================================================================================
------------------
ANNUAL REPORT
------------------
December 31, 1998
------------------
The Value Line
Fund, Inc.
[LOGO]
VALUE LINE
No Load
Mutual
Funds
<PAGE>
The Value Line Fund, Inc.
To Our Value Line
- --------------------------------------------------------------------------------
To Our Shareholders:
The U.S. stock market was pulled in two different directions in 1998. For most
of the year, stocks posted excellent gains, spurred by a benign domestic economy
(with moderate economic growth, low inflation, and declining interest rates) and
reasonable corporate profit growth. But during the third quarter, investors were
confronted with a wrenching market contraction, with stocks reacting to economic
woes in Asia and Latin America, the devaluation of the Russian ruble, and
financial difficulties surrounding some high-profile hedge funds.
For shareholders in the Value Line Fund, the year cut on the negative side of
the equation. Total returns from your Fund (including reinvested dividends)
trailed the unmanaged Standard & Poor's 500 Index by almost two percentage
points since July 1st and about eight percentage points over the full year. The
actual performance of the Fund and the benchmark are as follows:
Value
Line Fund S&P 500
--------- -------
Second half ............. 7.59% 9.23%
Full year ............... 20.25 28.58
This disappointing record is partially a function of our reaction to the
turbulence during the third quarter. Obviously, all stocks suffered in the
July-August time frame as developments in Russia, the Pacific Rim, and Latin
America roiled markets worldwide. As a defensive maneuver, we raised cash in the
Fund as a cushion against the current volatility and as a reservoir of funds
available to buy stocks when market conditions improved. When that improvement
arrived in early October, the market went straight up instantaneously, and we
were unable to purchase stocks quickly enough to capture the marketis rapid
upswing.
One contributor helping to prop up returns in the past year was the Fundis
sector allocation, with significant concentrations in technology, financial
services, and the health care and drug sectors. Stocks in all of these areas
were excellent relative performers during 1998, and in the current economic
environment (see our "Economic Observations" nearby) we expect relative
outperformance in 1999 as well. We have also increased our exposure to quality
retailing stocks over the past six months, since these companies generally
operate only within the U.S. and thus are insulated from the ongoing turmoil
overseas.
While 1999 may not produce the broad-market results we experienced last year, we
still believe that, despite the volatility that defines the stock market in
recent years, the year will be rewarding for growth-equity investors. We
appreciate your continued confidence in Value Line, and we wish you the best for
a healthy and prosperous year.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
February 1, 1999
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2
<PAGE>
The Value Line Fund, Inc.
Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
Steady growth and low inflation continue to be two of the dominant themes in the
domestic economy at this time. This enviable performance is underscored by
reports that show persisting strength in consumer spending, housing
construction, personal income, and employment. Such trends suggest that the
economy will expand by more than 3% during the opening quarter of 1999. At the
same time, inflation remains quiescent, with producer and consumer price
increases still modest, overall, and with selective industrial sectors finding
it difficult to implement price increases. In some instances, prices are
actually falling.
We believe this modest pace of economic activity will continue over the next
several months, with growth averaging 2.5%-3.0% for the year as a whole. Our
sense, as well, is that the economic crisis that is still afflicting much of
Asia and parts of Latin America (especially Brazil) will gradually recede over
the next 12 to 18 months. At the same time, we expect inflation to remain
subdued. The Federal Reserve, encouraged by this benign state of economic
affairs, will probably maintain its current monetary stance over the next
several months, at least. Any subsequent adjustment in rates will probably be
modest given the likely absence of excesses in growth or inflation in the
domestic economy.
*Performance Data:
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
--------- -------------
1 year ended 12/31/98 ...................... 20.25% $12,025
5 years ended 12/31/98 .................... 17.72% $22,610
10 years ended 12/31/98 .................... 17.25% $49,091
* 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.
- --------------------------------------------------------------------------------
3
<PAGE>
The Value Line Fund, Inc.
