UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-568
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The Value Line Fund, Inc.
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(Exact name of registrant as specified in charter)
220 East 42nd Street, New York, N.Y. 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-907-1500
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Date of fiscal year end: December 31, 2004
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Date of reporting period: June 30, 2004
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Item I. Reports to Stockholders.
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A copy of the Semi-Annual Report to Stockholders for the period ended
is included with this Form.
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INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o BFDS
P.O. Box 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
REGISTERED PUBLIC 1177 Avenue of the Americas
ACCOUNTING FIRM New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Sound View Drive, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Marion N. Ruth
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Brett Mitstifer
VICE PRESIDENT
Stephen E. Grant
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT AND
SECRETARY/TREASURER
Joseph Van Dyke
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 REGISTERED PUBLIC ACCOUNTING
FIRM 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).
#530542
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SEMI-ANNUAL REPORT
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JUNE 30, 2004
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THE VALUE LINE
FUND, INC.
[LOGO]
THE VALUE LINE FUND, INC.
TO OUR VALUE LINE
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TO OUR SHAREHOLDERS:
The first half of 2004 was a frustrating time for equity investors. Following
new post-recession highs in the first quarter, the stock market suffered its
first 5% correction since the current market rally began in early 2003. The
Standard & Poor's 500-stock Index and the Dow Jones Industrial Average fell
about 5%, but the corrections reached about 10% in the NASDAQ and the Russell
2000 small-cap index. Rising oil prices, the handover of power in Iraq, and the
looming prospect of the first increase in interest rates in several years all
contributed to a high degree of uncertainty. Corporate profit growth was the
one bright spot as year-over-year growth could well exceed 20% in the first
half. While equity markets do like to "climb a wall of worry", so far that
climb has been a difficult one, with the S&P 500 Index(1) generating a modest
3.44% return through June 30th. The Value Line Fund returned 1.47% in the
comparable period.
In managing the Fund, we rely on the Value Line Timeliness Ranking System,
which favors those companies that have high current earnings, strong earnings
growth, positive earnings surprises, reasonable valuations and improving
relative stock-price performance. As the year began, technology and consumer
discretionary stocks were favored by the Timeliness Ranking System due to
strong earnings and price momentum in 2003. Indeed, the tech and consumer
discretionary stocks did participate in the market gains early in the first
quarter, and we increased exposure to these groups. These sectors, however,
were two of the worst-performing ones for the second quarter of this year,
causing us to selectively reduce our holdings and overall exposure to
technology and consumer discretionary industries as earnings and/or price
momentum deteriorated. The energy, industrial, and consumer staple sectors were
the best performers during the first half of 2004, due to rising oil prices,
expanding manufacturing demand, and some sector rotation. We increased the
Fund's holdings in industrials and more than doubled the consumer staples
position. We reduced the Fund's holdings in the financial sector in the first
quarter in the belief that interest rates would soon rise and possibly threaten
that group's earnings; the financial sector posted a small loss for the six
month period. Finally, we increased investments in the health care sector.
Going forward, we remain committed to investing in those companies that show
strong earnings growth and positive earnings surprises. We believe that the
Fund is well positioned to benefit from today's market and economic
environments, as long as corporate profits remain strong, consumers and
business owners continue to spend at a moderate pace, labor markets continue to
improve, and interest rates remain accommodative, albeit at levels higher than
in the recent past.
We thank you for your confidence in Value Line and appreciate your continued
support.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
August 12, 2004
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(1) THE STANDARD & POOR'S 500 INDEX CONSISTS OF 500 STOCKS WHICH ARE TRADED ON
THE NEW YORK STOCK EXCHANGE, AMERICAN STOCK EXCHANGE AND THE NASDAQ
NATIONAL MARKET SYSTEM AND IS REPRESENTATIVE OF THE BROAD STOCK MARKET.
THIS IS AN UNMANAGED INDEX AND DOES NOT REFLECT CHARGES, EXPENSES OR
TAXES, AND IT IS NOT POSSIBLE TO DIRECTLY INVEST IN THIS INDEX.
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2
THE VALUE LINE FUND, INC.
