<PAGE>
This document is a copy of the Semi-Annual Report for the six months ended
April 30, 1995, filed on July 12, 1995.
INVESTMENT ADVISER
Value Line, Inc.
220 East 42nd Street, New York, NY 10017-5891
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street, New York, NY 10017-5891
CUSTODIAN BANK
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company c/o NFDS
P.O. Box 419729, Kansas City, MO 64141-6729
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas, New York, NY 10036-2798
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS
Jean Bernhard Buttner Leo R. Futia
Charles E. Reed Paul Craig Roberts
John W. Chandler
OFFICERS
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
David T. Henigson
VICE PRESIDENT/SECRETARY/TREASURER
Charles Heebner John Risner
VICE PRESIDENT VICE PRESIDENT
Jack M. Houston Stephen La Rosa
ASSISTANT ASSISTANT
SECRETARY/TREASURER SECRETARY/TREASURER
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This unaudited report is issued for information of shareholders. It is not
authorized for distribution to prospective investors unless preceded or
accompanied by a currently effective prospectus of the Fund (obtainable from the
Distributor).
------------------
SEMI-ANNUAL REPORT
April 30, 1995
------------------
VALUE LINE
ADJUSTABLE RATE
U.S. GOVERNMENT
SECURITIES
FUND, INC.
[Logo]
VALUE LINE MUTUAL FUNDS
<PAGE>
[Logo]
TO OUR VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND SHAREHOLDERS
DEAR SHAREHOLDER:
The volatility in interest rates continues. The bond markets experienced their
worst decline in many years in 1994; so far in 1995, long-term interest rates
have moved sharply lower. Long-term interest rates, as measured by the 30-year
Treasury bond, reached a peak of 8.17% on November 17, 1994, and have
subsequently plunged 1.66 percentage points to 6.51% on June 6, 1995. This is
still 0.72 percentage points above the cyclical low of 5.79% reached on October
15, 1993. This large change in yields has resulted in big price swings in most
fixed-income assets.
During the six months ended April 30, 1995, your Fund's net asset value has
stabilized. The net asset value was $8.61 on April 28, 1995, which was within 1%
of the net asset value on October 29, 1994. Your management's efforts to
stabilize the net asset value have been accomplished by restructuring the
portfolio. Collateralized Mortgage Obligations (CMOs) were sold to purchase less
volatile floating-rate and short-term securities issued by U.S. government
agencies and government sponsored enterprises.
One of the characteristics of volatile markets, especially when interest rates
rise rapidly as in 1994, is increased redemptions. As rates escalated and prices
dropped in the wake of the Federal Reserve Board's seven increases in interest
rates since February 4, 1994, many investors redeemed shares in all types of
bond funds. According to the Investment Company Institute, redemptions exceeded
sales (excluding reinvestment of dividends) by $34 billion in 1994 and $7
billion in the first three months of 1995. Many mutual fund managers, forced to
liquidate portfolio securities in the wake of these redemptions, became more
cautious.
Short-term interest rates, as measured by the three-month Treasury bill, rose
3.05 percentage points from a cyclical low of 2.97% on January 26, 1994, to a
high of 6.06% on February 1, 1995. Unlike long-term interest rates, short-term
rates declined by only 0.29 percentage points from their recent peak to the
current level of 5.72%. As a result, the difference between long- and short-term
interest rates decreased from a cyclical peak of 3.67 percentage points on April
4, 1994, to 0.77 percentage points on June 7, 1995. When this differential
narrows, the yield curve is said to flatten. When the yield curve flattens,
adjustable rate securities become less attractive than other short-term
instruments because they do not provide significantly higher yields. This
flattening of the yield curve and the decline in bond prices in 1994 contributed
to the increase in redemptions of adjustable rate funds. The total net assets in
adjustable rate mortgage funds declined over 51%, from $17.4 billion to $8.4
billion, in the 12 months ended March 31, 1995.
Besides the bond market's volatility and the flattening of the yield curve, two
other factors have spurred the redemptions of bond funds. Many investors in bond
mutual funds had experienced net asset value appreciation for over 10 years.
With the large declines in net asset values experienced in 1994, many of these
investors realized losses for the first time, leading to redemptions. In
addition, the continued strength in the stock market has drawn investors away
from bond funds.
