<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1998
FILE NO. 2-71928
FILE NO. 811-03171
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 22 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 22 /X/
-------------
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone number, including Area Code: (212) 907-1500
David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
Peter D. Lowenstein
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
It is proposed that this filing will become effective (check
appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/X/ on January 4, 1999 pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VALUE LINE
U.S. GOVERNMENT SECURITIES FUND, INC.
--------------------------------
PROSPECTUS
JANUARY 4, 1999
- --------------------------------------------------------------------------------
[LOGO]
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED
UPON THE ACCURACY OF THIS PROSPECTUS, AND ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
FUND SUMMARY
What are the Fund's goals? PAGE 2
What are the Fund's main investment strategies? PAGE
2
What are the main risks of investing in the Fund?
PAGE 2
How has the Fund performed? PAGE 3
What are the Fund's fees and expenses? PAGE 4
HOW WE MANAGE THE FUND
Our investment strategies PAGE 5
The securities in which we typically invest PAGE 5
The risks of investing in the Fund PAGE 6
WHO MANAGES THE FUND
Investment Adviser PAGE 7
Portfolio management PAGE 7
ABOUT YOUR ACCOUNT
How to buy shares PAGE 8
How to sell shares PAGE 10
Special services PAGE 11
Dividends, distributions and taxes PAGE 12
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 13
<PAGE>
FUND SUMMARY
- --------------------------------------------------------------------------------
WHAT ARE THE FUND'S GOALS?
The Fund primarily seeks maximum income without undue risk of
capital. Although the Fund will strive to achieve this goal,
there is no assurance that it will.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
Under normal conditions, we invest at least 80% of the Fund's
net assets in securities issued or guaranteed by the U.S.
government and its agencies and instrumentalities. We may
invest the balance of the Fund's net assets in
mortgage-backed securities issued by certain private,
non-government organizations. While we emphasize income from
such investments, we consider carefully security of
principal, marketability, and diversity of investments.
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In particular, the Fund's annual report
discusses the relevant market conditions and investment
strategies used by the Fund's investment adviser that
materially affected the Fund's performance during the last
fiscal year. You may obtain these reports at no cost by
calling 800-223-0818, or from our Internet site at
http://www.valueline.com.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
Investing in any mutual fund involves risk, including the
risk that you may lose part or all of the money you invest.
The price of Fund shares will increase and decrease according
to changes in the value of the Fund's investments. An
investment in the Fund is not a complete investment program
and you should consider it just one part of your total
investment program. For a more complete discussion of risk,
please turn to page 6.
2
<PAGE>
HOW HAS THE FUND PERFORMED?
This bar chart and table can help you evaluate the potential
risks and rewards of investing in the Fund. We show how
returns for the Fund's shares have varied over the past ten
calendar years, as well as the average annual returns of
these shares for one, five, and ten years all compared to the
performance of the Lehman Brothers Government Bond Index and
the Lehman Brothers Aggregate Bond Index, which are broad
based market indexes. You should remember that unlike the
Fund, these indexes are unmanaged and do not include the
costs of buying, selling, and holding the securities. The
Fund's past performance is not necessarily an indication of
how it will perform in the future.
YEAR BY YEAR RETURNS (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C>
1988 7.95%
1989 11.96%
1990 10.31%
1991 16.42%
1992 6.30%
1993 9.80%
1994 -10.67%
1995 14.44%
1996 3.93%
1997 9.22%
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q2 1989 +6.17%
WORST QUARTER: Q2 1994 (5.57%)
</TABLE>
1 As of September 30, 1998, the Fund had a year-to-date
total return of 8.05%.
AVERAGE ANNUAL RETURN AS OF 12/31/97
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND 9.22% 4.96% 7.71%
- ---------------------------------------------------------------
LEHMAN GOVERNMENT BOND INDEX 9.59% 7.34% 8.88%
- ---------------------------------------------------------------
LEHMAN AGGREGATE BOND INDEX 9.65% 7.48% 9.18%
- ---------------------------------------------------------------
</TABLE>
3
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you pay in
connection with an investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------
MAXIMUM SALES CHARGES (LOAD) IMPOSED ON PURCHASES NONE
AS A PERCENTAGE OF OFFERING PRICE
- --------------------------------------------------------
MAXIMUM SALES CHARGES (LOAD) IMPOSED ON REINVESTED
DIVIDENDS NONE
- --------------------------------------------------------
MAXIMUM CONTINGENT DEFERRED SALES CHARGES (LOAD) NONE
AS A PERCENTAGE OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PRICE, WHICHEVER IS LOWER
- --------------------------------------------------------
REDEMPTION FEE NONE
- --------------------------------------------------------
EXCHANGE FEE NONE
- --------------------------------------------------------
MAXIMUM ACCOUNT FEE NONE
- --------------------------------------------------------
</TABLE>
Annual Fund operating expenses are expenses that are deducted
from the Fund's income or assets. We will not charge you
separately for these expenses.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
(% OF AVERAGE DAILY NET ASSETS)
<S> <C>
- ---------------------------------------------------------
MANAGEMENT FEES 0.50%
- ---------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES NONE
- ---------------------------------------------------------
OTHER 0.16%
- ---------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.66%
- ---------------------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other
mutual funds. We show the cumulative amount of Fund expenses
on a hypothetical investment of $10,000 with an annual 5%
return over the time shown. This is an example only, and does
not represent future expenses, which may be greater or less
than those shown here.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
FUND $67 $211 $368 $822
</TABLE>
4
<PAGE>
HOW WE MANAGE THE FUND
- --------------------------------------------------------------------------------
OUR INVESTMENT STRATEGIES
We analyze economic and market conditions, seeking to
identify the market sector or securities that we think make
the best investments. The following is a description of how
the Adviser pursues the Fund's objectives.
We invest primarily in pursuit of a two-pronged investment
objective: maximum income and preservation of capital. We
blend a number of investment strategies to manage the Fund.
To seek current income and help preserve capital, we
generally invest at least 80% of the Fund in securities
issued by the U.S. government and its agencies and
instrumentalities known as U.S. government securities.
