<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1995
FILE NO. 2-87913
FILE NO. 811-3904
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 12 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 12 /X/
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THE VALUE LINE TAX EXEMPT FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES) (ZIP CODE)
</TABLE>
Registrant's Telephone Number, including Area Code: (212) 907-1500
David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
Peter D. Lowenstein
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
It is proposed that this filing will become effective (check
appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on July 1, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of rule 485
--------------
PURSUANT TO THE PROVISIONS OF RULE 24F-2(A)(1) UNDER THE INVESTMENT COMPANY ACT
OF 1940, REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES OF CAPITAL
STOCK UNDER THE SECURITIES ACT OF 1933. REGISTRANT FILED ITS RULE 24F-2 NOTICE
FOR THE YEAR ENDED FEBRUARY 28, 1995 ON OR ABOUT APRIL 6, 1995.
- --------------------------------------------------------------------------------
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<PAGE>
THE VALUE LINE TAX EXEMPT FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ---------------- ---------------------------------------
<S> <C> <C>
PART A (PROSPECTUS)
Item 1. Cover Page............................................ Cover Page
Item 2. Synopsis.............................................. Not Applicable
Item 3. Condensed Financial Information....................... Summary of Fund Expenses; Financial
Highlights
Item 4. General Description of Registrant..................... Cover Page; Investment Objective and
Policies; Investment Restrictions;
Additional Information
Item 5. Management of the Fund................................ Summary of Fund Expenses; Management of
the Fund; Additional Information
Item 6. Capital Stock and Other Securities.................... Dividends and Distributions; Taxes;
Additional Information
Item 7. Purchase of Securities Being Offered.................. How to Buy Shares; Calculation of Net
Asset Value; Investor Services
Item 8. Redemption or Repurchase.............................. How to Redeem Shares
Item 9. Pending Legal Proceedings............................. Not Applicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
Item 10. Cover Page............................................ Cover Page
Item 11. Table of Contents..................................... Table of Contents
Item 12. General Information and History....................... Additional Information (Part A)
Item 13. Investment Objectives and Policies.................... Investment Objective and Policies;
Investment Restrictions
Item 14. Management of the Fund................................ Directors and Officers
Item 15. Control Persons and Principal Holders of Securities... Management of the Fund (Part A);
Directors and Officers
Item 16. Investment Advisory and Other Services................ Management of the Fund (Part A); The
Adviser
Item 17. Brokerage Allocation.................................. Management of the Fund (Part A);
Portfolio Transactions
Item 18. Capital Stock and Other Securities.................... Additional Information (Part A)
Item 19. Purchase, Redemption and Pricing of Securities Being
Offered............................................. How to Buy Shares; Suspension of
Redemptions; Calculation of Net Asset
Value (Part A)
Item 20. Tax Status............................................ Taxes
Item 21. Underwriters.......................................... Not Applicable
Item 22. Calculation of Performance Data....................... Performance Information (Part A);
Performance Data
Item 23. Financial Statements.................................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
<TABLE>
<S> <C>
THE
VALUE LINE PROSPECTUS
TAX EXEMPT FUND, INC. July 1, 1995
</TABLE>
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 800-243-2729
The Value Line Tax Exempt Fund, Inc. (the "Fund") is
a no-load, diversified, open-end management
investment company whose primary investment
objective is to provide investors with the maximum
income exempt from federal income taxes while
avoiding undue risk to principal. Capital
appreciation is a secondary objective of the
High-Yield Portfolio.
The Fund presently offers investors a choice of two
portfolios: The Money Market Portfolio and The
High-Yield Portfolio (collectively, the
"Portfolios").
THE MONEY MARKET PORTFOLIO invests primarily in
investment grade municipal notes and presently
expects to maintain an average maturity of 90 days
of less.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND IS SUBJECT TO
THE RISK OF POSSIBLE LOSS OF PRINCIPAL. SHARES OF
THE FUND ARE OFFERED AT NET ASSET VALUE. IT IS THE
POLICY OF THE FUND TO ATTEMPT TO MAINTAIN A NET
ASSET VALUE OF $1.00 PER SHARE WITH RESPECT TO ITS
MONEY MARKET PORTFOLIO, BUT ATTAINMENT OF SUCH IS
NOT ASSURED. THERE ARE NO SALES CHARGES OR
REDEMPTION FEES.
THE HIGH-YIELD PORTFOLIO invests primarily in
investment grade municipal bonds and presently
expects to maintain an average maturity of between
10 and 40 years.
