================================================================================
------------------
SEMI-ANNUAL REPORT
------------------
February 28, 1999
------------------
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 delighted to report that the Value Line U.S. Government Securities Fund,
Inc. returned 5.22% for the twelve months ended February 28, 1999. This compares
favorably to the 5.10% median return for the Lipper Intermediate U.S. Government
Fund Peer Group. Our low expense ratio, nearly half the peer group average,
provides an additional edge in our pursuit of above average returns.
The Fund's performance was primarily produced from the coupon earned on your
investments, since the price changes over the period were minimal. At the
beginning of the period, interest rates began a gradual decline from a little
over 6% to about 5.60% by mid-summer. With turmoil in the Asian markets, the
Russian debt default, and fears of problems developing in Latin America,
investors sought the safe haven of the U.S. dollar and U.S. Treasury bonds. This
strong demand for domestic securities pushed interest rates (as represented by
the 30 year U.S. Treasury bond) to cycle lows (4.70%) in early October. All
other sectors of the bond market (i.e., those lacking the unquestioned quality
of U.S. Treasuries) underperformed during this period. As the crisis began to
ease, interest rates rose to close the period at the 5.60% level, or less than
half a percentage point lower than the beginning of the period.
Your Fund's strategy is to generate high income consistent with safety of
principal by investing primarily in U.S. Government securities, representing the
highest credit-quality and degree of liquidity. Furthermore, we control risk by
limiting the portfolio average maturity to 10 years or less and maintaining a
well-diversified portfolio. Treasury securities tend to outperform all other
sectors of fixed income investments in times of turmoil. Meanwhile, the
non-Treasury securities traded at higher yield premiums to Treasuries. We
continue to take advantage of these more attractive yields by reducing the
Fund's exposure to Treasuries and raising allocations to higher yielding
government agencies. Our allocation as of February 28, 1999 was as follows:
Treasury Notes .................................. 3%
Agency Notes .................................... 54%
Agency MBS ...................................... 40%
Short-Term Investments .......................... 3%
Looking ahead your Fund's management team believes that the major decline in
interest rates is behind us. For the next several months, the bond market is
likely to trade in a range between 5.25% and 5.75% until signs of an economic
deceleration begin to surface. A slowing in economic growth will foster
conditions for the bond yield to gravitate toward the 5.00% mark and possibly
lower by year-end. In this environment, the Fund will continue to seek
opportunities in the government sector to enhance yield and improve the fund's
relative performance.
We will continue to stick to our intermediate-term maturity structure and
provide competitive performance. We appreciate your continued support.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
March 30, 1999
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
U.S. Government Securities Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
Strong growth and low inflation continue to be two of the dominant themes in the
domestic economy at this time. This enviable performance is underscored by
reports that show persisting strength in consumer spending, housing
construction, personal income, and employment. Such trends suggest that the
economy will expand by more than 3% during the first quarter of 1999. At the
same time, inflation remains quiescent, with producer and consumer price
increases still modest, overall, and with selective industrial sectors finding
it difficult to implement price increases. In some instances, prices are
actually falling.
We believe this healthy pace of economic activity will continue in the next few
quarters, with growth averaging 2.5%-3.0% for the year as a whole. Our sense, as
well, is that the economic crisis that is still afflicting much of Asia and
parts of Latin America (especially Brazil) will gradually recede over the next
12 to 18 months. At the same time, we expect inflation to remain subdued. The
Federal Reserve, encouraged by this benign state of economic affairs, will
probably maintain its current monetary stance over the next several months, at
least. Any subsequent adjustment in interest rates will probably be modest given
the likely absence of excesses in growth or inflation in the domestic economy.
