--------------------------------------------------------------------------------
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
AUDITORS 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
Nancy L. Bendig
VICE PRESIDENT
Brett Mitstifer
VICE PRESIDENT
Stephen E. Grant
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT AND
SECRETARY/TREASURER
Joseph Van Dyke
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THIS REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A
CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE DISTRIBUTOR).
#528237
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ANNUAL REPORT
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DECEMBER 31, 2003
--------------------------------------------------------------------------------
THE VALUE LINE
FUND, INC.
[LOGO]
THE VALUE LINE FUND, INC.
TO OUR VALUE LINE
--------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
After a three-year bear market, 2003 brought welcome relief to equity investors.
The Value Line Fund, which had its portfolio more conservatively positioned, a
strategy that worked well during the prior 3-year bear market, returned 16.28%
for the year, while the Standard & Poor's 500-stock index climbed 28.7%.(1)
The speculative rally that began in mid-March, after the start of the Iraqi war,
clearly did not reward the more conservative, high-quality names in the
portfolio. Our best efforts to reposition the portfolio from the defensive
strategy that worked well during the multi-year downturn which enabled
shareholders to more safely weather the bear market was mostly successful. The
Value Line Timeliness Ranking System favors stocks with strong relative earnings
momentum, positive earnings surprise and strong relative price momentum. The
leaders during the early phase of the rally did not rank well and, therefore,
were not represented in the Fund. Higher risk technology stocks, many of which
had lost half of their market value over the past four years, especially telecom
equipment and semiconductor-related issues, are examples of where we were
underweight relative to the benchmark due to their poor fundamentals and low
Timeliness ranks. However, as technology companies began to report increased
year-over-year performance, they were assigned higher Timeliness ranks and we
increased our exposure.
The September quarter was characterized by a more tempered rise in the S&P 500,
up 2.6%, and the Dow Jones Industrial Average, up 3.8%, than we had seen in the
June period. Again, all of the action was in the high risk, smaller, more
speculative names, which we tend to avoid.
Over the course of the year, we have made significant changes in the portfolio.
As the economic picture improved, we increased our technology exposure, an area
that has shown renewed growth. In addition, we have added to our positions in
basic materials and industrials, which should benefit in a cyclical recovery.
Overall, the firming in business spending, a stabilizing labor market, and
relatively low interest rates for the foreseeable future, should be positive for
the equity markets. We believe that the Fund is well positioned to benefit in
this environment.
We thank you for your continued confidence in Value Line, and we look forward to
serving you in the new year.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
February 16, 2004
--------------------------------------------------------------------------------
(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
--------------------------------------------------------------------------------
ECONOMIC OBSERVATIONS
The U.S. economic recovery, which proceeded at an uninspiring pace in 2002 and
the first half of 2003, really took off during last year's third and fourth
quarters, when the nation's gross domestic product, buoyed by a strengthening in
both consumer spending and capital goods activity, rose at the fastest pace in
several years. What's more, early indications are that the economy will continue
to press forward at a solid gait in the opening half of 2004, with GDP most
likely increasing by more than 4%.
Meanwhile, underpinned by the critical support of the Federal Reserve, which
continues to maintain its low-interest-rate policies, and boosted also by the
stimulative effects of last year's tax reduction and spending programs, the U.S.
economy should remain in forward gear throughout the year with GDP maintaining
that healthy pace of better than 4%. We currently expect the business expansion
to continue into 2005.
Inflation, meantime, remains muted, thanks, in part, to subdued labor costs.
Adequate supplies of raw materials are also helping to keep the costs of
production low. We note, though, that as the U.S. economy moves further along
the recovery trail over the next several years, some modest increases in
inflation may emerge. Absent a stronger long-term business recovery than we now
envision, or a further sharp rise in oil and gas prices stemming from an
escalating conflict in Iraq and elsewhere in the always contentious Middle East,
or some severe production cutbacks by the Organization of Petroleum Exporting
Countries (OPEC), inflation should generally remain in check through the latter
years of this decade. Long-term interest rates should increase modestly over the
next several years, but most likely not to the degree that would bring the
expansion to a halt.
