================================================================================
---------------
ANNUAL REPORT
---------------
August 31, 1999
---------------
Value Line
U.S. Government
Securities
Fund, Inc.
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
To Our Value Line
- --------------------------------------------------------------------------------
To Our Shareholders
Fiscal year 1999 was a difficult one for fixed-income funds in general, with
only funds that had the shortest maturities posting positive returns. The Value
Line U.S. Government Securities Fund returned -0.17% for the fiscal year ended
August 31, 1999, beating the average Lipper Intermediate US Government Fund
Index* which posted a return of -0.23%.
The bond market produced little in the way of positive returns for the twelve
months ended August 31, 1999. The Federal Reserve Board responded to a liquidity
crises evidenced by falling stock and corporate bond prices, and cut interest
rates three times during the fall of 1998. The U.S. economy didn't miss a beat
and continued its impressive expansion. Unfortunately for the bond market, good
news concerning economic growth is bad news for interest rates.
As we entered 1999, a buoyant stock market and strong employment growth caused
the Federal Reserve Board to telegraph its intentions to keep a rein on
inflation by raising interest rates, if necessary. These comments put pressure
on interest rates causing the 30-year Treasury bond yield to jump from 5.25% in
January to 6.28% in late August. During this period, the Federal Reserve Board
hiked rates by 0.25% in June and raised them again in August amid concerns of
strong economic growth, tight labor markets, rising labor costs and higher
commodity prices- all indicative of building inflationary pressures.
In this environment of flat to rising interest rates, our policy emphasizing
government agency securities with high yields compared to Treasuries should
produce attractive total returns in the months ahead. The Fund's management team
believes that 30-year Treasury bond yields are likely to remain in a 6.0%-6.5%
band for awhile and then move down to 5.5%-6.0%. U.S. Agency securities suffered
relative to Treasuries due to heavy issuance and liquidity concerns similar to
corporate bonds. The management of your Fund believes that this disruption is
temporary and will likely be reversed in the near future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
October 11, 1999
- ----------
* The Lipper Intermediate U.S. Government Fund Index invests at least 65% of
the fund assets in securities issued or guaranteed by the U.S. Government,
its agencies, or its instrumentalities, with dollar-weighted average
maturities of five to ten years.
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<PAGE>
Value Line U.S. Government Securities Fund, Inc.
U.S. Government Securities Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The economy is picking up some renewed strength as we head into the final months
of 1999. Evidence of this increased business activity can be found in the
accelerating rate of consumer spending, the ongoing strength in the housing
market, booming auto sales, and modest uptick in manufacturing. Overall, this
recent firming in the key consumer and industrial markets suggests that GDP
growth, which slowed to a very modest 1.8% in the second quarter, will average
better than 3% during the final six months of the year, unless serious Year 2000
dislocations develop.
Inflationary pressures, meanwhile, are now starting to build, although, as yet,
we are not forecasting a dramatic change in trend. Nevertheless, the sharp runup
in oil prices in recent months, the escalation in wage costs, and the runup in
mortgage rates all indicate that the cost of living is increasing. A gradual
uptrend in pricing now seems likely over the next several quarters. The Federal
Reserve Board, taking note of these rising cost pressures, is likely to maintain
a somewhat restrictive monetary stance in the months ahead, with perhaps an
additional interest rate boost in the cards.
Performance Data:*
Growth of
an Assumed Average
Investment of Annual
$10,000 Total Return
------------ ------------
1 year ended 6/30/99..... $10,263 2.63%
5 years ended 6/30/99.... $13,463 6.13%
10 years ended 6/30/99... $19,234 6.76%
* The average annual total returns for the one, five and ten year periods
ended August 31, 1999, were -0.17%, 5.84% and 6.59%, 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.
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<PAGE>
Value Line U.S. Government Securities Fund, Inc.
- --------------------------------------------------------------------------------
The following graph compares the performance of the Value Line U.S. Government
Securities Fund, Inc. to that of the Lehman Brothers Aggregate Bond Index and
the Lehman Brothers Government Bond Index. The Value Line U.S. Government
Securities Fund, Inc. is a professionally managed mutual fund, while the Indices
are not available for investment and are not managed. The comparison is shown
for illustrative purposes only.
