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
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
Date of fiscal year end: Decembert 31, 2004
Date of reporting period: June 30, 2005
Item I. Reports to Stockholders.
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SEMI-ANNUAL REPORT
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June 30, 2005
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The Value Line
Fund, Inc.
[Value Line LOGO]
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 300 Madison Avenue
ACCOUNTING FIRM New York, NY 10017
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
Bardley Brooks
Vice President
Stephen E. Grant
Vice President
David T. Henigson
Vice President
Secretary/Treasurer
Howard A. Brecher
Assistant Secretary/
Assistant Treasurer
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 Trust (obtainable from the Distributor).
#533547
The Value Line Fund, Inc.
To Our Value Line
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To Our Shareholders:
In the first six months of 2005, The Value Line Fund returned 2.59%, compared
to the -0.81% return of the S&P 500 Index(1).
During the first six months of the year, the equity market had a mixed start,
as solid corporate earnings growth and economic data proved insufficient to
move the major market averages higher. Several factors have contributed to this
lackluster environment. First, higher oil prices have concerned consumers and
investors alike as they have recently tested their highs again. Higher energy
prices can have a two-fold effect as they weaken consumer's purchasing power as
well as reducing the profit margins of certain industries. Second, the Federal
Reserve continues along its measured path of interest rate hikes, which
probably won't be completed till sometime this fall. These higher short-term
rates have not yet had a meaningful impact on longer-term rates, but the
significant flattening of the yield curve over the past year will likely lower
profit margins at financial corporations, which currently account for the
largest weighting of the S& P 500, at over 20%. Lastly, given the strong
operating margin improvement and the resulting strong earnings growth that U.S.
corporations have delivered over the past two years, it would appear that going
forward these gains will likely be more moderate.
The Value Line Fund generally invests in multi-cap stocks that are ranked in
the highest category for price performance over the next six to twelve months
by the Value Line Timeliness Ranking System. The System favors stocks with
strong price and earnings momentum relative to those of all other companies in
the Value Line Investment Survey of approximately 1,700 stocks. Currently, the
Fund has significant weightings in the Consumer Discretionary and Information
Technology sectors and is especially optimistic about the Home Building
corporations, which can be volatile. The Fund is significantly underweighted in
the Financial sector due to the slowing growth of earnings that we expect from
this sector.
Looking forward, we expect the second half of the year to be better for
equities. Despite the rising interest environment, economic growth is solid
(see our Economic Observations for details on our outlook); U.S. corporations
currently have high levels of cash holdings; and merger and acquisition
activity looks like it will continue to increase. In addition, some of this
cash will be used for equity buybacks as more companies continue to announce
increases in their stock repurchasing programs.
As always, we appreciate your continued investment.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
August 8, 2005
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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 mature business expansion is now moving along at a modestly more deliberate
3.0%-3.5% pace, a level of activity that is being sustained by a resilient
housing market, healthy levels of retail spending, and a solid rate of growth
in industrial production. Recent trends, moreover, suggest that this mature
business up cycle will continue pressing forward at a similarly moderate rate
into 2006.
Helping to sustain this upturn are likely to be solid levels of activity in the
housing, retail, industrial, and service sectors. Such growth will probably be
accompanied by just modest rates of inflation. The wild card in this equation,
meanwhile, and the reason that we are not likely to see a materially higher
level of business growth, is the record high price for oil. Should that key
commodity not stabilize in price, as we expect it will, the sustainability of
the economic expansion, as well as the prolonged period of comparative of price
stability, would be threatened.
This steady, but moderate, pace of U.S. economic improvement and the
accompanying stable rates of inflation will have positive ramifications. That's
because this combination should allow the Federal Reserve Board to bring its
cycle of monetary tightening to a close over the next several months, without
undue harm to the durability of the lengthy economic expansion.
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3
The Value Line Fund, Inc.
Fund Shareholders
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FUND EXPENSES:
Example
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other Fund expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period (January 1, 2005 through June 30,
2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example an $8,600
account value divided by $1,000=8.6), then multiply the result by the number in
the first line under the heading "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses in the table are meant to highlight your ongoing
costs and will not help you determine the relative cost of owning different
funds.
