--------------------
SEMI-ANNUAL REPORT
--------------------
June 30, 1999
--------------------
Value Line
Income and
Growth
Fund, Inc.
[GRAPHIC]
-----------
VALUE LINE
No-Load
Mutual
Funds
-----------
<PAGE>
Value Line Income and Growth Fund, Inc.
To Our Value Line
- --------------------------------------------------------------------------------
Dear Shareholders:
During the first six months of 1999, the Value Line Income and Growth Fund
outperformed its benchmark by over 250 basis points. In the March quarter, the
Fund benefited from the strength in the large-capitalization growth sector of
the market. The June quarter was more difficult, with the Fund suffering from a
market rotation into cyclicals and value stocks before returning to a growth
orientation at the end of June. For the six months ending June 30, 1999, the
Fund returned 9.20% outpacing the 6.52% return of its unmanaged benchmark, a
composite consisting of the Standard & Poor's 500 Index (60%) and the Lehman
Government/Corporate Index (40%). The Fund's one-year return of 25.85%, for the
period ending June 30, 1999, was significantly better than the 14.73% return of
the benchmark.
The first half of the year saw dramatic volatility in the capital markets. The
Dow Jones Industrial Average (DJIA) as well as the broader indices, including
the Standard & Poor's 500 Index (S&P 500), the NASDAQ Composite and the Russell
2000 reached record highs. The DJIA closed above 11,000 for the first time in
mid-May, up almost 22% from its 9,121 low in January. The S&P 500, the NASDAQ
and the Russell 2000 all peaked on June 30th, representing increases of 13%,
23%, 19%, respectively, from their lows earlier in the year.
The first quarter was characterized by a narrow market, where selected large-cap
stocks outperformed small-caps. First-quarter stock appreciation was spurred by
continued corporate profit increases and an accommodative monetary policy on the
part of the Federal Reserve Board. The Fed left short-term interest rates
unchanged at both its February 3rd and March 30th Federal Open Market Committee
(FOMC) meetings. A significant weighting in technology boosted performance
considerably. The standouts included America Online (Internet play), EMC
Corporation (data storage), Sun Microsystems (computer systems and software),
Tellabs (telecommmunications), Microsoft (PC software) and Cisco Systems
(internetworking products). Quarterly performance also benefited from an
overweighting in consumer cyclicals. Omnicom Group, the world's largest
advertising company, and a number of the retailers, notably Dollar General,
Dayton Hudson and The Gap, were the stars in this sector. Healthcare was a
notably poor performer though, as was capital goods.
In the second quarter, market volatility increased sharply. The anticipation of
stronger worldwide growth in the wake of a bottoming in the Asian markets and
the prospect of higher inflation prompted investors to move money from richly
priced technology stocks into the increasingly attractive cyclicals. The Fund
benefited from some exposure to basic materials, which included holdings in
Alcoa (aluminum), Mead (paper) and USX-U.S. Steel. However, large-cap growth
stocks tumbled as the market took on a decidedly value-oriented bias. Fears of
inflation and concerns that the Fed would raise short-term interest rates
further fueled the shift. The market also broadened somewhat, with more money
flowing into mid- and small-cap stocks. Significant weightings in technology,
healthcare and financials, all of which increased performance in the first
quarter, hurt the portfolio in the second quarter. The prospect of higher
interest rates had a negative effect on financials; stock prices of banks,
insurance firms and specialty finance companies fell sharply. Although the Fed
did not increase short-term interest rates at the May 18th FOMC meeting, it
adopted a tightening bias. This created a great deal of concern that the Fed
would move toward a restrictive monetary policy at the June 29-30 meeting.
Investors began to worry that a single 25 basis point increase, which was
already priced into the market, would be only the first in a series of
tightenings as the Fed took back its 75 basis point reduction from last fall.
The healthcare sector was adversely affected by two factors--the rotation out of
large-cap growth stocks and the concern that new Medicare legislation would take
its toll on drug companies, medical supply firms and healthcare providers. As
the quarter came to a close, the Fed raised the Federal Funds rate 25 basis
points to 5.0%. Importantly, though, it changed its bias to neutral. The stock
market rallied on this news and money flowed back into growth stocks.
