50 2/01/34 477,271
461,720 Federal National Mortgage Association Pool #769862 ............ 5.50 2/01/34 469,698
990,222 Federal National Mortgage Association Pool #255311 ............ 6.00 7/01/34 1,027,137
----------- -----------
55,665,233 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
===========
(COST $56,238,168) ............................................ 58,377,056
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (12.4%)
1,000,000 Federal Home Loan Mortgage Corporation ........................ 4.26 7/19/07 1,028,536
1,000,000 Federal Home Loan Mortgage Corporation ........................ 2.75 3/15/08 985,759
4,500,000 Federal Home Loan Mortgage Corporation ........................ 5.88 3/21/11 4,896,639
1,000,000 Federal Home Loan Mortgage Corporation ........................ 4.50 5/14/12 994,364
1,000,000 Federal Home Loan Mortgage Corporation ........................ 4.75 5/06/13 984,199
36,328 Federal Home Loan Mortgage Corporation REMIC Trust Series
2540 Class GA ................................................. 5.00 12/15/13 36,325
1,000,000 Federal Home Loan Mortgage Corporation REMIC Trust Series
2849 Class VA ................................................. 5.00 8/15/15 1,030,938
40,787 Federal Home Loan Mortgage Corporation Gold PC Pool #E92226 5.00 11/01/17 41,668
652,113 Federal Home Loan Mortgage Corporation Gold PC Pool #E93499 5.00 12/01/17 666,201
44,520 Federal Home Loan Mortgage Corporation Gold PC Pool #E92829 5.00 12/01/17 45,482
553,911 Federal Home Loan Mortgage Corporation REMIC Trust Series
2597 Class KJ ................................................. 4.50 7/15/22 550,255
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7
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Schedule of Investments
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PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- ------------- ---------- ---------- -------------
$ 904,929 Federal Home Loan Mortgage Corporation Gold PC Pool #C90684 4.50% 5/01/23 $ 891,306
1,000,000 Federal Home Loan Mortgage Corporation ......................... 6.75 3/15/31 1,185,204
926,662 Federal Home Loan Mortgage Corporation REMIC Trust Series
2645 Class NA .................................................. 3.50 9/15/31 913,038
850,339 Federal Home Loan Mortgage Corporation REMIC Trust Series
-----------
2594 Class OR .................................................. 4.25 6/15/32 846,268
-----------
14,509,589 TOTAL FEDERAL HOME LOAN MORTGAGE
===========
CORPORATION (COST $14,641,972) ................................. 15,096,182
-----------
FEDERAL HOME LOAN BANK (10.3%)
1,000,000 Federal Home Loan Bank ......................................... 2.85 2/13/07 999,258
500,000 Federal Home Loan Bank ......................................... 4.88 5/15/07 524,966
500,000 Federal Home Loan Bank ......................................... 3.50 11/15/07 505,444
1,000,000 Federal Home Loan Bank ......................................... 6.01 4/22/08 1,092,373
1,000,000 Federal Home Loan Bank ......................................... 5.50 8/15/08 1,076,740
1,000,000 Federal Home Loan Bank ......................................... 5.25 11/14/08 1,068,972
1,000,000 Federal Home Loan Bank ......................................... 6.21 6/02/09 1,113,203
1,000,000 Federal Home Loan Bank ......................................... 3.75 8/18/09 1,003,690
1,000,000 Federal Home Loan Bank ......................................... 6.63 6/30/14 1,153,955
3,000,000 Federal Home Loan Bank ......................................... 7.45 2/03/20 3,917,778
----------- -----------
11,000,000 TOTAL FEDERAL HOME BANK (COST $11,940,695) ..................... 12,456,379
----------- -----------
FEDERAL FARM CREDIT BANK (6.3%)
2,000,000 Federal Farm Credit Bank ....................................... 6.03 5/07/08 2,186,298
1,000,000 Federal Farm Credit Bank ....................................... 6.82 3/16/09 1,132,719
1,000,000 Federal Farm Credit Bank ....................................... 4.85 10/25/12 1,031,172
3,000,000 Federal Farm Credit Bank ....................................... 5.70 7/03/17 3,246,333
----------- -----------
7,000,000 TOTAL FEDERAL FARM CREDIT BANK
