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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1995
REGISTRATION NO. 33-44133
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 4 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 5 /X/
(CHECK APPROPRIATE BOX OR BOXES)
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THE VALUE LINE ADJUSTABLE RATE
U.S. GOVERNMENT SECURITIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone Number, Including Area Code: (212) 907-1500
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David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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Copy to:
Peter D. Lowenstein
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
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Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, as amended, the Registrant has registered an indefinite number of shares
of common stock under the Securities Act of 1933. Registrant filed its Rule
24f-2 Notice for the year ended October 31, 1994 on or about December 1, 1994.
--------------
It is proposed that this filing will become effective (check appropriate box)
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<C> <S>
immediately upon filing pursuant to paragraph
/ / (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule
/ / 485
</TABLE>
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THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
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N-1A ITEM NO. LOCATION
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PART A (PROSPECTUS)
Item 1. Cover Page..................................... Cover Page
Item 2. Synopsis....................................... Not Applicable
Item 3. Condensed Financial Information................ Summary of Fund Expenses; Financial Highlights
Item 4. General Description of Registrant.............. Cover Page; Investment Objectives and Policies;
Investment Restrictions; Additional
Information
Item 5. Management of the Fund......................... Summary of Fund Expenses; Management of the
Fund; Additional Information
Item 6. Capital Stock and Other Securities............. Dividends, Distributions and Taxes; Additional
Information
Item 7. Purchase of Securities Being Offered........... How to Purchase Shares; Calculation of Net
Asset Value; Investor Services
Item 8. Redemption or Repurchase....................... How to Redeem Shares
Item 9. Pending Legal Proceedings...................... Not Applicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
Item 10. Cover Page..................................... Cover Page
Item 11. Table of Contents.............................. Table of Contents
Item 12. General Information and History................ Additional Information (Part A)
Item 13. Investment Objective and Policies.............. Investment Objectives and Policies; Investment
Restrictions
Item 14. Management of the Fund......................... Directors and Officers
Item 15. Control Persons and Principal Holders of
Securities................................... Management of the Fund (Part A); Directors and
Officers
Item 16. Investment Advisory and Other Services......... Management of the Fund (Part A); The Adviser
Item 17. Brokerage Allocation........................... Management of the Fund (Part A); Brokerage
Arrangements
Item 18. Capital Stock and Other Securities............. Additional Information (Part A)
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................ How to Buy Shares; How to Redeem Shares;
Calculation of Net Asset Value (Part A)
Item 20. Tax Status..................................... Taxes
Item 21. Underwriters................................... Not Applicable
Item 22. Calculation of Performance Data................ Performance Information (Part A); Performance
Data
Item 23. Financial Statements........................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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VALUE LINE PROSPECTUS
INTERMEDIATE BOND November 1,
FUND, INC. 1995
</TABLE>
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
Value Line Intermediate Bond Fund, Inc. (the "Fund")
is a no-load investment company whose investment
objective is high current income consistent with low
volatility of principal. The Fund seeks to meet its
investment objective by investing in a diversified
portfolio of debt securities with a dollar-weighted
average portfolio maturity of between three and ten
years.
The Fund's investment adviser is Value Line, Inc.
(the "Adviser").
Shares of the Fund are offered at net asset value.
There are no sales charges or redemption fees.
Fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they federally insured or otherwise
protected by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
This Prospectus sets forth concise information about the Fund that a
prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information about
the Fund is contained in a Statement of Additional Information, dated
November 1, 1995, which has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. A copy
of the Statement of Additional Information may be obtained at no charge
by writing or telephoning the Fund at the address or telephone numbers
listed above.
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases...................................................... None
Sales Load on Reinvested Dividends........................................... None
Deferred Sales Load.......................................................... None
Redemption Fees.............................................................. None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES* (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.............................................................. 0.50%
12b-1 Fees................................................................... 0.25%
Other Expenses............................................................... 0.48%
Total Fund Operating Expenses................................................ 1.23%
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Example 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each period shown............ $10 $31 $54 $120
As adjusted assuming payment of a 12b-1 fee............. $13 $39 $68 $149
<FN>
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* The foregoing is based upon the expenses for the year ended October 31, 1994,
adjusted for a new 12b-1 plan, and is designed to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Actual expenses in the future may be greater or
less than these shown.
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FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following information on selected per share data and ratios should be
read in conjunction with the financial statements and notes thereto which appear
in the Fund's Annual Report to Shareholders available from the Fund without
charge. The financial statements and financial highlights for each of the two
years in the period ended October 31, 1994 and for the period from April 10,
1992 (commencement of operations) through October 31, 1992, have been audited by
Price Waterhouse LLP, independent accountants, whose unqualified report thereon
appears in the Fund's 1994 Annual Report to Shareholders, which is incorporated
by reference in the Statement of Additional Information. For the periods shown
below, the Fund was known as The Value Line Adjustable Rate U.S. Government
Securities Fund, Inc. and invested at least 65% of its total assets in U.S.
Government adjustable rate securities.
2
<PAGE>
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SIX MONTHS APRIL 10, 1992
ENDED (COMMENCEMENT OF
APRIL 30, 1995 YEAR ENDED YEAR ENDED OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1994 OCTOBER 31, 1993 OCTOBER 31, 1992
-------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 8.70 $ 10.01 $ 9.99 $ 10.00
-------------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........ .20 .50 .54(2) .33(1)
Net gains or losses on
securities (both realized
and unrealized)............. (.09) (1.31) .05 (.01)
-------------- -------- -------- --------
Total from investment
operations................ .11 (.81) .59 .32
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LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (.20) (.50) (.54) (.33)
Distributions from capital
gains....................... -- -- (.03) --
-------------- -------- -------- --------
Total distributions........ (.20) (.50) (.57) (.33)
-------------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD... $ 8.61 $ 8.70 $ 10.01 $ 9.99
-------------- -------- -------- --------
-------------- -------- -------- --------
Total return..................... 1.34% + -8.37% 6.04% 3.26%+(3)
-------------- -------- -------- --------
-------------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in
thousands)...................... $9,809 $ 28,431 $ 44,508 $ 33,763
Ratio of operating expenses to
average net assets.............. 1.43% * .98% .88% (2) 0.0% (1)
Ratio of interest expense to
average net assets.............. -- .38% 0.18% 0.07% *
Ratio of net investment income to
average net assets.............. 5.08% * 5.23% 5.35% (2) 5.83% *(1)(3)
Portfolio turnover rate.......... 50% 175% 126% 85%
Amount of debt outstanding at end
of period (in thousands)........ $ -- $ -- $ -- $ 3,940
Average amount of debt
outstanding during the period
(in thousands).................. $ -- $ 3,947 $ 1,926 $ 524
Average number of shares
outstanding during the period
(in thousands).................. 2,335 4,366 3,766 1,968
Average amount of debt per
outstanding share during the
period.......................... $ -- $ .90 $ .51 $ .27
<FN>
------------------------------
+ Not annualized
* Annualized
(1) Net of fee waiver and expense reimbursement. Had these expenses been fully
paid by the Fund, net investment income per share would have been $.25 and
ratios of annualized operating expenses and net investment income to
average net assets would have been 1.46% and 4.37%, respectively.
(2) Net of advisory fee waived by the Adviser from November 1, 1992 to January
31, 1993. Had this expense been paid by the Fund, net investment income per
share would have been $.53 and the ratios of operating expenses and net
investment income to average net assets would have been 0.99% and 5.24%,
respectively.
(3) Due to fee waiver and reimbursement of expenses by the Adviser and the
short period covered by this report, data is not indicative of future
periods.
</TABLE>
3
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INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is high current income consistent with
low volatility of principal (I.E. limiting the degree of fluctuation in the net
asset value of the Fund's shares.) The Fund does not, however, attempt to
maintain a constant net asset value per share. The Fund's investment objective
cannot be changed without stockholder approval. There can be no assurance that
the Fund will achieve its investment objective.
The Fund is designed for the investor who seeks generally higher yields than
those offered by money market funds, with less capital fluctuation than that of
a long-term bond fund. In seeking its objective, the Fund will invest at least
65% of its assets, under normal circumstances in a diversified portfolio of
intermediate-term debt securities. The dollar-weighted average maturity of the
portfolio will be between three and ten years.
The Fund will primarily invest in investment-grade debt securities -- those
rated within one of the four highest grades assigned by Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or if
unrated, judged by the Adviser to be of comparable quality. Investment grade
debt securities include debt securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities ("U.S. Government Securities");
bank obligations; commercial paper rated P-1 by Moody's or A-1 by S&P;
adjustable rate securities; and Repurchase Agreements. Certain of these
securities have speculative characteristics and involve greater investment risk,
including the possibility of default or bankruptcy, than is the case with higher
rated securities.
The Fund may engage in various portfolio strategies to hedge its portfolio
against investment and interest rate risks, including, options on portfolio
securities, financial futures contracts and options on such futures. The Fund
may also enter into reverse repurchase transactions for the purpose of acquiring
additional portfolio securities. (See "Repurchase and Reverse Repurchase
Agreements" in this Prospectus.)
In determining a security's maturity for purposes of calculating the Fund's
average maturity or the security's maturity, estimates of the expected time for
its principal to be paid may be used. This can be substantially shorter than its
stated final maturity. For example, a 15-year mortgage-backed security has a
stated final maturity of 15 years but an average life between 5 and 7 years and
is a permitted investment for the Fund.
The Fund reserves the right to invest without limitation in investment-grade
money market or short-term debt instruments for temporary, defensive purposes.
Set forth below is a description of mortgage and asset-backed securities in
which the Fund may invest. The Fund may invest without stockholder approval in
other similar types of mortgage and asset-backed securities, including those
which may be developed in the future.
MORTGAGE-BACKED SECURITIES. The Fund may invest in pass-through
mortgage-backed securities ("MBS") which are collateralized by a pool of
mortgages. Most mortgage securities are pass-through securities, which means
that they provide investors with payments consisting of both principal and
interest as mortgages in the underlying mortgage pool are paid off by the
borrower. The Fund will invest only in mortgage-backed securities that have a
final stated maturity of 15 years or less from the date of purchase.
The Fund may also invest in securities issued by certain private,
nongovernment entities, such as financial institutions, if the securities are
"fully collateralized" at the time of issuance by securities
4
<PAGE>
or certificates issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs are debt securities issued by U.S. Government agencies or by financial
institutions, such as trusts and special purpose corporations, and other
mortgage lenders and collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series with different
maturities. The classes or series are retired in sequence as the underlying
mortgages are repaid. Prepayment may shorten the stated maturity of the
obligation and can result in a loss of premium, if any has been paid. Certain of
these securities may have variable or floating interest rates and others may be
stripped (securities which provide only the principal or interest feature of the
underlying security).