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE VALUE LINE FUND
AND THE S&P 500 STOCK INDEX*
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Value Line Fund S & P 500
--------------- ---------
1/89 $10,000 $10,000
3/89 $10,649 $10,707
6/89 $11,458 $11,651
9/89 $13,177 $12,897
12/89 $13,142 $13,161
3/90 $12,829 $12,767
6/90 $14,003 $13,568
9/90 $11,952 $11,706
12/90 $13,042 $12,760
3/91 $15,504 $14,613
6/91 $15,186 $14,580
9/91 $16,626 $15,360
12/91 $19,414 $16,647
3/92 $18,258 $16,227
6/92 $17,106 $16,535
9/92 $18,417 $17,056
12/92 $20,325 $17,915
3/93 $20,734 $18,697
6/93 $21,463 $18,788
9/93 $22,373 $19,274
12/93 $21,711 $19,721
3/94 $20,776 $18,973
6/94 $19,610 $19,053
9/94 $20,885 $19,985
12/94 $20,740 $19,982
3/95 $22,589 $21,927
6/95 $24,182 $24,020
9/95 $26,603 $25,929
12/95 $27,401 $27,490
3/96 $29,763 $28,965
6/96 $31,381 $30,265
9/96 $32,804 $31,201
12/96 $33,574 $33,802
3/97 $32,641 $34,704
6/97 $37,538 $40,762
9/97 $41,816 $43,819
12/97 $40,822 $45,077
3/98 $44,473 $51,364
6/98 $45,628 $53,060
9/98 $39,625 $47,782
12/98 $49,091 $57,958
* The Standard & Poor's 500 Index (S&P 500) is an unmanaged index that is
representative of the larger-capitalization stocks traded in the United
States.
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4
<PAGE>
The Value Line Fund, Inc.
Portfolio Highlights at December 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Ten Largest Holdings
<TABLE>
<CAPTION>
Value Percentage of
Issue Shares (in thousands) Net Assets
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EMC Corp. .................................................... 200,000 $17,000 4.1%
Cardinal Health, Inc. ........................................ 168,375 12,775 3.1
Pfizer, Inc. ................................................. 100,000 12,544 3.0
Omnicom Group, Inc. .......................................... 200,000 11,600 2.8
Staples, Inc. ................................................ 255,500 11,162 2.7
Cisco Systems, Inc. .......................................... 115,000 10,674 2.6
Dell Computer Corp. .......................................... 140,000 10,246 2.5
Lilly (Eli) & Co. ............................................ 105,000 9,332 2.2
Clear Channel Communications, Inc. ........................... 170,000 9,265 2.2
Dayton Hudson Corp. .......................................... 160,000 8,680 2.1
Five Largest Industry Categories
<CAPTION>
Value Percentage of
Industry (in thousands) Net Assets
- -----------------------------------------------------------------------------------------------------------
Computer & Peripherals ....................................... $ 56,528 13.5%
Drug ......................................................... 47,344 11.3
Medical Supplies ............................................. 27,560 6.6
Retail Store ................................................. 22,043 5.3
Computer Software & Services ................................. 20,534 4.9
Five Largest Net Security Purchases*
<CAPTION>
Cost
Issue (in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C>
American Express Co. ......................................... $ 4,989
Ingersoll-Rand Co. ........................................... 4,812
Costco Companies, Inc. ....................................... 4,252
Tandy Corp. .................................................. 4,060
Eastman Kodak Co. ............................................ 4,032
Five Largest Net Security Sales*
<CAPTION>
Proceeds
Issue (in thousands)
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Compuware Corp. .............................................. $ 8,392
Allstate Corp. (The) ......................................... 7,792
TJX Companies, Inc. .......................................... 5,800
PeopleSoft, Inc. ............................................. 5,786
ReliaStar Financial Corp. .................................... 4,556
</TABLE>
* For the six month period ended 12/31/98
- --------------------------------------------------------------------------------
5
<PAGE>
The Value Line Fund, Inc.