===========
(COST $ 7,411,113) ............................................ 7,596,522
-----------
PRIVATE EXPORT FUNDING CORPORATION (4.9%)
5,000,000 Private Export Funding Corporation Series "J" .................. 7.65 5/15/06 5,428,925
500,000 Private Export Funding Corporation Series "L" .................. 5.75 1/15/08 540,441
----------- -----------
5,500,000 TOTAL PRIVATE EXPORT FUNDING CORPORATION
===========
(COST $5,500,000) .............................................. 5,969,366
-----------
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8
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
August 31, 2004
- --------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- -------------- ---------- ---------- --------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (1.5%)
$ 20,654 Government National Mortgage Association Pool #541349 6.00% 4/15/31 $ 21,518
48,433 Government National Mortgage Association Pool #557681 6.00 8/15/31 50,458
460,620 Government National Mortgage Association Pool #548880 6.00 12/15/31 479,882
293,531 Government National Mortgage Association Pool #551762 6.00 4/15/32 305,710
244,410 Government National Mortgage Association Pool #610944 5.50 4/15/34 249,536
497,091 Government National Mortgage Association Pool #583008 5.50 6/15/34 507,517
254,391 Government National Mortgage Association Pool #605245 5.50 6/15/34 259,727
------------ ------------
1,819,130 TOTAL GOVERNMENT NATIONAL MORTGAGE
============ ASSOCIATION (COST $1,808,202) ........................ 1,874,348
------------
95,493,952 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
============ (COST $97,540,150) ................................... 101,369,853
------------
105,493,952 TOTAL INVESTMENT SECURITIES (92.3%)
============ (COST $108,058,215) .................................. 112,046,890
------------
PRINCIPAL
AMOUNT VALUE
- -------------- ----------------
REPURCHASE AGREEMENTS (6.8%) (INCLUDING ACCRUED INTEREST)
4,200,000 Collateralized by $4,037,000 U.S. Treasury Bonds 5.50%, due 8/15/28, with a value of
$4,316,628 (with UBS Warburg LLC, 1.54%, dated 8/31/04, due 9/01/04, delivery value
$4,200,180) .......................................................................... 4,200,180
4,100,000 Collateralized by $4,185,000 U.S. Treasury Notes 2.00%, due 8/31/05, with a value of
- ------------- $4,187,616 (with Morgan Stanley, 1.53%, dated 8/31/04, due 9/01/04, delivery value
$4,100,174) .......................................................................... 4,100,174
---------
8,300,000 TOTAL REPURCHASE AGREEMENTS (6.8%) (COST $8,300,354) ................................. 8,300,354
- ------------- ---------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (0.9%) ................................ 1,096,686
---------
NET ASSETS (100.0%) .................................................................. 121,443,930
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER OUTSTANDING
SHARE ($121,443,930 - 10,228,962 SHARES OF CAPITAL STOCK OUTSTANDING) ................ $ 11.87
=============
(1) STEP COUPON. 2.00% UNTIL 11/09/04, 3.45% THEREAFTER.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Statement of Assets and Liabilities Statement of Operations
at August 31, 2004 for the Year Ended August 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS: INVESTMENT INCOME:
Investment securities, at value Interest income .............................. $5,782,037
(Cost - $108,058,215) ....................... $112,046,890 ----------
Repurchase agreements EXPENSES:
(Cost - $8,300,354) ......................... 8,300,354 Advisory fee ................................. 659,852
Cash ........................................... 62,514 Service & distribution plan fees ............. 329,926
Interest receivable ............................ 1,196,766 Transfer agent fees .......................... 76,949
Receivable for securities sold ................. 1,027,837 Auditing and legal fees ...................... 61,012
Receivable for capital shares sold ............. 1,504 Printing ..................................... 38,986
------------ Custodian fees ............................... 36,852
