N-CSR 1 valueline034079s2gov_ncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file Number 811-3171 -------- Value Line US Government Securities Fund,Inc. -------------------------------------------------- (Exact name of registrant as specified in charter) 220 East 42nd Street, New York, N.Y. 10017 -------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-907-1500 ------------ Date of fiscal year end: August 31, 2003 --------------- Date of reporting period: August 31, 2003 --------------- Item 1. Reports to Stockholders. ------ ------------------------ A copy of the Annual Report to Stockholders for the period ended is included with this Form. Item 2. Code of Ethics ------ -------------- (a)The Registrant has adopted a Code of Ethics that applies to it's Principal Executive Officers and Principal Financial and Accounting Officer. (f)Pursuant to item 10(a),the Registrant is attaching as an exhibit a copy of it's Code of Ethics that applies to it's Principal Executive Officers and Principal Financial and Accounting Officer. Item 3. Audit Committee Financial Expert. ------ --------------------------------- (a)(1)The Registrant has an Audit Committee Financial Expert serving on it's Audit Committee. (2) The Registrant's Board has designated John W. Chandler, a member of the Registrant's Audit Committee, as the Registrant's Audit Committee Financial Expert. Mr. Chandler is an independent director who is a senior consultant with Academic Search Consultation Service. He spent most of his professional career at Williams College, where he served as a faculty member, Dean of the Faculty, and President (1973-85). He also served as President of Hamilton College (1968-73), and as President of the Association of American Colleges and Universities (1985-90). He has also previously served as Trustee Emeritus and Chairman of the Board of Trustees of Duke University. A person who is designated as an "audit committee financial expert" shall not make such person an "expert" for any purpose, including without limitation under Section 11 of the Securities Act of 1933 or under applicable fiduciary laws, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. Item 9. 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 10. Exhibits. ------- -------- a) Code of Ethics for Principal Executive and Senior Financial Officers attached hereto as Exhibit 100.COE (b)(1) Certification pursuant to Rule 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT. (2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By /s/ Jean B. Buttner ------------------- Jean B. Buttner, President Date: October 31, 2003 ---------------- 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: October 31, 2003 ---------------- ================================================================================ 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 NFDS P.O. Box 219729 Kansas City, MO 64121-9729 INDEPENDENT PricewaterhouseCoopers LLP AUDITORS 1177 Avenue of the Americas New York, NY 10036 LEGAL COUNSEL Peter D. Lowenstein, Esq. Two Sound View Drive, Suite 100 Greenwich, CT 06830 DIRECTORS Jean Bernhard Buttner John W. Chandler Frances T. Newton Francis C. Oakley David H. Porter Paul Craig Roberts Marion N. Ruth Nancy-Beth Sheerr OFFICERS Jean Bernhard Buttner CHAIRMAN AND PRESIDENT Jeffrey D. Geffen VICE PRESIDENT Charles Heebner VICE PRESIDENT Bradley T. Brooks VICE PRESIDENT David T. Henigson VICE PRESIDENT, SECRETARY/TREASURER Joseph Van Dyke ASSISTANT SECRETARY/TREASURER Stephen La Rosa ASSISTANT SECRETARY/TREASURER THIS REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE DISTRIBUTOR). #527647 -------------------------------------------------------------------------------- ANNUAL REPORT -------------------------------------------------------------------------------- AUGUST 31, 2003 -------------------------------------------------------------------------------- VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. [LOGO] VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. TO OUR VALUE LINE U.S. GOVERNMENT -------------------------------------------------------------------------------- TO OUR SHAREHOLDERS: This fiscal year was marked by uncertainty over the strength of the economy as well as geopolitical tensions brought about by the conflict with Iraq. Economic growth followed a sluggish path as labor markets were poor, capital spending was weak and global economies did not produce meaningful growth. Consumer spending did hold up as housing was strong and interest rates were low allowing individuals to refinance their mortgages and increase their purchasing power. However, the period of uncertainty leading up to the war with Iraq caused consumers to pull back their spending, slowing the economy during that time. Throughout the year the Federal Reserve Board continued its expansionary monetary policy, lowering rates to stimulate the economy. The Board was not only worried about the slow economy but was