On the fixed-income side, the Fund includes selected issues of the U.S. Treasury
and Agencies, and a number
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line Income and Growth Fund, Inc.
Income and Growth Fund Shareholders
- --------------------------------------------------------------------------------
of high-yield corporate bonds. Over the six-month period, favorable equity and
high-yield bond returns outweighed the negative impact of a dramatic downturn in
bond prices. The year began with Brazil's currency devaluation, reinforcing
concerns of global economic problems. The yield on the 30-year Treasury fell
from 5.31% to 5.05% in early January. By February, a strong1998 fourth quarter
GDP release, coupled with Fed Chairman Greenspan's hints at a possible
overreaction in its Fall 1998 rate cuts sent the bond market reeling. Rates rose
to 5.61%, producing the worst monthly return (-2.55%) since 1981. Rates
meandered between March and April. A stronger than expected Consumer Price Index
report for April shook the markets after its May release, but the subsequent
monthly data proved to be benign. Rates rebounded again in May and June, peaking
at 6.16% late in the second quarter.
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
objectives of relative high current return and capital growth without undue risk
to principal. On June 30, 1999, the Fund included 78.5% stocks, 18.0% fixed
income and 3.5% cash. 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 6, 1999
Economic Observations
The economy is now starting to turn in more of a mixed performance. Evidence of
this uneven pattern began to emerge in the second quarter, when GDP growth
slowed to a 2.3% rate. More recently, we've seen a moderation in the rate of
manufacturing activity and some selective weakening in retail sales. On the
other hand, housing is still quite strong and the level of employment continues
to increase at a healthy pace. Overall, this less even growth trend does not
imply that the long-running expansion is about to falter. But it does suggest
that growth is likely to hold nearer to the recent 2%-3% level over the next
several quarters than to the earlier, and more frenetic, 4%-5% pace.
Inflationary pressures, meanwhile, are starting to build. Here, as well, we
aren't forecasting a dramatic change in trend. Nevertheless, the sharp runup in
oil prices in recent months, the recent escalation in wage costs, and the runup
in mortgage rates all indicate that the cost of living is increasing. A gradual
uptrend in pricing now seems likely over the next several quarters. The Federal
Reserve, taking note of these rising cost pressures is likely to maintain a
somewhat more restrictive monetary stance in the months ahead.
*Performance Data:
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
------------ -------------
1 year ended 6/30/99 ....................... 25.85% $12,585
5 years ended 6/30/99 ...................... 20.07% $24,957
10 years ended 6/30/99 ...................... 14.05% $37,229
* 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>
Value Line Income and Growth Fund, Inc.
Portfolio Highlights at June 30, 1999 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Ten Largest Holdings
Principal
Amount Value Percentage of
Issue or Shares (in thousands) Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Microsoft Corp. ............................ 71,500 $6,448 3.1%
Omnicom Group, Inc. ........................ 78,000 6,240 3.0
America Online, Inc. ....................... 55,000 6,077 2.9
Cisco Systems, Inc. ........................ 91,750 5,918 2.8
EMC Corp. .................................. 102,000 5,610 2.7
Intel Corp. ................................ 91,000 5,415 2.6
Tyco International, Ltd. ................... 55,500 5,259 2.5
Wal-Mart Stores, Inc. ...................... 106,000 5,114 2.5
Federal Home Loan Bank Bonds
5.125%, 2/26/02 ........................ $5,000,000 4,903 2.4
Pfizer, Inc. ............................... 44,500 4,884 2.4
<CAPTION>
Five Largest Industry Categories
Value Percentage of
Industry (in thousands) Net Assets
- ---------------------------------------------------------------------------------------------
Computer & Peripherals ..................... $ 24,021 11.6%
Drug ....................................... 14,152 6.8
Telecommunication Services ................. 9,927 4.8
Entertainment .............................. 8,449 4.0
Medical Supplies ........................... 7,801 3.7
<CAPTION>
Five Largest Net Security Purchases*
Cost
Issue (in thousands)
- ---------------------------------------------------------------------------------------------
Federal Home Loan Bank Bonds
5.125%, 2/26/02......................... $ 4,992
Federal Home Loan Mortgage Corp. Debentures
5.000%, 1/15/04 ........................ 4,872
U.S. Treasury Notes
4.750%, 11/15/08 ....................... 4,806
AT & T Corp. ............................... 4,019
Clorox Company (The) ....................... 2,660
<CAPTION>
Five Largest Net Security Sales*
Proceeds
Issue (in thousands)
- ---------------------------------------------------------------------------------------------
Federal Home Loan Bank Bonds 5.500%, 8/13/01 $ 5,042
Tellabs, Inc. .............................. 4,883
McKesson HBOC, Inc. ........................ 3,933
BMC Software Inc. .......................... 2,839
Clear Channel Communications, Inc. ......... 2,551
</TABLE>
* For the six month period ended 06/30/99
<PAGE>
Value Line Income and Growth Fund, Inc.