TYPE OF FREQUENCY PERCENT OF
RESET INDEX OF RESET MARKET VALUE
--------------------------------------------------------------
Prime Rate Daily 26.9%
Three-month Treasury Weekly 43.1
Six-month LIBOR Semi-annually 15.6
Three-year Treasury Monthly 13.4
Inverse Floaters Monthly 1.0
2
<PAGE>
Looking ahead, your Fund's management expects to continue to purchase
adjustable-rate securities with low price volatility as well as short-term
government and agency securities. Currently, your Fund's investments consist of
securities, including some mortgage-backed securities, issued by U.S. government
agencies and government sponsored enterprises. The interest rates on these
investments are reset daily, weekly, monthly, and semi-annually, and are based
on various indexes, as noted above.
We thank you for your continued interest in the Value Line Adjustable Rate U.S.
Government Securities Fund, Inc., and we look forward to serving your investment
needs in the future.
Sincerely,
/s/ Jean BernhardButtner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
June 23, 1995
PERFORMANCE DATA:* FROM 4/10/92
(COMMENCEMENT
1 YEAR ENDED OF OPERATIONS)
3/31/95 TO 3/31/95
------------ --------------
Average Annual Total Return -7.52% 0.44%
Growth of an Assumed
Investment of $10,000 $9,248 $10,131
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL
GAINS DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST.
ECONOMIC OBSERVATIONS
The odds that a "soft economic landing" will materialize over the next several
months are fairly high. Under this scenario, the economy temporarily moves onto
a slower growth track, but doesn't stop growing altogether; corporate profits
continue to rise, but at a lesser rate; inflation begins to pick up, but does
not veer out of control; and short-term interest rates stabilize and then
decline. To date, such key indicators as the employment level, auto sales,
retail spending, and personal income show an expansion that's slowing, but not
coming apart. At the same time, the latest producer and consumer price data
signal that there has been little overall buildup in pricing pressures, although
rising oil and paper prices suggest that inflation reports later in the year may
make somewhat less hospitable reading.
Meanwhile, there is historical precedent for a "soft landing" as well as for a
lengthy business expansion. The 1960s and the 1980s both witnessed upcycles
that lasted for seven or eight years--or about double the length of the present
upturn--with nothing more serious than a brief interlude or two along the way.
The 1970s, in contrast, brought surging inflation and a pair of recessions.
There are risks in the current situation, however. For example, there is still
the possibility that the aforementioned runup in certain commodity prices is a
harbinger of things to come on the inflation front. There's also the risk that
recent weaker-than-expected employment data signal that the Federal Reserve has
already pushed interest rates too high and that a recession is probably on the
way, perhaps later this year or in 1996.
The stock market, meanwhile, is still accentuating the positive, with most
investors preferring to view the mixed economic and inflation statistics, along
with the very encouraging recent decline in long-term interest rates, as being
consistent with an orderly slowing in growth--rather than as the opening salvos
in a looming recession. We think the market's sentiments are on target and, as
such, believe that positive returns will still be achieved with equities in the
months ahead, although given the strong runup in stocks over the last several
months, we also suspect that the easy money has already been made this year.