Expenses*
paid during
Beginning Ending period
account account 1/1/05
value value thru
1/1/05 6/30/05 6/30/05
-------------- -------------- ------------
Actual ........................................... $ 1,000.00 $ 1,025.90 $ 5.73
Hypothetical (5% return before expenses) ......... $ 1,000.00 $ 1,019.14 $ 5.71
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* Expenses are equal to the Fund's annualized expense ratio of 1.14% multiplied
by the average account value over the period, multiplied by 181/365 to
reflect the one-half period.
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4
The Value Line Fund, Inc.
Portfolio Highlights at June 30, 2005
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Ten Largest Holdings
Value Percentage of
Issue Shares (in thousands) Net Assets
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Itron, Inc. ............................ 97,200 4,343 2.08%
Anteon International Corp. ............. 93,200 4,252 2.04
KB Home ................................ 54,800 4,177 2.00
Toll Brothers, Inc. .................... 40,000 4,062 1.95
Urban Outfitters, Inc. ................. 67,500 3,827 1.83
Affymetrix, Inc. ....................... 70,000 3,775 1.81
Community Health Systems, Inc. ......... 92,300 3,488 1.67
Triad Hospitals, Inc. .................. 63,200 3,453 1.65
Panera Bread Co. ....................... 53,000 3,291 1.58
Walgreen Co. ........................... 71,200 3,274 1.57
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Asset Allocation -- Percentage of Net Assets
[The following data represents the pie chart depicted in the printed material.]
Cash & Other 3.5%
Common Stocks 96.5%
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Sector Weightings -- Percentage of Total Investment Securities
[The following data represents the bar chart depicted in the printed material.]
Consumer, Cyclical 28.4%
Consumer, Non-cyclical 24.7%
Technology 17.3%
Energy 9.9%
Communications 9.0%
Industrial 7.6%
Basic Materials 1.4%
Financial 1.7%
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5
The Value Line Fund, Inc.
Schedule of Investments (unaudited) June 30, 2005
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Value
Shares (in thousands)
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COMMON STOCKS (96.5%)
AUTO & TRUCK (0.5%)
13,000 Oshkosh Truck Corp. ........................ $ 1,018
BIOTECHNOLOGY (5.5%)
52,500 Amgen, Inc.* ............................... 3,174
38,000 Genentech, Inc.* ........................... 3,051
39,150 Invitrogen Corp.* .......................... 3,261
42,000 Techne Corp.* .............................. 1,928
------------
11,414
CANADIAN ENERGY (1.2%)
62,400 EnCana Corp. ............................... 2,470
CHEMICAL -- DIVERSIFIED (0.2%)
8,100 Eastman Chemical Co. ....................... 447
COAL (3.6%)
27,500 Arch Coal, Inc. ............................ 1,498
18,000 CONSOL Energy, Inc. ........................ 964
68,100 Joy Global, Inc. ........................... 2,287
52,000 Peabody Energy Corp. ....................... 2,706
------------
7,455
COMPUTER & PERIPHERALS (2.7%)
53,400 Dell, Inc.* ................................ 2,110
30,000 MICROS Systems, Inc.* ...................... 1,343
122,000 Seagate Technology ......................... 2,141
------------
5,594
COMPUTER SOFTWARE
SERVICES (9.3%)
93,200 Anteon International Corp.* ................ 4,252
36,000 Autodesk, Inc. ............................. 1,237
66,200 Cognizant Technology Solutions
Corp. Class "A"* ........................... 3,120
69,800 Fiserv, Inc.* .............................. 2,998
57,000 Mercury Interactive Corp.* ................. 2,187
200,000 Oracle Corp.* .............................. 2,640
219,000 Western Digital Corp.* ..................... 2,939
------------
19,373
DRUG (2.0%)
38,000 Celgene Corp.* ............................. 1,549
43,900 Cephalon, Inc.* ............................ 1,748
30,000 Teva Pharmaceutical Industries Ltd. ........ 934
------------
4,231
Value
Shares (in thousands)
--------------------------------------------------------------------------------
E-COMMERCE (1.4%)
90,000 Internet Security Systems, Inc.* ........... $ 1,826
39,000 WebEx Communications, Inc.* ................ 1,030
------------
2,856
EDUCATIONAL SERVICES (0.7%)
37,500 Bright Horizons Family Solutions, Inc.* .... 1,527
ELECTRICAL EQUIPMENT (1.7%)
177,700 Corning, Inc.* ............................. 2,953
19,300 Thomas & Betts Corp.* ...................... 545
------------
3,498
ELECTRICAL UTILITY --
EAST (1.6%)
105,700 Jabil Circuit, Inc.* ....................... 3,248
GROCERY (0.7%)
13,000 Whole Foods Market, Inc. ................... 1,538
HEALTH CARE INFORMATION
SYSTEMS (1.4%)
23,800 Cerner Corp.* .............................. 1,618
118,000 WebMD Corp.* ............................... 1,212
------------
2,830
HOMEBUILDING (8.1%)
45,800 Beazer Homes USA, Inc. ..................... 2,617
31,066 D.R. Horton, Inc. .......................... 1,168
18,900 Hovnanian Enterprises, Inc. ................
