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, 2006
Date of reporting period: February 28, 2006
Item I. Reports to Stockholders.
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SEMI-ANNUAL REPORT
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February 28, 2006
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Value Line
U.S.
Government
Securities
Fund, Inc.
[LOGO]
----------
VALUE LINE
No-Loan
Mutual
Funds
Value Line U.S. Government Securities Fund, Inc.
To Our Value Line U.S. Government
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To Our Shareholders:
During the last six-month period, the U.S. economy remained healthy and equity
markets gained ground.
However, for bond investors the period was not as sanguine as interest rates
rose and bond prices fell. Due to strong economic growth and climbing energy
and commodity prices, bond investors worried about a rise in inflation, causing
weakness among fixed income securities.
In order to keep inflation under control, The Federal Reserve Board continued
its tight monetary policy raising interest rates 100 basis points. The Federal
Funds rate controlled by the Federal Reserve increased from 3.50% to 4.50%.
All fixed income securities lost ground, but short-term securities fell more
significantly than longer maturities. By the end of the period, the 10-year
Treasury note was actually yielding less, 4.55%, than the 4.67% yield of the
2-year Treasury note. This occurrence, known as an "inverted yield curve" has
been, at times in the past, a harbinger of slow economic growth. However, its
credibility as a forecaster for the present economic environment is being
questioned by economists and strategists, and presently the economic data do
not point to such a slowdown.
During this period of bond weakness, your Fund struggled. Despite price
declines in the portfolio, the Fund did manage to nearly break even for the
period with a return of -.28%. This compares to the -0.17% return of the Fund's
benchmark, the Lehman Brothers Intermediate U.S. Government Bond Index(1). The
income generated from the Fund's securities was nearly enough to offset the
price declines of its securities.
Looking ahead, with economic growth continuing on a solid path, and the Federal
Reserve not yet ready to end its interest rate hikes, we remain cautious. With
the yields on short-term maturities greater or the same as longer-term
maturities, and their price risk less, they represent attractive opportunities.
We will, selectively, concentrate our purchases among shorter 2-5 year
maturities until it appears that economic growth is moderating, inflation is
under control and the Federal Reserve Board is nearing the end of its
restrictive monetary policy.
As always, your confidence in Value Line is appreciated and we look forward to
serving your future investment needs.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
March 27, 2006
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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
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2
Value Line U.S. Government Securities Fund, Inc.
Securities Fund Shareholders
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Economic Observations
The business expansion appears to have picked up noticeably during the first
quarter of this year, following a disappointingly weak close to 2005. The
current improvement suggests that the nation's gross domestic product rose by
an estimated 4%, or so, in the opening quarter. Going forward, we would expect
some renewed moderation in growth, with GDP increases likely averaging closer
to 3% for the balance of the year. Our forecast assumes that oil prices will
stabilize in the range of $55-$65 a barrel, that there will be no supply
interruptions from any deterioration on the global scene, and that interest
rates will be comparatively stable.
Helping to sustain this healthy economic improvement are likely to be solid
levels of activity in the manufacturing and capital goods sectors and further
selective gains in retailing. Such economic growth is likely to be accompanied
by slower demand for housing. A severe housing pullback does not seem likely at
this point, given the expected relatively stable level of long-term interest
rates. Our forecast also assumes that inflation will remain fairly stable at
benign levels.
Moderating gross domestic product growth and accompanying modest level of
inflation would have positive ramifications for the stock markets. That's
because this combination would logically allow the Federal Reserve to bring its
cycle of monetary tightening to a close by the middle of this year, or before
its series of interest-rate hikes brings about a premature end to the long
business expansion.
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3
Value Line U.S. Government Securities Fund, Inc.
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FUND EXPENSES (unaudited):
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, 2005 through February
28, 2006).
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.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included your costs would have been higher.