also concerned about the low, declining inflation rate and was committed to preventing deflation, which they considered a low possibility, but one that is difficult to counteract once it begins. To this end, the Fed dropped the Federal Funds rate from 1.75% to 1.00%, bringing the rate to its lowest level in decades. The combination of this monetary stimulus, the successful resolution of the war with Iraq and fiscal stimulus through tax cuts eventually brought about a strengthening of the economy. By the second quarter of 2003 growth had vastly improved over the subpar performance of the first quarter of 2003 and the final quarter of 2002. The yield on the benchmark 10-year Treasury note began the period at 4.14% and rose to 4.47% at its end. This masked greater volatility during the course of the year. The yield on the 10-year note fell as low as 3.11% in June, its lowest level in decades. But as the economy began to grow beyond consensus expectations, equities rallied and interest rates rose sharply, rising over 136 basis points from its low of 3.11%, ending the period at 4.47%. Because of the rise in yields, bond prices declined for the period. Your Fund managed a positive return as a result of its investment in intermediate maturities, which provided favorable income, exceeding the price decline. We attempt to control price risk by limiting the portfolio's average maturity to a 7- to 10-year maturity range and by maintaining a well-diversified portfolio of U.S. government securities, representing the highest level of safety. Your Fund returned 2.35% for the fiscal year ended August 31, 2003, compared to the 3.04% return of the unmanaged Lehman Brothers Intermediate U.S. Government Bond Index(1), a proxy for the Fund's government investment strategy. We will continue to maintain a portfolio emphasizing an intermediate-term maturity structure, which we believe will provide competitive performance going forward. We appreciate your continued support. Sincerely, /s/ Jean Bernhard Buttner Jean Bernhard Buttner CHAIRMAN and PRESIDENT October 14, 2003 -------------------------------------------------------------------------------- (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. -------------------------------------------------------------------------------- 2 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. SECURITIES FUND SHAREHOLDERS -------------------------------------------------------------------------------- ECONOMIC OBSERVATIONS The U.S. economic recovery, which had been proceeding at an uninspiring pace for the better part of two years, has started to exhibit more spirit. Indeed, the U.S. gross domestic product, underpinned by a selective recovery in manufacturing, generally strong housing demand, and healthy retail spending levels now seems poised to increase by 4%, or so, in the second half of this year. There are pockets of weakness around, most notably in the employment area where jobless totals remain quite high. Overall, though, the economic picture is materially brighter than it was earlier in 2003 when talk of a possible double-dip recession was still being heard. Meanwhile, the ongoing support of the Federal Reserve Board, which continues to maintain its low-interest-rate policies, along with the earlier passage of a tax cut and fiscal stimulus package, should provide the help needed for the U.S. economy to continue pushing forward nicely in 2004, when we expect GDP growth to average upwards of 4%. Inflation, meantime, remains muted, thanks, in part, to subdued labor costs. Adequate supplies of raw materials are also helping to keep the costs of production low. We caution that as the U.S. economy moves further along the recovery trail over the next several years, some increase in pricing pressures may emerge. Absent a stronger long-term business recovery than we now envision, or a sharp rise in oil and gas prices stemming from a further serious conflict in the Middle East or severe production cutbacks by the Organization of Petroleum Exporting Countries (OPEC), inflation should remain in check through the latter years of this decade. Long-term interest rates, which moved higher for a time during the past several months, as the economy perked up, should stabilize at just modestly higher levels over the next several years. -------------------------------------------------------------------------------- 3 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. -------------------------------------------------------------------------------- The following graph compares the performance of the Value Line U.S. Government Securities Fund, Inc. to that of the Lehman Brothers Aggregate Bond Index and the Lehman Brothers Intermediate U.S. Government Bond Index. The Value Line U.S. Government Securities Fund, Inc. is a professionally managed mutual fund, while the Indices are not available for investment and are not managed. The comparison is shown for illustrative