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3
THE VALUE LINE FUND, INC.
--------------------------------------------------------------------------------
COMPARISON OF A CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE VALUE LINE FUND
AND THE S&P 500 Stock Index*
(FROM 1/1/94 TO 12/31/03)
--------------------------------------------------------------------------------
*THE STANDARD AND POOR'S 500 INDEX (S&P 500 INDEX) IS AN UNMANAGED INDEX THAT
IS REPRESENTATIVE OF THE LARGER-CAPITALIZATION STOCKS TRADED IN THE UNITED
STATES.
THE RETURN FOR THE INDEX DOES NOT REFLECT EXPENSES WHICH ARE DEDUCTED FROM THE
FUND'S RETURNS.
PERFORMANCE DATA:**
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
-------------- ---------------------
1 year ended 12/31/03 .......... +16.28% $11,628
5 years ended 12/31/03 ......... -4.08% $ 8,118
10 years ended 12/31/03 ......... +6.26% $18,355
** THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE
OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE PERFORMANCE DATA AND GRAPH DO
NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
--------------------------------------------------------------------------------
4
THE VALUE LINE FUND, INC.
PORTFOLIO HIGHLIGHTS AT DECEMBER 31, 2003 (UNAUDITED)
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
VALUE PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
--------------------------------------------------------------------------------------------
Citigroup, Inc. ............................ 141,000 $6,844 3.2%
Medtronic, Inc. ............................ 127,000 6,173 2.9
Cisco Systems, Inc. ........................ 253,000 6,145 2.8
Omnicom Group, Inc. ........................ 70,000 6,113 2.8
Lehman Brothers Holdings Inc. .............. 75,000 5,792 2.7
American International Group, Inc. ......... 87,000 5,766 2.7
Intel Corp. ................................ 169,000 5,442 2.5
Dell, Inc. ................................. 136,500 4,636 2.1
SanDisk Corp. .............................. 75,500 4,616 2.1
Lowe's Companies, Inc. ..................... 81,000 4,487 2.1
FIVE LARGEST INDUSTRY CATEGORIES
VALUE PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
------------------------------------------------------------------------------
Financial Services - Diversified ......... $17,932 8.3%
Medical Supplies ......................... 13,322 6.2
Computer & Peripherals ................... 10,306 4.8
Telecommunications Equipment ............. 10,026 4.6
Securities Brokerage ..................... 9,731 4.5
FIVE LARGEST NET SECURITY PURCHASES*
COST
ISSUE (IN THOUSANDS)
-----------------------------------------------------------------------------
SanDisk Corp. ............................................. $5,708
Lehman Brothers Holdings Inc. ............................. 5,403
Cisco Systems, Inc. ....................................... 5,217
Intel Corp. ............................................... 5,161
Countrywide Financial Corp. ............................... 3,310
FIVE LARGEST NET SECURITY SALES*
PROCEEDS
ISSUE (IN THOUSANDS)
-----------------------------------------------------------------------------
Amgen Inc. ................................................ $7,250
Fifth Third Bancorp ....................................... 6,316
Kohl's Corp. .............................................. 5,973
Bed Bath & Beyond Inc. .................................... 5,533
HCA, Inc. ................................................. 5,438
* FOR THE SIX MONTH PERIOD ENDED 12/31/03
--------------------------------------------------------------------------------
5
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------
COMMON STOCKS (96.5%)
ADVERTISING (2.8%)
70,000 Omnicom Group, Inc. ........................... $ 6,113
AEROSPACE/DEFENSE(0.6%)
23,500 L-3 Communications
Holdings, Inc.* ............................. 1,207
AUTO PARTS (2.2%)
31,000 Autoliv Inc. .................................. 1,167
60,000 Lear Corp. .................................... 3,680
--------
4,847
BANK (2.8%)
42,500 State Street Corporation ...................... 2,214
62,500 Zions Bancorporation .......................... 3,833
--------
6,047
BEVERAGE -
ALCOHOLIC (0.3%)
18,000 Constellation Brands, Inc.