Expenses*
paid during
Beginning Ending period
account account 9/1/05
value value thru
9/1/05 2/28/06 2/28/06
-------------- ------------ ------------
Actual ........................................... $ 1,000.00 $ 997.20 $ 5.15
Hypothetical (5% return before expenses) ......... $ 1,000.00 $ 1,019.64 $ 5.21
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* Expenses are equal to the Fund's annualized expense ratio of 1.04% 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, 2006 (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 $10,059,380 9.7%
Federal Home Loan Bank, 7.45%, 2/3/20 ................................. 3,000,000 3,764,550 3.6%
Federal Farm Credit Bank, 5.70%, 7/3/17 ............................... 3,000,000 3,146,649 3.0%
Private Export Funding Corporation Series J, 7.65%, 5/15/06 ........... 3,000,000 3,016,869 2.9%
Federal Home Loan Bank, 4.43%, 4/7/08 ................................. 3,000,000 2,973,234 2.9%
UBS Securities, LLC, Repurchase Agreement, 4.49%, 3/1/06 .............. 2,700,000 2,700,000 2.6%
Morgan Stanley & Co., Repurchase Agreement, 4.47%, 3/1/06 ............. 2,600,000 2,600,000 2.5%
Federal Home Loan Mortgage Corporation Gold PC, 6.00%, 3/1/33 ......... 2,065,411 2,089,858 2.0%
Federal Farm Credit Bank, 6.03%, 5/7/08 ............................... 2,000,000 2,046,974 2.0%
U.S. Treasury Notes, 4.00%, 11/15/12 .................................. 2,000,000 1,930,782 1.9%
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Asset Allocation -- Percentage of Net Assets
[THE FOLLOWING WAS DEPICTED BY A PIE CHART IN THE PRINTED MATERIAL]
U.S.Government Agency Obligations 87.0%
U.S. Treasury Obligations 6.8%
Short-Term, Cash & Other 6.2%
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Coupon Distribution
% of Fund's
investments
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Less than 4% 5.8
4-4.99% 33.1
5-5.99% 26.8
6-6.99% 24.0
7-7.99% 10.3
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5
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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U.S. TREASURY OBLIGATIONS (6.8%)
$ 1,000,000 U.S. Treasury Notes ............... 3.25 % 1/15/09 $ 962,852
1,000,000 U.S. Treasury Notes ............... 4.00 3/15/10 976,680
2,000,000 U.S. Treasury Notes ............... 4.00 11/15/12 1,930,782
1,030,810 U.S. Treasury Notes* .............. 1.63 1/15/15 1,000,490
1,000,000 U.S. Treasury Notes ............... 4.50 11/15/15 993,126
1,000,000 U.S. Treasury Notes ............... 6.13 11/15/27 1,195,860
----------- -----------
7,030,810 TOTAL U.S. TREASURY OBLIGATIONS
----------- (Cost $7,148,514) ............... 7,059,790
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (87.0%)
FEDERAL FARM CREDIT BANK (8.0%)
2,000,000 Federal Farm Credit Bank .......... 6.03 5/7/08 2,046,974
1,000,000 Federal Farm Credit Bank .......... 6.82 3/16/09 1,053,396
1,000,000 Federal Farm Credit Bank .......... 4.85 10/25/12 999,251
1,000,000 Federal Farm Credit Bank .......... 5.30 6/22/15 985,734
3,000,000 Federal Farm Credit Bank .......... 5.70 7/3/17 3,146,649
----------- -----------
8,000,000 TOTAL FEDERAL FARM CREDIT BANK
----------- (Cost $8,280,184) ............... 8,232,004
-----------
FEDERAL HOME LOAN BANK (17.1%)
1,000,000 Federal Home Loan Bank ............ 2.85 2/13/07 980,846
500,000 Federal Home Loan Bank ............ 4.88 5/15/07 499,689
500,000 Federal Home Loan Bank ............ 3.50 11/15/07 488,715
1,000,000 Federal Home Loan Bank ............ 4.00 3/10/08 983,276
3,000,000 Federal Home Loan Bank ............ 4.43 4/7/08 2,973,234
1,000,000 Federal Home Loan Bank ............ 6.01 4/22/08 1,022,626
1,000,000 Federal Home Loan Bank ............ 4.25 5/16/08 986,807
1,000,000 Federal Home Loan Bank ............ 4.10 6/13/08 983,097
1,000,000 Federal Home Loan Bank ............ 5.00 8/15/08 997,120
1,000,000 Federal Home Loan Bank ............ 5.25 11/14/08 1,007,698
1,000,000 Federal Home Loan Bank ............ 6.21 6/2/09 1,040,523
1,000,000 Federal Home Loan Bank ............ 4.38 3/17/10 981,449
1,000,000 Federal Home Loan Bank ............ 4.38 9/17/10 980,394
3,000,000 Federal Home Loan Bank ............ 7.45 2/3/20 3,764,550
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17,000,000 TOTAL FEDERAL HOME LOAN BANK
----------- (Cost $17,565,387) .............. 17,690,024
-----------
See Notes to Financial Statements.
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6
Value Line U.S. Government Securities Fund, Inc.