FUND SHAREHOLDERS
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ECONOMIC OBSERVATIONS
The U.S. economic expansion, which proceeded strongly from the middle of 2003
through the opening six months of this year, has more recently started to show
some signs of fatigue. True, the business upturn is hardly collapsing, and we
are still seeing improvement in the capital goods area and in certain
industrial sectors. However, manufacturing, in general, is now growing more
slowly than it had been, while the retail and residential construction markets
are pulling back a little. Our sense is that growth will now proceed at a
moderate 3% to 4% rate over the next several quarters to a year.
The slowing in growth may well have positive ramifications. That is because the
current deceleration in economic activity appears mild and seems unlikely to
evolve into a full-fledged slowdown barring another surge in oil prices.
(Higher oil prices limit economic growth by taking money out of the pockets of
consumers and businesses). If we are correct and the economy shifts to a
modestly slower, but sustainable pace, with accompanying lower inflation, the
Federal Reserve, which has increased interest rates twice in the past several
months, might well be inclined to proceed slowly and somewhat cautiously in
raising rates over the next several months.
Our current benign economic forecast, it should be noted, excludes any
allowance for a further escalation in global military conflict or a new act of
terrorism, neither of which can be accurately predicted as to scope or timing.
PERFORMANCE DATA:**
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
-----------------------------------------
1 year ended 6/30/04 .......... +8.76% $10,876
5 years ended 6/30/04 ......... -6.11% $ 7,297
10 years ended 6/30/04 ......... +7.50% $20,620
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** THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS 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. THE PERFORMANCE DATA DO
NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. CALL 1-800-243-2729 TO
OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END.
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3
THE VALUE LINE FUND, INC.
PORTFOLIO HIGHLIGHTS AT JUNE 30, 2004 (UNAUDITED)
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Ten Largest Holdings
VALUE PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
------------------------------------------------------------------------------------
Research In Motion Ltd. ........... 54,266 $3,714 1.8%
Waters Corp. ...................... 70,100 3,349 1.6
Navigant Consulting, Inc. ......... 154,300 3,308 1.6
Genentech, Inc. ................... 58,700 3,299 1.6
Norfolk Southern Corp. ............ 124,000 3,289 1.6
Yahoo! Inc. ....................... 90,500 3,288 1.6
Georgia-Pacific Corp. ............. 88,900 3,288 1.6
Qualcomm Incorporated ............. 45,000 3,284 1.6
Copart, Inc. ...................... 122,800 3,279 1.6
Helen of Troy Ltd. ................ 88,800 3,274 1.6
FIVE LARGEST INDUSTRY CATEGORIES
VALUE PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
------------------------------------------------------------------
Retail-Special Lines ......... $14,948 7.2%
Medical Supplies ............. 13,996 6.8
Toiletries/Cosmetics ......... 10,768 5.2
Drug ......................... 10,115 4.9
Electronics .................. 8,531 4.1
FIVE LARGEST NET SECURITY PURCHASES*
COST
ISSUE (IN THOUSANDS)
-------------------------------------------------------------
Archer-Daniels-Midland Co. ................ $3,325
Georgia-Pacific Corp. ..................... 3,307
Telecom Corp. of New Zealand Ltd. ......... 3,293
Motorola, Inc. ............................ 3,270
ResMed Inc. ............................... 3,237
FIVE LARGEST NET SECURITY SALES*
PROCEEDS
ISSUE (IN THOUSANDS)
----------------------------------------------------------