REMICs are private entities formed for the purpose of holding a fixed pool
of mortgages secured by an interest in real property. REMICs are similar to CMOs
in that they issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities and
are not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. The Fund intends to invest in
privately-issued CMOs and REMICs only if they are rated at the time of purchase
in the two highest grades by a nationally-recognized rating agency.
ASSET-BACKED SECURITIES. The Fund may invest in various types of asset
backed securities ("ABS"). The securitization techniques used in the context of
ABSs are similar to those used for MBS. Thus, through the use of trusts and
special purpose corporations, various types of receivables, primarily home
equity loans, automobile loans and credit card receivables and student loans,
equipment loans, boat loans, truck loans or leases, are securitized in
pass-through structures similar to the mortgage pass-through structures
described above or in a pay-through structure similar to the CMO structure. ABSs
are typically bought or sold from or to the same entities that act as primary
dealers in U.S. Government securities.
In general, the collateral supporting ABSs is of shorter maturity than
mortgage loans and may be less likely to experience substantial prepayments. The
maturities of ABS's is between one and ten years, with an average maturity of
less than five years. As with MBSs, ABSs are often backed by a pool of assets
representing the obligations of a number of different parties. Currently,
pass-through securities collateralized by SBA guaranteed loans, home equity
loans, automobile loans and credit card receivables are the most prevalent ABSs
which are adjustable rate securities.
The Fund will only invest in ABSs that are issued or guaranteed by a
corporation, trust or other entity which is rated in the top four categories by
at least one nationally recognized rating organization.
ABSs are relatively new and untested instruments and may be subject to
greater risk of default during periods of economic downturn than other
securities, including MBSs, resulting in possible losses to the Fund. Also, the
secondary market for ABSs may not be as liquid as the market for other
securities, including MBSs, which may result in the Fund's experiencing
difficulty in valuing such securities. Investments in ABSs that cannot be
disposed of promptly within seven days and in the usual course of business
without taking a reduced price will be considered illiquid and limited to an
amount which, together with other illiquid investments, does not exceed 10% of
the value of the Fund's net assets.
5
<PAGE>
SPECIAL CONSIDERATIONS AND ADDITIONAL RISK FACTORS
One of the principal risks regarding MBSs and, to a lesser extent, ABSs is
the risk of prepayments. Prepayment rates may vary significantly over relatively
short periods of time. Payments of principal of and interest on MBSs and ABSs
are made more frequently than are payments on conventional debt securities. In
addition, holders of MBSs and of certain ABSs (such as ABSs backed by home
equity loans) may receive unscheduled payments of principal at any time
representing prepayments on the underlying mortgage loans or financial assets.
Such prepayments may usually be made without penalty. Prepayment rates are
affected by changes in prevailing interest rates and numerous other economic,
geographic, social and other factors. (ABSs backed by other than home equity
loans do not generally prepay in response to changes in interest rates, but may
be subject to prepayments in response to other factors.) Changes in the rate of
prepayments will generally affect the yield to maturity of the security.
Moreover, when the holder of the security attempts to reinvest prepayments or
even the scheduled payments of principal and interest, it may receive a rate of
interest which is higher or lower than the rate on the MBS or ABS originally
held. Another consideration is that to the extent that MBSs or ABSs are
purchased at a premium, mortgage foreclosures and principal prepayments may
result in loss to the extent of the premium paid. On the other hand, where such
securities are bought at a discount, both scheduled payments of principal and
unscheduled prepayments will increase current and total returns and will
accelerate the recognition of income which, when distributed to stockholders,
will be taxable as ordinary income. The Adviser will consider remaining
maturities or estimated average lives of MBSs and ABSs in selecting them for the
Fund. Finally, ABSs may present certain risks not present in MBSs. Assets
underlying ABSs such as credit-card receivables are generally unsecured, and
debtors are entitled to the protection of various state and Federal consumer
protection laws. Some of those laws give a right of set-off, which may reduce
the balance owed.
The interest rate reset features of any adjustable rate securities held by
the Fund may reduce the effect on the net asset value of Fund shares caused by
changes in market interest rates. However, the market value of adjustable rate
securities and, therefore, the Fund's net asset value, may vary to the extent
that the current interest rate on such securities differs from market interest
rates during periods between the interest reset dates. These variations in value
occur inversely to changes in the market interest rates. Thus, if market
interest rates rise above the current rates on the securities, the value of the
Fund's securities will decrease; conversely, if market interest rates fall below
the current rate on the securities, the value of the Fund's securities will
rise. The longer the adjustment intervals on Adjustable Rate Securities held by
the Fund, the greater the potential for fluctuations in the Fund's net asset
value.
PORTFOLIO TURNOVER. The Fund's annual portfolio turnover rate may exceed
100%. A portfolio turnover rate of 100% would occur if all of the Fund's
portfolio were replaced in a period of one year. To the extent that the Fund
engages in short-term trading in attempting to achieve its objective, it may
increase portfolio turnover and incur larger brokerage commissions and other
expenses than might otherwise be the case. The Fund's portfolio turnover rate
for recent fiscal years is set forth under "Financial Highlights", see page 3.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to broker-dealers or
institutional investors if as a result thereof the aggregate value of all
securities loaned does not exceed 25% of the total assets of the Fund. The loans
will be made in conformity with applicable regulatory policies and will be 100%
collateralized by cash, cash equivalents or United States Treasury Bills on a
daily basis in an amount
6
<PAGE>
equal to the market value of the securities loaned and interest earned. While
there may be delays in recovery or even loss of rights in the collateral should
the borrower fail financially, the loans will be made only to firms deemed by
the Adviser to be of good standing and will not be made unless, in the judgment
of the Adviser, the consideration which can be earned from such loans justifies
the risk. The Fund may pay reasonable custodian and administrative fees in
connection with the loans.
WHEN-ISSUED TRANSACTIONS
The Fund may from time to time purchase securities on a "when-issued" basis.
The price of such securities, which may be expressed in yield terms, is fixed at
the time the commitment to purchase is made, but delivery and payment for the
when-issued securities take place at a later date. Normally, the settlement date
occurs within one month of the purchase. During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. Forward commitments involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of the Fund's other assets. While
when-issued securities may be sold prior to the settlement date, the Fund
intends to purchase such securities with the purpose of actually acquiring them
unless a sale appears desirable for investment reasons. At the time the
commitment to purchase a security on a when-issued basis is confirmed, the Fund
will record the transaction and reflect the value of the security in determining
its net asset value. The Fund does not believe that its net asset value or
income will be adversely affected by its purchase of securities on a when-issued
basis. The Fund will maintain cash and high quality marketable securities equal
in value to commitments for when-issued securities in a segregated account.
OPTIONS AND FUTURES
The Fund may engage in a variety of transactions involving the use of
options and futures in order to hedge against changes in the values of
securities the Fund owns or expects to purchase or to hedge against interest
changes. For example, if the Adviser expected interest rates to increase, the
Fund might sell futures contracts on U.S. Government Securities. If rates were
to increase, the value of U.S. Government Securities held by the Fund would
decline, but this decline would be offset in whole or in part by an increase in
the value of the Fund's positions in its futures contracts. The Fund may
purchase and sell call and put options with respect to securities the Fund owns
or expects to purchase. The Fund will not (1) sell put or call options to the
extent that, immediately after a sale, the aggregate value of the securities
underlying the calls or obligations securing the puts would exceed 10% of the
Fund's net assets or (2) purchase put or call options if, immediately after a
purchase, the premiums paid for all the options owned at that time would exceed
5% of the Fund's net assets. The Fund may also purchase and sell financial
futures contracts and options thereon. The Fund will not purchase put and call
options with respect to such securities if as a result more than 5% of its
assets would at the time be invested in such options. In addition, the Fund will
not purchase or sell futures contracts or options on futures contracts if as a
result the sum of the initial margin deposits on the Fund's existing futures and
related options positions and premiums paid for outstanding options on futures
contracts would exceed 5% of the Fund's assets. (For options that are
"in-the-money" at the time of purchase, the amount by which the option is
"in-the-money" is excluded from this calculation.) In instances involving
entering into long futures or options contracts by the Fund, an amount equal to
the market value of the futures contract will be deposited in a segregated
account with the Fund's custodian of cash, cash equivalents and other liquid
high grade
7
<PAGE>
debt securities to collateralize the position and thereby insure that the use of
such futures contract is unleveraged. No more than 25% of the Fund's net assets
may be deposited in such segregated account.
RISKS ON OPTIONS AND FUTURES TRANSACTIONS
Options and futures transactions involve costs and may result in losses. The
use of options and futures may involve certain special risks, including the
risks that the Fund may be unable at times to close out such positions, that
hedging transactions may not accomplish their purpose because of imperfect
market correlations, or that the Adviser may not forecast interest rate and
market movements correctly.
The effective use of options and futures strategies depends, among other
things, on the Fund's ability to terminate options and futures positions at
times when the Adviser deems it desirable to do so. Although the Fund will enter
into an option or futures contract position only if the Adviser believes that a
liquid secondary market exists for such option or futures contract, there is no
assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price. Options on certain U.S. Government
Securities are traded in significant volume on securities exchanges. However,
other options which the Fund may purchase or sell are traded in the "over-the-
counter" market rather than on an exchange. This means that the Fund will enter
into such option contracts with particular securities dealers who make markets
in these options. The Fund's ability to terminate option positions in the
over-the-counter market may be more limited than for exchange-traded options and
may also involve the risk that securities dealers participating in such
transactions would fail to meet their obligations to the Fund.
However, the Fund will engage in these transactions only if, in the opinion
of the Adviser, the pricing mechanism and liquidity of the over-the-counter
market are satisfactory and the participants are responsible parties likely to
meet their contractual obligations.
The use of options and futures strategies also involves the risk of
imperfect correlation among movements in the values of the securities underlying
the futures and options purchased and sold by the Fund, of the option and
futures contract itself, and of the securities which are the subject of the
hedge. The successful use of these strategies further depends on the ability of
the Adviser to forecast interest rate and market movements correctly.
The Fund's ability to engage in options and futures transactions and to sell
related securities may be limited by tax considerations.