3
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1995
-----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT RATE MATURITY DATE VALUE
-----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (59.1%)
STUDENT LOAN MORTGAGE ASSOCIATION (30.6%)
$ 1,000,000 Student Loan Mortgage Association Floating Rate Note . . . . . . 6.050%(1) 12/20/96 $ 1,000,519
2,000,000 Student Loan Mortgage Association Floating Rate Note . . . . . . 6.190%(1) 10/30/97 2,004,436
--------- -----------
3,000,000 TOTAL STUDENT LOAN MORTGAGE ASSOCIATION (COST $3,002,500). . . . 3,004,955
--------- -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (15.8%)
80,232 Federal Home Loan Mortgage Corporation #1505 NB. . . . . . . . . 9.508%(2)(4) 12/15/22 50,145
105,862 Federal Home Loan Mortgage Corporation #1505 ND. . . . . . . . . 5.768%(2)(4) 12/15/22 44,992
1,454,826 Federal Home Loan Mortgage Corporation Pool #845802. . . . . . . 5.288%(2) 06/01/24 1,453,917
--------- -----------
1,640,920 TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST $1,631,630) . 1,549,054
--------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (12.7%)
1,239,477 Federal National Mortgage Association Pool #170758 . . . . . . . 6.811%(3) 06/01/21 1,244,900
--------- -----------
1,239,477 TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST $1,217,787). . 1,244,900
--------- -----------
5,880,397 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $5,851,917) . . . 5,798,909
--------- -----------
5,880,397 TOTAL INVESTMENT SECURITIES (59.1%) (COST $5,851,917). . . . . . 5,798,909
--------- -----------
4
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1995
-----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT RATE MATURITY DATE VALUE
-----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (39.8%)
U.S. GOVERNMENT AGENCY OBLIGATIONS (35.7%)
$ 2,500,000 Federal National Mortgage Association Floating Rate Note . . . . 6.000%(5) 05/01/95 $ 2,500,000
1,000,000 Student Loan Mortgage Association Floating Rate Note . . . . . . 5.890%(1) 09/14/95 999,369
--------- -----------
3,500,000 Total U.S. Government Agency Obligations (Cost $3,500,000) . . . 3,499,369
--------- -----------
REPURCHASE AGREEMENT (4.1%) (INCLUDING ACCRUED INTEREST)
405,000 Collateralized by $415,000 U.S. Treasury Notes, 4.625%,
--------- due 2/15/96, with a value of $413,371. (With State Street
Bank & Trust Company, N.A., 5.88%, dated 4/28/95,
due 5/01/95, delivery value $405,198.) . . . . . . . . . . . . . 405,198
3,905,000 TOTAL SHORT-TERM INVESTMENTS (COST $3,905,198) . . . . . . . . . 3,904,567
--------- -----------
CASH AND OTHER ASSETS OVER LIABILITIES (1.1%). . . . . . . . . . 105,920
-----------
NET ASSETS (100.0%). . . . . . . . . . . . . . . . . . . . . . . $ 9,809,396
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER OUTSTANDING SHARE ($9,809,396
DIVIDED BY 1,138,661 SHARES OUTSTANDING) . . . . . . . . . . . . $ 8.61
-----------
-----------
<FN>
(1) Resets weekly. Rate in effect on 4/30/95.
(2) Resets monthly. Rate in effect on 4/30/95.
(3) Resets various months. Rate in effect on 4/30/95.
(4) Inverse Floater--Floating Rate Mortgage backed security whose interest rate
fluctuates in the opposite direction of general market rates.
(5) Prime Rate Floater
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AT APRIL 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment securities, at value (Cost-$5,851,917). . . . . . $ 5,798,909
Short-term investments (Cost-$3,905,198) . . . . . . . . . . 3,904,567
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,761
Interest receivable. . . . . . . . . . . . . . . . . . . . . 104,766
Deferred organization costs (note 2) . . . . . . . . . . . . 29,785
Receivable for principal paydowns. . . . . . . . . . . . . . 8,776
-----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . 9,849,564
-----------
LIABILITIES:
Dividends payable to shareholders. . . . . . . . . . . . . . 8,241
Payable for capital shares repurchased . . . . . . . . . . . 2,731
Accrued expenses (note 5):
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . 6,015
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 23,181
-----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 40,168
-----------
NET ASSETS:
Capital stock, at $.001 par value (authorized
300,000,000, outstanding 1,138,661 shares). . . . . . . . . 1,139
Additional paid-in capital . . . . . . . . . . . . . . . . . 16,205,161
Undistributed investment income-net. . . . . . . . . . . . . 5,326
Accumulated net realized loss on investments . . . . . . . . (6,348,591)
Unrealized net depreciation of investments . . . . . . . . . (53,639)
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . $ 9,809,396
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($9,809,396 DIVIDED BY 1,138,661
SHARES OUTSTANDING). . . . . . . . . . . . . . . . . . $ 8.61
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income. . . . . . . . . . . . . . . . . . . . . . . $ 647,060
-----------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . 51,815
Registration and filing fees . . . . . . . . . . . . . . . . 18,172
