<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-----------------
INVESTMENT ADVISER Value Line, Inc. SEMIANNUAL REPORT
-----------------
220 East 42nd Street April 30, 1996
-----------------
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729 VALUE LINE
Kansas City, MO 64141-6729 INTERMEDIATE
BOND FUND, INC.
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
Francis C. Oakley
Marion N. Ruth
Frances T. Newton
OFFICERS Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
Charles Heebner
VICE PRESIDENT
John Risner
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT and
SECRETARY/TREASURER
Jack M. Houston
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN
TAKEN FROM THE RECORDS OF THE FUND WITHOUT
EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND,
ACCORDINGLY, THEY DO NOT EXPRESS AN OPINION THEREON. [LOGO]
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).
VLF046996
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
TO OUR VALUE LINE INTERMEDIATE
- --------------------------------------------------------------------------------
To Our Shareholders:
The Value Line Intermediate Bond Fund, Inc. (the "Fund") has now completed four
months as an Intermediate Investment-Grade Debt Fund, as classified by Lipper
Analytical Services, Inc. (Prior to 1996, Lipper classified the Fund as an
adjustable-rate, mortgage-backed securities fund.) The Fund has completed its
transition from an adjustable-rate securities fund and now consists of a
diversified portfolio of government, agency, corporate, asset-backed, and
mortgage-backed bonds, with a dollar-weighted average maturity of 4.6 years as
of April 30, 1996. Your Fund's net assets consisted of 28.5% asset-backed,
21.6% mortgage-backed, 18.4% U.S. government agency, 12.2% U.S. Treasury, and
12.1% corporate bonds, with the remaining 7.2% in cash equivalents.
Between October 31, 1995, and April 30, 1996, the U.S. bond markets experienced
continued volatility. Long-term interest rates, as measured by the 30-year
Treasury bond, declined from 6.33% on October 31, 1995, to 5.95% on December 29,
1995, only to rise 1.24 percentage points to 7.19% on June 12, 1996. Late last
year, investors were anticipating slower economic growth and further easing of
the federal funds rate by the Federal Reserve. These expectations were
confirmed when the Fed reduced the rate in January from 5.50% to 5.25%.
Thereafter, some investors became concerned about several major issues: the
failure by Congress to reach agreement on balancing the federal budget, the
generous settlement terms for striking engineers at Boeing, and the potential
changes in tax policy that surfaced early in the presidential race. In
addition, during March, the release of strong employment-growth numbers for
February was received with alarm. Fears of a stronger economy, higher
inflation, and no further Federal Reserve cuts in interest rates contributed to
the subsequent additional rise in interest rates.
For the six-month period ending April 30, 1996, your Fund was up 0.03%, compared
to 1.16% for the Lehman Brothers Intermediate Government/Corporate Bond Index.
We point out, however, that the index performance excludes management fees and
expenses. Looking ahead. we anticipate that volatile movements in interest
rates will continue. We expect to maintain a diversified portfolio, selecting
those sectors, including asset-backed and intermediate-term mortgage-backed
securities, that we believe will provide superior returns for shareholders. We
plan to maintain a very high-grade portfolio, mostly rated triple-A by Moody's
Investors Service and Standard and Poor's Corporation, since the yield
differential between high-grade and lower investment-grade securities is narrow
and does not compensate investors for the additional credit risk.
We thank you for your continued confidence in the Value Line Intermediate
Bond Fund, and we look forward to serving your investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
June 14, 1996
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2
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
BOND FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
Economic Observations
The economic expansion is heating up once again. True, there's no all-out boom
under way, nor does one figure to evolve over the next few quarters. Indeed,
it's likely that the economy will start to slow down later this year, under
pressure from high consumer-debt levels and rising long-term borrowing costs.
But for now, at least, the government and private-sector reports coming out show
sufficient strength to virtually assure that growth in the second and third
quarters of this year will exceed the 0.5% and 2.3% rates of expansion logged,
respectively, in last year's final three months and the opening quarter of 1996.
The current pickup in business activity is producing some unwelcome side
effects, however, namely inflationary pressures--dormant for so long--that are
starting to selectively resurface. This can be observed in the higher prices
now being paid for manufactured goods, in the emergence of some wage pressures,
and in the somewhat elevated pricing levels of certain commodities. Thus, while
inflation is still being fairly well contained on an overall basis, the
disquieting trends cited above will have to be watched.
The Federal Reserve Board will be among those monitoring the situation closely.
In particular, the central bank is likely to focus on upcoming job-growth
figures, on retail-sales trends, and on producer- and consumer-price reports to
determine whether the selective inflationary pressures being seen become more
widespread. Should that happen, the Fed would likely start to push interest
rates higher, in an effort to cool down the expansion--and ultimately inflation.