Class "A"* .................................. 593
BEVERAGE - SOFT
DRINK (0.7%)
54,000 Cott Corp.* ................................... 1,513
BIOTECHNOLOGY (1.1%)
25,500 Genentech, Inc.* .............................. 2,386
BUILDING
MATERIALS (2.0%)
90,000 Jacobs Engineering Group, Inc.* ............... 4,321
CHEMICAL -
DIVERSIFIED (1.2%)
30,000 3M Company .................................... 2,551
CHEMICAL -
SPECIALTY (0.5%)
43,000 OM Group, Inc.* ............................... 1,126
COMPUTER &
PERIPHERALS (4.8%)
136,500 Dell, Inc.* ................................... 4,636
VALUE
SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------
39,500 Emulex Corp.* ................................. $ 1,054
75,500 SanDisk Corp.* ................................ 4,616
--------
10,306
COMPUTER SOFTWARE &
SERVICES (3.7%)
47,000 Cognizant Technology Solutions
Corp. Class "A"* ............................ 2,145
84,500 Fiserv, Inc.* ................................. 3,338
67,000 VERITAS Software Corp.* ....................... 2,490
--------
7,973
DIVERSIFIED
COMPANIES (2.8%)
28,000 Danaher Corp. ................................. 2,569
47,500 Fortune Brands, Inc. .......................... 3,396
--------
5,965
DRUG (3.2%)
35,500 Gilead Sciences, Inc.* ........................ 2,064
39,750 Mylan Laboratories, Inc. ...................... 1,004
108,500 Pfizer, Inc. .................................. 3,833
--------
6,901
EDUCATIONAL
SERVICES (2.1%)
60,000 Career Education Corp.* ....................... 2,404
68,600 Education Management Corp.* ................... 2,130
--------
4,534
ELECTRICAL
EQUIPMENT (1.0%)
61,500 Rockwell Automation, Inc. ..................... 2,189
ENTERTAINMENT (0.8%)
41,000 Univision Communications, Inc.
Class "A"* .................................. 1,627
ENTERTAINMENT
TECHNOLOGY (1.9%)
86,000 Electronic Arts Inc.* ......................... 4,109
--------------------------------------------------------------------------------
6
THE VALUE LINE FUND, INC.
DECEMBER 31, 2003
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------
FINANCIAL SERVICES -
DIVERSIFIED (8.3%)
87,000 American International
Group, Inc. ................................. $ 5,766
141,000 Citigroup, Inc. ............................... 6,844
41,333 Countrywide Financial Corp. ................... 3,135
88,000 MBNA Corp. .................................... 2,187
--------
17,932
HOMEBUILDING (1.0%)
20,000 Lennar Corp. Class "A" ........................ 1,920
2,000 Lennar Corp. Class "B" ........................ 183
--------
2,103
HOTEL - GAMING (0.5%)
33,000 International Game Technology.................. 1,178
HOUSEHOLD
PRODUCTS (0.5%)
40,000 Yankee Candle Company,
Inc. (The)* ................................. 1,093
INFORMATION
SERVICES (0.6%)
25,500 Corporate Executive Board
Co. (The)* .................................. 1,190
INSURANCE - PROPERTY/
CASUALTY (0.9%)
22,000 Everest Re Group, Ltd. ........................ 1,861
INTERNET (1.5%)
39,000 Ameritrade Holding Corp.* ..................... 549
40,500 eBay, Inc.* ................................... 2,616
--------
3,165
MACHINERY (0.3%)
43,500 JLG Industries, Inc. .......................... 663
MEDICAL SERVICES (3.0%)
70,000 Odyssey HealthCare Inc.* ...................... 2,048
