<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust
Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust
SERVICING AGENT Co.
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
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
</TABLE>
This 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).
VLF61O209
------------------------------------
ANNUAL REPORT
------------------------------------
OCTOBER 31, 1996
----------------------------------------
VALUE LINE
INTERMEDIATE
BOND FUND, INC.
[LOGO]
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
To Our Value Line Intermediate
- -------------------------------------------
TO OUR SHAREHOLDERS:
The Value Line Intermediate Bond Fund, Inc. (the "Fund") was originally
established on April 10, 1992 as the Value Line Adjustable Rate U.S. Government
Securities Fund. On November 1, 1995, it adopted its present title. This report
covers the first full fiscal year, which ended October 31, 1996, under the new
name. The change in title reflected a shift in the Funds holdings from
adjustable-rate securities to a more diverse mixture. As of fiscal year-end, we
held U.S. government and government agency bonds, as well as bonds issued by
domestic corporations. Some of these issues are backed by assets such as
accounts receivable and mortgages. Bonds issued or guaranteed by the U.S.
government carry the highest credit quality. Most of the Funds non-government
holdings merit the highest ratings (AAA) assigned by such rating agencies as
Standard & Poor's and Moody's Investors Service. As of October 31, 1996, about
15% of the Funds portfolio consisted of U.S. Treasury bonds, 20% government
agencies, 22% mortgage-backed, 26% corporate asset-backed, 13% direct corporate
obligations, and the remaining 4% in cash.
The high quality of the Funds holdings make it especially suitable for
conservative investors, since the payment of interest and principal on these
bonds is virtually certain. But even if a bond is of high quality and thus
carries little credit risk, it is still subject to market risk. If interest
rates rise, the prices of bonds fall, regardless of high credit quality. The
Fund provides a further degree of safety through the relatively short maturities
of its investments, as indicated by its name and as required by the Prospectus.
As of September 30, 1996, the average effective maturity of all holdings was
around 4.2 years, consistent with the Funds policy of concentrating on
intermediate maturities. This means that fluctuation in the value of our
holdings due to changes in interest rates will be considerably less than is the
case with longer maturities.
The Funds objective continues to be to provide the highest current income
consistent with the minimizing of risk through the methods discussed above. In
the latest fiscal year, the investor received a total return (income plus
appreciation) of 3.28% with minimal risk.
LOOKING AHEAD
Value Line doesnt expect much change in interest rates over the course of 1997,
as discussed in the Economic Observations section elsewhere in this report. We
expect, therefore, that we will continue to hold the same types of securities,
thus providing the highest income consistent with limited risk.
We suggest that holders of this fund reinvest their income, so that they can
enhance their return by compounding. For example, $10,000 invested at the Funds
current yield of about 4.4% would be worth about $15,400 in ten years. Moreover,
bear in mind that the Funds return is enhanced by its no-load feature. This
means that there is no sales charge and the entire investment goes to work at
once.
We thank you for your continued confidence in the Value Line Intermediate Bond
Fund and look forward to continuing to meet your investment needs.
Sincerely,
[SIGNATURE]
CHAIRMAN AND PRESIDENT
December 9, 1996
- --------------------------------------------------------------------------------
2
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
Bond Fund Shareholders
- -------------------------------------------
ECONOMIC OBERSERVATIONS
The domestic economy is now expanding at a decidedly slower pace than had been
the case several months earlier. Real, inflation-adjusted GDP, for example,
which increased by better than 3% in the first half of 1996, as the housing,
auto, retail, and industrial markets all pushed forward briskly, was rising by
perhaps 2%, or so, as 1996 drew to a close. Moreover, current indications point
to more of the same in the new year, with growth probably averaging 1.7%-2.0%.
The case for slow, but sustained growth, is a compelling one. The present easing
in activity is largely the result of two factors, the first being the jump in
long-term interest rates early in 1996 (which made the financing of certain
purchases more costly) and the second being the ongoing runup in household debt.
Our sense, for now, however, is that neither event is sufficient to bring the
uptrend to a close. Long-term interest rates, for one thing, have recently
turned lower (as the earlier inflation fears, which led to the rise in rates in
the first place, have subsided). Second, several areas of the country, notably
the East and the West Coasts, are now strengthening selectively. Finally,
inventory levels remain low, and this should obviate the need to clear goods off
the shelves before factory production can again ramp up.