TOTAL ASSETS ............................. 122,635,865 Registration and filing fees ................. 24,467
------------ Directors' fees and expenses ................. 21,384
LIABILITIES: Postage ...................................... 18,576
Payable for securities purchased ............... 1,004,419 Insurance .................................... 15,161
Payable for capital shares repurchased ......... 46,266 Telephone, dues and other .................... 14,122
Accrued expenses: ----------
Advisory fee ................................ 51,431 Total Expenses Before Custody
Service & distribution plan fee ............. 25,715 Credits ............................. 1,297,287
Other ....................................... 64,104 Less: Custody Credits .................. (554)
------------ ----------
TOTAL LIABILITIES ........................ 1,191,935 Net Expenses ........................... 1,296,733
------------ ----------
NET ASSETS ..................................... $121,443,930 NET INVESTMENT INCOME ........................ 4,485,304
============ ----------
NET ASSETS CONSIST OF: NET REALIZED AND UNREALIZED GAIN
Capital stock, at $1 par value (LOSS) ON INVESTMENTS:
(authorized 100,000,000, outstanding Net Realized Loss ...................... (344,427)
10,228,962 shares) .......................... $ 10,228,962 Change in Net Unrealized
Additional paid-in capital ..................... 111,879,615 Appreciation (Depreciation) ......... 858,586
Undistributed net investment income ............ 653,681 ----------
Accumulated net realized loss on NET REALIZED LOSS AND CHANGE IN NET
investments ................................. (5,307,003) UNREALIZED APPRECIATION
Net unrealized appreciation of (DEPRECIATION) ON INVESTMENTS ............. 514,159
investments ................................. 3,988,675 ----------
------------ NET INCREASE IN NET ASSETS FROM
NET ASSETS ..................................... $121,443,930 OPERATIONS ................................ $4,999,463
============ ==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER OUTSTANDING
SHARE ($121,443,930 - 10,228,962
SHARES OUTSTANDING) ......................... $ 11.87
============
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Statement of Changes in Net Assets
for the Years Ended August 31, 2004 and August 31, 2003
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
2004 2003
---------------- -----------------
OPERATIONS:
Net investment income ............................................... $ 4,485,304 $ 5,589,668
Net realized (loss) gain on investments ............................. (344,427) 1,821,513
Change in net unrealized appreciation (depreciation) ................ 858,586 (3,569,894)
------------- --------------
Net increase in net assets from operations .......................... 4,999,463 3,841,287
------------- --------------
DIVIDENDS TO SHAREHOLDERS:
Net investment income ............................................... (4,655,086) (5,766,950)
------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares ........................................ 46,350,407 248,802,569
Proceeds from reinvestment of distributions to shareholders ......... 3,990,642 4,930,910
Cost of shares repurchased .......................................... (73,505,326) (263,202,861)
------------- --------------
Net decrease from capital share transactions ........................ (23,164,277) (9,469,382)
------------- --------------
TOTAL DECREASE IN NET ASSETS ......................................... (22,819,900) (11,395,045)
NET ASSETS:
Beginning of year ................................................... 144,263,830 155,658,875
------------- --------------
End of year ......................................................... $ 121,443,930 $ 144,263,830
============= ==============
UNDISTRIBUTED NET INVESTMENT INCOME, AT END OF YEAR .................. $ 653,681 $ 822,313
============= ==============
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Value Line U.S. Government Securities Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company whose primary investment objective is to obtain
maximum income without undue risk to principal. Capital preservation and
possible capital appreciation are secondary objectives.