75,000 Oxford Health Plans, Inc. ..................... 3,263
29,000 Sunrise Senior Living, Inc.* .................. 1,123
--------
6,434
VALUE
SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------
MEDICAL SUPPLIES (6.2%)
58,500 Fisher Scientific
International, Inc.* ........................ $ 2,420
127,000 Medtronic, Inc. ............................... 6,173
45,000 Varian Medical Systems, Inc.* ................. 3,110
23,000 Zimmer Holdings, Inc.* ........................ 1,619
--------
13,322
METALS & MINING -
DIVERSIFIED (2.3%)
24,500 Freeport-McMoRan Copper &
Gold, Inc. Class "B" .......................... 1,032
43,000 Inco Ltd.* .................................... 1,712
28,500 Phelps Dodge Corp.* ........................... 2,169
--------
4,913
NATURAL GAS -
DIVERSIFIED (1.6%)
46,500 Patina Oil &Gas Corp. ......................... 2,278
39,500 XTO Energy, Inc. .............................. 1,118
--------
3,396
OFFICE EQUIPMENT &
SUPPLIES (0.5%)
41,000 Staples, Inc.* ................................ 1,119
OILFIELD SERVICES/
EQUIPMENT (1.1%)
43,500 Schlumberger Ltd. ............................. 2,380
PETROLEUM -
PRODUCING (1.3%)
34,000 Apache Corp. .................................. 2,757
PHARMACY
SERVICES (0.5%)
32,000 CVS Corp. ..................................... 1,156
PRECIOUS METALS (1.1%)
48,000 Newmont Mining Corp. .......................... 2,333
--------------------------------------------------------------------------------
7
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------
PRECISION
INSTRUMENT (1.6%)
39,500 Agilent Technologies, Inc.* ..................... $ 1,155
57,000 Kronos Inc.* .................................... 2,258
--------
3,413
RECREATION (1.0%)
44,000 Harley-Davidson, Inc. ........................... 2,091
RESTAURANT (0.9%)
42,500 CEC Entertainment, Inc.* ........................ 2,014
RETAIL BUILDING
SUPPLY (3.7%)
100,500 Home Depot, Inc. (The) .......................... 3,567
81,000 Lowe's Companies, Inc. .......................... 4,487
--------
8,054
RETAIL - SPECIAL
LINES (2.9%)
46,000 Best Buy Co., Inc. .............................. 2,403
51,500 Foot Locker, Inc. ............................... 1,208
50,000 Guitar Center, Inc.* ............................ 1,629
46,000 PETsMART, Inc. .................................. 1,095
--------
6,335
RETAIL STORE (1.0%)
53,500 Dollar General Corp. ............................ 1,123
36,000 Fred's, Inc. Class "A" .......................... 1,115
--------
2,238
SECURITIES
BROKERAGE (4.5%)
29,000 Legg Mason, Inc. ................................ 2,238
75,000 Lehman Brothers Holdings Inc. ................... 5,792
29,000 Merrill Lynch & Co., Inc. ....................... 1,701
--------
9,731
SEMICONDUCTOR (3.7%)
169,000 Intel Corp. ..................................... 5,442
66,000 National Semiconductor Corp.* ................... 2,601
--------
8,043
VALUE
SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------
SEMICONDUCTOR
CAPITAL
EQUIPMENT (1.8%)
61,000 Amkor Technology, Inc.* ......................... $ 1,111
89,000 Lam Research Corp.* ............................. 2,875
--------
3,986
STEEL - GENERAL (0.2%)
18,000 Carpenter Technology Corp. ...................... 532
TELECOMMUNICATION
SERVICES (0.8%)
64,500 Nextel Communications, Inc.
