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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1999
FILE NO. 2-71928
FILE NO. 811-03171
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 24 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 24 /X/
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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)
/X/ on January 3, 2000 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
VALUE LINE
U.S. GOVERNMENT SECURITIES FUND, INC.
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PROSPECTUS
JANUARY 3, 2000
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[LOGO]
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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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 principal investment strategies PAGE 5
The securities in which we typically invest PAGE 6
The principal risks of investing in the Fund PAGE 6
WHO MANAGES THE FUND
Investment Adviser PAGE 8
Management fees PAGE 8
Portfolio management PAGE 8
ABOUT YOUR ACCOUNT
How to buy shares PAGE 9
How to sell shares PAGE 11
Special services PAGE 12
Dividends, distributions and taxes PAGE 13
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 14
<PAGE>
FUND SUMMARY
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WHAT ARE THE FUND'S GOALS?
The Fund primarily seeks maximum income without undue risk to
principal. Capital preservation and possible capital
appreciation are secondary objectives. Although the Fund will
strive to achieve these goals, there is no assurance that it
will succeed.
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 or its agencies and instrumentalities, including
mortgage-backed securities issued by government sponsored
enterprises. While we emphasize income from investments for
the Fund, we consider carefully security of principal,
duration, marketability, and diversity of investments. We are
looking for the best relative values among the universe of
government securities. The Fund's portfolio will be actively
traded.
WHAT ARE THE MAIN 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.
The price of Fund shares will increase and decrease according
to changes in the value of the Fund's investments.
The principal risk you assume when investing in the Fund is
interest rate risk, the possibility that as interest rates
rise the value of some fixed income securities may decrease.
Mortgage-backed securities are also more volatile and less
liquid than other U.S. government securities and may be
subject to both credit and prepayment risk.
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
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HOW HAS THE FUND PERFORMED?
This bar chart and table can help you evaluate the potential
risks 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.
TOTAL RETURNS AS OF 12/31 EACH YEAR (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C>
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%
1998 7.68%
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q2 1989 +6.17%
WORST QUARTER: Q2 1994 (5.57%)
</TABLE>
As of September 30, 1999, the Fund had a year-to-date total
return of -1.05%.
AVERAGE ANNUAL RETURN AS OF 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
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U.S. GOVERNMENT SECURITIES FUND 7.68% 4.56% 7.69%
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LEHMAN BROS. GOVERNMENT BOND INDEX 9.85% 7.18% 9.17%
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LEHMAN BROS. AGGREGATE BOND INDEX 8.69% 7.27% 9.26%
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</TABLE>
3
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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 FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
<S> <C>
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MAXIMUM SALES CHARGES (LOAD) IMPOSED ON PURCHASES AS A NONE
PERCENTAGE OF OFFERING PRICE
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MAXIMUM DEFERRED SALES CHARGES (LOAD) AS A PERCENTAGE OF NONE
ORIGINAL PURCHASE PRICE OR REDEMPTION PRICE, WHICHEVER IS
LOWER
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MAXIMUM SALES CHARGES (LOAD) IMPOSED ON REINVESTED DIVIDENDS NONE
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REDEMPTION FEE NONE
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EXCHANGE FEE NONE
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</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
<S> <C>
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MANAGEMENT FEES 0.50%
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DISTRIBUTION AND SERVICE (12b-1) FEES NONE
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OTHER EXPENSES 0.17%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.67%
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</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 assuming that the Fund's operating
expenses remain the same. The expenses would be the same
whether you sold your shares at the end of each period or
continue to hold them. This is an example only, and your
actual costs may be greater or less than those shown here.
Based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
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U.S. GOVERNMENT SECURITIES FUND $68 $214 $373 $835
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</TABLE>
4
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HOW WE MANAGE THE FUND
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OUR PRINCIPAL INVESTMENT STRATEGIES
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
following is a description of how the Adviser pursues the
Fund's objectives.
We analyze economic conditions and the outlook for interest
rates, seeking to identify the type of government securities
that we think make the best investments.
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's net assets in
securities issued or guaranteed by the U.S. government or its
agencies and instrumentalities, including mortgage-backed
securities issued by government sponsored enterprises.
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, 1999 was 5.25 years.
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.
This may have the effect of reducing the Fund's income or
capital appreciation, or both.