Accounting and bookkeeping expense . . . . . . . . . . . . . 16,200
Auditing and legal fees. . . . . . . . . . . . . . . . . . . 14,419
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . 10,576
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . 8,422
Amortization of deferred organization costs (note 2) . . . . 7,593
Directors' fees and expenses . . . . . . . . . . . . . . . . 5,779
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . 4,593
Postage, insurance, and dues . . . . . . . . . . . . . . . . 2,386
Telephone and other. . . . . . . . . . . . . . . . . . . . . 2,363
-----------
TOTAL EXPENSES. . . . . . . . . . . . . . . . . . . . . . 142,318
-----------
INVESTMENT INCOME-NET. . . . . . . . . . . . . . . . . . . . 504,742
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-NET:
Realized Loss-Net. . . . . . . . . . . . . . . . . . . (2,412,779)
Change in Unrealized Depreciation. . . . . . . . . . . 2,107,300
-----------
NET REALIZED LOSS AND CHANGE IN UNREALIZED
DEPRECIATION ON INVESTMENTS. . . . . . . . . . . . . . . . (305,479)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . $ 199,263
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED), AND FOR THE YEAR ENDED OCTOBER 31, 1994
------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR
APRIL 30, 1995 ENDED
(UNAUDITED) OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Investment income-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 504,742 $ 2,168,933
Realized loss on investments-net. . . . . . . . . . . . . . . . . . . . . . . . . (2,412,779) (3,907,636)
Change in unrealized appreciation (depreciation). . . . . . . . . . . . . . . . . 2,107,300 (2,163,233)
------------ ------------
Net increase (decrease) in net assets from operations . . . . . . . . . . . . . . 199,263 (3,901,936)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (499,416) (2,181,029)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,082 22,424,620
Proceeds from reinvestment of distributions to shareholders . . . . . . . . . . . 412,343 1,836,985
Cost of shares repurchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,737,555) (34,255,826)
------------ ------------
Decrease from capital share transactions. . . . . . . . . . . . . . . . . . . . . (18,321,130) (9,994,221)
------------ ------------
TOTAL DECREASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,621,283) (16,077,186)
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,430,679 44,507,865
------------ ------------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,809,396 $ 28,430,679
------------ ------------
------------ ------------
UNDISTRIBUTED INVESTMENT INCOME-NET, AT END OF PERIOD. . . . . . . . . . . . . . . . $ 5,326 $ --
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 1995
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
(A) SECURITY VALUATION. Where market quotations are readily available, portfolio
securities are valued at the midpoint between the latest available and
representative asked and bid prices, or when stock exchange valuations are used,
at the latest quoted sale price as of the close of business of the New York
Stock Exchange on the valuation date. The Fund values mortgage-backed securities
on the basis of valuations provided by dealers in such securities. Some of the
general factors which may be considered by the dealers in arriving at such
valuations include the fundamental analytic data relating to the security and an
evaluation of the forces which influence the market in which these securities
are purchased and sold. Determination of values may involve subjective judgment,
as the actual market value of a particular security can be established only by
negotiations between the parties in a sales transaction. The values for U.S.
Treasury Securities are determined on the valuation date by reference to
valuations obtained from an independent pricing service which determines
valuations for normal institutional size trading units of debt securities,
without exclusive reliance upon quoted prices. This service takes into account
appropriate factors such as institutional size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations.
Short-term instruments with maturities of 60 days or less at the date of
purchase are valued at amortized cost, which approximates market value. Other
assets and securities for which market valuations are not readily available will
be valued at fair value as the Board of Directors may determine.
(B) REPURCHASE AGREEMENT. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted
for on the date the securities are purchased or sold. Realized gains and losses
on securities transactions are determined using the identified cost method and
interest income is accrued as earned. Distributions to shareholders are recorded
on the ex-dividend date. Distributions are determined in
8
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
April 30, 1995
-------------------------------------------------------------------------------
accordance with income tax regulations which may differ from generally accepted
accounting principles.