Class "A"* .................................... 1,810
TELECOMMUNICATIONS
EQUIPMENT (4.6%)
253,000 Cisco Systems, Inc.* ............................ 6,145
77,500 Foundry Networks, Inc.* ......................... 2,120
47,500 UTStarcom, Inc.* ................................ 1,761
--------
10,026
THRIFT (1.3%)
75,000 New York Community
Bancorp, Inc. ................................... 2,854
TOILETRIES &
COSMESTICS (1.5%)
49,000 Avon Products, Inc. ............................. 3,307
TRUCKING/TRANSPORTATION
LEASING (1.3%)
17,200 Forward Air Corp.* .............................. 473
86,500 Hunt (J.B.) Transport
Services, Inc.* ............................... 2,336
--------
2,809
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (96.5%)
(Cost $176,904,000)........................................ $208,546
========
--------------------------------------------------------------------------------
8
THE VALUE LINE FUND, INC.
DECEMBER 31, 2003
--------------------------------------------------------------------------------
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER SHARE
(IN THOUSANDS) AMOUNT)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (4.2%)
(INCLUDING ACCRUED INTEREST)
$ 3,000 Collateralized by $2,979,000
U.S. Treasury Bonds 5.25%,
due 2/15/29, with a value of
$3,062,000 (with UBS
Warburg LLC, 0.84%, dated
12/31/03, due 1/2/04, delivery
value $3,000,140) .......................... $ 3,000
3,000 Collateralized by $2,745,000
U.S. Treasury Bonds 5.625%,
due 5/15/08, with a value of
$3,060,000 (with Morgan
Stanley, 0.75%, dated
12/31/03, due 1/2/04, delivery
value $3,000,125) .......................... 3,000
3,000 Collateralized by $2,910,000
U.S. Treasury Bonds 6%, due
8/15/04, with a value of
$3,064,000 (with State Street
Bank & Trust Co., 0.73%,
dated 12/31/03, due 1/2/04,
delivery value $3,000,122) ................. 3,000
--------
TOTAL REPURCHASE
AGREEMENTS
(COST $9,000,000)........................... 9,000
--------
EXCESS OF LIABILITIES OVER
CASH AND OTHER ASSETS (-0.7%) ........................... (1,499)
--------
NET ASSETS (100.0%)........................................ $216,047
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($216,046,603 DIVIDED BY 15,161,762 SHARES OF
CAPITAL STOCK OUTSTANDING)............................... $ 14.25
========
* NON-INCOME PRODUCING
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
9
THE VALUE LINE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
AT DECEMBER 31, 2003 FOR THE YEAR ENDED DECEMBER 31, 2003
----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS
EXCEPT PER
SHARE AMOUNT) (IN THOUSANDS)
------------- --------------
ASSETS: INVESTMENT INCOME:
Investment securities, at value Dividends .................................. $ 1,776
(Cost - $176,904) ........................... $208,546 Interest ................................... 215
Repurchase agreements ---------
(Cost - $9,000) ............................. 9,000 Total Income ............................. 1,991
Cash ........................................... 97 ---------
Receivable for securities sold ................. 4,935 EXPENSES:
Dividends receivable ........................... 68 Advisory fee ............................... 1,428
Receivable for capital shares sold ............. 43 Service and distribution plan fees ......... 530
Prepaid insurance expense ...................... 5 Transfer agent fees ........................ 151
-------- Auditing and legal fees .................... 63
TOTAL ASSETS ................................. 222,694 Printing ................................... 51
-------- Custodian fees ............................. 39
LIABILITIES: Postage .................................... 37
Payable for securities purchased ............... 3,618 Insurance, dues and other .................. 26
Payable for capital shares repurchased ......... 2,812 Registration and filing fees ............... 24
Accrued expenses: Directors' fees and expenses ............... 20
Advisory fee ................................ 123 Telephone .................................. 20
Service and distribution plan fees ---------
payable .................................. 46 Total Expenses before Custody
Other ....................................... 48 Credits ............................... 2,389
-------- Less: Custody Credits ................... (1)
TOTAL LIABILITIES ............................ 6,647 ---------
-------- Net Expenses ............................ 2,388
NET ASSETS ..................................... $216,047 ---------
======== NET INVESTMENT LOSS ........................ (397)
NET ASSETS CONSIST OF: ---------
Capital stock, at $1.00 par value NET REALIZED AND UNREALIZED GAIN
(authorized 50,000,000, outstanding (LOSS) ON INVESTMENTS:
15,161,762 shares) .......................... $ 15,162 Net Realized Gain ..................... 42,700