The following significant accounting principles are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(A) SECURITY VALUATION. The Fund utilizes an independent pricing service (the
"Service") approved by the Board of Directors. Where market quotations are
readily available, portfolio securities are valued at the midpoint between the
latest available and representative asked and bid prices on the basis of
valuations provided by dealers in such securities. Some of the general factors
which may be considered by the dealers in arriving at such valuations include
the fundamental analytic data relating to the security and an evaluation of the
forces which influence the market in which these securities are purchased and
sold. Determination of values may involve subjective judgment, as the actual
market value of a particular security can be established only by negotiation
between the parties in a sales transaction. The values for other portfolio
securities are determined on the valuation date by reference to valuations
obtained from the Service which determines valuations for normal
institutional-size trading units of debt securities, without exclusive reliance
upon quoted prices. The Service takes into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data in determining valuations. Short-term instruments with maturities of 60
days or less at the date of purchase are valued at amortized cost, which
approximates market value. Other assets and securities for which market
valuations are not readily available will be valued at fair value as the Board
of Directors may determine in good faith.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income and capital gains to its
shareholders. Therefore, no federal income tax or excise tax provision is
required.
(D) SECURITY TRANSACTIONS AND RELATED INCOME. Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses on securities transactions are determined using the identified cost
method. Interest income, adjusted for amortization of discount and premium, is
earned from settlement date and recognized on the accrual basis.
(E) REPRESENTATIONS AND INDEMNIFICATIONS. In the normal course of business the
Fund enters into contracts that contain a variety of representations and
warranties which provide general indemnifications. The Fund's
- --------------------------------------------------------------------------------
12
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
August 31, 2004
- --------------------------------------------------------------------------------
maximum exposure under these arrangements is unknown, as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, based on experience, the Fund expects the risk of loss to be remote.
2. Capital Share Transactions and Dividends to Shareholders
Transactions in capital stock were as follows:
YEAR YEAR
ENDED ENDED
AUGUST 31, AUGUST 31,
2004 2003
--------------- ----------------
Shares sold ................. 3,892,455 20,615,131
Shares issued to
shareholders in
reinvestment of
dividends ................ 336,755 407,998
--------- ----------
4,229,210 21,023,129
Shares repurchased .......... (6,183,849) (21,812,007)
---------- -----------
Net decrease ................ (1,954,639) (788,878)
========== ===========
Dividends per share ......... $ .4125 $ .445
========== ===========
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
On September 23, 2004 the Fund's Board of Directors declared a quarterly
dividend from net investment income of $.1025 per share payable on September 27,
2004 to shareholders of record on September 23, 2004.
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
YEAR
ENDED
AUGUST 31,
2004
------------
PURCHASES:
U.S. Treasury Obligations .................. $ 13,475,703
U.S. Government Agency Obligations
and Other Investment Securities ......... 27,903,706
------------
$ 41,379,409
============
SALES:
U.S. Treasury Obligations .................. $ 18,201,719
U.S. Government Agency Obligations
and Other Investment Securities ......... 33,201,994
------------
$ 51,403,713
============
4. Income Taxes
At August 31, 2004, information on the tax basis of investments is follows:
Cost of investments for tax purposes ......... $116,561,304
============
Gross tax unrealized appreciation ............ $ 4,020,966
Gross tax unrealized depreciation ............ $ (235,026)
============
Net tax unrealized appreciation on
investments ............................... $ 3,785,940
============
Undistributed ordinary income ................ $ 856,416
============
Capital loss carryforward, expires
August 31, 2005 ........................... $ 2,829,335
Capital loss carryforward, expires
August 31, 2008 ........................... 2,132,091
Capital loss carryforward, expires
August 31, 2012 ........................... 11,348
------------
Capital loss carryforward, at
August 31, 2004 ........................... $ 4,972,774
============
During the year ended August 31, 2004, as permitted under federal income tax
regulations, the Fund elected to defer $334,229 of post-October net capital
losses to the next taxable year.