Citigroup, Inc. ........................ $6,983
Lehman Brothers Holdings, Inc. ......... 6,558
Medtronic, Inc. ........................ 6,070
Cisco Systems, Inc. .................... 5,844
Omnicom Group, Inc. .................... 5,613
* FOR THE SIX MONTH PERIOD ENDED 6/30/04
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4
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
----------------------------------------------------------------------
COMMON STOCKS (97.4%)
AEROSPACE/DEFENSE (2.1%)
95,300 Armor Holdings, Inc.* .................. $3,240
16,400 L-3 Communications
Holdings, Inc. ......................... 1,096
------
4,336
AUTO PARTS (0.5%)
33,800 Modine Manufacturing Co. ............... 1,077
BEVERAGE -- SOFT
DRINK (0.5%)
50,000 PepsiAmericas, Inc. .................... 1,062
BIOTECHNOLOGY (3.2%)
58,700 Genentech, Inc.* ....................... 3,299
45,200 Invitrogen Corp.* ...................... 3,254
------
6,553
CHEMICAL --
DIVERSIFIED (1.6%)
69,500 Eastman Chemical Company ............... 3,213
COMPUTER SOFTWARE &
SERVICES (3.6%)
24,700 Autodesk, Inc. ......................... 1,057
131,500 Macromedia, Inc.* ...................... 3,228
74,000 Symantec Corp.* ........................ 3,240
------
7,525
DRUG (4.9%)
50,600 Biogen Idec, Inc.* ..................... 3,200
18,300 Celgene Corp.* ......................... 1,048
20,000 Cephalon, Inc.* ........................ 1,080
27,700 Covance Inc.* .......................... 1,069
37,500 ImClone Systems Inc.* .................. 3,217
14,600 Pfizer, Inc. ........................... 501
------
10,115
E-COMMERCE (0.5%)
174,700 Sapient Corp.* ......................... 1,050
VALUE
SHARES (IN THOUSANDS)
----------------------------------------------------------------------
EDUCATIONAL
SERVICES (2.1%)
12,100 Apollo Group, Inc. Class "A"* .......... $1,068
36,300 University of Phoenix Online* .......... 3,180
------
4,248
ELECTRICAL
EQUIPMENT (2.1%)
19,400 FLIR Systems, Inc.* .................... 1,065
118,000 Thomas & Betts Corp.* .................. 3,213
------
4,278
ELECTRONICS (4.1%)
77,400 Agilysys, Inc. ......................... 1,067
121,400 Arrow Electronics, Inc.* ............... 3,256
35,100 Harman International
Industries, Inc. ....................... 3,194
14,500 Rogers Corp.* .......................... 1,014
------
8,531
ENTERTAINMENT (0.7%)
25,000 Radio One, Inc. Class "A"* ............. 403
66,900 Radio One, Inc. Class "D"* ............. 1,071
------
1,474
ENTERTAINMENT
TECHNOLOGY (0.9%)
116,000 Pixelworks, Inc.* ...................... 1,777
FINANCIAL SERVICES --
DIVERSIFIED (1.5%)
44,500 American International
Group, Inc. ............................ 3,172
FOOD PROCESSING (2.1%)
193,400 Archer-Daniels-Midland Co .............. 3,245
52,300 Tyson Foods, Inc. Class "A" ............ 1,096
------
4,341
FOREIGN
TELECOMMUNICATIONS (1.6%)
108,000 Telecom Corp. of New Zealand
Ltd. (ADR) ............................. 3,218
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5
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
-----------------------------------------------------------------------
GROCERY (0.5%)
11,300 Whole Foods Market, Inc. ................ $1,079
HEALTHCARE
INFORMATION
SYSTEMS (1.6%)
115,600 eResearch Technology, Inc.* ............. 3,237
HOME APPLIANCE (0.5%)
15,100 Toro Company (The) ...................... 1,058
HOTEL/GAMING (0.5%)
21,800 Station Casinos, Inc. ................... 1,055
HOUSEHOLD
PRODUCTS (0.5%)
23,200 Church & Dwight Co., Inc. ............... 1,062
HUMAN RESOURCES (1.5%)
164,500 Korn/Ferry International * .............. 3,186
INDUSTRIAL
SERVICES (3.2%)
122,800 Copart, Inc.* ........................... 3,279
154,300 Navigant Consulting, Inc.* .............. 3,308
------
6,587
INFORMATION
SERVICES (0.5%)
18,700 Getty Images, Inc.* ..................... 1,122
INSURANCE --
PROPERTY/CASUALTY (1.6%)
105,500 American Financial Group, Inc. .......... 3,225