Additional paid-in capital ..................... 153,897 Change in Net Unrealized
Undistributed net realized gain on Appreciation ....................... (10,197)
investments ................................. 15,346 ---------
Net unrealized appreciation of NET REALIZED GAIN AND CHANGE IN NET
investments ................................. 31,642 UNREALIZED APPRECIATION ON
-------- INVESTMENTS ............................. 32,503
NET ASSETS ..................................... $216,047 ---------
======== NET INCREASE IN NET ASSETS FROM
NET ASSET VALUE, OFFERING AND OPERATIONS .............................. $ 32,106
REDEMPTION PRICE PER OUTSTANDING =========
SHARE ($216,046,603 DIVIDED BY 15,161,762
SHARES OUTSTANDING) ......................... $ 14.25
========
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
10
THE VALUE LINE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002
----------------------------
(IN THOUSANDS)
OPERATIONS:
Net investment loss ............................................. $ (397) $ (790)
Net realized gain (loss) on investments ......................... 42,700 (4,404)
Change in net unrealized appreciation ........................... (10,197) (68,950)
----------------------------
Net increase (decrease) in net assets from operations ........... 32,106 (74,144)
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions .................. (22,708) (2,007)
----------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares .................................... 59,344 87,992
Proceeds from reinvestment of distributions to shareholders ..... 21,413 1,895
Cost of shares repurchased ...................................... (80,446) (110,432)
----------------------------
Increase (Decrease) from capital share transactions ............. 311 (20,545)
----------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 9,709 (96,696)
NET ASSETS:
Beginning of year ............................................... 206,338 303,034
----------------------------
End of year ..................................................... $ 216,047 $ 206,338
============================
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
11
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 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. 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.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted
for on the date the securities are purchased or sold. Interest income is accrued
as earned. Realized gains and losses on sales of securities are calculated for
financial accounting and federal income tax purposes on the identified cost
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
(E) REPRESENTATIONS AND INDEMNIFICATIONS. In the normal course of business the
Fund enters into contracts that contain a variety of representations and
warranties which provide general indemnifications. The Fund's maximum exposure
under these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risk of loss to be remote.
--------------------------------------------------------------------------------
12
THE VALUE LINE FUND, INC.
DECEMBER 31, 2003
--------------------------------------------------------------------------------
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows (in thousands except per share
amounts):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002
--------------------------------
Shares sold ......................... 4,159 4,997
Shares issued to
shareholders in
reinvestment of
dividends and
distributions .................... 1,520 138
--------------------------------
5,679 5,135
Shares repurchased .................. (5,608) (6,434)
--------------------------------
Net increase (decrease) ............. 71 (1,299)
================================
Distributions per share
from net realized
gains ............................ $ 1.6269 $ .1335
================================
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
YEAR ENDED
DECEMBER 31,
2003
---------------
(IN THOUSANDS)
PURCHASES:
Investment Securities ................................ $256,730
===============
SALES:
Investment Securities ................................ $246,862
===============
4. INCOME TAXES
At December 31, 2003, information on the tax components of capital is as
follows:
(IN THOUSANDS)
Cost of investments for tax purposes ................. $186,116
==============
Gross tax unrealized appreciation .................... $ 33,767
Gross tax unrealized depreciation .................... (2,337)
--------------
Net tax unrealized appreciation on
investments ....................................... $ 31,430
==============
Undistributed long-term gains ........................ $ 15,558
==============
Net realized gains/losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales.