Class "A"* ................................. 1,232
54,800 KB Home .................................... 4,177
13,700 Pulte Homes, Inc. .......................... 1,154
17,400 Ryland Group, Inc. (The) ................... 1,320
14,100 Standard Pacific Corp. ..................... 1,240
40,000 Toll Brothers, Inc.* ....................... 4,062
------------
16,970
HOTEL/GAMING (1.5%)
56,000 MGM MIRAGE* ................................ 2,216
14,300 Station Casinos, Inc. ...................... 950
------------
3,166
INFORMATION SERVICES (2.3%)
51,500 Advisory Board Co. (The)* .................. 2,510
28,500 Equifax, Inc. .............................. 1,018
18,000 Getty Images, Inc.* ........................ 1,337
------------
4,865
See Notes to Financial Statements.
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6
The Value Line Fund, Inc.
June 30, 2005
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Value
Shares (in thousands)
--------------------------------------------------------------------------------
INTERNET (1.3%)
50,600 CheckFree Corp.* ........................... $ 1,723
29,000 Yahoo!, Inc.* .............................. 1,005
------------
2,728
MACHINERY (0.5%)
93,300 Columbus McKinnon Corp.* ................... 1,022
MEDICAL SERVICES (7.5%)
25,000 Aetna, Inc. ................................ 2,071
89,000 Allscripts Healthcare
Solutions, Inc.* ........................... 1,478
92,300 Community Health Systems, Inc.* ............ 3,488
24,200 HCA, Inc. .................................. 1,371
50,500 LCA-Vision, Inc. ........................... 2,447
63,200 Triad Hospitals, Inc.* ..................... 3,453
24,400 UnitedHealth Group, Inc. ................... 1,272
------------
15,580
MEDICAL SUPPLIES (5.4%)
70,000 Affymetrix, Inc.* .......................... 3,775
13,500 Alcon, Inc. ................................ 1,476
23,400 ResMed, Inc.* .............................. 1,544
40,000 Respironics, Inc.* ......................... 1,444
71,500 SurModics, Inc.* ........................... 3,101
------------
11,340
METAL FABRICATING (0.5%)
23,200 Lone Star Technologies, Inc.* .............. 1,056
METALS & MINING --
DIVERSIFIED (1.4%)
89,400 Teck Cominco Ltd. Class "B" ................ 3,011
NATURAL GAS --
DIVERSIFIED (3.0%)
35,000 EOG Resources, Inc. ........................ 1,988
67,000 Southwestern Energy Co.* ................... 3,148
34,000 XTO Energy, Inc. ........................... 1,156
------------
6,292
OILFIELD SERVICES/
EQUIPMENT (1.5%)
60,000 Cal Dive International, Inc.* .............. 3,142
Value
Shares (in thousands)
--------------------------------------------------------------------------------
PETROLEUM -- INTEGRATED (0.3%)
7,897 Kerr-McGee Corp. ........................... $ 603
PETROLEUM -- PRODUCING (0.5%)
15,200 Noble Energy, Inc. ......................... 1,150
PHARMACY SERVICES (3.5%)
20,600 Express Scripts, Inc.* ..................... 1,030
67,800 Longs Drug Stores Corp. .................... 2,919
71,200 Walgreen Co. ............................... 3,274
------------
7,223
RAILROAD (0.5%)
25,000 CSX Corp. .................................. 1,067
RESTAURANT (2.1%)
33,300 Darden Restaurants, Inc. ................... 1,098
53,000 Panera Bread Co. Class "A"* ................ 3,291
------------
4,389
RETAIL AUTOMOTIVE (1.1%)
20,000 Advance Auto Parts, Inc.* .................. 1,291
34,800 O'Reilly Automotive, Inc.* ................. 1,037
------------
2,328
RETAIL BUILDING SUPPLY (1.6%)
46,900 Building Materials Holding Corp. ........... 3,250
RETAIL -- SPECIAL LINES (7.4%)
17,500 Abercrombie & Fitch Co. ....................