Schedule of Investments (unaudited) June 30, 1999
================================================================================
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS (78.5%)
ADVERTISING (3.0%)
78,000 Omnicom Group, Inc............................. $ 6,240
ALUMINUM (0.3%)
11,500 Alcoa Inc...................................... 712
BANK (2.1%)
25,500 Chase Manhattan Corp........................... 2,209
13,800 Mellon Bank Corp............................... 502
27,000 Zions Bancorporation........................... 1,714
--------
4,425
BANK-MIDWEST (1.8%)
27,250 Fifth Third Bancorp............................ 1,814
67,500 Firstar Corp................................... 1,890
--------
3,704
BEVERAGE-SOFT
DRINK (0.8%)
54,000 Coca-Cola Enterprises Inc...................... 1,607
CABLE TV (0.6%) 17,000 Cablevision Systems Corp.
Class "A"*................................ 1,190
CHEMICAL-
SPECIALTY (0.5%)
19,500 Praxair, Inc................................... 954
COMPUTER &
PERIPHERALS (11.6%)
91,750 Cisco Systems, Inc.*........................... 5,918
130,500 Dell Computer Corp.*........................... 4,828
102,000 EMC Corp.*..................................... 5,610
22,000 International Business
Machines Corp............................. 2,844
70,000 Sun Microsystems, Inc.*........................ 4,821
--------
24,021
COMPUTER SOFTWARE &
SERVICES (3.1%)
71,500 Microsoft Corp.*............................... 6,448
DIVERSIFIED
COMPANIES (3.6%)
12,000 AlliedSignal Inc............................... 756
55,500 Tyco International, Ltd........................ 5,259
20,500 United Technologies Corp....................... 1,469
--------
7,484
DRUG (6.8%)
24,000 Merck & Co., Inc............................... 1,776
44,500 Pfizer, Inc.................................... 4,884
80,500 Schering-Plough Corp........................... 4,266
46,500 Warner-Lambert Co.............................. 3,226
--------
14,152
DRUGSTORE (1.0%)
18,510 CVS Corp....................................... 939
36,500 Walgreen Co.................................... 1,072
--------
2,011
ELECTRICAL
EQUIPMENT (1.8%)
32,500 General Electric Co............................ 3,673
ELECTRONICS (0.5%)
16,500 Lexmark International
Group Inc. Class "A"*...................... 1,090
ENTERTAINMENT (3.1%)
64,500 Time Warner, Inc............................... 4,741
40,000 Viacom Inc. Class "A"*......................... 1,765
--------
6,506
FINANCIAL SERVICES (2.9%)
7,000 American Express Co............................ 911
89,625 Citigroup Inc.................................. 4,257
18,500 FINOVA Group, Inc. (The)....................... 974
--------
6,142
FOREIGN TELE-
COMMUNICATIONS (0.8%)
18,000 Nokia Corp. (ADR).............................. 1,648
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line Income and Growth Fund, Inc.