- --------------------------------------------------------------------------------
13
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Notes to Financial Statements August 31, 2004
- --------------------------------------------------------------------------------
To the extent future capital gains are offset by capital losses, the Fund does
not anticipate distributing any such gains to shareholders.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatment of bond
premiums.
The tax composition of dividends paid during the years ending August 31, 2004
and August 31, 2003 is as follows:
AUGUST 31, AUGUST 31,
2004 2003
Ordinary Income ......... $ 4,655,086 $5,766,950
=========== ==========
Permanent book-tax differences relating to the current year expired capital loss
are reclassified within the composition of net asset accounts. During the year
ended August 31, 2004, the Fund reclassified $8,976,510 from accumulated net
realized loss on investments to additional paid-in capital.
5. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $659,852 was paid or payable to Value Line, Inc., the Fund's
investment adviser ("Adviser"), for the year ended August 31, 2004. This was
computed at the rate of 1/2 of 1% of the Fund's average daily net assets during
the year and was paid monthly.
The Adviser provides research, investment programs, and supervision of the
investment portfolio and pays costs of administrative services, office space,
equipment and compensation of administrative, bookkeeping, and clerical
personnel necessary for managing the affairs of the Fund. The Adviser also
provides persons, satisfactory to the Fund's Board of Directors, to act as
officers and employees of the Fund and pays their salaries and wages. The Fund
bears all other costs and expenses.
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The Plan compensates Value
Line Securities, Inc., a wholly-owned subsidiary of the Adviser (the
"Distributor"), for advertising, marketing and distributing the Fund's shares
and for servicing the Fund's shareholders at an annual rate of 0.25% of the
Fund's average daily net assets. Fees amounting to $329,926 were paid or payable
to the Distributor under this Plan for the year ended August 31, 2004.
For the year ended August 31, 2004, the Fund's expenses were reduced by $554
under a custody credit arrangement with the Custodian.
Certain officers and directors of the Adviser and the Distributor are also
officers and directors of the Fund.
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan at August 31, 2004 owned 130,896 shares of the Fund's capital
stock, representing 1.28% of the outstanding shares. In addition, officers and
directors owned 968 shares of capital stock, representing less than 1% of the
outstanding shares.
- --------------------------------------------------------------------------------
14
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
YEARS ENDED AUGUST 31,
-----------------------------------------------------------------------
2004 2003 2002 2001 2000
============ ============ ================ ============ ===========
NET ASSET VALUE, BEGINNING OF YEAR .......... $ 11.84 $ 12.00 $ 11.51 $ 10.87 $ 10.81
------- ------- -------- ------- --------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income ..................... .41 .44 .50 .58 .64
Net gains or losses on securities (both
realized and unrealized) ................ .03 (.15) .49 .67 .04
------- -------- --------- ------- --------
Total income from investment
operations .............................. .44 .29 .99 1.25 .68
------- -------- --------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (.41) (.45) (.50) (.61) (.62)
Distributions from net realized gains ..... -- -- -- -- --
-------- -------- --------- -------- --------
Total distributions ....................... (.41) (.45) (.50) (.61) (.62)
-------- -------- --------- -------- --------
NET ASSET VALUE, END OF YEAR ................ $ 11.87 $ 11.84 $ 12.00 $ 11.51 $ 10.87
======== ======== ========= ======== ========
TOTAL RETURN ................................ 3.79% 2.35% 8.84% 11.82% 6.53%
======== ======== ========= ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) ............................. $121,444 $144,264 $155,659 $150,593 $140,408
Ratio of operating expenses
to average net assets (1) .................. 0.98% 0.96% 0.92% 0.92% 0.73%
Ratio of net investment income
to average net assets ...................... 3.40% 3.57% 4.17%(2) 5.17% 5.82%
Portfolio turnover rate ..................... 35% 65% 168% 140% 49%
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE
RATIOS OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD NOT
HAVE CHANGED.
