------------------
SEMI-ANNUAL REPORT
------------------
JUNE 30, 1998
------------------
The Value Line
Income
Fund, Inc.
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
The Value Line Income Fund, Inc.
To Our Value Line
- --------------------------------------------------------------------------------
To Our Shareholders:
The stock market posted strong returns in the first half of 1998, with the
unmanaged Standard & Poor's 500 Index up 17.7%. During the March quarter, the
S&P 500 rebounded sharply as investors shrugged off concerns surrounding the
economic woes in Asia that were so pervasive at the end of 1997. The S&P 500
soared 13.1% in the first three months of the year. However, fears about the
Pacific Rim and Japan, in particular, resurfaced in the June quarter, and the
S&P 500 rose only 3.3%.
REVIEW OF PERFORMANCE AND STRATEGY
For the six-month period ended June 30, 1998, the Value Line Income Fund, Inc.
achieved a total return of 10.92%. This was below the 12.29% return of a
comparable unmanaged benchmark consisting of the combined performance of the
Standard & Poor's 500 Index/Lehman Government Corporate Bond Index at a ratio of
60%/40%. Separately, the Standard & Poor's 500 Index posted a return of 17.71%
and the Lehman Government Corporate Bond Index, an increase of 4.17%. Although
the Fund lagged the benchmark during the first quarter (7.64% versus 8.98%),
performance improved in the second quarter with the Fund returning 3.04%, about
even with the benchmark return of 3.03%.
During the first half of 1998, large-cap stocks outperformed small-cap names.
Investor sentiment favored large, liquid, multinational, market leaders, bidding
up the prices of such stocks as Cisco Systems, Dell Computer, Microsoft, The Gap
and Pfizer. The Value Line Income Fund benefited from strong performance in the
technology, consumer cyclicals and healthcare sectors, but was hurt by holdings
in energy.
The bond market was fairly volatile. The yield on 30-year Treasuries peaked in
March and April at 6.1%, and then fell as low as 5.6% in June. The Lehman
Government Corporate Bond Index benefited from the rally, rising 4.2% in the
first six months of 1998--1.5% in the March quarter and 2.6% in the June
quarter.
STRATEGY FOR 1998
As we look toward the second half of 1998, we remain somewhat cautious. The
economic environment remains healthy, providing a strong backdrop for the
capital markets. Continued economic growth, low inflation, rising corporate
profits and fairly stable to declining long-term interest rates characterize the
economy. We are not overly concerned about the possibility of rising interest
rates given the deflationary forces at work as a result of the crisis in Asia.
However, the economic downturn in the Pacific Rim countries represents a
significant uncertainty. In this investment climate, we favor broad
diversification across many sectors, with an emphasis on those industries
offering attractive growth opportunities. Our largest sector weightings include
technology, finance, consumer cyclicals, and healthcare.
In terms of fixed-income securities, the Income Fund includes selected corporate
issues, mortgage-backed securities, convertibles, and issues of the U.S.
Treasury and Agencies. There are no derivatives in the portfolio.
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 look forward to serving your
investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
August 10, 1998
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2
<PAGE>
The Value Line Income Fund, Inc.
Income Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The U.S. economy has slowed considerably since the early part of this year,
principally as a result of the fallout from the deepening financial crisis now
gripping much of Asia. Specifically, GDP, which expanded at a frenetic 5.5% pace
during the opening three months of 1998, came in with just a modest 1.4% gain in
the second quarter. Moreover, based on the data released since then, we believe
that the current expansion will not strengthen appreciably over the final six
months of the year.
At this point, though, we do not believe that this slower pace of economic
activity is the forerunner of a recession. Our sense is that the Asian crisis
will gradually recede over the next year and that the continuing low rate of
inflation in this country will encourage the Federal Reserve to keep a steady
hand on the monetary reins. That combination should help to keep this nation's
economy moving forward, albeit slowly.
But even a modest deceleration in U.S. economic activity is likely to mean a
further slowing in overall corporate profit growth. With equity valuations at
elevated levels, such a slowing in profit growth will lead to accentuated
volatility in the financial markets.
