--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
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JUNE 30, 2002
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THE VALUE LINE
FUND, INC.
[LOGO]
VALUE LINE
NO-LOAD MUTUAL FUNDS
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 NFDS
P.O. Box 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
ACCOUNTANTS 1177 Avenue of the Americas
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
Alan N. Hoffman
VICE PRESIDENT
Philip J. Orlando
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 ACCOUNTANTS AND, ACCORDINGLY, THEY
DO NOT EXPRESS AN OPINION THEREON.
THIS UNAUDITED REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE
DISTRIBUTOR).
#522854
THE VALUE LINE FUND, INC.
TO OUR VALUE LINE
--------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
Despite the difficult environment for equity investment during the first six
months of 2002 -- especially for investment in large-capitalization growth
stocks -- we are pleased that your Fund narrowly surpassed the first-half return
of the benchmark Standard & Poor's 500 Index (including reinvested dividends).
The actual results are as follows:
VALUE LINE S&P(1)
FUND 500
--------------------------
First half, 2002 ......... -12.87% -13.16%
The market we've encountered over the past several months has been shaped by an
extremely negative psychological overhang, brought about by the unrelenting
juggernaut of unfolding headlines. When the force of the Enron/Andersen
imbroglio began to fade, Tyco International and its chairman were there to draw
the attention. Other big companies, like General Electric and IBM, also fell
under suspicion. Global Crossing joined the parade a little later, and then we
got the news about WorldCom. In other words, the run of corporate malfeasance
disclosures has thoroughly dispirited the marketplace, and enthusiasm is so
difficult to jump-start because investors are terrified that there might be more
shockers waiting in the wings.
This negative psychology is truly a shame, because the U.S. economy has shown
some real recovery from levels almost everyone thought were the makings of a
protracted recession. In terms of GDP growth, manufacturing, productivity, and
several other segments of the economy, significant progress has been made over
the first half of the year. (For more detailed information about our view of the
economy, please read our "Economic Observations" nearby.)
The consumer has been the mainstay of the recent economy, and that's where we
have been getting our best relative returns. Retail spending has remained
vibrant, and we've had good returns from both general merchandise stores and
some of the big-box specialty stores. Also, the weak stock market has prompted
money to flow into the nation's housing stock, which is benefiting both the
building supply sector and the large, nationwide homebuilders.
The market's travails over the past several months make forecasting its future
course difficult, but let's try it. Let us assume that we've seen the end of the
big corporate blowups, and that is definitely an assumption. As these situations
filter out of the market's collective memory into the fall, investment
fundamentals will again capture investors' attentions, especially because
earnings comparisons should improve as we anniversary some weak results back in
2001. Under that scenario, stocks could begin trading higher later this year,
and with interest rates low and inflation under control, it's entirely possible
that 2003 could be a good one for investors.
We thank you for your continued confidence in Value Line, and we look forward to
a more upbeat report on the second half of the year.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
August 5, 2002
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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 recovery, which accelerated markedly earlier this year, has
now moved back onto a slower, but, we believe, ultimately sustainable upward
path. Our cautious optimism on the business outlook reflects the ongoing
strength in such key sectors as housing and retailing, and the gradual emergence
of the industrial sector from its deep slump. Also contributing to the likely
sustained business expansion are continued low interest rates. The Federal
Reserve, which put into effect a succession of interest rate cuts last year, now
appears in no hurry to lift borrowing costs, even though economic activity is
firming up. Overall, we expect the economy to expand by some 3% in the second
half of this year and to then proceed at a similar pace in 2003. Our
expectations assume that oil supplies will remain high enough, notwithstanding
the continuing turmoil in the Middle East, and that equity prices will stabilize
sufficiently so that consumers do not rein in their spending to any significant
degree.
Inflation, meantime, remains muted, thanks, in part, to continued stable labor
costs. Adequate supplies of raw materials are also helping to keep the costs of
production low. We caution, though, that as the economy moves further along the
recovery road over the next year or two, some modest increases in pricing
pressures may evolve. Absent a more vigorous business recovery than we now
expect, or a prolonged rise in oil prices, inflation should remain on the modest
side through 2003, and perhaps beyond.
Finally, the Federal Reserve, which, as noted, had been aggressive in reducing
interest rates in order to promote stronger economic activity, has completed its
extended rate reduction cycle. We believe the Fed will now keep interest rates
at current levels until well into 2003.