Typically, securities of medium maturities offer the highest
income without undue risk to capital. Accordingly, the
weighted average effective maturity of the bond portfolio
will generally be between 5 and 10 years. The weighted
average effective maturity for the bond portfolio as of
August 31, 1998 was 5.92 years. While we do not intend to
engage in short term trading, we sell securities regardless
of how long we have held them in order to take advantage of
better investment opportunities or to adjust to changing
economic conditions.
THE SECURITIES IN WHICH WE TYPICALLY INVEST
The following is a description of the securities in which we
normally invest. Please see the Statement of Additional
Information for additional descriptions and risk information
on these and all the securities in which we invest.
U.S. GOVERNMENT SECURITIES: include U.S. Treasury bills,
notes and bonds, as well as securities issued or guaranteed
by U.S. government agencies or instrumentalities, such as the
Federal Farm Credit System, Federal Home Loan Banks, the
Tennessee Valley Authority, Farmers Home Administration, and
the Export-Import Bank.
MORTGAGE-BACKED SECURITIES: fixed-income securities which
represent pools of mortgages with investors receiving
principal and interest payments as the underlying mortgage
loans are paid back. We invest in those mortgage-backed
securities issued by certain government sponsored
enterprises, such as the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association and
the Government National Mortgage Association.
5
<PAGE>
TEMPORARY DEFENSIVE POSITION
From time to time in response to adverse market or other
conditions, we may invest up to 20% of the Fund's net assets
in cash or cash equivalents for temporary defensive purposes.
PORTFOLIO TURNOVER
The Fund may engage in active and frequent trading of
portfolio securities to achieve its investment objectives
which may result in higher brokerage commissions and other
expenses.
THE RISKS OF INVESTING IN THE FUND
Investing in any mutual fund involves risk, including the
risk that you may receive little or no return on your
investment, and the risk that you may lose part or all of the
money you invest. Therefore, before you invest in this Fund
you should carefully evaluate the risks. Because of the
nature of the Fund, you should consider an investment in it
to be a long-term investment that will best meet its
objectives when held for a number of years. The chief risk
you assume when investing in this Fund is interest rate risk,
the possibility that as interest rates rise the value of some
fixed income securities, especially those securities with
longer maturities, may decrease. Please see the Statement of
Additional Information for a further discussion of risks.
6
<PAGE>
WHO MANAGES THE FUND
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed by the
Fund's officers under the direction of the Fund's Board of
Directors.
INVESTMENT ADVISER
Value Line, Inc. serves as the Fund's investment adviser and
manages the Fund's business affairs. Value Line also acts as
investment adviser to the other Value Line mutual funds and
furnishes investment counseling services to private and
institutional clients with combined assets of over $4
billion.
The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co.,
Inc. which with its predecessor had been in business since
1931. Value Line Securities, Inc., the Fund's distributor, is
a subsidiary of the Adviser. Another subsidiary of the
Adviser publishes The Value Line Investment Survey and other
publications.
MANAGEMENT FEES
For managing the Fund and its investments, the Adviser is
paid a yearly fee of 0.50% of the average daily net assets.
PORTFOLIO MANAGEMENT
A committee of employees of the Investment Adviser is jointly
and primarily responsible for the day-to-day management of
the Fund's portfolio.
7
<PAGE>
ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
/ / BY TELEPHONE
Once you have opened an account, you can buy additional
shares by calling 800-243-2729 between 9:00 a.m. and 4:00
p.m. New York time. You must pay for these shares within
three business days of placing your order.
/ / BY WIRE
If you are making an initial purchase by wire, you must call
us at 1-800-243-2729 so we can assign you an account number.
Request your bank to wire the amount you want to invest to
State Street Bank and Trust Company, ABA #011000028,
attention DDA # 99049868. Include your name, account number,
tax identification number and the name of the Fund in which
you want to invest.
/ / THROUGH A BROKER-DEALER
You can open an account and buy shares through a
broker-dealer, who may charge a fee for this service.
/ / BY MAIL
Complete the Account Application and mail it with your check
payable to NFDS, Agent, to Value Line Funds, c/o National
Financial Data Services, Inc., P.O. Box 419729, Kansas City,
MO 64141-6729. If you are making an initial purchase by mail,
you must include a completed Account Application, or an
appropriate retirement plan application if you are opening a
retirement account, with your check.
/ / BY EXCHANGE
You can exchange all or part of your investment in the Fund
for shares in other Value Line funds. To execute an exchange,
call 800-243-2729.
Once you have completed an application, you can open an
account with an initial investment of $1,000, and make
additional investments at any time for as little as $250. The
price you pay for shares will depend on when we receive your
purchase order.
If we or an authorized agent receives your order before the
close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time) on a business day, you
will pay that day's closing share price which is based
8
<PAGE>
on the Fund's net asset value. If we receive your order after
the close of trading, you will pay the next business day's
price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject
any purchase order and to waive the initial and subsequent
investment minimums at any time.
We determine the Fund's net asset value (NAV) per share as of
the close of regular trading on the New York Stock Exchange
each business day. We calculate this value by adding the
market value of all the securities and assets in the Fund's
portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The
result is the net asset value per share. With assistance from
an independent pricing service, we price securities and other
assets for which market prices or quotations are available at
their market value. We price securities for which market
valuations are not available at their fair market value as
determined by the Board of Directors. Any investments which
have a maturity of less than 60 days we price at amortized
cost. The amortized cost method of valuation involves valuing
a security at its cost and accruing any discount or premium
over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the
security.
9
<PAGE>
HOW TO SELL SHARES
/ / BY MAIL
You can redeem your shares (sell them back to the Fund) by
mail by writing to: Value Line Funds, c/o National Financial
Data Services, Inc., P.O. Box 419729, Kansas City, MO
64141-6729. The request must be signed by all owners of the
account, and you must include a signature guarantee for each
owner. Signature guarantees are also required when redemption
proceeds are going to anyone other than the account holder(s)
of record. A signature guarantee can be obtained from most
banks or securities dealers, but not from a notary public. A
signature guarantee helps protect against fraud.
/ / BY TELEPHONE OR WIRE
You can sell $1,000 or more of your shares by telephone or
wire, with the proceeds sent to your bank the next business
day after we receive your request.
/ / BY CHECK
You can sell $500 or more of your shares by writing a check
payable to the order of any person.