Schedule of Investments (unaudited)
================================================================================
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
GROCERY (1.0%)
43,000 Safeway, Inc.*................................. $ 2,129
HOUSEHOLD
PRODUCTS (3.3%)
25,000 Clorox Company (The)........................... 2,670
10,000 Colgate-Palmolive Co........................... 987
10,500 Kimberly-Clark Corp............................ 599
28,500 Procter & Gamble Co............................ 2,544
--------
6,800
INSURANCE-
DIVERSIFIED (1.9%)
32,925 American International
Group, Inc................................. 3,854
INTERNET (2.9%)
55,000 America Online, Inc.*.......................... 6,077
MACHINERY (0.3%)
9,500 Ingersoll-Rand Co.............................. 614
MEDICAL SUPPLIES (3.7%)
31,500 Cardinal Health, Inc........................... 2,020
45,500 Guidant Corp.*................................. 2,340
6,500 Johnson & Johnson.............................. 637
36,000 Medtronic, Inc................................. 2,804
--------
7,801
NATURAL GAS-
DIVERSIFIED (0.3%)
13,500 Williams Companies,
Inc. (The)................................. 575
OFFICE EQUIPMENT &
SUPPLIES (0.7%)
48,000 Staples, Inc.*................................. 1,485
PAPER & FOREST
PRODUCTS (0.3%)
14,000 Georgia-Pacific Group.......................... 663
RETAIL-SPECIAL
LINES (1.7%)
54,375 Gap, Inc....................................... 2,739
25,000 TJX Companies, Inc. (The)...................... 833
--------
3,572
RETAIL BUILDING
SUPPLY (1.0%)
33,000 Home Depot, Inc. (The)......................... 2,126
RETAIL STORE (2.8%)
8,000 Costco Companies, Inc.*........................ 641
106,000 Wal-Mart Stores, Inc........................... 5,114
--------
5,755
SECURITIES
BROKERAGE (0.8%)
15,000 Schwab (Charles) Corp.......................... 1,648
SEMICONDUCTOR (2.6%)
91,000 Intel Corp..................................... 5,415
STEEL-GENERAL (0.3%)
13,000 Nucor Corp..................................... 617
STEEL-INTEGRATED (0.5%)
41,700 USX-U.S. Steel Group........................... 1,126
TELECOMMUNICATIONS
EQUIPMENT (2.9%)
52,000 Lucent Technologies Inc........................ 3,507
37,000 Tellabs, Inc.*................................. 2,500
--------
6,007
TELECOMMUNICATION
SERVICES (4.8%)
73,000 AT & T Corp.................................... 4,074
11,000 Bell Atlantic Corp............................. 719
51,902 MCI WorldCom, Inc.*............................ 4,467
11,500 SBC Communications Inc......................... 667
--------
9,927
- --------------------------------------------------------------------------------
6
<PAGE>
Value Line Income and Growth Fund, Inc.
Schedule of Investments (unaudited)
================================================================================
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
THRIFT (2.4%)
42,500 Federal Home Loan
Mortgage Corp.............................. $ 2,465
36,000 Federal National Mortgage
Association................................ 2,461
--------
4,926
--------
TOTAL COMMON STOCKS
(Cost $106,062,000) ......................... 163,124
--------
Principal
Amount
(in Value
thousands) (in thousands)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (3.7%)
$ 2,000 U.S. Treasury Notes
5.875%, 6/30/00............................ 2,012
5,000 U.S. Treasury Notes
4.750%, 11/15/08........................... 4,587
1,000 U.S. Treasury Bonds
6.000%, 2/15/26........................... 975
--------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $7,865,000) ......................... 7,574
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (9.4%)
5,000 Federal Home Loan
Bank Bonds,
5.125%, 2/26/02............................ 4,903
2,000 Federal Home Loan
Mortgage Corp.
Debentures 5.750%, 7/15/03................. 1,977
5,000 Federal Home Loan
Mortgage Corp.