(2) AS REQUIRED, EFFECTIVE SEPTEMBER 1, 2001, THE FUND HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES
AND BEGAN AMORTIZING PREMIUM AND DISCOUNT ON DEBT SECURITIES. THE EFFECT OF
THIS CHANGE FOR THE YEAR ENDED AUGUST 31, 2002 ON NET INVESTMENT INCOME AND
NET REALIZED AND UNREALIZED GAINS AND LOSSES WAS LESS THAN $.01 PER SHARE.
THE EFFECT OF THIS CHANGE WAS TO DECREASE THE RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS FROM 4.24% TO 4.17%.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
15
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Value Line U.S. Government Securities Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line U.S. Government
Securities Fund (the "Fund") at August 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 15, 2004
- --------------------------------------------------------------------------------
16
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge
upon request by calling 1-800-243-2729 or on the SEC's web site
(http://www.sec.gov). Information regarding how the fund voted proxies relating
to portfolio securities during the most recent 12-month period ended August 31
is also available on the SEC's web site at http://www.sec.gov or on the Fund's
web site at http://vlfunds.com.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund will be required to file its complete schedule of portfolio holdings
with the SEC for its first and third fiscal quarters on Form N-Q for fiscal
quarters ending on or after July 9, 2004. Once filed, the Fund's Forms N-Q will
be available without charge, upon request on the SEC's website
(http://www.sec.gov) and may be available by calling Value Line at
1-800-243-2729. You can also obtain copies of Form N-Q by (i) visiting the SEC's
Public Reference Room in Washington, DC (information on the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); (ii) sending
your request and a duplicating fee to the SEC's Public Reference Room,
Washington, DC 20549-0102; or (iii) sending your request electronically to
publicinfosec.gov.
- --------------------------------------------------------------------------------
17
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Management of the Fund
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed by the Fund's officers under
the direction of the Board of Directors. The following table sets forth
information on each Director and officer of the Fund. Each Director serves as a
director or trustee of each of the 14 Value Line Funds and oversees a total of
15 portfolios. Each Director serves until his or her successor is elected and
qualified.
PRINCIPAL
OCCUPATION
LENGTH OF DURING THE OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR
========================= ==================== ============= ================================ ====================
INTERESTED DIRECTORS*
- -------------------------
Jean Bernhard Buttner Chairman of the Since 1983 Chairman, President and Value Line, Inc.
Age 69 Board of Directors Chief Executive Officer of
and President Value Line, Inc. (the
"Adviser") and
Value Line
Publishing, Inc.;
Chairman and
President of each
of the 14 Value
Line Funds and
Value Line
Securities, Inc.
(the "Distributor").
- ------------------------------------------------------------------------------------------------------------------
Marion N. Ruth Director Since 2000 Real Estate Executive: Value Line, Inc.
5 Outrider Road President, Ruth Realty (real
Rolling Hills, CA 90274 estate broker); Director of the
Age 69 Adviser since 2000.
- ------------------------------------------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- ------------------------
John W. Chandler Director Since 1991 Consultant, Academic Search None
1611 Cold Spring Rd. Consultation Service, Inc.;
Williamstown, MA 01267 Trustee Emeritus and
Age 80 Chairman (1993-1994) of the
Board of Trustees of Duke
University; President
Emeritus, Williams College.
- ------------------------------------------------------------------------------------------------------------------
Frances T. Newton Director Since 2000 Customer Support Analyst, None
4921 Buckingham Drive Duke Power Company.
Charlotte, SC 28209
Age 63
- --------------------------------------------------------------------------------
18
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Management of the Fund
- --------------------------------------------------------------------------------
PRINCIPAL
OCCUPATION
LENGTH OF DURING THE OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR
============================ ================ ============= ============================ ====================
Francis Oakley Director Since 2000 Professor of History, Berkshire Life
54 Scott Hill Road Williams College, 1961 to Insurance Company
Williamstown, MA 01267 2002. President Emeritus of America.
