<PAGE>
INVESTMENT ADVISER
Value Line, Inc.
220 East 42nd Street, New York, NY 10017-5891 ANNUAL REPORT
AUGUST 31, 1995
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street, New York, NY 10017-5891
VALUE LINE
CUSTODIAN BANK U.S GOVERNMENT
State Street Bank and Trust Company SECURITIES
225 Franklin Street, Boston, MA 02110 FUND, INC.
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company c/o NFDS
P.O. Box 419729, Kansas City, MO 64141-6729
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas, New York, NY 10036-2798
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS
Jean Bernhard Buttner Leo R. Futia
Charles E. Reed Paul Craig Roberts
John W. Chandler
OFFICERS
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
David T. Henigson
VICE PRESIDENT, SECRETARY/TREASURER
Charles Heebner Robert E. Manning
VICE PRESIDENT VICE PRESIDENT
Jack M. Houston Stephen La Rosa
ASSISTANT ASSISTANT
SECRETARY/TREASURER SECRETARY/TREASURER
This report is issued for information of shareholders. [LOGO]
It is not authorized for distribution to prospective VALUE LINE
investors unless preceded or accompanied by a currently MUTUAL FUNDS
effective prospectus of the Fund (obtainable from the
Distributor). VLF 50694
<PAGE>
[LOGO] TO OUR VALUE LINE U.S. GOVERNMENT SECURITIES FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
Your Fund's fiscal year ended August 31, 1995, comprised two sharply contrasting
periods: one stormy and difficult, the other sunny and favorable to the bond
markets. The first, which ended in early February, teemed with troubles. Several
institutional investors experienced large and highly publicized losses from
leveraged positions in complex derivative securities. News of those
misadventures, coupled with the monetary authorities' unrelenting upward
pressure on interest rates, resulted in substantial downward pressure on bond
prices, accompanied by interest-rate volatility. The benchmark 30-year U.S.
Treasury bond began the period at 7.45% and rose above 8.00% before easing
slightly near the end of January.
The second, benign period got under way in early February. The Federal Reserve
announced one final boost to its target for the Federal Funds rate (the rate at
which banks borrow for overnight reserves). That action led to favorable
bond-market developments. The yield on the 30-year Treasury bond fell from
7.93%, just a week before the announcement of the Fed's last rate increase, to
6.52% in late June. Then, following the Fed's announcement on July 6th that it
was making a modest cut in the Federal Funds rate, yields declined further.
REVIEW OF PERFORMANCE AND STRATEGY
Amid the changing times your Fund maintained a conservative posture. The mix of
Treasury and agency bonds and mortgage-backed securities issued by government
agencies recorded a gain of 7.37% in total return for the 12 months ended August
31, 1995. Total return for the Lehman Brothers Aggregate Index was 11.30%, while
that of the Lehman Brothers Government Bond Index was 10.90%. As explained in
our semi-annual report, the disparity in returns resulted mainly from our
efforts in late 1994 to counter the dramatic slowdown in mortgage prepayments,
which could have increased the average maturity of our portfolio dangerously
during a period of rapidly rising interest rates.
For the six months ended August 31, 1995, the Fund earned a total return of
6.62%, compared to 7.79% for the Lehman Brothers Aggregate Index. The Lehman
Brothers Government Bond Index reported a return of 7.72% for the same period.
(Total return is the sum of capital appreciation or loss and reinvested interest
payments. Over longer time spans, market fluctuations tend to cancel one another
out, so that, for a typical bond fund, reinvested interest accounts for
virtually all of the total return.)
To meet our objective of providing maximum current income for our shareholders,
we hold investments in callable bonds and mortgage-backed securities. Although
such holdings support the interest income of the portfolio, they sometimes
penalize short-term performance (measured by total return). For example, they
perform less well over brief periods, when bond prices move sharply, than
Treasuries and other non-callable bonds with similar maturities. In conformity
with our mandate, all of our mortgage-backed securities are issued by agencies
of the U.S. government and by government-sponsored enterprises, and all are
backed by residential mortgages.