The tax composition of distributions to shareholders for the years ended
December 31, 2003 and 2002 were all from net long-term capital gains.
Permanent book-tax differences relating to current year net operating loss are
reclassified within the composition of the net asset accounts. In the current
year the Fund reclassified $397,000 from accumulated net investment loss to
additional paid-in capital. Net assets were not affected by this
reclassification.
--------------------------------------------------------------------------------
13
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003
--------------------------------------------------------------------------------
5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES
AND TRANSACTIONS WITH AFFILIATES
An advisory fee of $1,428,000 was paid or payable to Value Line, Inc., the
Fund's investment adviser (the "Adviser"), for the year ended December 31, 2003.
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 year ended
December 31, 2003, fees amounting to $530,000 were paid or payable to the
Distributor under this Plan.
Certain officers and directors of the Adviser and its wholly owned subsidiary,
Value Line Securities, Inc. (the Fund's distributor and a registered
broker/dealer), are also officers and directors of the Fund. During the year
ended December 31, 2003, the Fund paid brokerage commissions totaling $297,000
to the Distributor, which clears its transactions through unaffiliated brokers.
For the year ended December 31, 2003, the Fund's expenses were reduced by $1,000
under a custody credit arrangement with the Custodian.
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan owned 433,050 shares of the Fund's capital stock, representing
2.9% of the outstanding shares at December 31, 2003.
--------------------------------------------------------------------------------
14
THE VALUE LINE FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
2003 2002 2001 2000 1999
====================================================================
NET ASSET VALUE, BEGINNING OF YEAR .............. $ 13.67 $ 18.49 $ 21.37 $ 26.25 $ 22.65
--------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) income ................... (.03) (.05) (.04) (.07) (.02)
Net gains or losses on securities
(both realized and unrealized) ............... 2.24 (4.64) (2.70) (3.95) 5.98
--------------------------------------------------------------------
Total from investment operations ............... 2.21 (4.69) (2.74) (4.02) 5.96
--------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net realized gains .......... (1.63) (.13) (.14) (.86) (2.36)
--------------------------------------------------------------------
Total distributions ............................ (1.63) (.13) (.14) (.86) (2.36)
--------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................... $ 14.25 $ 13.67 $ 18.49 $ 21.37 $ 26.25
====================================================================
TOTAL RETURN .................................... 16.28% -25.35% -12.82% -15.35% 26.74%
====================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) .......... $216,047 $206,338 $303,034 $386,406 $495,465
Ratio of expenses to average net assets (1) ..... 1.13% 1.11% 1.04% .89% .76%
Ratio of net investment (loss) income to
average net assets ............................. (0.19)% (0.31)% (.18)% (.27)% (.09)%
Portfolio turnover rate ......................... 129% 33% 45% 17% 36%
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE RATIO
OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD HAVE BEEN
1.03% FOR THE YEAR ENDED DECEMBER 31, 2001 AND UNCHANGED FOR THE YEARS ENDED
DECEMBER 31, 2003, 2002, 2000, AND 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
15
THE VALUE LINE FUND, INC.
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF THE VALUE LINE FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Value Line Fund, Inc. (the
"Fund") at December 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 19, 2004
--------------------------------------------------------------------------------
16
THE VALUE LINE FUND, INC.
2003 TAX NOTICE TO SHAREHOLDERS (UNAUDITED)
--------------------------------------------------------------------------------
For the year ended December 31, 2003 the Fund distributed $22,707,898 of
long-term capital gain to shareholders.
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
MANAGEMENT INFORMATION
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
LENGTH OF DURING THE OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR
=======================================================================================================================
INTERESTED DIRECTORS*
---------------------
Jean Bernhard Buttner Chairman of the Since 1983 Chairman, President and Value Line, Inc.