*Performance Data:
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
------------ ------------
1 year ended 6/30/98 ...................... 19.29% $11,929
5 years ended 6/30/98 ..................... 13.49% $18,824
10 years ended 6/30/98 ..................... 13.01% $33,972
* The performance data quoted represent past performance and are no guarantee
of future performance. The average annual total returns and growth of an
assumed investment of $10,000 include dividends reinvested and capital
gains distributions accepted in shares. The investment return and principal
value of an investment will fluctuate so that an investment, when redeemed,
may be worth more or less than its original cost.
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3
<PAGE>
<TABLE>
<CAPTION>
The Value Line Income Fund, Inc.
Portfolio Highlights at June 30, 1998 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Largest Holdings
Principal
Amount Value Percentage of
Issue or Shares (in thousands) Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Notes 6 1/2% 4/30/99 ................................ $10,000,000 $ 10,081 6.0%
WorldCom, Inc. ................................................... 144,902 7,019 4.2
Pfizer, Inc. ..................................................... 52,000 5,652 3.4
U.S. Treasury Notes 57/8% 6/30/00 ................................ 5,000,000 5,035 3.0
Federal National Mortgage Association
6.32%, Note, 7/28/03 ........................................... 5,000,000 4,998 3.0
Schering-Plough Corp. ............................................ 46,000 4,215 2.5
Diamond Offshore Drilling, Inc.
3.75%, Sub. Note Conv., 2/15/07 ................................ 3,000,000 3,465 2.1
Microsoft Corp. .................................................. 31,000 3,360 2.0
AES Trust II 5.50%, Conv. Pfd., 9/30/12 .......................... 60,000 3,338 2.0
Cisco Systems, Inc. .............................................. 36,250 3,337 2.0
<CAPTION>
Five Largest Industry Categories
Industry Value Percentage of
(in thousands) Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Drug ............................................................. $ 14,833 8.8%
Oilfield Services/Equipment ...................................... 11,410 6.8
Telecommunication Services ....................................... 8,504 5.1
Computer Software & Services ..................................... 8,366 5.0
Computer & Peripehrals ........................................... 8,024 4.8
<CAPTION>
Five Largest Net Security Purchases*
Cost
(in thousands)
Issue
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Merck & Co., Inc. ................................................ $ 2,183
Gillette Co. ..................................................... 1,834
Safeway Inc. ..................................................... 1,822
EMC Corp. ........................................................ 1,715
AccuStaff Inc. ................................................... 1,711
<CAPTION>
Five Largest Net Security Sales*
Proceeds
(in thousands)
Issue
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
SLM Holding Corp. ................................................ $ 3,764
Imperial Oil, Ltd. ............................................... 3,142
USX-Marathon Group ............................................... 2,387
Tidewater, Inc. .................................................. 2,259
Newbridge Networks Corp. ......................................... 2,052
</TABLE>
* For the six month period ended 06/30/98
- --------------------------------------------------------------------------------
4
<PAGE>
The Value Line Income Fund, Inc.
Schedule of Investments (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS (70.3%)
ADVERTISING (1.9%)
63,000 Omnicom Group, Inc............................. $ 3,142
AIR TRANSPORT (0.5%)
26,000 Airborne Freight Corp.......................... 908
AUTO PARTS--
REPLACEMENT (0.2%)
6,000 Federal Mogul Corp............................. 405
BANK (3.8%)
13,500 BankAmerica Corp............................... 1,167
21,000 BankBoston Corporation......................... 1,168
8,500 First Union Corp............................... 495
9,000 Mellon Bank Corp............................... 627
7,000 NationsBank Corp............................... 535
21,000 Synovus Financial Corp......................... 499
37,000 Zions Bancorporation........................... 1,966
-------
6,457
BANK--MIDWEST (1.5%)
16,750 Fifth Third Bancorp............................ 1,055
15,500 Norwest Corp................................... 580
15,000 Star Banc Corp................................. 958
--------
2,593
CABLE TV (0.5%)
21,000 Tele-Communications, Inc.