Age 72 since 1994 and President,
1985-1994; Chairman
(1993-1997) and
Interim President
(2002) of the
American Council of
Learned Societies.
- -------------------------------------------------------------------------------------------------------------
David H. Porter Director Since 1997 Visiting Professor of None
5 Birch Run Drive Classics, Williams College,
Saratoga Springs, NY 12866 since 1999; President
Age 68 Emeritus, Skidmore College
since 1999 and President,
1987-1998.
- -------------------------------------------------------------------------------------------------------------
Paul Craig Roberts Director Since 1983 Chairman, Institute for A Schulman Inc.
169 Pompano St. Political Economy. (plastics)
Panama City Beach, FL 32413
Age 65
- -------------------------------------------------------------------------------------------------------------
Nancy Beth Sheerr Director Since 1996 Senior Financial Advisor None
1409 Beaumont Drive Veritable, L.P. (investment
Gladwyne, PA 19035 advisor) since 2004; Senior
Age 55 Financial Advisor,
Hawthorne, since 2001-2004.
- -------------------------------------------------------------------------------------------------------------
OFFICERS
- ----------
Jeffrey D. Geffen Vice President Since 2001 Portfolio Manager with the
Age 55 Adviser since 2001;Vice
President Investments,
Morgan Stanley Dean Witter
Advisors,1989-2001.
- -------------------------------------------------------------------------------------------------------------
Bradley Brooks Vice President Since 2001 Portfolio Manager with the
Age 41 Adviser.
- -------------------------------------------------------------------------------------------------------------
Charles Heebner Vice President Since 2000 Senior Portfolio Manager
Age 68 with the Adviser.
- --------------------------------------------------------------------------------
19
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Management of the Fund
- --------------------------------------------------------------------------------
PRINCIPAL
OCCUPATION
LENGTH OF DURING THE OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR
======================== ================= ============= ============================== ====================
David T. Henigson Vice President, Since 1994 Director, Vice President and
Age 47 Secretary and Compliance Officer of the
Treasurer Adviser; Director and Vice
President of the
Distributor; Vice
President, Secretary
and Treasurer of each
of the 14 Value Line
Funds.
- -------------------------------------------------------------------------------------------------------------
* MRS. BUTTNER IS AN "INTERESTED PERSON" AS DEFINED IN THE INVESTMENT COMPANY
ACT OF 1940 BY VIRTUE OF HER POSITIONS WITH THE ADVISER AND HER INDIRECT
OWNERSHIP OF A CONTROLLING INTEREST IN THE ADVISER; MRS. RUTH IS AN INTERESTED
PERSON BY VIRTUE OF BEING A DIRECTOR OF THE ADVISER.
UNLESS OTHERWISE INDICATED, THE ADDRESS FOR EACH OF THE ABOVE IS 220 EAST
42ND STREET, NEW YORK, NY 10017.
- --------------------------------------------------------------------------------
20
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
21
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
22
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
23
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
The Value Line Family of Funds
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital. Current income is
a secondary objective.
1952 -- VALUE LINE INCOME AND GROWTH FUND'S primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks long-term growth of
capital. No consideration is given to current income in the choice of
investments.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be invested in securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with the
maximum income exempt from federal income taxes while avoiding undue risk to
principal. The Fund offers investors a choice of two portfolios: The Money
Market Portfolio and The National Bond Portfolio. The Fund may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with the maximum income exempt from New York State, New York City and federal
income taxes while avoiding undue risk to principal. The Trust may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* seeks to achieve a high
total investment return consistent with reasonable risk.
1993 -- VALUE LINE EMERGING OPPORTUNITIES FUND invests primarily in common
stocks or securities convertible into common stock, with its primary objective
being long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the asset mix.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-243-2729, 24
HOURS A DAY, 7 DAYS A WEEK, OR VISIT US AT WWW.VALUELINE.COM. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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