Performance Data:*
Growth of
an Assumed Average
Investment of Annual
$10,000 Total Return
------------- -------------
1 year ended 12/31/98............. $10,768 7.68%
5 years ended 12/31/98............ $12,495 4.56%
10 years ended 12/31/98........... $20,969 7.69%
* The average annual total return for the one, five and 10 year periods ended
February 28, 1999, were 5.22%, 4.33% and 7.45%, 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>
U.S. TREASURY OBLIGATIONS (2.9%)
$ 5,000,000 U.S. Treasury Notes........................................ 6.25% 2/28/02 $ 5,137,000
----------- ------------
5,000,000 TOTAL U.S. TREASURY OBLIGATIONS (Cost $5,123,828) ......... 5,137,000
----------- ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (94.0%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (50.2%)
7,737,092 Federal National Mortgage Association Pool #313031......... 6.83 7/01/03 7,964,408
5,000,000 Federal National Mortgage Association...................... 5.13 2/13/04 4,896,300
10,000,000 Federal National Mortgage Association...................... 5.75 6/15/05 10,040,800
8,564,212 Federal National Mortgage Association Pool #313032......... 7.04 7/01/06 8,917,486
10,391,685 Federal National Mortgage Association Pool #375667......... 6.02 2/01/08 10,128,645
10,000,000 Federal National Mortgage Association Pool #380188......... 6.45 4/01/08 9,918,750
5,000,000 Federal National Mortgage Association...................... 5.25 1/15/09 4,784,300
13,585,979 Federal National Mortgage Association REMIC Trust 1992-6 Z. 7.50 1/25/21 13,812,321
9,584,564 Federal National Mortgage Association Pool #412682......... 6.00 3/01/28 9,301,053
4,904,699 Federal National Mortgage Association Pool #424691......... 6.50 4/01/28 4,871,200
4,748,114 Federal National Mortgage Association Pool #425239......... 6.50 4/01/28 4,716,349
----------- ------------
89,516,345 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
-----------
(Cost $89,746,178) ...................................... 89,351,612
------------
FEDERAL HOME LOAN BANK (26.2%)
5,000,000 Federal Home Loan Bank..................................... 5.16 3/08/00 5,000,000
17,000,000 Federal Home Loan Bank..................................... 5.38 3/02/01 16,994,560
5,000,000 Federal Home Loan Bank..................................... 5.13 2/26/02 4,955,700
15,000,000 Federal Home Loan Bank..................................... 5.13 9/15/03 14,705,700
5,000,000 Federal Home Loan Bank..................................... 5.19 10/20/03 4,903,000
----------- ------------
47,000,000 TOTAL FEDERAL HOME LOAN BANK (Cost $46,863,260) ........ 46,558,960
----------- ------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION (13.9%)
15,000,000 Federal Home Loan Mortgage Corporation..................... 5.75 7/15/03 15,073,500
5,000,000 Federal Home Loan Mortgage Corporation..................... 5.00 1/15/04 4,869,150
5,000,000 Federal Home Loan Mortgage Corporation..................... 5.13 10/15/08 4,735,800
76,598 Federal Home Loan Mortgage Corporation REMIC 1157 KZ....... 7.50 10/15/20 76,432
----------- ------------
25,076,598 TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
-----------
(Cost $25,248,836) ...................................... 24,754,882
------------
</TABLE>
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4
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
<TABLE>
<CAPTION>
February 28, 1999
==========================================================================================================
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TENNESSEE VALLEY AUTHORITY (2.8%)
$ 5,000,000 Tennessee Valley Authority Global Power Bonds Series C..... 6.00% 3/15/13 $ 4,922,150
----------- ------------
5,000,000 TOTAL TENNESSEE VALLEY AUTHORITY
-----------
(Cost $4,925,658) ....................................... 4,922,150
------------
RESOLUTION TRUST CORPORATION SECURITIES (0.9%)
1,607,097 Resolution Trust Corporation 1992-5 A-6.................... 9.24 5/25/26 1,639,255
----------- ------------
1,607,097 TOTAL RESOLUTION TRUST CORPORATION
-----------
(Cost $1,633,212) ....................................... 1,639,255
------------
168,200,040 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
-----------
(Cost $168,417,144) ..................................... 167,226,859
------------
173,200,040 TOTAL INVESTMENT SECURITIES (96.9%)
-----------
(Cost $173,540,972) ..................................... $172,363,859
------------
REPURCHASE AGREEMENT (5.2%) (including accrued interest)
9,300,000 Collateralized by $9,185,000 U.S. Treasury Notes 6.125% due
12/31/01, with a value of $9,480,246 (with Morgan Stanley and
Co., Incorporated 4.70%, dated 2/26/99, due 3/1/99, delivery
value $9,303,643)........................................ 9,303,643
EXCESS OF LIABILITIES OVER CASH AND
OTHER ASSETS (-2.1%) .................................... (3,711,896)
-----------
NET ASSETS (100.0%) ....................................... $177,955,606
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER OUTSTANDING SHARE ($177,955,606 / 15,874,307
shares of capital stock outstanding) .................... $ 11.21
============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Statement of Assets and Liabilities
at February 28, 1999 (unaudited)
================================================================================
Assets:
Investment securities at value
(Cost--$173,540,972) .................................. $ 172,363,859
Repurchase agreement
(Cost--$9,303,643) .................................... 9,303,643
Cash .................................................... 43,935
Receivable for securities sold .......................... 17,047,123
Interest receivable ..................................... 1,752,838