One obvious casualty of slower growth could be corporate profits.
Performance Data:*
GROWTH OF AVERAGE
AN ASSUMED ANNUAL TOTAL
INVESTMENT OF $10,000 RETURN
--------------------- ------------
1 year ended March 31, 1996(A) . . . $10,334 3.34%
From April 10, 1992,+
to March 31, 1996(A) . . . . . . . $10,470 1.16%
(A) INCLUDED IN THE PERFORMANCE DATA IS THE PERFORMANCE OF THE VALUE LINE
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND FROM 4/10/92 TO 10/31/95
(SEE NOTE #1 TO THE FINANCIAL STATEMENTS).
+ COMMENCEMENT OF OPERATIONS.
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL
GAINS DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST.
3
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (12.1%)
<C> <S> <C> <C> <C>
$ 1,000,000 U.S. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.125% 09/30/00 $ 990,311
1,000,000 U.S. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.250% 01/31/01 954,375
- ------------- -------------
2,000,000 Total U.S. Treasury Obligations (Cost $2,000,469) . . . . . . . . . . . . . 1,944,686
- ------------- -------------
<CAPTION>
U.S. GOVERNMENT AGENCY OBLIGATIONS (36.8%)
<C> <S> <C> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (23.9%)
500,000 Federal National Mortgage Association Global Note . . . . . . . . . . . . .6.400% 05/02/01 496,530
1,000,000 Federal National Mortgage Association Medium Term Note. . . . . . . . . . .6.320% 07/28/03 947,078
500,000 Federal National Mortgage Association Debenture . . . . . . . . . . . . . .6.850% 09/12/05 483,336
986,137 *Federal National Mortgage Association Pool #50751 . . . . . . . . . . . . .7.000% 06/01/08 979,193
930,829 Federal National Mortgage Association Pool #190836. . . . . . . . . . . . .7.000% 06/01/09 924,275
- ------------ -------------
3,916,966 3,830,412
- ------------ -------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (6.6%)
992,397 Federal Home Loan Mortgage Corporation #G10337. . . . . . . . . . . . . . .7.000% 02/01/10 983,404
105,862 Federal Home Loan Mortgage Corporation #1505 ND . . . . . . . . . . . . . .8.064%(1)(2) 12/15/22 73,045
- ------------ -------------
1,098,259 1,056,449
- ------------ -------------
TENNESSEE VALLEY AUTHORITY (6.3%)
1,000,000 +Tennessee Valley Authority Power Bonds Series 1991-A. . . . . . . . . . . .7.450% 10/15/01 1,012,230
- ------------ -------------
6,015,225 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $6,089,113). . . . . . . . . 5,899,091
- ------------ -------------
- ------------ -------------
<CAPTION>
ASSET BACKED SECURITIES (28.5%)
<C> <S> <C> <C> <C>
AUTOMOBILE LEASING (8.6%)
576,040 Premier Auto Trust Series 1994-2 Class A4 . . . . . . . . . . . . . . . . .6.000% 05/02/00 575,141
800,000 World Omni Automobile Lease Securitization
Trust Series 1995-A Class A . . . . . . . . . . . . . . . . . . . . . . .6.050% 11/25/01 800,575
- ------------ -------------
1,376,040 1,375,716
- ------------ -------------
- ------------ -------------
CREDIT CARD FINANCING (4.9%)
800,000 Standard Credit Card Master Trust Series 1995-10 Class A. . . . . . . . . .5.900% 02/07/01 787,000
- ------------ -------------
OTHER (15.0%)
795,441 Advanta Home Equity Loan Trust Series 1993-2 Class A1 . . . . . . . . . . .6.150% 10/25/09 772,572
770,671 AFC Home Equity Loan Trust Series 1993-3 Class A. . . . . . . . . . . . . .5.450% 06/20/13 718,771
149,418 CIT Group Securitization Corp. Series 1993-1 Class A1 . . . . . . . . . . .4.700% 06/15/18 148,210
782,721 Old Stone Credit Corp. Home Equity Loan
Trust Series 1993-2 Class A1. . . . . . . . . . . . . . . . . . . . . . .6.025% 06/15/08 763,152
- ------------ -------------
2,498,251 2,402,705
- ------------ -------------
- ------------ -------------
</TABLE>
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4
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,674,291 TOTAL ASSET BACKED SECURITIES (COST $4,641,578) . . . . . . . . . . . . . . $ 4,565,421
- ------------ -------------
CORPORATE BONDS & NOTES (12.1%)
FINANCE (4.7%)
800,000 General Motors Acceptance Corp. Medium Term Note. . . . . . . . . . . . . .6.500% 12/05/05 753,752
- ------------ -------------
INDUSTRIAL (3.0%)
500,000 Union Pacific Railroad Co. Pass Through Trust Series 1995-B . . . . . . . .6.290% 09/25/07 477,500
- ------------ -------------
YANKEE BONDS (4.4%)
750,000 Province of Quebec. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.500% 01/17/06 708,382
- ------------ -------------