Class "A" .................................. 1,202
89,000 American Eagle Outfitters, Inc. ............ 2,728
37,000 Chico's FAS, Inc.* ......................... 1,268
44,000 Coach, Inc.* ............................... 1,477
57,000 Men's Wearhouse, Inc. (The)* ............... 1,963
73,000 Michaels Stores, Inc. ...................... 3,020
67,500 Urban Outfitters, Inc.* .................... 3,827
------------
15,485
RETAIL STORE (1.6%)
21,700 J.C. Penney Company, Inc. .................. 1,141
32,000 Nordstrom, Inc. ............................ 2,175
------------
3,316
See Notes to Financial Statements.
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7
The Value Line Fund, Inc.
Schedule of Investments (unaudited) June 30, 2005
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Value
Shares (in thousands)
--------------------------------------------------------------------------------
SECURITIES BROKERAGE (1.3%)
5,000 Chicago Mercantile Exchange
Holdings, Inc. ............................. $ 1,478
12,600 Legg Mason, Inc. ........................... 1,312
------------
2,790
SEMICONDUCTOR (1.9%)
111,000 NVIDIA Corp.* .............................. 2,966
39,000 Photronics, Inc.* .......................... 910
------------
3,876
TELECOMMUNICATIONS
EQUIPMENT (4.2%)
139,500 ADC Telecommunications, Inc.* .............. 3,037
51,500 Cisco Systems, Inc.* ....................... 984
76,000 Juniper Networks, Inc.* .................... 1,914
74,800 Marvell Technology Group Ltd.* ............. 2,845
------------
8,780
TOILETRIES/COSMETICS (0.4%)
22,700 Chattem, Inc.* ............................. 940
TRUCKING (1.9%)
74,600 Goodyear Tire & Rubber
Co. (The)* ................................. 1,112
120,000 Swift Transportation
Company, Inc.* ............................. 2,795
------------
3,907
WIRELESS NETWORKING (2.7%)
97,200 Itron, Inc.* ............................... 4,343
118,000 Powerwave Technologies, Inc.* .............. 1,206
------------
5,549
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (96.5%)
(Cost $177,892,000) ........................ $ 201,324
------------
Value
Principal (in thousands
Amount except per
(in thousands) share amount)
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
(including accrued interest)
$ 6,600 Collateralized by $5,001,000 U.S.
Treasury Bonds, 6.625%,
due 2/15/27, with a value of
$6,875,000 (with UBS
Warburg LLC, 2.75%, dated
6/30/05, due 7/1/05,
delivery value $6,601,000)................ $ 6,601
TOTAL REPURCHASE
AGREEMENT
(Cost $6,601,000) .......................... 6,601
------------
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES (0.3%) ............................ 740
------------
NET ASSETS (100.0%) ........................................ $ 208,665
------------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($208,664,770 [divided by] 14,636,764 shares
of capital stock outstanding) $ 14.26
------------
* Non-income producing
See Notes to Financial Statements.
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8
The Value Line Fund, Inc.
