================================================================================
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
February 28, 1998
- --------------------------------------------------------------------------------
Value Line
U.S. Government
Securities
Fund, Inc.
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
To Our Value Line
================================================================================
To Our Shareholders
We are pleased to report that your fund returned 9.59% for the twelve months
ended February 28, 1998. The unmanaged Lehman Mutual Fund Government/Mortgage
Index returned 10.27% for the same period. It is worth noting that the Fund's
expense ratio of 0.66% is quite low, by industry standards and about half the
Lipper peer group average expense of 1.26% for government bond funds.
The Fund's returns were achieved during a period of sound fiscal and monetary
policy resulting in a decline in interest rates. As 1997 began, interest rates
started a climb that saw the 30-year Treasury bond exceed the 7% mark. By late
spring, the bond market outlook began to brighten as the Federal budget deficit
declined and the net supply of government financing was reduced. The 30-year
Treasury bond rallied and yields dropped to the 6.55% area. In October, the
Asian crisis rocked the world's financial markets with the U.S. stock market
falling over 500 points on October 27th, the single largest point drop in
history. The government bond market benefited as investors fled from the equity
markets to the shelter of the bond market, pushing yields to a low of 5.69% in
January.
The Fund's management team believes that the major decline in interest rates is
behind us and the bond market is likely to trade in a narrow range. In this
environment, the fund will continue to emphasize the highest quality government
securities and to seek opportunities in this sector to add value to the fund's
overall performance. One area of value is the government mortgage-backed sector
with its excellent credit quality and high coupon income and potential for
superior 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,
/s/ Jean Bernhard Buttner
----------------------------
Jean Bernhard Buttner
Chairman and President
April 2, 1998
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
U.S. Government Securities Fund Shareholders
================================================================================
Economic Observations
The economic expansion remains alive and well, as we make our way through the
first few months of 1998. To be sure, the uptrend is not proceeding at 1997's
frenetic pace, when growth averaged better than 3.5% for the full 12 months.
But, with most of the key consumer and industrial markets continuing to show
surprising resiliency, and with jobs still being created at a strong pace, the
economy now looks as though it will expand by 2.5%-3.0% during the opening six
months of the year.
Meanwhile, the difficulties in Asia seem as though they will have only a
moderate effect on this nation's business uptrend going forward. Obviously, the
problems afflicting that part of the globe will lead to selective reductions in
demand for goods and services produced in the United States. Nevertheless,
assuming that the affected nations take the remedial steps recommended by the
leading international monetary authorities and the situation there begins to
stabilize, the likely opening-half rate of growth could well be maintained for
the balance of the year. That's a slightly better showing than we would have
forecast several months earlier.
This suggests that the Federal Reserve will keep interest rates about where they
are for the time being. That, in fact, would seem to be the sensible approach.
The economy is still too strong and the labor markets too tight (thereby keeping
alive the threat of higher inflation) for the Fed to think of relaxing the
credit reins at this point. At the same time, the situation in Asia is still
unresolved. And despite some hopeful signs there, at least a modest threat to
our economic well being is still present. Thus, to raise rates with that
uncertainty still around would likewise probably be counterproductive.
