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 811-03171
Value Line U.S. 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
Date of fiscal year end: August 31, 2005
Date of reporting period: February 28, 2005
Item I. Reports to Stockholders.
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SEMI-ANNUAL REPORT
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February 28, 2005
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Value Line
U.S. Government
Securities
Fund, Inc.
[LOGO]
----------
VALUE LINE
No-Load
Mutual
Funds
Value Line U.S. Government Securities Fund, Inc.
To Our Value Line U.S. Government
- --------------------------------------------------------------------------------
To Our Shareholders:
Over the last nine months, the bond market has struggled, as the Federal Reserve
Board under Chairman Alan Greenspan has implemented a modestly more restrictive
monetary policy, increasing short-term interest rates. From a low base of 1.00%
at the beginning of the period, short-term interest rates have risen 175 basis
points to 2.75%, currently.
The Federal Reserve has embarked upon this path because economic growth has
remained strong, inflation has edged up and there is the potential for higher
inflation. The Consumer Price Index on a year over year basis has risen from
1.7% in March of 2004, to its current rate of around 3.0%. By raising interest
rates, the Federal Reserve Board hopes to slow the economic expansion, without
cutting off growth, thereby holding inflation in check.
One of the consequences of the Federal Reserve's restrictive policy has been a
flattening of the bond maturity yield curve, meaning that the difference between
short- and long-term interest rates has lessened significantly. At the beginning
of the period, the 10-year Treasury note was yielding 4.12%, 173 basis points
higher than the 2.39% yield on the 2-year Treasury note. By the end of the
period, this gap had narrowed to 58 basis points as the 10-year Treasury yield
remained virtually unchanged, up only six basis points to 4.18%, while the yield
on the two-year note rose 121 basis points to 3.60%. The fact that longer-term
rates have not risen much may be considered too stimulative with inflationary
potential. Therefore, it appears that more interest-rate hikes are planned. As
such, bond prices should continue to be under some further pressure.
During the period ended February 28, 2005, your Fund returned 1.33% which
compares very favorably to the -0.17% return of the unmanaged Lehman Brothers
Intermediate U.S. Government Bond Index, a proxy for the Fund's government
investment strategy(1).
Your Fund's long-term strategy remains aimed at generating 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. The Fund has continued
to increase its allocation to mortgage-backed securities, which are issued by
government sponsored enterprises. Such issues carry more yield and usually offer
more price protection than U.S. Treasuries in rising interest rate environments,
the most likely scenario over the next year.
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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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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
April 11, 2005
Economic Observations
The maturing business expansion continues to move along at a solid 3%-4% pace, a
level of growth that is being underpinned by a resilient housing market,
moderate levels of consumer spending improvement, and an increasing rate of
industrial activity. Moreover, recent trends suggest that the several-year-long
business expansion will be sustained over the balance of this year and most
likely into 2006, with growth on the order of 3%, or more.
Helping the anticipated moderate expansion along are likely to be relatively
high levels of activity in the housing, retail, manufacturing, and service
sectors. Such growth may well be accompanied by some pickup in inflation. For
now, though, we do not expect the prospective increases in pricing pressures to
be dramatic or to threaten the sustainability of the economic upturn. The wild
card in the equation and the reason that we are not forecasting a higher level
of economic growth is the near-record price of oil. Should that key commodity
not stabilize in price, as we now expect it will, the sustainability of the
long-running business expansion, as well as the prolonged period of comparative
of price stability, would be threatened, in our opinion.
The continuing steady pace of U.S. gross domestic product growth and
accompanying moderate inflation should have positive ramifications. That's
because this combination probably will allow the Federal Reserve Board to pursue
a measured monetary tightening course over the next year. Our feeling is that
the Fed will increase rates sufficiently to keep inflation subdued but will not
raise rates aggressively enough to derail the economic up cycle for the next 12
to 18 months, at least.
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3
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 (September 1, 2004 through February 28,
2005).
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 9/1/04
value value thru
9/1/04 2/28/05 2/28/05
-------------- -------------- ------------
Actual ........................................... $ 1,000.00 $ 1,005.10 $ 5.02
Hypothetical (5% return before expenses) ......... $ 1,000.00 $ 1,019.79 $ 5.06
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* Expenses are equal to the Fund's annualized expense ratio of 1.01%
multiplied by the average account value over the period, multiplied by
181/365 to reflect the one-half period.
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4
Value Line U.S. Government Securities Fund, Inc.