purposes only. COMPARISON OF A CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC., THE LEHMAN BROTHERS AGGREGATE BOND INDEX**, AND THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT BOND INDEX** [GRAPH] FROM 9/1/93 TO 8/31/03 Performance Data:* GROWTH OF AN ASSUMED AVERAGE ANNUAL INVESTMENT OF $10,000 TOTAL RETURN ----------------------- --------------- 1 year ended 8/31/03 .......... $10,235 2.35% 5 years ended 8/31/03 ......... $13,249 5.79% 10 years ended 8/31/03 ......... $16,238 4.97% * THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS AND GROWTH OF AN ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL GAINS DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE PERFORMANCE DATA AND GRAPH DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ** THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS REPRESENTATIVE OF THE BROAD FIXED-INCOME MARKET. IT INCLUDES GOVERNMENT, INVESTMENT-GRADE CORPORATE, AND MORTGAGE BACKED BONDS. THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT BOND INDEX REPRESENTS THE INTERMEDIATE MATURITY (1-10 YEAR) OF THE U.S. TREASURY AND U.S. AGENCY SEGMENT OF THE FIXED-INCOME MARKET. THE RETURNS FOR THE INDICES DO NOT REFLECT EXPENSES WHICH ARE DEDUCTED FROM THE FUND'S RETURNS. -------------------------------------------------------------------------------- 4 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. SCHEDULE OF INVESTMENTS AUGUST 31, 2003 --------------------------------------------------------------------------------
PRINCIPAL MATURITY AMOUNT RATE DATE VALUE ----------------------------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (10.8%) $ 1,000,000 U.S. Treasury Notes .................................. 2.00% 5/15/06 $ 992,540 4,000,000 U.S. Treasury Notes .................................. 6.50 10/15/06 4,466,876 2,000,000 U.S. Treasury Notes .................................. 6.25 2/15/07 2,230,314 3,000,000 U.S. Treasury Notes .................................. 6.13 8/15/07 3,347,463 1,000,000 U.S. Treasury Notes .................................. 6.00 8/15/09 1,120,469 1,000,000 U.S. Treasury Bonds .................................. 7.25 8/15/22 1,232,657 1,000,000 U.S. Treasury Bonds .................................. 6.25 8/15/23 1,110,352 1,000,000 U.S. Treasury Bonds .................................. 6.38 8/15/27 1,134,454 ------------ ----------- 14,000,000 TOTAL U.S. TREASURY OBLIGATIONS (COST $15,618,618) ... 15,635,125 ------------ ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (73.9%) FEDERAL NATIONAL MORTGAGE ASSOCIATION (41.5%) 1,000,000 Federal National Mortgage Association ................ 2.25 5/15/06 991,055 6,253,312 Federal National Mortgage Association Pool #313032 ... 7.04 7/01/06 6,657,462 4,000,000 Federal National Mortgage Association ................ 4.75 1/02/07 4,186,908 1,000,000 Federal National Mortgage Association ................ 3.25 1/29/07 1,007,622 9,800,168 Federal National Mortgage Association Pool #375667 ... 6.02 2/01/08 10,563,791 10,000,000 Federal National Mortgage Association Pool #380188 ... 6.45 4/01/08 10,756,250 314,124 Federal National Mortgage Association Pool #254243 ... 6.00 2/01/09 321,516 487,051 Federal National Mortgage Association Pool #254273 ... 5.00 3/01/09 495,052 2,000,000 Federal National Mortgage Association ................ 6.38 6/15/09 2,230,002 1,000,000 Federal National Mortgage Association ................ 5.00 4/16/15 978,093 518,317 Federal National Mortgage Association Pool #511823 ... 5.50 5/01/16 530,377 1,361,488 Federal National Mortgage Association Pool #622373 ... 5.50 12/01/16 1,393,166 525,356 Federal National Mortgage Association Pool #615289 ... 5.50 12/01/16 537,579 869,368 Federal National Mortgage Association Pool #623503 ... 6.00 2/01/17 901,165 468,560 Federal National Mortgage Association Pool #631328 ... 5.50 2/01/17 479,026 55,539 Federal National Mortgage Association Pool #643277 ... 5.50 4/01/17 56,779 63,818 Federal National Mortgage Association Pool #638247 ... 5.50 5/01/17 65,244 866,096 Federal National Mortgage Association Pool #669613 ... 5.00 10/01/17 870,996 945,349 Federal National Mortgage Association Pool #685183 ... 5.00 3/01/18 949,867 886,872 Federal National Mortgage Association Pool #254684 ... 5.00 3/01/18 891,109 958,509 Federal National Mortgage Association Pool #695828 ... 5.00 4/01/18 963,089 971,256 Federal National Mortgage Association Pool #703936 ... 5.00 5/01/18 975,897 1,000,100 Federal National Mortgage Association Pool #713379 ... 5.00 7/01/18 1,004,879 924,909 Federal National Mortgage Association REMIC Trust Series 2003-38 Class TC .............................. 5.00 3/25/23 928,178 887,312 Federal National Mortgage Association Pool #412682 ... 6.00 3/01/28 903,684
-------------------------------------------------------------------------------- 5 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. SCHEDULE OF INVESTMENTS --------------------------------------------------------------------------------