TCI Group Series "A"* ..................... 807
COMPUTER &
PERIPHERALS (4.8%)
36,250 Cisco Systems, Inc.*........................... 3,337
19,000 Compaq Computer Corp........................... 539
14,000 Dell Computer Corp.*........................... 1,300
40,500 EMC Corp.*..................................... 1,815
9,000 International Business
Machines Corp.............................. 1,033
--------
8,024
COMPUTER SOFTWARE &
SERVICES (5.0%)
33,000 BMC Software Inc.*............................. 1,714
23,050 Computer Associates
International, Inc......................... 1,281
31,000 Microsoft Corp.*............................... 3,360
11,250 Network Associates, Inc.*...................... 538
14,250 Paychex, Inc................................... 580
19,000 PeopleSoft, Inc.*.............................. 893
--------
8,366
DIVERSIFIED
COMPANIES (1.5%)
20,500 Tyco International, Ltd........................ 1,292
13,000 United Technologies Corp....................... 1,202
--------
2,494
DRUG (8.8%)
30,000 ICN Pharmaceuticals, Inc....................... 1,370
19,000 Lilly (Eli) & Co............................... 1,255
17,500 Merck & Co., Inc............................... 2,341
52,000 Pfizer, Inc.................................... 5,652
46,000 Schering-Plough Corp........................... 4,215
--------
14,833
DRUGSTORE (0.4%)
15,910 CVS Corp....................................... 620
ELECTRICAL
EQUIPMENT (1.8%)
34,000 General Electric Co............................ 3,094
ENTERTAINMENT (1.1%)
12,000 Clear Channel
Communications, Inc.*...................... 1,309
6,000 Time Warner Inc................................ 513
--------
1,822
ENVIRONMENTAL (0.3%)
23,000 Allied Waste Industries, Inc.*................. 552
- --------------------------------------------------------------------------------
5
<PAGE>
The Value Line Income Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.9%)
10,500 Capital One Financial Corp..................... $ 1,304
26,000 FINOVA Group, Inc. (The)....................... 1,472
36,000 Travelers Group, Inc........................... 2,182
--------
4,958
FURNITURE/HOME
FURNISHINGS (0.6%)
20,000 Ethan Allen Interiors, Inc..................... 998
GROCERY (1.9%)
8,000 Albertson's, Inc............................... 415
27,500 Food Lion, Inc. Class "B"...................... 277
12,000 Kroger Co.*.................................... 514
48,500 Safeway Inc.*.................................. 1,973
--------
3,179
HEALTHCARE INFORMATION
SYSTEMS (1.0%)
47,000 HBO & Co....................................... 1,657
HOME APPLIANCE (0.4%)
13,000 Maytag Corp.................................... 642
INDUSTRIAL
SERVICES (1.0%)
54,500 AccuStaff Inc.*................................ 1,703
INSURANCE--
DIVERSIFIED (0.7%)
5,000 American International
Group, Inc................................. 730
9,000 MGIC Investment Corp........................... 514
--------
1,244
INSURANCE--LIFE (0.8%)
23,000 SunAmerica Inc................................. 1,321
INSURANCE--PROPERTY/
CASUALTY (0.8%)
15,000 Allstate Corp. (The)........................... 1,373
INTERNET (0.4%)
6,500 America Online, Inc.*.......................... 689
MEDICAL SUPPLIES (3.3%)
6,000 Cardinal Health, Inc........................... 562
31,500 Guidant Corp................................... 2,246
11,000 McKesson Corp.................................. 894
29,000 Medtronic, Inc................................. 1,849
--------
5,551
OFFICE EQUIPMENT &
SUPPLIES (0.9%)
33,000 Staples, Inc.*................................. 955
8,000 United Stationers, Inc.*....................... 518
--------
1,473
OILFIELD SERVICES/
EQUIPMENT (3.7%)
39,500 Baker Hughes Inc............................... 1,365
34,000 Halliburton Co................................. 1,515
21,500 Schlumberger Ltd............................... 1,469
42,500 Transocean Offshore, Inc....................... 1,891
--------
6,240
PACKAGING &
CONTAINER (0.3%)
9,000 AptarGroup, Inc................................ 560
RECREATION (0.8%)
36,000 Carnival Corp.................................. 1,427
RETAIL--
SPECIAL LINES (2.4%)
24,000 Bed Bath & Beyond Inc.*........................ 1,243
24,500 Gap, Inc....................................... 1,510
54,000 TJX Companies, Inc............................. 1,303
--------
4,056
RETAIL BUILDING
SUPPLY (1.5%)
17,000 Home Depot, Inc. (The)......................... 1,412
28,000 Lowes Companies, Inc........................... 1,136
--------
2,548
- --------------------------------------------------------------------------------
6
<PAGE>
The Value Line Income Fund, Inc.