/ / THROUGH A BROKER-DEALER
You may sell your shares through a broker-dealer, who may
charge a fee for this service.
If you hold your shares in certificates, you must submit the
certificates properly endorsed with signature guaranteed with
your request to sell the shares.
When you send us a properly completed request to sell or
exchange shares, you will receive the net asset value as
determined on the business day we receive your request. You
may have to pay taxes on the gain from your sale of shares.
We will pay you promptly, normally the next business day, but
no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to
15 days, before we honor your request to sell these shares.
The Fund has authorized brokers to accept purchase and
redemption orders on behalf of the Fund. The Fund has also
authorized these brokers to designate others to accept
purchase and redemption orders on behalf of the Fund.
10
<PAGE>
We treat any order to buy or sell shares that you place with
one of these brokers, or anyone they have designated, as if
you had placed it directly with the Fund. The shares that you
buy or sell through brokers or anyone they have designated
are priced at the next net asset value that is computed after
they accept your order.
ACCOUNT MINIMUM
If as a result of redemption your account balance falls below
$500, the Fund may ask you to increase your balance within 30
days. If your account is not at the minimum by the required
time, the Fund may redeem your account, after first notifying
you in writing.
SPECIAL SERVICES
To help make investing with us as easy as possible, and to
help you build your investments, we offer the following
special services. You can get further information about these
programs by calling Shareholder Services at 800-223-0818.
/ / Valu-Matic-Registered Trademark- allows you to make
regular monthly investments of $25 or more automatically
from your checking account.
/ / You can exchange all or part of your shares for shares
in another Value Line fund without paying a sales
charge. You may have to pay taxes on your exchange. When
you exchange shares, you are purchasing shares in
another fund so you should be sure to get a copy of that
fund's prospectus and read it carefully before buying
shares through an exchange.
/ / Through our Systematic Cash Withdrawal Plan you can
arrange a regular monthly or quarterly payment from your
account payable to you or someone you designate. If your
account is $5,000 or more, you can have monthly or
quarterly withdrawals of $25 or more.
/ / You may buy shares in the Fund for your individual or
group retirement plan, including your Individual
Retirement Account (IRA) or Roth IRA. You may establish
your IRA account even if you already are a member of an
employer-sponsored retirement plan. Not all
contributions to an IRA account are tax deductible;
consult your tax advisor about the tax consequences of
your contribution.
11
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund pays dividends quarterly, while any capital gains
are distributed annually. We automatically reinvest all
dividends and any capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult
your tax adviser about your particular tax situation and how
it might be affected by current tax law. The tax status of
your dividends from the Fund is not affected by whether you
reinvest your dividends or receive them in cash.
Distributions from a fund's long-term capital gains are
taxable as capital gains, while dividends from short-term
capital gains and net investment income are generally taxable
as ordinary income. Any capital gains distributions may be
taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement by January 31 each year
detailing the amount and nature of all dividends and capital
gains that you were paid during the prior year.
12
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you
understand the Fund's financial performance for the past five
years. All information reflects financial results for a
single Fund share. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual
report, which is available upon request by calling
800-223-0818.
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR:
YEAR ENDED AUGUST 31,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $11.04 $10.85 $11.28 $11.20 $13.44
- ------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .69 .74 .77 .74 .82
Net gains or losses on securities (both
realized and unrealized) .41 .21 (.43) .04 (1.80)
- ------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.10 .95 .34 .78 (.98)
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.70) (.76) (.77) (.70) (.93)
Distributions from capital gains -- -- -- -- (.33)
- ------------------------------------------------------------------------------------------------------------
Total distributions (.70) (.76) (.77) (.70) (1.26)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.44 $11.04 $10.85 $11.28 $11.20
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN 10.28% 9.01% 3.06% 7.37% (7.87)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $185,294 $185,004 $214,889 $256,004 $ 339,478
Ratio of operating expenses to average net
assets .66%(1) .65%(1) .65%(1) .66% .63%
Ratio of net investment income to average net
assets 6.07% 6.52% 6.74% 6.58% 6.58%
Portfolio turnover rate 159% 255% 158% 193% 100%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before offset of custody credits.
- --------------------------------------------------------------------------------
13
<PAGE>
FOR MORE INFORMATION
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional
Information dated January 4, 1999, which we have filed
electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you
want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any
questions about investing in this Fund, you can write to us
at 220 East 42nd Street, New York, NY 10017-5891 or call
toll-free 800-223-0818.
You can find reports and other information about the Fund on
the SEC Web site (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by
writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund,
including its Statement of Additional Information, can be
reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. You
can get information on operation of the public reference room
by calling the SEC at 1-800-SEC-0330.
<TABLE>
<S> <C>
INVESTMENT ADVISER SERVICE AGENT
Value Line, Inc. State Street Bank and Trust Company
220 East 42nd Street c/o NFDS
New York, NY 10017-5891 P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN DISTRIBUTOR
State Street Bank and Trust Company Value Line Securities, Inc.
225 Franklin Street 220 East 42nd Street
Boston, MA 02110 New York, NY 10017-5891
</TABLE>
<TABLE>
<S> <C>
Value Line Securities, Inc.
220 East 42nd Street, New York, NY 10017-5891 File no. 811-03171
</TABLE>
<PAGE>
VALUE LINE U.S. GOVERNMENT
SECURITIES FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 4, 1999
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line U.S. Government Securities
Fund, Inc. dated January 4, 1999, a copy of which may be obtained without charge
by writing or telephoning the Fund. Certain information in the Fund's 1998
Annual Report to Shareholders is incorporated by reference in this Statement. A
copy of the Annual Report is available from the Fund upon request and without
charge by calling 800-223-0818.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Description of the Fund and Its Investments and Risks............................... B-2
Management of the Fund.............................................................. B-7
Investment Advisory and Other Services.............................................. B-9
Brokerage Allocation and Other Practices............................................ B-10
Capital Stock....................................................................... B-11
Purchase, Redemption and Pricing of Shares.......................................... B-11
Taxes............................................................................... B-12
Performance Data.................................................................... B-13
Financial Statements................................................................ B-15
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
CLASSIFICATION. The Fund is an open-end, diversified management investment
company incorporated in Maryland in 1981 as The Value Line Bond Fund, Inc. In
1986, the Fund's name was changed to Value Line U.S. Government Securities Fund,
Inc. The Fund's investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT STRATEGIES AND RISKS. The Fund has a fundamental policy that
under normal conditions at least 80% of the value of its net assets will be
invested in issues of the U.S. Government and its agencies and instrumentalities
("U.S. Government Securities"). The balance of the Fund's net assets may be
invested in repurchase agreements, commercial paper, convertible debentures,
short-term money market instruments, preferred stocks, common stocks, and bonds
at such times and in such amounts as in the opinion of the Adviser seem
appropriate to achieve the Fund's investment objective.