February 28, 2006
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Principal Maturity
Amount Rate Date Value
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FEDERAL HOME LOAN MORTGAGE CORPORATION (21.6%)
$ 1,000,000 Federal Home Loan Mortgage Corporation .......... 4.26% 7/19/07 $ 991,218
1,000,000 Federal Home Loan Mortgage Corporation .......... 3.25 11/2/07 970,735
887,552 Federal Home Loan Mortgage Corporation
Gold PC Pool #M90840 .......................... 3.00 9/1/08 845,023
1,000,000 Federal Home Loan Mortgage Corporation .......... 4.25 7/15/09 979,438
1,000,000 Federal Home Loan Mortgage Corporation .......... 4.00 12/15/09 970,061
1,000,000 Federal Home Loan Mortgage Corporation .......... 4.13 7/12/10 969,641
1,500,000 Federal Home Loan Mortgage Corporation .......... 5.50 9/15/11 1,542,000
1,000,000 Federal Home Loan Mortgage Corporation .......... 4.50 5/14/12 965,161
1,000,000 Federal Home Loan Mortgage Corporation .......... 4.75 5/6/13 964,011
1,000,000 Federal Home Loan Mortgage Corporation .......... 4.50 1/15/15 973,113
893,496 Federal Home Loan Mortgage Corporation
REMIC Trust Series 2849 Class VA .............. 5.00 8/15/15 880,884
29,594 Federal Home Loan Mortgage Corporation
Gold PC Pool #E92226 .......................... 5.00 11/1/17 29,274
490,180 Federal Home Loan Mortgage Corporation
Gold PC Pool #E93499 .......................... 5.00 12/1/17 484,885
33,467 Federal Home Loan Mortgage Corporation
Gold PC Pool #E92829 .......................... 5.00 12/1/17 33,105
73,457 Federal Home Loan Mortgage Corporation
Gold PC Pool #B17398 .......................... 4.50 12/1/19 71,232
517,285 Federal Home Loan Mortgage Corporation
Gold PC Pool #G18044 .......................... 4.50 3/1/20 501,137
324,117 Federal Home Loan Mortgage Corporation
Gold PC Pool #B18034 .......................... 4.50 4/1/20 313,999
75,276 Federal Home Loan Mortgage Corporation
Gold PC Pool #J00118 .......................... 5.00 10/1/20 74,331
905,378 Federal Home Loan Mortgage Corporation
Gold PC Pool #J00139 .......................... 5.00 10/1/20 894,006
1,000,000 Federal Home Loan Mortgage Corporation
REMIC Trust Series 2937 Class JC .............. 5.00 9/15/22 996,689
741,578 Federal Home Loan Mortgage Corporation
Gold PC Pool #C90684 .......................... 4.50 5/1/23 711,857
1,000,000 Federal Home Loan Mortgage Corporation .......... 6.75 3/15/31 1,262,628
715,003 Federal Home Loan Mortgage Corporation
REMIC Trust Series 2645 Class NA .............. 3.50 9/15/31 670,217
554,865 Federal Home Loan Mortgage Corporation
REMIC Trust Series 2594 Class OR .............. 4.25 6/15/32 532,048
2,065,411 Federal Home Loan Mortgage Corporation
Gold PC Pool #C77717 .......................... 6.00 3/1/33 2,089,858
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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$ 1,156,477 Federal Home Loan Mortgage Corporation
Gold PC Pool #A29526 ....................................... 5.00% 1/1/35 $ 1,121,289
617,024 Federal Home Loan Mortgage Corporation
Gold PC Pool #A29633 ....................................... 5.00 1/1/35 598,250
881,349 Federal Home Loan Mortgage Corporation Pool #783022 .......... 4.45 2/1/35 861,654
----------- -----------
22,461,509 TOTAL FEDERAL HOME LOAN MORTGAGE
----------- CORPORATION (Cost $22,712,243) ............................. 22,297,744
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (34.8%)
1,533,579 Federal National Mortgage Association Pool #313032 ........... 7.04 7/1/06 1,531,104
1,000,000 Federal National Mortgage Association ........................ 4.75 1/2/07 998,025
1,000,000 Federal National Mortgage Association ........................ 4.10 6/14/07 989,785
10,000,000 Federal National Mortgage Association ........................ 6.45 4/1/08 10,059,380
63,978 Federal National Mortgage Association Pool #254243 ........... 6.00 2/1/09 64,106
145,340 Federal National Mortgage Association Pool #254273 ........... 5.00 3/1/09 144,730
643,723 Federal National Mortgage Association Pool #254956 ........... 4.00 11/1/10 622,558
400,907 Federal National Mortgage Association Pool #255325 ........... 4.50 7/1/11 392,497
1,000,000 Federal National Mortgage Association ........................ 5.00 4/16/15 978,378
199,904 Federal National Mortgage Association Pool #511823 ........... 5.50 5/1/16 201,069
151,784 Federal National Mortgage Association Pool #615289 ........... 5.50 12/1/16 152,668