PORTFOLIO TURNOVER
The Fund engages in active and frequent trading of portfolio
securities in order to take advantage of better investment
opportunities to achieve its investment objectives. This
strategy results in higher trading costs and other expenses
and may negatively affect the Fund's performance. Portfolio
turnover may also result in capital gain distributions that
could increase your income tax liability.
5
<PAGE>
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.
Information on the Fund's recent holdings can be found in the
Fund's current annual or semiannual report.
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.
THE PRINCIPAL RISKS OF INVESTING IN THE FUND
/ / The principal risk you assume when investing in the 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.
/ / Mortgage-backed securities may be more volatile and less
liquid than other U.S. government securities and may be
subject to credit and prepayment risk. Prepayments of
high interest rate mortgage-backed securities during
times of declining interest rates will tend to lower the
return of the Fund and could result in losses to the
Fund if some securities were acquired at a premium. In
addition, during periods of rising interest rates,
prepayments of mortgage-backed securities may decline,
resulting in the extension of the Fund's average
portfolio maturity. As a result, the Fund's portfolio
may experience greater volatility during periods of
rising interest rates than under normal market
conditions.
6
<PAGE>
/ / With respect to U.S. government securities supported
only by the credit of the issuing agency or an
additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. Government will provide
support to such agencies and such securities may involve
risk of loss of principal and interest.
/ / Please see the Statement of Additional Information for a
further discussion of risks. Information on the Fund's
recent holdings can be found in the Fund's current
annual or semi-annual report.
YEAR 2000 RISKS
Like other mutual funds, the Fund could be adversely affected
if the computer systems used by the Adviser and the Fund's
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.
7
<PAGE>
WHO MANAGES THE FUND
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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., 220 East 42nd Street, New York, NY 10017,
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 $5 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 has 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.
8
<PAGE>
ABOUT YOUR ACCOUNT
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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 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 219729, Kansas City,
MO 64121-9729. 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. Third party checks will
not be accepted for either the initial or any subsequent
purchase. All purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
/ / MINIMUM INITIAL/ADDITIONAL INVESTMENTS
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.
9
<PAGE>
/ / TIME OF PURCHASE
Your price for Fund shares is the Fund's net asset value per
share (NAV), which is generally calculated as of the close of
trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) every day the Exchange is open for business.
The Exchange is currently closed on New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day and on the preceding Friday or subsequent
Monday if any of those days falls on a Saturday or Sunday,
respectively. Your order will be priced at the next NAV
calculated after your order is received by the Fund. We
reserve the right to reject any purchase order and to waive
the initial and subsequent investment minimums at any time.
Fund shares may be purchased through various third-party
intermediaries including banks, brokers, financial advisers
and financial supermarkets. When the intermediary is
authorized by the Fund, orders will be priced at the NAV next
computed after receipt by the intermediary.
/ / NET ASSET VALUE
We calculate NAV 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. Securities
for which quotations are not available from the pricing
service and all other assets of the Fund are valued at fair
value as the Board of Directors or persons acting at their
direction may determine in good faith. 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.
10
<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 219729, Kansas City, MO
64121-9729. 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. If you hold your shares in certificates, you must
submit the certificates properly endorsed with signature
guaranteed with your request to sell the shares. 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.
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. 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.
Among the brokers that have been authorized are Charles
Schwab & Co., Inc., National Investor Services Corp.,
Pershing and Fidelity Brokerage Services Corp. You should
consult with your broker to determine if it has been
authorized.
11
<PAGE>
/ / BY EXCHANGE
You can exchange all or part of your investment in the Fund
for shares in other Value Line funds. 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. To execute an
exchange, call 800-243-2729.
When you send us a request to sell or exchange shares, you
will receive the net asset value that is next determined
after we receive your request. For each account involved you
should provide the account name, number, name of Fund and
exchange or redemption amount. Call 1-800-243-2729 for
additional documentation that may be required. 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 from the date of purchase, before we send the
proceeds to you.
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.
12
<PAGE>
/ / 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.
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 instruct us
otherwise in your application to purchase shares.
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. 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 received during the prior year.