MORTGAGE ROLLS
The Fund may enter into mortgage "dollar rolls" in which the Fund sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase substantially similar (same type, coupon and
maturity) securities on a specified future date. At the time the Fund enters
into the transaction, it will establish and maintain a segregated account with
its approved custodian containing cash, cash equivalents or liquid high grade
debt securities having a value not less than the repurchase price (including
accrued interest). During the roll period, the Fund foregoes principal and
interest paid on the securities sold. The Fund is compensated by the difference
between the current sales price and the lower forward price for the future
purchase (often referred to as the "drop") or a fee as well as by the interest
earned on the cash proceeds of the initial sale. A "covered roll" is a specific
type of dollar roll for which there is an offsetting cash position or a cash
equivalent security position which matures on or before the forward settlement
date of the
8
<PAGE>
dollar and the transaction cover rolls. Covered rolls are treated as borrowings.
The risks of entering into mortgage rolls are (i) failure of the dealer to
deliver the security purchased resulting in the replacement of the security at a
higher price; (ii) the security purchased while substantially similar to the
security sold, may have different characteristics which may result in a lower
return than the security sold; and (iii) the actual returns from the
transactions may be less than expected. There is no assurance that Mortgage
dollar rolls can be successfully employed.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. The Fund may invest temporary
cash balances in repurchase agreements. A repurchase agreement involves a sale
of securities to the Fund, with the concurrent agreement of the seller (a member
bank of the Federal Reserve System or a securities dealer which the Adviser
believes to be financially sound) to repurchase the securities at the same price
plus an amount equal to an agreed-upon interest rate, within a specified time,
usually less than one week, but, on occasion, at a later time. The Fund will
make payment for such securities only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent
for the Fund. Repurchase agreements may also be viewed as loans made by the Fund
which are collateralized by the securities subject to repurchase. The value of
the underlying securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. The Fund has a fundamental
policy that it will not enter into repurchase agreements which will not mature
within seven days if any such investment, together with all other assets held by
the Fund which are not readily marketable, amounts to more than 10% of its total
assets. The Board of Directors monitors the creditworthiness of parties dealing
with the Fund in repurchase agreements and loans of portfolio securities.
The Fund may enter into reverse repurchase agreements with the same parties
with whom it may enter into repurchase agreements. Under a reverse repurchase
agreement, the Fund sells securities and agrees to repurchase them at a mutually
agreed date and price. At the time the Fund enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with its approved
custodian containing cash, cash equivalents or liquid high grade debt securities
having a value not less than the repurchase price (including accrued interest).
The Fund intends to use reverse repurchase agreements, which is considered to be
borrowing, to enhance its income by investing the proceeds in instruments with a
higher rate of return than the cost of borrowing. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by the Fund may decline below the price of the securities the Fund has sold
but is obligated to repurchase. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, such
buyer or its trustee or receiver may receive an extension of time to determine
whether to enforce the Fund's obligations to repurchase the securities and the
Fund's use of the proceeds of the reverse repurchase agreement may effectively
be restricted pending such decision. The use of reverse repurchase agreements by
the Fund may cause greater fluctuation in the Fund's net asset value.
ILLIQUID SECURITIES. The Fund will not purchase or otherwise acquire any
security if, as a result, more than 10% of its net assets (taken at current
value) would be invested in securities that are
9
<PAGE>
illiquid by virtue of the absence of a readily available market. This policy
includes repurchase agreements maturing in more than seven days, certain
interest rate hedging transactions and over-the-counter options held by the Fund
and that portion of assets used to cover such options.
FOREIGN SECURITIES. The Fund may purchase U.S. dollar denominated
securities of foreign issuers which are publicly traded in the United States.
Foreign securities involve additional risks and may be affected by the strength
of foreign currencies relative to the U.S. dollar, or by political or economic
developments in foreign countries. Foreign companies may not be subject to
accounting standards or government supervision comparable to U.S. companies, and
there may be less public information about their operations. These risks are
typically greater for investments in less-developed countries whose governments
and financial markets may be more susceptible to adverse political and economic
developments. The Adviser considers these factors in making investments for the
Fund. The Fund will not invest more than 25% of its net assets in these types of
foreign securities.
RISK FACTORS
Investors should be aware of the following:
- There are risks in all investments, including any stock investment, and in
all mutual funds. The Fund's net asset value will fluctuate to reflect the
investment performance of the securities held by the Fund.
- The value a shareholder receives upon redemption may be greater or lesser
than the value of such shares when acquired.
- The use of investment techniques such as investing in repurchase
agreements, lending portfolio securities, purchasing securities on a
when-issued basis, short-selling and trading in index futures contracts
and in options on such contracts involve greater risk than does an
investment in a fund that does not engage in these activities.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of investment restrictions which may not be
changed without shareholder approval. These are set forth in the Statement of
Additional Information and provide, among other things, that the Fund may not:
(a) purchase securities (other than U.S. government securities) if the
purchase would cause the Fund, with respect to 75% of its assets at the time, to
have more than 5% of the value of its total assets invested in the securities of
any one company or to own more than 10% of the outstanding voting securities of
any one company; or,
(b) invest 25% or more of the value of the Fund's assets in one particular
industry. This restriction does not apply to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
MANAGEMENT OF THE FUND
The management and affairs of the Fund are supervised by the Fund's Board of
Directors. The Fund's officers conduct and supervise the daily business
operations of the Fund. The Fund's investment decisions are made by an
investment committee of employees of the Adviser. The Fund's Annual Report
contains a discussion on the Fund's performance which will be made available
upon request and without charge.
10
<PAGE>
THE ADVISER. The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co., Inc. ("AB&Co.").
AB&Co. currently owns approximately 81% of the outstanding shares of the
Adviser's common stock. Jean Bernhard Buttner, Chairman, Chief Executive Officer
and President of the Adviser, owns a majority of the voting stock of AB&Co. All
of the non-voting stock is owned by or for the benefit of the Bernhard family
and certain employees and former employees of AB&Co. or the Adviser. The Adviser
currently acts as investment adviser to the other Value Line mutual funds and
furnishes investment counseling services to private and institutional accounts
with combined assets in excess of $4 billion. Value Line Securities, Inc., the
Fund's distributor, is a subsidiary of the Adviser. The Adviser manages the
Fund's investments, provides various administrative services and supervises the
Fund's daily business affairs, subject to the authority of the Board of
Directors. The Adviser is paid an advisory fee at an annual rate of 0.50% on the
Fund's average daily net assets during the year. From time to time, the Adviser
may voluntarily assume certain expenses of the Fund. This will have the effect
of lowering the overall expense ratio of the Fund and of increasing the yield to
investors. For more information about the Fund's management fees and expenses,
see the "Summary of Fund Expenses" on page 2.
CALCULATION OF NET ASSET VALUE
The net asset value of the Fund's shares for purposes of both purchases and
redemptions is calculated by State Street Bank & Trust Company and is determined
once daily as of the close of regular trading of the New York Stock Exchange
(currently 4:00 p.m., New York time) on each day that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem Fund shares have been received. The New York Stock Exchange is
currently closed on New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share is determined by dividing the total value of the investments and
other assets of the Fund, less any liabilities, by the total outstanding shares.
Fixed-income corporate securities are valued on the basis of prices provided by
an independent pricing service approved by the Directors. In valuing such
securities, the pricing service generally takes into account appropriate factors
such as institutional size trading characteristics and other market data.
Securities not priced in this manner are valued at the midpoint between the
latest available bid and asked prices in the principal market (last sales price
if the principal market is an exchange) in which such securities are normally
traded.
The Fund values mortgage-backed securities other than GNMAs (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 analytical 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 negotiations between the parties in a sales
transaction. Securities for which market quotations are not readily available or
which are not readily marketable and all other assets of the Fund are valued at
fair value as the Board of Directors may determine. Short-term instruments with
maturities of 60 days or less at the date of purchase are valued at amortized
cost, which approximates market. Short-term instruments with maturities greater
than 60 days, at date of purchase, are valued at the midpoint between the latest
available and representative asked and bid prices, and, commencing 60 days prior
to maturity, such securities are valued at amortized cost.
11
<PAGE>
HOW TO BUY SHARES
PURCHASE BY CHECK. To buy shares, send a check made payable to "NFDS-Agent"
and a completed and signed application form to Value Line Funds, c/o NFDS, P.O.
Box 419729, Kansas City, MO, 64141-6729. For assistance in completing the
application and for information on pre-authorized telephone purchases, call
Value Line Securities at 1-800-223-0818 during New York business hours. Upon
receipt of the completed and signed purchase application and a check, National
Financial Data Services, Inc. ("NFDS"), the Fund's shareholder servicing agent,
will buy full and fractional shares (to three decimal places) at the net asset
value next computed after the funds are received and will confirm the investment
to the investor. Subsequent investments may be made by attaching a check to the
confirmation's "next payment" stub, by telephone or by federal funds wire.
Investors may also buy shares through broker-dealers other than Value Line
Securities. Such broker-dealers may charge investors a reasonable service fee.
Neither Value Line Securities nor the Fund receives any part of such fees when
charged (and which can be avoided by investing directly). If an order to buy
shares is cancelled due to nonpayment or because the purchaser's check does not
clear, the purchaser will be responsible for any loss incurred by the Fund or
Value Line Securities by reason of such cancellation. If the purchaser is a
shareholder, Value Line Securities reserves the right to redeem sufficient
shares from the shareholder's account to protect the Fund against loss. Minimum
orders are $1,000 for an initial purchase and $100 for each subsequent purchase.
The Fund may refuse any order for the purchase of shares.
WIRE PURCHASE -- $1,000 MINIMUM. An investor should call 1-800-243-2729 to
obtain an account number. After receiving an account number, instruct your
commercial bank to wire transfer "federal funds" via the Federal Reserve System
as follows:
<TABLE>
<S> <C>
State Street Bank and Trust Company, Boston, MA
ABA #011000028
Attn: Mutual Fund Division
DDA #99049868
Value Line Intermediate Bond Fund, Inc.
A/C #
Shareholder's name and account information
Tax ID #
</TABLE>
NOTE: A COMPLETED AND SIGNED APPLICATION MUST BE MAILED IMMEDIATELY AND
RECEIVED BY NFDS BEFORE IT CAN HONOR ANY WITHDRAWAL OR EXCHANGE TRANSACTIONS.
After your account has been opened, you may wire additional investments in
the same manner.
For an initial investment made by federal funds wire purchase, the wire must
include a valid social security number or tax identification number. Investors
purchasing shares in this manner will then have 30 days after purchase to
provide the certification and signed account application. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn on only U.S.
banks. Until receipt of the above, any distributions from the account will be
subject to 31% withholding.