Portfolio Highlights at February 28, 2005 (Unaudited)
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Ten Largest Holdings
Principal Percentage of
Issue Amount Value Net Assets
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Federal National Mortgage Association, 6.45%, 4/1/08 .................. $10,000,000 $10,371,880 9.0%
Private Export Funding Corporation Series "J", 7.65%, 5/15/06 ......... 5,000,000 5,242,240 4.6%
Morgan Stanley Repurchase Agreement, 2.52%, 3/1/05 .................... 5,100,000 5,100,343 4.4%
UBS Warburg Repurchase Agreement, 2.55%, 3/1/05 ....................... 4,700,000 4,700,333 4.1%
Federal National Mortgage Association, 7.04%, 7/1/06 .................. 4,081,213 4,148,674 3.6%
Federal Home Loan Bank, 7.45%, 2/3/20 ................................. 3,000,000 3,802,119 3.3%
Federal Farm Credit Bank, 5.70%, 7/3/17 ............................... 3,000,000 3,174,765 2.8%
Federal Home Loan Mortgage Corporation Gold, 6.00%, 3/1/33 ............ 3,000,001 3,082,317 2.7%
Federal Home Loan Bank, 2.50%, 3/30/06 ................................ 3,000,000 2,969,997 2.6%
Federal Home Loan Mortgage Corporation, 5.50%, 9/15/11 ................ 2,500,000 2,649,805 2.3%
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Asset Allocation -- Percentage of Net Assets
[The following table was represented as a pie chart in the printed material.]
Short-Term, Cash & Other 7.6%
U.S. Treasury Obligations 6.5%
U.S. Government Agency Obligations 85.9%
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Coupon Distribution
% of fund's
investments
- -------------------------------
Less than 4% 19.0
4-4.99% 14.1
5-5.99% 27.2
6-6.99% 23.8
7-7.99% 15.9
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5
Value Line U.S. Government Securities Fund, Inc.
Schedule of Investments (unaudited) February 28, 2005
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Principal Maturity
Amount Rate Date Value
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U.S. TREASURY OBLIGATIONS (6.5%)
$ 1,000,000 U.S. Treasury Notes ......................................... 2.88% 11/30/06 $ 989,180
1,000,000 U.S. Treasury Notes ......................................... 3.00 12/31/06 990,469
1,000,000 U.S. Treasury Notes ......................................... 4.00 11/15/12 985,157
2,000,000 U.S. Treasury Notes ......................................... 4.00 2/15/14 1,950,548
2,000,000 U.S. Treasury Notes ......................................... 7.13 2/15/23 2,563,830
----------- -----------
7,000,000 TOTAL U.S. TREASURY OBLIGATIONS
----------- (Cost $7,548,621) ........................................... 7,479,184
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (85.9%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (38.8%)
4,081,213 Federal National Mortgage Association Pool #313032 .......... 7.04 7/1/06 4,148,674
1,000,000 Federal National Mortgage Association ....................... 4.75 1/2/07 1,016,321
10,000,000 Federal National Mortgage Association Pool #380188 .......... 6.45 4/1/08 10,371,880
95,070 Federal National Mortgage Association Pool #254243 .......... 6.00 2/1/09 96,710
208,690 Federal National Mortgage Association Pool #254273 .......... 5.00 3/1/09 211,418
1,000,000 Federal National Mortgage Association ....................... 6.38 6/15/09 1,083,822
815,247 Federal National Mortgage Association Pool #254956 .......... 4.00 11/1/10 809,097
1,530,839 Federal National Mortgage Association Pool #255325 .......... 4.50 6/1/11 1,536,377
1,000,000 Federal National Mortgage Association ....................... 5.00 4/16/15 994,473
246,653 Federal National Mortgage Association Pool #511823 .......... 5.50 5/1/16 252,999
561,145 Federal National Mortgage Association Pool #622373 .......... 5.50 12/1/16 575,582
204,554 Federal National Mortgage Association Pool #615289 .......... 5.50 12/1/16 209,817
417,709 Federal National Mortgage Association Pool #623503 .......... 6.00 2/1/17 435,250
231,774 Federal National Mortgage Association Pool #631328 .......... 5.50 2/1/17 237,710
35,671 Federal National Mortgage Association Pool #643277 .......... 5.50 4/1/17 36,585
34,267 Federal National Mortgage Association Pool #638247 .......... 5.50 5/1/17 35,145
189,797 Federal National Mortgage Association Pool #685183 .......... 5.00 3/1/18 191,408
627,978 Federal National Mortgage Association Pool #254684 .......... 5.00 2/1/18 633,309
774,017 Federal National Mortgage Association Pool #695828 .......... 5.00 4/1/18 780,588
631,467 Federal National Mortgage Association Pool #703936 .......... 5.00 5/1/18 636,828
736,864 Federal National Mortgage Association Pool #713379 .......... 5.00 7/1/18 743,119
977,142 Federal National Mortgage Association Pool #703617 .......... 5.00 7/1/18 985,437