2,050,000 TOTAL CORPORATE BONDS & NOTES (COST $2,054,983) . . . . . . . . . . . . . . 1,939,634
- ------------ -------------
<CAPTION>
MORTGAGE-BACKED SECURITIES (3.0%)
<C> <S> <C> <C> <C>
500,000 Residential Funding Mortgage Securities I Series 1993-S15 Class A5. . . . .6.700% 04/25/08 484,219
- ------------ -------------
500,000 TOTAL MORTGAGE-BACKED SECURITIES (COST $496,605). . . . . . . . . . . . . . 484,219
- ------------ -------------
15,239,516 TOTAL INVESTMENT SECURITIES (92.5%) (COST $15,282,748). . . . . . . . . . . 14,833,051
- ------------ -------------
<CAPTION>
SHORT-TERM INVESTMENTS (6.2%)
<C> <S> <C> <C> <C>
1,000,000 Federal National Mortgage Association . . . . . . . . . . . . . . . . . . .5.813% 10/04/96 1,001,139
- ------------ -------------
Excess of Cash and Other Assets Over Liabilites (1.3%). . . . . . . . . . . 210,420
-------------
Net Assets (100.0%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,044,610
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER OUTSTANDING SHARE ($16,044,610
DIVIDED BY 1,896,004 SHARES OUTSTANDING) . . . . . . . . . . . . . . . . . . $ 8.46
-------------
-------------
</TABLE>
(1) RESETS MONTHLY. RATE IN EFFECT ON 04/30/96.
(2) INVERSE FLOATER--FLOATING RATE MORTGAGE BACKED SECURITY WHOSE INTEREST RATE
FLUCTUATES IN THE OPPOSITE DIRECTION OF GENERAL MARKET RATES.
* TBA--SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS WITH AN APPROXIMATE
PRINCIPAL AMOUNT. THE ACTUAL PRINCIPAL AMOUNT WILL BE DETERMINED UPON
SETTLEMENT.
+ A PORTION OF THIS SECURITY HAS BEEN SEGREGATED FOR SETTLEMENT OF TBA
POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AT APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
Investment securities, at value
(Cost--$15,282,748) . . . . . . . . . . . . . . . . . . . . $14,833,051
Short-term investments (Cost--$1,000,000). . . . . . . . . . . 1,001,139
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597,104
Receivable for securities sold . . . . . . . . . . . . . . . . 970,925
Interest receivable. . . . . . . . . . . . . . . . . . . . . . 143,832
Deferred organization costs (note 2) . . . . . . . . . . . . . 14,431
Receivable for capital shares sold . . . . . . . . . . . . . . 1,022
------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . 17,561,504
------------
------------
LIABILITIES:
Payable for securities purchased . . . . . . . . . . . . . . . 1,485,545
Dividends payable to shareholders. . . . . . . . . . . . . . . 7,156
Payable for capital shares repurchased . . . . . . . . . . . . 2,250
Accrued expenses:
Advisory fee payable. . . . . . . . . . . . . . . . . . . . 6,632
Plan fee payable. . . . . . . . . . . . . . . . . . . . . . 3,316
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,995
Total Liabilities . . . . . . . . . . . . . . . . . . . . . 1,516,894
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $16,044,610
------------
------------
NET ASSETS CONSIST OF:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 1,896,004 shares). . . . . . . . . . . . . . . $1,896
Additional paid-in capital . . . . . . . . . . . . . . . . . . 22,767,163
Accumulated net realized loss on investments . . . . . . . . . (6,275,891)
Unrealized net depreciation of investments . . . . . . . . . . (448,558)
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $16,044,610
------------
------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE, PER OUTSTANDING SHARE
($16,044,610 DIVIDED BY 1,896,004 SHARES
OUTSTANDING). . . . . . . . . . . . . . . . . . . . . . . . . $ 8.46
------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income. . . . . . . . . . . . . . . . . . . . . . . . $ 509,999
------------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . 41,773
Auditing and legal fees. . . . . . . . . . . . . . . . . . . . 23,661
Service and distribution-plan fee. . . . . . . . . . . . . . . 20,887
Accounting and bookkeeping expense . . . . . . . . . . . . . . 16,200
Registration and filing fees . . . . . . . . . . . . . . . . . 14,350
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 11,727
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,643
Directors' fees and expenses . . . . . . . . . . . . . . . . . 7,688
Amortization of deferred organization costs
(note 2). . . . . . . . . . . . . . . . . . . . . . . . . . 7,635
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . 4,132
Postage, insurance, and dues . . . . . . . . . . . . . . . . . 2,653
Telephone and other. . . . . . . . . . . . . . . . . . . . . . 1,487
------------
