<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust
Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust
SERVICING AGENT Co.
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 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 Jean Bernhard Buttner
DIRECTORS John W. Chandler
Leo R. Futia
Charles E. Reed
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
David T. Henigson
VICE PRESIDENT,
SECRETARY/TREASURER
Nathan N.J. Grant
VICE PRESIDENT
Bruce H. Alston
VICE PRESIDENT
Jack M. Houston
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
</TABLE>
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE
RECORDS OF THE FUND WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS
AND, ACCORDINGLY, THEY DO NOT EXPRESS AN OPINION THEREON.
THIS UNAUDITED REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS
NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS
PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE
TRUST (OBTAINABLE FROM THE DISTRIBUTOR).
VLF702101
------------------------------------
SEMI-ANNUAL REPORT
------------------------------------
FEBRUARY 28, 1997
----------------------------------------
VALUE LINE
U.S. GOVERNMENT
SECURITIES
FUND, INC.
[LOGO]
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
To Our Value Line
- -------------------------------------------
TO OUR SHAREHOLDERS:
The first six months of your fund's fiscal year was an interesting one for the
fixed-income markets, with significant fluctuations in short and long-term
interest rates in response to the changing economic landscape. The yield on the
30-year Treasury bond began the period at 7.12%, and started to fall almost
immediately thereafter. Interest rates had risen to their highs of 1996 during
the summer on the heels of unexpectedly strong second quarter growth in the
economy. With the reduction in economic activity that began to surface in the
third quarter, however, long-term rates started to decline, culminating in a low
yield of 6.35% on the 30-year bond in November. However, as 1996 ended and 1997
commenced, several factors started to reverse this trend. Consumer purchase
activity resumed; lower interest rates increased housing and construction
expenditures; and economic growth in the fourth quarter of 1996 matched the
strength of the second period, forcing long-term rates to begin retracing their
descent, ending the period at 6.80%.
The Value Line U.S. Government Securities Fund's performance during this period
was noteworthy. Indeed, your fund outperformed its peer group for the six months
ended February 28, 1997, by returning 5.04%, while the average return for all
funds with the same investment objective was 4.87%. A comparable index, the
Lehman Brothers Mutual Fund Government Mortgage Index returned 5.20% over the
same period. (The Index makes no allowance for management costs.)
Your fund's management intends to actively manage the assets of the portfolio,
allocating between government, agency and mortgage-backed securities in order to
provide the highest possible income and total return consistent with safety of
capital. For example, the fund recently added positions in securities backed by
U.S. Government Agency guaranteed multifamily loans structured with significant
prepayment protection. These bonds offer higher yields than straight Agency
debentures, with the same minimal credit risk. By identifying and exploiting
opportunities, such as this, management believes it can offer superior returns.
The fund also maintains a significant position in Agency single-family
mortgage-backed securities, as they provide higher yields than U.S. Agencies and
Treasuries, and utilizes intensive analytical systems designed to quantify risk
and maximize total return.
We thank you for your continued confidence in Value Line, and we look forward to
serving your investment needs in the future.
Sincerely,
[SIGNATURE]
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
April 16, 1997
- --------------------------------------------------------------------------------
2
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
U.S. Government Securities Fund Shareholders
- -------------------------------------------
ECONOMIC OBSERVATIONS
The current economic expansion is now entering its seventh year. Although this
does not yet qualify as the longest peacetime period of growth on record (both
the 1960s and the 1980s experienced somewhat longer upcycles), it is still quite
noteworthy, especially since there are as yet few signs that this lengthy run of
uninterrupted prosperity is about to draw to a close. In fact, recent reports
show that there is still a good deal of strength around, with high doses of
consumer confidence, continuing solid job growth, and healthy levels of retail,
housing, and manufacturing activity pointing to economic growth that will likely
stay above 2% for most, if not all, of 1997.