It is a continuing challenge to meet the investment objectives of our
shareholders. Interest rates today are substantially below rates that obtained
five years ago. As bonds mature or prepayments are received on mortgage-backed
securities, funds must be reinvested at lower rates. We encourage shareholders
to review the table entitled "Financial Highlights," on page 12 at the end of
this report. The line "Ratio of net
2
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TO OUR VALUE LINE U.S. GOVERNMENT SECURITIES FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
investment income to average net assets" demonstrates how the decline in
interest rates during the 1990s has lowered the investment return on average
assets--from 8.54% in 1991 to 6.58% in 1995. This four-year period traces a
sharp decline in dividends. As always, however, we continue to seek
investments that afford attractive income but do not carry imprudent risks.
Your Fund's management believes that the current portfolio of government bonds
and mortgage-backed securities is well structured to meet its objective of high
current return without undue risk to principal. As of August 31, 1995, 15.1% of
the Fund was invested in U.S. Treasury notes and bonds, 27.2% in notes and bonds
issued by U.S. government agencies, 47.8% in U.S. agency securities backed by
residential mortgages, and 15.0% in short-term cash equivalents.
We thank you for your continued confidence, and we look forward to serving your
investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
September 28, 1995
ECONOMIC OBSERVATIONS
The economy is giving off mixed signals. For example, housing activity,
benefitting from earlier reductions in mortgage rates, remains quite strong, and
production at the nation's factories is once more on the rise after a period of
weakness during the middle months of the year. Conversely, a number of retailers
are reporting soft sales, and average employment growth remains somewhat below
the levels one would normally associate with a vigorous business expansion.
On balance, though, we think the current picture is more positive than not,
largely because of the more favorable interest-rate structure vis-a-vis earlier
in the year. Moreover, we would expect business conditions to remain relatively
upbeat and for the long-running economic expansion to prove largely sustainable.
All in all, we sense that the upturn, which faltered in the second quarter, as
the economy grew by just 1.3%, will strengthen moderately over the final months
of the year and then retain this upward bias in 1996.
Such a scenario, however, is probably not conducive to a major relaxation in
Federal Reserve policies. To be sure, this moderately more positive economic
tone should hardly be the lightning rod for a new round of monetary tightening.
Rather, it just seems that the recent reduction in short-term interest rates
will not be the opening salvo in a multi-step process. At best, we now see one
or two additional rate cuts in the months ahead--barring any sudden reversal in
business fortunes.
3
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
[GRAPH]
The ten-year period covered by this graph is
from August 31, 1985, to August 31, 1995.
* PERFORMANCE DATA:
<TABLE>
<CAPTION>
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED
6/30/95 6/30/95 6/30/95
------------ ------------- --------------
<S> <C> <C> <C>
Average Annual Total Return 7.28% 7.22% 8.31%
Growth of an Assumed Investment of $10,000 $10,728 $14,169 $22,213
</TABLE>
*THE AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE-, FIVE-, AND TEN-YEAR PERIODS
ENDED AUGUST 31, 1995, WERE 7.37%, 7.21%, AND 8.18%, RESPECTIVELY. THE
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN ASSUMED
INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF
AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN ITS ORIGINAL COST.