SUBSEQUENT TELEPHONE PURCHASES -- $250 MINIMUM. Upon completion of the
telephone purchase authorization section of the account application,
shareholders who own Fund shares with a current value of $500 or more may also
purchase additional shares in amounts of $250 or more up to twice the value of
their shares by calling 1-800-243-2729 between 9:00 a.m. and 4:00 p.m. New York
time. Such orders will be priced at the closing net asset value on the day
received and payment
12
<PAGE>
will be due within three business days. If payment is not received within the
required time or a purchaser's check does not clear, the order is subject to
cancellation and the purchaser will be responsible for any loss incurred by the
Fund or Value Line Securities. Shares may not be purchased by telephone for a
tax-sheltered retirement plan.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to distribute monthly its net investment income and
realized capital gains, if any, at least annually. Income dividends and capital
gains distributions are automatically reinvested in additional shares of the
Fund unless the shareholder has requested otherwise. The shareholder can so
request by informing NFDS by sending in the form attached to each shareholder
statement or by making such request on the initial application. Because the Fund
intends to distribute all of its net investment income and capital gains to
shareholders, it is not expected that the Fund will be required to pay any
federal income or excise taxes. However, shareholders of the Fund normally will
have to pay federal income taxes, and any applicable state or local taxes, on
the dividends and capital gains distributions they receive from the Fund
(whether or not reinvested in additional Fund shares). Shareholders will be
informed annually of the amount and nature of the Fund's income and
distributions.
PERFORMANCE INFORMATION
The Fund may from time to time include information regarding its total
return performance or yield in advertisements or in information furnished to
existing or prospective shareholders. When information regarding total return is
furnished, it will be based upon changes in the Fund's net asset value and will
assume the reinvestment of all capital gains distributions and income dividends.
It will take into account nonrecurring charges, if any, which the Fund may incur
but will not take into account any income taxes due on Fund distributions.
The table below illustrates the total return performance of the Fund for the
periods indicated by showing the value of a hypothetical $1,000 investment made
at the beginning of each period. The information contained in the table has been
computed by applying the Fund's average annual compounded rate of return to the
hypothetical $1,000 investment. The table assumes reinvestment of all capital
gains distributions and income dividends, but does not take into account income
taxes due on Fund distributions or dividends. For the periods shown below, the
Fund was known as The Value Line Adjustable Rate U.S. Government Securities
Fund, Inc. and invested at least 65% of its total assets in U.S. Government
adjustable rate securities.
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
COMPOUNDED
RATE OF RETURN
---------------
<S> <C> <C>
For the year ended October 31, 1994...................................... $ 916 -8.37%
From April 10, 1992 (commencement of operations)
to October 31, 1994..................................................... $ 1,003 0.13%
</TABLE>
When information regarding "yield" is furnished it will refer to the net
investment income per share generated by an investment in the Fund over a
thirty-day period. This income will then be annualized by assuming that the
amount of income generated by the investment during that thirty-day period is
generated each 30 days over one year and assuming that the income is reinvested
every six months.
13
<PAGE>
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc. and other industry or financial publications. The Fund may compare its
performance to that of other mutual funds with similar investment objectives,
other financial instruments such as certificates of deposit, and to stock or
other relevant indices. The Fund will not compare its specific investment
performance with money market funds. From time to time, articles about the Fund
regarding its performance or ranking may appear in national publications such as
Kiplinger's Personal Finance, Money Magazine, Financial World, Morningstar,
Personal Investors, Forbes, Fortune, Business Week, Wall Street Journal,
Investor's Business Daily, Donoghue, The Financial Times, The Economist, Worth,
Smart Money, Mutual Fund Forecaster, U.S. News and World Report and Barrons.
Some of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund. Reference to or reprints of such articles
may be used in the Fund's promotional literature.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation or what an investment may earn or what an
investor's total return may be in any future period.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after NFDS receives a request in proper form. The value of
shares of the Fund on redemption may be more or less than the shareholder's
cost, depending upon the market value of the Fund's assets at the time. A
shareholder holding certificates for shares must surrender the certificates
properly endorsed with signature guaranteed. A signature guarantee may be
executed by any "eligible" guarantor. Eligible guarantors include domestic
banks, savings associations, credit unions, member firms of a national
securities exchange, and participants in the New York Stock Exchange Medallion
Signature Program, the Securities Transfer Agents Medallion Program ("STAMP")
and the Stock Exchanges Medallion Program. A guaranty from a Notary Public is
not an acceptable source. The signature on any request for redemption of shares
not represented by certificates, or on any stock power in lieu thereof, must be
similarly guaranteed. In each case the signature or signatures must correspond
to the names in which the account is registered. Additional documentation may be
required when shares are registered in the name of a corporation, agent or
fiduciary. For further information, you should contact NFDS.
The Fund does not impose a redemption charge but shares redeemed through
brokers or dealers may be subject to a service charge by such firms. A check for
the redemption proceeds will be mailed within seven days following receipt of
all required documents. However, payment may be postponed under unusual
circumstances such as when normal trading is not taking place on the New York
Stock Exchange. In addition, payment of the redemption of shares purchased by
check may be delayed until the check has cleared, which may take up to 15 days
following the purchase date.
If the Board of Directors determines that it is in the best interests of the
Fund, the Fund may redeem, upon prior written notice, at net asset value all
shareholder accounts which due to redemptions fall below $500 in net asset
value. In such event, an investor will have 30 days to increase the shares in
his account to the minimum level. Individual Retirement Accounts are excluded
from this provision.
14
<PAGE>
BY TELEPHONE OR WIRE. You may redeem shares by telephone or wire
instructions to NFDS, by so indicating on the initial application. Payment will
normally be transmitted by wire on the business day following receipt of your
instructions to the bank account at a member bank of the Federal Reserve System
you have designated on your initial purchase application. Heavy wire traffic,
however, may delay its arrival until after public hours at your bank. Telephone
or wire redemptions must be in amounts of $1,000 or more and your instructions
must include your name and account number. The number to call before the close
of business on the New York Stock Exchange is 1-800-243-2729. The Fund employs
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include requiring some form of personal identification
prior to acting upon instructions received by telephone. The Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. Any loss will be borne by the investor. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time by the Fund.
BY CHECK. You may elect this method of redemption by indicating so on the
initial application and you will be provided a supply of checks by NFDS. These
checks may be made payable to the order of any person in any amount of $500 or
more. When your check is presented for payment, the Fund will redeem a
sufficient number of full and fractional shares in your account to cover the
amount of the check. Checks will be returned unpaid if there are insufficient
shares to meet the withdrawal amount. Potential fluctuations in the net asset
value of the Fund's shares should be considered in determining the amount of the
check.
This method of redemption requires that your shares must remain in an open
account and that no share certificates are issued and outstanding. You cannot
close your account through the issuance of a check because the exact balance at
the time your check clears will not be known when you write the check. Checks
are free, but NFDS will impose a $5 fee for stopping payment of a check upon
your request or if NFDS cannot honor the check due to insufficient funds or
other valid reasons.
If you use this privilege you will be required to sign a signature card
which will subject you to State Street Bank and Trust Company's rules and
regulations governing checking accounts. The authorization form which you must
sign also contains a provision relieving the bank, NFDS, the Fund, Value Line
Securities and the Adviser from liability for loss, if any, which you may
sustain arising out of a non-genuine instruction pursuant to this redemption
feature. Any additional documentation required to assure a redemption must be
maintained on file with NFDS in such a current status as NFDS may deem
necessary. A new form properly signed and with the signature guaranteed as
described above must be received and accepted by NFDS before authorized
redemption instructions already on file with NFDS can be changed.
An additional supply of checks will be furnished upon request. There
presently is no charge to the shareholder for these checks or their clearance.
However, the Fund and NFDS reserve the right to make reasonable charges and to
terminate or modify any or all of the services in connection with this privilege
at any time without prior notice.
IMPORTANT: Shares purchased by check may not be redeemed until the Fund is
reasonably assured of the final collection of such check, currently determined
to be up to 15 days.
The Fund will ordinarily pay in cash all redemptions by any shareholder of
record. However, the Fund has reserved the right under the Investment Company
Act of 1940 to make payment in whole
15
<PAGE>
or in part in securities of the Fund, if the Directors determine that such
action is in the best interests of the other shareholders. Under such
circumstances, the Fund will, nevertheless, pay to each shareholder of record in
cash all redemptions by such shareholder, during any 90-day period, up to the
lesser of $250,000 or 1% of the Fund's net assets. Securities delivered in
payment of redemptions are valued at the same value assigned to them in
computing the net asset value per share. Shareholders receiving such securities
may incur brokerage costs on their sales.
SERVICE AND DISTRIBUTION PLAN
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, for the payment of
certain expenses incurred by Value Line Securities, Inc. (the "Distributor") in
advertising, marketing and distributing the Fund's shares and for servicing the
Fund's shareholders at an annual rate of 0.25% of the Fund's average daily net
assets. Under the Plan, the Distributor may make payments to securities dealers,
banks, financial institutions and other organizations which render distribution
and administrative services with respect to the distribution of the Fund's
shares. Such services may include, among other things, answering investor
inquiries regarding the Fund; processing new shareholder account applications
and redemption transactions; responding to shareholder inquiries; and such other
services as the Fund may request to the extent permitted by applicable statute,
rule or regulation. The Plan also provides that the Adviser may make such
payments out of its advisory fee, its past profits or any other source available
to it. The fees payable to the Distributor under the Plan are payable without
regard to actual expenses incurred.
The Glass-Steagall Act and other applicable laws prohibit banks from
engaging in the business of underwriting, selling or distributing securities.
Generally, banks will be engaged to provide administrative services. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either Federal or State statutes or regulations relating to the
permissible activities of banks and their affiliates, could prevent a bank from
continuing to perform all or a part of its administrative services. In that
case, its shareholder clients would be permitted to remain shareholders of the
Fund and alternative means for continuing the servicing of such shareholders
would be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these consequences.
INVESTOR SERVICES
VALU-MATIC.-Registered Trademark- The Fund offers a free, pre-authorized
check service to its shareholders through which monthly investments of $25 or
more are automatically made into the shareholder's Fund account. Further
information regarding this service can be obtained from Value Line Securities,
Inc. by calling 1-800-223-0818.
EXCHANGE OF SHARES. Shares of the Fund may be exchanged for shares of the
other Value Line funds in any identically registered account on the basis of the
respective net asset values next computed after receipt of the exchange order.