INTERNET (2.6%)
96,200 E*TRADE Financial Corp.* ................ 1,073
11,600 eBay, Inc.* ............................. 1,066
90,500 Yahoo! Inc.* ............................ 3,288
------
5,427
MACHINERY (1.6%)
70,800 Stanley Works (The) ..................... 3,227
VALUE
SHARES (IN THOUSANDS)
-----------------------------------------------------------------------
MEDICAL SERVICES (2.6%)
12,700 Aetna Inc. .............................. $1,079
12,200 Anthem, Inc.* ........................... 1,093
36,000 DaVita Inc.* ............................ 1,110
26,700 Laboratory Corp. of America
Holdings* ............................... 1,060
12,600 Quest Diagnostics, Inc. ................. 1,070
------
5,412
MEDICAL SUPPLIES (6.8%)
18,900 Bard (C.R.), Inc. ....................... 1,071
22,600 Charles River Laboratories
International, Inc.* .................... 1,105
18,500 Fisher Scientific International,
Inc.* ................................... 1,068
50,700 IDEXX Laboratories, Inc.* ............... 3,191
63,400 ResMed Inc.* ............................ 3,231
19,400 Stryker Corp. ........................... 1,067
37,000 Zimmer Holdings, Inc.* .................. 3,263
------
13,996
METALS & MINING --
DIVERSIFIED (0.9%)
100,000 Brush Engineered
Materials Inc.* ......................... 1,890
NATURAL GAS --
DIVERSIFIED (2.1%)
107,200 Patina Oil & Gas Corp. .................. 3,202
37,500 Southwestern Energy Co.* ................ 1,075
------
4,277
OILFIELD SERVICES/
EQUIPMENT (1.6%)
50,800 Schlumberger Ltd ........................ 3,226
PAPER & FOREST
PRODUCTS (3.2%)
88,900 Georgia-Pacific Corp. ................... 3,288
78,000 Potlatch Corp. .......................... 3,248
------
6,536
--------------------------------------------------------------------------------
6
THE VALUE LINE FUND, INC.
JUNE 30, 2004
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
-----------------------------------------------------------------------
PHARMACY
SERVICES (2.6%)
54,200 Accredo Health, Inc.* ..................... $2,111
76,000 CVS Corp. ................................. 3,194
-------
5,305
PRECISION
INSTRUMENT (3.2%)
108,700 Agilent Technologies, Inc.* ............... 3,183
70,100 Waters Corp* .............................. 3,349
-------
6,532
RAILROAD (1.6%)
124,000 Norfolk Southern Corp. .................... 3,289
RESTAURANT (0.7%)
15,000 Landry's Restaurants, Inc. ................ 448
24,500 Starbucks Corp.* .......................... 1,065
-------
1,513
RETAIL BUILDING
SUPPLY (1.5%)
90,700 Home Depot, Inc. (The) .................... 3,193
RETAIL--SPECIAL
LINES (7.2%)
111,200 American Eagle Outfitters, Inc.* .......... 3,215
362,300 Charming Shoppes, Inc.* ................... 3,235
23,800 Coach, Inc.* .............................. 1,075
43,900 Gap, Inc. (The) ........................... 1,065
23,500 Guitar Center, Inc..* ..................... 1,045
32,500 PETsMART, Inc. ............................ 1,055
118,500 Rent-Way, Inc.* ........................... 1,066
52,400 Urban Outfitters, Inc.* ................... 3,192
-------
14,948
RETAIL STORE (1.5%)
85,000 Penney (J.C.) Co., Inc. ................... 3,210
SEMICONDUCTOR (1.6%)
177,400 Motorola, Inc. ............................ 3,237
VALUE
SHARES (IN THOUSANDS)
-----------------------------------------------------------------------
TELECOMMUNICATION
SERVICES (3.1%)
120,000 Nextel Communications, Inc.
Class "A"* ................................ $3,199
112,700 Western Wireless Corp.
Class "A"* ................................ 3,258
-------
6,457
TELECOMMUNICATIONS
EQUIPMENT (3.1%)
120,600 Marvell Technology Group Ltd.* 3,220
45,000 QUALCOMM Inc. ............................. 3,284
-------
6,504
TOILETRIES/COSMETICS (5.2%)
23,400 Avon Products, Inc. ....................... 1,080
111,400 Chattem, Inc.* ............................ 3,216
88,800 Helen of Troy Ltd..*. ..................... 3,274
126,300 Nu Skin Enterprises, Inc.