949,855 Federal National Mortgage Association Pool #790984 .......... 5.00 7/1/19 957,606
937,003 Federal National Mortgage Association Pool #786915 .......... 5.00 8/1/19 944,650
728,368 Federal National Mortgage Association REMIC Trust
Series 2003-28 Class KA ..................................... 4.25 3/25/22 710,614
643,096 Federal National Mortgage Association REMIC Trust
Series 2003-38 Class TC ..................................... 5.00 3/25/23 646,029
392,351 Federal National Mortgage Association Pool #412682 .......... 6.00 3/1/28 403,544
229,768 Federal National Mortgage Association Pool #424691 .......... 6.50 4/1/28 239,809
197,092 Federal National Mortgage Association Pool #425239 .......... 6.50 4/1/28 205,705
See Notes to Financial Statements.
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6
Value Line U.S. Government Securities Fund, Inc.
February 28, 2005
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Principal Maturity
Amount Rate Date Value
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$ 1,000,000 Federal National Mortgage Association ....................... 7.25% 5/15/30 $ 1,305,567
1,000,000 Federal National Mortgage Association ....................... 6.63 11/15/30 1,216,159
157,310 Federal National Mortgage Association Pool #571090 .......... 7.50 1/1/31 168,478
3,410 Federal National Mortgage Association Pool #568625 .......... 7.50 1/1/31 3,652
6,274 Federal National Mortgage Association Pool #573935 .......... 7.50 3/1/31 6,719
953,460 Federal National Mortgage Association Pool #626440 .......... 7.50 2/1/32 1,019,951
118,697 Federal National Mortgage Association Pool #629297 .......... 6.50 2/1/32 123,732
180,471 Federal National Mortgage Association Pool #254383 .......... 7.50 5/1/32 193,056
101,998 Federal National Mortgage Association Pool #634996 .......... 6.50 5/1/32 106,319
1,087,483 Federal National Mortgage Association Pool #254476 .......... 5.50 9/1/32 1,098,940
17,578 Federal National Mortgage Association Pool #688539 .......... 5.50 3/1/33 17,754
776,457 Federal National Mortgage Association Pool #650386 .......... 5.00 7/1/33 767,507
768,541 Federal National Mortgage Association Pool #726889 .......... 5.50 7/1/33 776,233
907,407 Federal National Mortgage Association Pool #759028 .......... 5.50 1/1/34 916,488
433,832 Federal National Mortgage Association Pool #761913 .......... 5.50 2/1/34 438,040
475,392 Federal National Mortgage Association Pool #357484 .......... 5.50 2/1/34 480,150
416,242 Federal National Mortgage Association Pool #769862 .......... 5.50 2/1/34 420,279
388,110 Federal National Mortgage Association Pool #763393 .......... 5.50 2/1/34 391,995
40,248 Federal National Mortgage Association Pool #769682 .......... 5.00 3/1/34 39,719
31,927 Federal National Mortgage Association Pool #778141 .......... 5.00 5/1/34 31,507
647,151 Federal National Mortgage Association Pool #773586 .......... 5.50 6/1/34 653,428
885,426 Federal National Mortgage Association Pool #255311 .......... 6.00 7/1/34 909,341
49,894 Federal National Mortgage Association Pool #258149 .......... 5.50 9/1/34 50,378
1,007,753 Federal National Mortgage Association Pool #789150 .......... 5.00 10/1/34 994,496
904,939 Federal National Mortgage Association Pool #255496 .......... 5.00 10/1/34 893,034
104,561 Federal National Mortgage Association Pool #797154 .......... 5.50 11/1/34 105,576
238,588 Federal National Mortgage Association Pool #801063 .......... 5.50 11/1/34 240,903
397,904 Federal National Mortgage Association Pool #803675 .......... 5.50 12/1/34 401,764
551,164 Federal National Mortgage Association Pool #804683 .......... 5.50 12/1/34 556,511
75,040 Federal National Mortgage Association Pool #255580 .......... 5.50 2/1/35 75,768
----------- -----------
43,204,887 TOTAL FEDERAL NATIONAL MORTGAGE
----------- ASSOCIATION (Cost $43,860,048) .............................. 44,533,950
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (18.3%)
1,000,000 Federal Home Loan Mortgage Corporation ...................... 4.26 7/19/07 1,008,351
2,000,000 Federal Home Loan Mortgage Corporation ...................... 3.50 9/15/07 1,985,844
1,000,000 Federal Home Loan Mortgage Corporation ...................... 3.25 11/2/07 984,518
2,500,000 Federal Home Loan Mortgage Corporation ...................... 5.50 9/15/11 2,649,805
1,000,000 Federal Home Loan Mortgage Corporation ...................... 4.50 5/14/12 982,618
1,000,000 Federal Home Loan Mortgage Corporation ...................... 4.75 5/6/13 977,669
965,381 Federal Home Loan Mortgage Corporation REMIC Trust
Series 2849 Class VA ........................................ 5.00 8/15/15 974,841
37,012 Federal Home Loan Mortgage Corporation Gold PC
Pool #E92226 ................................................ 5.00 11/1/17 37,369
See Notes to Financial Statements.