PRINCIPAL MATURITY AMOUNT RATE DATE VALUE ----------------------------------------------------------------------------------------------------------- $ 547,151 Federal National Mortgage Association Pool #424691 .... 6.50% 4/01/28 $ 567,530 317,081 Federal National Mortgage Association Pool #425239 .... 6.50 4/01/28 328,890 1,000,000 Federal National Mortgage Association ................. 7.25 5/15/30 1,184,893 1,000,000 Federal National Mortgage Association ................. 6.63 11/15/30 1,102,575 241,566 Federal National Mortgage Association Pool #571090 .... 7.50 1/01/31 256,881 11,622 Federal National Mortgage Association Pool #568625 .... 7.50 1/01/31 12,358 14,286 Federal National Mortgage Association Pool #573935 .... 7.50 3/01/31 15,191 1,712,107 Federal National Mortgage Association Pool #626440 .... 7.50 2/01/32 1,820,349 330,976 Federal National Mortgage Association Pool #629297 .... 6.50 2/01/32 342,679 493,506 Federal National Mortgage Association Pool #254383 .... 7.50 5/01/32 524,707 300,186 Federal National Mortgage Association Pool #634996 .... 6.50 5/01/32 310,817 1,828,071 Federal National Mortgage Association Pool #254476 .... 5.50 9/01/32 1,822,311 1,000,002 Federal National Mortgage Association Pool #726889 .... 5.50 7/01/33 996,867 998,559 Federal National Mortgage Association Pool #650386 .... 5.00 7/01/33 967,344 ----------- ----------- 56,952,617 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION ----------- (COST $57,684,280) ................................... 59,892,178 ----------- FEDERAL HOME LOAN MORTGAGE CORPORATION (12.4%) 2,000,000 Federal Home Loan Mortgage Corporation ................ 1.50 8/15/05 1,975,804 1,500,000 Federal Home Loan Mortgage Corporation ................ 3.00 12/16/05 1,518,309 1,000,000 Federal Home Loan Mortgage Corporation ................ 5.95 1/19/06 1,081,478 1,000,000 Federal Home Loan Mortgage Corporation ................ 3.55 6/29/07 1,004,138 4,500,000 Federal Home Loan Mortgage Corporation ................ 5.88 3/21/11 4,712,288 1,000,000 Federal Home Loan Mortgage Corporation ................ 4.50 5/14/12 962,045 1,000,000 Federal Home Loan Mortgage Corporation ................ 4.75 5/06/13 953,403 55,846 Federal Home Loan Mortgage Corporation Gold PC Pool #E92226 ............................................... 5.00 11/01/17 56,107 801,510 Federal Home Loan Mortgage Corporation Gold PC Pool #E93499 ............................................... 5.00 12/01/17 805,257 59,500 Federal Home Loan Mortgage Corporation Gold PC Pool #E92829 ............................................... 5.00 12/01/17 59,779 818,117 Federal Home Loan Mortgage Corporation REMIC Trust Series 2597 Class KJ .................................. 4.50 7/15/22 817,843 978,021 Federal Home Loan Mortgage Corporation Gold PC Pool #C90684 ............................................... 4.50 5/01/23 935,673 1,000,000 Federal Home Loan Mortgage Corporation ................ 6.75 3/15/31 1,120,145 997,274 Federal Home Loan Mortgage Corporation REMIC Trust Series 2645 Class NA .................................. 3.50 9/15/31 959,010 982,005 Federal Home Loan Mortgage Corporation REMIC Trust ----------- Series 2594 Class OR .................................. 4.25 6/15/32 978,630 ----------- 17,692,273 TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION ----------- (COST $17,861,573) ................................... 17,939,909 -----------
-------------------------------------------------------------------------------- 6 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. AUGUST 31, 2003 --------------------------------------------------------------------------------
PRINCIPAL MATURITY AMOUNT RATE DATE VALUE ----------------------------------------------------------------------------------------------------------- FEDERAL HOME LOAN BANK (9.2%) $ 1,000,000 Federal Home Loan Bank ................................ 4.13% 5/13/05 $ 1,036,972 1,000,000 Federal Home Loan Bank ................................ 4.88 8/15/05 1,055,216 1,500,000 Federal Home Loan Bank ................................ 4.88 5/15/07 1,583,872 500,000 Federal Home Loan Bank ................................ 3.50 11/15/07 498,549 1,000,000 Federal Home Loan Bank ................................ 6.01 4/22/08 1,096,019 1,000,000 Federal Home Loan Bank ................................ 5.25 11/14/08 1,059,744 1,000,000 Federal Home Loan Bank ................................ 6.21 6/02/09 1,107,900 1,000,000 Federal Home Loan Bank ................................ 3.88 6/14/13 919,651 1,000,000 Federal Home Loan Bank ................................ 6.63 6/30/14 1,132,113 3,000,000 Federal Home Loan Bank ................................ 7.45 2/03/20 3,735,966 ------------ ------------ 12,000,000 TOTAL FEDERAL HOME BANK (COST $13,063,349) ............ 13,226,002 ------------ ------------ FEDERAL FARM CREDIT BANK (5.2%) 2,000,000 Federal Farm Credit Bank .............................. 