The slower growth pace is likely to keep inflation below 3%, on average, over
the next year. The combination of a modest level of business activity and
persistent moderate inflation should also keep the Federal Reserve Board from
pursuing overly restrictive monetary policies. Interest rates, meanwhile, will
probably remain fairly stable over the next year or so. The one potential fly in
the ointment is a likely deceleration in corporate profit growth as the economy
slows a bit further in 1997.
- --------------------------------------------------------------------------------
3
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
- -------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE VALUE LINE ("VL")
INTERMEDIATE BOND FUND INC (A), THE LEHMAN ARM INDEX,
AND THE LEHMAN AGGREGATE BOND INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VL ADJUSTABLE BOND LEHMAN AGG. BOND INDEX LEHMAN ARM INDEX
<S> <C> <C> <C>
3/92 $10,000 $10,000 $10,000
6/92 $10,173 $10,404 $10,304
9/92 $10,362 $10,851 $10,495
12/92 $10,367 $10,879 $10,521
3/93 $10,602 $11,329 $10,769
6/93 $10,797 $11,630 $10,973
9/93 $10,929 $11,933 $11,091
12/93 $10,998 $12,181 $11,174
3/94 $10,954 $11,798 $11,003
6/94 $10,192 $11,652 $11,050
9/94 $10,047 $11,710 $10,980
12/94 $9,908 $11,753 $11,042
3/95 $10,131 $12,345 $11,506
6/95 $10,286 $13,097 $11,865
9/95 $10,380 $13,354 $12,066
10/95 $10,448 $13,528 $12,140
12/31/95 $10,579 $13,923 $12,336
3/31/96 $10,470 $13,674 $12,472
6/30/96 $10,472 $13,753 $12,614
9/30/96 $10,675 $14,005 $12,849
10/31/96 $10791(A) $14,317 $12,996
</TABLE>
PERFORMANCE DATA:*
<TABLE>
<CAPTION>
FROM
4/10/92+
1 YEAR ENDED TO
9/30/96(A) 9/30/96(A)
------------- ----------
<S> <C> <C>
Average Annual Total Return....................................... 2.35% 1.36%
Growth of an Assumed
Investment of $10,000............................................ $ 10,235 $10,625
</TABLE>
* THE TOTAL RETURNS FOR THE ONE-YEAR PERIOD ENDED 10/31/96 AND THE PERIOD FROM
4/10/92 (COMMENCEMENT OF OPERATIONS) TO 10/31/96 WERE 3.28% AND 1.68%,
RESPECTIVELY. THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE
NO GUARANTEE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND
GROWTH OF AN ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND
CAPITAL GAINS DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST.
(A) RESULTS PERTAIN TO VALUE LINE ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND INC
FROM 4/10/92 TO 10/31/95. (SEE NOTE #1 TO THE THE FINANCIAL STATEMENT.)
- --------------------------------------------------------------------------------
THE LEHMAN AGGREGATE BOND INDEX IS AN UNMANAGED INDEX THAT IS REPRESENTATIVE
OF THE INVESTMENT-GRADE DOMESTIC CORPORATE GOVERNMENT BOND MARKETS.
THE LEHMAN ARM INDEX IS AN UNMANAGED INDEX THAT IS REPRESENTATIVE OF THE
ADJUSTABLE RATE MORTGAGE SECURITY.