13
<PAGE>
FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you
understand the Fund's financial performance for the past five
years. Certain information reflects financial results for a
single Fund share. The total returns in the table represent
the rate that an investor would have earned or lost on an
investment in the Fund assuming reinvestment of all dividends
and distributions. 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
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<TABLE>
<S> <C> <C> <C> <C> <C>
SELECTED DATA FOR A SHARE OF CAPITAL STOCK
OUTSTANDING THROUGHOUT EACH YEAR:
YEARS ENDED AUGUST 31,
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1999 1998 1997 1996 1995
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NET ASSET VALUE, BEGINNING OF
YEAR $11.44 $11.04 $10.85 $11.28 $11.20
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INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income .61 .69 .74 .77 .74
Net gains or losses on
securities (both realized
and unrealized) (.62) .41 .21 (.43) .04
--------------------------------------------------------------------------------------------
Total income (loss) from
investment operations (.01) 1.10 .95 .34 .78
--------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.62) (.70) (.76) (.77) (.70)
Distributions from capital
gains -- -- -- -- --
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Total distributions (.62) (.70) (.76) (.77) (.70)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.81 $11.44 $11.04 $10.85 $11.28
--------------------------------------------------------------------------------------------
TOTAL RETURN -.17% 10.28% 9.01% 3.06% 7.37%
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RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands) $167,231 $185,294 $185,004 $214,889 $ 256,004
Ratio of expenses to average net
assets .67%(2) .66%(1) .65%(1) .65%(1) .66%
Ratio of net income to average
net assets 5.40% 6.07% 6.52% 6.74% 6.58%
Portfolio turnover rate 125% 159% 255% 158% 193%
--------------------------------------------------------------------------------------------
</TABLE>
(1) Before offset of custody credits.
(2)Ratio reflects expenses grossed up for custody credit
arrangement. The ratio of expenses net of custody credits
would have been .66%.
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14
<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 3, 2000, 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 may also obtain the prospectus at
no cost from our Internet site at http://www.valueline.com.
Reports and other information about the Fund are available on
the EDGAR Database on the SEC's Internet site
(http://www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by
electronic request at the following E-mail address:
[email protected], or by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-0102. 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 1-202-942-8090.
<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 219729
Kansas City, MO 64121-9729
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>
15
<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
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STATEMENT OF ADDITIONAL INFORMATION
JANUARY 3, 2000
- -------------------------------------------------------------------------------
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 3, 2000, a copy of which may be obtained without charge
by writing or telephoning the Fund. The financial statements, accompanying notes
and report of independent auditors appearing in the Fund's 1999 Annual Report to
Shareholders are 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
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<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-8
Brokerage Allocation and Other Practices.................... B-10
Capital Stock............................................... B-10
Purchase, Redemption and Pricing of Shares.................. B-11
Taxes....................................................... B-12
Performance Data............................................ B-14
Financial Statements........................................ B-15
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
HISTORY AND 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").
NON-PRINCIPAL INVESTMENT STRATEGIES AND ASSOCIATED RISKS.
- 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 net 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.
- 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.
- 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
B-2
<PAGE>
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 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.
B-3
<PAGE>
- 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
arecollateralized 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 net
assets.
FUND POLICIES.
(i)
The Fund may not issue senior securities except evidences of
indebtedness permitted under clause (ii) below.
B-4
<PAGE>
(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.
(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.
B-5
<PAGE>
(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 Chairman, President and Chief Executive
Age 65 Board of Directors Officer of the Adviser and Value Line
and President Publishing, 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 Consulta-
2801 New Mexico Ave., tion Service, Inc. Trustee Emeritus and
N.W. Chairman (1993-1994) of Duke Universi-
Washington, DC 20007 ty; President Emeritus, Williams College.
Age 76
David H. Porter Director President Emeritus, Skidmore College
5 Birch Run Drive since January 1, 1999; Visiting Professor
Saratoga Springs, NY of Classics, Williams College, since Ju-
12866 ly 1, 1999; President, Skidmore College,
Age 63 1987-1998; Director of Adirondack Trust
Company.
Paul Craig Roberts Director Chairman, Institute for Political
169 Pompano St. Economy; Director, A. Schulman Inc.
Panama City Beach, FL (plastics).
32413
Age 60
Nancy-Beth Sheerr Director Former Chairman, Radcliffe College Board
1409 Beaumont Drive of Trustees.
Gladwyne, PA 19035
Age 50
Bruce Alston Vice President Portfolio Manager with the Adviser since
Age 54 1997; Portfolio Manager with Dreyfus
Management, Inc., 1994-1996.