401,050 Federal National Mortgage Association Pool #622373 ........... 5.50 12/1/16 403,386
187,020 Federal National Mortgage Association Pool #631328 ........... 5.50 2/1/17 188,077
304,732 Federal National Mortgage Association Pool #623503 ........... 6.00 2/1/17 310,852
29,628 Federal National Mortgage Association Pool #643277 ........... 5.50 4/1/17 29,795
25,991 Federal National Mortgage Association Pool #638247 ........... 5.50 5/1/17 26,138
839,280 Federal National Mortgage Association
REMIC Trust Series 2892 Class DC ........................... 4.50 12/15/17 818,345
502,265 Federal National Mortgage Association Pool #254684 ........... 5.00 3/1/18 496,687
155,312 Federal National Mortgage Association Pool #685183 ........... 5.00 3/1/18 153,587
630,130 Federal National Mortgage Association Pool #695828 ........... 5.00 4/1/18 623,132
177,854 Federal National Mortgage Association Pool #703936 ........... 5.00 5/1/18 175,879
782,679 Federal National Mortgage Association Pool #703617 ........... 5.00 7/1/18 773,986
768,933 Federal National Mortgage Association Pool #790984 ........... 5.00 7/1/19 759,667
830,907 Federal National Mortgage Association Pool #786915 ........... 5.00 8/1/19 820,894
982,430 Federal National Mortgage Association Pool #844207 ........... 5.00 11/1/20 970,033
557,055 Federal National Mortgage Association
REMIC Trust Series 2003-28 Class KA ........................ 4.25 3/25/22 528,065
508,212 Federal National Mortgage Association
REMIC Trust Series 2003-38 Class TC ........................ 5.00 3/25/23 500,688
270,747 Federal National Mortgage Association Pool #412682 ........... 6.00 3/1/28 274,046
67,535 Federal National Mortgage Association Pool #424691 ........... 6.50 4/1/28 69,481
193,665 Federal National Mortgage Association Pool #425239 ........... 6.50 4/1/28 199,246
1,000,000 Federal National Mortgage Association ........................ 7.25 5/15/30 1,319,702
See Notes to Financial Statements.
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8
Value Line U.S. Government Securities Fund, Inc.
February 28, 2006
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Principal Maturity
Amount Rate Date Value
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$ 1,000,000 Federal National Mortgage Association .......................... 6.63% 11/15/30 $ 1,239,664
1,749 Federal National Mortgage Association Pool #568625 ............. 7.50 1/1/31 1,832
155,395 Federal National Mortgage Association Pool #571090 ............. 7.50 1/1/31 162,781
1,949 Federal National Mortgage Association Pool #573935 ............. 7.50 3/1/31 2,041
69,740 Federal National Mortgage Association Pool #629297 ............. 6.50 2/1/32 71,602
618,443 Federal National Mortgage Association Pool #626440 ............. 7.50 2/1/32 647,535
94,995 Federal National Mortgage Association Pool #634996 ............. 6.50 5/1/32 97,489
121,420 Federal National Mortgage Association Pool #254383 ............. 7.50 6/1/32 127,132
430,669 Federal National Mortgage Association Pool #254476 ............. 5.50 9/1/32 427,708
12,669 Federal National Mortgage Association Pool #688539 ............. 5.50 3/1/33 12,584
591,876 Federal National Mortgage Association Pool #650386 ............. 5.00 7/1/33 577,351
613,340 Federal National Mortgage Association Pool #726889 ............. 5.50 7/1/33 609,188
662,563 Federal National Mortgage Association Pool #759028 ............. 5.50 1/1/34 658,077
319,577 Federal National Mortgage Association Pool #761913 ............. 5.50 2/1/34 317,143
332,807 Federal National Mortgage Association Pool #763393 ............. 5.50 2/1/34 330,554
309,949 Federal National Mortgage Association Pool #769862 ............. 5.50 2/1/34 307,588
34,603 Federal National Mortgage Association Pool #769682 ............. 5.00 3/1/34 33,698
27,067 Federal National Mortgage Association Pool #778141 ............. 5.00 5/1/34 26,359
487,332 Federal National Mortgage Association Pool #773586 ............. 5.50 6/1/34 483,620
632,184 Federal National Mortgage Association Pool #255311 ............. 6.00 7/1/34 638,465
33,631 Federal National Mortgage Association Pool #258149 ............. 5.50 9/1/34 33,374
6,076 Federal National Mortgage Association Pool #789150 ............. 5.00 10/1/34 5,917
801,806 Federal National Mortgage Association Pool #255496 ............. 5.00 11/1/34 780,829
90,844 Federal National Mortgage Association Pool #797154 ............. 5.50 11/1/34 90,152