6.03 5/7/08 2,193,938 1,000,000 Federal Farm Credit Bank .............................. 6.82 3/16/09 1,134,975 1,000,000 Federal Farm Credit Bank .............................. 4.85 10/25/12 995,578 3,000,000 Federal Farm Credit Bank .............................. 5.70 7/03/17 3,109,839 ------------ ------------ 7,000,000 TOTAL FEDERAL FARM CREDIT BANK (COST $7,495,142) ...... 7,434,330 ------------ ------------ PRIVATE EXPORT FUNDING CORPORATION (4.3%) 5,000,000 Private Export Funding Corporation Series "J" ......... 7.65 5/15/06 5,659,315 500,000 Private Export Funding Corporation Series "L" ......... 5.75 1/15/08 542,328 ------------ ------------ 5,500,000 TOTAL PRIVATE EXPORT FUNDING CORPORATION ------------ (COST $5,500,000) .................................... 6,201,643 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (1.3%) 504,869 Government National Mortgage Association REMIC Trust Series 2003-35 Class VB ............................... 5.00 12/16/15 506,323 31,838 Government National Mortgage Association Pool #541349 . 6.00 4/15/31 32,538 59,596 Government National Mortgage Association Pool #557681 . 6.00 8/15/31 60,907 668,201 Government National Mortgage Association Pool #548880 . 6.00 12/15/31 682,900 533,242 Government National Mortgage Association Pool #551762 . 6.00 4/15/32 545,004 ------------ ------------ 1,797,746 TOTAL GOVERNMENT NATIONAL MORTGAGE ------------ ASSOCIATION (COST $1,803,808) ........................ 1,827,672 ------------ 100,942,636 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS ------------ (COST $103,408,152) .................................. 106,521,734 ------------ 114,942,636 TOTAL INVESTMENT SECURITIES (84.7%) ------------ (COST $119,026,770) .................................. 122,156,859 ------------
-------------------------------------------------------------------------------- 7 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. SCHEDULE OF INVESTMENTS AUGUST 31, 2003 --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------------------------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (14.0%) (INCLUDING ACCRUED INTEREST) $ 7,200,000 Collateralized by $7,206,000 U.S. Treasury Bonds 5.500%, due 8/15/28, with a value of $7,326,916 (with UBS Warburg LLC, 1.00%, dated 8/29/03, due 9/02/03, delivery value $7,200,800) ........................................................................... $ 7,200,600 7,200,000 Collateralized by $6,365,000 U.S. Treasury Notes 6.500%, due 2/15/10, with a value of $7,331,511 (with Morgan Stanley, 0.88%, dated 8/29/03, due 9/02/03, delivery value $7,200,704) ........................................................................... 7,200,528 5,800,000 Collateralized by $5,685,000 U.S. Treasury Notes 3.625%, due 3/31/04, with a value of ------------ $5,852,731 (with State Street Bank and Trust Company, 0.87%, dated 8/29/03, due 9/02/03, delivery value $5,800,561) ................................................... 5,800,421 ------------- 20,200,000 TOTAL REPURCHASE AGREEMENTS (14.0%) ------------ (COST $20,201,549) ................................................................... 20,201,549 ------------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 1,905,422 ------------- NET ASSETS (100.0%) ................................................................... $ 144,263,830 ============= NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER OUTSTANDING SHARE ($144,263,830 DIVIDED BY 12,183,601 SHARES OF CAPITAL STOCK OUTSTANDING) ........ $ 11.84 =============
SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- 8 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. STATEMENT OF ASSETS AND LIABILITIES AT AUGUST 31, 2003 -------------------------------------------------------------------------------- ASSETS: Investment securities, at value (Cost - $119,026,770) ....................... $122,156,859 Repurchase agreements (Cost - $20,201,549) ........................ 20,201,549 Cash ........................................... 37,898 Interest receivable ............................ 1,297,334 Receivable for capital shares sold ............. 893,548 ------------ TOTAL ASSETS ............................. 144,587,188 ------------ LIABILITIES: Payable for capital shares repurchased ......... 171,551 Accrued expenses: Advisory fee ................................. 59,019 Service & distribution plan fee .............. 31,510 Other ........................................ 61,278 ------------ TOTAL LIABILITIES ........................ 323,358 ------------ NET ASSETS ..................................... $144,263,830 ============ NET ASSETS CONSIST OF: Capital stock, at $1 par value (authorized 100,000,000, outstanding 12,183,601 shares) .......................... $ 12,183,601 Additional paid-in capital ..................... 142,065,763 Undistributed net investment income ............ 