Schedule of Investments
- --------------------------------------------------------------------------------
Shares Value
(in thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS (96.3%)
ADVERTISING (2.8%)
200,000 Omnicom Group, Inc..................... $ 11,600
BANK (3.8%)
100,000 Mellon Bank Corp....................... 6,875
60,000 State Street Corp...................... 4,174
75,000 Zions Bancorporation................... 4,678
--------
15,727
BANK--MIDWEST (1.4%)
45,000 Fifth Third Bancorp.................... 3,209
30,000 Firstar Corporation.................... 2,798
--------
6,007
COAL/ALTERNATE
ENERGY (1.1%)
100,000 AES Corp.*............................. 4,738
COMPUTER AND
PERIPHERALS (13.5%)
115,000 Cisco Systems, Inc.*................... 10,674
140,000 Compaq Computer Corp................... 5,871
140,000 Dell Computer Corp.*................... 10,246
200,000 EMC Corp.*............................. 17,000
32,000 International Business
Machines Corp....................... 5,912
110,000 Storage Technology Corp.*.............. 3,912
65,000 3Com Corp.*............................ 2,913
--------
56,528
COMPUTER SOFTWARE
& SERVICES (4.9%)
150,000 BMC Software, Inc.*.................... 6,684
120,000 Computer Associates
International, Inc.................. 5,115
35,000 Microsoft Corp.*....................... 4,854
90,000 Oracle Corp.*.......................... 3,881
--------
20,534
DIVERSIFIED
COMPANIES (0.9%)
50,000 Tyco International, Ltd................ $ 3,772
DRUG (11.3%)
25,000 Amgen Inc.*............................ 2,614
25,000 Biogen, Inc.*.......................... 2,075
45,000 Genzyme Corp.*......................... 2,239
105,000 Lilly (Eli) & Co....................... 9,332
23,000 Merck & Co., Inc....................... 3,396
100,000 Pfizer, Inc............................ 12,544
80,000 Schering-Plough Corp................... 4,420
105,000 Warner-Lambert Co...................... 7,895
45,000 Watson Pharmaceuticals, Inc.*.......... 2,829
--------
47,344
ELECTRICAL
EQUIPMENT (1.2%)
50,000 General Electric Co.................... 5,103
ENTERTAINMENT (2.2%)
170,000 Clear Channel
Communications, Inc.*............... 9,265
FINANCIAL
SERVICES (2.8%)
40,000 American Express Co.................... 4,090
100,000 Citigroup Inc.......................... 4,950
50,000 FINOVA Group, Inc. (The)............... 2,697
--------
11,737
FOOD
WHOLESALERS (1.0%)
85,000 U.S. Foodservice, Inc.*................ 4,165
GROCERY (2.7%)
67,500 Albertson's, Inc....................... 4,299
115,000 Safeway, Inc.*......................... 7,008
--------
11,307
- --------------------------------------------------------------------------------
6
<PAGE>
The Value Line Fund, Inc.