4
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
SCHEDULE OF INVESTMENTS AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT COUPON DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (15.1%)
$ 5,000,000 U.S. Treasury Notes 5.875% 3/31/99 $ 4,976,555
16,000,000 U.S. Treasury Notes 7.75 1/31/00 17,024,976
16,000,000 U.S. Treasury Notes 7.125 2/29/00 16,654,976
- ------------ ------------
37,000,000 TOTAL U.S. TREASURY OBLIGATIONS
- ------------ (COST $38,284,844) 38,656,507
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (75.1%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (36.4%)
10,500,000 +Federal National Mortgage Association Notes 5.22 7/10/98 10,234,224
7,000,000 Federal National Mortgage Association Notes 5.30 12/10/98 6,801,410
5,000,000 Federal National Mortgage Association Notes 7.00 8/11/99 5,067,940
8,441,464 Federal National Mortgage Association REMIC Trust 1993-180 SB 2.774 (1)(3) 9/25/00 7,407,384
6,000,000 Federal National Mortgage Association Notes 5.45 10/10/03 5,603,772
5,000,000 Federal National Mortgage Association Notes 7.37 4/14/04 5,042,670
6,600,000 Federal National Mortgage Association REMIC Trust 1992-G13 PH 7.00 11/25/20 6,488,625
8,260,155 Federal National Mortgage Association REMIC Trust 1992-G31 W 8.00 9/25/21 8,337,594
5,192,187 Federal National Mortgage Association MBS Pool #312298 9.50 12/01/21 5,536,170
5,000,000 Federal National Mortgage Association REMIC Trust 1993-G9 K 7.25 5/25/22 4,887,500
6,290,805 Federal National Mortgage Association REMIC Trust 1993-2 H 16.00 1/25/23 8,162,320
9,571,433 Federal National Mortgage Association REMIC Trust 1994-107 F 5.87 (1) 4/25/23 9,098,843
1,770,851 Federal National Mortgage Association REMIC Trust 1993-99 SD 7.547 (1)(3) 4/25/23 1,601,514
10,370,000 Federal National Mortgage Association REMIC Trust 1993-162 C 3.00 8/25/23 8,736,725
- ------------ ------------
94,996,895 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
- ------------ (COST $94,081,184) 93,006,691
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (18.8%)
5,000,000 Federal Home Loan Mortgage Corporation Notes 7.91 3/17/99 5,010,505
5,000,000 *Federal Home Loan Mortgage Corporation C004-A1 (TBA) 7.00 * 4,956,250
3,260,767 Federal Home Loan Mortgage Corporation 1476 K 6.25 12/15/07 3,167,020
4,273,632 Federal Home Loan Mortgage Corporation 1561 S 8.116 (1)(3) 8/15/08 3,728,743
5,000,000 Federal Home Loan Mortgage Corporation 141 C 9.30 9/15/20 5,210,940
5,000,000 Federal Home Loan Mortgage Corporation 1379 G 7.50 4/15/21 5,040,625
8,362,000 Federal Home Loan Mortgage Corporation 1255 G 7.50 7/15/21 8,437,785
6,229,333 Federal Home Loan Mortgage Corporation 1775 G 9.50 11/15/23 6,774,400
6,161,460 Federal Home Loan Mortgage Corporation 1760 VD 5.87 (1) 2/15/24 5,864,939
- ------------ -------------
48,287,192 TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
- ------------ (COST $47,749,813) 48,191,207
-------------
5
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
SCHEDULE OF INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT COUPON DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL HOME LOAN BANK (6.7%)
$ 5,000,000 Federal Home Loan Bank Notes 6.54% 8/03/98 $ 4,992,560
7,000,000 Federal Home Loan Bank Notes 7.14 5/20/99 7,060,410
5,000,000 Federal Home Loan Bank Notes 8.25 2/23/00 5,059,165
- ------------ ------------
17,000,000 TOTAL FEDERAL HOME LOAN BANK
- ------------ (COST $17,081,250) 17,112,135
------------
TENNESSEE VALLEY AUTHORITY (5.8%)
5,000,000 Tennessee Valley Authority Series "A" 6.375 6/15/05 4,922,780
10,000,000 Tennessee Valley Authority 6.235 7/15/45 9,996,600
- ------------ ------------
15,000,000 TOTAL TENNESSEE VALLEY AUTHORITY
- ------------ (COST $14,925,940) 14,919,380
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (5.4%)
9,502,863 Government National Mortgage Association II
Adjustable Rate Mortgage Pool #8855 6.125 (2) 10/20/21 9,603,831
3,985,011 Government National Mortgage Association Project
- ------------ Loan Pool #262847 10.25 9/15/23 4,266,452
------------
13,487,874 TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
- ------------ (COST $13,702,620) 13,870,283
------------
RESOLUTION TRUST CORPORATION SECURITIES (2.0%)
5,000,000 Resolution Trust Corporation 1992-5 A-6 9.238 5/25/26 5,162,500
- ------------ ------------
5,000,000 TOTAL RESOLUTION TRUST CORPORATION
- ------------ (COST $5,081,250) 5,162,500
------------
193,771,961 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
- ------------ (COST $192,622,057) 192,262,196
------------
230,771,961 TOTAL INVESTMENTS (90.2%)
- ------------ (COST $230,906,901) 230,918,703
------------
6