Statement of Assets and Liabilities
at June 30, 2005 (unaudited)
--------------------------------------------------------------------------------
(In thousands
except per share
amount)
-----------------
Assets:
Investment securities, at value
(Cost -- $177,892) .......................................... $ 201,324
Repurchase agreements
(Cost -- $6,601) ............................................ 6,601
Cash ........................................................... 119
Receivable for securities sold ................................. 5,260
Dividends receivable ........................................... 79
Prepaid expenses ............................................... 52
Receivable for capital shares sold ............................. 2
------------
Total Assets .............................................. 213,437
------------
Liabilities:
Payable for securities purchased ............................... 4,509
Payable for capital shares repurchased ......................... 27
Accrued expenses:
Advisory fee ................................................ 115
Service and distribution plan fees .......................... 43
Other ....................................................... 78
------------
Total Liabilities ......................................... 4,772
------------
Net Assets ..................................................... $ 208,665
============
Net assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
14,636,764 shares) .......................................... $ 14,637
Additional paid-in capital ..................................... 146,778
Accumulated net investment loss ................................ (555)
Undistributed net realized gain
on investments .............................................. 24,372
Net unrealized appreciation of investments ..................... 23,433
------------
Net Assets ..................................................... $ 208,665
============
Net Asset Value, Offering and
Redemption Price per Outstanding
Share ($208,664,770 [divided by] 14,636,764
shares outstanding) ......................................... $ 14.26
============
Statement of Operations
for the Six Months Ended June 30, 2005 (unaudited)
--------------------------------------------------------------------------------
(In thousands)
--------------
Investment Income:
Dividends (Net of foreign withholding
taxes of $6) ................................................ $ 466
Interest ....................................................... 125
------------
Total Income ................................................ 591
------------
Expenses:
Advisory fee ................................................... 687
Service and distribution plan fees ............................. 255
Transfer agent fees ............................................ 72
Auditing and legal fees ........................................ 32
Custodian fees ................................................. 23
Printing ....................................................... 22
Postage ........................................................ 19
Directors' fees and expenses ................................... 12
Registration and filing fees ................................... 11
Insurance ...................................................... 11
Telephone ...................................................... 10
Other .......................................................... 2
------------
Total Expenses before Custody Credits ....................... 1,156
Less: Custody Credits ....................................... (2)
------------
Net Expenses ................................................ 1,154
------------
Net Investment Loss ............................................ (563)
------------
Net Realized and Unrealized Gain
on Investments:
Net Realized Gain ........................................... 14,312
Change in Net Unrealized
Appreciation/(Depreciation) ............................... (8,844)
------------
Net Realized Gain and Change in
Net Unrealized Appreciation/
(Depreciation) on Investments ............................... 5,468
------------
Net Increase in Net Assets
from Operations ............................................. $ 4,905
============
See Notes to Financial Statements.
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9
The Value Line Fund, Inc.
Statement of Changes in Net Assets for the
Six Months Ended June 30, 2005 (unaudited) and for the Year Ended December 31,
2004
--------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 2005 December 31,
(unaudited) 2004
----------------- -------------
(In thousands)
Operations:
Net investment loss ................................................. $ (563) $ (1,185)
Net realized gain on investments .................................... 14,312 24,093
Change in net unrealized appreciation/(depreciation) ................ (8,844) 635
--------- ---------
Net increase in net assets from operations .......................... 4,905 23,543
--------- ---------
Distributions to Shareholders:
Net realized gain from investment transactions ...................... -- (28,186)
--------- ---------
Capital Share Transactions:
Proceeds from sale of shares ........................................ 4,053 7,470
Proceeds from reinvestment of distributions to shareholders ......... -- 26,514
Cost of shares repurchased .......................................... (15,318) (30,363)
--------- ---------
Increase from capital share transactions ............................ (11,265) 3,621
--------- ---------
Total Increase/(Decrease) in Net Assets .............................. (6,360) (1,022)
Net Assets:
Beginning of period ................................................. 215,025 216,047
--------- ---------
End of period ....................................................... $ 208,665 $ 215,025
========= =========
Undistributed net investment income/(loss), at end of period ......... $ (555) $ 8
========= =========
See Notes to Financial Statements.
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10
The Value Line Fund, Inc.
Notes to Financial Statements (unaudited) June 30, 2005
--------------------------------------------------------------------------------
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 are valued
at the closing sales prices on the date as of which the net asset value is
being determined. Securities traded on the NASDAQ Stock Market are valued at
the NASDAQ Official Closing Price. 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. 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 mid point between the latest
available and representative asked and bid prices, and commencing 60 days prior
to maturity such securities are valued at amortized cost. 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. In addition, the Fund may use the fair
value of a security when the closing market price on the primary exchange where
the security is traded no longer accurately reflects the value of a security
due to factors affecting one or more relevant securities markets or the
specific issuer.
(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 contract that contain a variety of representations and
warranties which provide general indemnifications. The 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
Ended Year
June 30, Ended
2005 December 31,
(unaudited) 2004
------------- -------------
Shares sold ..................... 296 512
Shares issued to
shareholders in
reinvestment of dividends
and distributions ............ -- 1,910
--- -----
296 2,422
Shares repurchased .............. (1,126) (2,117)
------ ------
Net increase/(decrease) ......... (830) 305
------ ------
Distributions per share from
net realized gains ........... $ -- $ 2.07
------ -------
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months Ended
June 30, 2005
(unaudited)
-----------------
(in thousands)
PURCHASES:
Investment Securities ......... $230,646
--------
SALES:
Investment Securities ......... $240,078
--------
4. Income Taxes (unaudited)
At June 30, 2005, information on the tax components of capital is as follows:
(in thousands)
---------------
Cost of investments for tax purposes ......... $ 184,493
---------
Gross tax unrealized appreciation ............ $ 26,102
Gross tax unrealized depreciation ............ (2,670)
---------
Net tax unrealized appreciation
on investments ............................ $ 23,432
=========
5. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $686,628 was paid or payable to Value Line, Inc., (the
"Adviser"), for the six months ended June 30, 2005. 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 months
ended June 30, 2005, fees amounting to $254,552 were paid or payable to the
Distributor under this Plan.
