<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 Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company c/o NFDS
P.O. Box 419729, Kansas City, MO 64141-6729
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas, New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS
Jean Bernhard Buttner Leo R. Futia
Charles E. Reed Paul Craig Roberts
John W. Chandler
OFFICERS
Jean Bernhard Buttner Robert E. Manning
CHAIRMAN AND PRESIDENT VICE PRESIDENT
David T. Henigson
VICE PRESIDENT, SECRETARY/TREASURER
Harvey S. Katz
VICE PRESIDENT
Jack M. Houston Stephen La Rosa
ASSISTANT ASSISTANT
SECRETARY/TREASURER 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).
--------------------
SEMI-ANNUAL REPORT
June 30, 1995
----------------
THE VALUE LINE INCOME FUND, INC.
[LOGO]
VALUE LINE MUTUAL FUNDS
<PAGE>
[LOGO] TO OUR VALUE LINE INCOME FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
Against an ideal backdrop -- rising corporate profits together with falling
interest rates -- prices in the domestic stock and bond markets moved sharply
higher during the first six months of 1995. On February 1st, the Federal Reserve
announced the last in a series of boosts to its target for the Federal Funds
rate -- the rate at which banks borrow for overnight reserves. Market
participants correctly anticipated that the ensuing slowdown in economic growth
would prove sufficient to offer at least temporary relief from incipient
inflationary pressures. The yield on the benchmark 30-year U.S. Treasury bond
fell from 7.93% a week before the Fed announcement to a low of 6.52% on June
22nd. Translated to price appreciation, the bond moved up 18.6%. Stock prices,
as measured by the Standard and Poor's 500 Index, had begun to climb early in
December of 1994. From a low of 445.45 on December 8, 1994, the S&P 500 reached
a high of 562.72 in mid-July 1995, a gain of 26.3%.
Low inflation does not always constitute a recipe for strong earnings, but many
corporations faced easy profit comparisons with results from a year earlier. In
addition, the benefits of corporate restructuring began to emerge in the form of
higher productivity and important cost reductions. Finally, the push for higher
productivity and increased competitiveness fostered strong demand for capital
goods, especially those emphasizing the latest in high technology. The result
was a plethora of double-digit earnings gains across a broad spectrum of
corporations, with especially good results to be found among capital goods
producers, computer manufacturers, semiconductor makers, telecommunications
companies, and others in high-tech sectors.
REVIEW OF PERFORMANCE AND STRATEGY
Holdings in technology contributed strongly to a healthy performance by your
Fund during the first half of 1995. Our positions in IBM, Motorola, and
Hewlett-Packard all added to the Fund's gains. Nevertheless, stocks that
emphasize dividend income lagged the market, as they usually do during periods
of unusual market strength. Electric utilities and financial stocks, the
traditional staples of income-oriented portfolios, posted price gains that
lagged the market, while low-yielding stocks with an emphasis on growth and
technology were among the best performers. For the six months ended June 30,
1995, The Value Line Income Fund produced a total return including reinvested
dividends of 13.59%. For the 12 months ended June 30, 1995, the Fund returned
15.62%. For the last 12 months, an unmanaged index of equity performance, as
measured by the Standard and Poor's 500 Index, provided a total return of
26.07%. For the six months ended June 30, 1995, the Lehman Brothers
Government/Corporate Index, an unmanaged index of bonds, produced a return of
11.80%. The best bond-market performance was to be had in the longer maturity
sectors, which provide excellent returns when interest rates fall but are
subject to very high volatility. Bonds with shorter maturities and higher
coupons, which offered attractive yields, performed less well on a total-return
basis than did the broad market indexes.
STRATEGY FOR 1995
Our equity strategy during 1995 has continued to emphasize a reduction of market
risk through broad diversification of holdings across companies, industries, and
economic sectors. We reduced the sizes of some of our largest holdings of
individual stocks and broadened our industry diversification. We added shares of
International Flavors and Fragrances, Sysco, B.F. Goodrich, Diebold, and
PepsiCo. We took profits in some of our holdings that are particularly sensitive
to the economic cycle, with the sale of our full position in Microsoft, which
does not pay a dividend. We also reduced our positions in Coca Cola, Campbell's
Soup, Schering Plough, and Motorola. In order to add yield and improve the
geographic diversification of our utility holdings, we added positions in
SCEcorp, FPL Group, and Illinova, among the electrics.