Debentures 5.000%, 1/15/04 ................ 4,781
3,000 Federal National Mortgage
Association Notes,
5.750%, 6/15/05 ........................... 2,947
$ 2,000 Federal National Mortgage
Association Notes,
6.000%, 5/15/08 ........................... 1,946
3,000 Tennessee Valley Authority
Global Power Bonds 1995
Series "E", 6.750%, 11/1/25 ............... 3,033
--------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $20,242,000) ........................ 19,587
--------
CORPORATE BONDS AND NOTES (4.9%)
ADVERTISING (0.5%) 1,000 Outdoor Systems, Inc.
8.875% Senior Sub.
Notes, 6/15/07 ............................ 1,040
AUTO PARTS-
REPLACEMENT (0.4%)
1,000 Federal-Mogul Corp.
7.875%, Notes 7/1/10....................... 938
CABLE TV (0.5%)
1,000 Adelphia Communications
Corp. 9.875%, Senior Notes
Series "B", 3/1/07 ........................ 1,057
ENTERTAINMENT (0.9%) 1,000 Chancellor Media Corp.
8.125%, Senior Sub. Notes
Series "B", 12/15/07 ...................... 973
1,000 Loews Cineplex
Entertainment Corp.,
8.875%, Senior Sub
Notes, 8/1/08 ............................. 970
--------
1,943
ENVIRONMENTAL (0.4%)
1,000 Allied Waste North America Inc.
Senior Notes Series "B",
7.875%, 1/1/09 ............................ 926
- --------------------------------------------------------------------------------
7
<PAGE>
Value Line Income and Growth Fund, Inc.
Schedule of Investments (unaudited) June 30, 1999
================================================================================
Principal
Amount
(in Value
thousands) (in thousands)
- --------------------------------------------------------------------------------
FOREIGN TELE-
COMMUNICATIONS (0.2%)
$ 500 Call-Net Enterprises, Inc.,
9.375%, Senior Notes,
5/15/09.................................... $ 476
HOTEL/GAMING (0.5%)
1,000 Park Place Entertainment Corp.
7.875%, Senior Sub. Notes,
12/15/05 .................................. 950
INDUSTRIAL
SERVICES (0.5%)
1,000 Iron Mountain Inc. Series 144A
8.250%, Senior Sub. Notes,
7/1/11** .................................. 970
MACHINERY (0.5%) 1,000 Columbus McKinnon Corp.
8.500%, Senior Sub. Notes,
4/1/08 .................................... 972
RECREATION (0.5%)
1,000 Six Flags Entertainment Corp.
8.875%, Senior Notes, 4/1/06 .............. 1,008
--------
TOTAL CORPORATE
BONDS & NOTES
(Cost $10,563,000) ........................ 10,280
--------
TOTAL INVESTMENT
SECURITIES (96.5%)
(Cost $144,732,000) ....................... 200,565
--------
Principal Value
Amount (in thousands)
(in except per
thousands) share amount
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
(including accrued interest)
$ 6,600 Collateralized by $5,490,000
U.S. Treasury Bonds
11.125%, due 8/15/03,
with a value of $6,728,000
(with State Street Bank &
Trust Company, 4.70%,
dated 6/30/99, due 7/1/99,
delivery value of
$6,601,000) ............................ $ 6,601
CASH AND RECEIVABLES LESS
LIABILITIES (0.3%) ......................................... 593
--------
NET ASSETS (100.0%) ........................................ $207,759
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($207,758,526 / 20,036,824
shares outstanding) ........................................ $ 10.37
========
* Non-income producing.
** Pursuant to Rule 144A under the Securities Act of 1933, this security can
only be sold to qualified institutional investors.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line Income and Growth Fund, Inc.