PERFORMANCE DATA:**
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
-------------- ---------------------
1 year ended 6/30/02 ................. -18.35% $ 8,165
5 years ended 6/30/02 ................ +1.28% $10,656
10 years ended 6/30/02 ................ +8.87% $23,382
--------------------------------------------------------------------------------
** 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.
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3
THE VALUE LINE FUND, INC.
PORTFOLIO HIGHLIGHTS AT JUNE 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
VALUE PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
--------------------------------------------------------------------------------------------
Bed Bath & Beyond Inc. ..................... 250,000 $9,435 3.7%
Fifth Third Bancorp ........................ 135,000 8,998 3.5
HCA, Inc. .................................. 180,000 8,550 3.4
Kohl's Corp. ............................... 120,000 8,409 3.3
Harley-Davidson, Inc. ...................... 150,000 7,690 3.0
Citigroup, Inc. ............................ 150,000 5,813 2.3
Lowe's Companies, Inc. ..................... 120,000 5,448 2.1
State Street Corp. ......................... 120,000 5,364 2.1
Pfizer, Inc. ............................... 150,000 5,250 2.1
Amgen Inc. ................................. 125,000 5,235 2.1
FIVE LARGEST INDUSTRY CATEGORIES
VALUE PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
--------------------------------------------------------------------------------------------
Financial Services - Diversified ....................... $25,231 10.0%
Medical Services ....................................... 23,518 9.3
Retail Store ........................................... 18,149 7.1
Retail - Special Lines ................................. 17,561 6.9
Computer Software & Services ........................... 16,024 6.3
FIVE LARGEST NET SECURITY PURCHASES*
COST
ISSUE (IN THOUSANDS)
--------------------------------------------------------------------------------------------
Whirlpool Corp. .......................................................... $2,691
Electronic Arts Inc. ..................................................... 2,411
Polycom, Inc. ............................................................ 2,361
Ann Taylor Stores Corp. .................................................. 2,346
Best Buy Co., Inc. ....................................................... 2,345
FIVE LARGEST NET SECURITY SALES*
PROCEEDS
ISSUE (IN THOUSANDS)
--------------------------------------------------------------------------------------------
International Business Machines Corp. .................................... $5,558
AOL Time Warner, Inc. .................................................... 4,388
American International Group, Inc. ....................................... 3,579
Omnicom Group, Inc. ...................................................... 3,532
Kohl's Corp. ............................................................. 3,300
* FOR THE SIX MONTH PERIOD ENDED 6/30/02
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4
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2002
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------
COMMON STOCKS (97.2%)
ADVERTISING (2.0%)
110,000 Omnicom Group, Inc. ................................... $ 5,038
AEROSPACE/DEFENSE (2.9%)
35,000 General Dynamics Corp. ................................ 3,722
28,100 L-3 Communications
Holdings, Inc.* ...................................... 1,517
50,000 Raytheon Co. .......................................... 2,038
-------
7,277
BANK (4.4%)
45,800 BB&T Corp. ............................................ 1,768
120,000 State Street Corp. .................................... 5,364
75,000 Zions Bancorporation .................................. 3,907
-------
11,039
BANK -- MIDWEST (4.7%)
135,000 Fifth Third Bancorp ................................... 8,998
120,000 U.S. Bancorp .......................................... 2,802
-------
11,800
BEVERAGE -- SOFT
DRINK (0.9%)
45,000 PepsiCo, Inc. ......................................... 2,169
BIOTECHNOLOGY (2.9%)
125,000 Amgen Inc.* ........................................... 5,235
90,000 Immunex Corp.* ........................................ 2,011
-------
7,246
CHEMICAL --
SPECIALTY (1.4%)
110,000 International Flavors &
Fragrances, Inc. ..................................... 3,574
COMPUTER &
PERIPHERALS (1.1%)
100,000 Adaptec, Inc.* ........................................ 789
80,000 Dell Computer Corp.* .................................. 2,091
-------
2,880
VALUE
SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------
COMPUTER SOFTWARE &
SERVICES (6.3%)
75,000 Adobe Systems, Inc. ................................... $ 2,138