The fixed-income component of the Income Fund consists of selected corporate
issues, mortgage-backed securities, and issues of the U.S. Treasury and
Agencies. The portfolio contains no derivative securities. Your Fund's
management believes that careful selection of bonds and equities will provide an
attractive yield while lending stability to the portfolio during times of market
volatility. The portfolio is well structured to meet its objective of high
current return without undue risk to principal.
We thank you for your continued confidence, and we look forward to serving your
investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
July 16, 1995
2
<PAGE>
ECONOMIC OBSERVATIONS
The economy slowed to a virtual crawl in the second quarter, with real,
inflation-adjusted gross domestic product rising by a scant 0.5%. This narrow
increase in growth, which follows much healthier expansion rates of 5.1% and
2.7% in the final quarter of 1994 and the first three months of this year,
respectively, was fueled principally by a mild pickup in consumer spending.
Sharply lower levels of housing construction and somewhat weaker auto production
numbers were the quarter's main depressants.
The recent slowing in business activity, however, is likely to prove short-lived
as recent data show that consumer spending is continuing to pick up, while the
sharp reduction in mortgage rates over the past several months seems to be
injecting some life into the housing market. Assuming that these positive trends
persist, we would expect economic growth to accelerate in the third and fourth
quarters. A moderate carryover effect is likely through at least the opening
months of 1996. The risk of recession, which seemed very real just a short time
ago, has lessened noticeably, in the past month or two.
But the news isn't all good. For example, the pending improvement on the
economic front is likely to dissuade the Federal Reserve Board from trimming
interest rates aggressively in the months ahead, since the added stimulus of
substantially lower borrowing costs would, presumably, not be needed. If that's
the case, the stock market, which continues to be partially underpinned by the
expectation of further interest rate reductions, would have a key support
mechanism removed.
*PERFORMANCE DATA
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
-------------- ---------------------
1 year ended 6/30/95. . . . . 15.62% $ 11,562
5 years ended 6/30/95 . . . . 9.28% $ 15,582
10 years ended 6/30/95. . . . 10.29% $ 26,621
*THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN 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 INCOME FUND, INC.
PORTFOLIO HIGHLIGHTS AT JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN LARGEST COMMON STOCK HOLDINGS
- ----------------------------------------------------------------------------------------------
DOLLARS PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Abbott Laboratories 75,000 $ 3,037 2.2%
Telecomm Corp. of New Zealand Ltd. (ADR) 50,000 3,031 2.2
Coca-Cola Co. 45,000 2,869 2.1
Motorola, Inc. 40,000 2,685 2.0
Northrop Grumman Corp. 50,000 2,606 1.9
Schering-Plough Corp. 54,000 2,383 1.7
General Electric Co. 40,000 2,255 1.7
TCF Financial Corp. 45,000 2,138 1.6
Exxon Corp. 30,000 2,119 1.6
Hewlett-Packard Co. 27,400 2,041 1.5
- ----------------------------------------------------------------------------------------------
<CAPTION>
FIVE LARGEST COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
DOLLARS PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Thrift $ 6,274 4.6%
Beverage-Soft Drink 4,594 3.5
Foreign Telecommunications 4,224 3.1
Electric Utility-West 4,087 3.0
Computer & Peripherals 3,961 2.9
- --------------------------------------------------------------------------------
<CAPTION>
FIVE LARGEST SECURITY PURCHASES*+
- --------------------------------------------------------------------------------
COST
ISSUE (IN THOUSANDS)
- --------------------------------------------------------------------------------
<S> <C>
Timken Co. $1,783
Automatic Data Processing, Inc. 1,741
PacifiCorp 1,730
PepsiCo Inc. 1,552
Southwestern Public Service Co. 1,430
- --------------------------------------------------------------------------------
<CAPTION>
FIVE LARGEST SECURITY SALES*+
- --------------------------------------------------------------------------------
PROCEEDS
ISSUE (IN THOUSANDS)
- --------------------------------------------------------------------------------
<S> <C>
Equifax, Inc. $3,241
Barrick Gold Corp. 2,408
SBC Communications, Inc. 2,167
Briggs & Stratton Corp. 2,048
Broken Hill Proprietary Co. Ltd. (ADR) 1,850
- --------------------------------------------------------------------------------
<FN>
* EXCLUSIVE OF FIXED INCOME SECURITIES.