The Fund's investment adviser is Value Line, Inc.
(the "Adviser").
This Prospectus sets forth concise information about the Fund that a
prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information about
the Fund is contained in a Statement of Additional Information, dated
July 1, 1995, which has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. A copy
of the Statement of Additional Information may be obtained at no charge
by writing or telephoning the Fund at the address or telephone numbers
listed above.
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases....................................................... None
Sales Load on Reinvested Dividends............................................ None
Deferred Sales Load........................................................... None
Redemption Fees............................................................... None
Exchange Fee.................................................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
HIGH-YIELD PORTFOLIO
Management Fees............................................................... .50%
12b-1 Fees.................................................................... None
Other Expenses................................................................ .11%
Total Portfolio Operating Expenses............................................ .61%
MONEY MARKET PORTFOLIO
Management Fees............................................................... .50%
12b-1 Fees.................................................................... None
Other Expenses................................................................ .39%
Total Portfolio Operating Expenses............................................ .89%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO MONEY MARKET PORTFOLIO
- ---------------------------------------------------- --------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------- ----------- ----------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6 $ 20 $ 34 $ 76 $ 9 $ 28 $ 49 $ 110
</TABLE>
The foregoing is based upon the expenses for the year ended February 28,
1995, and is designed to assist investors in understanding the various costs and
expenses that an investor in the Fund will bear directly or indirectly. Actual
expenses in the future may be greater or less than these shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The following information on selected per share data and ratios with respect
to each of the five years in the period ended February 28, 1995, and the related
financial statements, have been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon appears in the Fund's Annual
Report to Shareholders which is incorporated by reference in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and notes thereto which also appear in the Fund's Annual
Report to Shareholders available from the Fund without charge.
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
-----------------------------------------------------------------------------------------
YEAR ENDED
LAST DAY OF FEBRUARY
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.97 $ 11.29 $ 10.59 $ 10.20 $ 10.23 $ 10.24 $ 10.31
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income...... .568 .598 .635 .676 .756 .792 .794
Net gains or losses on
securities (both realized
and unrealized)........... (.528) (.112) .698 .388 (.030) (.010) (.070)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations............ .040 .486 1.333 1.064 .726 .782 .724
----------- ----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends (from net
investment income)........ (.568) (.602) (.633) (.674) (.756) (.792) (.794)
Distributions (from capital
gains).................... (.042) (.204) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions.... (.610) (.806) (.633) (.674) (.756) (.792) (.794)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of
period....................... $ 10.40 $ 10.97 $ 11.29 $ 10.59 $ 10.20 $ 10.23 $ 10.24
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total return................... .64% 4.37% 13.03% 10.75% 7.41% 7.87% 7.32%
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................... $ 241,467 $ 273,888 $ 301,514 $ 299,781 $ 278,176 $ 271,693 $ 265,800
Ratio of expenses to average
net assets................... .61% .58% .60% .58% .60% .62% .63%
Ratio of net investment income
to average net assets........ 5.54% 5.30% 5.89% 6.50% 7.47% 7.70% 7.77%
Portfolio turnover rate........ 60% 55% 101% 122% 122% 63% 73%
<CAPTION>
1988 1987 1986
----------- ----------- --------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.01 $ 11.12 $ 9.97
----------- ----------- --------------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income...... .818 .886 .976(1)
Net gains or losses on
securities (both realized
and unrealized)........... (.653) .248 1.172
----------- ----------- --------------
Total from investment
operations............ .165 1.134 2.148
----------- ----------- --------------
LESS DISTRIBUTIONS
Dividends (from net
investment income)........ (.818) (.886) (.976)
Distributions (from capital
gains).................... (.047) (.358) (.022)
----------- ----------- --------------
Total distributions.... (.865) (1.244) (.998)
----------- ----------- --------------
Net asset value, end of
period....................... $ 10.31 $ 11.01 $ 11.12
----------- ----------- --------------
----------- ----------- --------------
Total return................... 1.91% 11.33% 22.45%
----------- ----------- --------------
----------- ----------- --------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................... $ 259,135 $ 311,861 $ 133,889
Ratio of expenses to average
net assets................... .64% .68% .66%(1)
Ratio of net investment income
to average net assets........ 7.98% 8.20% 9.36%(1)
Portfolio turnover rate........ 76% 79% 254%