822,313 Accumulated net realized loss on investments .............................. (13,937,936) Net unrealized appreciation of investments .............................. 3,130,089 ------------ NET ASSETS ..................................... $144,263,830 ============ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER OUTSTANDING SHARE ($144,263,830 DIVIDED BY 12,183,601 SHARES OUTSTANDING) ......................... $ 11.84 ============ STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2003 -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest income ................................ $ 7,089,995 ------------ EXPENSES: Advisory fee ................................... 782,249 Service & distribution plan fees ............... 391,124 Transfer agent fees ............................ 87,698 Auditing and legal fees ........................ 61,270 Custodian fees ................................. 40,088 Printing ....................................... 39,182 Registration and filing fees ................... 28,788 Insurance ...................................... 23,191 Directors' fees and expenses ................... 19,800 Postage ........................................ 18,264 Telephone, dues and other ...................... 9,652 ------------ Total Expenses Before Custody Credits ....................... 1,501,306 Less: Custody Credits .................... (979) ------------ Net Expenses ............................. 1,500,327 ------------ NET INVESTMENT INCOME .......................... 5,589,668 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net Realized Gain ........................ 1,821,513 Change in Net Unrealized Appreciation (Depreciation) ........... (3,569,894) ------------ NET REALIZED GAIN AND CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS ............... (1,748,381) ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 3,841,287 ============ SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- 9 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED AUGUST 31, 2003 AND AUGUST 31, 2002 --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED AUGUST 31, AUGUST 31, 2003 2002 ---------------------------------- OPERATIONS: Net investment income ............................................... $ 5,589,668 $ 6,204,297 Net realized gain on investments .................................... 1,821,513 2,935,615 Change in net unrealized appreciation (depreciation) ................ (3,569,894) 3,368,375 ---------------------------------- Net increase in net assets from operations .......................... 3,841,287 12,508,287 ---------------------------------- DIVIDENDS TO SHAREHOLDERS: Net investment income ............................................... (5,766,950) (6,332,607) ---------------------------------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares ........................................ 248,802,569 133,951,436 Proceeds from reinvestment of distributions to shareholders ......... 4,930,910 5,359,856 Cost of shares repurchased .......................................... (263,202,861) (140,421,110) ---------------------------------- Net decrease from capital share transactions ........................ (9,469,382) (1,109,818) ---------------------------------- TOTAL (DECREASE) INCREASE IN NET ASSETS .............................. (11,395,045) 5,065,862 NET ASSETS: Beginning of year ................................................... 155,658,875 150,593,013 ---------------------------------- End of year ......................................................... $ 144,263,830 $ 155,658,875 ================================== UNDISTRIBUTED NET INVESTMENT INCOME, AT END OF YEAR .................. $ 822,313 $ 954,806 ==================================
SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- 10 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2003 -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 11 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- (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: YEAR ENDED YEAR ENDED AUGUST 31, AUGUST 31, 2003 2002 -------------------------------- Shares sold ................. 20,615,131 11,548,967 Shares issued to shareholders in reinvestment of dividends ................ 407,998 468,856 -------------------------------- 21,023,129 12,017,823 Shares repurchased .......... (21,812,007) (12,129,138) -------------------------------- Net decrease ................ (788,878) (111,315) ================================ Dividends per share ......... $ .445 $ .495 ================================ Dividends and distributions to shareholders are recorded on the ex-dividend date. On September 18, 2003 the Fund's Board of Directors declared a quarterly dividend from net investment income of $.105 per share payable on September 25, 2003 to shareholders of record on September 22, 2003. 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of investment securities, excluding short-term investments, were as follows: YEAR ENDED AUGUST 31, 2003 -------------- PURCHASES: U.S. Treasury Obligations .................. $ 11,144,677 U.S. Government Agency Obligations and Other Investment Securities ......... 