112,500 Fiserv, Inc.* ......................................... 4,130
70,000 Microsoft Corp.* ...................................... 3,829
160,000 Network Associates, Inc.* ............................. 3,083
60,000 Paychex, Inc. ......................................... 1,877
65,000 Peoplesoft, Inc.* ..................................... 967
-------
16,024
DRUG (3.2%)
51,800 Biovail Corp.* ........................................ 1,500
55,000 MedImmune, Inc.* ...................................... 1,452
150,000 Pfizer, Inc. .......................................... 5,250
-------
8,202
EDUCATIONAL
SERVICES (1.2%)
73,800 Education Management Corp.* ........................... 3,006
ELECTRICAL
EQUIPMENT (1.7%)
150,000 General Electric Co. .................................. 4,358
ENTERTAINMENT
TECHNOLOGY (1.0%)
40,000 Electronic Arts Inc.* ................................. 2,642
FINANCIAL SERVICES --
DIVERSIFIED (10.0%)
75,000 American International
Group, Inc. .......................................... 5,117
40,000 Capital One Financial Corp. ........................... 2,442
150,000 Citigroup, Inc. ....................................... 5,813
40,000 Federal Home Loan
Mortgage Corp. ....................................... 2,448
35,000 Federal National
Mortgage Association ................................. 2,581
40,000 Hartford Financial Services
Group, Inc. (The) .................................... 2,379
35,000 Household International, Inc. ......................... 1,739
40,000 MGIC Investment Corp. ................................. 2,712
-------
25,231
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5
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------
FOOD WHOLESALERS (1.2%)
130,000 Supervalu, Inc. ....................................... $ 3,189
FURNITURE/HOME
FURNISHINGS (0.4%)
15,491 Mohawk Industries, Inc.* .............................. 953
GROCERY (1.3%)
115,000 Safeway Inc.* ......................................... 3,357
HOME APPLIANCE (1.0%)
40,000 Whirlpool Corp. ....................................... 2,614
HOMEBUILDING (1.6%)
80,000 KB Home ............................................... 4,121
HOUSEHOLD
PRODUCTS (0.9%)
45,000 Colgate-Palmolive Co. ................................. 2,252
INSURANCE -- LIFE (0.9%)
90,000 UnumProvident Corp. ................................... 2,291
MEDICAL SERVICES (9.3%)
180,000 HCA, Inc. ............................................. 8,550
100,000 Healthsouth Corp.* .................................... 1,279
70,600 Laboratory Corp. of America
Holdings* ............................................ 3,223
85,000 Oxford Health Plans, Inc.* ............................ 3,949
50,000 Tenet Healthcare Corp.* ............................... 3,577
60,000 Universal Health Services, Inc.* ...................... 2,940
-------
23,518
MEDICAL SUPPLIES (6.1%)
93,000 Biomet, Inc. .......................................... 2,522
41,250 Cardinal Health, Inc. ................................. 2,533
70,500 Fisher Scientific
International, Inc.* ................................. 1,974
80,000 Johnson & Johnson ..................................... 4,181
100,000 Medtronic, Inc. ....................................... 4,285
-------
15,495
VALUE
SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------
OFFICE EQUIPMENT &
SUPPLIES (1.0%)
125,000 Staples, Inc.* ........................................ $ 2,463
OILFIELD SERVICES/
EQUIPMENT (2.3%)
90,000 BJ Services Co.* ...................................... 3,049
75,000 Noble Corporation* .................................... 2,895
-------
5,944
RAILROAD (0.7%)
75,000 Norfolk Southern Corp. ................................ 1,754
RECREATION (3.9%)
150,000 Harley-Davidson, Inc. ................................. 7,690
100,000 Mattel, Inc. .......................................... 2,108
-------
9,798
RESTAURANT (1.0%)
75,000 Cheesecake Factory,
Incorporated (The)* .................................. 2,661
RETAIL BUILDING
SUPPLY (3.2%)
75,000 Home Depot, Inc. (The) ................................ 2,755
120,000 Lowe's Companies, Inc. ................................ 5,448
-------
8,203
RETAIL -- SPECIAL
LINES (6.9%)
125,000 Abercrombie & Fitch Co.
Class "A"* ........................................... 3,015
60,000 American Eagle Outfitters, Inc.* ...................... 1,268
82,500 AnnTaylor Stores Corp.* ............................... 2,095
250,000 Bed Bath & Beyond Inc.* ............................... 9,435
45,000 Best Buy Co., Inc.* ................................... 1,633
3,500 Linens 'n Things, Inc.* ............................... 115
-------
17,561
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6
THE VALUE LINE FUND, INC.