December 31, 1998
- --------------------------------------------------------------------------------
HOMEBUILDING (1.5%)
140,000 Centex Corp............................ $ 6,309
HOUSEHOLD
PRODUCTS (2.2%)
33,000 Clorox Company (The)................... 3,855
35,000 Colgate-Palmolive Co................... 3,250
65,000 Dial Corporation (The)................. 1,877
--------
8,982
INSURANCE--
DIVERSIFIED (0.9%)
37,500 American International
Group, Inc.......................... 3,623
INSURANCE--LIFE (1.6%)
81,000 SunAmerica Inc......................... 6,571
INTERNET (1.9%)
50,000 America Online, Inc.*.................. 8,000
MACHINERY (1.1%)
100,000 Ingersoll-Rand Co...................... 4,694
MEDICAL SUPPLIES (6.6%)
168,375 Cardinal Health, Inc................... 12,775
70,000 Guidant Corp........................... 7,718
40,000 Johnson & Johnson...................... 3,355
50,000 Medtronic, Inc......................... 3,712
--------
27,560
OFFICE EQUIPMENT &
SUPPLIES (2.7%)
255,500 Staples, Inc.*......................... 11,162
OILFIELD SERVICES/
EQUIPMENT (0.6%)
100,000 Transocean Offshore, Inc............... 2,681
PACKAGING &
CONTAINER (0.7%)
100,000 Owens-Illinois, Inc.*.................. 3,063
PRECISION
INSTRUMENT (1.0%)
55,000 Eastman Kodak Co....................... $ 3,960
RECREATION (2.3%)
85,000 Electronic Arts Inc.*.................. 4,771
100,000 Harley-Davidson, Inc................... 4,737
--------
9,508
RETAIL BUILDING
SUPPLY (1.6%)
60,000 Home Depot, Inc. (The)................. 3,671
60,000 Lowe's Companies, Inc.................. 3,071
--------
6,742
RETAIL--
SPECIAL LINES (3.9%)
125,000 Bed Bath & Beyond Inc.*................ 4,266
97,500 Gap, Inc............................... 5,484
100,000 Tandy Corp............................. 4,119
65,000 Williams-Sonoma, Inc.*................. 2,620
--------
16,489
RETAIL STORE (5.3%)
62,000 Costco Companies, Inc.*................ 4,476
160,000 Dayton Hudson Corp..................... 8,680
85,000 Kohl's Corp.*.......................... 5,222
45,000 Wal-Mart Stores, Inc................... 3,665
--------
22,043
SECURITIES
BROKERAGE (1.5%)
112,500 Schwab (Charles) Corp.................. 6,321
SEMICONDUCTOR (2.7%)
45,000 Intel Corp............................. 5,335
90,000 Maxim Integrated
Products, Inc.*..................... 3,932
45,000 Vitesse Semiconductor Corp.*........... 2,053
--------
11,320
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7
<PAGE>
The Value Line Fund, Inc.
Schedule of Investments December 31, 1998
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT (2.3%)
25,000 Lucent Technologies Inc................ $ 2,750
100,000 Tellabs, Inc.*......................... 6,856
--------
9,606
TELECOMMUNICATION
SERVICES (3.3%)
90,000 AirTouch
Communications, Inc.*............... 6,491
100,000 MCI WorldCom, Inc.*.................... 7,175
--------
13,666
THRIFT (1.5%)
58,500 Federal Home Loan
Mortgage Corp....................... 3,770
32,000 Federal National
Mortgage Association................ 2,368
--------
6,138
TOBACCO (1.0%)
80,000 Philip Morris Companies, Inc........... 4,280
TRUCKING/
TRANSPORTATION
LEASING (0.5%)
60,000 CNF Transportation Inc................. 2,254
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT SECURITIES (96.3%)
(Cost $229,168,000) ................... 402,799
--------
Value
Principal (in thousands
Amounts except per
(in thousands) share amount)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.5%)
(including accrued interest)
$14,800 Collateralized by $11,955,000
U.S. Treasury Bonds 10 3/4%,
due 2/15/03, with a value of
$15,089,000 (with Morgan
Stanley & Co., Inc.
4.62%, dated 12/31/98,
due 1/4/99, delivery value
of $14,808,000)..................... $ 14,802
CASH AND RECEIVABLES
LESS LIABILITIES (0.2%) ............................ 838
--------
NET ASSETS (100%) .................................. $418,439
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($418,439,246 / 18,474,434 shares of
capital stock outstanding) ......................... $ 22.65
========
* Non-income producing
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8
<PAGE>
The Value Line Fund, Inc.