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
SCHEDULE OF INVESTMENTS
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (14.9%)
$ 1,000,000 U.S. Treasury Notes........................................ 6.000% 05/31/98 $ 1,005,311
500,000 U.S. Treasury Notes........................................ 6.000 08/15/99 501,563
750,000 U.S. Treasury Notes........................................ 6.250 10/31/01 755,273
- ----------- -----------
2,250,000 TOTAL U.S. TREASURY OBLIGATIONS (COST $2,244,858)..................................... 2,262,147
- ----------- -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (19.8%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (13.0%)
500,000 Federal National Mortgage Association Global Note.......... 6.400 05/02/01 502,745
1,000,000 Federal National Mortgage Association Medium Term Note..... 6.320 07/28/03 977,997
500,000 Federal National Mortgage Association Debenture............ 6.850 09/12/05 495,332
- ----------- -----------
2,000,000 1,976,074
- ----------- -----------
TENNESSEE VALLEY AUTHORITY (6.8%)
1,000,000 Tennessee Valley Authority Power Bonds Series 1991-A....... 7.450 10/15/01 1,027,290
- ----------- -----------
1,000,000 1,027,290
- ----------- -----------
3,000,000 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $3,048,797)............................ 3,003,364
- ----------- -----------
ASSET BACKED SECURITIES (26.1%)
AUTOMOBILE LEASING (7.9%)
396,850 Premier Auto Trust Series 1994-2 Class A4.................. 6.000 05/02/00 398,632
800,000 World Omni Automobile Lease Securitization Trust
---------- Series 1995-A Class A.................................... 6.050 11/25/01 803,679
-----------
1,196,850 1,202,311
- ----------- -----------
CREDIT CARD FINANCING (5.2%)
800,000 Standard Credit Card Master Trust Series 1995-10 Class A... 5.900 02/07/01 793,500
- ----------- -----------
800,000 793,500
- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
SCHEDULE OF INVESTMENTS OCTOBER 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OTHER (13.0%)
$ 679,429 Advanta Home Equity Loan Trust Series 1993-2 Class A1...... 6.150% 10/25/09 $ 665,628
657,542 AFC Home Equity Loan Trust Series 1993-3 Class A........... 5.450 06/20/13 620,555
50,195 CIT Group Securitization Corp. Series 1993-1 Class A1...... 4.700 06/15/18 50,069
635,262 Old Stone Credit Corp. Home Equity Loan Trust Series 1993-2
---------- Class A1................................................. 6.025 06/15/08 626,826
-----------
2,022,428 1,963,078
- ----------- -----------
4,019,278 TOTAL ASSET BACKED SECURITIES (COST $3,992,112)....................................... 3,958,889
- ----------- -----------
MORTGAGE-BACKED SECURITIES (21.7%)
500,000 Residential Funding Mortgage Securities I Series 1993-S15
---------- Class A5................................................. 6.700 04/25/08 492,969
918,275 Federal National Mortgage Corporation Pool #50751.......... 7.000 06/01/08 926,686
864,980 Federal National Mortgage Corporation Pool #190836......... 7.000 06/01/09 872,903
931,832 Federal Home Loan Mortgage Corporation #G10337............. 7.000 02/01/10 932,706
105,862 Federal Home Loan Mortgage Corporation #1505MD............. 7.504(1)(2) 12/15/22 72,515
- ----------- -----------
3,320,949 TOTAL MORTGAGE-BACKED SECURITIES (COST $3,341,337).................................... 3,297,779
- ----------- -----------
CORPORATE BONDS & NOTES (13.0%)
FINANCE (5.1%)
800,000 General Motors Acceptance Corp. Medium Term Note........... 6.500 12/05/05 773,885
- ----------- -----------
800,000 773,885
- ----------- -----------
INDUSTRIAL (3.1%)
486,567 Union Pacific Railroad Co. Pass Through Trust Series
1995-B................................................... 6.290 09/25/07 476,228
- ----------- -----------
486,567 476,228
- ----------- -----------
YANKEE BONDS (4.8%)
750,000 Province of Quebec......................................... 6.500 01/17/06 728,819
- ----------- -----------
750,000 728,819
- ----------- -----------
2,036,567 TOTAL CORPORATE BONDS & NOTES (COST $2,041,723)....................................... 1,978,932
- ----------- -----------
14,626,794 TOTAL INVESTMENT SECURITIES (95.5%) (COST $14,668,827)................................ 14,501,111
- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
OCTOBER 31, 1996
- -------------------------------------------
<TABLE>
<C> <S> <C> <C> <C>
VALUE
-----------
EXCESS OF CASH AND OTHER ASSETS OVER LIABILITES (4.5%)............................................. $ 686,399
-----------
NET ASSETS (100.0%)................................................................................ $15,187,510
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER OUTSTANDING SHARE
($15,187,510 DIVIDED BY 1,770,292 SHARES OUTSTANDING)........................................... $8.58
-----------
</TABLE>
(1)RESETS MONTHLY. RATE DISCLOSED IS THAT IN EFFECT ON 10/31/96.