No telephone exchanges can be made for less than $1,000. If shares of the Fund
are being exchanged for shares of The Value Line Cash Fund, Inc. or The Value
Line Tax Exempt Fund--Money Market Portfolio and the shares (including shares in
accounts under the control of one investment adviser) have a value in excess of
$500,000, then at the discretion of the Adviser, the shares to be purchased will
be purchased at the closing price on the third business day following the
redemption of the Fund shares being exchanged to allow the Fund to utilize
normal securities settlement procedures in transferring the proceeds of the
redemption.
16
<PAGE>
The exchange privilege may be exercised only if the shares to be acquired
may be sold in the investor's State. Prospectuses for the other Value Line funds
may be obtained from Value Line Securities by calling 1-800-223-0818. Each such
exchange involves a redemption and a purchase for income tax purposes.
Broker-dealers are not prohibited from charging a commission for handling the
exchange of Fund shares. To avoid paying such a commission, send the request in
with signature guaranteed to NFDS. The Fund reserves the right to terminate the
exchange privilege of any account making more than eight exchanges a year. (An
exchange out of The Value Line Cash Fund, Inc. or The Value Line Tax Exempt
Fund--Money Market Portfolio is not counted for this purpose.) The exchange
privilege may be modified or terminated upon sixty days notice to shareholders,
and any of the Value Line funds may discontinue offering its shares generally or
in any particular state without prior notice. To make an exchange, call
1-800-243-2729 or if busy call Value Line Securities, Inc. at 1-800-223-0818.
Although it has not been a problem in the past, shareholders should be aware
that a telephone exchange may be difficult during periods of major economic or
market changes.
SYSTEMATIC CASH WITHDRAWAL PLAN. A shareholder who has invested a minimum
of $5,000 in the Fund, or whose shares have attained that value, may request a
transfer of his shares to a Value Line Systematic Cash Withdrawal Account which
NFDS will maintain in his name on the Fund's books. Under the Systematic Cash
Withdrawal Plan (the "Plan") the shareholder will request that NFDS, acting as
his agent, redeem monthly or quarterly a sufficient number of shares to provide
for payment to him, or someone he designates, of any specified dollar amount
(minimum $25). All certificated shares must be placed on deposit under the Plan
and dividends and capital gains distributions, if any, are automatically
reinvested at net asset value. The Plan will automatically terminate when all
shares in the account have been redeemed. The shareholder may at any time
terminate the Plan, change the amount of the regular payment, or request
liquidation of the balance of his account on written notice to NFDS. The Fund
may terminate the Plan at any time on written notice to the shareholder.
TAX-SHELTERED RETIREMENT PLANS. Shares of the Fund may be purchased for
various types of retirement plans. For more complete information, contact Value
Line Securities, Inc. at 1-800-223-0818 during New York business hours.
ADDITIONAL INFORMATION
The Fund is an open-end, diversified management investment company
incorporated in Maryland in 1991 as The Value Line Adjustable Rate U.S.
Government Securities Fund Inc. In 1995, it changed its name and investment
policy. The Fund has 300 million authorized shares of common stock, $.001 par
value. Each share has one vote with fractional shares voting proportionately.
Shares have no preemptive rights, are freely transferable, are entitled to
dividends as declared by the Directors, and, if the Fund were liquidated, would
receive the net assets of the Fund.
INQUIRIES. All inquiries regarding the Fund should be directed to the Fund
at 1-800-223-0818 or the address set forth on the cover page of this Prospectus.
Inquiries from shareholders regarding their accounts and account balances should
be directed to National Financial Data Services, Inc., servicing agent for State
Street Bank and Trust Company, the Fund's transfer agent, at 1-800-243-2729.
Shareholders should note that they may be required to pay a fee for special
requests such as historical transcripts of an account. Our Info-Line provides
the latest account information 24 hours a day, every day, and is available to
shareholders with push button phones. The Info-Line toll-free number is
1-800-243-2739.
17
<PAGE>
WITHHOLDING. Mutual funds are required to withhold 31% of dividends,
distributions of capital gains and redemption proceeds in accounts without a
valid social security or tax identification number. You must provide this
information when you complete the Fund's application and certify that you are
not currently subject to backup withholding. The Fund reserves the right to
close by redemption accounts for which the holder fails to provide a valid
social security or tax identification number.
STOCKHOLDER MEETINGS. The Fund does not intend to hold routine annual
meetings of stockholders. However, special meetings of shareholders will be held
as required by law, for purposes such as changing fundamental policies or
approving an advisory agreement. Stockholders of record of not less than a
majority of the outstanding shares of the Fund may remove a Director by votes
cast in person or by proxy at a meeting called for that purpose. The Directors
are required to call a meeting of stockholders for the purpose of voting upon
the question of the removal of any Director when so requested by the
stockholders of record of not less than 10% of the Fund's outstanding shares.
18
<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
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of Fund Expenses..................... 2
Financial Highlights......................... 2
Investment Objectives and Policies........... 4
Investment Restrictions...................... 10
Management of the Fund....................... 10
Calculation of Net Asset Value............... 11
How to Buy Shares............................ 12
Dividends, Distributions and Taxes........... 13
Performance Information...................... 13
How to Redeem Shares......................... 14
Service and Distribution Plan................ 16
Investor Services............................ 16
Additional Information....................... 17
</TABLE>
------------------------------------------
PROSPECTUS
-------------------
November 1, 1995
Value Line
Intermediate Bond
Fund, Inc.
(800) 223-0818
[logo]
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1995
--------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line Intermediate Bond Fund,
Inc. (the "Fund"), dated November 1, 1995, a copy of which may be obtained
without charge by writing or telephoning the Fund.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objectives and Policies........................................................ B-1
Other Investment Strategies............................................................... B-2
Investment Restrictions................................................................... B-5
Directors and Officers.................................................................... B-7
The Adviser............................................................................... B-8
Brokerage Arrangements.................................................................... B-9
How to Purchase Shares.................................................................... B-10
How to Redeem Shares...................................................................... B-10
Service and Distribution Plan............................................................. B-11
Taxes..................................................................................... B-11
Performance Data.......................................................................... B-12
Additional Information.................................................................... B-14
Financial Statements...................................................................... B-14
</TABLE>
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The Fund's investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT OBJECTIVES AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVES AND POLICIES" IN THE FUND'S PROSPECTUS)
Value Line Intermediate Bond Fund, Inc. (the "Fund") is a no-load,
diversified, open-end management investment company. Its investment objective is
high current income consistent with low volatility of principal. The Fund
intends to limit its annual portfolio turnover so that realized short-term gains
on securities held for less than three months are less than 30% of the Fund's
gross income so that the Fund will meet one of the tests for qualification as a
regulated investment company under the Internal Revenue Code.
B-1
<PAGE>
The investment policies set forth in the Fund's Prospectus and in this
Statement of Additional Information and the policies set forth below under
"Investment Restrictions" are, unless otherwise indicated, fundamental policies
of the Fund and may not be changed without the affirmative vote of a majority of
the outstanding voting securities of the Fund. As used in this Statement of
Additional Information and in the Prospectus, a "majority of the outstanding
voting securities of the Fund" means the lesser of (1) the holders of more than
50% of the outstanding shares of capital stock of the Fund or (2) 67% of the
shares present if more than 50% of the shares are present at a meeting in person
or by proxy.
OTHER INVESTMENT STRATEGIES
(SEE ALSO "OTHER INVESTMENT POLICIES" IN THE FUND'S PROSPECTUS)
OPTIONS
A call option is a contract that, in return for a premium, gives the holder
of the option the right to buy from the writer of the call option the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option has the obligation, upon exercise
of the option, to deliver the underlying security upon payment of the exercise
price during the option period. A put option is the reverse of a call option,
giving the holder the right to sell the security to the writer and obligating
the writer to purchase the underlying security from the holder.
A call option is "covered" if the Fund holds a call on the same security, as
the call written where the exercise price of the call held is (a) equal to or
less than the exercise price of the call written or (b) greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, U.S. Government securities or other high grade short-term obligations
in a segregated account held with its custodian. An option on securities is also
covered if the Fund owns the underlying security covered by the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities held in its
portfolio. A put option is "covered" if the Fund maintains cash or other high
grade short-term obligations with a value equal to the exercise price in a
segregated account held with its custodian, or else holds a put on the same
security, as the put written where the exercise price of the put held is equal
to or greater than the exercise price of the put written.
OPTIONS ON LISTED SECURITIES. Portfolio securities on which call options
may be written will be purchased solely on the basis of investment
considerations consistent with the Fund's investment objectives. When writing a
covered call option, the Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security above
the exercise price, but retains the risk of loss should the price of the
security decline. If a call option which a Fund has written expires, the Fund
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security during the
option period. If the call option is exercised, a decision over which the Fund
has no control, the Fund will realize a gain or loss from the sale of the
underlying security.
The Fund will generally write covered put options in circumstances where the
Fund's investment adviser wishes to purchase the underlying security at the
exercise price at the time the option is written. By writing a covered put
option, the Fund, in exchange for the premium received, accepts the risk of a
decline in the market value of the underlying security below the exercise price.
Because the Fund does not own the specific securities that it may be required to
purchase in the exercise of the put, the Fund can not benefit from any
appreciation with respect to those securities. If the option expires
unexercised, the Fund
B-2
<PAGE>
will realize a gain in the amount of the premium received for writing the
option. If the put option is exercised, a decision over which the Fund has no
control, the Fund must purchase the underlying security from the option holder
at the exercise price.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying securities for its portfolio in anticipation of an increase in the
market value of the securities or to protect unrealized gains on call options
previously written by it. The Fund would ordinarily recognize a gain on these
options if the value of the securities increased above the exercise price
sufficiently to cover the premium and would have a loss if the value of the
securities remained at or below the exercise price during the option period.
Put options may be purchased by the Fund to offset or hedge against a
decline in the market value of the securities in the Fund's portfolio or
securities of the sort in which the Fund is permitted to invest. Put options may
also be purchased by the Fund for the purpose of affirmatively benefiting from a
decline in the price of securities that the Fund does not own. The Fund would
ordinarily recognize a gain on these options if the value of the securities
decreased below the exercise price sufficiently to cover the premium and would
recognize a loss if the value of the securities remained at or above the
exercise price.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series (options that have the same exercise prices and
expiration dates as those written by the Fund) as the option previously written.
Once the Fund has been assigned an exercise notice, however, the Fund will be
unable to effect a closing purchase transaction. Similarly, if the Fund is the
holder of an option it may liquidate its position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as the
option previously purchased. Generally, the Fund will realize a profit from a
closing transaction if the price of the transaction is less than the premium
received from writing the option or is more than the premium paid to purchase
the option; the Fund will realize a loss from a closing transaction if the price
of the transaction is more than the premium received from writing the option or
is less than the premium paid to purchase the option.