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7
Value Line U.S. Government Securities Fund, Inc.
Schedule of Investments (unaudited)
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Principal Maturity
Amount Rate Date Value
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$ 595,844 Federal Home Loan Mortgage Corporation Gold PC
Pool #E93499 ..................................... 5.00% 12/1/17 $ 601,583
40,414 Federal Home Loan Mortgage Corporation Gold PC
Pool #E92829 ..................................... 5.00 12/1/17 40,803
839,152 Federal Home Loan Mortgage Corporation Gold PC
Pool #C90684 ..................................... 4.50 5/1/23 819,400
3,000,001 Federal Home Loan Mortgage Corporation Gold PC
Pool #C77717 ..................................... 6.00 3/1/33 3,082,317
1,000,000 Federal Home Loan Mortgage Corporation ........... 6.75 3/15/31 1,240,517
866,644 Federal Home Loan Mortgage Corporation REMIC Trust
Series 2645 Class NA ............................. 3.50 9/15/31 844,577
750,600 Federal Home Loan Mortgage Corporation
REMIC Trust Series 2594 Class OR ................... 4.25 6/15/32 738,562
1,348,140 Federal Home Loan Mortgage Corporation Gold PC
Pool #A29526 ..................................... 5.00 1/1/35 1,332,105
649,645 Federal Home Loan Mortgage Corporation Gold PC
Pool #A29633 ..................................... 5.00 1/1/35 641,918
1,000,000 Federal Home Loan Mortgage Corporation Gold PC
Pool #783022 ..................................... 4.45 2/1/35 996,758
1,000,000 Federal Home Loan Mortgage Corporation ........... 4.50 TBA 987,500
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20,592,833 TOTAL FEDERAL HOME LOAN MORTGAGE
---------- CORPORATION (Cost $21,026,119) ................... 20,927,055
-----------
FEDERAL HOME LOAN BANK (13.9%)
3,000,000 Federal Home Loan Bank ........................... 2.50 3/30/06 2,969,997
1,000,000 Federal Home Loan Bank ........................... 2.75 12/15/06 985,390
1,000,000 Federal Home Loan Bank ........................... 2.85 2/13/07 983,559
500,000 Federal Home Loan Bank ........................... 4.88 5/15/07 511,325
500,000 Federal Home Loan Bank ........................... 3.50 11/15/07 494,928
1,000,000 Federal Home Loan Bank ........................... 4.00 3/10/08 998,319
1,000,000 Federal Home Loan Bank ........................... 6.01 4/22/08 1,060,209
1,000,000 Federal Home Loan Bank ........................... 5.50 8/15/08 1,045,056
1,000,000 Federal Home Loan Bank ........................... 5.25 11/14/08 1,038,774
1,000,000 Federal Home Loan Bank ........................... 6.21 6/2/09 1,082,563
1,000,000 Federal Home Loan Bank ........................... 3.75 8/18/09 982,483
3,000,000 Federal Home Loan Bank ........................... 7.45 2/3/20 3,802,119
---------- -----------
15,000,000 TOTAL FEDERAL HOME BANK
---------- (Cost $15,684,700) ............................... 15,954,722
-----------
See Notes to Financial Statements.