Inflation, meanwhile, continues to be under control, with prices at both the
producer (or wholesale) and consumer levels either falling or going up only
modestly. This healthy inflation trend, which is remarkable given the longevity
of the business expansion, is, moreover, showing few signs of running its
course. Underscoring our optimism in this area is the fact that there is still a
lack of serious shortages on either the labor or the raw materials fronts,
although we do note that the recent pickup in wage pressures could, if
unchecked, pose some threat down the road.
Interest rates, meanwhile, reflecting the likely moderate pace of upcoming
economic growth and the benign nature of inflation, are unlikely to change all
that much over the next year. Nevertheless, we caution that recent remarks by
Federal Reserve Chairman Alan Greenspan, in which he indicated that the Fed has,
in the past, occasionally raised rates before higher inflation actually took
hold, and the subsequent one-quarter of a percentage point increase in
short-term interest rates, would seem to suggest that the central bank will not
be shy about tightening the credit reins further this year, if it sees the need.
An additional upward move in rates, if sufficiently pronounced, would not be
good news for either the stock or the bond markets, or, ultimately, for the U.S.
economy.
PERFORMANCE DATA:*
<TABLE>
<CAPTION>
GROWTH OF
AN ASSUMED AVERAGE
INVESTMENT ANNUAL TOTAL
OF $10,000 RETURN
------------- -------------
<S> <C> <C>
1 year ended 12/31/96... $10,393 3.93%
5 years ended
12/31/96................ $12,400 4.40%
10 years ended
12/31/96................ $19,914 7.13%
</TABLE>
* THE AVERAGE ANNUAL TOTAL RETURN FOR THE ONE, FIVE AND TEN YEAR PERIODS ENDED
FEBRUARY 28, 1997, WERE 5.06%, 4.82% AND 7.00%, 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.
- --------------------------------------------------------------------------------
3
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
Schedule of Investments (unaudited)
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (8.3%)
$ 8,000,000 U.S. Treasury Notes 6.38% 5/15/99 $ 8,040,400
8,000,000 U.S. Treasury Notes 7.88 11/15/99 8,329,280
- ------------ ------------
16,000,000 TOTAL U.S. TREASURY OBLIGATIONS (COST $16,451,250) 16,369,680
- ------------ ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (91.4%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (67.2%)
14,000,000 Federal National Mortgage Association Notes 9.05 4/10/00 15,015,280
3,977,350 Federal National Mortgage Association Pool #313031 6.83 7/01/03 3,982,759
5,000,000 Federal National Mortgage Association Pool #360010 7.05 9/01/03 5,056,250
25,218,869 Federal National Mortgage Association Pool #313443 (TBA) 6.78 4/01/04 25,155,822
6,960,970 Federal National Mortgage Association Pool #313032 7.04 7/01/06 7,009,418
2,961,737 Federal National Mortgage Association Pool #73817 6.93 12/01/06 2,958,628
5,550,524 Federal National Mortgage Association REMIC Trust 93-59 K 6.00 12/25/07 5,402,769
6,546,154 Federal National Mortgage Association REMIC Trust 93-192 SB 7.22(1)(2) 10/25/08 5,312,613
10,000,000 Federal National Mortgage Association REMIC Trust 93-156 B 6.50 4/25/18 9,512,100
8,000,000+ Federal National Mortgage Association REMIC Trust 93-137 PG 6.00 9/25/19 7,780,000
10,000,000 Federal National Mortgage Association REMIC Trust 1992-129 JA 7.00 7/25/20 9,791,000
9,553,328 Federal National Mortgage Association REMIC Trust 1996-46 L 6.50 5/25/21 9,436,681
7,060,000 Federal National Mortgage Association REMIC Trust 1993-122 C 6.50 2/25/23 6,443,097
10,000,000 Federal National Mortgage Association REMIC Trust 1993-223 C 6.50 5/25/23 9,586,900
10,000,000 Federal National Mortgage Association REMIC Trust 1996-7 J 6.50 9/25/24 9,253,700
- ------------ ------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
134,828,932 (COST $132,562,767) 131,697,017
- ------------ ------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (19.6%)
5,714,885 Federal Home Loan Mortgage Corporation 1679 A 5.25 9/15/06 5,609,160
4,878,150 Federal Home Loan Mortgage Corporation 1564 SG 8.03(1)(2) 8/15/08 4,170,819
13,665,502+ Federal Home Loan Mortgage Corporation 1853 D 7.00 12/15/20 13,669,602
6,691,000 Federal Home Loan Mortgage Corporation 1674 B 6.05 10/15/21 6,084,126
9,750,000 Federal Home Loan Mortgage Corporation 1829 L 6.50 4/15/24 8,878,594
- ------------ ------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
40,699,537 (COST $38,303,352) 38,412,301
- ------------ ------------
RESOLUTION TRUST CORPORATION SECURITIES (2.6%)
4,999,819 Resolution Trust Corporation 1992-5 A-6 9.24 5/25/26 5,120,964