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
AUGUST 31, 1995
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (15.0%)
REPURCHASE AGREEMENT (11.1%)
(INCLUDING ACCRUED INTEREST)
$ 28,500,000 Collateralized by $22,870,000 U.S. Treasury Bonds, 9.25%,
due 2/15/16, with a value of $29,129,730. (With State
Street Bank and Trust Company, N.A., 5.80%, dated
8/31/95, due 9/1/95, delivery value $28,504,592.) $ 28,504,592
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.9%)
10,000,000 Federal National Mortgage Association Discount Notes,
- ------------ Zero Coupon, Effective Yield 5.68%, due 9/18/95 9,973,178
------------
38,500,000 TOTAL SHORT-TERM INVESTMENTS
- ------------ (COST $38,477,770) 38,477,770
------------
EXCESS OF LIABILITIES OVER
CASH AND OTHER ASSETS (-5.2%) (13,392,693)
------------
NET ASSETS (100.0%) $256,003,780
------------
------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER OUTSTANDING SHARE ($256,003,780 DIVIDED BY 22,697,777
SHARES OF CAPITAL STOCK OUTSTANDING) $ 11.28
------------
------------
</TABLE>
(1) Floating Rate Mortgage Backed Security--Resets Monthly (rate in effect on
8/31/95).
(2) Adjustable Rate Mortgage Obligation--Resets Annually (rate in effect on
8/31/95).
(3) Inverse Floater--Floating Rate Mortgage Backed Security whose interest
rate fluctuates in the opposite direction from general market
rates (Rate in effect on 8/31/95).
* TBA--Securities purchased on a forward commitment basis with an
approximate principal amount and no definite maturity date. The
actual principal amount and the maturity will be determined upon
settlement.
+ A portion of this security has been segregated for settlement of a TBA
position.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF ASSETS
AND LIABILITIES
AT AUGUST 31, 1995
- -----------------------------------------------------------
ASSETS:
Investment securities at value
(Cost--$230,906,901) $ 230,918,703
Short-term investments
(Cost--$38,477,770) 38,477,770
Cash 70,394
Interest receivable 1,904,970
Receivable for capital shares sold 64,405
------------
TOTAL ASSETS 271,436,242
------------
LIABILITIES:
Payable for securities purchased 14,923,837
Payable for capital shares repurchased 231,472
Accrued expenses:
Advisory fee 108,635
Other 168,518
------------
TOTAL LIABILITIES 15,432,462
------------
NET ASSETS:
Capital stock, at $1 par value (authorized
100,000,000, outstanding 22,697,777
shares) 22,697,777
Additional paid-in capital 278,392,726
Undistributed investment income--net 3,287,557
Accumulated net realized loss on
investments (48,386,082)
Unrealized net appreciation of investments 11,802
------------
NET ASSETS $ 256,003,780
------------
------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE
($256,003,780 DIVIDED BY 22,697,777
SHARES OUTSTANDING) $ 11.28
------------
------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
AUGUST 31, 1995
- -----------------------------------------------------------
INVESTMENT INCOME:
Interest income $ 20,537,434
------------
EXPENSES:
Advisory fee 1,414,604
Transfer agent fees 170,254
Postage 50,573
Auditing and legal fees 47,133
Custodian fees 45,428
Printing and stationery 38,046
Registration and filing fees 35,761
Telephone and wire charges 30,421
Insurance, dues, and other 21,684
Directors' fees and expenses 11,636
------------
TOTAL EXPENSES 1,865,540
------------
INVESTMENT INCOME--NET 18,671,894
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS--NET:
Realized Loss--Net (21,392,006)
Change in Unrealized Appreciation/
Depreciation 20,178,999
------------
NET REALIZED LOSS AND CHANGE IN NET
UNREALIZED APPRECIATION/DEPRECIATION
ON INVESTMENTS (1,213,007)
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 17,458,887
------------
------------
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1995, AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 18,671,894 $ 27,850,933
Realized loss on investments--net (21,392,006) (25,645,494)
Change in unrealized appreciation (depreciation) 20,178,999 (37,015,568)
------------ ------------
Net increase (decrease) in net assets from
operations 17,458,887 (34,810,129)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net (18,519,083) (32,217,539)
Realized gain from investment transactions--net -- (11,348,796)
------------ ------------
(18,519,083) (43,566,335)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 24,282,328 102,436,868
Proceeds from reinvestment of distributions to
shareholders 14,937,817 36,542,534
Cost of shares repurchased (121,634,092) (177,836,272)
------------ ------------
Decrease from capital share transactions (82,413,947) (38,856,870)
------------ ------------