--------------------------------------------------------------------------------
12
The Value Line Fund, Inc.
June 30, 2005
--------------------------------------------------------------------------------
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.
For the six months ended June 30, 2005, the Fund's expenses were reduced by
$2,224 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 444,790 shares of the Fund's capital stock, representing
3.04% of the outstanding shares at June 30, 2005. In addition certain officers
and directors of the Fund owned 1,532 shares of the Fund, representing .01% of
the outstanding shares.
--------------------------------------------------------------------------------
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, 2005 ----------------------------------------------------------------------
(unaudited) 2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 13.90 $ 14.25 $ 13.67 $ 18.49 $ 21.37 $ 26.25
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
Investment Operations:
Net investment loss ............... (.04) (.08) (.03) (.05) (.04) (.07)
Net gains or losses on securities
(both realized and unrealized) .. .40 1.80 2.24 (4.64) (2.70) (3.95)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .. .36 1.72 2.21 (4.69) (2.74) (4.02)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Distributions from net
realized gains .................. -- (2.07) (1.63) (.13) (.14) (.86)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ..... $ 14.26 $ 13.90 $ 14.25 $ 13.67 $ 18.49 $ 21.37
---------- ---------- ---------- ---------- ---------- ----------
Total return ....................... 2.59%+ 12.09% 16.28% (25.35)% (12.82)% (15.35)%
---------- ---------- ---------- ---------- ---------- ----------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) .................... $ 208,665 $ 215,025 $ 216,047 $ 206,338 $ 303,034 $ 386,406
Ratio of expenses to average
net assets (1) .................... 1.14%* 1.13% 1.13% 1.11% 1.04% .89%
Ratio of net investment loss
to average net assets ............. (0.56)%* (0.58)% (0.19)% (0.31)% (0.18)% (0.27)%
Portfolio turnover rate ............ 118%+ 297% 129% 33% 45% 17%
(1) Ratio 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, 2005 (unaudited), and for the years ended December 31, 2004,
2003, 2002, and 2000.
* Annualized
+ Not Annualized
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14
The Value Line Fund, Inc.
Factors Considered by the Independent Directors
in Approving the Agreement (unaudited)
--------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that the Fund's Agreement be
approved annually by both the Board of Directors (collectively "the Directors")
and a majority of the Directors who are not affiliated with Value Line, Inc.
the Fund's investment adviser (the "Adviser") (the "Independent Directors")
voting separately. The Directors have determined that the terms of the Fund's
investment advisory agreement (the "Agreement") are fair and reasonable and
that renewal of the contract is in the best interests of the Fund and its
shareholders. In making such determinations, the Independent Directors relied
upon the assistance of counsel to the Independent Directors. Throughout the
year, including the meeting specifically focused upon the review of the
Agreement, the Independent Directors met in executive sessions separately from
the Interested Directors of the Fund and any officers of Value Line.
Both in meetings specifically addressed to renewal of the Agreement and at
other meetings during the course of the year, the Directors, including the
Independent Directors, received materials relating to the Adviser's investment
and management services under the Agreement. These materials included (i)
information on the investment performance of the Fund, a peer group of funds
and an index, (ii) sales and redemption data in respect of the Fund, (iii) the
general investment outlook in the markets in which the Fund invests, (iv)
arrangements in respect of the distribution of the Fund's shares, (v) the
allocation of the Fund's brokerage, and (vi) the record of compliance with the
Fund's investment policies and restrictions and with the Fund's Code of Ethics,
and the structure and responsibilities of the Adviser's compliance department.
As part of the review of the Agreement, the Independent Directors requested and
the Adviser provided additional information in order to evaluate the quality of
the Adviser's services and the reasonableness of the fee under the Agreement.