Nathan N.J. Grant Vice President Portfolio Manager with the Adviser since
Age 29 1996; Trader, Fixed Income Securities,
Blaylock & Partner, 1994-1996.
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- ------------------ -----------------------------------------
<S> <C> <C>
David T. Henigson Vice President, Director, Vice President and Compliance
Age 42 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, 1999. 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, 1999
<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
David H. Porter 2,968 N/A N/A 35,620
Paul Craig Roberts 2,968 N/A N/A 35,620
Nancy-Beth Sheer 2,968 N/A N/A 35,620
</TABLE>
As of October 31, 1999, 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 825,349 shares of record or approximately 5.3%
and the Adviser and its parent, Arnold Bernhard & Co., Inc., which owned 837,334
shares (5.4%), Jean B. Buttner, Chairman and CEO of the Adviser and its parent
and of the Fund owned 243,790 shares (1.58%) and First Union National Bank as
Trustee of the Value Line, Inc. Profit Sharing and Savings Plan owned 166,577
shares (1.08%). Certain other officers and directors of the Fund as a group
owned less than 1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund's investment adviser is Value Line, Inc. (the "Adviser").
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
B-8
<PAGE>
voting stock of Arnold Bernhard & Co., Inc. 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.
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, 1997, 1998 and 1999, the Fund paid or accrued
advisory fees of $991,099, $932,396, and $894,701, 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
$5.0 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 Fund, the Adviser and the Distributor have adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act which permits personnel subject
to the Code to invest in securities, including securities that may be purchased
or held by the Fund. The Code requires that such personnel submit reports of
security transactions for their respective accounts and restricts 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 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.
B-9
<PAGE>
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 performs certain tax preparation services.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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, 1997, 1998 and 1999, the Fund paid
brokerage commissions of $9,414, $1,094, and $3,844, respectively.
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.
B-10
<PAGE>
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.
CALCULATION OF NET ASSET VALUE: The net asset value of the Fund's shares
for purposes of both purchases and redemptions is determined once daily as of
the close of regular trading on the New York Stock Exchange (currently 4:00
p.m., New York time) on each day that the New York Stock Exchange is open for
trading except on days on which no orders to purchase, sell or redeem Fund
shares have been received. The New York Stock Exchange is currently closed on
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor
B-11
<PAGE>
Day, Thanksgiving Day and Christmas Day and on the preceding Friday or
subsequent Monday if one of those days falls on a Saturday or Sunday,
respectively. The net asset value per share is determined by dividing the total
value of the investments and other assets of the Fund, less any liabilities, by
the total outstanding shares. The Fund values mortgage-backed securities other
than GNMAs (Government National Mortgage Association) 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
analytical 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 negotiations between
the parties in a sales transaction. The values for GNMAs are determined on the
valuation date by reference to valuations obtained from an independent pricing
service which determines valuations for normal institutional-size trading units
of debt securities, without exclusive reliance upon quoted prices. This 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.
Securities not priced in this manner are valued at the midpoint between the
latest available and representative asked and bid prices provided by market
makers for such securities or, when stock exchange valuations are used, at the
latest quoted sale price as of the close of business of the New York Stock
Exchange on the day of valuation. If there is no such reported sale, the
midpoint between the latest available and representative asked and bid prices
will be used. Short-term instruments with maturities of 60 days or less at the
date of purchase are valued at amortized cost, which approximates market.
Short-term instruments with maturities greater than 60 days, at date of
purchase, are valued at the midpoint between the latest available and
representative asked and bid prices, and, commencing 60 days to maturity, such
securities are valued at amortized cost. Securities for which market valuations
are not readily available will be valued at fair value as the Board of Directors
or persons acting at their direction may determine.
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, 1999, of $47,733,893 of which $35,928,048 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,
1999, the Fund did not incur such losses.
B-12
<PAGE>
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.
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). Any loss realized by shareholders upon
redemption of shares within six months of the date of their purchase will
generally be treated as a long-term capital loss to the extent of any
distributions of net long-term capital gains with respect to such shares during
the six month period. 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 who are not citizens or residents of the United States and certain
foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short-term capital
gains. Shareholders are advised to consult with their tax advisers concerning
the application of Federal, state and local taxes to an investment in the Fund.
B-13
<PAGE>
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
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
The Fund's average annual total returns for the one, five and ten year
periods ending August 31, 1999 were -0.17%, 5.84% and 6.59%, respectively.