2. ORGANIZATION COSTS
Costs of $76,603 incurred in connection with the Funds's organization and
initial registration have been deferred and are being amortized over sixty
months beginning at the commencement of operations of the Fund. In the event any
of the initial shares of the Fund are redeemed by the holder thereof during the
five-year amortization period, the redemption proceeds will be reduced by a pro
rata portion of any unamortized deferred organizational expenses in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock were as follows:
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
-------------- -----------
Shares sold. . . . . . . . . . . . . . . . . 116,956 2,269,010
Shares issued to shareholders in
reinvestment of dividends and
distributions . . . . . . . . . . . . . . . 38,765 194,905
---------- ----------
155,721 2,463,915
Shares repurchased . . . . . . . . . . . . . 2,285,075 3,640,182
---------- ----------
Net decrease . . . . . . . . . . . . . . . . (2,129,354) (1,176,267)
---------- ----------
---------- ----------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities for the six months ended April 30, 1995,
excluding short-term investments, were as follows:
PURCHASES:
U.S. Government Agency Obligations . . . . . . . . . . . . . $ 6,268,434
-----------
-----------
SALES AND MATURITIES:
U.S. Treasury Obligations. . . . . . . . . . . . . . . . . . $ 4,413,125
U.S. Government Agency Obligations . . . . . . . . . . . . . 23,387,717
-----------
$27,800,842
-----------
-----------
At April 30, 1995, the aggregate cost of investment securities and short-term
investments for Federal income tax purposes is $9,757,115. The aggregate
appreciation and depreciation of investments at April 30, 1995, based on a
comparison of investment values and their costs for federal income tax purposes
is $41,389 and $95,028, respectively, resulting in a net depreciation of
$53,639.
At October 31, 1994, the Fund had a carryover loss 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 carryover
capital losses, the Fund does not anticipate distributing any such gains to its
shareholders.
5. INVESTMENT ADVISORY CONTRACT, ADVISORY FEES AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $51,815 was paid or payable to Value Line, Inc. (the Adviser)
for the six months ended April 30, 1995. This was computed at the rate of 1/2 of
1% of average daily net assets during the period and paid monthly. The Adviser
provides research, investment programs, and supervision of the investment
portfolio and pays costs of certain administrative services and office space.
The Adviser also
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
-------------------------------------------------------------------------------
provides persons, satisfactory to the Fund's Board of Directors, to act as
officers and employees of the Fund and pays their salaries and wages. The Fund
bears all other costs and expenses. If the aggregate expenses of the Fund, other
than taxes, interest, brokerage commissions, and extraordinary expenses, exceed
the expense limitation imposed by any state in which the Fund's shares are sold,
the advisory fee will be reduced by the amount of such excess, or the amount of
such excess will be refunded. No reimbursement was required for the period ended
April 30, 1995.
A fee of $1,890 for printing services was payable to the Adviser for the six
months ended April 30, 1995.
Certain officers and directors of the Adviser and its subsidiary, Value Line
Securities, Inc. (the Fund's distributor and a registered broker/dealer), are
also officers and a director of the Fund.
At April 30, 1995, the Adviser and/or affiliated companies owned 11,808 shares
of the Fund's capital stock, representing 1.0% of the outstanding shares.
10
<PAGE>
VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND, INC.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
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PER-SHARE DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS YEARS ENDED APRIL 10, 1992
ENDED OCTOBER 31, (COMMENCEMENT
APRIL 30, 1995 ------------------------- OF OPERATIONS) TO
(UNAUDITED) 1994 1993 OCT. 31, 1992
-------------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $ 8.70 $ 10.01 $ 9.99 $ 10.00
------- -------- -------- --------
INCOME (LOSS) 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
------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income . . . . . . . . . . (.20) (.50) (.54) (.33)
Distributions from net realized 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%(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 expense reimbursement. Had these expenses been fully paid by the
Fund, investment income-net 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 11/1/92 to 1/31/93. Had
this fee been paid by the Fund, investment income-net per share would have
been $.53, and the ratio 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 Value Line, Inc. and the
short period covered by this report, data are not indicative of future
periods.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
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1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth
of capital by investing not less than 80% of its assets in "special situations".
No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTOR'S sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983 -- VALUE LINE CENTURION FUND seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance. The Fund is available to investors only through
the purchase of Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income securities.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal income
taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times. The Fund is available to investors only through the
purchase of the Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1992 -- THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND seeks
high current income consistent with low volatility of principal by investing
primarily in adjustable rate U.S. Government securities.
1993 -- VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
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For more complete information about any of the Value Line Funds, including
charges and expenses, send for a prospectus from Value Line Securities, Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call 1-800-223-0818, 24
hours a day, 7 days a week. Read the prospectus carefully before you invest or
send money.
12