Statement of Assets
and Liabilities at June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands
except per share
amount)
-------------
Assets:
Investment securities, at value
(Cost--$144,732) ........................................... $200,565
Repurchase agreement (Cost--$6,601) .......................... 6,601
Receivable for securities sold ............................... 3,364
Dividends and interest receivable ............................ 668
Receivable for capital shares sold ........................... 15
Prepaid insurance expense .................................... 5
--------
Total Assets ........................................... 211,218
--------
Liabilities:
Payable for securities purchased ............................. 3,166
Payable to custodian bank for overdraft ...................... 123
Payable for capital shares repurchased ....................... 18
Accrued expenses:
Advisory fee ............................................... 110
Other ...................................................... 42
--------
Total Liabilities ...................................... 3,459
--------
Net Assets ................................................... $207,759
========
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
20,036,824 shares) ......................................... $ 20,037
Additional paid-in capital ................................... 106,608
Undistributed net investment income .......................... 146
Undistributed net realized gain
on investments ............................................. 25,135
Net unrealized appreciation
of investments ............................................. 55,833
--------
Net Assets ................................................... $207,759
========
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($207,758,526 / 20,036,824
shares outstanding) ........................................ $ 10.37
========
Statement of Operations
for the six months ended June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands)
------------
Investment Income:
Interest (Net of foreign withholding
taxes of $1) ............................................. $ 1,341
Dividends .................................................. 510
--------
Total Income ......................................... 1,851
--------
Expenses:
Advisory fee ............................................... 673
Transfer agent fees ........................................ 51
Printing and stationery .................................... 21
Postage .................................................... 19
Custodian fees ............................................. 19
Auditing and legal fees .................................... 15
Telephone and wire charges ................................. 10
Registration and filing fees ............................... 10
Directors' fees and expenses ............................... 8
Insurance, dues and other .................................. 7
--------
Total Expenses Before
Custody Credits .................................... 833
Less: Custody Credits ................................ (2)
--------
Net Expenses ......................................... 831
--------
Net Investment Income ...................................... 1,020
--------
Net Realized and Unrealized
Gain on Investments:
Net Realized Gain ...................................... 17,363
Change in Net Unrealized
Appreciation (Depreciation) .......................... (796)
--------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ........................................... 16,567
--------
Net Increase in Net Assets
from Operations .......................................... $ 17,587
========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line Income and Growth Fund, Inc.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
for the six months ended June 30, 1999 (unaudited) and for the year ended December 31, 1998
- -------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
June 30, 1999 December 31,
(unaudited) 1998
--------------------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Net investment income ......................................... $ 1,020 $ 2,033
Net realized gain on investments .............................. 17,363 17,759
Change in net unrealized appreciation (depreciation) .......... (796) 22,129
--------------------------------
Net increase in net assets from operations .................... 17,587 41,921
--------------------------------
Distributions to Shareholders:
Net investment income ......................................... (903) (2,011)
Net realized gain from investment transactions ................ -- (9,945)
In excess of realized gain from investment transactions ....... -- --
--------------------------------
Total distributions ........................................... (903) (11,956)
--------------------------------
Capital Share Transactions:
Net proceeds from sale of shares .............................. 24,820 10,481
Net proceeds from reinvestment of distributions to shareholders 713 9,742
Cost of shares repurchased .................................... (22,875) (22,231)
--------------------------------
Increase (Decrease) from capital share transactions ........... 2,658 (2,008)
--------------------------------
Total Increase .................................................. 19,342 27,957
Net Assets:
Beginning of period ........................................... 188,417 160,460
--------------------------------
End of period ................................................. $ 207,759 $ 188,417
================================
Undistributed Net Investment Income, at end of period ........... $ 146 $ 29
================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
Value Line Income and Growth Fund, Inc.
Notes to Financial Statements (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Value Line Income and Growth 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.
(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>
Value Line Income and Growth Fund, Inc.
Notes to Financial Statements (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
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
1999 December 31,
(unaudited) 1998
-------------------------
Shares sold ..................................... 2,474 1,198
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................. 71 1,073
-------------------------
2,545 2,271
Shares repurchased .............................. 2,273 2,609
-------------------------
Net increase (decrease) ......................... 272 (338)
=========================
Dividends per share from net
investment income ............................. $ .045 $.1050
=========================
Distributions per share from
net realized gains ............................ $ -- $.5281
=========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months Ended
June 30, 1999
(unaudited)
--------------
(in thousands)
Purchases:
U.S. Treasury & Government
Agency Obligations ...................................... $ 14,669
Investment Securities ..................................... 78,289
----------
$ 92,958
==========
Sales & Redemptions:
U.S. Treasury & Government
Agency Obligations ...................................... $ 5,042
Investment Securities ..................................... 85,365
----------
$ 90,407
==========
At June 30, 1999 the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes was $151,336,000. The aggregate
appreciation and depreciation of investments at June 30, 1999, based on a
comparison of investment values and their costs for federal income tax purposes,
was $57,458,000 and $1,628,000, respectively, resulting in a net appreciation of
$55,830,000.