Among the investment strategies that may be used by the Adviser in managing
the Fund that are not principal strategies and the risks of such strategies are
the following:
RESTRICTED SECURITIES. On occasion the Fund may purchase securities which
would have to be registered under the Securities Act of 1933 if they were to be
publicly distributed. However, it will not do so if the value of such securities
and other securities which are not readily marketable (including repurchase
agreements maturing in more than seven days) would exceed 15% of the market
value of its total assets. It is management's policy to permit the occasional
acquisition of such restricted securities only if (except in the case of
short-term non-convertible debt securities) there is an agreement by the issuer
to register such securities, ordinarily at the issuer's expense, when requested
to do so by the Fund. The acquisition in limited amounts of restricted
securities is believed to be helpful toward the attainment of the Fund's
secondary objective of capital appreciation without unduly restricting its
liquidity or freedom in the management of its portfolio. However, because
restricted securities may only be sold privately or in an offering registered
under the Securities Act of 1933, or pursuant to an exemption from such
registration, substantial time may be required to sell such securities, and
there is greater than usual risk of price decline prior to sale. The Fund has no
present intention to purchase such securities.
STRUCTURED SECURITIES. The Fund may invest in structured notes, bonds or
debentures. The value of the principal of and/or interest on such securities is
determined by reference to changes in the value of specific currencies, interest
rates, commodities, indices or other financial indicators (the "Reference") or
the relative change in two or more References. The interest rate or the
principal amount payable upon maturity or redemption may be increased or
decreased depending upon changes in the applicable Reference. The terms of the
structured securities may provide that in certain circumstances no principal is
due at maturity and, therefore, may result in the loss of the Fund's investment.
Structured securities may be positively or negatively indexed, so the
appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, changes in
interest rates or the value of the security at maturity may be a multiple of
changes in the value of the Reference. Consequently, structured securities may
entail a greater degree of market risk than other types of fixed income
securities. Structured securities may also be more volatile, less liquid and
more difficult to price accurately than less complex securities.
B-2
<PAGE>
CUSTODIAL RECEIPTS. The Fund may acquire custodial receipts in respect of
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities, instrumentalities or sponsored
enterprises. Such custodial receipts evidence ownership of future interest
payments, principal payments or both on certain notes or bonds issued by the
U.S. Government or its agencies or instrumentalities. For certain securities law
purposes, custodial receipts are not considered obligations of the U.S.
Government.
INVERSE FLOATING RATE SECURITIES. The Fund may invest in inverse floating
rate securities. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher the degree of leverage of an inverse
floater, the greater the volatility of its market value.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to broker-dealers or institutional investors if as a result thereof the
aggregate value of all securities loaned does not exceed 33 1/3% of the total
assets of the Fund (including the loan collateral). The loans will be made in
conformity with applicable regulatory policies and will be 100% collateralized
by cash, cash equivalents or United States Treasury Bills on a daily basis in an
amount equal to the market value of the securities loaned and interest earned.
The Fund will retain the right to call, upon notice, the loaned securities and
intends to call loaned voting securities in anticipation of any important or
material matter to be voted on by shareholders. While there may be delays in
recovery or even loss of rights in the collateral should the borrower fail
financially, the loans will be made only to firms deemed by the Adviser to be of
good standing and will not be made unless, in the judgment of the Adviser, the
consideration which can be earned from such loans justifies the risk. The Fund
may pay reasonable custodian and administrative fees in connection with the
loans.
WHEN-ISSUED TRANSACTIONS. The Fund may from time to time purchase
securities on a "when-issued" basis. The price of such securities, which may be
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase. During the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the risk of
decline in value of the Fund's other assets. While when-issued securities may be
sold prior to the settlement date, the Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the commitment to purchase a security on a
when-issued basis is confirmed, the Fund will record the transaction and reflect
the value of the security in determining its net asset value.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may invest in stripped
mortgage-backed securities ("SMBS"), which are derivative multiclass mortgage
securities. Although the market for such securities is increasingly liquid,
certain SMBS may not be readily marketable and may be considered illiquid for
purposes of the Fund's limitation on investments in illiquid securities. The
market value of the class consisting entirely of principal payments generally is
unusually volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the
B-3
<PAGE>
interest from Mortgage Assets are generally higher than prevailing market yields
on other mortgage-backed securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
VARIABLE AND FLOATING RATE SECURITIES
The interest rates payable on certain securities in which the Fund may
invest are not fixed and may fluctuate based upon changes in market rates. A
variable rate obligation has an interest rate which is adjusted at predesignated
periods in response to changes in the market rate of interest on which the
interest rate is based. Variable and floating rate obligations are less
effective than fixed rate instruments at locking in a particular yield.
Nevertheless, such obligations may fluctuate in value in response to interest
rate changes if there is a delay between changes in market interest rates and
the interest reset date for the obligation.
BANK OBLIGATIONS
The Fund may invest in U.S. dollar denominated obligations issued or
guaranteed by U.S. banks. Bank obligations, including without limitation time
deposits, bankers' acceptances and certificates of deposit, may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation.
Banks are subject to extensive but different governmental regulations which
may limit both the amount and types of loans which may be made and interest
rates which may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of this industry.
ZERO COUPON BONDS
The Fund's investments in fixed income securities may include zero coupon
bonds, which are debt obligations issued or purchased at a significant discount
from face value. The discount approximates the total amount of interest the
bonds would have accrued and compounded over the period until maturity. Zero
coupon bonds do not require the periodic payment of interest. Such investments
benefit the issuer by mitigating its need for cash to meet debt service, but
some also require a higher rate of return to attract investors who are willing
to defer receipt of such cash. Such investments may experience greater
volatility in market value than debt obligations which provide for regular
payments of interest. In addition, if an issuer of zero coupon bonds held by the
Fund defaults, the Fund may obtain no return at all on its investment. The Fund
will accrue income on such investments for tax and accounting purposes, as
required, which is distributable to shareholders and which, because no cash is
received at the time of accrual, may require the liquidation of other portfolio
securities to satisfy the Fund's distribution obligations.