+ FOR THE SIX MONTHS ENDED 6/30/95.
</TABLE>
4
<PAGE>
THE VALUE LINE INCOME FUND, INC.
SCHEDULE OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (IN THOUSANDS)
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (61.7%)
AEROSPACE/DEFENSE (1.9%)
50,000 Northrop Grumman Corp. . . . . . . . . . . . . . . $ 2,606
AUTO PARTS - ORIGINAL EQUIPMEMT (0.8%)
30,000 Modine Manufacturing Co. . . . . . . . . . . . . . 1,103
BANK (1.0%)
35,000 Bank of New York Co., Inc. . . . . . . . . . . . . 1,413
BANK-MIDWEST (0.9%)
40,000 National City Corp.. . . . . . . . . . . . . . . . 1,175
BEVERAGE-SOFT DRINK (3.5%)
45,000 Coca-Cola Co. . . . . . . . . . . . . . . . . . . 2,869
40,000 PepsiCo Inc. . . . . . . . . . . . . . . . . . . . 1,825
---------
4,694
BROADCASTING/CABLE TV (1.2%)
14,600 Capital Cities/ABC, Inc. . . . . . . . . . . . . . 1,577
CANADIAN ENERGY (0.8%)
30,000 Imperial Oil Ltd. . . . . . . . . . . . . . . . . 1,114
CHEMICAL-BASIC (2.1%)
46,700 Lyondell Petrochemical Co. . . . . . . . . . . . . 1,196
50,000 Union Carbide Corp. . . . . . . . . . . . . . . . 1,669
---------
2,865
CHEMICAL-DIVERSIFIED (1.2%)
21,200 Goodrich (B.F.) Co. . . . . . . . . . . . . . . . 1,137
20,000 Pall Corp. . . . . . . . . . . . . . . . . . . . . 445
---------
1,582
CHEMICAL-SPECIALTY (0.7%)
20,000 International Flavors & Fragrances Inc.. . . . . . 995
COMPUTER & PERIPHERALS (2.9%)
27,400 Hewlett-Packard Co. . . . . . . . . . . . . . . . 2,041
20,000 International Business Machines, Inc.. . . . . . . 1,920
---------
3,961
COMPUTER SOFTWARE & SERVICES (2.0%)
24,100 Autodesk, Inc. . . . . . . . . . . . . . . . . . . 1,036
27,500 Automatic Data Processing, Inc.. . . . . . . . . . 1,729
---------
2,765
COPPER (0.4%)
20,000 Asarco, Inc. . . . . . . . . . . . . . . . . . . . 610
DRUG (1.7%)
54,000 Schering-Plough Corp.. . . . . . . . . . . . . . . 2,383
ELECTRIC UTILITY - CENTRAL (2.0%)
50,000 Illinova Corp. . . . . . . . . . . . . . . . . . . 1,269
50,000 Southwestern Public Service Co.. . . . . . . . . . 1,475
---------
2,744
ELECTRIC UTILITY - EAST (1.0%)
35,000 FPL Group, Inc.. . . . . . . . . . . . . . . . . . 1,352
ELECTRIC UTILITY - WEST (3.0%)
90,000 PacifiCorp . . . . . . . . . . . . . . . . . . . . 1,688
45,000 Puget Sound Power & Light Co.. . . . . . . . . . . 1,029
80,000 SCEcorp. . . . . . . . . . . . . . . . . . . . . . 1,370
---------
4,087
ELECTRICAL EQUIPMENT (1.7%)
40,000 General Electric Co. . . . . . . . . . . . . . . . 2,255
FINANCIAL SERVICES (0.8%)
25,000 Travelers Group Inc. . . . . . . . . . . . . . . . 1,094
FOOD PROCESSING (1.4%)
55,000 ConAgra, Inc.. . . . . . . . . . . . . . . . . . . 1,918
FOOD WHOLESALERS (0.9%)
40,000 Sysco Corp.. . . . . . . . . . . . . . . . . . . . 1,180
5
<PAGE>
THE VALUE LINE INCOME FUND, INC.