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8
Value Line U.S. Government Securities Fund, Inc.
February 28, 2005
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Principal Maturity
Amount Rate Date Value
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FEDERAL FARM CREDIT BANK (6.5%)
$ 2,000,000 Federal Farm Credit Bank ...................................... 6.03% 5/7/08 $ 2,119,946
1,000,000 Federal Farm Credit Bank ...................................... 6.82 3/16/09 1,097,952
1,000,000 Federal Farm Credit Bank ...................................... 4.85 10/25/12 1,021,657
3,000,000 Federal Farm Credit Bank ...................................... 5.70 7/3/17 3,174,765
- ----------- -----------
7,000,000 TOTAL FEDERAL FARM CREDIT BANK
- ----------- (Cost $7,368,281) ........................................... 7,414,320
-----------
PRIVATE EXPORT FUNDING CORPORATION (5.0%)
5,000,000 Private Export Funding Corporation Series "J" ................. 7.65 5/15/06 5,242,240
500,000 Private Export Funding Corporation Series "L" ................. 5.75 1/15/08 524,284
- ----------- -----------
5,500,000 TOTAL PRIVATE EXPORT FUNDING
- ----------- CORPORATION (Cost $5,500,000) ............................... 5,766,524
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (3.4%)
322,438 Government National Mortgage Association Pool #003645 ......... 4.50 12/20/19 320,043
20,442 Government National Mortgage Association Pool #541349 ......... 6.00 4/15/31 21,132
39,757 Government National Mortgage Association Pool #557681 ......... 6.00 8/15/31 41,100
298,130 Government National Mortgage Association Pool #548880 ......... 6.00 12/15/31 308,196
247,275 Government National Mortgage Association Pool #551762 ......... 6.00 4/15/32 255,533
87,228 Government National Mortgage Association Pool #582415 ......... 6.00 11/15/32 90,142
490,089 Government National Mortgage Association Pool #604485 ......... 6.00 7/15/33 506,585
377,157 Government National Mortgage Association Pool #622603 ......... 6.00 11/15/33 389,852
17,474 Government National Mortgage Association Pool #429786 ......... 6.00 12/15/33 18,063
946,654 Government National Mortgage Association Pool #605025 ......... 6.00 2/15/34 978,322
25,452 Government National Mortgage Association Pool #626480 ......... 6.00 2/15/34 26,303
242,780 Government National Mortgage Association Pool #610944 ......... 5.50 4/15/34 247,120
451,825 Government National Mortgage Association Pool #583008 ......... 5.50 6/15/34 459,903
227,297 Government National Mortgage Association Pool #605245 ......... 5.50 6/15/34 231,358
- ----------- -----------
3,793,998 TOTAL GOVERNMENT NATIONAL MORTGAGE
- ----------- ASSOCIATION (Cost $3,853,935) ............................... 3,893,652
-----------
95,091,718 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
- ----------- (Cost $97,293,083) .......................................... 98,490,223
-----------
102,091,718 TOTAL INVESTMENT SECURITIES (92.4%)
- ----------- (Cost $104,841,704) ......................................... 105,969,407
-----------
See Notes to Financial Statements.
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9
Value Line U.S. Government Securities Fund, Inc.
Schedule of Investments (unaudited)
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Principal
Amount Value
- --------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (8.5%) (including accrued interest)
$ 5,100,000 Collateralized by $4,905,000 U.S. Treasury Bonds 9.375%, due 02/15/2006,
with a value of $5,116,514 (with Morgan Stanley, 2.52%, dated 2/28/05,
due 3/01/05, delivery value $5,100,343) ................................... $ 5,100,343
4,700,000 Collateralized by $3,809,000 U.S. Treasury Bonds 6.625%, due 02/15/2027,
----------- with a value of $4,709,062 (with UBS Warburg, LLC, 2.55%, dated 2/28/05,
due 3/01/05, delivery value $4,700,333) ................................... 4,700,333
------------
9,800,000 TOTAL REPURCHASE AGREEMENTS (8.5%)
=========== (Cost $9,800,676) ......................................................... 9,800,676
------------
LIABILITIES LESS CASH AND OTHER
ASSETS (-0.9%) ............................................................ (1,026,653)
------------
NET ASSETS (100.0%) ......................................................... $114,743,430
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($114,743,430 / 9,801,430 shares of capital stock outstanding)............. $ 11.71
============
See Notes to Financial Statements.