(2)INVERSE FLOATER-FLOATING RATE MORTGAGE BACKED SECURITY WHOSE INTEREST RATE
RESETS IN THE OPPOSITE DIRECTION OF MARKET RATE OF INTEREST TO WHICH THE
INVERSE FLOATER IS INDEXED. AN INVERSE FLOATER MAY BE CONSIDERED TO BE
LEVERAGED TO THE EXTENT THAT ITS INTEREST RATE VARIES BY A MAGNITUDE THAT
EXCEEDS THE MAGNITUDE OF THE CHANGE IN THE INDEX RATE OF INTEREST.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AT OCTOBER 31, 1996
- ------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment securities, at value
(Cost--$14,668,827).................. $14,501,111
Cash................................... 597,694
Interest receivable.................... 138,007
Deferred organization costs (note 2)... 6,712
-----------
TOTAL ASSETS....................... 15,243,524
-----------
LIABILITIES:
Dividends payable to shareholders...... 6,335
Payable for capital shares
repurchased.......................... 1,244
Accrued expenses:
Advisory fee payable................. 6,410
Distribution Plan fee payable........ 3,205
Other................................ 38,820
-----------
TOTAL LIABILITIES.................. 56,014
-----------
NET ASSETS............................. $15,187,510
-----------
NET ASSETS CONSIST OF:
Capital stock, at $.001 par value
(authorized 300,000,000, outstanding
1,770,292 shares).................... $ 1,770
Additional paid-in capital............. 21,705,083
Accumulated net realized loss on
investments.......................... (6,351,627)
Unrealized net depreciation of
investments.......................... (167,716)
-----------
NET ASSETS............................. $15,187,510
-----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE, PER OUTSTANDING
SHARE ($15,187,510 DIVIDED BY
1,770,292 SHARES OUTSTANDING)........ $ 8.58
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income......................... $1,000,079
----------
EXPENSES:
Advisory fee............................ 80,691
Service and distribution plan fee....... 40,345
Auditing and legal fees................. 39,530
Accounting and bookkeeping expense...... 32,400
Registration and filing fees............ 27,985
Custodian fees.......................... 23,868
Printing................................ 21,996
Directors' fees and expenses............ 16,435
Amortization of deferred organization
costs (note 2)........................ 15,354
Postage, insurance and dues............. 8,574
Transfer agent fees..................... 8,444
Telephone and other..................... 3,513
----------
Total Expenses Before Offset........ 319,135
Less: Expense Offset................ (8,546)
----------
Net Expenses........................ 310,589
----------
INVESTMENT INCOME--NET.................. 689,490
----------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS--NET:
Realized Loss--Net.................... (35,502)
Change in Unrealized Depreciation..... (150,715)
----------
NET REALIZED LOSS AND CHANGE IN
UNREALIZED DEPRECIATION ON
INVESTMENTS........................... (186,217)
----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS............................ $ 503,273
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 1996 AND 1995
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995(A)
<S> <C> <C>
-------------------------------------
OPERATIONS:
Investment income--net............................................. $ 689,490 $ 732,584
Realized loss on investments--net.................................. (35,502) (2,380,313)
Change in unrealized depreciation.................................. (150,715) 2,143,938
-------------------------------------
Net increase in net assets from operations......................... 503,273 496,209
-------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net............................................. (689,490 ) (732,584 )
-------------------------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares................................... 1,105,303 10,931,415
Net proceeds from reinvestment of distributions to shareholders.... 604,879 596,742
Cost of shares repurchased......................................... (3,225,395 ) (22,833,521 )
-------------------------------------
Decrease from capital share transactions........................... (1,515,213 ) (11,305,364 )
-------------------------------------
TOTAL DECREASE....................................................... (1,701,430 ) (11,541,739 )
NET ASSETS:
Beginning of year.................................................. 16,888,940 28,430,679
-------------------------------------
End of year........................................................ $ 15,187,510 $ 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.
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996
- -------------------------------------------
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 objective of high current income consistent with low volatility of
principal remains the same, but the means of meeting this objective changed. The
Fund seeks 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 replaced a portfolio
consisting primarily of adjustable-rate mortgage-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 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 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. Other
assets and securities for which market valuations are not readily available will
be valued at fair value as the Board of Directors may determine in good faith.
(B) REPURCHASE 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
- --------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
OCTOBER 31, 1996
- -------------------------------------------
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 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 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 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:
<TABLE>
<CAPTION>
1996 1995(A)
<S> <C> <C>
----------------------
Shares sold................ 127,591 1,263,230
Shares issued to
shareholders in
reinvestment of
dividends................ 70,805 69,375
----------------------
198,396 1,332,605
Shares repurchased......... (376,727) (2,651,997)
----------------------
Net decrease............... (178,331) (1,319,392)
----------------------
</TABLE>
(A) RESULTS PERTAIN TO VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT FUND INC. (SEE
NOTE #1 TO THE FINANCIAL STATEMENTS).