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:
<TABLE>
<S> <C> <C> <C>
Yield = 2 [(a - b + 1)to the power of 6 -1)]
---
cd
</TABLE>
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in advertising by the Fund.
B-14
<PAGE>
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.
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, 1999,
including the financial highlights for each of the five fiscal years in the
period ended August 31, 1999, appearing in the 1999 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.
(p) Code of Ethics.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 25. INDEMNIFICATION.
Incorporated by reference to Article Sixth (7) of Exhibit (a).
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, Chairman of the Board and Chief Executive
President and Chief Executive Officer of Arnold Bernhard & Co., Inc. and
Officer 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
Director Bernhard & 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 Attorney-at-law; Retired Administrative Law
Judge
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison,
attorneys, One Market Plaza, San Francisco,
CA 94105
Linda S. Wilson Director President Emerita of Radcliffe College;
Senior Lecturer, Harvard Graduate School of
Education, Cambridge, MA 02138
</TABLE>
C-1
<PAGE>
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.; Value Line Income and Growth 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
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
None.
--------------
C-2
<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. 24 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 20, 1999, relating to the financial
statements and financial highlights appearing in the August 31, 1999 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 headings "Investment Advisory and Other Services"
and "Financial Statements" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 27, 1999
C-3
<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 27th day of December, 1999.
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; December 27, 1999
(JEAN B. BUTTNER) President; Principal
Executive Officer
*JOHN W. CHANDLER Director December 27, 1999
(JOHN W. CHANDLER)
*DAVID H. PORTER Director December 27, 1999
(DAVID H. PORTER)
*PAUL CRAIG ROBERTS Director December 27, 1999
(PAUL CRAIG ROBERTS)
*NANCY-BETH SHEERR Director December 27, 1999
(NANCY-BETH SHEERR)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial December 27, 1999
.................................. and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
*By /s/ DAVID T. HENIGSON
.................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-4
<PAGE>
EXHIBIT 99(p)
12/99
VALUE LINE, INC.
VALUE LINE DISTRIBUTION CENTER, INC.
VALUE LINE PUBLISHING, INC.
VALUE LINE SECURITIES, INC.
COMPUPOWER CORPORATION
VALUE LINE FUNDS
CODE OF ETHICS REGARDING
SECURITIES TRANSACTIONS
AND INSIDER TRADING POLICY
This organization is one of the most complex in the investment advisory
business. The diversity of its activities, including the publication of The
Value Line Investment Survey and other services, and the management of mutual
funds and asset management accounts, raises special problems regarding areas
in which conflicts of interest may arise between the overall organization and
its directors, officers and employees and shareholders on the one hand, and
subscribers to the services, shareholders of the funds, and asset management
clients, on the other.
Ethics and law place a heavy burden on an investment adviser and its
officers, directors and employees. They are, together, in a position of
trust in which the highest standards of integrity at all times must be
maintained. It is the duty of management to take all steps to ensure that
the private financial or other transactions of all employees are conducted so
as not to conflict with the interest of subscribers, shareholders and clients
with whom the organization is in a relationship of trust. The interests of
such subscribers and investors are specially protected by the Securities and
Exchange Commission and other governmental authorities and the consequences
of the discovery of an improper transaction by an employee are most serious
for both the employee and the employer.
It is the duty of management to protect both Value Line and its
officers, directors, and employees by establishing procedures to be followed
by all personnel in their private transactions. Much thought has been given
to working out solutions that are practical and realistic. The rules and
procedures that have been established are similar to those that have been
adopted by a number of other firms in the securities business.
- ------------------
This Code of Ethics Regarding Securities Transactions and Insider Trading
Policy is applicable to all officers, directors and employees of Value Line,
Inc. and its subsidiaries ("Value Line") and of the Value Line Funds.
<PAGE>
1. CONFIDENTIALITY; INSIDER TRADING RULES APPLICABLE TO OFFICERS, DIRECTORS
AND EMPLOYEES
-------------------------------------------------------------------------
Management wishes to emphasize, in the strongest possible manner, the
paramount necessity for exercising the greatest discretion in divulging
confidential information. Depending on their functions in the organization,
officers, directors and employees have access to, or may become aware of,
confidential information to a greater or lesser degree. It is not possible
to give an exhaustive list of what material is confidential, and common sense
must be applied to the circumstances, but the following matters must ALWAYS
be treated as strictly confidential:
(a) the name of a Stock Highlight prior to the time when subscribers
to a Value Line Service have had a reasonable time to act on a
recommendation;
(b) the name of a Special Situation after selection for publication in
a Value Line Service and prior to the time when subscribers to
that Service have had a reasonable time to act on the recommendation;
(c) any information regarding, or connected with, buying and selling
operations conducted, or proposed to be conducted, in respect of
the security portfolios of any of the Value Line Funds or of any
asset management client;
(d) any information privately tendered to any person in the Value Line
organization that, if or when publicly known, would be likely to
affect the price of a security.