192,096 Federal National Mortgage Association Pool #801063 ............. 5.50 11/1/34 190,633
343,226 Federal National Mortgage Association Pool #803675 ............. 5.50 12/1/34 340,612
458,148 Federal National Mortgage Association Pool #804683 ............. 5.50 12/1/34 454,659
880,855 Federal National Mortgage Association Pool #815813 ............. 4.60 2/1/35 862,288
64,088 Federal National Mortgage Association Pool #255580 ............. 5.50 2/1/35 63,600
851,179 Federal National Mortgage Association Pool #735224 ............. 5.50 2/1/35 845,416
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35,594,916 TOTAL FEDERAL NATIONAL MORTGAGE
----------- ASSOCIATION (Cost $36,034,638) ............................... 36,015,877
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.6%)
287,253 Government National Mortgage Association Pool #003645 .......... 4.50 12/20/19 281,077
17,115 Government National Mortgage Association Pool #541349 .......... 6.00 4/15/31 17,483
32,223 Government National Mortgage Association Pool #557681 .......... 6.00 8/15/31 32,916
245,195 Government National Mortgage Association Pool #548880 .......... 6.00 12/15/31 250,469
161,938 Government National Mortgage Association Pool #551762 .......... 6.00 4/15/32 165,457
68,361 Government National Mortgage Association Pool #582415 .......... 6.00 11/15/32 69,846
383,762 Government National Mortgage Association Pool #604485 .......... 6.00 7/15/33 392,085
245,525 Government National Mortgage Association Pool #622603 .......... 6.00 11/15/33 250,850
See Notes to Financial Statements.
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9
Value Line U.S. Government Securities Fund, Inc.
Schedule of Investments (unaudited) February 28, 2006
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Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------------------------------------------------------------------------
$ 12,034 Government National Mortgage Association Pool #429786 .......... 6.00% 12/15/33 $ 12,295
555,269 Government National Mortgage Association Pool #605025 .......... 6.00 2/15/34 566,737
14,351 Government National Mortgage Association Pool #626480 .......... 6.00 2/15/34 14,648
150,087 Government National Mortgage Association Pool #610944 .......... 5.50 4/15/34 150,575
167,025 Government National Mortgage Association Pool #605245 .......... 5.50 6/15/34 167,568
347,563 Government National Mortgage Association Pool #583008 .......... 5.50 6/15/34 348,694
----------- -------------
2,687,701 TOTAL GOVERNMENT NATIONAL MORTGAGE
----------- ASSOCIATION (Cost $2,726,832) ................................ 2,720,700
-------------
PRIVATE EXPORT FUNDING CORPORATION (2.9%)
3,000,000 Private Export Funding Corporation Series J .................... 7.65 5/15/06 3,016,869
----------- -------------
3,000,000 TOTAL PRIVATE EXPORT FUNDING
----------- CORPORATION (Cost $3,000,000) ................................ 3,016,869
-------------
88,744,126 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
----------- (Cost $90,319,284) ........................................... 89,973,218
-------------
95,774,936 TOTAL INVESTMENT SECURITIES (93.8%)
----------- (Cost $97,467,798) ........................................... 97,033,008
-------------
REPURCHASE AGREEMENTS (5.1%)
2,600,000 With Morgan Stanley & Co., 4.47%, dated 2/28/06, due 3/1/06, delivery value
----------- $2,600,323 (collateralized by $2,565,000 U.S. Treasury Notes 5.625%,
due 5/15/08 with a value of $2,657,749) .............................................. 2,600,000
2,700,000 With UBS Securities, LLC, 4.49%, dated 2/28/06, due 3/1/06, delivery value
----------- $2,700,337 (collateralized by $2,527,000 U.S. Treasury Notes 5.25%,
due 11/15/28, with a value of $2,768,431) ............................................ 2,700,000
-------------
5,300,000 TOTAL REPURCHASE AGREEMENTS
----------- (Cost $5,300,000) ...................................................................... 5,300,000
-------------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (1.1%) .................................. 1,085,031
-------------
NET ASSETS (100.0%) .................................................................... $ 103,418,039
=============
NET ASSET VALUE OFFERING AND REDEMPTION PRICE, PER
OUTSTANDING SHARE ($103,418,039 [divided by] 9,053,300 shares outstanding) ........... $ 11.42
=============
* Treasury Inflation Protected Security (TIPS).