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 1995
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- --------------------------------------------------------------------------------
<C> <S> <C>
FOREIGN TELECOMMUNICATIONS (3.1%)
60,000 Hong Kong Telecommunications, Ltd. (ADR) . . . . . $ 1,193
50,000 Telecom Corp. of New Zealand Ltd. (ADR) . . . . . 3,031
---------
4,224
HOME APPLIANCE (1.3%)
55,500 Black & Decker Corp. . . . . . . . . . . . . . . . 1,714
HOUSEHOLD PRODUCTS (1.0%)
20,000 Clorox Co. . . . . . . . . . . . . . . . . . . . . 1,305
INSURANCE-DIVERSIFIED (0.8%)
10,000 American International Group, Inc. . . . . . . . . 1,140
INSURANCE-LIFE (0.6%)
16,000 Jefferson-Pilot Corp.. . . . . . . . . . . . . . . 876
MEDICAL SUPPLIES (2.2%)
75,000 Abbott Laboratories. . . . . . . . . . . . . . . . 3,037
METAL FABRICATING (1.4%)
40,000 Timken Co. . . . . . . . . . . . . . . . . . . . . 1,845
NATURAL GAS-DIVERSIFIED (2.4%)
75,000 Panhandle Eastern Corp.. . . . . . . . . . . . . . 1,828
40,000 Williams Companies, Inc. . . . . . . . . . . . . . 1,395
---------
3,223
OFFICE EQUIPMENT & SUPPLIES (0.9%)
27,000 Diebold, Inc.. . . . . . . . . . . . . . . . . . . 1,174
OILFIELD SERVICES/EQUIPMENT (0.7%)
27,200 Halliburton Co.. . . . . . . . . . . . . . . . . . 972
PACKAGING & CONTAINER (1.0%)
40,000 Ball Corp. . . . . . . . . . . . . . . . . . . . . 1,395
PETROLEUM-INTEGRATED (1.6%)
30,000 Exxon Corp.. . . . . . . . . . . . . . . . . . . . 2,119
R.E.I.T (2.0%)
50,000 BRE Properties Inc. Class "A". . . . . . . . . . . 1,550
50,000 New Plan Realty Trust (SBI). . . . . . . . . . . . 1,119
---------
2,669
RESTAURANT (1.1%)
40,000 McDonald's Corp. . . . . . . . . . . . . . . . . . 1,565
SEMICONDUCTOR (2.0%)
40,000 Motorola, Inc. . . . . . . . . . . . . . . . . . . 2,685
STEEL-GENERAL (0.8%)
20,000 Nucor Corp.. . . . . . . . . . . . . . . . . . . . 1,070
TELECOMMUNICATIONS
SERVICE (1.5%)
35,000 Century Telephone Enterprises, Inc.. . . . . . . . 993
40,000 Cincinnati Bell, Inc.. . . . . . . . . . . . . . . 1,010
---------
2,003
THRIFT (4.6%)
90,000 * Glendale Federal Bank. . . . . . . . . . . . . . . 1,125
90,000 Great Western Financial Corp.. . . . . . . . . . . 1,856
40,000 JSB Financial Corp.. . . . . . . . . . . . . . . . 1,155
45,000 TCF Financial Corp.. . . . . . . . . . . . . . . . 2,138
---------
6,274
TOILETRIES/COSMETICS (0.8%)
25,600 Gillette Co. . . . . . . . . . . . . . . . . . . . 1,142
---------
TOTAL COMMON STOCKS (Cost $71,318) . . . . . . . . 83,905
---------
6
<PAGE>
THE VALUE LINE INCOME FUND, INC.
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 1995
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL AMOUNT VALUE
(IN THOUSANDS) (IN THOUSANDS)
- --------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS (2.9%)
ELECTRIC UTILITY-CENTRAL (0.9%)
50,000 Texas Utilities Electric Co.