Performance Data:*
Growth of
an Assumed Average
Investment of Annual
$10,000 Total Return
------------- ------------
1 year ended 12/31/97............... $10,922 9.22%
5 years ended 12/31/97.............. $12,741 4.96%
10 years ended 12/31/97............. $21,022 7.71%
* The average annual total return for the one, five and 10 year periods ended
February 28, 1998, were 9.59%, 4.55% and 7.38%, 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.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
===========================================================================================================
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (16.6%)
$ 15,000,000 U.S. Treasury Notes........................................ 5.88% 7/31/99 $ 15,060,450
16,000,000 U.S. Treasury Notes........................................ 5.75 8/15/03 16,085,920
------------ ------------
31,000,000 TOTAL U.S. TREASURY OBLIGATIONS (Cost $30,786,938) ........ 31,146,370
------------ ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (76.0%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (42.9%)
7,825,849 Federal National Mortgage Association Pool #313031......... 6.83 7/01/03 8,066,024
15,095,648 Federal National Mortgage Association Pool #313443......... 6.78 4/01/04 15,571,463
8,661,304 Federal National Mortgage Association Pool #313032......... 7.04 7/01/06 9,113,164
5,000,000 Federal National Mortgage Association...................... 5.75 2/15/08 4,967,400
10,000,000 Federal National Mortgage Association REMIC Trust 93-156 B. 6.50 4/25/18 9,995,000
10,000,000 Federal National Mortgage Association REMIC
Trust 1992-129 JA........................................ 7.00 7/25/20 10,144,200
12,607,245 Federal National Mortgage Association REMIC Trust 1992-6 Z. 7.50 1/25/21 12,866,198
10,000,000 Federal National Mortgage Association REMIC Trust 1996-7 J. 6.50 9/25/24 9,844,600
------------ ------------
79,190,046 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
------------ (Cost $78,002,550) ...................................... 80,568,049
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION (13.9%)
12,000,000 Federal Home Loan Mortgage Corporation..................... 5.90 2/14/06 12,007,080
7,490,575 Federal Home Loan Mortgage Corporation 1157 KZ............. 7.50 10/15/20 7,544,881
6,761,000 Federal Home Loan Mortgage Corporation 1674 B.............. 6.05 10/15/21 6,583,930
------------ ------------
26,251,575 TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
------------ (Cost $25,991,364) ...................................... 26,135,891
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (12.8%)
3,918,286 Government National Mortgage Association Project
Loan Pool #262847 ....................................... 10.25 9/15/23 3,918,247
19,616,763 Government National Mortgage Association
Single Family Pool #439558 .............................. 7.50 5/15/27 20,136,607
------------ ------------
23,535,049 TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
------------ (Cost $23,862,059) ...................................... 24,054,854
------------
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
<TABLE>
<CAPTION>
February 28, 1998
===========================================================================================================
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TENNESSEE VALLEY AUTHORITY (4.6%)
$ 8,000,000 Tennessee Valley Authority Global Power Bonds 1995 Series E 6.75% 11/01/25 $ 8,568,720
------------ ------------
8,000,000 TOTAL TENNESSEE VALLEY AUTHORITY
------------ (Cost $8,005,920) ....................................... 8,568,720
------------
RESOLUTION TRUST CORPORATION SECURITIES (1.8%)
3,309,349 Resolution Trust Corporation 1992-5 A-6.................... 9.239 5/25/26 3,376,132
------------ ------------
3,309,349 TOTAL RESOLUTION TRUST CORPORATION
------------ (Cost $3,363,126) ....................................... 3,376,132
------------
140,286,019 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
------------ (Cost $139,225,019) ..................................... 142,703,646
------------
ASSET BACKED SECURITIES (5.3%)
5,000,000 MBNA Master Credit Card Trust Series 1996-E Class A........ 5.80* 10/15/05 5,004,500
5,000,000 First USA Credit Card Master Trust Series 1996-2 Class A... 5.81* 2/10/06 5,007,500
------------ ------------
10,000,000 TOTAL ASSET BACKED SECURITES
------------ (Cost $10,028,125) ...................................... 10,012,000
------------
181,286,019 TOTAL INVESTMENT SECURITIES (97.9%)
------------ (Cost $180,040,082) ..................................... 183,862,016
------------
REPURCHASE AGREEMENT (1.8%) (including accrued interest)
3,300,000 Collateralized by $3,085,000 U.S. Treasury Notes
8.00% due 5/15/01, with a value of $3,367,516
(with UBS Securities LLC, 5.60%, dated 2/27/98,
due 3/2/98, delivery value $3,301,540)................... 3,301,027
CASH AND OTHER ASSETS
OVER LIABILITIES (0.3%) ................................. 637,936
------------
NET ASSETS (100.0%) ....................................... $187,800,979
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER OUTSTANDING SHARE ($187,800,979 / 16,630,252
shares of capital stock outstanding) .................... $ 11.29
============
* Resets Monthly. Rate disclosed is that in effect on 2/28/98.