Among other items, this information included data or analyses of (1) management
and other fees incurred by a peer group of funds selected by an independent
evaluation service (the "Peer Group"), (2) expense ratios for the Fund and the
Peer Group, (3) the investment performance for the Fund and its Peer Group, (4)
the Adviser's financial results and condition, including its and certain of its
affiliates' profitability from services performed for the Fund, (5) investment
management staffing, and (6) the potential for achieving further economies of
scale.
The following summarizes matters considered by the Directors in connection with
their renewal of the Agreement. However, the Directors did not identify any
single factor as all-important or controlling, and the summary does not detail
all the matters that were considered.
Compliance and Investment Performance. The Directors determined that the
Adviser had policies and systems reasonably designed to achieve compliance with
the Fund's investment objective and regulatory requirements. The Directors also
reviewed the Fund's investment performance, as well as the Fund's performance
compared to both the performance of a peer group and the results of an index.
The Fund outperformed its Peer Group for the most recent one-year period and
the five-year period that ended December 31, 2004. Although the Fund
underperformed its Peer Group for the three-year and 10-year periods ended
December 31, 2004, and the Directors concluded that the Fund's overall
performance supported the continuation of the Agreement.
The Adviser's Personnel and Methods. The Directors reviewed the background of
members of the team responsible for the daily management of the Fund and the
Fund's investment objective and discipline. The Independent Directors also
engaged in discussions with senior management of the Adviser responsible for
investment operations. The Directors
--------------------------------------------------------------------------------
15
The Value Line Fund, Inc.
Factors Considered by the Independent Directors
in Approving the Agreement (unaudited)
--------------------------------------------------------------------------------
concluded that the Adviser has the quality and depth of personnel and the
well-developed methods essential to performing its duties under the Agreement.
Nature and Quality of Other Services. The Directors considered the nature,
quality, cost and extent of other services provided to shareholders of the
Fund. The Directors also considered the nature and extent of the other services
provided by the Adviser's affiliates under other contracts and its supervision
of third party service providers. Based on these considerations, the Directors
concluded that the nature, quality, cost and extent of such services are
satisfactory and reliable and serve the shareholders of the Fund well.
Management Fee and Expenses. The Directors considered the Adviser's fee under
the Agreement relative to the management fees charged by the Peer Group. The
Fund's management fee and total expenses for the most recent fiscal year were
lower than the average fees and expense ratios for the Peer Group. The
Directors concluded that the Adviser's fee was reasonable in light of the
services and expertise provided to the Fund by the Adviser's management team
and the Adviser's proprietary ranking system.
Profitability. The Directors considered the level of the Adviser's profits with
respect to the management of the Fund. This consideration included a review of
the Adviser's methodology in allocating certain of its costs to the management
of each Fund. The Directors concluded that the Adviser's profits from
management of the Funds, including the financial results derived from the Fund,
bear a reasonable relationship to the services rendered and are fair for the
management of the Fund in light of the business risks involved.
Economies of Scale. The Directors noted that, given the current and anticipated
size of the Fund, any perceived and potential economies of scale were not yet a
relevant consideration for the Fund.
Other Benefits to the Adviser. The Directors also considered the character and
amount of fees paid by the Fund, other than under the Agreement, and by the
Fund's shareholders for services provided by the Value Line and affiliates.
Conclusion. The Directors, in light of the Adviser's overall performance,
considered it appropriate to continue to retain the management services of the
Adviser. Based on their evaluation of all material factors deemed relevant and
the advice of independent counsel, the Directors concluded that the Agreement
with the Fund is fair and reasonable and voted to approve the continuation of
the Agreement for another year.
--------------------------------------------------------------------------------
16
The Value Line Fund, Inc.
--------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at
http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities, and information regarding
how the Fund voted these proxies during the most recent 12-month period ended
June 30 is available through the Fund's website at http://www.vlfunds.com and
on the SEC's website at http://www.sec.gov. The description of the policies and
procedures is also available without charge, upon request, by calling
1-800-243-2729.
--------------------------------------------------------------------------------
17
The Value Line Fund, Inc.
Management of the Fund
--------------------------------------------------------------------------------
MANAGEMENT INFORMATION
The business and affairs of the Fund are managed by the Fund's officers under
the direction of the Board of Directors. The following table sets forth
information on each Director and Officer of the Fund. Each Director serves as a
director or trustee of each of the 14 Value Line Funds and oversees a total of
15 portfolios. Each Director serves until his or her successor is elected and
qualified.