Total Decrease (83,474,143) (117,233,334)
NET ASSETS:
Beginning of year 339,477,923 456,711,257
------------ ------------
End of year $256,003,780 $339,477,923
------------ ------------
------------ ------------
Undistributed investment income--net, at end of year $ 3,287,557 $ 3,134,746
------------ ------------
------------ ------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
(A) SECURITY VALUATION. Where market quotations are readily available,
portfolio securities are valued at the midpoint between the latest available and
representative asked and bid prices, 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 valuation date. The Fund values mortgage-backed
securities other than GNMA's (Government National Mortgage Association) on the
basis of valuations provided by dealers in such securities. Some of the general
factors that 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
9
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
that influence the market in which these securities are
purchased and sold. Determination of values may involve subjective judgment, as
the actual market value of a particular security can be established only by
negotiation between the parties in a sales transaction. The values for GNMAs
and agency debentures are determined on the valuation date by reference to
valuations obtained from an independent pricing service that 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. Short-term
instruments with maturities of 60 days or less at the date of purchase are
valued at amortized cost, which approximates market value. Other assets and
securities for which market valuations are not readily available will be valued
at fair value as the Board of Directors may determine.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements, and to distribute all of its
income and capital gains to its shareholders. Therefore, no Federal income-tax
or excise-tax provision is required.
(D) SECURITY TRANSACTIONS AND RELATED INCOME. Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses on securities transactions are determined using the identified-cost
method, and interest income is accrued as earned. In computing net investment
income, the Fund amortizes premiums and discounts on securities owned. The Fund
purchases stripped mortgage-backed securities at premiums and discounts. The
Fund amortizes such premiums on interest-only securities using the
yield-to-maturity method. Cash is received based on the stated coupon rate, and
interest income is earned based on the security's effective yield-to-maturity.
When the Fund purchases principal-only securities, although no interest payments
are received, the discounts are accrued using the yield-to-maturity method based
on the effective yield-to-maturity of the security.
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS, AND DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows:
1995 1994
----------- -----------
Shares sold 2,227,119 8,175,160
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,377,208 2,944,724
----------- -----------
3,604,327 11,119,884
Shares repurchased (11,213,352) (14,800,945)
----------- -----------
Net decrease (7,609,025) (3,681,061)
----------- -----------
Dividends per share $.70000 $ .93509
----------- -----------
----------- -----------
Distributions per share
from net realized gains $ -- $ .33077
----------- -----------
----------- -----------
10
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
AUGUST 31, 1995
- --------------------------------------------------------------------------------
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
In June 1995, the Fund's Board of Directors declared a dividend from net
investment income of $.17 per share payable on September 19, 1995, to
shareholders of record on September 13, 1995.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
1995
-------------
PURCHASES:
U.S. Treasury Obligations $ 54,753,594
U.S. Government Agency Obligations
and Other Investment Securities 434,312,523
-------------
$489,066,117
-------------
-------------
SALES AND REDEMPTIONS:
U.S. Treasury Obligations $ 61,629,990
U.S. Government Agency Obligations
and Other Investment Securities 498,845,274
-------------
$560,475,264
-------------
-------------
At August 31, 1995, the aggregate cost of investment securities and short-term
investments for Federal income tax purposes was $269,384,671. The aggregate
appreciation and depreciation of investments at August 31, 1995, based on a
comparison of investment values and their costs for Federal income-tax purposes,
was $2,693,085 and $2,681,283 respectively, resulting in a net appreciation of
$11,802.