77,778,009 ------------ $ 88,922,686 ============ SALES AND REDEMPTIONS: U.S. Treasury Obligations .................. $ 14,494,375 U.S. Government Agency Obligations and Other Investment Securities ......... 87,617,542 ------------ $102,111,917 ============ 4. INCOME TAXES At August 31, 2003, information on the tax basis of investments is follows: Cost of investments for tax purposes ......... $139,408,877 ============ Gross tax unrealized appreciation ............ $ 4,118,151 Gross tax unrealized depreciation ............ $ (1,168,620) ------------ Net tax unrealized appreciation on investments ............................... $ 2,949,531 ============ Undistributed ordinary income ................ $ 1,002,871 ============ Capital loss carryforward, expires August 31, 2004 ........................... $ 8,976,510 Capital loss carryforward, expires August 31, 2005 ........................... 2,829,335 Capital loss carryforward, expires August 31, 2008 ........................... 2,132,091 ------------ Capital loss carryforward, at August 31, 2003 ........................... $ 13,937,936 ============ During the year-ended August 31, 2003 the Fund utilized a capital loss carryforward of approximately $1,761,906. In addition, $30,413,465 of the capital loss carryforward expired. -------------------------------------------------------------------------------- 12 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. AUGUST 31, 2003 -------------------------------------------------------------------------------- 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 and wash sales. The tax composition of dividends paid during the years ending August 31, 2003 and August 31, 2002 is as follows: AUGUST 31, AUGUST 31, 2003 2002 ------------------------- Ordinary Income ......... $5,766,950 $6,332,607 ========================= 5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES AND TRANSACTIONS WITH AFFILIATES An advisory fee of $782,249 was paid or payable to Value Line, Inc., the Fund's investment adviser ("Adviser"), for the year ended August 31, 2003. 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 $391,124 were paid or payable to the Distributor under this Plan for the year ended August 31, 2003. For the year ended August 31, 2003, the Fund's expenses were reduced by $979 under a custody credit arrangement with the Custodian. Certain officers and directors of the Adviser and the Distributor are also officers and directors of the Fund. The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing and Savings Plan at August 31, 2003 owned 157,858 shares of the Fund's capital stock, representing 1.30% of the outstanding shares. In addition, officers and directors owned 935 shares of capital stock, representing less than 1% of the outstanding shares. -------------------------------------------------------------------------------- 13 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
YEARS ENDED AUGUST 31, ---------------------------------------------------------------------------- 2003 2002 2001 2000 1999 ---------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR ......... $ 12.00 $ 11.51 $ 10.87 $ 10.81 $ 11.44 ---------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income .................... .44 .50 .58 .64 .61 Net gains or losses on securities (both realized and unrealized) ......... (.15) .49 .67 .04 (.62) ---------------------------------------------------------------------------- Total income (loss) from investment operations .................. .29 .99 1.25 .68 (.01) ---------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income ...................... (.45) (.50) (.61) (.62) (.62) Distributions from net realized gains .................................. -- -- -- -- -- ---------------------------------------------------------------------------- Total distributions ...................... (.45) (.50) (.61) (.62) (.62) ---------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR ............... $ 11.84 $ 12.00 $ 11.51 $ 10.87 $ 10.81 ============================================================================ TOTAL RETURN ............................... 2.35% 8.84% 11.82% 6.53% (0.17)% ============================================================================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (in thousands) ............................ $144,264 $155,659 $150,593 $140,408 $167,231 Ratio of operating expenses to average net assets ..................... 0.96%(1) .92%(1) .92%(1) .73%(1) .67%(1) Ratio of net investment income to average net assets ..................... 3.57% 4.17%(2) 5.17% 5.82% 5.40% Portfolio turnover rate .................... 65% 168% 140% 49% 125%