Comparison of a Change in Value of a $10,000 Investment in the
Value Line U.S. Government Securities Fund, Inc.,
the Lehman Brothers Aggregate Bond Index*,
and the Lehman Brothers Government Bond Index*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value Line
U.S. Government Lehman Aggregate Lehman Government
Date Securities Fund, Inc. Bond Index Bond Index
- ---- --------------------- --------------- ----------------
9/89 10000 10000 10000
11/89 10282 10401 10403
2/90 10324 10334 10293
5/90 10565 10550 10485
8/90 10809 10723 10637
11/90 11229 11184 11156
2/91 11646 11597 11516
5/91 11909 11873 11747
8/91 12318 12291 12145
11/91 12801 12796 12633
2/92 13095 13082 12911
5/92 13327 13349 13154
8/92 13934 13949 13806
11/92 13888 13930 13776
2/93 14540 14676 14592
5/93 14799 14858 14737
8/93 15477 15480 15494
11/93 15441 15448 15441
2/94 15464 15468 15380
5/94 14204 14964 14897
8/94 14259 15246 15139
11/94 13787 14975 14887
2/95 14359 15742 15585
5/95 15080 16682 16528
8/95 15309 16969 16789
11/95 15707 17617 17477
2/96 15775 17670 17470
5/96 15604 17413 17185
8/96 15778 17666 17411
11/96 16646 18686 18404
2/97 16573 18616 18261
5/97 16720 18861 18487
8/97 17199 19433 19035
11/97 17875 20098 19756
2/98 18163 20545 20206
5/98 18423 20920 20564
8/98 18968 21486 21371
11/98 19299 21997 21880
2/99 19111 21833 21532
5/99 19126 21832 21475
8/99 18936 21657 21400
From 9/1/89 to 8/31/99.
* The Lehman Brothers Aggregate Bond Index is representive of the broad
fixed-income market. It includes government, investment-grade corporate, and
mortgage backed bonds. The Lehman Brothers Government Bond Index represents
the U.S. Treasury and U.S. Agency segment of the fixed-income market. The
returns for the Indices do not reflect expenses which are deducted from the
fund's returns.
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4
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Schedule of Investments August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (11.2%)
$ 10,134,100 U.S. Treasury Inflation Indexed Notes......................... 3.88% 1/15/09 $ 9,988,372
10,000,000 U.S. Treasury Bonds........................................... 5.25 2/15/29 8,739,100
----------- -----------
20,134,100 TOTAL U.S. TREASURY OBLIGATIONS (Cost $19,336,267) ........... 18,727,472
----------- -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (85.2%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (46.1%)
7,690,058 Federal National Mortgage Association Pool #313031............ 6.83 7/01/03 7,692,442
5,000,000 Federal National Mortgage Association......................... 6.50 8/15/04 4,976,850
10,000,000 Federal National Mortgage Association......................... 5.75 6/15/05 9,567,600
8,458,489 Federal National Mortgage Association Pool #313032............ 7.04 7/01/06 8,558,975
10,334,659 Federal National Mortgage Association Pool #375667............ 6.02 2/01/08 9,591,856
10,000,000 Federal National Mortgage Association Pool #380188............ 6.45 4/01/08 9,515,630
10,000,000 Federal National Mortgage Association......................... 6.63 9/15/09 9,825,000
9,053,120 Federal National Mortgage Association Pool #412682............ 6.00 3/01/28 8,371,058
4,873,968 Federal National Mortgage Association Pool #424691............ 6.50 4/01/28 4,614,673
4,554,885 Federal National Mortgage Association Pool #425239............ 6.50 4/01/28 4,323,087
----------- -----------
79,965,179 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
-----------
(Cost $79,789,351) ......................................... 77,037,171
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (17.0%)