See Notes to Financial Statements.
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Statement of Assets and Liabilities
at February 28, 1998 (unaudited)
================================================================================
Assets:
Investment securities at value
(Cost--$180,040,082) ................................ $ 183,862,016
Repurchase agreement
(Cost--$3,301,027) .................................. 3,301,027
Cash .................................................. 48,168
Interest receivable ................................... 1,053,268
Receivable for capital shares sold .................... 1,980
-------------
Total Assets ...................................... 188,266,459
=============
Liabilities:
Payable for capital shares
repurchased ......................................... 287,452
Accrued expenses:
Advisory fee ........................................ 72,598
Other ............................................... 105,430
-------------
Total Liabilities ................................. 465,480
-------------
Net Assets ............................................ $ 187,800,979
=============
Net Assets consist of:
Capital stock, at $1 par value
(authorized 100,000,000,
outstanding 16,630,252 shares) ...................... $ 16,630,252
Additional paid-in capital ............................ 216,949,911
Undistributed investment
income--net ......................................... 1,782,998
Accumulated net realized loss
on investments ...................................... (51,384,116)
Unrealized net appreciation of
investments ......................................... 3,821,934
-------------
Net Assets ............................................ $ 187,800,979
=============
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($187,800,979 / 16,630,252
shares outstanding) ................................. $ 11.29
=============
Statement of Operations
for the six months ended February 28, 1998 (unaudited)
================================================================================
Investment Income:
Interest income ........................................ $ 6,435,221
------------
Expenses:
Advisory fee ........................................... 471,397
Transfer agent fees .................................... 54,300
Auditing and legal fees ................................ 21,720
Custodian fees ......................................... 19,483
Postage ................................................ 15,747
Telephone .............................................. 10,860
Printing ............................................... 9,050
Registration and filing fees ........................... 9,050
Directors' fees and expenses ........................... 7,240
Insurance, dues and other .............................. 5,973
------------
Total Expenses Before
Custody Credits .................................. 624,820
Less: Custody Credits .............................. (5,546)
------------
Net Expenses ....................................... 619,274
------------
Investment Income--Net ................................. 5,815,947
------------
Realized and Unrealized Gain on
Investments--Net:
Realized Gain-Net .................................. 811,150
Change in Unrealized Appreciation .................. 3,680,604
------------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ....................................... 4,491,754
------------
Net Increase in Net Assets
from Operations ...................................... $ 10,307,701
============
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 February 28, 1998 (unaudited) and for the year ended
August 31, 1997
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended
February 28, Year Ended
1998 August 31,
(unaudited) 1997
--------------------------------
<S> <C> <C>
Operations:
Investment income--net .................................... $ 5,815,947 $ 13,004,606
Realized gain on investments--net ......................... 811,150 324,459
Change in unrealized appreciation (depreciation) .......... 3,680,604 4,068,492
--------------------------------
Net increase in net assets from operations ................ 10,307,701 17,397,557
--------------------------------
Dividends to Shareholders:
Investment income-net ..................................... (6,100,224) (13,704,364)
--------------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 14,124,198 15,492,038
Proceeds from reinvestment of distributions to shareholders 4,942,986 10,979,149
Cost of shares repurchased ................................ (20,477,913) (60,049,643)
--------------------------------
Decrease from capital share transactions .................. (1,410,729) (33,578,456)
--------------------------------
Total Increase (Decrease) ................................... 2,796,748 (29,885,263)
Net Assets:
Beginning of period ....................................... 185,004,231 214,889,494
--------------------------------
End of period ............................................. $ 187,800,979 $ 185,004,231
================================
Undistributed investment income-net, at end of period ....... $ 1,782,998 $ 2,067,275
================================
</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 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
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
February 28, 1998
================================================================================
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 and Dividends to Shareholders
Transactions in capital stock were as follows:
Six Months
Ended
February 28, Year Ended
1998 August 31,
(unaudited) 1997
-----------------------------
Shares sold .............................. 1,259,527 1,407,967
Shares issued to shareholders in
reinvestment of dividends .............. 444,949 1,009,943
-----------------------------
1,704,476 2,417,910
Shares repurchased ....................... (1,826,790) (5,469,260)
-----------------------------
Net decrease ............................. (122,314) (3,051,350)
=============================
Dividends per share ...................... $ .36 $ .755
=============================
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
On March 19, 1998 the Fund's Board of Directors declared a quarterly dividend
from net investment income of $.17 per share payable on March 26, 1998 to
shareholders of record on March 23, 1998.