Total Expenses Before Offset. . . . . . . . . . . . . . . . 162,836
Less: Expense Offset. . . . . . . . . . . . . . . . . . . . (3,251)
------------
Net Expenses. . . . . . . . . . . . . . . . . . . . . . . . 159,585
------------
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . 350,414
------------
Realized and Unrealized Gain (Loss)
on Investments--Net:
Realized Gain--Net. . . . . . . . . . . . . . . . . . . . . 40,234
Change in Unrealized Depreciation . . . . . . . . . . . . . (431,557)
------------
NET REALIZED GAIN AND CHANGE IN
UNREALIZED DEPRECIATION ON INVESTMENTS . . . . . . . . . . . . (391,323)
------------
NET DECREASE IN NET ASSETS
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . $ (40,909)
------------
------------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1996
(UNAUDITED), AND FOR THE YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCT. 31, 1995
(UNAUDITED) (A)
------------------------------------------
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 350,414 $ 732,584
Realized gain (loss) on investments-net. . . . . . . . . . . . . . . . . . . . . 40,234 (2,380,313)
Change in unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . (431,557) 2,143,938
-------------------------------------------
Net (decrease) increase in net assets from operations. . . . . . . . . . . . . . (40,909) 496,209
-------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (350,414) (732,584)
-------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares . . . . . . . . . . . . . . . . . . . . . . . . 961,069 10,931,415
Net proceeds from reinvestment of distributions to shareholders. . . . . . . . . 305,562 596,742
Cost of shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,719,638) (22,833,521)
-------------------------------------------
Decrease from capital share transactions . . . . . . . . . . . . . . . . . . . . (453,007) (11,305,364)
-------------------------------------------
Total Decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (844,330) (11,541,739)
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,888,940 28,430,679
-------------------------------------------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,044,610 $ 16,888,940
-------------------------------------------
-------------------------------------------
</TABLE>
(A) RESULTS PERTAIN TO VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES
FUND, INC. (SEE NOTE #1 TO THE FINANCIAL STATEMENTS).
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS, APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Value Line Intermediate Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company.
On November 1, 1995, with the approval of shareholders, the Fund changed its
name from Value Line Adjustable Rate U.S. Government Securities Fund, Inc. The
primary object of high current income consistent with low volatility of
principal remains the same, but the means of meeting this objective has changed.
The Fund will seek to meet its investment objective by investing in a
diversified portfolio of investment-grade debt securities with a dollar-weighted
average portfolio maturity of between three and 10 years. This will replace a
portfolio consisting primarily of adjustable-rate, mortgaged-backed securities.
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(A) SECURITY VALUATION. Where market quotations are readily available,
portfolio securities are valued at the midpoint between the latest available and
representative asked and bid prices or, when stock-exchange valuations are used,
at the latest quoted sale price as of the close of business of the New York
Stock Exchange on the valuation date. The Fund values mortgage-backed
securities on the basis of valuations provided by dealers in such securities.
Some of the general factors that 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 that 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 that
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.
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.
(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 pur-
- --------------------------------------------------------------------------------
8
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
APRIL 30, 1996
- --------------------------------------------------------------------------------
chased 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 accordance with income-tax regulations, which
may differ from generally accepted accounting principles.