10,000,000 Federal Home Loan Mortgage Corporation........................ 5.75 7/15/03 9,752,600
10,000,000 Federal Home Loan Mortgage Corporation........................ 5.00 1/15/04 9,403,700
5,000,000 Federal Home Loan Mortgage Corporation........................ 6.25 7/15/04 4,935,750
5,000,000 Federal Home Loan Mortgage Corporation........................ 5.13 10/15/08 4,409,200
----------- -----------
30,000,000 TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
-----------
(Cost $30,025,005) ......................................... 28,501,250
-----------
FEDERAL HOME LOAN BANK (12.9%)
17,000,000 Federal Home Loan Bank........................................ 5.50 8/13/01 16,780,870
5,000,000 Federal Home Loan Bank........................................ 5.13 2/26/02 4,868,900
----------- -----------
22,000,000 TOTAL FEDERAL HOME LOAN BANK (COST $22,059,990) .............. 21,649,770
----------- -----------
FEDERAL FARM CREDIT BANK (6.0%)
10,000,000 Federal Farm Credit Bank...................................... 5.88 7/02/01 9,950,200
----------- -----------
10,000,000 TOTAL FEDERAL FARM CREDIT BANK (Cost $9,973,100) ............. 9,950,200
----------- -----------
</TABLE>
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5
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Schedule of Investments August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TENNESSEE VALLEY AUTHORITY (2.7%)
$ 5,000,000 Tennessee Valley Authority Global Bonds Series C.............. 6.00% 3/15/13 $ 4,562,700
----------- -----------
5,000,000 TOTAL TENNESSEE VALLEY AUTHORITY (Cost $4,928,326) ........... 4,562,700
----------- -----------
RESOLUTION TRUST CORPORATION (0.5%)
824,071 Resolution Trust Corporation 1992-5 A-6....................... 9.24 5/25/26 837,182
----------- -----------
824,071 TOTAL RESOLUTION TRUST CORPORATION
-----------
(Cost $837,463) ............................................ 837,182
-----------
147,789,250 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
-----------
(Cost $147,613,235) ........................................ 142,538,273
-----------
167,923,350 TOTAL INVESTMENT SECURITIES (96.4%)
-----------
(Cost $166,949,502) ........................................ 161,265,745
-----------
REPURCHASE AGREEMENTS (14.7%) (including accrued interest)
8,200,000 Collateralized by $8,130,000 U.S. Treasury Notes 6.50% due
5/31/01, with a value of $8,356,835 (with State Street Bank and
Trust Company 5.45%, dated 8/31/99, due 9/1/99,
delivery value $8,201,242) ................................. 8,201,242
8,200,000 Collateralized by $7,235,000 U.S. Treasury Bonds 9.125% due
5/15/09, with a value of $8,369,301 (with Morgan Stanley and
Co. Incorporated 5.37%, dated 8/31/99, due 9/1/99,
delivery value $8,201,223) ................................. 8,201,223
8,200,000 Collateralized by $5,652,000 U.S. Treasury Bonds 11.25% due
----------- 2/15/15, with a value of $8,344,917 (with Warburg Dillon
Read LLC 5.48%, dated 8/31/99, due 9/1/99,
delivery value $8,201,248) ................................. 8,201,248
-----------
24,600,000 TOTAL REPURCHASE AGREEMENTS (14.7%) (Cost $24,603,713) ....... 24,603,713
-----------
EXCESS OF LIABILITlES OVER CASH AND
OTHER ASSETS (-11.1%) ...................................... (18,638,936)
------------
NET ASSETS (100.0%) .......................................... $167,230,522
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER OUTSTANDING SHARE ($167,230,522 / 15,467,911
shares of capital stock outstanding) ....................... $ 10.81
============
</TABLE>
See Notes to Financial Statements.