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, 2006 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(Cost -- $97,467,798) ...................................... $ 97,033,008
Repurchase agreements
(Cost -- $5,300,000) ....................................... 5,300,000
Cash .......................................................... 116,586
Interest receivable ........................................... 1,153,324
Receivable for capital shares sold ............................ 21,123
------------
Total Assets ............................................. 103,624,041
------------
Liabilities:
Payable for capital shares repurchased ........................ 60,819
Accrued expenses:
Advisory fee ............................................... 39,658
Service and distribution plan fees ......................... 19,829
Directors' fees ............................................ 5,316
Dividends Payable .......................................... 7,598
Other ...................................................... 72,782
------------
Total Liabilities 206,002
------------
Net Assets .................................................... $103,418,039
============
Net assets consist of:
Capital stock, at $1 par value
(authorized 100,000,000, outstanding
9,053,300 shares) .......................................... $ 9,053,300
Additional paid-in capital .................................... 96,556,107
Undistributed net investment income ........................... 551,057
Accumulated net realized loss on investments (2,307,635)
Net unrealized depreciation of investments .................... (434,790)
------------
Net Assets .................................................... $103,418,039
============
Net Asset Value, Offering and Redemption
Price per Outstanding Share
($103,418,039 [divided by] 9,053,300
shares outstanding) ........................................ $ 11.42
============
Statement of Operations for the
Six Months Ended February 28, 2006 (unaudited)
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Investment Income:
Interest ......................................................... $2,571,259
----------
Expenses:
Advisory fee ..................................................... 265,992
Service and distribution plan fees ............................... 132,996
Transfer agent fees .............................................. 38,680
Auditing and legal fees .......................................... 31,241
Custodian fees ................................................... 19,048
Printing ......................................................... 18,348
Registration and filing fees ..................................... 11,157
Directors' fees and expenses ..................................... 10,612
Postage .......................................................... 9,421
Insurance ........................................................ 8,183
Telephone ........................................................ 5,951
Other ............................................................ 1,118
----------
Total Expenses Before Custody Credits ......................... 552,747
Less: Custody Credits ......................................... (1,444)
----------
Net Expenses .................................................. 551,303
----------
Net Investment Income ............................................ 2,019,956
----------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net Realized Gain (Loss) ...................................... (95,651)
Change in Net Unrealized Appreciation
(Depreciation) .............................................. (2,218,007)
----------
Net Realized Gain (Loss) and Change
in Net Unrealized Appreciation
(Depreciation) on Investments ................................. (2,313,658)
----------
Net Decrease in Net Assets
from Operations ............................................. $ (293,702)
==========
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, 2006 (unaudited) and for the Year Ended August 31, 2005
- -----------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
February 28, 2006 August 31,
(unaudited) 2005
-----------------------------------
Operations:
Net investment income ........................................ $ 2,019,956 $ 4,170,837
Net realized gain (loss) on investments ...................... (95,651) 1,193,238
Net change in unrealized (depreciation) on investments ....... (2,218,007) (2,205,458)
-----------------------------------
Net increase (decrease) in net assets from operations ........ (293,702) 3,158,617
-----------------------------------
Distributions to Shareholders:
Net investment income ........................................ (2,661,075) (4,535,933)
-----------------------------------
Capital Share Transactions:
Proceeds from sale of shares ................................. 1,546,454 5,655,477
Proceeds from reinvestment of distributions to shareholders .. 2,294,548 3,874,153
Cost of shares repurchased ................................... (9,608,009) (17,456,421)
-----------------------------------
Net decrease from capital share transactions ................. (5,767,007) (7,926,791)
-----------------------------------
Total Decrease in Net Assets .................................. (8,721,784) (9,304,107)
Net Assets:
Beginning of period .......................................... 112,139,823 121,443,930
-----------------------------------
End of period ................................................ $103,418,039 $ 112,139,823
===================================
Undistributed Net Investment Income, at End of Period ......... $ 551,057 $ 1,192,176
===================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements (unaudited) February 28, 2006
- --------------------------------------------------------------------------------
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 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: 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. If a security is not priced in this manner, the Fund
utilizes an independent pricing service (the "Service") approved by the Board
of Directors. 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, it is the Fund's policy to mark-to-market
the collateral 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 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.