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $673,000 was paid or payable to Value Line, Inc., ("Adviser")
the Fund's investment adviser, for the six months ended June 30, 1999. 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 six
months ended June 30, 1999, the Fund paid brokerage commissions totalling
$66,762 to the distributor, which clears its transactions through unaffiliated
brokers.
The Adviser and/or affiliated companies owned 426,430 shares of the Fund's
capital stock, representing 2.1% of the outstanding shares at June 30, 1999. In
addition, certain officers and directors of the Fund owned 150,631 shares of the
Fund, representing 0.8% of the outstanding shares.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Income and Growth Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
June 30, 1999 ----------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............ $ 9.53 $ 7.98 $ 7.37 $ 7.37 $ 6.21 $ 6.77
----------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .......... .05 .10 .15 .24 .25 .21
Net gains or losses on
securities (both realized
and unrealized) .............. .83 2.08 1.18 1.03 1.36 (.51)
----------------------------------------------------------------------------------------
Total from investment
operations ................... .88 2.18 1.33 1.27 1.61 (.30)
----------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ............ (.04) (.10) (.15) (.24) (.25) (.21)
Distributions from capital gains -- (.53) (.54) (1.03) (.20) (.05)
Distributions in excess of
realized gains ............... -- -- (.03) -- -- --
----------------------------------------------------------------------------------------
Total distributions ............ (.04) (.63) (.72) (1.27) (.45) (.26)
----------------------------------------------------------------------------------------
Net asset value, end of period ... $ 10.37 $ 9.53 $ 7.98 $ 7.37 $ 7.37 $ 6.21
========================================================================================
Total return ..................... 9.20%+ 27.83% 18.55% 17.38% 26.24% -4.36%
========================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................. $ 207,759 $188,417 $160,460 $147,193 $144,306 $131,644
Ratio of expenses to
average net assets ............. .83%*(1) .87%(1) .87%(1) .93%(1) .93% .90%
Ratio of net investment income
to average net assets .......... 1.02%* 1.24% 1.82% 3.08% 3.48% 3.29%
Portfolio turnover rate .......... 47%+ 99% 54% 83% 76% 56%
</TABLE>
(1) Before offset of custody credits.
+ Not annualized
* Annualized.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
13
<PAGE>
Value Line Income and Growth Fund, Inc.
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
14
<PAGE>
Value Line Income and Growth Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Income and Growth Fund, Inc.
The Value Line Family of Funds
- --------------------------------------------------------------------------------
1950--The Value Line Fund seeks long-term growth of capital. Current income is a
secondary objective.
1952--Value Line Income and Growth Fund's primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks long-term growth of capital.
No consideration is given to current income in the choice of investments.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth.
1979--The Value Line Cash Fund, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be invested in securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital.
1984--The Value Line Tax Exempt Fund seeks to provide investors with the maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: The Money Market Portfolio
and the National Bond Portfolio.
1985--Value Line Convertible Fund seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986--Value Line Aggressive Income Trust seeks to maximize current income.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with the maximum income exempt from New York State, New York City and federal
income taxes while avoiding undue risk to principal.
1987--Value Line Strategic Asset Management Trust* seeks to achive a high total
investment return consistent with reasonable risk.
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 through the purchase of Guardian Investor, a tax deferred
variable annuity, or ValuePlus, a variable life insurance policy.
For more complete information about any of the Value Line Funds, including
charges and expenses, send for a prospectus from Value Line Securities, Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call 1-800-223-0818, 24
hours a day, 7 days a week, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
<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).
#507988