Statement of Assets
and Liabilities at December 31, 1998
- --------------------------------------------------------------------------------
Dollars
(in thousands
except per share
amount)
---------------
Assets:
Investment securities, at value
(Cost--$229,168)................................. $402,799
Repurchase agreement (Cost--$14,802) .............. 14,802
Cash ............................................. 104
Receivable for capital shares sold ............... 1,227
Dividends & interest receivable .................. 195
--------
Total Assets .............................. 419,127
--------
Liabilities:
Payable for capital shares repurchased............ 385
Accrued expenses:
Advisory fee ................................... 220
Other .......................................... 83
--------
Total Liabilities .......................... 688
--------
Net Assets ....................................... $418,439
========
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
18,474,434 shares).............................. $ 18,474
Additional paid-in capital ....................... 218,417
Undistributed net realized gain
on investments.................................. 7,917
Net unrealized appreciation
of investments ................................. 173,631
--------
Net Assets ....................................... $418,439
========
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($418,439,246/18,474,434
shares outstanding) ............................ $ 22.65
========
Statement of Operations
for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
Dollars
(in thousands)
------------
Investment Income:
Dividends ........................................ $ 1,948
Interest ......................................... 1,615
-------
Total Income ................................. 3,563
-------
Expenses:
Advisory fee ..................................... 2,529
Transfer agent fees .............................. 168
Postage .......................................... 57
Custodian fees ................................... 46
Auditing and legal fees .......................... 38
Printing and stationery .......................... 36
Telephone and wire charges ....................... 33
Registration and filing fees ..................... 18
Directors' fees and expenses ..................... 15
Insurance, dues and other ........................ 15
-------
Total Expenses before
Custody Credits ............................ 2,955
Less: Custody Credits ........................ (4)
-------
Net Expenses ................................. 2,951
-------
Net Investment Income ............................ 612
-------
Net Realized and Unrealized Gain
on Investments:
Net Realized Gain ............................ 13,338
Change in Net Unrealized
Appreciation ............................... 58,617
-------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ................................. 71,955
-------
Net Increase in Net Assets
from Operations ................................ $72,567
=======
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
<PAGE>
The Value Line Fund, Inc.
Statement of Changes in Net Assets
for the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Net investment income ............................................... $ 612 $ 2,391
Net realized gain on investments .................................... 13,338 48,276
Change in net unrealized appreciation ............................... 58,617 19,978
-------------------------
Net increase in net assets from operations............................. 72,567 70,645
-------------------------
Distributions to Shareholders:
Net investment income ............................................... (646) (2,392)
Net realized gain from investment transactions ...................... (8,809) (63,076)
-------------------------
Total distributions ................................................. (9,455) (65,468)
-------------------------
Capital Share Transactions:
Proceeds from sale of shares ........................................ 107,298 110,688
Proceeds from reinvestment of distributions to shareholders ......... 8,871 61,277
Cost of shares repurchased .......................................... (143,273) (143,582)
-------------------------
(Decrease) Increase from capital share transactions.................. (27,104) 28,383
-------------------------
Total Increase ........................................................ 36,008 33,560
Net Assets:
Beginning of year ................................................... 382,431 348,871
-------------------------
End of year ......................................................... $418,439 $382,431
=========================
Undistributed net investment income, at end of year ................... $ -- $ 34
=========================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
The Value Line Fund, Inc.
Notes to Financial Statements December 31, 1998
- --------------------------------------------------------------------------------
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 revenue 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 securiites are valued at amortized cost.
(B) Repurchase Agreements. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) Federal Income Taxes. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) Security Transactions and Distributions. Security transactions are accounted
for on the date the securities are purchased or sold. Interest income is accrued
as earned. Realized gains and losses on sales of securities are calculated for
financial accounting and federal income tax purposes on the identified cost
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
(E) Amortization. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
- --------------------------------------------------------------------------------
11
<PAGE>
The Value Line Fund, Inc.
Notes to Financial Statements December 31, 1998
- --------------------------------------------------------------------------------
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,
1998 1997
--------------------------
Shares sold .................................... 5,360 5,344
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ 411 3,348
----------------------
5,771 8,692
Shares repurchased ............................. 7,124 6,949
----------------------
Net (decrease) increase ........................ (1,353) 1,743
======================
Dividends per share from
net investment income ........................ $ .03 $.1416
======================
Distributions per share from
net realized gains ........................... $ .491 $3.792
======================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Year Ended
December 31,
1998
--------------
(in thousands)
Purchases:
Investment Securities .......................... $344,079
========
Sales:
Investment Securities .......................... $349,117
========
At December 31, 1998, the aggregate cost of investment securities and repurchase
agreement for federal income tax purposes was $243,970,000. The aggregate
appreciation and depreciation of investments at December 31, 1998, based on a
comparison of investment values and their costs for federal income tax purposes
was $174,079,000 and $448,000, respectively, resulting in a net appreciation of
$173,631,000.