June 30, 1998
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
RETAIL STORE (2.5%)
14,500 Consolidated Stores Corp.*..................... $ 525
26,000 Dayton Hudson Corp............................. 1,261
28,000 Dollar General Corp............................ 1,108
21,000 Wal-Mart Stores, Inc........................... 1,276
--------
4,170
SEMICONDUCTOR (1.3%)
29,500 Intel Corp..................................... 2,187
SEMICONDUCTOR
CAPITAL
EQUIPMENT (0.4%)
22,500 Applied Materials, Inc.*....................... 664
TELECOMMUNICATIONS EQUIPMENT (1.5%)
36,500 Tellabs, Inc.*................................. 2,614
TELECOMMUNICATION
SERVICES (4.2%)
144,902 WorldCom, Inc.*................................ 7,019
TEXTILE (0.8%)
40,000 Westpoint Stevens Inc.*........................ 1,320
THRIFT (3.1%)
32,000 Federal Home Loan
Mortgage Corp.............................. 1,506
43,500 Federal National Mortgage
Association................................ 2,643
24,000 Washington Mutual, Inc......................... 1,042
--------
5,191
TOILETRIES/
COSMETICS (1.0%)
31,000 Gillette Co.................................... 1,757
--------
TOTAL COMMON
STOCKS (Cost $80,311) ....................... 118,658
--------
PREFERRED STOCKS (6.9%)
COAL/ALTERNATE
ENERGY (2.0%)
60,000 AES Trust II 5.50%,
Conv. Pfd., 9/30/12........................ 3,338
ELECTRICAL
EQUIPMENT (0.5%)
50,000 Cooper Industries, Inc.
6% Exchangeable
Notes, 1/1/99 ............................. 881
ENVIRONMENTAL (1.1%)
50,000 Laidlaw One, Inc. 53/4%,
Exchangeable Notes,
12/31/2000 ................................ 1,825
OILFIELD SERVICES/
EQUIPMENT (1.0%)
40,000 EVI, Inc. 5%, Conv. Pfd.,
11/1/27.................................... 1,705
RAILROAD (0.1%)
5,500 Union Pacific Capital Trust
Conv. Pfd., 61/4%
Series "144A" (1) ......................... 255
TELECOMMUNICATION
SERVICES (0.9%)
18,000 AirTouch Communications, Inc.
4.25% Conv.
"C" Pfd. 8/16/16........................... 1,485
THRIFT (1.3%)
25,000 Golden State Bancorp Inc.,
8.75% Conv. "A"
Pfd. 12/31/49 ............................. 2,167
--------
TOTAL PREFERRED
STOCKS
(Cost $9,103) ............................... 11,656
--------
- --------------------------------------------------------------------------------
7
<PAGE>
The Value Line Income Fund, Inc.
Schedule of Investments (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
Principal
Amount Value
(in thousands) (in thousands)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (9.0%)
$10,000 U.S. Treasury Notes 6 1/2%,
4/30/99.................................... $ 10,081
5,000 U.S. Treasury Notes 5 7/8%,
6/30/00.................................... 5,035
--------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $14,957) ............................ 15,116
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.3%)
5,000 Federal National Mortgage
Association Note, 6.32%,
7/28/03.................................... 4,998
2,286 Federal National Mortgage
Association REMIC Trust
1989-90 E, 8.70%, 12/25/19................. 2,402
--------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $7,288) ............................. 7,400
--------
CORPORATE BONDS AND NOTES (3.8%)
OILFIELD SERVICES/
EQUIPMENT (2.1%)
3,000 Diamond Offshore Drilling,
Inc. 3.750%, Sub. Note
Conv., 2/15/07............................. 3,465
PETROLEUM--
INTEGRATED (0.6%)
1,000 Texaco Capital, Inc. 6 7/8%,
Gtd Deb., 8/15/23.......................... 1,042
RETAIL--
SPECIAL LINES (1.1%)
750 Inacom Corp. 4.50%,
Sub. Deb. Conv., 11/1/04................... 766
1,000 Michaels Stores, Inc. 6.75%,
Sub. Note Conv., 1/15/03................... 1,069
--------
1,835
--------
TOTAL CORPORATE
BONDS & NOTES
(Cost $7,738) ............................. 6,342
--------
TOTAL INVESTMENT
SECURITIES (94.3%)
(Cost $119,397) ........................... 159,172
--------
REPURCHASE AGREEMENT (5.1%)
(includes accrued interest)
8,600 Collateralized by $6,774,000
U.S. Treasury Notes
7.875%, due 2/15/21,
with a value of $8,765,933
(with UBS Securities LLC,
5.75%, dated 6/30/98,
due 7/1/98, delivery value
of $8,601,000) ............................ 8,601
CASH AND RECEIVABLES LESS
LIABILITIES (0.6%) ............................................ 931
--------
NET ASSETS (100.0%) ........................................... $168,704
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($168,704,495 / 19,184,556
shares outstanding) ........................................... $ 8.79
========
* Non-income producing.