All officers, directors and employees must not use, reveal or discuss
any confidential information with any person outside Value Line unless they
are specifically authorized to do so for a particular business reason; and
officers, directors and employees must not disclose confidential information
to any other member of the organization unless it is clearly necessary for
such person to be informed. Any information relating to Value Line, Inc., its
subsidiaries or the Value Line Funds prior to its release to the public must
be considered to be confidential information.
OFFICERS, DIRECTORS AND EMPLOYEES MUST NOT BUY, SELL, TIP, RECOMMEND OR
SUGGEST THAT ANYONE ELSE BUY, SELL OR RETAIN, THE SECURITIES OF ANY COMPANY
(INCLUDING VALUE LINE, INC.) WHILE IN POSSESSION OF INSIDE INFORMATION
REGARDING SUCH COMPANY. THIS PROHIBITION ON INSIDER TRADING APPLIES NOT ONLY
TO PERSONAL TRANSACTIONS, BUT ALSO BARS TRADING FOR CLIENT ACCOUNTS OR FOR
FAMILY MEMBERS OR FRIENDS WHEN IN POSSESSION OF INSIDE INFORMATION. IN
SHORT, "INSIDE INFORMATION" MEANS NON-PUBLIC INFORMATION (INFORMATION WHICH
IS NOT AVAILABLE TO INVESTORS GENERALLY) THAT A REASONABLE INVESTOR WOULD
CONSIDER TO BE IMPORTANT IN DECIDING WHETHER TO BUY, SELL, OR RETAIN A
SECURITY.
THE UNAUTHORIZED DISCLOSURE OF INSIDE INFORMATION IS ALWAYS WRONG AND
MAY HAVE THE MOST SERIOUS CONSEQUENCES. ANY BREACH OF THIS RULE WILL BE
REGARDED AS A SERIOUS CONTRAVENTION OF COMPANY REGULATIONS.
-2-
<PAGE>
2. TRADING AND OTHER RULES APPLICABLE TO OFFICERS AND EMPLOYEES
-------------------------------------------------------------------------
(a) Employees, including officers, are:
(1) forbidden to act as investment advisers, to operate any
security account management service, or to give any
investment advice to any person for profit or benefit,
whether direct or indirect, without the express prior
written authorization of the Chief Executive Officer or
President of Value Line, Inc.
(2) forbidden to trade against the interest of subscribers to any
of the Value Line Services, asset management clients, or any
Value Line Funds, for their own account or benefit, whether
direct or indirect, or for the account or benefit, whether
direct or indirect, of any other person.
(3) forbidden to recommend any securities transaction to any
Value Line Fund or asset management account without having
disclosed in writing his interest, if any, in the securities
or the issuer thereof to the Company's Compliance Officer or
Legal Counsel.
(4) forbidden from serving on the Board of Directors of any
publicly traded company without the express prior written
authorization of the Chief Executive Officer or President of
Value Line, Inc.
(5) forbidden from purchasing or selling any security until 7
calendar days AFTER all transactions for a Value Line Fund
or asset management account have been completed for that
security. A portfolio manager may not purchase or sell a
security for his or her own account within 7 calendar days
BEFORE or AFTER all transactions for a Value Line Fund or
asset management account have been completed for that security
if he acts as a portfolio manager for that Fund or account or
is a member of the portfolio management team for that Fund or
account.
(6) forbidden from PURCHASING or SELLING any security that has
been selected or is about to be recommended as a special
recommendation or stock highlight by any of the Value Line
Services or if its rank is being upgraded by one of the
Services until at least 1 business day after publication of
the Service.
(7) forbidden from SELLING any security if its rank is being
downgraded or if a Value Line Service is recommending that it
be sold until at least 1 business day after publication.