Class "A" ................................. 3,198
-------
10,768
TRUCKING (0.5%)
28,000 Hunt (J.B.) Transport
Services, Inc. ............................ 1,080
WIRELESS
NETWORKING (1.8%)
54,266 Research In Motion Ltd.* .................. 3,714
-------
TOTAL COMMON STOCKS AND
TOTAL INVESTMENT
SECURITIES (97.4%)
(COST $187,804,000).................................. 201,322
--------
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7
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
--------------------------------------------------------------------------------
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER SHARE
(IN THOUSANDS) AMOUNT)
-----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.0%)
(INCLUDING ACCRUED INTEREST)
$ 8,300 Collateralized by $8,606,000
U.S. Treasury Bonds 5.25%,
due 11/15/28, with a value of
$8,489,000 (with UBS
Warburg LLC, 1.22%, dated
6/30/04, due 7/1/04, delivery
value $8,300,281) ............................ $ 8,300
--------
EXCESS OF LIABILITIES OVER CASH
AND OTHER ASSETS (-1.4%) - (2,935)
--------
NET ASSETS (100.0%) - $206,687
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE ($206,686,540
- 14,289,902 SHARES OF CAPITAL STOCK
OUTSTANDING) $ 14.46
========
*NON-INCOME PRODUCING
(ADR) AMERICAN DEPOSITORY RECEIPTS.
SEE NOTES TO FINANCIAL STATEMENTS.
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8
THE VALUE LINE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
AT JUNE 30, 2004 (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS
EXCEPT PER
SHARE AMOUNT) (IN THOUSANDS)
-------------- --------------
ASSETS: INVESTMENT INCOME:
Investment securities, at value Dividends (Net of foreign withholding
(Cost - $187,804) ........................... $201,322 taxes of $12) ........................... $ 556
Repurchase agreement Interest ................................... 43
(Cost - $8,300) ............................. 8,300 -------
Cash ........................................... 46 Total Income ............................. 599
Receivable for securities sold ................. 27,885 -------
Dividends receivable ........................... 40 EXPENSES:
Receivable for capital shares sold ............. 2 Advisory fee ............................... 701
Prepaid expenses ............................... 20 Service and distribution plan fees ......... 260
-------- Transfer agent fees ........................ 72
TOTAL ASSETS ............................. 237,615 Auditing and legal fees .................... 33
-------- Printing ................................... 25
LIABILITIES: Custodian fees ............................. 23
Payable for securities purchased ............... 30,603 Postage .................................... 18
Payable for capital shares repurchased ......... 98 Insurance, dues and other .................. 15
Accrued expenses: Registration and filing fees ............... 12
Advisory fee ................................ 112 Telephone .................................. 10
Service and distribution plan fees Directors' fees and expenses ............... 10
payable .................................. 42 -------
Other ....................................... 73 Total Expenses before Custody Credits 1,179
-------- Less: Custody Credits ................... (2)
TOTAL LIABILITIES ........................ 30,928 -------
-------- Net Expenses ............................ 1,177
NET ASSETS ..................................... $206,687 -------
======== NET INVESTMENT LOSS ........................ (578)
NET ASSETS CONSIST OF: -------
Capital stock, at $1.00 par value NET REALIZED AND UNREALIZED GAIN ON
(authorized 50,000,000, outstanding INVESTMENTS:
14,289,902 shares) .......................... $ 14,290 Net Realized Gain ....................... 21,758
Additional paid-in capital ..................... 142,353 Change in Net Unrealized
Accumulated net investment loss ................ (578) Appreciation .......................... (18,124)
Undistributed net realized gain on -------
investments ................................. 37,104 NET REALIZED GAIN AND CHANGE IN NET
Net unrealized appreciation of UNREALIZED APPRECIATION ON
investments ................................. 13,518 INVESTMENTS .............................. 3,634
-------- -------
NET ASSETS ..................................... $206,687 NET INCREASE IN NET ASSETS FROM
======== OPERATIONS ............................... $ 3,056
NET ASSET VALUE, OFFERING AND =======
REDEMPTION PRICE PER OUTSTANDING
SHARE ($206,686,540 - 14,289,902
SHARES OUTSTANDING) ......................... $ 14.46
========
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
9
THE VALUE LINE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS FOR THE
SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31,
(UNAUDITED) 2003
--------------- -------------
(IN THOUSANDS)
OPERATIONS:
Net investment loss ............................................. $ (578) $ (397)
Net realized gain on investments ................................ 21,758 42,700
Change in net unrealized appreciation ........................... (18,124) (10,197)
--------- ---------
Net increase in net assets from operations ...................... 3,056 32,106
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions .................. -- (22,708)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares .................................... 2,249 59,344
Proceeds from reinvestment of distributions to shareholders ..... -- 21,413
Cost of shares repurchased ...................................... (14,665) (80,446)
--------- ---------
Net (decrease) increase from capital share transactions ......... (12,416) 311
--------- ---------
TOTAL (DECREASE) INCREASE IN NET ASSETS .......................... (9,360) 9,709
NET ASSETS:
Beginning of period ............................................. 216,047 206,338
--------- ---------
End of period ................................................... $ 206,687 $ 216,047
========= =========
ACCUMULATED NET INVESTMENT LOSS, END OF PERIOD ................... $ (578) $ --
========= =========
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
10
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2004
--------------------------------------------------------------------------------
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 whose primary investment
objective is long-term growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
(A) SECURITY VALUATION. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales prices on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or that are
not readily marketable and all other assets of the Fund are valued at fair
value as the Board of Directors may determine in good faith. 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 the 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 AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act 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. Interest income
is accrued as earned. Realized gains and losses on sales of securities are
calculated for financial accounting and federal income tax purposes on the
identified cost basis. Dividend income and 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) REPRESENTATIONS AND INDEMNIFICATIONS. In the normal course of business the
Fund enters into contracts that contain a variety of representations and
warranties which provide general indemnifications. The Fund's maximum exposure
under these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risk of loss to be remote.