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6
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Statement of Assets and Liabilities
at August 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investment securities at value
(Cost -- $166,949,502) ................................ $ 161,265,745
Repurchase agreements
(Cost-- $24,603,713) .................................. 24,603,713
Cash .................................................... 117,109
Interest receivable ..................................... 1,300,634
Receivable for capital shares sold ...................... 325,941
-------------
Total Assets ........................................ 187,613,142
-------------
Liabilities:
Payable for securities purchased ........................ 20,058,317
Payable for capital shares
repurchased ........................................... 129,848
Accrued expenses:
Advisory fee .......................................... 71,691
Other ................................................. 122,764
-------------
Total Liabilities ................................... 20,382,620
-------------
Net Assets .............................................. $ 167,230,522
=============
Net Assets consist of:
Capital stock, at $1 par value
(authorized 100,000,000,
outstanding 15,467,911 shares) ........................ $ 15,467,911
Additional paid-in capital .............................. 205,083,663
Undistributed net investment income ..................... 1,639,818
Accumulated net realized loss
on investments ........................................ (49,277,113)
Net unrealized depreciation
of investments ........................................ (5,683,757)
-------------
Net Assets .............................................. $ 167,230,522
=============
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($167,230,522 / 15,467,911
shares outstanding) ................................... $ 10.81
=============
Statement of Operations
for the year ended August 31, 1999
Investment Income:
Interest income ......................................... $ 10,842,341
------------
Expenses:
Advisory fee ............................................ 894,701
Transfer agent fees ..................................... 93,886
Auditing and legal fees ................................. 60,874
Printing ................................................ 38,714
Registration and filing fees ............................ 27,000
Custodian fees .......................................... 26,174
Postage ................................................. 20,166
Telephone, insurance, dues and other .................... 15,187
Directors' fees and expenses ............................ 15,120
------------
Total expenses before
custody credits ..................................... 1,191,822
Less: custody credits ................................. (8,584)
------------
Net Expenses .......................................... 1,183,238
------------
Net Investment Income ................................... 9,659,103
------------
Net Realized and Unrealized Loss
on Investments:
Net Realized Loss ..................................... (232,408)
Change in Net Unrealized
Appreciation (Depreciation) ......................... (9,439,773)
------------
Net Realized Loss and Change in
Net Unrealized Appreciation
(Depreciation) on Investments ......................... (9,672,181)
------------
Net Decrease in Net Assets
from Operations ....................................... $ (13,078)
============
See Notes to Financial Statements.
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7
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Statement of Changes in Net Assets
for the years ended August 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, August 31,
1999 1998
-------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................ $ 9,659,103 $ 11,381,036
Net realized (loss) gain on investments .......................... (232,408) 3,150,561
Change in net unrealized appreciation (depreciation).............. (9,439,773) 3,614,686
----------------------------
Net (decrease) increase in net assets from operations ............ (13,078) 18,146,283
----------------------------
Dividends to Shareholders:
Net investment income ............................................ (9,846,476) (11,621,120)
----------------------------
Capital Share Transactions:
Proceeds from sale of shares ..................................... 22,704,158 23,808,062
Proceeds from reinvestment of distributions to shareholders....... 8,073,713 9,423,276
Cost of shares repurchased ....................................... (38,981,549) (39,466,978)
----------------------------
Decrease from capital share transactions ......................... (8,203,678) (6,235,640)
----------------------------
Total (Decrease) Increase .......................................... (18,063,232) 289,523
Net Assets:
Beginning of year ................................................ 185,293,754 185,004,231
----------------------------
End of year ...................................................... $167,230,522 $185,293,754
=============================
Undistributed net investment income, at end of year ................ $ 1,639,818 $ 1,827,191
=============================
</TABLE>
See Notes to Financial Statements.
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8
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements August 31, 1999
- --------------------------------------------------------------------------------
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, U.S. Treasury
and U.S. Government agency notes and 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.
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
(D) Security Transactions and Related Income. Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses on securities transactions are determined using the identified cost
method and interest income is accrued as earned. In computing net investment
income, the Fund amortizes premiums and discounts on securities owned. The Fund
purchases stripped mortgage-backed securities at premiums and discounts. The
Fund amortizes such premiums on interest-only securities using the
yield-to-maturity method. Cash is received based on the stated coupon rate and
interest income is earned based on the security's effective yield-to-maturity.
When the Fund purchases principal-only securities, although no interest payments
are received, the discounts are accrued using the yield-to-maturity method based
on the effective yield-to-maturity of the security.
2. Capital Share Transactions and Dividends to Shareholders
Transactions in capital stock were as follows:
Year Ended August 31,
----------------------------
1999 1998
----------------------------
Shares sold ................................ 2,015,642 2,118,818
Shares issued to shareholders in
reinvestment of dividends ................ 720,630 845,513
----------------------------
2,736,272 2,964,331
Shares repurchased ......................... (3,467,790) (3,517,468)
----------------------------
Net decrease ............................... (731,518) (553,137)
============================
Dividends per share ........................ $ .62 $ .70
============================
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
On September 23, 1999 the Fund's Board of Directors declared a quarterly
dividend from net investment income of $.15 per share payable on September 28,
1999 to shareholders of record on September 24, 1999.