-3-
<PAGE>
("Publication" refers to the date of publication appearing
on a Service or the date of such publication's release to the
public, whichever is appropriate.)
(8) prohibited from participating in initial public offerings.
Purchases of new issues are allowed only in the secondary
markets.
(9) prohibited from acquiring securities in a private placement
without the express prior written authorization of the Chief
Executive Officer or President of Value Line, Inc.
(10) expected to seek to avoid day-trades and should be prepared
to hold securities for at least 60 calendar days in order to
avoid any conflict of interest.
(11) prohibited without the express prior written authorization
of the Chief Executive Officer or President of Value Line,
Inc., from accepting any offer made by any person whereby
the officer or that person would be enabled to purchase or sell
any security at a price, or under other conditions, more
favorable than those obtainable at the time by the general
public.
(12) prohibited from receiving any gift other than of a minor
value from any person that does business with Value Line, any
of its subsidiaries or any of the Value Line Funds.
IN ADDITION, AS SET FORTH IN SECTION 3, WITH RARE
EXCEPTIONS, ALL TRANSACTIONS MUST BE CLEARED IN ADVANCE BY THE
---
TRADING DEPARTMENT.
3. PRE-CLEARANCE OF TRADES APPLICABLE TO OFFICERS AND EMPLOYEES
-------------------------------------------------------------------------
NO OFFICER OR EMPLOYEE MAY ENGAGE IN ANY TRANSACTION IN ANY SECURITY
WITHOUT ADVANCE NOTIFICATION TO AND CLEARANCE BY THE TRADING DEPARTMENT, EXCEPT
AS SET FORTH BELOW. IF CLEARANCE IS DENIED, THIS FACT SHOULD BE CONSIDERED
AS CONFIDENTIAL INFORMATION AND MUST NOT BE DISCLOSED. In addition, the
acquisition of securities in a private placement or the purchase or sale of
any security at a price more favorable than that which is ascertainable at
the time by the general public also requires the express written
authorization of the Chief Executive Officer or Present of Value Line, Inc.
The fullest assistance will always be given to any employee who is in
doubt as to whether a particular transaction would CONTRAVENE EITHER THE
GENERAL PROHIBITIONS SET OUT IN SECTION 1 OR ANY OF THE SPECIFIC RULES SET
FORTH IN SECTION 2. Employees and officers are urged in any case where they
have the slightest doubt as to the propriety of a transaction, to refer it to
the Company's Compliance Officer or Legal Counsel.
-4-
<PAGE>
Provided the standards of Sections 1 and 2 are met, the following
transactions are exempted from the pre-clearance requirement:
(a) transactions effected in any account in which the employee has no
direct or indirect influence or control or beneficial interest;
(b) transactions in securities that are direct obligations of the
United States;
(c) purchases of shares in automatic dividend reinvestment programs;
(d) transactions in the shares of any registered open-end investment
company (mutual fund);
(e) transactions in banker's acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements.
4. REPORTING OBLIGATIONS APPLICABLE TO OFFICERS, DIRECTORS AND EMPLOYEES
-------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION REQUIRES VALUE LINE, INC. AND
OTHER INVESTMENT ADVISERS TO OBTAIN FROM OFFICERS, DIRECTORS AND EMPLOYEES,
AND TO MAINTAIN RECORDS OF, PARTICULARS OF THEIR SECURITIES TRANSACTIONS AND
OF OTHER TRANSACTIONS IN SECURITIES IN WHICH THEY MAY BE CONSIDERED TO HAVE A
BENEFICIAL INTEREST.
(a) OFFICERS AND EMPLOYEES
IN ORDER TO COMPLY WITH THE REPORTING REQUIREMENTS, OFFICERS AND
EMPLOYEES MUST (i) INSTRUCT THE BROKER DEALER OR BANK WITH OR THROUGH WHOM A
SECURITY TRANSACTION IS EFFECTED IN WHICH SUCH PERSON HAS, OR BY REASON OF
SUCH TRANSACTION, ACQUIRES ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP OF A
SECURITY TO FURNISH DUPLICATE COPIES OF TRANSACTION CONFIRMATIONS AND
STATEMENTS OF ACCOUNT AT THE SAME TIME THAT SUCH STATEMENTS ARE SENT TO THE
OFFICER OR EMPLOYEE AND (ii) REPORT BY MAY 30 OF EACH CALENDAR YEAR TO THE
COMPLIANCE DEPARTMENT THAT SUCH PERSON HAS EITHER FORWARDED ALL BROKERAGE
STATEMENTS WITH RESPECT TO TRANSACTIONS OR HAD NO TRANSACTIONS DURING THE
PREVIOUS HALF-YEAR.