- ------------ ------------
TOTAL RESOLUTION TRUST CORPORATION
4,999,819 (COST $5,081,066) 5,120,964
- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
FEBRUARY 28, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.0%)
$ 3,947,084 Government National Mortgage Association Project Loan Pool
#262847 10.25% 9/15/23 $ 3,947,084
3,947,084 TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (COST
$4,018,598) 3,947,084
184,475,372 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $179,965,783) 179,177,366
200,475,372 TOTAL INVESTMENT SECURITIES (99.7%) (COST $196,417,033) 195,547,046
- ------------ ------------
REPURCHASE AGREEMENT (2.0%) (including accrued interest)
4,000,000 Collateralized by $3,815,000 U.S. Treasury Notes 7.50% due
05/15/02, with a value of $4,083,973; (with First Chicago
Capital Markets, Inc., 5.33%, dated 2/28/97, due 3/3/97,
delivery value $4,001,777) 4,000,592
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS (-1.7%) (3,407,563)
------------
NET ASSETS (100.0%) $196,140,075
------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($196,140,075 DIVIDED BY 17,837,515
SHARES OF CAPITAL STOCK OUTSTANDING) $ 11.00
------------
</TABLE>
(1)RESETS MONTHLY. RATE DISCLOSED IS THAT IN EFFECT ON 2/28/97.
(2)INVERSE FLOATER -- FLOATING RATE MORTGAGE-BACKED SECURITY WHOSE INTEREST RATE
RESETS IN THE OPPOSITE DIRECTION OF MARKET RATE OF INTEREST TO WHICH THE
INVERSE FLOATER IS INDEXED. AN INVERSE FLOATER MAY BE CONSIDERED TO BE
LEVERAGED TO THE EXTENT THAT ITS INTEREST RATE VARIES BY A MAGNITUDE THAT
EXCEEDS THE MAGNITUDE OF THE CHANGE IN THE INDEX RATE OF INTEREST.
+ A PORTION OF THIS SECURITY HAS BEEN SEGREGATED FOR SETTLEMENT OF A TBA
POSITION.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AT FEBRUARY 28, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment securities, at value
(Cost-$196,417,033)................. $195,547,046
Repurchase agreement (Cost-
$4,000,592)......................... 4,000,592
Cash.................................. 116,870
Receivable for securities sold........ 20,721,385
Interest receivable................... 1,703,994
Receivable for capital shares sold.... 7,038
------------
TOTAL ASSETS...................... 222,096,925
------------
LIABILITIES:
Payable for securities purchased...... 25,275,909
Payable for capital shares
repurchased......................... 488,615
ACCRUED EXPENSES:
Advisory fee.......................... 76,149
Other................................. 116,177
------------
TOTAL LIABILITIES................. 25,956,850
------------
NET ASSETS:........................... $196,140,075
------------
NET ASSETS CONSIST OF:
Capital stock, at $1 par value
(authorized 100,000,000, outstanding
17,837,515 shares).................. $ 17,837,515
Additional paid-in capital............ 229,035,177
Undistributed investment income-net... 2,232,140
Accumulated net realized loss on
investments......................... (52,094,770)
Unrealized net depreciation of
investments......................... (869,987)
------------
NET ASSETS............................ $196,140,075
------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER OUTSTANDING
SHARE ($196,140,075 DIVIDED BY
17,837,515 SHARES OUTSTANDING)...... $ 11.00
------------
</TABLE>
Statement of Operations
for the six months ended February 28, 1997 (unaudited)
- ---------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest income........................ $ 7,526,490
-----------
EXPENSES:
Advisory fee........................... 514,945
Transfer agent fees.................... 53,776
Auditing and legal fees................ 25,576
Postage................................ 18,405
Printing............................... 14,774
Custodian fees......................... 13,517
Telephone.............................. 10,407
Registration and filing fees........... 10,227
Insurance, dues and other.............. 7,529
Directors' fees and expenses........... 7,145
-----------
Total Expenses Before Custody
Credits........................... 676,301
Less: Custody Credits.............. (2,637)
-----------
Net Expenses....................... 673,664
-----------
INVESTMENT INCOME-NET.................. 6,852,826
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS-NET:
Realized Gain-Net.................. 424,955
Change in Unrealized
Appreciation (Depreciation)....... 3,057,175
-----------
NET REALIZED GAIN AND CHANGE IN NET
UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS........ 3,482,130
-----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS........................... $10,334,956
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED FEBRURARY 28, 1997 (UNAUDITED) AND FOR THE YEAR ENDED