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The Fund will make payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
B-4
<PAGE>
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. The Fund has a fundamental
policy that it will not enter into repurchase agreements which will not mature
within seven days if any such investment, together with all other assets held by
the Fund which are not readily marketable, amounts to more than 15% of its total
assets. The Board of Directors monitors the creditworthiness of parties dealing
with the Fund in repurchase agreements and loans of the portfolio securities.
YEAR 2000. Like other mutual funds, the Fund could be adversely affected if
the computer systems used by the Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser
is taking steps that it believes are reasonably designed to address the Year
2000 Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact U.S. Government agencies and
instrumentalities and corporations, which may include issuers of portfolio
securities held by the Fund, to varying degrees based upon various factors,
including, but not limited to, the corporation's industry sector and degree of
technological sophistication. The Fund is unable to predict what impact, if any,
the Year 2000 Problem will have on issuers of the portfolio securities held by
the Fund.
FUND POLICIES:
(i)
The Fund may not issue senior securities except evidences of
indebtedness permitted under clause (ii) below.
(ii)
The Fund may not borrow money in excess of 10% of the value of its
assets and then only as a temporary measure to meet unusually heavy
redemption requests or for other extraordinary or emergency purposes.
Securities will not be purchased while borrowings are outstanding. No assets
of the Fund may be pledged, mortgaged or otherwise encumbered, transferred
or assigned to secure a debt.
(iii)
The Fund may not engage in the underwriting of securities except to
the extent that the Fund may be deemed an underwriter as to
restricted securities under the Securities Act of 1933 in selling portfolio
securities.
(iv)
The Fund may not invest 25% or more of its assets in securities of
issuers in any one industry. For this purpose, gas, electric, water
and telephone utilities will each be treated as a separate industry.
(v)
The Fund may not invest in real estate, mortgages or illiquid
securities of real estate investment trusts although the Fund may
purchase securities of issuers which engage in real estate operations.
B-5
<PAGE>
(vi)
The Fund may not lend money except in connection with the purchase
of debt obligations or by investment in repurchase agreements. The
Fund may lend its portfolio securities to broker-dealers and institutional
investors if as a result thereof the aggregate value of all securities
loaned does not exceed 33 1/3% of the total assets of the Fund (including
the loan collateral).
(vii)
The Fund may not engage in arbitrage transactions or in short sales,
except to the extent that it owns other securities convertible into
an equivalent amount of such securities and then only for the purpose of
protecting a profit or in attempting to minimize a loss with respect to
convertible securities. No more than 10% of the value of the Fund's assets
taken at market may at any one time be held as collateral for such sales.
(viii)
The Fund may not write, purchase or sell puts, calls or combinations
thereof, invest in commodities or commodity contracts or purchase
securities of other investment companies.
(ix)
The Fund may not invest more than 5% of the value of its total
assets in the securities of any one issuer or purchase more than 10%
of the outstanding voting securities, or any other class of securities, of
any one issuer. For purposes of this restriction, all outstanding debt
securities of an issuer are considered as one class, and all preferred stock
of an issuer is considered as one class. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
(x)
The Fund may not invest more than 5% of its total assets in
securities of issuers having a record, together with its
predecessors, of less than three years of continuous operation. This
restriction does not apply to any obligation issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(xi)
The Fund may not purchase securities for the purpose of exercising
control over another company.
(xii)
The Fund may not purchase securities on margin or participate on a
joint or a joint and several basis in any trading account in
securities or purchase oil, gas or other mineral type development programs
or leases, except that the Fund may invest in the securities of companies
which invest in or sponsor such programs.
(xiii)
The primary investment objective of the Fund is to obtain maximum
income without undue risk of principal. Capital preservation and
possible capital appreciation are secondary objectives. Under normal
conditions, at least 80% of the value of the Fund's net assets will be
invested in U.S. Government Securities.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
The policies set forth above may not be changed without the affirmative vote
of the majority of the outstanding voting securities of the Fund which means the
lesser of (1) the holders of more than 50% of the outstanding shares of capital
stock of the Fund or (2) 67% of the shares present if more than 50% of the
shares are present at a meeting in person or by proxy.
B-6
<PAGE>
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed by the Fund's officers
under the direction of the Board of Directors. Set forth below is certain
information regarding the Directors and Officers of the Fund.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 64 of Directors and Officer of the Adviser and Value Line Pub-
President lishing, Inc. Chairman and President of the
Value Line Funds and Value Line Securities,
Inc. (the "Distributor"); Chairman and
President of each of the 15 Value Line Funds.
John W. Chandler Director Consultant, Academic Search Consultation
2801 New Mexico Ave., N.W. Service, Inc. Trustee Emeritus and Chairman
Washington, DC 20007 (1993-1994) of Duke University; President
Age 75 Emeritus, Williams College.
*Leo R. Futia Director Retired Chairman and Chief Executive Officer
201 Park Avenue South of The Guardian Life Insurance Company of
New York, NY 10003 America and Director since 1970. Director
Age 79 (Trustee) of The Guardian Insurance & Annuity
Company, Inc., Guardian Investor Services
Corporation and the Guardian-sponsored mutual
funds.
David H. Porter Director President Emeritus, Skidmore College since
813 North Broadway January 1, 1999; President, Skidmore College,
Saratoga Springs, NY 12866 1987-1998; Director of Adirondack Trust
Age 62 Company.
Paul Craig Roberts Director Chairman, Institute for Political Economy;
505 S. Fairfax Street Director, A. Schulman Inc. (plastics).
Alexandria, VA 22320
Age 59
Nancy-Beth Sheerr Director Chairman, Radcliffe College Board of
1409 Beaumont Drive Trustees.
Gladwyne, PA 19035
Age 49
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
Bruce Alston Vice President Portfolio Manager with the Adviser since
Age 53 1997; Portfolio Manager with Dreyfus
Management, Inc., 1994-1996, and Prudential
Capital Markets Group, 1981-1994.