Principal
Occupation Other
Length of During the Directorships
Name, Address, and Age Position Time Served Past 5 Years Held by Director
-------------------------- -------------------- ------------- --------------------------------- -----------------
Interested Directors*
---------------------
Jean Bernhard Buttner Chairman of the Since 1987 Chairman, President and Chief Value Line, Inc.
Age 70 Board of Directors Executive Officer of Value Line,
and President Inc. (the "Adviser") and Value
Line Publishing, Inc. Chairman
and President of each of the 15
Value Line Funds and Value
Line Securities, Inc. (the
"Distributor").
Marion N. Ruth Director Since 2000 Real Estate Executive: None
5 Outrider Road President, Ruth Realty (real
Rolling Hills, CA 90274 estate broker).
Age 70
Non-Interested Directors*
-------------------------
John W. Chandler Director Since 1991 Consultant, Academic None
1611 Cold Spring Rd. Search Consultation Service,
Williamstown, MA 01267 Inc.; Trustee Emeritus and
Age 81 Chairman (1993-1994) of
the Board of Trustees of Duke
University; President Emeritus,
Williams College.
Frances T. Newton Director Since 2000 Customer Support Analyst, None
4921 Buckingham Drive Duke Power Company.
Charlotte, NC 28209
Age 64
Francis C. Oakley Director Since 2000 Professor of History, Berkshire Life
54 Scott Hill Road Williams College, 1961 to Insurance
Williamstown, MA 01267 present. President Emeritus Company of
Age 74 since 1994 and President, America
1985-1994; Chairman
(1993-1997) and Interim
President (2002) of the American
Council of Learned Societies.
--------------------------------------------------------------------------------
18
The Value Line Fund, Inc.
Management of the Fund
--------------------------------------------------------------------------------
Principal
Occupation Other
Length of During the Directorships
Name, Address, and Age Position Time Served Past 5 Years Held by Director
---------------------------- ---------------------- ------------- ------------------------------------ -------------------
David H. Porter Director Since 1997 Visiting Professor of Classics, None
5 Birch Run Drive Williams College, since 1999;
Saratoga Springs, NY 12866 President Emeritus, Skidmore
Age 69 College since 1999 and President,
1987-1998.
Paul Craig Roberts Director Since 1987 Chairman, Institute for Political A. Schulman Inc.
169 Pompano St. Economy. (plastics)
Panama City Beach, FL 32413
Age 66
Nancy-Beth Sheerr Director Since 1996 Senior Financial Advisor, None
1409 Beaumont Drive Veritable L.P. (investment adviser)
Gladwyne, PA 19035 since April 1, 2004; Senior
Age 56 Financial Advisor, Hawthorne,
2001-2004.
Officers
--------
Bradley Brooks Vice President Since 2001 Portfolio Manager with
Age 43 the Adviser.
Stephen E. Grant Vice President Since 1997 Portfolio Manager with
Age 51 the Adviser.
David T. Henigson Vice President, Since 1994 Director, Vice President and
Age 47 Secretary and Compliance Officer of the
Treasurer Adviser. Director and Vice
President of the Distributor. Vice
President, Secretary, Treasurer
and Chief Compliance Officer of
each of the 14 Value Line Funds.
Howard A. Brecher Assistant Secretary/ Since 2005 Director, Vice President and
Age 51 Assistant Treasurer Secretary of the Adviser. Director
and Vice President of the
Distributor.
* Mrs. Buttner is an "interested person" as defined in the Investment Company
Act of 1940 by virtue of her positions with the Adviser and her indirect
ownership of a controlling interest in the Adviser; Mrs. Ruth is an
interested person by virtue of having been a director of the Adviser.
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY 10017.
--------------------------------------------------------------------------------
The Fund's Statement of Additional Information (SAI) includes additional
information about the Fund's directors and
is available, without charge, upon request by calling 1-800-243-2729.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
19
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 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.
--------------------------------------------------------------------------------
20
Item 2. Code of Ethics
N/A
Item 3. Audit Committee Financial Expert.
N/A
Item 4. Principal Accountant Fees and Services
N/A
Item 11. 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-2(c) under the Act (17 CFR
270.30a-2(c)) based on their evaluation of these controls and
procedures as of a date within 90 days of the 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 12. Exhibits.
(a) (1) Certification pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit
99.CERT.
(2) Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 attached hereto as Exhibit 99.906.CERT.
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: 09/06/2005
---------------------------
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: 09/06/2005
---------------------------