JUNE 30, 2002
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------
RETAIL STORE (7.1%)
124,000 Costco Wholesale Corp.* ........................... $ 4,789
120,000 Kohl's Corp.* ..................................... 8,409
90,000 Wal-Mart Stores, Inc. ............................. 4,951
--------
18,149
SEMICONDUCTOR (0.7%)
75,000 Texas Instruments, Inc. ........................... 1,778
TELECOMMUNICATIONS
EQUIPMENT (1.5%)
80,000 Polycom, Inc.* .................................... 959
100,000 QUALCOMM Incorporated* ............................ 2,749
--------
3,708
TELECOMMUNICATION
SERVICES (0.3%)
12,900 Telephone & Data Systems, Inc. .................... 781
THRIFT (1.1%)
75,000 Washington Mutual, Inc. ........................... 2,783
TOBACCO (0.9%)
51,500 Philip Morris Companies, Inc. ..................... 2,250
TRUCKING/TRANSPORTATION
LEASING (0.2%)
19,500 Hunt (J.B.) Transport
Services, Inc.* ................................... 576
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (97.2%)
(COST $186,836,000) ............................... 246,685
--------
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER SHARE
(IN THOUSANDS) AMOUNT)
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.8%)
(INCLUDING ACCRUED INTEREST)
$7,000 Collateralized by $6,090,000
U.S. Treasury Notes
10.375%, due 11/15/09,
with a value of
$7,140,000 (with State
Street Bank and Trust
Company, 1.83%,
dated 6/28/02,
due 7/1/02, delivery
value $7,001,067) ............................. $ 7,001
CASH AND OTHER ASSETS
LESS LIABILITIES (0.0%) ....................................... 32
--------
NET ASSETS (100.0%) ........................................... $253,718
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER OUTSTANDING SHARE
($253,718,056 divided by 15,750,214
SHARES OF CAPITAL STOCK OUTSTANDING) .......................... $ 16.11
========
* NON-INCOME PRODUCING
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
7
THE VALUE LINE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AT JUNE 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNT)
----------------
ASSETS:
Investment securities, at value
(Cost - $186,836) .................................. $246,685
Repurchase agreement
(Cost - $7,001)..................................... 7,001
Cash .................................................. 83
Receivable for capital shares sold .................... 967
Dividends receivable .................................. 193
Prepaid insurance expense ............................. 11
--------
TOTAL ASSETS ........................................ 254,940
--------
LIABILITIES:
Payable for capital shares repurchased ................ 969
Accrued expenses:
Advisory fee ......................................... 145
Service and distribution plan
fees payable ..................................... 54
Other ............................................... 54
--------
TOTAL LIABILITIES ................................... 1,222
--------
NET ASSETS ............................................ $253,718
========
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
15,750,214 shares) ................................. $ 15,750
Additional paid-in capital ............................ 163,508
Accumulated net investment loss ....................... (566)
Undistributed net realized gain
on investments ..................................... 15,177
Net unrealized appreciation of
investments ........................................ 59,849
--------
NET ASSETS ............................................ $253,718
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE
($253,718,056 divided by 15,750,214
SHARES OUTSTANDING) ................................ $ 16.11
========
STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
(IN THOUSANDS)
--------------
INVESTMENT INCOME:
Dividends ............................................ $ 909
Interest ............................................. 76
--------
Total Income ....................................... 985
--------
EXPENSES:
Advisory fee ......................................... 956
Service and distribution plan fees ................... 358
Transfer agent fees .................................. 69
Trading service expense .............................. 46
Auditing and legal fees .............................. 25
Custodian fees ....................................... 21
Postage .............................................. 19
Printing ............................................. 15
Registration and filing fees ......................... 14
Directors' fees and expenses ......................... 11
Telephone ............................................ 10
Insurance, dues and other ............................ 8
--------
Total Expenses before
Custody Credits .............................. 1,552
Less: Custody Credits ........................... (1)
--------
Net Expenses .................................... 1,551
--------
NET INVESTMENT LOSS .................................. (566)
--------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net Realized Gain ............................... 13,413
Change in Net Unrealized
Appreciation ................................. (50,940)
--------
NET REALIZED GAIN AND CHANGE
IN NET UNREALIZED APPRECIATION
ON INVESTMENTS .................................... (37,527)
--------
NET DECREASE IN NET ASSETS FROM
OPERATIONS ........................................ $(38,093)
========
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
8
THE VALUE LINE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS FOR THE
SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31,
2001
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2002 DECEMBER 31,
(UNAUDITED) 2001
----------------------------
(IN THOUSANDS)
OPERATIONS:
Net investment loss ............................................. $ (566) $ (610)
Net realized gain on investments ................................ 13,413 3,884
Change in net unrealized appreciation ........................... (50,940) (53,876)
----------------------------
Net decrease in net assets from operations ...................... (38,093) (50,602)
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions .................. -- (2,268)
----------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares .................................... 76,951 228,089
Proceeds from reinvestment of distributions to shareholders ..... -- 2,141
Cost of shares repurchased ...................................... (88,174) (260,732)
----------------------------
Decrease from capital share transactions ........................ (11,223) (30,502)
----------------------------
TOTAL DECREASE IN NET ASSETS ..................................... (49,316) (83,372)
NET ASSETS:
Beginning of period ............................................. 303,034 386,406
----------------------------
End of period ................................................... $ 253,718 $ 303,034
============================
ACCUMULATED NET INVESTMENT LOSS, END OF PERIOD ................... $ (566) $ --
============================
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
9
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
10
THE VALUE LINE FUND, INC.