(E) AMORTIZATION. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
2. ORGANIZATION COSTS
Costs of $76,603 incurred in connection with the Fund's organization and initial
registration have been deferred and are being amortized over 60 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
amoritzation period, the redemption proceeds will be reduced by a pro-rata
portion of any un-amortized, 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 Year
Ended Ended
April 30, 1996 Oct. 31,
(unaudited) 1995
---------------------------------
Shares sold. . . . . . . . . . . . . . . 110,581 1,263,230
Shares issued to shareholders in
reinvestment of dividends . . . . . . 35,433 69,375
-----------------------------
146,014 1,332,605
Shares repurchased . . . . . . . . . . . 198,633 1,651,997
-----------------------------
Net decrease . . . . . . . . . . . . . . (52,619) (1,319,392)
-----------------------------
-----------------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, were as
follows:
SIX MONTHS
ENDED
APRIL 30, 1996
(UNAUDITED)
-----------------
PURCHASES:
U.S. Treasury Obligations. . . . . . . . $ 6,047,344
Other Investment securities. . . . . . . 17,041,769
-----------------
$23,089,113
-----------------
-----------------
SALES AND MATURITIES:
U.S. Treasury Obligations. . . . . . . . $ 4,046,719
Other Investment securities. . . . . . . 15,139,834
-----------------
$19,186,553
-----------------
-----------------
At April 30, 1996, the aggregate cost of investment securities and short-term
investments for Federal income-tax purposes was $16,282,748. The aggregate
appreciation and depreciation of investments at April 30, 1996, based on a
comparison of investment values and their costs for federal income-tax purposes
was $1,767 and $450,325, respectively, resulting in a net depreciation of
$448,558.
At October 31, 1995, the Fund had a carryover loss of $6,316,125, of which
$28,176 will expire on October 31, 2001, $3,907,636 on October 31, 2002, and the
balance of $2,380,313 on October 31, 2003. 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.
9
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
5. ADVISORY FEES, SERVICE AND DISTRIBUTION PLAN FEES, AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $41,773 was paid or payable to Value Line, Inc. (the
"Adviser") for the six months ended April 30, 1996. 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 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 six months ended April 30, 1996.
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"), a
wholly-owned subsidiary of the Adviser, 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. For the six months
ended April 30, 1996, fees amounting to $20,887 were paid or payable under the
Plan.
A fee of $2,880 for printing services was paid or payable to the Adviser for the
six months ended April 30, 1996.
Certain officers and directors of the Adviser and the Distributor are also
officers and a director of the Fund.
At April 30, 1996, the Adviser owned 1,067,705 shares of the Fund's capital
stock, representing 56% of the outstanding shares.
- --------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
April 10, 1992
Six Months Ended (commencement of
April 30, 1996 Years Ended October 31, operations), to
(unaudited) 1995(A) 1994(A) 1993(A) Oct. 31, 1992 (A)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . $ 8.67 $ 8.70 $10.01 $ 9.99 $10.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income. . . . . . . . . . . . . . .18 .38 .50 .54(2) .33(1)
Net gains or losses on securities
(both realized and unrealized) . . . . . . . . (.21) (.03) (1.31) .05 (.01)
------------------------------------------------------------------------
Total from investment opeations. . . . . . . . . (.03) .35 (.81) .59 .32
------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . . . . . . (.18) (.38) (.50) (.54) (.33)
Distributions from capital gains . . . . . . . . - - - (.03) -
------------------------------------------------------------------------
Total distributions . . . . . . . . . . . . . . (.18) (.38) (.50) (.57) (.33)
------------------------------------------------------------------------
Net asset value, end of period . . . . . . . . . . $ 8.46 $ 8.67 $ 8.70 $10.01 $ 9.99
------------------------------------------------------------------------
------------------------------------------------------------------------
Total return . . . . . . . . . . . . . . . . . . . -0.36%+ 4.14% -8.37% 6.04% 3.26%+
------------------------------------------------------------------------
------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets end of period (in thousands). . . . . . $16,045 $16,889 $28,431 $44,508 $33,763
Ratio of operating expenses to average net assets. .92%*(3) 1.57% .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 4.22%* 4.52% 5.23% 5.35%(2) 5.83%*(1)
Portfolio turnover rate. . . . . . . . . . . . . . 125%+ 177% 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) . . . . . . . . . . . 1,940 1,887 4,366 3,766 1,968
Average amount of debt per outstanding share
during the period. . . . . . . . . . . . . . . . $ - $ - $ .90 $ .51 $ .27
</TABLE>
+ NOT ANNUALIZED
* ANNUALIZED
(A) RESULTS PERTAIN TO VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
(SEE NOTE #1 TO THE FINANCIAL STATEMENTS).
(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) NET OF CUSTODY-CASH CREDITS. HAD THE FUND NOT RECEIVED THESE CUSTODY
CREDITS, THE RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS WOULD HAVE
BEEN 1.96%.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth
of capital by investing not less than 80% of its assets in "special situations."
No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income 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.
1992 -- VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing primarily in a diversified
portfolio of investment-grade debt 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.
1995 -- VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* ONLY AVAILABLE THROUGH THE PURCHASE OF THE GUARDIAN INVESTOR, A
TAX-DEFERRED, VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891, OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
- --------------------------------------------------------------------------------
12