Age 69 Board of Directors Chief Executive Officer of
and President Value Line, Inc. (the
"Adviser") and Value Line
Publishing, Inc.; Chairman
and President
of each of the
14 Value Line
Funds and Value
Line
Securities,
Inc. (the
"Distributor").
-----------------------------------------------------------------------------------------------------------------------
Marion N. Ruth Director Since 2000 Real Estate Executive: Value Line, Inc.
5 Outrider Road President, Ruth Realty (real
Rolling Hills, CA 90274 estate broker); Director of the
Age 68 Adviser since 2000.
-----------------------------------------------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
------------------------
John W. Chandler Director Since 1991 Consultant, Academic Search None
1611 Cold Spring Rd. Consultation Service, Inc.;
Williamstown, MA 01267 Trustee Emeritus and
Age 80 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 62
-----------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
17
THE VALUE LINE FUND, INC.
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
PRINCIPAL
OCCUPATION
LENGTH OF DURING THE OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR
=======================================================================================================================
Francis C. Oakley Director Since 2000 Professor of History, Berkshire Life
54 Scott Hill Road Williams College, 1961 to Insurance Company
Williamstown, MA 01267 2002; President Emeritus of America
Age 72 since 1994 and President,
1985-1994; Chairman
(1993-1997) and Interim
President (2002) of the
American Council of
Learned Societies.
-----------------------------------------------------------------------------------------------------------------------
David H. Porter Director Since 1997 Visiting Professor of None
5 Birch Run Drive Classics, Williams College,
Saratoga Springs, NY 12866 since 1999; President
Age 68 Emeritus, Skidmore College
since 1999 and President,
1987-1998.
-----------------------------------------------------------------------------------------------------------------------
Paul Craig Roberts Director Since 1985 Chairman, Institute for A. Schulman Inc.
169 Pompano St. Political Economy. (plastics)
Panama City Beach, FL 32413
Age 64
-----------------------------------------------------------------------------------------------------------------------
Nancy-Beth Sheerr Director Since 1996 Senior Financial Advisor, None
1409 Beaumont Drive Hawthorne, since January
Gladwyne, PA 19035 2001; Chairman, Radcliffe
Age 54 College Board of Trustees,
1990-1999.
-----------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
18
THE VALUE LINE FUND, INC.
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
PRINCIPAL
OCCUPATION
LENGTH OF DURING THE OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION TIME SERVED PAST 5 YEARS HELD BY DIRECTOR
=======================================================================================================================
OFFICERS
--------
Nancy L. Bendig Vice President Since 2003 Portfolio Manager with the -
Age 48 Adviser since 2003 and from
1993 to 1999; Portfolio
Manager-First Vice President,
Avatar Associates (investment
management), 1999-2003.
-----------------------------------------------------------------------------------------------------------------------
Brett Mitstifer Vice President Since 2003 Portfolio Manager with the -
Age 41 Adviser since 2003;
Executive Vice President,
Hovey, Youngman Associates
(investment management),
2001-2003; Portfolio
Manager, Bankers Trust,
1997-2000.
-----------------------------------------------------------------------------------------------------------------------
Stephen Grant Vice President Since 2001 Portfolio Manager with the -
Age 50 Adviser.
-----------------------------------------------------------------------------------------------------------------------
David T. Henigson Vice President, Since 1994 Director, Vice President and -
Age 46 Secretary and Compliance Officer of the
Treasurer Adviser; Director and Vice
President of the Distributor;
Vice President, Secretary and
Treasurer of each of the 14
Value Line Funds.
-----------------------------------------------------------------------------------------------------------------------
* 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 BEING A DIRECTOR OF THE ADVISER.
UNLESS OTHERWISE INDICATED, THE ADDRESS FOR EACH OF THE ABOVE IS 220 EAST
42ND STREET, NEW YORK, NY 10017.
--------------------------------------------------------------------------------
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 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 fund 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