(1) Rule 144A Security where certain conditions for public sale may exist.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line Income Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Assets
and Liabilities at June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands
except per share
amount)
-------------
Assets:
Investment securities, at value
(Cost--$119,397)............................................. $159,172
Repurchase agreement (Cost--$8,601) ......................... 8,601
Cash ....................................................... 59
Receivable for securities sold ............................. 1,591
Dividends and interest receivable .......................... 462
Receivable for capital shares sold.......................... 33
--------
Total Assets ......................................... 169,918
--------
Liabilities:
Payable for securities purchased ........................... 1,020
Payable for capital shares repurchased ..................... 39
Accrued expenses:
Advisory fee ............................................. 92
Other .................................................... 63
--------
Total Liabilities .................................... 1,214
--------
Net Assets ................................................. $168,704
========
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000,
outstanding 19,184,556 shares)............................ $ 19,185
Additional paid-in capital ................................. 99,215
Undistributed net investment income ........................ 85
Undistributed net realized gain
on investments............................................ 10,444
Net unrealized appreciation
of investments............................................ 39,775
--------
Net Assets ................................................. $168,704
========
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($168,704,495 / 19,184,556
shares outstanding) ...................................... $ 8.79
========
Statement of Operations
for the six months ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands)
------------
Investment Income:
Interest ................................................... $ 1,168
Dividends (Net of foreign withholding
taxes of $5).............................................. 780
-------
Total Income ......................................... 1,948
-------
Expenses:
Advisory fee ............................................... 551
Transfer agent fees ........................................ 49
Postage .................................................... 25
Auditing and legal fees .................................... 21
Custodian fees ............................................. 17
Printing and stationery .................................... 14
Registration and filing fees ............................... 13
Telephone and wire charges ................................. 12
Directors' fees and expenses ............................... 8
Insurance, dues and other................................... 5
-------
Total Expenses Before
Custody Credits .................................... 715
Less: Custody Credits ................................ (2)
-------
Net Expenses ......................................... 713
-------
Net Investment Income ...................................... 1,235
-------
Net Realized and Unrealized
Gain on Investments:
Net Realized Gain ...................................... 10,491
Change in Net Unrealized
Appreciation.......................................... 5,275
-------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ........................................... 15,766
-------
Net Increase in Net Assets
from Operations .......................................... $17,001
=======
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
<PAGE>
The Value Line Income Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
for the six months ended June 30, 1998 (unaudited) and
for the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1998 December 31,
(unaudited) 1997
------------------------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Net investment income ........................................................ $ 1,235 $ 2,836
Net realized gain on investments ............................................. 10,491 7,580
Change in net unrealized appreciation ........................................ 5,275 15,853
-----------------------------
Net increase in net assets from operations.................................... 17,001 26,269
-----------------------------
Distributions to Shareholders:
Net investment income ........................................................ (1,162) (2,890)
Net realized gain from investment transactions................................ -- (10,288)
In excess of realized gain from investment transactions....................... -- (489)
-----------------------------
Total distributions .......................................................... (1,162) (13,667)
-----------------------------
Capital Share Transactions:
Proceeds from sale of shares.................................................. 2,311 6,835
Proceeds from reinvestment of distributions to shareholders................... 908 11,110
Cost of shares repurchased ................................................... (10,814) (17,280)
-----------------------------
(Decrease) Increase from capital share transactions........................... (7,595) 665
-----------------------------
Total Increase ................................................................. 8,244 13,267
Net Assets:
Beginning of period .......................................................... 160,460 147,193
-----------------------------
End of period ................................................................ $168,704 $160,460
=============================
Undistributed Net Investment Income, at end of period .......................... $ 85 $ 12
=============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
The Value Line Income Fund, Inc.