Series "B" depositary
$1.805 Cum Pfd. . . . . . . . . . . . . . . . . . $ 1,181
PETROLEUM-INTEGRATED (2.0%)
125,000 Texaco Capital LLC Series "A"
$1.71875 MIPS Pfd.. . . . . . . . . . . . . . . . 2,813
---------
TOTAL PREFERRED STOCKS
(Cost $4,375). . . . . . . . . . . . . . . . . . . 3,994
---------
CORPORATE BONDS AND NOTES (8.5%)
APPAREL (1.5%)
$ 2,000 Tultex Corp. 10.625% Notes, 3/15/05. . . . . . . . 2,027
FINANCIAL SERVICES (3.7%)
5,000 McDonnell Douglas Finance Corp.
7 3/8%, Series "A" Notes, 11/15/05. . . . . . . . 5,092
INSURANCE-DIVERSIFIED (1.4%)
1,500 Pioneer Financial Services, Inc.
8%, Sub. Conv. Deb., 7/15/00. . . . . . . . . . . 1,860
MARITIME (0.4%)
500 Eletson Holdings Inc. 9 1/4%,
Mortgage Notes, 11/15/03. . . . . . . . . . . . . 489
NATURAL GAS-DISTRIBUTION (0.6%)
750 Trident NGL, Inc. 10 1/4%, Notes, 4/15/03. . . . . 836
PUBLISHING (0.9%)
1,500 Western Publishing Group, Inc.
7.65%, Notes, 9/15/02. . . . . . . . . . . . . . 1,223
---------
TOTAL CORPORATE BONDS & NOTES (Cost $11,221). . . 11,527
---------
U.S. TREASURY OBLIGATIONS (7.5%)
10,000 U.S. Treasury Notes 6 1/2%, 4/30/99. . . . . . . . 10,184
---------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $9,936). . . 10,184
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%)
5,600 Federal Farm Credit Banks 5.83%, 12/21/95. . . . . 5,598
4,000 Federal National Mortgage Association 8.70%,
REMIC Trust 1989-90 E, 12/25/19 . . . . . . . . . 4,170
---------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $9,603) . . . . . . . . . . . . 9,768
---------
TOTAL INVESTMENT SECURITIES
(87.8%) (Cost $106,453) . . . . . . . . . . . . . 119,378
---------
SHORT-TERM INVESTMENTS (12.0%) (INCLUDING ACCRUED INTEREST)
16,300 Federal Home Loan Mortgage Corp.
Discount Notes 6.10%, 7/3/95. . . . . . . . . . . 16,294
---------
TOTAL SHORT-TERM INVESTMENTS (Cost $16,294). . . . 16,294
---------
CASH AND RECEIVABLES LESS LIABILITIES (0.2%) . . . . . . . . 340
---------
NET ASSETS (100.0%). . . . . . . . . . . . . . . . . . . . . $ 136,012
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($136,012,000 DIVIDED BY
19,581,216 shares outstanding) . . . . . . . . . . . . . . . $ 6.95
---------
---------
<FN>
* NON-INCOME PRODUCING.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
THE VALUE LINE INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS
(IN THOUSANDS
EXCEPT PER-SHARE
AMOUNT)
----------------
<S> <C>
ASSETS:
Investment securities, at value (Cost--$106,453) . . . . . . $ 119,378
Short-term investments (Cost--$16,294) . . . . . . . . . . 16,294
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Dividends and interest receivable. . . . . . . . . . . . . . 500
Receivable for capital shares sold . . . . . . . . . . . . . 2
---------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . 136,202
---------
LIABILITIES:
Payable for capital shares repurchased . . . . . . . . . . . 42
Accrued expenses:
Advisory fee. . . . . . . . . . . . . . . . . . . . . 77
Other . . . . . . . . . . . . . . . . . . . . . . . . 71
---------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . 190
---------
NET ASSETS:
Capital stock, at $1.00 par value (authorized 50,000,000,
outstanding 19,581,216 shares). . . . . . . . . . . . . 19,581
Additional paid-in capital . . . . . . . . . . . . . . . . . 104,494
Undistributed investment income--net . . . . . . . . . . . . 229
Accumulated net realized loss on investments . . . . . . . . (1,217)
Accumulated net appreciation of investments. . . . . . . . . 12,925
---------
Net Assets . . . . . . . . . . . . . . . . . . . . $ 136,012
---------
---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($136,012,000 DIVIDED BY
19,581,216 SHARES OUTSTANDING) . . . . . . . . . . $ 6.95
---------
---------
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS
(IN THOUSANDS)
---------------
<S> <C>
INVESTMENT INCOME:
Interest. . . . . . . . . . . . . . . . . . . . . . . . $ 1,512