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10
Value Line U.S. Government Securities Fund, Inc.
Statement of Assets and Liabilities
at February 28, 2005 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(cost $104,841,704) .................................... $ 105,969,407
Repurchase agreements
(cost $9,800,676) ...................................... 9,800,676
Cash ...................................................... 105,234
Interest receivable ....................................... 1,101,338
Receivable for capital shares sold ........................ 54,207
-------------
Total Assets ........................................ 117,030,862
-------------
Liabilities:
Payable for securities purchased .......................... 2,000,125
Payable for capital shares repurchased .................... 116,752
Accrued expenses:
Advisory fee ........................................... 44,463
Director's fee ......................................... 6,722
Service and distribution plan fee ...................... 22,232
Other .................................................. 97,138
-------------
Total Liabilities ................................... 2,287,432
-------------
Net Assets ................................................ $ 114,743,430
=============
Net Assets consist of:
Capital stock, at $1 par value
(authorized 100,000,000, outstanding
9,801,430 shares) .................................... $ 9,801,430
Additional paid-in capital ................................ 107,263,226
Undistributed net investment income ....................... 1,296,460
Accumulated net realized loss on
investments ............................................ (4,745,389)
Net unrealized appreciation of
investments ............................................ 1,127,703
-------------
Net Assets ................................................ $ 114,743,430
=============
Net Asset Value, Offering and
Redemption Price per Outstanding
Share ($114,743,430 / 9,801,430
shares outstanding) .................................... $ 11.71
=============
Statement of Operations for the
Six Months Ended February 28, 2005 (unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest .................................................. $ 3,441,327
-------------
Expenses:
Advisory fee .............................................. 293,362
Service and distribution plan fees ........................ 146,681
Transfer agent fees ....................................... 36,881
Auditing and legal fees ................................... 27,901
Registration and filing fees .............................. 18,841
Printing .................................................. 18,348
Telephone, dues and other ................................. 12,491
Custodian fees ............................................ 12,079
Director's fees and expenses .............................. 10,612
Postage ................................................... 9,421
Insurance ................................................. 8,183
-------------
Total Expenses Before Custody
Credits ............................................. 594,800
Less: Custody Credits .................................. (442)
-------------
Net Expenses ........................................... 594,358
-------------
Net Investment Income ..................................... 2,846,969
-------------
Net Realized and Unrealized Gain
(Loss) on Investments:
Net Realized Gain ...................................... 561,614
Change in Net Unrealized
Appreciation (Depreciation) ......................... (2,860,972)
-------------
Net Realized Loss and Change in
Net Unrealized Appreciation
(Depreciation) on Investments .......................... (2,299,358)
-------------
Net Increase in Net Assets from
Operations ............................................. $ 547,611
=============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
Value Line U.S. Government Securities Fund, Inc.
Statement of Changes in Net Assets
for the Six Months Ended February 28, 2005 (unaudited) and for the Year Ended
August 31, 2004
- --------------------------------------------------------------------------------
Six Months
Ended Year
February 28, Ended
2005 August 31,
(unaudited) 2004
---------------------------------
Operations:
Net investment income ..................................... $ 2,846,969 $ 4,485,304
Net realized gain (loss) on investments ................... 561,614 (344,427)
Net change in unrealized (depreciation) appreciation
on investments .......................................... (2,890,972) 858,586
---------------------------------
Net Increase in net assets from operations ................ 547,611 4,999,463
---------------------------------
Distributions to Shareholders:
Net investment income ..................................... (2,204,190) (4,655,086)
---------------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 3,042,387 46,350,407
Proceeds from reinvestment of distributions to shareholders 1,877,933 3,990,642
Cost of shares repurchased ................................ (9,964,241) (73,505,326)
---------------------------------
Net decrease from capital share transactions .............. (5,043,921) (23,164,277)
---------------------------------
Total Decrease in Net Assets ............................... (6,700,500) (22,819,900)
Net Assets:
Beginning of period ....................................... 121,443,930 144,263,830
---------------------------------
End of period ............................................. $ 114,743,430 $ 121,443,930
=================================
Undistributed Net Investment Income, at end of period ...... $ 1,296,460 $ 653,681
=================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements (Unaudited) February 28, 2005