AUGUST 31, 1996
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1997 YEAR ENDED
(UNAUDITED) AUGUST 31, 1996
<S> <C> <C>
-----------------------------------
OPERATIONS:
Investment income-net................................................. $ 6,852,826 $ 15,750,414
Realized gain (loss) on investments-net............................... 424,955 (4,133,643)
Change in unrealized appreciation (depreciation)...................... 3,057,175 (3,938,964)
-----------------------------------
Net increase in net assets from operations............................ 10,334,956 7,677,807
-----------------------------------
DIVIDENDS TO SHAREHOLDERS:
Investment income-net................................................. (7,387,719 ) (16,270,938 )
-----------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares.......................................... 8,725,117 30,038,363
Proceeds from reinvestment of distributions to shareholders........... 5,913,580 12,860,558
Cost of shares repurchased............................................ (36,335,353 ) (75,420,076 )
-----------------------------------
Decrease from capital share transactions.............................. (21,696,656 ) (32,521,155 )
-----------------------------------
TOTAL DECREASE.......................................................... (18,749,419 ) (41,114,286 )
NET ASSETS:
Beginning of period................................................... 214,889,494 256,003,780
-----------------------------------
End of period......................................................... $ 196,140,075 $ 214,889,494
-----------------------------------
Undistributed investment income-net, at end of period................... $ 2,232,140 $ 2,767,033
-----------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
Value Line U.S. Government Securities Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company whose primary investment objective is to obtain
maximum income without undue risk to principal. Capital preservation and
possible capital appreciation are secondary objectives.
The following significant accounting principles are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(A) SECURITY VALUATION. Where market maker 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
which may be considered by the dealers in arriving at such valuations include
the fundamental analytic data relating to the security and an evaluation of the
forces which influence the market in which these securities are purchased and
sold. Determination of values may involve subjective judgment, as the actual
market value of a particular security can be established only by negotiation
between the parties in a sales transaction. The values for GNMA's and agency
debentures 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. Short-term instruments with maturities of
60 days or less at the date of purchase are valued at amortized cost, which
approximates market value. Other assets and securities for which market
valuations are not readily available will be valued at fair value as the Board
of Directors may determine in good faith.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act, and to
distribute all of its taxable income and capital gains to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) SECURITY TRANSACTIONS AND RELATED INCOME. Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses on securities transactions are determined using the identified cost
method and interest income is accrued as earned. In computing net investment
income, the Fund amortizes premiums and discounts on securities owned. The Fund
- --------------------------------------------------------------------------------
8
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
FEBRUARY 28, 1997
- -------------------------------------------
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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31,
(UNAUDITED) 1996
<S> <C> <C>
------------------------------
Shares sold......... 788,969 2,709,711
Shares issued to
shareholders in
reinvestment of
dividends......... 541,914 1,162,193
------------------------------
1,330,883 3,871,904
Shares
repurchased....... (3,297,284 ) (6,765,764 )
------------------------------
Net decrease........ (1,966,401 ) (2,893,860 )
------------------------------
Dividends per
share............. $ .39 $ .77
------------------------------
</TABLE>
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
On March 21, 1997 the Fund's Board of Directors declared a quarterly dividend
from net investment income of $.185 per share payable on March 26, 1997 to
shareholders of record on March 24, 1997.