Dividends (Net of foreign withholding taxes of $1). . . 1,206
---------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . 2,718
---------
EXPENSES:
Advisory fee. . . . . . . . . . . . . . . . . . . . . . 452
Transfer agent fees . . . . . . . . . . . . . . . . . . 62
Auditing and legal fees . . . . . . . . . . . . . . . . 25
Postage . . . . . . . . . . . . . . . . . . . . . . . . 18
Telephone and wire charges. . . . . . . . . . . . . . . 15
Registration and filing fees. . . . . . . . . . . . . . 15
Printing and stationery . . . . . . . . . . . . . . . . 14
Directors' fees and expenses. . . . . . . . . . . . . . 6
Custodian fees. . . . . . . . . . . . . . . . . . . . . 5
Insurance, dues, and other. . . . . . . . . . . . . . . 5
---------
TOTAL EXPENSES . . . . . . . . . . . . . . . . . . 617
---------
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . 2,101
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET:
Realized Loss--Net . . . . . . . . . . . . . . . . (123)
Change in Unrealized
Appreciation (Depreciation). . . . . . . . . . . . 14,883
---------
NET REALIZED LOSS AND CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) ON INVESTMENTS. . . . . . . 14,760
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . $ 16,861
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
THE VALUE LINE INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED),
AND FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, 1995 ENDED
(UNAUDITED) DECEMBER 31, 1994
------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,101 $ 4,758
Realized loss on investments--net. . . . . . . . . . . . . . . . . . . . . . . . . (123) (1,094)
Change in unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . 14,883 (10,492)
--------- ---------
Net increase (decrease) in net assets from operations. . . . . . . . . . . . . . . 16,861 (6,828)
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Investmemt income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,973) (4,657)
Realized gain from investment transactions--net. . . . . . . . . . . . . . . -- (1,130)
--------- ---------
(1,973) (5,787)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . 1,975 5,172
Net proceeds from reinvestment of distributions to shareholders. . . . . . . . . . 1,522 4,538
Cost of shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,017) (27,786)
--------- ---------
Decrease from capital share transactions . . . . . . . . . . . . . . . . . . . . . (10,520) (18,076)
--------- ---------
TOTAL INCREASE (DECREASE). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,368 (30,691)
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,644 162,335
--------- ---------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,012 $ 131,644
--------- ---------
--------- ---------
Undistributed Investment Income--net, at end of period . . . . . . . . . . . . . . . $ 229 $ 101
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
THE VALUE LINE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1995
- --------------------------------------------------------------------------------
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. 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 price 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 which 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.
The Board of Directors has determined that the value of bonds and other
fixed-income securities be calculated on the valuation date by reference to
valuations obtained from an independent pricing service which determines
valuations for normal institutional-size trading units of debt securities,
without exclusive reliance upon quoted prices. This service takes into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data in determining valuations.
(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
<PAGE>
THE VALUE LINE INCOME FUND, INC.
(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.