The Fund may invest in Treasury Inflation-Protection Securities (TIPS). The
principal value and interest payout
- --------------------------------------------------------------------------------
13
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
of TIPS are periodically adjusted according to the rate of inflation based on
the Consumer Price Index. The adjustments for interest income due to the
inflation are reflected in interest income in the Statement of Operations.
(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
Ended Year
February 28, Ended
2006 August 31,
(unaudited) 2005
------------------------------
Shares sold ................................... 134,982 482,186
Shares issued in reinvestment
of dividends ............................... 200,802 332,235
Shares repurchased ............................ (837,946) (1,487,920)
------------------------------
Net decrease .................................. (502,162) (673,499)
==============================
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,
2006
(unaudited)
------------
Purchases:
U.S. Treasury Obligations .............................. $ 2,949,844
U.S. Government Agency
Obligations ......................................... 4,987,577
------------
$ 7,937,421
============
U.S. Government Agency
U.S. Treasury Obligations .............................. $ 4,394,766
U.S. Government Agency
Obligations ......................................... 6,059,449
------------
$ 10,454,215
============
4. Income Taxes (unaudited)
At February 28, 2006, information on the tax basis of investments is follows:
Cost of investments for tax purposes ...................... $102,767,798
------------
Gross tax unrealized appreciation ......................... $ 1,167,728
Gross tax unrealized depreciation ......................... (1,602,518)
------------
Net tax unrealized depreciation on
investments ............................................ $ (434,790)
============
Capital loss carryforward, expires
August 31, 2008 ........................................ $ 2,132,091
Capital loss carryforward, expires
August 31, 2012 ........................................ 11,348
------------
Capital loss carryforward, at
February 28, 2006 ...................................... $ 2,143,439
============
- --------------------------------------------------------------------------------
14
Value Line U.S. Government Securities Fund, Inc.
February 28, 2006
- --------------------------------------------------------------------------------
During the year ended August 31, 2005, as permitted under federal income tax
regulations, the Fund elected to defer $31,996 of post-October net capital
losses to the next taxable year.
To the extent that current or future capital gains are offset by capital
losses, the Fund does not anticipate distributing any such gains to
shareholders.
5. Investment Advisory Fees, Service and Distribution Fees and Transactions
With Affiliates
An advisory fee of $265,992 was paid or payable to Value Line, Inc., the Fund's
investment adviser ("Adviser"), for the six months ended February 28, 2006.
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 Advisor 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 $132,996 were paid or
payable to the Distributor under this Plan for the six months ended February
28, 2006.
For the six months ended February 28, 2006 the Fund's expenses were reduced by
$1,444 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, 2006 owned 126,617 shares of the Fund's
capital stock, representing 1.40% of the outstanding shares. In addition,
certain officers and directors of the Fund owned 805 shares, representing less
than 1% of the outstanding shares.
- --------------------------------------------------------------------------------
15
Value Line U.S. Government Securities Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
Six Months
Ended
February 28, 2006 Years Ended August 31,
(unaudited) 2005 2004 2003 2002 2001
-------------------------------------------------------------------------------------
Net Asset Value, beginning of period ......... $ 11.74 $ 11.87 $ 11.84 $ 12.00 $ 11.51 $ 10.87
-------------------------------------------- ------------- --------------------------
Income (loss) from
Investment Operations:
Net investment income ....................... .22 .52 .41 .44 .50 .58
Net gains or losses on securities
(both realized and unrealized) ............. (.25) (.19) .03 (.15) .49 .67
-------------------------------------------------------------------------------------
Total income from
investment operations ...................... (.03) .33 .44 .29 .99 1.25
-------------------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends from net
investment income .......................... (.29) (.46) (.41) (.45) (.50) (.61)
Distributions from net realized gains ....... -- -- -- -- -- --
-------------------------------------------------------------------------------------
Total distributions ......................... (.29) (.46) (.41) (.45) (.50) (.61)
-------------------------------------------------------------------------------------
Net Asset Value, end of period ............... $ 11.42 $ 11.74 $ 11.87 $ 11.84 $ 12.00 $ 11.51
=====================================================================================
Total return ................................. (0.28)%(3) 2.86% 3.79% 2.35% 8.84% 11.82%
=====================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ..... $ 103,418 $ 112,140 $ 121,444 $ 144,264 $ 155,659 $ 150,593
Ratio of operating expenses to average net
assets (1) .................................. 1.04%(4) 1.04% 0.98% 0.96% 0.92% 0.92%
Ratio of net investment income
to average net assets ....................... 3.79%(4) 3.60% 3.40% 3.57% 4.17%(2) 5.17%
Portfolio turnover rate ...................... 8%(3) 60% 35% 65% 168% 140%
(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 during the most recent 12-month period ended
June 30 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 available 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. Each Director serves
until his or her successor is elected and qualified.