Receivable for capital shares sold ...................... 16,540
-------------
Total Assets ........................................ 200,527,938
=============
Liabilities:
Payable for securities purchased ........................ 21,994,560
Payable for capital shares
repurchased ........................................... 385,435
Accrued expenses:
Advisory fee .......................................... 69,053
Other ................................................. 123,284
-------------
Total Liabilities ................................... 22,572,332
-------------
Net Assets .............................................. $ 177,955,606
=============
Net Assets consist of:
Capital stock, at $1 par value
(authorized 100,000,000,
outstanding 15,874,307 shares) ........................ $ 15,874,307
Additional paid-in capital .............................. 209,189,145
Undistributed net investment
income ................................................ 1,763,703
Accumulated net realized loss
on investments ........................................ (47,694,436)
Net unrealized depreciation of
investments ........................................... (1,177,113)
-------------
Net Assets .............................................. $ 177,955,606
=============
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($177,955,606 / 15,874,307
shares outstanding) ................................... $11.21
=============
Statement of Operations
for the six months ended February 28, 1999 (unaudited)
================================================================================
Investment Income:
Interest income ......................................... $ 5,689,171
-----------
Expenses:
Advisory fee ............................................ 457,409
Transfer agent fees ..................................... 47,672
Printing ................................................ 16,143
Insurance, dues and other ............................... 15,364
Registration and filing fees ............................ 13,500
Custodian fees .......................................... 12,882
Postage ................................................. 11,343
Auditing and legal fees ................................. 8,624
Telephone ............................................... 8,528
Directors' fees and expenses ............................ 7,116
-----------
Total Expenses Before
Custody Credits ................................... 598,581
Less: Custody Credits ............................... (893)
-----------
Net Expenses ........................................ 597,688
-----------
Net Investment Income ................................... 5,091,483
-----------
Net Realized and Unrealized Gain
on Investments:
Net Realized Gain ................................... 1,350,269
Change in Net Unrealized
Appreciation (Depreciation) ....................... (4,933,129)
-----------
Net Realized Gain and Change in
Net Unrealized Appreciation
(Depreciation) on Investments ......................... (3,582,860)
-----------
Net Increase in Net Assets
from Operations ....................................... $ 1,508,623
===========
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, 1999 (unaudited) and for the year ended
August 31, 1998
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended
February 28, Year Ended
1999 August 31,
(unaudited) 1998
------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 5,091,483 $ 11,381,036
Net realized gain on investments .......................... 1,350,269 3,150,561
Change in net unrealized appreciation ..................... (4,933,129) 3,614,686
------------------------------
Net increase in net assets from operations ................ 1,508,623 18,146,283
------------------------------
Dividends to Shareholders:
Net investment income ..................................... (5,154,971) (11,621,120)
------------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 12,721,663 23,808,062
Proceeds from reinvestment of distributions to shareholders 4,203,692 9,423,276
Cost of shares repurchased ................................ (20,617,155) (39,466,978)
------------------------------
Decrease from capital share transactions .................. (3,691,800) (6,235,640)
------------------------------
Total (Decrease) Increase ................................... (7,338,148) 289,523
Net Assets:
Beginning of period ....................................... 185,293,754 185,004,231
------------------------------
End of period ............................................. $ 177,955,606 $ 185,293,754
==============================
Undistributed net investment income, at end of period ....... $ 1,763,703 $ 1,827,191
==============================
</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 the identified
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
February 28, 1999
================================================================================
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 Year Ended
February 28, August 31,
1999 1998
(unaudited)
----------------------------
Shares sold ................................ 1,110,056 2,118,818
Shares issued to shareholders in
reinvestment of dividends ................ 368,274 845,513
----------------------------
1,478,330 2,964,331
Shares repurchased ......................... (1,803,452) (3,517,468)
----------------------------
Net decrease ............................... (325,122) (553,137)
============================
Dividends per share ........................ $ .32 $ .70
============================
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
On March 18, 1999 the Fund's Board of Directors declared a quarterly dividend
from net investment income of $.15 per share payable on March 25, 1999 to
shareholders of record on March 22, 1999.