3.PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1997
(UNAUDITED)
-----------------
<S> <C>
PURCHASES:
U.S. Treasury Obligations........ $ 41,727,813
U.S. Government Agency
Obligations and Other
Investment Securities.......... 156,752,118
-----------------
$ 198,479,931
-----------------
SALES AND REDEMPTIONS:
U.S. Treasury Obligations........ $ 57,702,266
U.S. Government Agency
Obligations and Other
Investment Securities.......... 146,956,273
-----------------
$ 204,658,539
-----------------
</TABLE>
At February 28, 1997, the aggregate cost of investment securities and short-term
investments for federal income tax purposes was $196,417,033. The aggregate
appreciation and depreciation of investments at February 28, 1997, based on a
comparison of investment values and their costs for federal income tax purposes,
were $1,053,871 and $1,923,858 respectively, resulting in a net depreciation of
$869,987.
For federal income tax purposes, the Fund had a net capital loss carryover at
August 31, 1996 of approximately $49,212,000 which will expire in the year 2004.
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. The Fund incurred and
elected to defer losses of approximately $3,308,000. To the extent future
capital gains are offset by such capital losses, the Fund does not anticipate
distributing any such gains to the shareholders.
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------
4.INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES AND
TRANSACTIONS WITH AFFILIATES
An advisory fee of $514,945 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the period ended February 28, 1997.
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 and employees of the Fund and pays their salaries and wages. The Fund
bears all other costs and expenses.
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 February 28, 1997 owned 214,536 shares of the Fund's capital
stock, representing 1.2% of the outstanding shares. In addition, officers and
directors owned 212,844 shares, representing 1.2% of the outstanding shares.
- --------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
1997 ----------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 10.85 $ 11.28 $ 11.20 $ 13.44 $ 13.06 $ 12.39
--------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income .37 .77 .74 .82 .93 .88
Net gains or losses on
securities (both realized
and unrealized)........... .17 (.43) .04 (1.80) .44 .68
--------------------------------------------------------------------------------------
Total income (loss) from
investment operations..... .54 .34 .78 (.98) 1.37 1.56
--------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net
investment income......... (.39) (.77) (.70) (.93) (.89) (.89)
Distributions from capital
gains..................... -- -- -- (.33) (.10) --
--------------------------------------------------------------------------------------
Total distributions....... (.39) (.77) (.70) (1.26) (.99) (.89)
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 11.00 $ 10.85 $ 11.28 $ 11.20 $ 13.44 $ 13.06
--------------------------------------------------------------------------------------
TOTAL RETURN.................. 5.04%+ 3.06% 7.37% (7.87)% 11.07% 13.11%
--------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................. $196,140 $214,889 $256,004 $339,478 $456,711 $424,330
Ratio of operating expenses to
average net assets.......... .66%(1)* .65%(1) .66% .63% .61% .64%
Ratio of net investment income
to average net assets....... 6.66%* 6.74% 6.58% 6.58% 7.29% 7.47%
Portfolio turnover rate....... 98%+ 158% 193% 100% 169% 130%
</TABLE>
(1)BEFORE OFFSET OF CUSTODY CREDITS.
+ NOT ANNUALIZED
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
VALUE LINE U.S. GOVERNMENT SECURITIES FUND, INC.
THE VALUE LINE FAMILY OF FUNDS
- ---------------------------------------------------------------------
1950--THE VALUE LINE FUND seeks long-term growth of capital 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.
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 to
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.
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.
1992--VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing primarily in a diversified
portfolio of investment-grade debt 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 ASSETS 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.
1995--VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
- --------------------------------------------------------------------------------
12