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
Six Months Ended
February 28, 1998
(unaudited)
------------
PURCHASES:
U.S. Treasury Obligations ............................ $ 94,356,563
U.S. Government Agency
Obligations and Other
Investment Securities .............................. 76,465,618
------------
$170,822,181
============
SALES AND REDEMPTIONS:
U.S. Treasury Obligations ............................ $ 85,580,546
U.S. Government Agency
Obligations and Other
Investment Securities .............................. 89,476,259
------------
$175,056,805
============
At February 28, 1998, the aggregate cost of investment securities and repuchase
agreement for Federal income tax purposes was $183,341,109. The aggregate
appreciation and depreciation of investments at February 28, 1998, based on a
comparison of investment values and their costs for Federal income tax purposes,
is $4,053,862 and $231,928 respectively, resulting in a net appreciation of
$3,821,934.
For Federal income tax purposes, the Fund had a net capital loss carryover at
August 31, 1997 of approximately $52,042,000 of which approximately $40,236,000
will expire in 2003, $8,977,000 will expire in 2004 and $2,829,000 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. The Fund
incurred and elected to defer losses of approximately $154,000. 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) February 28, 1998
================================================================================
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $471,397 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the six months ended February 28,
1998. 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, 1998 owned 856,050 shares of the Fund's capital
stock, representing 5.1% of the outstanding shares. In addition, officers and
directors owned 226,568 shares, representing 1.4% 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 Year Ended August 31,
Feb. 28, 1998 ------------------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ... $ 11.04 $ 10.85 $ 11.28 $ 11.20 $ 13.44 $ 13.06
-----------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .............. .34 .74 .77 .74 .82 .93
Net gains or losses on securities
(both realized and unrealized) ... .27 .21 (.43) .04 (1.80) .44
-----------------------------------------------------------------------------------
Total income (loss) from
investment operations .............. .61 .95 .34 .78 (.98) 1.37
-----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ................ (.36) (.76) (.77) (.70) (.93) (.89)
Distributions from capital gains ... -- -- -- -- (.33) (.10)
-----------------------------------------------------------------------------------
Total distributions .................. (.36) (.76) (.77) (.70) (1.26) (.99)
-----------------------------------------------------------------------------------
Net asset value, end of period ......... $ 11.29 $ 11.04 $ 10.85 $ 11.28 $ 11.20 $ 13.44
===================================================================================
Total return ........................... 5.60%+ 9.01% 3.06% 7.37% -7.87% 11.07%
===================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $187,801 $185,004 $214,889 $256,004 $339,478 $456,711
Ratio of operating expenses to
average net assets ................... .66%*(1) .65%(1) .65%(1) .66% .63% .61%
Ratio of net investment income to
average net assets ................... 6.19%* 6.52% 6.74% 6.58% 6.58% 7.29%
Portfolio turnover rate ................ 92%+ 255% 158% 193% 100% 169%
</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 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.
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 corporate 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
individual 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. 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.
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
<PAGE>
================================================================================
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 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
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
David H. Porter
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
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 Fund (obtainable from the
Distributor).
VLF803013