Nathan N.J. Grant Vice President Portfolio Manager with the Adviser since
Age 28 1996; Trader, Fixed Income Securities,
Blaylock & Partner, 1994-1996; Trader,
Donaldson, Lufkin, Jenrette, 1992-1994.
David T. Henigson Vice President, Director, Vice President and Compliance
Age 41 Secretary and Officer of the Adviser. Director and Vice
Treasurer President of the Distributor. Vice Presi-
dent, Secretary and Treasurer of each of the
15 Value Line Funds.
</TABLE>
- --------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors of the Fund are also directors/trustees of 11 other Value Line
Funds.
The following table sets forth information regarding compensation of
Directors by the Fund and by the Fund and the eleven other Value Line Funds of
which each of the Directors is a director or trustee for the fiscal year ended
August 31, 1998. Directors who are officers or employees of the Adviser do not
receive any compensation from the Fund or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSONS FROM FUND OF FUND EXPENSES RETIREMENT (12 FUNDS)
- ------------------------------------------- --------------- ------------------ ----------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner $ -0- N/A N/A $ -0-
John W. Chandler 2,968 N/A N/A 35,620
Leo R. Futia 2,968 N/A N/A 35,620
David H. Porter 2,037 N/A N/A 24,443
Nancy-Beth Sheer 2,968 N/A N/A 35,620
Paul Craig Roberts 2,968 N/A N/A 35,620
</TABLE>
As of August 31, 1998, no person owned of record or, to the knowledge of the
Fund, owned beneficially, 5% or more of the outstanding stock of the Fund other
than Guardian Insurance & Annuity Company, Inc., 201 Park Avenue South, New
York, NY 10003, which owned 873,347 shares of record or approximately 5.4%. The
Adviser and its parent, Arnold Bernhard & Co., Inc., owned
B-8
<PAGE>
781,710 shares (4.8%) and Jean B. Buttner, Chairman and CEO of the Adviser and
its parent and of the Fund owned 227,594 shares (1.40%). In addition, First
Union National Bank as Trustee of the Value Line, Inc. Profit Sharing and
Savings Plan owned 172,112 shares (1.06%). Certain other officers and directors
of the Fund as a group owned less than 1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Arnold Bernhard & Co., Inc., 220 East 42nd Street, New York, NY 10017, a
holding company, owns approximately 81% of the outstanding shares of the
Adviser's common stock. Jean Bernhard Buttner, Chairman, President and Chief
Executive Officer of the Adviser and Chairman and President of the Fund, owns
all of the voting stock of Arnold Bernhard & Co., Inc.
The Fund's investment adviser is Value Line, Inc. (the "Adviser"). The
investment advisory agreement between the Fund and the Adviser dated August 10,
1988 provides for an advisory fee payable monthly at a rate equal to 1/2 of 1%
of the Fund's average daily net assets during the year. During the fiscal years
ended August 31, 1996, 1997 and 1998, the Fund paid or accrued advisory fees of
$1,170,848, $991,099 and $932,396, respectively.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal and
accounting fees, fees and expenses in connection with qualification under
federal and state securities laws and costs of shareholder reports and proxy
materials. The Fund has agreed that it will use the words "Value Line" in its
name only so long as Value Line, Inc. serves as investment adviser to the Fund.
The agreement will terminate upon its assignment.
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment counseling
services to private and institutional accounts with combined assets in excess of
$4.5 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may
from time to time own securities which are also held in the portfolio of the
Fund. The Adviser has imposed rules upon itself and such persons requiring
monthly reports of security transactions for their respective accounts and
restricting trading in various types of securities in order to avoid possible
conflicts of interest. The Adviser may from time to time, directly or through
affiliates, enter into agreements to furnish for
B-9
<PAGE>
compensation special research or financial services to companies, including
services in connection with acquisitions, mergers or financings. In the event
that such agreements are in effect with respect to issuers of securities held in
the portfolio of the Fund, specific reference to such agreements will be made in
the "Schedule of Investments" in shareholder reports of the Fund. As of the date
of this Statement of Additional Information no such agreements exist.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor") whose address is 220 East 42nd Street, New
York, NY 10017, pursuant to which the Distributor acts as principal underwriter
and distributor of the Fund for the sale and distribution of its shares. The
Distributor is a wholly-owned subsidiary of the Adviser. For its services under
the agreement, the Distributor is not entitled to receive any compensation. The
Distributor also serves as distributor to the other Value Line funds. Jean
Bernhard Buttner is Chairman and President of the Distributor.
The Adviser has retained State Street Bank and Trust Company ("State
Street") to provide certain bookkeeping and accounting services for the Fund.
The Adviser pays State Street $32,400 per annum for each Value Line fund for
which State Street provides these services. State Street, whose address is 225
Franklin Street, Boston, MA 02110, also acts as the Fund's custodian, transfer
agent and dividend-paying agent. As custodian, State Street is responsible for
safeguarding the Fund's cash and securities, handling the receipt and delivery
of securities and collecting interest and dividends on the Fund's investments.
As transfer agent and dividend-paying agent, State Street effects transfers of
Fund shares by the registered owners and transmits payments for dividends and
distributions declared by the Fund. National Financial Data Services, Inc., a
State Street affiliate, whose address is 1004 Baltimore, Kansas City, MO 64105,
provides certain transfer agency functions to the Fund as an agent for State
Street. PricewaterhouseCoopers LLP, whose address is 1177 Avenue of the
Americas, New York, NY 10036, acts as the Fund's independent accountants and
also perform certain tax preparation services.
BROKERAGE ALLOCATION AND OTHER PRACTICES
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Debt
securities are traded principally in the over-the-counter market on a net basis
through dealers acting for their own account and not as brokers. Purchases and
sales of securities which are not listed or traded on a securities exchange will
ordinarily be executed with primary market makers acting as principal, except
when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of the brokerage and research services provided. Such
allocation will be in such amounts and in such proportions as the Adviser may
determine. Orders may also be placed with brokers or dealers who sell shares of
the Fund or other funds for which the Adviser acts as investment adviser, but
this fact, or the volume of such sales, is not a consideration in their
selection. During the years ended August 31, 1996, 1997 and 1998, the Fund paid
brokerage commissions of $3,013, $9,414, and $1,094, respectively.