--------------------------------------------------------------------------------
11
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows (in thousands except per share
amounts):
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2004 DECEMBER 31,
(UNAUDITED) 2003
-------------------------------
Shares sold ........................ 158 4,159
Shares issued to
shareholders in
reinvestment of
dividends and
distributions ................... -- 1,520
-------------------------------
158 5,679
Shares repurchased ................. (1,029) (5,608)
-------------------------------
Net (decrease) increase ............ (871) 71
===============================
Distributions per share
from net realized gains ......... $ -- $ 1.6269
===============================
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
SIX MONTHS
ENDED
JUNE 30, 2004
(UNAUDITED)
---------------
(IN THOUSANDS)
PURCHASES:
Investment Securities ......... $362,108
========
SALES:
Investment Securities ......... $372,966
========
4. INCOME TAXES
At June 30, 2004, information on the tax components of capital is as follows:
(unaudited)
(IN THOUSANDS)
---------------
Cost of investments for tax purposes ......... $196,105
========
Gross tax unrealized appreciation ............ $15,194
Gross tax unrealized depreciation ............ (1,677)
--------
Net tax unrealized appreciation on
investments ............................... $13,517
========
Net realized gains/losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales.
5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $701,000 was paid or payable to Value Line, Inc., the Fund's
investment adviser (the "Adviser"), for the six months ended June 30, 2004.
This was computed at the rate of .70% of the first $100 million of the Fund's
average daily net assets plus .65% on the excess thereof, and paid monthly. The
Adviser provides research, investment programs, supervision of the investment
portfolio and pays costs of administrative services, office space, equipment
and compensation of administrative, bookkeeping and clerical personnel
necessary for managing the affairs of the Fund. The Adviser also provides
persons, satisfactory to the Fund's Board of Directors, to act as officers and
employees of the Fund and pays their salaries and wages. The Fund bears all
other costs and expenses.
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
--------------------------------------------------------------------------------
12
THE VALUE LINE FUND, INC.
JUNE 30, 2004
--------------------------------------------------------------------------------
months ended June 30, 2004, fees amounting to $260,000 were paid or payable to
the Distributor under this Plan.
Certain officers and directors of the Adviser and its wholly owned subsidiary,
Value Line Securities, Inc. (the Fund's distributor and a registered
broker/dealer), are also officers and directors of the Fund. During the six
months ended June 30, 2004, the Fund paid brokerage commissions totaling
$363,000 to the Distributor, which clears its transactions through unaffiliated
brokers.
For the six months ended June 30, 2004, the Fund's expenses were reduced by
$2,000 under a custody credit arrangement with the Custodian.
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan owned 415,185 shares of the Fund's capital stock, representing
2.9% of the outstanding shares at June 30, 2004.
PROXY VOTING
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available without charge upon request by calling 1-800-243-2729 or
on the SEC's website (http://www.sec.gov). Information regarding how
the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is also available on the
SEC's website at http://www.sec.gov or at the Fund's website at
http://vlfunds.com.
--------------------------------------------------------------------------------
13
THE VALUE LINE FUND, INC.