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MONEY-MARKET PORTFOLIO
----------------------------------------------------------------------------------
YEAR ENDED
LAST DAY OF FEBRUARY
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. .022 .016 .023 .037 .053 .058 .049
Net gains or losses on securities (both
realized and unrealized).............. -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations... .022 .016 .023 .037 .053 .058 .049
---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends (from net investment
income)............................... (.022) (.016) (.023) (.037) (.053) (.058) (.049)
Distributions (from capital gains)..... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions................ (.022) (.016) (.023) (.037) (.053) (.058) (.049)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total return............................... 2.22% 1.58% 2.34% 3.79% 5.28% 5.83% 4.89%
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 25,681 $ 31,707 $ 36,309 $ 58,090 $ 60,371 $ 51,362 $ 48,439
Ratio of expenses to average net assets.... .89% .86% .80% .74% .76% .81% .87%
Ratio of net investment income to average
net assets............................... 2.17% 1.56% 2.38% 3.74% 5.13% 5.68% 4.75%
<CAPTION>
1988 1987 1986
---------- ---------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period....... $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. .041 .040 .046(1)
Net gains or losses on securities (both
realized and unrealized).............. -- -- --
---------- ---------- -------------
Total from investment operations... .041 .040 .046
---------- ---------- -------------
LESS DISTRIBUTIONS
Dividends (from net investment
income)............................... (.041) (.040) (.046)
Distributions (from capital gains)..... -- -- --
---------- ---------- -------------
Total distributions................ (.041) (.040) (.046)
---------- ---------- -------------
Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------------
---------- ---------- -------------
Total return............................... 4.22% 4.00% 4.77%
---------- ---------- -------------
---------- ---------- -------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 50,251 $ 34,149 $ 23,988
Ratio of expenses to average net assets.... .89% .96% .98%(1)
Ratio of net investment income to average
net assets............................... 4.16% 3.90% 4.65%(1)
<FN>
- ------------------------------
* Annualized
(1) Net of partial waiver of advisory fee by the Adviser. Had this fee been
fully paid by the Fund, net investment income per share and the ratio of
expenses to average net assets would have been $.965 and .77% for the
High-Yield Portfolio and $.045 and 1.12% for the Money Market Portfolio,
respectively.
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's primary investment objective is to provide investors with the
maximum income exempt from federal income taxes while avoiding undue risk to
principal. The Fund seeks to achieve its objective by offering two separate and
distinct portfolios. Each portfolio will invest substantially all of its assets
in investment-grade municipal securities, the interest on which is deemed exempt
from federal income tax. Under normal conditions, the Fund's assets will be
invested so that at least 80% of the annual income of the Fund will be exempt
from federal income taxes. This is a fundamental policy of the Fund which will
not be changed without shareholders' approval. The Fund reserves the right to
create additional portfolios although there are no present plans to do so. No
assurance can be made that the objectives of any portfolio will be attained. The
investment objective and policies of the Fund, other than the fundamental policy
described above or those enumerated under "Investment Restrictions" in the
Statement of Additional Information, may be changed by the Board of Directors of
the Fund without shareholder approval.
The basic difference between the two portfolios will be the length of time
as to the maturities of their holdings as set forth below:
MONEY MARKET PORTFOLIO: Expected weighted average maturity is 90 days or
less. Generally, maturities will be no more than 397 days at time of purchase.
The Fund will attempt to maintain the net asset value at $1.00 per share but
attainment of such is not assured. Investments will consist of short-term
municipal or United States Government obligations and notes and will be limited
to those obligations which are backed by the full faith and credit of the United
States or are rated Aa-3 or better, MIG-2 or better or Prime-1 by Moody's
Investors Service, Inc. ("Moody's") and AA or better, A-1 or better or SP-2 or
better by Standard & Poor's Corporation ("S&P"). If the municipal obligations
are not
4
<PAGE>
rated, then the issuer's long-term bond rating must be at least Aa-3 as
determined by Moody's or AA as determined by S&P. In the case of industrial
revenue bonds, the corporation responsible for the debt must carry a Value Line
Financial Strength rating of A+ or better (the second highest of nine rating
groups).
The Fund will limit its portfolio investments to U.S. dollar denominated
instruments that its Board of Directors determines present minimal credit risks
and which are "Eligible Securities" at the time of acquisition. The term
Eligible Securities includes securities rated by the Requisite NRSROs in one of
the two highest short-term rating categories, securities of issuers that have
received such rating with respect to other short-term debt securities and
comparable unrated securities. "Requisite NRSROs" means (a) any two nationally
recognized statistical rating organizations ("NRSROs") that have issued a rating
with respect to a security or class of debt obligations of an issuer, or (b) one
NRSRO, if only one NRSRO has issued a rating with respect to such security or
issuer at the time the Fund purchases the security.