B-10
<PAGE>
CAPITAL STOCK
Each share of the Fund's common stock, $1 par value, has one vote with
fractional shares voting proportionately. Shares have no preemptive rights, are
freely transferable, are entitled to dividends as declared by the Directors and,
if the Fund were liquidated, would receive the net assets of the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES: Shares of the Fund are purchased at net asset value next calculated
after receipt of a purchase order. Minimum orders are $1,000 for an initial
purchase and $250 for each subsequent purchase. The Fund reserves the right to
reduce or waive the minimum purchase requirements in certain cases such as
pursuant to payroll deduction plans, etc., where subsequent and continuing
purchases are contemplated.
AUTOMATIC PURCHASES: The Fund offers a free service to its shareholders,
Valu-Matic, through which monthly investments of $25 or more may be made
automatically into the shareholder's Fund account. The required form to enroll
in this program is available upon request from the Distributor.
RETIREMENT PLANS: Shares of the Fund may be purchased as the investment medium
for various tax-sheltered retirement plans. Upon request, Value Line Securities,
Inc. will provide information regarding eligibility and permissible
contributions. Because a retirement plan is designed to provide benefits in
future years, it is important that the investment objectives of the Fund be
consistent with the participant's retirement objectives. Premature withdrawals
from a retirement plan may result in adverse tax consequences. For more complete
information, contact Shareholder Services at 1-800-223-0818.
REDEMPTION: The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period, by the Fund under the following
conditions authorized by the 1940 Act: (1) For any period (a) during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) For any period during which an emergency exists as a result of
which (a) disposal by the Fund of securities owned by it is not reasonably
practical, or (b) it is not reasonably practical for the Fund to determine the
fair value of its net assets; (3) For such other periods as the Securities and
Exchange Commission may by order permit for the protection of the Fund's
shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time. Shareholders should note that if a loss has been realized on the sale of
shares of the Fund, the loss may be disallowed for tax purposes if shares of the
same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities or other property of the Fund. However, the Fund has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Fund's net assets
if that is less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing the net
asset value per share. Shareholders receiving such securities may incur
brokerage costs on their sales.
B-11
<PAGE>
TAXES
The Fund intends to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). The Fund so
qualified during the Fund's last fiscal year. By so qualifying, the Fund is not
subject to Federal income tax on its net investment income or net realized
capital gains which are distributed to shareholders (whether or not reinvested
in additional Fund shares).
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
For Federal income-tax purposes, the Fund had a net capital-loss carryover
at August 31, 1998, of $49,044,227 of which $37,238,382 will expire in 2003,
$8,976,510 will expire in 2004 and $2,829,335 will expire in 2005. Realized
losses incurred after October 31, if so elected by the Fund, are deemed to arise
on the first day of the following fiscal year. In the year ended August 31,
1998, the Fund did not incur such losses.
Distributions of net investment income and of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income. Distributions of the excess of net long-term capital gain over
net short-term capital loss (net capital gains) are taxable to the shareholders
as long-term capital gain, regardless of the length of time the shares of the
Fund have been held by such shareholders and regardless of whether the
distribution is received in cash or in additional shares of the Fund. The Fund
does not anticipate that any distributions will be eligible for the dividends
received deduction for corporate shareholders. Upon request, the Fund will
inform shareholders of the amounts of dividends which so qualify.
A distribution by the Fund will result in reduction in the Fund's net asset
value per share. Such a distribution is taxable to the shareholder as ordinary
income or capital gain as described above even though, from an investment
standpoint, it may constitute a return of capital. In particular, investors
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at that time (at the net asset
value per share) includes the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will then receive a return of capital
upon the distribution which will nevertheless be taxable to them. All
distributions, whether received in shares or cash, must be reported by each
shareholder on his Federal income tax return. Furthermore, under the Code,
dividends declared by the Fund in October, November or December of any calendar
year, and payable to shareholders of record in such a month, shall be deemed to
have been received by the shareholder on December 31 of such calendar year if
such dividend is actually paid in January of the following calendar year.
B-12
<PAGE>
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date). Under certain circumstances, a loss on the sale
or redemption of shares held for twelve months or less may be treated as a
long-term capital loss to the extent that the Fund has distributed long-term
capital gain dividends on such shares. Moreover, a loss on sale or redemption of
Fund shares will be disallowed if shares of the Fund are purchased within 30
days before or after the shares are sold or redeemed.
For shareholders who fail to furnish to the Fund their social security or
taxpayer identification numbers and certain related information or who fail to
certify that they are not subject to back-up withholding, dividends,
distributions of capital gains and redemption proceeds paid by the Fund will be
subject to a 31% Federal income tax withholding requirement. If the withholding
provisions are applicable, any such dividends or capital-gains distributions to
these shareholders, whether taken in cash or reinvested in additional shares,
and any redemption proceeds will be reduced by the amounts required to be
withheld.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents, domestic
corporations and partnerships, and certain trusts and estates) and is not
intended to be a complete discussion of all Federal tax consequences.
Shareholders are advised to consult with their tax advisers concerning the
application of Federal, state and local taxes to an investment in the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual compounded rate of return for the periods of one year,
five years and ten years, all ended on the last day of a recent calendar
quarter. The Fund may also advertise aggregate total return information for
different periods of time.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T) to the power of n = ERV
Where: P = a hypothetical initial purchase order of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the
hypothetical $1,000 purchase at the end
of the period.
The Fund's average annual total returns for the one, five and ten year
periods ending August 31, 1998 were 10.28%, 4.15% and 7.69%, respectively.
B-13
<PAGE>
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
The Fund may also quote its current yield in advertisements and investor
communications.
The yield computation is determined by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period and annualizing the resulting figure, according to
the following formula:
Yield = 2 [(a - b + 1)to the power of 6 -1)]
---
cd
Where: a = dividends and interest earned during the
period (calculated as required by the
Securities and Exchange Commission);
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on
the last day of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in advertising by the Fund.