For Federal income-tax purposes, the Fund had a net capital-loss carryover at
August 31, 1995, of approximately $40,236,000 that will expire in the year 2003.
Realized losses incurred after October 31, if so elected by the Fund, are
deemed to arise on the fist day of the following fiscal year. The Fund incurred
and elected to defer losses of approximately $8,151,000. To the extent future
capital gains are offset by such capital losses, the Fund does not anticipate
distributing any such gains to the shareholders.
4. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES, AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $1,414,604 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the year ended August 31, 1995.
This was computed at the rate of 1/2 of 1% of the Fund's average daily net
assets during the period and was paid monthly.
The Adviser provides research, investment programs, and supervision of the
investment portfolio and pays costs of administrative services, office space,
equipment, and compensation of administrative, bookkeeping, and clerical
personnel necessary for managing the affairs of the Fund. The Adviser also
provides persons, satisfactory to the Fund's Board of Directors, to act as
officers of the Fund and pays their salaries and wages. The Fund bears all
other costs and expenses. If the aggregate expenses of the Fund, other than
taxes, interest, brokerage commissions and extraordinary expenses, exceed the
expense limitation imposed by any state in which the Fund sells its shares, the
advisory fee will be reduced by the amount of such excess, or the amount of such
excess will be refunded. No such reimbursement was required for the year ended
August 31, 1995. During the year ended August 31, 1995, the Fund paid the
Adviser $3,780 for printing services.
Certain officers and directors of the Adviser and its subsidiary, Value Line
Securities, Inc. (the Fund's distributor and a registered broker/dealer), are
also officers and a director of the Fund.
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan at August 31, 1995, owned 136,398 shares of the Fund's capital
stock, representing 0.6% of the outstanding shares.
11
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per-share data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.20 $13.44 $13.06 $12.39 $11.82
-------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .74 .82 .93 .88 .93
Net gains or losses on securities
(both realized and unrealized) .04 (1.80) .44 .68 .64
-------- -------- -------- -------- --------
Total income (loss) from investment
operations .78 (.98) 1.37 1.56 1.57
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (.70) (.93) (.89) (.89) (1.00)
Distributions from capital gains -- (.33) (.10) -- --
-------- -------- -------- -------- --------
Total distributions (.70) (1.26) (.99) (.89) (1.00)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $11.28 $11.20 $13.44 $13.06 $12.39
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 7.37% -7.87% 11.07% 13.11% 13.96%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $256,004 $339,478 $456,711 $424,330 $336,523
Ratio of operating expenses to average
net assets .66% .63% .61% .64% .64%
Ratio of net investment income to average
net assets 6.58% 6.58% 7.29% 7.47% 8.54%
Portfolio turnover rate 193% 100% 169% 130% 79%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF THE VALUE LINE U.S. GOVERNMENT
SECURITIES FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Value Line U.S. Government
Securities Fund, Inc. (the "Fund") at August 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1995, by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
October 23, 1995
13
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective. The Fund invests substantially
all of its assets in common stocks or securities convertible into common stock.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth
of capital by investing not less than 80% of its assets in "special situations."
No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current
income consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983 -- VALUE LINE CENTURION FUND seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance. The Fund is available to investors only through
the purchase of Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income securities.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal income
taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times. The Fund is available to investors only through the
purchase of the Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1992 -- THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND seeks
high current income consistent with low volatility of principal by investing
primarily in adjustable rate U.S. Government securities.
1993 -- VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
- --------------------------------------------------------------------------------
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818,
24 HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
14