There can be no assurance that either a closing purchase or sale transaction
can be effected when the Fund so desires. Where the Fund is unable to effect a
closing purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities that it receives or may be forced to hold
underlying securities until an option is exercised or expires. In addition, to
the extent that option markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
securities markets that can not be reflected in the option markets.
OTC OPTIONS. The Fund may purchase or sell covered over-the-counter ("OTC")
or dealer options. Unlike listed options where the Fund would look to a clearing
corporation to exercise those options, if the Fund were to purchase a dealer
option, it would rely on the dealer from whom it purchased the option to perform
if the option were exercised. If the dealer fails to exercise the option, the
Fund would lose the premium it paid for the option and the expected benefit of
the transaction.
Listed options generally have a continuous liquid market while dealer
options have none. Consequently, the Fund will generally be able to realize the
value of a dealer option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when a Fund writes a dealer option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which the Fund
originally wrote the option. Although the Fund will seek to enter into dealer
options only with dealers who will agree to and that are expected to be capable
of entering into closing transactions with the Fund, there can be no assurance
that the Fund will be able to
B-3
<PAGE>
liquidate a dealer option at a favorable price at any time prior to expiration.
The inability to enter into a closing transaction may result in material losses
to the Fund. Until the Fund, as a covered dealer call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair the Fund's ability to sell
portfolio securities at a time when such sale might be advantageous. In the
event of insolvency of the other party, the Fund may be unable to liquidate a
dealer option.
The staff of the SEC has taken the position that purchased dealer options
and the assets used to cover the written dealer options are unmarketable or
illiquid securities. The Fund may treat the cover used for written OTC options
as liquid if the dealer agrees that the Fund may repurchase the OTC option it
has written for a maximum price to be calculated by a predetermined formula. In
such cases, the OTC option would be considered illiquid only to the extent the
maximum purchase price under the formula exceeds the intrinsic value of the
option. Accordingly, the Fund will treat dealer options as subject to the Funds'
limitation on unmarketable or illiquid securities. If the SEC's staff changes
its position on the liquidity of dealer options, the Fund will change its
treatment of them accordingly.
FINANCIAL FUTURES CONTRACTS AND OPTIONS THEREON
The Fund is authorized to engage in transactions in financial futures
contracts ("futures contracts"), and related options on such futures contracts
as a hedge against adverse changes in the market value of its portfolio
securities and interest rates. A futures contract is an agreement between two
parties which obligates the purchaser of the futures contract to buy and the
seller of a futures contract to sell a security for a set price on a future date
or, in the case of an index futures contract, to make and accept a cash
settlement based upon the difference in value of the index between the time the
contract was entered into and the time of its settlement. Transactions by the
Fund in futures contracts and financial futures are subject to limitations as
described below.
The Fund may sell financial futures contracts in anticipation of an increase
in the general level of interest rates. Generally, as interest rates rise, the
market values of securities which may be held by the Fund will fall, thus
reducing the net asset value of the Fund. However, as interest rates rise, the
value of the Fund's short position in the futures contract will also tend to
increase, thus offsetting all or a portion of the depreciation in the market
value of the Fund's investments which are being hedged. While the Fund will
incur commission expenses in selling and closing-out futures positions, these
commissions are generally less than the transaction expenses which the Fund
would have incurred had the Fund sold portfolio securities in order to reduce
its exposure to increases in interest rates. The Fund also may purchase
financial futures contracts in anticipation of a decline in interest rates when
it is not fully invested in a particular market in which it intends to make
investments to gain market exposure that may in part or entirely offset an
increase in the cost of securities it intends to purchase. It is anticipated
that, in a substantial majority of these transactions, the Fund will purchase
securities upon termination of the futures contract. In the event interest rates
increased, such purchase of securities would be at a higher price than if the
Fund had not purchased the futures contract.
The Fund also has authority to purchase and write call and put options on
futures contracts in connection with its hedging activities. Generally, these
strategies are utilized under the same market and market sector conditions
(i.e., conditions relating to specific types of investments) in which the Fund
enters into futures transactions. The Fund may purchase put options or write
call options on futures contracts rather than selling the underlying futures
contract in anticipation of a decrease in the market value of a security or an
increase in interest rates. Similarly, the Fund may purchase call options, or
write
B-4
<PAGE>
put options on futures contracts, as a substitute for the purchase of such
futures to hedge against the increased cost resulting from an increase in the
market value or a decline in interest rates of securities which the Fund intends
to purchase.
Regulations of the Commodity Futures Trading Commission ("CFTC") applicable
to the Fund require that all of the Fund's transactions in futures contracts and
options on futures contracts constitute bona fide hedging transactions and that
the Fund not enter into such transactions if, immediately thereafter, the sum of
the amount of initial margin deposits on the Fund's existing futures positions
and premiums paid for related options would exceed 5% of the market value of the
Fund's total assets.
When the Fund purchases a futures contract or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated, plus the amount of variation margin held in the account of its
broker, equals the market value of the futures contract, thereby ensuring that
the use of such futures is unleveraged.
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS.
Utilization of options and futures transactions to hedge the portfolio
involves the risk of imperfect correlation in movements in the price of options
and futures and movements in the prices of the securities which are the subject
of the hedge. If the price of the options or futures moves more or less than the
price of the subject of the hedge, the Fund will experience a gain or loss which
will not be completely offset by movements in the price of the subject of the
hedge. This risk particularly applies to the Fund's use of futures and options
thereon since it will generally use such instruments as a so-called
"cross-hedge," which means that the security that is the subject of the futures
contract is different from the security being hedged by the contract. The Fund
will not purchase puts, calls, straddles, spreads or any combination thereof if
by reason thereof the premiums paid for the aggregate investments in such
classes of securities exceed 5% of the Fund's total assets at the time of
purchase.
The Fund intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a liquid
secondary market for such options or futures. However, there can be no assurance
that a liquid secondary market will exist at any specific time. Thus, it may not
be possible to close an options or futures position. The inability to close
options and futures positions also could have an adverse impact on the Fund's
ability to effectively hedge its portfolio. There is also the risk of loss by
the Fund of margin deposits or collateral in the event of bankruptcy of a broker
with whom the Fund has an open position in an option, a futures contract or an
option related to a futures contract.
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Engage in arbitrage transactions, short sales, purchases on margin
or participate on a joint or joint and several basis in any trading account
in securities, except in connection with the purchase or sale of futures
transactions and to deposit or pay initial or variation margin in connection
with financial futures contracts or related options transactions.
(2) Engage in the underwriting of securities, except to the extent that
the Fund may be deemed an underwriter as to restricted securities under the
Securities Act of 1933 in selling portfolio securities.
B-5
<PAGE>
(3) Lend money except in connection with the purchase of debt
obligations or by investment in repurchase agreements, provided that
repurchase agreements maturing in more than seven days, over-the-counter
options held by the Fund and the portion of the assets used to cover such
options when taken together with other securities that are illiquid by
virtue of the absence of a readily available market do not exceed 10% of the
Fund's assets. The Fund may lend its portfolio securities to broker-dealers
and institutional investors if as a result thereof the aggregate value of
all securities loaned does not exceed 25% of the total assets of the Fund.
(4) Purchase real estate or interests therein (including limited
partnership interests, but excluding mortgage-backed securities and stripped
mortgage-backed securities) or interests in oil, gas or mineral leases.
(5) Invest in commodities or commodity contracts, except that the Fund
may invest in futures contracts and financial futures contracts and options
on futures contracts and financial futures contracts.
(6) With respect to 75% of the Fund's assets invest more than 5% of the
value of its total assets in the securities of any one issuer or purchase
more than 10% of the outstanding voting securities, or any other class of
securities, of any one issuer. For purposes of this restriction, all
outstanding debt securities of an issuer are considered as one class. This
restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
(7) Purchase securities of other registered investment companies, except
in mergers or other business combinations.
(8) Invest 25% or more of its assets in securities of issuers in any one
industry. This restriction, does not apply to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or
government sponsored enterprises.
(9) Invest more than 5% of its total assets in securities of issuers
having a record, together with predecessors, of less than three years of
continuous operation. The restriction does not apply to any obligation
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(10) Purchase or retain the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and of Value
Line, Inc. (the "Adviser"), who each owns more than 0.5% of the outstanding
securities of such issuer, together own more than 5% of such securities.
(11) Invest in warrants.
(12) Issue senior securities or borrow money in excess of 10% of the
value of its assets and then only as a temporary measure to meet unusually
heavy redemption requests or for other extraordinary or emergency purposes,
except that the Fund may enter into mortgage rolls, mortgage swaps, reverse
repurchase agreements, with up to 33 1/3% of its net assets.
(13) Purchase securities for the purpose of exercising control over
another company.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction, except for the Fund's policy on
borrowing.
B-6
<PAGE>
DIRECTORS AND OFFICERS
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<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
---------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive Officer of
Age 60 of Directors, the Adviser and Value Line Publishing, Inc.
President Chairman of the Value Line Funds and Value Line
Securities, Inc.
Francis C. Oakley Director Professor of History, Williams College, 1961 to
936 Main Street present and President Emeritus since 1994;
Williamstown, MA 01267 President of Williams College, 1985-1993;
Age 63 Director, Berkshire Life Insurance Company.
Marion N. Ruth Director Real Estate Executive; President, Ruth Realty
5 Outrider Road (real estate broker).
Rolling Hills, CA 90274
Age 60
Frances T. Newton Director Computer Programming Professional, Duke Power
4921 Buckingham Drive Company.
Charlotte, NC 28209
Age 54
Charles Heebner Vice President Director of Fixed Income with the Adviser since
Age 59 1989.
John Risner Vice President Portfolio Manager with the Adviser since 1992;
Age 36 Assistant Vice President, Bankers Trust Company,
1987-1992.
David T. Henigson Vice President, Compliance Officer and since 1992, Vice President
Age 38 Secretary and and Director of the Adviser. Director and Vice
Treasurer President of the Distributor.
<FN>
------------------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
</TABLE>
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors and certain officers of the Fund are also directors and officers
of other investment companies for which the Adviser acts as investment adviser.
Directors who are officers or employees of the Adviser receive no remuneration
from the Fund. Directors of the Fund who are not affiliated with the Adviser
receive total annual compensation from the Fund and the other Value Line Funds
of which each is a director of $20,000 plus reimbursement of out-of-pocket
expenses. The following table sets forth information regarding compensation of
Directors by the Fund and by the Fund and the two other Value Line Funds of
which each of the Directors is a director for the fiscal year ended October 31,
1994. Directors who are officers or employees of the Adviser do not receive any
compensation from the Fund or any of the Value Line funds. (Mr. Oakley and Ms.