JUNE 30, 2002
--------------------------------------------------------------------------------
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, 2002 DECEMBER 31,
(UNAUDITED) 2001
----------------------------
Shares sold ........................ 4,238 12,093
Shares issued to
shareholders in
reinvestment of
dividends and
distributions ................... -- 117
------------------------
4,238 12,210
Shares repurchased ................. 4,878 13,898
------------------------
Net decrease ....................... (640) (1,688)
========================
Distributions per share
from net realized gains ......... $ -- $ .1387
========================
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
SIX MONTHS
ENDED
JUNE 30, 2002
(UNAUDITED)
--------------
(IN THOUSANDS)
PURCHASES:
Investment Securities ............................. $29,215
=======
SALES:
Investment Securities ............................. $40,475
=======
4. INCOME TAXES
At June 30, 2002, information on the tax components of capital is as follows:
(UNAUDITED)
(IN THOUSANDS)
--------------
Cost of investment for tax purposes .............. $193,595
========
Gross tax unrealized appreciation ................ $ 71,054
Gross tax unrealized depreciation ................ (11,448)
--------
Net tax unrealized appreciation
on investments ................................ $ 59,606
========
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11
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES
AND TRANSACTIONS WITH AFFILIATES
An advisory fee of $956,000 was paid or payable to Value Line, Inc., the Fund's
investment adviser (the "Adviser"), for the six months ended June 30, 2002. 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, 2002, fees amounting to $358,000 were paid or payable to the
Distributor under this Plan. For the six months ended June 30, 2002, the Fund
also reimbursed the Distributor $46,000 for trading services it performed on
behalf of the Fund.
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, 2002, the Fund's expenses were reduced by $905
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 507,992 shares of the Fund's capital stock, representing
3.2% of the outstanding shares at June 30, 2002. In addition, certain officers
and directors of the Fund owned 175,738 shares of the Fund, representing 1.1% of
the outstanding shares.
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THE VALUE LINE FUND, INC.
FINANCIAL HIGHLIGHTS
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SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2002 ------------------------------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 1997
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NET ASSET VALUE, BEGINNING
OF PERIOD ........................ $ 18.49 $ 21.37 $ 26.25 $ 22.65 $ 19.29 $ 19.29
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INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment (loss)
income ........................ (.04) (.04) (.07) (.02) .03 .14
Net gains or losses on
securities (both realized
and unrealized) ............... (2.34) (2.70) (3.95) 5.98 3.85 3.79
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Total from investment
operations .................... (2.38) (2.74) (4.02) 5.96 3.88 3.93
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LESS DISTRIBUTIONS:
Dividends from net
investment income ............. -- -- -- -- (.03) (.14)
Distributions from net
realized gains ................ -- (.14) (.86) (2.36) (.49) (3.79)
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Total distributions ............. -- (.14) (.86) (2.36) (.52) (3.93)
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NET ASSET VALUE, END OF PERIOD .... $ 16.11 $ 18.49 $ 21.37 $ 26.25 $ 22.65 $ 19.29
=========================================================================================
TOTAL RETURN ...................... -12.87%+ -12.82% -15.35% 26.74% 20.25% 21.59%
=========================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ................... $253,718 $303,034 $386,406 $495,465 $418,439 $382,431
Ratio of expenses to average
net assets ....................... 1.08%*(1) 1.04%(1) .89%(1) .76%(1) .77% .78%
Ratio of net investment (loss)
income to average net assets ..... (0.40)%* (.18)% (.27)% (.09)% .16% .63%
Portfolio turnover rate ........... 10%+ 45% 17% 36% 98% 68%
(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 AND UNCHANGED FOR THE YEARS ENDED
DECEMBER 31, 2000 AND DECEMBER 31, 1999.
* ANNUALIZED.
+ NOT ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS.
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THE VALUE LINE FUND, INC.
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THE VALUE LINE FUND, INC.
THE VALUE LINE FAMILY OF FUNDS
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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.
1995 -- VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK, OR VISIT US AT WWW.VALUELINE.COM. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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