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
13
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements (Unaudited) February 28, 2005
- --------------------------------------------------------------------------------
(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 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:
Six Months Year
Ended Ended
February 28, August 31,
2005 2004
-----------------------------
Shares sold ...................... 258,041 3,892,455
Shares issued in
reinvestment
of dividends .................. 159,722 336,755
-----------------------------
417,763 4,229,210
Shares
repurchased ................... (845,295) (6,183,849)
-----------------------------
Net decrease ..................... (427,532) (1,954,639)
=============================
Dividends per
share ......................... $ .2200 $ .4125
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
Six Months
Ended
February 28,
2005
-----------
PURCHASES:
U.S. Treasury Obligations ............................ $12,894,609
U.S. Government Agency
Obligations and Other Investment
Securities ........................................ 31,543,049
-----------
$44,437,658
===========
SALES:
U.S. Treasury Obligations ............................ $15,839,141
U.S. Government Agency
Obligations and Other Investment
Securities ........................................ 18,889,986
-----------
$34,729,197
===========
4. Income Taxes
At February 28, 2005, information on the tax basis of investments is follows:
Cost of investments for tax purposes ................... $114,856,807
============
Gross tax unrealized appreciation ...................... $ 1,700,462
Gross tax unrealized depreciation ...................... 787,186
------------
Net tax unrealized appreciation on
investments ......................................... $ 913,276
============
Undistributed ordinary income .......................... $ 1,322,557
============
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
============
- --------------------------------------------------------------------------------
14
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements (Unaudited) February 28, 2005
- --------------------------------------------------------------------------------
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.
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 six months ending February 28,
2005 and year ending August 31, 2004 is as follows:
February 28, August 31,
2005 2004
------------------------------
Ordinary Income $2,204,190 $4,655,086
------------------------------
Permanent book-tax differences relating to the current year expired capital loss
are reclassified within the composition of net assets 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 $293,362 was paid or payable to Value Line, Inc., the Fund's
investment adviser ("Adviser"), for the six months ended February 28, 2005. 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 $146,681 were paid or payable
to the Distributor under this Plan for the six months ended February 28, 2005.
For the six months ended February 28, 2005 the Fund's expenses were reduced by
$442 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 February 28, 2005 owned 136,080 shares of the Fund's capital
stock, representing 1.39% of the outstanding shares. In addition, officers and
directors owned 760 shares of capital stock, representing less than 1% of the
outstanding shares.
- --------------------------------------------------------------------------------
15
Value Line U.S. Government Securities Fund, Inc.
Financial Highlights (unaudited)
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
U.S. Government Securities Fund, Inc.
--------------------------------------------------------------------------------------------
Six Months Years Ended
Ended August 31,
February 28, --------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------
Net Asset Value, beginning
of period ...................... $ 11.87 $ 11.84 $ 12.00 $ 11.51 $ 10.87 $ 10.81
--------------------------------------------------------------------------------------------
Income (loss) from Investment
Operations:
Net investment income ........... .29 .41 .44 .50 .58 .64
Net gains or losses on securities
(both realized and unrealized) . (.23) .03 (.15) .49 .67 .04
--------------------------------------------------------------------------------------------
Total income from investment
operations ................... .06 .44 .29 .99 1.25 .68
--------------------------------------------------------------------------------------------
Less Dividends and
Distributions:
Dividends from net investment
income ......................... (.22) (.41) (.45) (.50) (.61) (.62)
Distributions from net realized
gains .......................... -- -- -- -- -- --
--------------------------------------------------------------------------------------------
Total distributions ............. (.22) (.41) (.45) (.50) (.61) (.62)
--------------------------------------------------------------------------------------------
Net Asset Value, end of period .. $ 11.71 $ 11.87 $ 11.84 $ 12.00 $ 11.51 $ 10.87
============================================================================================
Total return .................... 0.51%(3) 3.79% 2.35% 8.84% 11.82% 6.53%
============================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................. $ 114,743 $ 121,444 $ 144,264 $ 155,659 $ 150,593 $ 140,408
Ratio of operating expenses to
average net assets (1) ......... 1.01%(4) 0.98% 0.96% 0.92% 0.92% 0.73%
Ratio of net investment income
to average net assets .......... 4.85%(4) 3.40% 3.57% 4.17%(2) 5.17% 5.82%
Portfolio turnover rate ......... 32%(3) 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%.
(3) Not annualized.