Notes to Financial Statements (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Value Line Income Fund, Inc. (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 income, as high and
dependable as is consistent with reasonable risk. Capital growth to increase
total return is a secondary objective.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
(A) Security Valuation. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales prices on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or 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.
- --------------------------------------------------------------------------------
11
<PAGE>
The Value Line Income Fund, Inc.
Notes to Finanical Statements (unaudited) June 30, 1998
- --------------------------------------------------------------------------------
(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):
Six Months
Ended Year
June 30, Ended
1998 December 31,
(unaudited) 1997
---------------------------
Shares sold .................................... 282 853
Shares issued to shareholders
in reinvestment of dividends
and distributions............................. 105 1,444
---------------------------
387 2,297
Shares repurchased ............................. 1,305 2,158
---------------------------
Net (decrease) increase ........................ (918) 139
===========================
Dividends per share ............................ $ .06 $ .15
===========================
Distributions per share from
net realized gains............................ $ -- $ .5705
===========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months Ended
June 30, 1998
(unaudited)
--------------
(in thousands)
Purchases:
Investment Securities .................................... $59,136
=======
Sales & Redemptions:
Investment Securities .................................... $73,397
=======
At June 30, 1998 the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes was $127,998,000. The aggregate
appreciation and depreciation of investments at June 30, 1998, based on a
comparison of investment values and their costs for federal income tax purposes,
was $42,509,000 and $2,734,000, respectively, resulting in a net appreciation of
$39,775,000.
Realized losses incurred after October 31, if so 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 $41,000. 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 $551,000 was paid or payable to Value Line, Inc., the Fund's
investment adviser ("Adviser), for the six months ended June 30, 1998. 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.
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 period
ended June 30, 1998, the Fund paid brokerage commissions totalling $74,000 to
the distributor, which clears its transactions through unaffiliated brokers.
The Adviser and/or affiliated companies owned 210,645 shares of the Fund's
capital stock, representing 1.1% of the outstanding shares at June 30, 1998.
- --------------------------------------------------------------------------------
12
<PAGE>
The Value Line Income Fund, Inc.
Financail Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Years Ended December 31,
Six Months Ended --------------------------------------------------------------------------
June 30, 1998
(unaudited) 1997 1996 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............ $ 7.98 $ 7.37 $ 7.37 $ 6.21 $ 6.77 $ 7.29
------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .......... .06 .15 .24 .25 .21 .21
Net gains or losses on
securities (both realized
and unrealized) .............. .81 1.18 1.03 1.36 (.51) .38
------------------------------------------------------------------------------------------------
Total from investment
operations ................... .87 1.33 1.27 1.61 (.30) .59
------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ............ (.06) (.15) (.24) (.25) (.21) (.22)
Distributions from capital gains -- (.54) (1.03) (.20) (.05) (.89)
Distributions in excess of
realized gains ............... -- (.03) -- -- -- --
------------------------------------------------------------------------------------------------
Total distributions ............ (.06) (.72) (1.27) (.45) (.26) (1.11)
------------------------------------------------------------------------------------------------
Net asset value, end of period ... $ 8.79 $ 7.98 $ 7.37 $ 7.37 $ 6.21 $ 6.77
================================================================================================
Total return ..................... 10.92%+ 18.55% 17.38% 26.24% =4.36% 8.26%
================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................. $ 168,704 $ 160,460 $ 147,193 $ 144,306 $ 131,644 $ 162,335
Ratio of operating expenses to
average net assets ............. .88%*(1) .87%(1) .93%(1) .93% .90% .88%
Ratio of net investment income
to average net assets .......... 1.52%* 1.82% 3.08% 3.48% 3.29% 2.82%
Portfolio turnover rate .......... 38%+ 54% 83% 76% 56% 165%
</TABLE>
(1) Before offset of custody credits.
+ Not annualized
* Annualized.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
13
<PAGE>
The Value Line Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
<PAGE>
The Value Line Income Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE>
The Value Line Income Fund, Inc.
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.
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 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 throughthe 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. 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
Nancy Bendig
Vice President
Stephen E. Grant
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and, accordingly, they
do not express an opinion thereon. This unaudited report is issued for
information of shareholders. It is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
prospectus of the Fund (obtainable from the Distributor).
#501001