4.PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, were as
follows:
<TABLE>
<CAPTION>
1996
<S> <C>
-----------
PURCHASES:
U.S. Treasury Obligations.............. $ 9,259,355
Other Investment Securities............ 17,041,770
-----------
$26,301,125
-----------
SALES AND MATURITIES:
U.S. Treasury Obligations.............. $ 6,935,344
Other Investment Securities............ 17,002,556
-----------
$23,937,900
-----------
</TABLE>
At October 31, 1996, the aggregate cost of investment securities for Federal
income tax purposes is $14,668,827. The aggregate appreciation and depreciation
of investments at October 31, 1996, based on a comparison of investment values
and their costs for federal income tax purposes is $37,163 and $204,879,
respectively, resulting in a net depreciation of $167,716.
At October 31, 1996 the Fund had a carryover loss of $6,351,627 of which $28,176
will expire on October 31, 2001 and $3,907,636 will expire on October 31, 2002
- --------------------------------------------------------------------------------
11
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
$2,380,313 in October 31, 2003 and the balance of $35,502 on October 31, 2004.
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.ADVISORY FEES, SERVICE AND DISTRIBUTION PLAN FEES AND
TRANSACTIONS WITH AFFILIATES
An advisory fee of $80,691 was paid or payable to Value Line, Inc. (the
"Adviser") for the year ended October 31, 1996. This was computed at the rate of
1/2 of 1% of average daily net assets during the year and paid monthly. The
Adviser provides research, investment programs, 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.
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. In the year ended
October 31, 1996, fees amounting to $40,345 were paid or payable under the Plan.
A fee of $5,760 for printing services was paid or payable to the Adviser for the
year ended October 31, 1996.
Certain officers and directors of the Adviser and the Distributor are also
officers and a director of the Fund.
At October 31, 1996, the Adviser owned 1,091,307 shares of the Fund's capital
stock, representing 62% of the outstanding shares.
- --------------------------------------------------------------------------------
12
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
APRIL 10, 1992
YEARS ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------------------- OPERATIONS) TO
1996 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.............. .37 .38 .50 .54 (2) .33 (1)
Net gains or losses on securities
(both realized and unrealized)... (.09 ) (.03 ) (1.31 ) .05 (.01 )
-----------------------------------------------------------------
Total from investment opeations.... .28 .35 (.81 ) .59 .32
-----------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income.......................... (.37 ) (.38 ) (.50 ) (.54 ) (.33 )
Distributions from capital gains... -- -- -- (.03 ) --
-----------------------------------------------------------------
Total distributions................ (.37 ) (.38 ) (.50 ) (.57 ) (.33 )
-----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $8.58 $8.67 $ 8.70 $10.01 $ 9.99
-----------------------------------------------------------------
TOTAL RETURN............................. 3.28 % 4.14 % (8.37 %) 6.04 % 3.26 %+
-----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in
thousands)............................. $ 15,188 $ 16,889 $ 28,431 $ 44,508 $ 33,763
Ratio of operating expenses to average
net assets............................. 1.98 % 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.................. 4.27 % 4.52 % 5.23 % 5.35 (2) 5.83 %*(1)
Portfolio turnover rate.................. 159 % 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)....... 1,884 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.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13
<PAGE>
VALUE LINE INTERMEDIATE BOND FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF
DIRECTORS OF VALUE LINE INTERMEDIATE BOND FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Intermediate Bond Fund,
Inc., formerly Value Line Adjustable Rate U.S. Government Securities Fund, Inc.,
(the "Fund") at October 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended and for the period from April 10, 1992 (commencement of
operations), through October 31, 1992, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's managment; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
December 13, 1996
- --------------------------------------------------------------------------------
14
<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 to
its assets will be invested in issues of the U.S. Government and its agencies
and instru-
mentalities.
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
individual income taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* invests in stocks, bonds
and cash equivalents according to computer trend models developed by Value Line.
The objective is to professionally manage the optimal allocation of these
investments at all times.
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.
- --------------------------------------------------------------------------------
15