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
Six Months Ended
February 28, 1999
(unaudited)
-----------------
PURCHASES:
U.S. Treasury Obligations ............................ $ 3,310,781
U.S. Government Agency
Obligations and Other
Investment Securities .............................. 109,355,440
------------
$112,666,221
============
SALES AND REDEMPTIONS:
U.S. Treasury Obligations ............................ $ 8,751,469
U.S. Government Agency
Obligations and Other
Investment Securities .............................. 103,564,104
------------
$112,315,573
============
At February 28, 1999, the aggregate cost of investment securities and repuchase
agreement for Federal income tax purposes was $182,844,615. The aggregate
appreciation and depreciation of investments at February 28, 1999, based on a
comparison of investment values and their costs for Federal income tax purposes,
was $399,422 and $1,576,535 respectively, resulting in a net depreciation of
$1,177,113.
For Federal income tax purposes, the Fund had a net capital loss carryover at
August 31, 1998 of approximately $49,044,227 of which approximately $37,238,382
will expire in 2003, $8,976,510 will expire in 2004 and $2,829,335 will expire
in 2005. During the year ended August 31, 1998, the Fund utilized prior year's
carryover losses of approximately $2,997,688 to offset net realized gains.
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements (unaudited) February 28, 1999
================================================================================
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $457,409 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the six months ended February 28,
1999. 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, 1999 owned 971,221 shares of the Fund's capital
stock, representing 6.1% of the outstanding shares. In addition, officers and
directors owned 239,972 shares, representing 1.5% of the outstanding shares.
Other Information (unaudited)
Year 2000. Like other mutual funds, the Fund could be adversely affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.
- --------------------------------------------------------------------------------
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,
February 28, 1999 -----------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.44 $11.04 $10.85 $11.28 $11.20 $13.44
------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income ........... .32 .69 .74 .77 .74 .82
Net gains or losses on securities
(both realized and unrealized) (.23) .41 .21 (.43) .04 (1.80)
------------------------------------------------------------------------------------
Total income (loss) from
investment operations ........... .09 1.10 .95 .34 .78 (.98)
------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ............. (.32) (.70) (.76) (.77) (.70) (.93)
Distributions from capital gains -- -- -- -- -- (.33)
------------------------------------------------------------------------------------
Total distributions ............... (.32) (.70) (.76) (.77) (.70) (1.26)
------------------------------------------------------------------------------------
Net asset value, end of period ...... $11.21 $11.44 $11.04 $10.85 $11.28 $11.20
====================================================================================
Total return ........................ 0.76%+ 10.28% 9.01% 3.06% 7.37% -7.87%
====================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) .................... $177,956 $185,294 $185,004 $214,889 $256,004 $339,478
Ratio of operating expenses to
average net assets ................ .65%*(1) .66%(1) .65%(1) .65%(1) .66% .63%
Ratio of net investment income to
average net assets ................ 5.57%* 6.07% 6.52% 6.74% 6.58% 6.58%
Portfolio turnover rate ............. 64%+ 159% 255% 158% 193% 100%
</TABLE>
(1) After offset for custody credits. Excluding the custody credits would not
have changed the expense ratio.
+ 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, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
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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 PricewaterhouseCoopers 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).
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