(i) The foregoing requirements relate to all securities
transactions (purchases, sales, or other acquisitions or
dispositions) effected by or on behalf of the officer,
employee, his/her spouse, minor child, other household members,
accounts subject to the officer's or employee's discretion and
control and other accounts in which the employee has a
beneficial interest.
(ii) Every such transaction is to be reported, whether or not it
is effected directly or indirectly. Examples of transactions
in securities that indirectly
-5-
<PAGE>
benefit a person mentioned in subparagraph (i) above include
transactions that entitle such person to any of the rights or
benefits of ownership even though he or she is not the owner
of record. In addition to the family situations mentioned
above, beneficial ownership may also occur where such person
acquires or disposes of securities in the capacity of trustee,
executor, pledgee, agent or in any similar capacity, or where
any such person has a beneficial interest in the securities
under a trust, will, partnership or other arrangement, or
through a closely held corporation.
(b) DIRECTORS
(1) DIRECTORS OTHER THAN OUTSIDE FUND DIRECTORS. All Directors
other than outside Value Line Fund directors, must either comply with Section
4(a) as if it applied to such directors or file a report with the Compliance
Department within 10 days of the end of any calendar quarter covering every
transaction in which the director had, or by reason of the transaction,
acquired, any direct or indirect beneficial ownership of a security which
contains the following information: (a) the date of the transaction, title
and number of shares or interest rate, maturity and principal amount of each
security involved; (b) the nature of the transaction (i.e., a purchase, sale,
gift); (c) the price; (d) the name of the broker, dealer or bank through whom
the transaction was effected; and (e) the date the report is submitted to the
Compliance Department.
(2) OUTSIDE FUND DIRECTORS. The Securities and Exchange
Commission requires that any Director of the Value Line Funds (who is not an
interested person of a Fund or otherwise an officer, director or employee of
Value Line) must file a report with the Compliance Department within 10 days
of the end of any calendar quarter if such director knew, or "in the ordinary
course of fulfilling his or her official duties as a Fund director, should
have known," that during the 15 days BEFORE or AFTER the date of a
transaction by the director, the security is or was purchased or sold by a
Value Line Fund, or was being considered by a Value Line Fund or Value Line,
Inc. for purchase or sale. Ordinarily, reports would need to be filed only if
an outside director actually knows of a Fund transaction since, generally,
outside directors would not be expected to be in a position in which they
"should have known" of a Fund transaction.
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<PAGE>
(c) ACCESS PERSONS*
(1) INITIAL REPORTING REQUIREMENTS. No later than 10 days after
a person becomes an Access Person, such person must file a report with the
Compliance Department which contains the following information: (a) the title
and number of shares or principal amount of each security in which such
person has any direct or indirect beneficial ownership; (b) the name of the
broker, dealer or bank with whom such person maintains an account in which
the securities are held; and (c) the date the report is submitted to the
Compliance Department.
(2) ANNUAL REPORTING REQUIREMENTS. No later than May 30 of each
calendar year, each Access Person must file a report with the Compliance
Department which contains the following information: (a) the title and
number of shares or principal amount of security in which such person has any
direct or indirect beneficial ownership; (b) the name of the broker, dealer
or bank with whom such person maintains an account in which the securities
are held; and (c) the date the report is submitted to the Compliance
Department.
***
The provisions of this Policy Statement must be strictly observed.
Violations of this policy will be grounds for appropriate disciplinary
action, including, in the case of officers and employees, dismissal.
Pre-clearance and reporting of personal securities transactions do not
relieve anyone from responsibility for compliance with the proscriptions
against insider trading and tipping described in Section 1.
The Legal and Compliance Departments shall be responsible for the
interpretation and enforcement of the Policy Statement and Code of Ethics.
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* You are an Access Person if you are a director, officer or employee
of a Value Line Fund or of Value Line (or of any company in a control
relationship to Value Line) who, in connection with your regular
functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of securities by the Fund, or whose
functions relate to the making of any recommendation to the Fund with
respect to the purchase or sale of securities. If you are in doubt as
to your status, you should check with the Legal Department.
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