Ruth and Newton were not directors of the Fund during the period shown.)
B-7
<PAGE>
COMPENSATION TABLE
FISCAL YEAR ENDED OCTOBER 31 1994
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSON FROM FUND OF FUND EXPENSES RETIREMENT (2 FUNDS)
------------------------------------------------- --------------- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner $ -0- N/A N/A $ -0-
Francis C. Oakley -0- N/A N/A 20,000
Marion N. Ruth -0- N/A N/A 20,000
Frances T. Newton -0- N/A N/A 20,000
</TABLE>
As of October 31, 1994, no person owned of record or, to the knowledge of
the Fund, owned beneficially, 5% or more of the outstanding stock of the Fund,
except for the Adviser (and its parent) which owned 1,699,642 shares or 52% of
the outstanding shares. The officers and previous directors of the Fund as a
group owned an aggregate of 122,627 shares or 3.8%.
THE ADVISER
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
The Investment advisory agreement between the Fund and the Adviser dated
April 1, 1992 provides for an advisory fee at an annual rate of 1/2 of 1% on the
Fund's average daily net assets during the year. During the period from April
10, 1992 (commencement of operations) to October 31, 1992, and for the period
November 1, 1992 to January 31, 1993, the Adviser voluntarily waived its fee of
$49,017 and $41,598, respectively. During the period from February 1, 1993 to
October 31, 1993, the Fund paid or accrued advisory fees of $145,303. During the
fiscal year ended October 31, 1994, the Fund paid or accrued advisory fees of
$208,159. The Adviser shall reimburse the Fund for expenses (exclusive of
interest, taxes, brokerage expenses and extraordinary expenses) which in any
year exceed the limits prescribed by any state in which shares of the Fund are
qualified for sale. Presently, the most restrictive limitation is 2.5% of the
first $30 million of average daily net assets, 2% of the next $70 million and
1.5% of any excess over $100 million.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal, audit
and fund accounting expenses, fees and expenses in connection with qualification
under federal and state securities laws and costs of shareholder reports and
proxy materials. The Fund has agreed that it will use the words "Value Line" in
its name only so long as Value Line, Inc. serves as investment adviser to the
Fund.
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment advisory
services to private and institutional accounts with combined assets in excess of
$4 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
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<PAGE>
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, the Adviser
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may
from time to time own securities which are also held in the portfolio of the
Fund. The Adviser has imposed rules upon itself and such persons requiring
monthly reports of security transactions for their respective accounts and
restricting trading in various types of securities in order to avoid possible
conflicts of interest. The Adviser may from time to time, directly or through
affiliates, enter into agreements to furnish for compensation special research
or financial services to companies, including services in connection with
acquisitions, mergers or financings. In the event that such agreements are in
effect with respect to issuers of securities held in the portfolio of the Fund,
specific reference to such agreements will be made in the "Schedule of
Investments" in shareholder reports of the Fund. As of the date of this
Statement of Additional Information, no such agreements exist.
BROKERAGE ARRANGEMENTS
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Debt
securities are traded principally in the over-the-counter market on a net basis
through dealers acting for their own account and not as brokers. Purchases and
sales of securities which are not listed or traded on a securities exchange will
ordinarily be executed with primary market makers acting as principal, except
when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of the brokerage and research services provided. Such
services may include but are not limited to information as to the availability
of securities for purchase or sale; statistical or factual information or
opinions pertaining to investments; and appraisals or evaluations of portfolio
securities. Such allocation will be in such amounts and in such proportions as
the Adviser may determine. Orders may also be placed with brokers or dealers who
sell shares of the Fund or other funds for which the Adviser acts as investment
adviser, but this fact, or the volume of such sales, is not a consideration in
their selection. From its inception to October 31, 1993, all of the Fund's
transactions were at net prices and there were no brokerage commissions paid by
the Fund. For the year ended October 31, 1994, the Fund paid brokerage
commissions of $12,130.
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<PAGE>
HOW TO PURCHASE SHARES
(SEE ALSO "CALCULATION OF NET ASSET VALUE", "HOW TO PURCHASE SHARES" AND
"INVESTOR SERVICES" IN THE FUND'S PROSPECTUS)
Shares of the Fund are purchased at net asset value next calculated after
receipt of a purchase order. Minimum orders are $1,000 for an initial purchase
and $100 for each subsequent purchase. The Fund reserves the right to reduce or
waive the minimum purchase requirements in certain cases such as pursuant to
payroll deduction plans, etc., where subsequent and continuing purchases are
contemplated.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor"), pursuant to which the Distributor acts as
principal underwriter and distributor of the Fund for the sale and distribution
of its shares. The Distributor is a wholly-owned subsidiary of the Adviser. For
its services under the agreement, the Distributor is not entitled to receive any
compensation. The Distributor also serves as distributor to the other Value Line
funds.
AUTOMATIC PURCHASES: The Fund offers a free service to its shareholders,
Valu-Matic Bank Check Program, through which monthly investments of $25 or more
are automatically made into the shareholder's Value Line account. The Fund's
Transfer Agent debits via automated clearing house a draft each month on the
shareholder's checking account and invests the money in full and fractional
shares. The purchase is confirmed directly to the shareholder (who will also
receive debit information each month with his bank statement). The required form
to enroll in this program is available upon request from the Distributor.
RETIREMENT PLANS: Shares of the Fund may be purchased as the investment medium
for various tax-sheltered retirement plans. Upon request, the Distributor will
provide information regarding eligibility and permissible contributions. Because
a retirement plan is designed to provide benefits in future years, it is
important that the investment objectives of the Fund be consistent with the
participant's retirement objectives. Premature withdrawals from a retirement
plan may result in adverse tax consequences. For more complete information,
contact the Distributor at 1-800-223-0818 during New York business hours.
HOW TO REDEEM SHARES
(SEE ALSO "HOW TO REDEEM SHARES" AND "INVESTOR SERVICES" IN THE FUND'S
PROSPECTUS)
The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period, by the Fund under the following conditions
authorized by the 1940 Act: (1) For any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday closing, or
(b) during which trading on the New York Stock Exchange is restricted; (2) For
any period during which an emergency exists as a result of which (a) disposal by
the Fund of securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for the Fund to determine the fair value of its net assets;
(3) For such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time. Shareholders should note that if a loss has been realized on the sale of
shares of the Fund, the loss may be disallowed for tax purposes if shares of the
same Fund are purchased within (before or after) 30 days of the sale.
B-10
<PAGE>
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities or other property of the Fund. However, the Fund has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Fund's net assets
if that is less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing the net
asset value per share. Shareholders receiving such securities may incur
brokerage costs on their sales.
SERVICE AND DISTRIBUTION PLAN
(SEE ALSO "SERVICE AND DISTRIBUTION PLAN" IN THE FUND'S PROSPECTUS)
The Service and Distribution Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, provides for the payment of certain expenses
incurred by Value Line Securities, Inc. in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets.
TAXES
(SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE FUND'S PROSPECTUS)
The Fund intends to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). The Fund so
qualified during the Fund's last fiscal year. By so qualifying, the Fund is not
subject to Federal income tax on its net investment income or net realized
capital gains which are distributed to shareholders (whether or not reinvested
in additional Fund shares).
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
Distributions of investment income and of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income. Distributions of the excess of net long-term capital gain over
net short-term capital loss (net capital gains) are taxable to the shareholders
as long-term capital gain, regardless of the length of time the shares of the
Fund have been held by such shareholders and regardless of whether the
distribution is received in cash or in additional shares of the Fund. The Fund
does not anticipate that any distributions will be eligible for the
dividends-received deduction for corporate shareholders. Upon request, the Fund
will inform shareholders of the amounts of dividends which so qualify. For
Federal income tax purposes, the Fund had a net capital loss carryover at
October 31, 1994, of $3,935,812 of which $28,176 will expire on October 31, 2001
and $3,907,636 will expire on October 31, 2002. To the extent future capital
gains are offset by such capital losses, the Fund does not anticipate
distributing any such gains to the shareholders.
Options and futures contracts entered into by the Fund will be subject to
special tax rules. These rules may accelerate income to the Fund, defer Fund
losses, cause adjustments in the holding periods of Fund securities, convert
capital gain into ordinary income and convert short-term capital losses into
long-term capital losses. As a result, these rules could affect the amount,
timing and character of Fund distributions.
B-11
<PAGE>
A distribution by the Fund will result in reduction in the Fund's net asset
value per share. Such a distribution is taxable to the shareholder as ordinary
income or capital gain as described above even though, from an investment
standpoint, it may constitute a return of capital. In particular, investors
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at that time (at the net asset
value per share) includes the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will then receive a return of capital
upon the distribution which will nevertheless be taxable to them. All
distributions, whether received in shares or cash, must be reported by each
shareholder on his Federal income tax return. Furthermore, under the Code,
dividends declared by the Fund in October, November or December of any calendar
year, and payable to shareholders of record in such a month, shall be deemed to
have been received by the shareholder on December 31 of such calendar year if
such dividend is actually paid in January of the following calendar year.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date). Under certain circumstances, a loss on the sale
or redemption of shares held for six months or less may be treated as a
long-term capital loss to the extent that the Fund has distributed long-term
capital gain dividends on such shares. Moreover, a loss on sale or redemption of
Fund shares will be disallowed if shares of the Fund are purchased within 30
days before or after the shares are sold or redeemed.
For shareholders who fail to furnish to the Fund their taxpayer
identification numbers and certain related information or who fail to certify
that they are not subject to back up withholding, dividends, distributions of
capital gains and redemption proceeds paid by the Fund will be subject to a 31%
Federal income tax withholding requirement. If the withholding provisions are
applicable, any such dividends or capital-gains distributions to these
shareholders, whether taken in cash or reinvested in additional shares, and any
redemption proceeds will be reduced by the amounts required to be withheld.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents, domestic
corporations and partnerships, and certain trusts and estates) and is not
intended to be a complete discussion of all Federal tax consequences.
Shareholders are advised to consult with their tax advisers concerning the
application of Federal, state and local taxes to an investment in the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual compounded rate of return over the most recent four
calendar quarters and the period from the Fund's inception of operations. The
Fund may also advertise aggregate total return information for different periods
of time.
B-12
<PAGE>
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
T =#ERV/P_-_1
n
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the end of the
period.
</TABLE>
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
As stated in the Prospectus, the Fund may also quote its current yield in
advertisements and investor communications.