The Fund may also, from time to time, include a reference to its current
quarterly or annual yield in investor communications and sales literature
preceded or accompanied by a Prospectus, reflecting the amounts actually
distributed to shareholders which could include capital gains and other items of
income not reflected in the Fund's yield, as well as interest and dividend
income received by the Fund and distributed to shareholders (which is reflected
in the Fund's yield).
All calculations of the Fund's distribution rate are based on the
distributions per share which are declared, but not necessarily paid, during the
fiscal year. The distribution rate is determined by dividing the distributions
declared during the period by the maximum offering price per share on the last
day of the period and annualizing the resulting figure. In calculating its
distribution rate, the Fund has used the same assumptions that apply to its
calculation of yield. The distribution rate does not reflect capital
appreciation or depreciation in the price of the Fund's shares and should not be
considered to be a complete indicator of the return to the investor on his
investment.
The Fund's current yield, distribution rate and total return may be compared
to relevant indices, including U.S. domestic and international taxable bond
indices (such as the Lehman Government Bond Index and the Lehman Aggregate Bond
Index) and data from Lipper Analytical Services, Inc., or Standard & Poor's
Indices.
From time to time, evaluations of the Fund's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Fund.
B-14
<PAGE>
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield, total return or
distribution rate for any period should not be considered as a representation of
what an investment may earn or what an investor's total return, yield or
distribution rate may be in any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended August 31, 1998,
including the financial highlights for each of the five fiscal years in the
period ended August 31, 1998, appearing in the 1998 Annual Report to
Shareholders and the report thereon of PricewaterhouseCoopers LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information.
B-15
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation. Incorporated by reference to Exhibit 1 to
Registration Number 2-71928.
(b) By-laws, as amended. Incorporated by reference to Post-Effective
Amendment No. 12 to Registration Number 2-71928.
(c) Instruments Defining Rights of Security Holders. Reference is made to
Article 5 of the Articles of Incorporation filed as Exhibit (a) hereto.
(d) Investment Advisory Agreement. Incorporated by reference to
Post-Effective Amendment No. 12 to Registration Number 2-71928.
(e) Principal Underwriter and Distributor Agreement. Incorporated by
reference to Exhibit 6 to Registration Number 2-71928.
(f) Custodian Agreement. Incorporated by reference to Post-Effective
Amendment No. 14 to Registration Number 2-71928.
(g) Legal Opinion. Incorporated by reference to Exhibit 5 to Registration
Number 2-71928.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 25. INDEMNIFICATION.
Incorporated by reference from Post-effective Amendment No. 11 (filed with
the Commission December 22, 1987).
ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individuals, trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 27.
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- -------------------------- -------------------------------- ---------------------------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, President Chairman of the Board and Chief Executive Officer
and Chief Executive Officer of Arnold Bernhard & Co., Inc. and Chairman of the
Value Line Funds and the Distributor
Samuel Eisenstadt Senior Vice President and ---------------------------------------------
Director
David T. Henigson Vice President, Treasurer and Vice President and a Director of Arnold Bernhard &
Director Co., Inc. and the Distributor
Howard A. Brecher Vice President, Secretary and Vice President, Secretary, Treasurer and a Director
Director of Arnold Bernhard & Co., Inc.
Harold Bernard, Jr. Director Retired Administrative Law Judge
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison, attorneys,
One Market Plaza, San Francisco, CA 94105
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- -------------------------- -------------------------------- ---------------------------------------------------
<S> <C> <C>
Linda S. Wilson Director President, Radcliffe College, 10 Garden Street,
Cambridge, MA 02138
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Value Line Securities, Inc., acts as principal underwriter for the
following Value Line funds, including the Registrant: The Value Line
Fund, Inc.; The Value Line Income Fund, Inc.; The Value Line Special
Situations Fund, Inc.; Value Line Leveraged Growth Investors, Inc.; The
Value Line Cash Fund, Inc.; Value Line U.S. Government Securities Fund,
Inc.; Value Line Centurion Fund, Inc.; The Value Line Tax Exempt Fund,
Inc.; Value Line Convertible Fund, Inc.; Value Line Aggressive Income
Trust; Value Line New York Tax Exempt Trust; Value Line Strategic Asset
Management Trust; Value Line Small-Cap Growth Fund, Inc.; Value Line
Asset Allocation Fund, Inc.; Value Line U.S. Multinational Company Fund,
Inc.
(b)
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
- ------------------------- ------------------ --------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Chairman of the
Board Board and President
David T. Henigson Vice President, Vice President,
Secretary, Secretary and
Treasurer and Treasurer
Director
Stephen LaRosa Asst. Vice Asst. Treasurer
President
</TABLE>
The business address of each of the officers and directors is 220 East
42nd Street, NY 10017-5891.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc.
220 East 42nd Street
New York, NY 10017
For records pursuant to:
Rule 31a-1(b)(4),(5),(6),(7),(10),(11)
Rule 31a-1(f)
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141
For records pursuant to Rule 31a-1(b)(2)(iv)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
For all other records
C-2
<PAGE>
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
None.
--------------
C-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 22 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 22, 1998, relating to the financial
statements and financial highlights appearing in the August 31, 1998 Annual
Report to Shareholders of Value Line U.S. Government Securities Fund, Inc.,
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the heading "Financial Highlights" in
the Prospectus and under the heading "Financial Statements" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
October 28, 1998
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 28 day of October, 1998.
VALUE LINE U.S. GOVERNMENT
SECURITIES FUND, INC.
By: /s/ DAVID T. HENIGSON
...................................
DAVID T. HENIGSON, VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
-------------------------------------------- --------------------------------- --------------------
<S> <C> <C> <C>
*JEAN B. BUTTNER Chairman and Director; President; October 28, 1998
(JEAN B. BUTTNER) Principal Executive Officer
*JOHN W. CHANDLER Director October 28, 1998
(JOHN W. CHANDLER)
*LEO R. FUTIA Director October 28, 1998
(LEO R. FUTIA)
*DAVID H. PORTER Director October 28, 1998
(DAVID H. PORTER)
*PAUL CRAIG ROBERTS Director October 28, 1998
(PAUL CRAIG ROBERTS)
*NANCY-BETH SHEERR Director October 28, 1998
(NANCY-BETH SHEERR)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial October 28, 1998
............................................ and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
*By /s/ DAVID T. HENIGSON
.................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-5