Principal
Occupation Other
Length of During the Directorships
Name, Address, and Age Position Time Served Past 5 Years Held by Director
- -----------------------------------------------------------------------------------------------------------------------
Interested Director*
- --------------------
Jean Bernhard Buttner Chairman of the Since 1983 Chairman, President and Chief Value Line, Inc.
Age 71 Board of Directors Executive Officer of Value Line,
and President 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").
- -----------------------------------------------------------------------------------------------------------------------
Non-Interested Directors*
- -------------------------
John W. Chandler Director Since 1991 Consultant, Academic None
18 Victoria Lane Search Consultation Service,
Lanesboro, MA 01237 Inc.; Trustee Emeritus and
Age 82 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 64
- -----------------------------------------------------------------------------------------------------------------------
Francis C. Oakley Director Since 2000 Professor of History, Williams Berkshire Life
54 Scott Hill Road College, 1961 to present. Professor Insurance
Williamstown, MA 01267 Emeritus since 2002; President Company of
Age 74 Emeritus since 1994 and President, America
1985-1994; Chairman (1993-1997)
and Interim President (2002-2003)
of the American Council of
Learned Societies. Trustee since
1997 and Chairman of the Board
since 2005, National Humanities
Center.
- -----------------------------------------------------------------------------------------------------------------------
David H. Porter Director Since 1997 Visiting Professor of Classics, None
5 Birch Run Drive Williams College, since 1999;
Saratoga Springs, NY 12866 President Emeritus, Skidmore
Age 70 College since 1999 and President,
1987-1998.
- --------------------------------------------------------------------------------
18
Value Line U.S. Government Securities Fund, Inc.
Management of the Fund
- --------------------------------------------------------------------------------
Principal
Occupation Other
Length of During the Directorships
Name, Address, and Age Position Time Served Past 5 Years Held by Director
- -----------------------------------------------------------------------------------------------------------------------
Paul Craig Roberts Director Since 1983 Chairman, Institute for Political A. Schulman Inc.
169 Pompano St. Economy. (plastics)
Panama City Beach, FL 32413
Age 67
- -----------------------------------------------------------------------------------------------------------------------
Nancy-Beth Sheerr Director Since 1996 Senior Financial Advisor, None
1409 Beaumont Drive Veritable L.P. (investment adviser)
Gladwyne, PA 19035 since 2004; Senior Financial
Age 57 Advisor, Hawthorn, 2001-2004.
- -----------------------------------------------------------------------------------------------------------------------
Officers
- --------
Jeffrey Geffen Vice President Since 1997 Portfolio Manager with
Age 56 the Adviser.
- -----------------------------------------------------------------------------------------------------------------------
Bradley Brooks Vice President Since 2001 Portfolio Manager with
Age 43 the Adviser.
- -----------------------------------------------------------------------------------------------------------------------
David T. Henigson Vice President, Since 1994 Director, Vice President and
Age 47 Secretary and Compliance Officer of the
Chief Compliance Adviser. Director and Vice
Officer President of the Distributor. Vice
President, Secretary and Chief
Compliance Officer of each of
the 14 Value Line Funds.
- -----------------------------------------------------------------------------------------------------------------------
Stephen R. Anastasio Treasurer Since 2005 Controller of the Adviser until
Age 47 2003; Chief Financial Officer of
the Adviser 2003-2005; Treasurer
of the Adviser since 2005.
Treasurer of each of the 14 Value
Line Funds.
- -----------------------------------------------------------------------------------------------------------------------
Howard A. Brecher Assistant Secretary/ Since 2005 Director, Vice President and
Age 51 Assistant Treasurer Secretary of the Adviser. Director
and Vice President of the
Distributor.
- -----------------------------------------------------------------------------------------------------------------------
* 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.
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 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.
- --------------------------------------------------------------------------------
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
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Jeffrey Geffen
Vice President
Bradley Brooks
Vice President
David T. Henigson
Vice President,
Secretary
Stephen R. Anastasio
Treasurer
Howard A. Brecher
Assistant Secretary/
Assistant 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 Trust (obtainable from the Distributor).
#535784
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert.
Not Applicable
Item 4. Principal Accountant Fees and Services
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) Not Applicable
(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: 05/05/2006
------------------
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/ Stephen R. Anastasio
------------------------------------------------------------
Stephen R. Anastasio, Treasurer, Principal Financial Officer
Date: 05/05/2006
------------------