(4) Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16
Value Line U.S. Government Securities Fund, Inc.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at
http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities, and information regarding how
the Fund voted these proxies for the 12-month period ended June 30, 2004 is
available through the Fund's website at http://www.vlfunds.com and on the SEC's
website at http://www.sec.gov. The description of the policies and procedures is
also avaliable without charge, upon request, by calling 1-800-243-2729.
- --------------------------------------------------------------------------------
17
Value Line U.S. Government Securities Fund, Inc.
Management of the Fund
- --------------------------------------------------------------------------------
MANAGEMENT INFORMATION
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 1987 Chairman, President and Value Line, Inc.
Age 70 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
15 Value Line Funds and
Value Line Securities, Inc.
(the "Distributor").
- ----------------------------------------------------------------------------------------------------------------
Marion N. Ruth Director Since 2000 Real Estate Executive: None
5 Outrider Road President, Ruth Realty (real
Rolling Hills, CA 90274 estate broker); Director of
Age 69 the Adviser since 2000.
- ----------------------------------------------------------------------------------------------------------------
Non-Interested Directors*
- -------------------------
John W. Chandler Director Since 1991 Consultant, Academic None
1611 Cold Spring Rd. Search Consultation Service,
Williamstown, MA 01267 Inc.; Trustee Emeritus and
Age 81 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, NC 28209
Age 63
- ----------------------------------------------------------------------------------------------------------------
Francis C. Oakley Director Since 2000 Professor of History, Berkshire Life
54 Scott Hill Road Williams College, 1961 to Insurance Company
Williamstown, MA 01267 present. President Emeritus of America
Age 73 since 1994 and President,
1985-1994; Chairman (1993-
1997) and Interim President
(2002) of the American
Council of Learned
Societies.
- ----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------
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 69 Emeritus, Skidmore College
since 1999 and President,
1987-1998.
- ------------------------------------------------------------------------------------------------------------------------
Paul Craig Roberts Director Since 1987 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 adviser) since April 1, 2004;
Age 55 Senior Financial Advisor,
Hawthorne, 2001-2004.
- ------------------------------------------------------------------------------------------------------------------------
Officers
- --------
Jeffrey Geffen Vice President Since 2004 Portfolio Manager with the --
Age 55 Adviser since 2001; Vice
President Investments,
Morgan Stanley Dean Witter
Advisors, 1989-2001.
- ------------------------------------------------------------------------------------------------------------------------
Charles Heebner Vice President Since 1995 Senior Portfolio Manager --
Age 68 with the Adviser.
- ------------------------------------------------------------------------------------------------------------------------
Bradley Brooks Vice President Since 2001 Portfolio Manager with the --
Age 42 Adviser.
- ------------------------------------------------------------------------------------------------------------------------
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,
Treasurer and Chief
Compliance Officer of each
of the 14 Value Line Funds.
- ------------------------------------------------------------------------------------------------------------------------
Howard A. Brecher Assistant Treasurer Since 2005 Vice President and Secretary --
Age 51 Assistant Secretary of the Adviser.
- ------------------------------------------------------------------------------------------------------------------------
* 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 having been a director of the Adviser.
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY 10017.
- --------------------------------------------------------------------------------
The Fund's Statement of Additional Information (SAI) includes additional
information about the Fund's directors and is available, without charge,
upon request by calling 1-800-243-2729.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
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 1-800-223-0818, 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.
- --------------------------------------------------------------------------------
20
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
TRUSTEES 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
Howard A. Brecher
Assistant Secretary/Treasurer
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and, accordingly,
they do not express an opinion thereon.
This unaudited 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 Trust (obtainable from
the Distributor).
#532851
Item 2. Code of Ethics
(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 12(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.
(a) (1) The Registrant has an Audit Committee Financial Expert serving on
its 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 2005 - $15,852
(b) Audit-Related fees - None.
(c) Tax Preparation Fees 2005 -$2,000
(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 2005 -$2,000
(h) Not applicable.
Item 11. Controls and Procedures.
(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 12. Exhibits.
(a) Code of Business Conduct and Ethics for Principal Executive and Senior
Financial Officers attached hereto as Exhibit 100.COE
(b) (1) Certification pursuant to Rule 30a-2(a) 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
-------------------------------------------------------
Jean B. Buttner, President
Date: April 29, 2005
-------------------------------------------
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
-------------------------------------------------------
Jean B. Buttner, President, Principal Executive Officer
By: /s/ David T. Henigson
-------------------------------------------------------
David T. Henigson, Vice President, Treasurer,
Principal Financial Officer
Date: April 29, 2005
-------------------------------------------