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $2,529,000 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the year ended December 31, 1998.
This was computed at an annual 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.
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 a director of the Fund. During the year
ended December 31, 1998, the Fund paid brokerage commissions totalling $350,987
to the distributor, which clears its transactions through unaffiliated brokers.
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan owned 897,868 shares of the Fund's capital stock, representing
4.9% of the outstanding shares at December 31, 1998. In addition, certain
officers and directors of the Fund owned 169,568 shares of the Fund,
representing 0.9% of the outstanding shares.
- --------------------------------------------------------------------------------
12
<PAGE>
The Value Line Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $19.29 $19.29 $17.63 $14.36 $17.90
-------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................. .03 .14 .11 .12 .10
Net gains or losses on securities
(both realized and unrealized) ...... 3.85 3.79 3.88 4.47 (.93)
-------------------------------------------------------------------------------
Total from investment operations ........ 3.88 3.93 3.99 4.59 (.83)
-------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .... (.03) (.14) (.11) (.12) (.10)
Distributions from capital gains ........ (.49) (3.79) (2.22) (1.20) (2.61)
-------------------------------------------------------------------------------
Total distributions ..................... (.52) (3.93) (2.33) (1.32) (2.71)
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Net asset value, end of year .............. $22.65 $19.29 $19.29 $17.63 $14.36
===============================================================================
Total return .............................. 20.25% 21.59% 22.52% 32.12% -4.47%
===============================================================================
Ratios/Supplemental Data:
Net assets, end of year (in thousands) .... $418,439 $382,431 $348,871 $317,569 $272,763
Ratio of expenses to average net assets ... .77%(1) .78%(1) .80%(1) .83% .82%
Ratio of net investment income to
average net assets ...................... .16% .63% .55% .73% .54%
Portfolio turnover rate ................... 98% 68% 54% 78% 150%
</TABLE>
(1) After offset for custody credits. Excluding the custody credits would not
have changed the expense ratio.
See Notes to Financial Statements
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13
<PAGE>
The Value Line Fund, Inc.
Report of Independent Accountants
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To the Shareholders and Board of Directors 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, 1998, 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 generally accepted accounting principles.
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 generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
February 12, 1999
- --------------------------------------------------------------------------------
Other Information (unaudited)
Year 2000. Like other mutual funds, the Fund could be adversely affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.
- --------------------------------------------------------------------------------
Federal Tax Status of Distributions (unaudited)
For corporate taxpayers 100.00% of the ordinary income distributions paid during
the calendar year 1998 qualify for the corporate dividends received deductions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
<PAGE>
The Value Line Fund, Inc.
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15
<PAGE>
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 along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952--The Value Line Income Fund's primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks to obtain long-term growth of
capital by investing not less than 80% of its assets in "special situations". No
consideration is given to achieving current income.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979--The Value Line Cash Fund, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984--The Value Line Tax Exempt Fund seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985--Value Line Convertible Fund seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System
1986--Value Line Aggressive Income Trust seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income corporate securities.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal
individual income taxes while avoiding undue risk to principal.
1987--Value Line Strategic Asset Management Trust* invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times.
1993--Value Line Small-Cap Growth Fund invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993--Value Line Asset Allocation Fund seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
1995--Value Line U.S. Multinational Company Fund's investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* Only available through the purchase of 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 @ www.valueline.com. Read the prospectus
carefully before you invest or send money.
<PAGE>
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 419729
Kansas City, MO 64141-6729
INDEPENDENT PricewaterhouseCoopers LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
Directors Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Philip J. Orlando
Vice President
Alan N. Hoffman
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
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).
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