The yield computation is determined by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period and annualizing the resulting figure, according to
the following formula:
<TABLE>
<S> <C> <C> <C>
Yield = 2 a - b +1 6 -1
</TABLE>
( )
<TABLE>
<S> <C> <C> <C>
cd
</TABLE>
<TABLE>
<S> <C> <C> <C>
Where: a = dividends and interest earned during the period (calculated as required by the
Securities and Exchange Commission);
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on the last day of the period.
</TABLE>
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in advertising by the Fund.
The Fund may also, from time to time, include a reference to its current
quarterly or annual distribution rate in investor communications and sales
literature preceded or accompanied by a Prospectus, reflecting the amounts
actually distributed to shareholders which could include capital gains and other
items of income not reflected in the Fund's yield, as well as interest and
dividend income received by the Fund and distributed to shareholders (which is
reflected in the Fund's yield).
All calculations of the Fund's distribution rate are based on the
distributions per share which are declared, but not necessarily paid, during the
fiscal year. The distribution rate is determined by dividing the distributions
declared during the period by the maximum offering price per share on the last
day of the period and annualizing the resulting figure. In calculating its
distribution rate, the Fund has used the same assumptions that apply to its
calculation of yield. The distribution rate does not reflect capital
appreciation or depreciation in the price of the Fund's shares and should not be
considered to be a complete indicator of the return to the investor on his
investment.
B-13
<PAGE>
The Fund's current yield, distribution rate and total return may be compared
to relevant indices, including U.S. domestic and international taxable bond
indices and data from Lipper Analytical Services, Inc., or Standard & Poor's
Indices.
From time to time, evaluations of the Fund's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Fund.
ADDITIONAL INFORMATION
EXPERTS
The financial statements of the Fund and the financial highlights included
in the Fund's Annual Report to Shareholders and incorporated by reference in
this Statement of Additional Information have been so incorporated by reference
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
CUSTODIAN
The Fund employs State Street Bank and Trust Company, Boston, MA as
custodian for the Fund. The custodian's responsibilities include safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Fund's
investments. The custodian does not determine the investment policies of the
Fund or decide which securities the Fund will buy or sell.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended October 31, 1994,
including the financial highlights for the fiscal years ended October 31, 1994
and 1993 and the period April 10, 1992 (commencement of operations) to October
31, 1992, appearing in the 1994 Annual Report to Shareholders and the report
thereon of Price Waterhouse LLP, independent accountants, appearing therein, are
incorporated by reference in this Statement of Additional Information.
The Fund's 1994 Annual Report to Shareholders is enclosed with this
Statement of Additional Information.
B-14
<PAGE>
THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
PART C
OTHER INFORMATION
<TABLE>
<C> <S> <C>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements
Included in Part A of this Registration Statement
Financial Information
Financial Highlights for each of the two years in the period ended October 31,
1994 and for the period from April 10, 1992 (commencement of operations) to
October 31, 1992.
Included in Part B of this Registration Statement:*
Schedule of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the year ended October 31, 1994
Statements of Changes in Net Assets for the years ended October 31, 1994 and
October 31, 1993.
Financial Highlights for each of the two years in the period ended October 31,
1994 and the period from April 10, 1992 (commencement of operations) to
October 31, 1992
Report of Independent Accountants
Notes to Financial Statements
Schedule of Investments at April 30, 1995 (unaudited)
Statement of Assets and Liabilities at April 30, 1995 (unaudited)
Statement of Operations for the Six Months ended April 30, 1995 (unaudited)
Statement of Changes in Net Assets for the Six Months ended April 30, 1995
(unaudited).
Financial Highlighes for the Six Months ended April 30, 1995 (unaudited)
Notes to Financial Statements (unaudited)
Statements, schedules and historical information other than those listed above have been
omitted since they are either not applicable or are not required.
---------
* Incorporated by reference from the Annual Report to Shareholders for the year ended
October 31, 1994 or from the unaudited Semi-Annual Report to Shareholders for the Six
Months Ended April 30, 1995.
</TABLE>
<TABLE>
<C> <S> <C>
b. Exhibits
None.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
<TABLE>
<C> <S> <C>
None.
</TABLE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of October 31, 1994, there were 948 record holders of the Registrant's
Capital Stock ($.001 par value).
C-1
<PAGE>
ITEM 27. INDEMNIFICATION.
Incorporated by Reference from initial Registration Statement (filed on
November 22, 1991).
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individuals, trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 29.
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
---------------------------- ---------------------------------- ------------------------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, Chairman of the Board and Chief Executive
President, and Chief Executive Officer of Arnold Bernhard & Co., Inc; Chairman
Officer of the Value Line funds and the Distributor
Samuel Eisenstadt Senior Vice President and Director
David T. Henigson Vice President, Treasurer and Vice President and a Director of Arnold Bernhard
Director & Co., Inc. and the Distributor
Howard A. Brecher Secretary and Director Secretary and Treasurer of Arnold Bernhard &
Co., Inc.
Harold Bernard, Jr. Director Administrative Law Judge
Arnold Van H. Bernhard Director Self-Employed
William S. Kanaga Director Retired Chairman of the Advisory Board of Ernst
& Young
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison, attorneys.
</TABLE>
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Value Line Securities, Inc., acts as principal underwriter for the
following Value Line funds, including the Registrant: The Value Line
Fund, Inc., The Value Line Income Fund, Inc.; The Value Line Special
Situations Fund, Inc.; Value Line Leveraged Growth Investors, Inc.; The
Value Line Cash Fund, Inc.; Value Line U.S. Government Securities Fund,
Inc.; Value Line Centurion Fund, Inc.; The Value Line Tax Exempt Fund,
Inc.; Value Line Convertible Fund, Inc.; Value Line Aggressive Income
Trust; Value Line New York Tax Exempt Trust; Value Line Strategic Asset
Management Trust; Value Line Small-Cap Growth Fund, Inc.; Value Line
Asset Allocation Fund, Inc.; Value Line U.S. Multinational Company Fund.
(b)
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
-------------------------- ------------------- ---------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Chairman of the Board
Board and President
David T. Henigson Vice President and Vice President,
Director Secretary and
Treasurer
Stephen LaRosa Asst. Vice Asst. Treasurer
President Asst. Secretary
</TABLE>
The business address of each of the officers and directors is 220 East
42nd Street, New York, NY 10017-5891.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc.
220 East 42nd Street
New York, NY 10017
For records pursuant to:
Rule 31a-1(b)(4),(5),(6),(7),(10),(11)
Rule 31a-1(f)
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141
For records pursuant to Rule 31a-1(b)(2)(iv)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
For all other records
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information, constituting parts of this Post-Effective
Amendment No. 4 to the registration statement on Form N-1A (the "Registration
Statement"), of our report dated December 8, 1994, relating to the financial
statements and financial highlights appearing in the October 31, 1994 Annual
Report to Shareholders of The Value Line Adjustable Rate U.S. Government
Securities Fund, Inc., which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and under the headings
"Additional Information" and "Financial Statements" in the Statement of
Additional Information.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
September 15, 1995
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, the 15 day of
September, 1995.
THE VALUE LINE ADJUSTABLE RATE
U.S. GOVERNMENT SECURITIES FUND, INC.
By /s/ DAVID T. HENIGSON
-------------------------------------
David T. Henigson, Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
--------------------------------------------- ---------------------------------------- ------------------------
<C> <S> <C>
*JEAN B. BUTTNER Chairman and Director; President; September 15, 1995
(Jean B. Buttner) Principal Executive Officer
*JOHN W. CHANDLER Director September 15, 1995
(John W. Chandler)
*LEO R. FUTIA Director September 15, 1995
(Leo R. Futia)
*CHARLES E. REED Director September 15, 1995
(Charles E. Reed)
*PAUL CRAIG ROBERTS Director September 15, 1995
(Paul Craig Roberts)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial and September 15, 1995
(David T. Henigson) Accounting Officer
</TABLE>
By /s/ DAVID T. HENIGSON
-------------------------------------
(David T. Henigson, Attorney-in-fact)
C-5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881329
<NAME> V/L ADJ RATE
<SERIES>
<NUMBER> 001
<NAME> V/L ADJ RATE
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<INVESTMENTS-AT-COST> 9757
<INVESTMENTS-AT-VALUE> 9703
<RECEIVABLES> 113
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9850
<PAYABLE-FOR-SECURITIES> 3
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37
<TOTAL-LIABILITIES> 40
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16206
<SHARES-COMMON-STOCK> 1139
<SHARES-COMMON-PRIOR> 3268
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6348)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (54)
<NET-ASSETS> 9809
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 647
<OTHER-INCOME> 0
<EXPENSES-NET> 142
<NET-INVESTMENT-INCOME> 505
<REALIZED-GAINS-CURRENT> (2413)
<APPREC-INCREASE-CURRENT> 2107
<NET-CHANGE-FROM-OPS> 199
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 499
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 117
<NUMBER-OF-SHARES-REDEEMED> 2285
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> (18621)
<ACCUMULATED-NII-PRIOR> (3936)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 142
<AVERAGE-NET-ASSETS> 20034
<PER-SHARE-NAV-BEGIN> 8.70
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> (.09)
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.61
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881329
<NAME> V/L ADJ RATE
<SERIES>
<NUMBER> 002
<NAME> V/F ADJ RATE
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 32,481
<INVESTMENTS-AT-VALUE> 30,320
<RECEIVABLES> 2,186
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 37
<TOTAL-ASSETS> 32,560
<PAYABLE-FOR-SECURITIES> 4,065
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 64
<TOTAL-LIABILITIES> 4,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,528
<SHARES-COMMON-STOCK> 3,268
<SHARES-COMMON-PRIOR> 4,444
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,936)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,161)
<NET-ASSETS> 28,431
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,734
<OTHER-INCOME> 0
<EXPENSES-NET> 565
<NET-INVESTMENT-INCOME> 2,169
<REALIZED-GAINS-CURRENT> (3,908)
<APPREC-INCREASE-CURRENT> (2,163)
<NET-CHANGE-FROM-OPS> (3,902)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,181)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,269
<NUMBER-OF-SHARES-REDEEMED> 3,640
<SHARES-REINVESTED> 195
<NET-CHANGE-IN-ASSETS> (16,077)
<ACCUMULATED-NII-PRIOR> 12
<ACCUMULATED-GAINS-PRIOR> (28)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 208
<INTEREST-EXPENSE> 157
<GROSS-EXPENSE> 565
<AVERAGE-NET-ASSETS> 41,465
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> (1.31)
<PER-SHARE-DIVIDEND> (.50)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.70
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