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE RATIOS OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD HAVE BEEN UNCHANGED FOR THE YEARS ENDED AUGUST 31, 2003, AUGUST 31, 2002, AUGUST 31, 2001 AND AUGUST 31, 2000, AND WOULD HAVE BEEN 0.66% FOR THE YEAR ENDED AUGUST 31, 1999. (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 $.01 PER SHARE. THE EFFECT OF THIS CHANGE WAS TO DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.24% TO 4.17%. SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- 14 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. REPORT OF INDEPENDENT AUDITORS -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Value Line U.S. Government Securities Fund, Inc. (the "Fund") at August 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 October 15, 2003 -------------------------------------------------------------------------------- 15 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 1985 Chairman, President and Value Line, Inc. Age 68 Board of Directors Chief Executive Officer of and President Value Line, Inc. (the "Adviser") and Value Line Publishing, Inc., Chairman and President of each of the 14 Value Line Funds and Value Line Securities, Inc. (the "Distributor"). Marion N. Ruth Director Since 2000 Real Estate Executive: Value Line, Inc. 5 Outrider Road President, Ruth Realty (real Rolling Hills, CA 90274 estate broker); Director of Age68 the Adviser since 2000. NON-INTERESTED DIRECTORS ------------------------ John W. Chandler Director Since 1991 Consultant, Academic Search None 1611 Cold Spring Rd. Consultation Service, Inc. Williamstown, MA 01267 Trustee Emeritus and Age 79 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 62
-------------------------------------------------------------------------------- 16 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. MANAGEMENT OF THE FUND --------------------------------------------------------------------------------
PRINCIPAL OCCUPATION LENGTH OF DURING THE OTHER DIRECTORSHIPS NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR ============================================================================================================ Francis Oakley Director Since 2000 Professor of History, Berkshire Life 54 Scott Hill Road Williams College, 1961 to Insurance Company. Williamstown, MA 01267 present. President Emeritus Age 71 since 1994 and President, 1985-1994; Chairman (1993-1997) and Interim President (2002) of the American Council of Learned Societies. David H. Porter Director Since 1997 Visiting Professor of None 5 Birch Run Drive Classics, Williams College, Saratoga Springs, NY12866 since 1999; President Age 67 Emeritus, Skidmore College since 1999 and President, 1987-1998. Paul Craig Roberts Director Since 1985 Chairman, Institute for A. Schulman Inc. 169 Pompano St. Political Economy. (plastics) Panama City Beach, FL 32413 Age 64 Nancy-Beth Sheerr Director Since 1996 Senior Financial Advisor, None 1409 Beaumont Drive Hawthorne, since 2001; Gladwyne, PA 19035 Chairman, Radcliffe College Age 54 Board of Trustees. 1990-1999. OFFICERS -------- Jeffrey D. Geffen Vice President Since 2001 Portfolio Manager with the -- Age 54 Adviser since 2001; Vice President Investments, Morgan Stanley Dean Witter Advisors, 1989-2001. Bradley T. Brooks Vice President Since 2001 Portfolio Manager with the -- Age 40 Adviser since 1999; Securities Analyst with the Adviser, 1997-1999. Charles Heebner Vice President Since 2000 Senior Portfolio Manager -- Age 67 with the Adviser.
-------------------------------------------------------------------------------- 17 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. MANAGEMENT OF THE FUND --------------------------------------------------------------------------------
PRINCIPAL OCCUPATION LENGTH OF DURING THE OTHER DIRECTORSHIPS NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR ============================================================================================================ David T. Henigson Vice President, Since 1994 Director, Vice President Age 46 Secretary and and Compliance Officer of -- Treasurer the Adviser. Director and Vice President of the Distributor. Vice President, Secretary and Treasurer of each of the 14 Value Line Funds.
* MRS. BUTTNER IS AN "INTERESTED PERSON" AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940 BY VIRTUE OF HER POSITIONS WITH THE ADVISER AND HER INDIRECT OWNERSHIP OF A CONTROLLING INTEREST IN THE ADVISER; MRS. RUTH IS AN INTERESTED PERSON BY VIRTUE OF BEING A DIRECTOR OF THE ADVISER. UNLESS OTHERWISE INDICATED, THE ADDRESS FOR EACH OF THE ABOVE IS 220 EAST 42ND STREET, NEW YORK, NY 10017. -------------------------------------------------------------------------------- 18 VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC. -------------------------------------------------------------------------------- (This page intentionally left blank.) -------------------------------------------------------------------------------- 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 fund 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