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS, AND DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows (in thousands except per-share
amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
---------------- ------------
<S> <C> <C>
Shares sold. . . . . . . . . . . . . . . . . 299 793
Shares issued to shareholders in
reinvestment of dividends and
distributions . . . . . . . . . . . . . . . 227 713
------- --------
526 1,506
Shares repurchased . . . . . . . . . . . . . 2,156 4,271
------- --------
Net decrease . . . . . . . . . . . . . . . . (1,630) (2,765)
------- --------
------- --------
Dividends per share. . . . . . . . . . . . . $ .10 $ .21400
------- --------
------- --------
Distributions per share from net realized
gains . . . . . . . . . . . . . . . . . . . $ -- $ .05383
------- --------
------- --------
</TABLE>
On June 30, 1995, the Board of Directors declared a dividend from investment
income of $.05 per share to shareholders of record September 13, 1995, payable
September 19, 1995.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
(UNAUDITED)
---------------
(IN THOUSANDS)
<S> <C>
PURCHASES:
U.S. Treasury and Government Agency Obligations. . . . . $ 10,001
Other Investment Securities. . . . . . . . . . . . . . . 35,088
--------
$ 45,089
--------
--------
SALES:
U.S. Treasury and Government Agency Obligations. . . . . $ 14,233
Other Investment Securities. . . . . . . . . . . . . . . 41,969
--------
$ 56,202
--------
--------
</TABLE>
At June 30, 1995, the aggregate cost of investment securities and
short-term investments for federal income tax purposes was
$122,747,000. The aggregate appreciation and depreciation of
investments at June 30, 1995, based on a comparison of investment values
and their costs for federal income tax purposes, was $13,795,000 and
$870,000, respectively, resulting in a net appreciation of $12,925,000.
For federal income tax purposes, the Fund had a net capital loss
carryover at December 31, 1994, of approximately $535,000, which will
expire in the year 2002. Realized losses incurred after October 31, if
so
11
<PAGE>
THE VALUE LINE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
elected by the Fund, are deemed to arise on the first day of the
following fiscal year. The Fund incurred and elected to defer losses of
approximately $516,000 during the fiscal year ended December 31, 1994.
To the extent future capital gains are offset by such capital losses,
the Fund does not anticipate distributing any such gains to the
shareholders.
4. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES, AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $452,000 was paid or payable to Value Line, Inc., the
Fund's investment adviser ("Adviser"), for the six months ended June 30,
1995. 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,
and 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. If the aggregate expenses of the Fund,
other than taxes, interest, brokerage commissions, and extraordinary
expenses, exceed the expense limitation imposed by any state in which
the Fund's shares are sold, the advisory fee will be reduced by the
amount of such excess, or the amount of such excess will be refunded.
No such reimbursement was required for the six months ended June 30,
1995.
A fee of $1,890 for printing services was paid or payable to the Adviser
for the six months ended June 30, 1995.
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 six months ended June 30, 1995, the Fund paid
brokerage commissions totalling $69,000 to the Distributor, which clears
its transactions through unaffiliated brokers.
The Adviser and/or affiliated companies owned 759,172 shares of the
Fund's capital stock, representing 3.9% of the outstanding shares at
June 30, 1995.
12
<PAGE>
THE VALUE LINE INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 -------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 6.21 $ 6.77 $ 7.29 $ 7.86 $ 6.39 $ 6.66
------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . .11 .21 .21 .28 .31 .36
Net gains or losses on securities
(both realized and unrealized) . . . . . . . . . . . . .73 (.51) .38 (.15) 1.47 ( .24)
------ ------ ------ ------ ------ ------
Total from investment operations . . . . . . . . . . . .84 (.30) .59 .13 1.78 .12
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income . . . . . . . . . ( .10) ( .21) (.22) ( .28) ( .31) ( .39)
Distributions from capital gains . . . . . . . . . . . -- ( .05) ( .89) (.42) -- --
------ ------ ------ ------ ------ ------
Total distributions. . . . . . . . . . . . . . . . . . ( .10) ( .26) (1.11) ( .70) ( .31) ( .39)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 6.95 $ 6.21 $ 6.77 $ 7.29 $ 7.86 $ 6.39
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . 13.59%+ -4.36% 8.26% 1.75% 28.50% 2.00%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $136,012 $131,644 $162,335 $163,251 $172,200 $140,990
Ratio of operating expenses to average net assets. . . . . .94%* .90% .88% .89% .74% .77%
Ratio of net investment income to average net assets . . . 3.19%* 3.29% 2.82% 3.69% 4.37% 5.59%
Portfolio turnover rate. . . . . . . . . . . . . . . . . . 38%+ 56% 165% 85% 67% 57%
<FN>
+ Not annualized
* Annualized
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
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. The Fund is available to investors only through
the purchase of Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
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 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 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. The Fund is available to investors only through the
purchase of the Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1992 -- THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND seeks
high current income consistent with low volatility of principal by investing
primarily in adjustable rate U.S. Government securities.
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.
- --------------------------------------------------------------------------------
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. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
14