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term investments,
were as follows:
Year Ended
August 31, 1999
---------------
PURCHASES:
U.S. Treasury Obligations ............................. $ 32,479,310
U.S. Government Agency
Obligations and Other
Investment Securities ............................... 176,466,742
------------
$208,946,052
============
SALES AND REDEMPTIONS:
U.S. Treasury Obligations ............................. $ 23,832,719
U.S. Government Agency
Obligations and Other
Investment Securities ............................... 189,845,521
------------
$213,678,240
============
At August 31, 1999, the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes was $191,553,215. The aggregate
appreciation and depreciation of investments at August 31, 1999, based on a
comparison of investment values and their costs for federal income tax purposes,
was $19,581 and $5,703,338 respectively, resulting in a net depreciation of
$5,683,757.
For federal income tax purposes, the Fund had a net capital loss carryover at
August 31, 1999 of approximately $47,733,893 of which approximately $35,928,048
will expire in 2003, $8,976,510 will expire in 2004 and $2,829,335 will expire
in 2005.
- --------------------------------------------------------------------------------
10
<PAGE>
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates An advisory fee of $894,701 was paid or payable to Value Line, Inc.,
the Fund's investment adviser ("Adviser"), for the year ended August 31, 1999.
This was computed at the annual 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 August 31, 1999 owned 984,228 shares of the Fund's capital
stock, representing 6.4% of the outstanding shares. In addition, officers and
directors owned 240,779 shares of capital stock, representing 1.6% of the
outstanding shares.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Years Ended August 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .............. $11.44 $11.04 $10.85 $11.28 $11.20
----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ....................... .61 .69 .74 .77 .74
Net gains or losses on securities
(both realized and unrealized) ............ (.62) .41 .21 (.43) .04
----------------------------------------------------------------------------
Total income (loss) from
investment operations ..................... (.01) 1.10 .95 .34 .78
----------------------------------------------------------------------------
Less distributions:
Dividends from net investment income ........ (.62) (.70) (.76) (.77) (.70)
Distributions from capital gains ............ -- -- -- -- --
----------------------------------------------------------------------------
Total distributions ......................... (.62) (.70) (.76) (.77) (.70)
----------------------------------------------------------------------------
Net asset value, end of year .................... $10.81 $11.44 $11.04 $10.85 $11.28
=============================================================================
Total return .................................... -0.17% 10.28% 9.01% 3.06% 7.37%
=============================================================================
Ratios/Supplemental Data:
Net assets, end of year (in thousands) .......... $167,231 $185,294 $185,004 $214,889 $256,004
Ratio of operating expenses to average net assets .67%(2) .66%(1) .65%(1) .65%(1) .66%
Ratio of net investment income to
average net assets ............................ 5.40% 6.07% 6.52% 6.74% 6.58%
Portfolio turnover rate ......................... 125% 159% 255% 158% 193%
</TABLE>
(1) Before offset of custody credits.
(2) Ratio reflects expenses grossed up for custody credit arrangement. The
ratio of expenses net of custody credits would have been .66%.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line U.S. Government Securities Fund, Inc.
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Value Line U.S. Government Securities Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line U.S. Government
Securities Fund, Inc. (the "Fund") at August 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
October 20, 1999
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Value Line U.S. Government Securities Fund, Inc.
Other Information (unaudited)
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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.
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Value Line U.S. Government Securities Fund, Inc.
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Value Line U.S. Government Securities Fund, Inc.
The Value Line Family of Funds
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1950--The Value Line Fund seeks long-term growth of capital. Current income is a
secondary objective.
1952--Value Line Income and Growth Fund's primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks long-term growth of capital.
No consideration is given to current income in the choice of investments.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth.
1979--The Value Line Cash Fund, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be invested in securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital.
1984--The Value Line Tax Exempt Fund seeks to provide investors with the maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: The Money Market Portfolio
and The National Bond 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.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with the 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* seeks to achive a high total
investment return consistent with reasonable risk.
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 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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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
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Nathan N.J. Grant
Vice President
Bruce H. Alston
Vice President
David T. Henigson
Vice President,
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
This audited 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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