Financial Highlights
--------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2004 ---------------------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.25 $ 13.67 $ 18.49 $ 21.37 $ 26.25 $ 22.65
--------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment loss (.04) (.03) (.05) (.04) (.07) (.02)
Net gains or losses on
securities (both realized and
unrealized) .25 2.24 (4.64) (2.70) (3.95) 5.98
--------------------------------------------------------------------------------------------
Total from investment
operations .21 2.21 (4.69) (2.74) (4.02) 5.96
--------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net
realized gains -- (1.63) (.13) (.14) (.86) (2.36)
--------------------------------------------------------------------------------------------
Total distributions -- (1.63) (.13) (.14) (.86) (2.36)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.46 $ 14.25 $ 13.67 $ 18.49 $ 21.37 $ 26.25
============================================================================================
TOTAL RETURN 1.47%+ 16.28% -25.35% -12.82% -15.35% 26.74%
============================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $ 206,687 $ 216,047 $ 206,338 $ 303,034 $ 386,406 $ 495,465
Ratio of expenses to average net
assets (1) 1.13%* 1.13% 1.11% 1.04% .89% .76%
Ratio of net investment loss to
average net assets (0.56)%* (0.19)% (0.31)% (.18)% (.27)% (.09)%
Portfolio turnover rate 180%+ 129% 33% 45% 17% 36%
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE
RATIO OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD HAVE
BEEN 1.03% FOR THE YEAR ENDED DECEMBER 31, 2001, UNCHANGED FOR THE SIX
MONTHS ENDED JUNE 30, 2004 (UNAUDITED), AND FOR THE YEARS ENDED DECEMBER
31, 2003, 2002, 2000, AND 1999.
*ANNUALIZED
+NOT ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
14
THE VALUE LINE FUND, INC.
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
15
THE VALUE LINE FUND, INC.
THE VALUE LINE FAMILY OF FUNDS
--------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital. Current income
is a secondary objective.
1952 -- VALUE LINE INCOME AND GROWTH FUND'S primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks long-term growth of
capital. No consideration is given to current income in the choice of
investments.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks to secure as high
a level of current income as is consistent with maintaining liquidity and
preserving capital. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND
seeks maximum income without undue risk to capital. Under normal conditions, at
least 80% of the value of its net assets will be invested in securities issued
or guaranteed by the U.S. Government and its agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with the
maximum income exempt from federal income taxes while avoiding undue risk to
principal. The Fund offers investors a choice of two portfolios: The Money
Market Portfolio and The National Bond Portfolio. The Fund may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York
taxpayers with the maximum income exempt from New York State, New York City and
federal income taxes while avoiding undue risk to principal. The Trust may be
subject to state and local taxes and the Alternative Minimum Tax (if
applicable).
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* seeks to achieve a high
total investment return consistent with reasonable risk.
1993 -- VALUE LINE EMERGING OPPORTUNITIES FUND invests primarily in common
stocks or securities convertible into common stock, with its primary objective
being long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the asset mix.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-243-2729, 24
HOURS A DAY, 7 DAYS A WEEK, OR VISIT US AT WWW.VALUELINE.COM. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
--------------------------------------------------------------------------------
16
Item 2. Code of Ethics.
------- --------------
Not applicable.
Item 3. Audit Committee Financial Expert.
------- ---------------------------------
Not applicable.
Item 10. Controls and Procedures.
-------- ------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's
disclosure controls and procedures (as defined in rule
30a-3(c) under the Act (17 CFR 270.30a-3(c) ) based on their
evaluation of these controls and procedures as of the date
within 90 days of filing date of this report, are
appropriately designed to ensure that material information
relating to the registrant is made known to such officers and
are operating effectively.
(b) The registrant's principal executive officer and principal
financial officer have determined that there have been no
significant changes in the registrant's internal controls or
in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 11. Exhibits.
-------- ---------
(a) Certifications of principal executive officer and principal
financial officer of the registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By /s/ Jean B. Buttner
--------------------------
Jean B. Buttner, President
Date: August 31, 2004
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jean B. Buttner
-------------------------------------------------------
Jean B. Buttner, President, Principal Executive Officer
By: /s/ David T. Henigson
-------------------------------------------------------------------------
David T. Henigson, Vice President, Treasurer, Principal Financial Officer
Date: August 31, 2004
---------------