HIGH-YIELD PORTFOLIO: Expected weighted average maturity is between 10 and
40 years. Typically, the municipal bonds in the High-Yield Portfolio will be
rated at the time of purchase within the four highest grades assigned by Moody's
(Aaa, Aa, A and Baa) or S&P (AAA, AA, A and BBB) or will be obligations of
issuers of equivalent creditworthiness, in the opinion of the Adviser. Those
bonds rated "BBB" or "Baa" may have more speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case for
higher grade bonds. These bonds include both secured and unsecured debt
obligations and, as a group, possess a fairly high degree of dependability of
interest payments although certain of these bonds may have speculative
characteristics. Portfolio securities may be sold without regard to the length
of time that they have been held in order to take advantage of new investment
opportunities or yield differentials, or because the Adviser desires to preserve
gains or limit losses due to changing economic conditions. Capital appreciation
is a secondary objective of the High-Yield Portfolio. Portfolio turnover for the
High-Yield Portfolio in recent periods is shown under "Financial Highlights",
above. High portfolio turnover may result in correspondingly greater transaction
costs.
The two Portfolios may also invest in variable rate demand instruments and
industrial development bonds and other securities, which pay interest from
revenues of projects with similar characteristics. The Portfolios may also
contain commercial paper (considered Eligible Securities as defined above), U.S.
government securities, repurchase agreements or other taxable short-term money
market instruments when the Adviser deems such action appropriate. For a
description of municipal securities and their ratings, see the Statement of
Additional Information.
Yields of municipal securities depend upon a number of factors, including
the financial condition of the issuer, economic and money and capital market
conditions, the volume of municipal securities available, conditions within the
municipal securities market, proposed and actual changes in tax laws,
regulations and rules, and the maturity, rating, and size of individual
offerings. Market values of municipal securities will vary inversely in relation
to their yields. The magnitude of changes in market values in response to
changes in market rates of interest typically varies in proportion to maturity
of the obligations.
VARIABLE RATE DEMAND INSTRUMENTS. Variable rate demand instruments are
tax-exempt municipal obligations that provide for a periodic adjustment in the
interest rate paid on the instrument according to changes in interest rates
generally. These instruments permit the Fund to demand
5
<PAGE>
payment of the unpaid principal balance plus accrued interest upon a specified
number of days' notice to the issuer or its agent. The demand feature may be
backed by a bank letter of credit or guarantee issued with respect to such
instrument. The Fund intends to exercise the demand only (1) upon a default
under the terms of the municipal obligation, (2) as needed to provide liquidity
to the Fund, or (3) to maintain a high quality investment portfolio. The issuer
of a variable rate demand instrument may have a corresponding right to prepay in
its discretion the outstanding principal of the instrument plus accrued interest
upon notice comparable to that required for the holder to demand payment. The
variable rate demand instruments that the Fund may purchase are payable on
demand on not more than seven calendar days' notice. The terms of the
instruments provide that interest rates are adjustable at intervals ranging from
daily up to six months, and the adjustments are based upon the prime rate of a
bank or other appropriate interest rate adjustment index as provided in the
respective instruments.
WHEN-ISSUED SECURITIES. Municipal securities may be purchased or sold on a
delayed-delivery basis or on a when-issued basis. These transactions arise when
the Fund buys or sells securities with payment and delivery taking place in the
future, to secure what is considered to be an advantageous price and yield to
the Fund. No payment is made until delivery is due, often a month or more after
the purchase. When the Fund engages in when-issued and delayed-delivery
transactions, certain risks are involved. The Fund relies on the buyer or
seller, as the case may be, to consummate the transaction. Failure of the buyer
or seller to do so may result in the Fund failing to obtain a price considered
to be advantageous. The securities are subject to market fluctuations and no
interest accrues to the purchaser during this period. At the time the Fund
commits to purchase municipal securities on a delayed-delivery basis or a
when-issued basis, it will record the transaction and reflect the value of the
municipal securities in determining the net asset value of the appropriate
portfolio. A separate account for the Fund consisting of cash or high-grade
securities equal to the amount of the when-issued commitments will be
established at the Fund's custodian bank. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market. If the market value of the deposited securities declines,
additional cash or securities will be placed in the account on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.
STANDBY COMMITMENTS. When municipal securities are purchased for the Money
Market Portfolio, the Fund may obtain a "standby commitment"--that is, the right
to resell the security to the seller at an agreed-upon price on certain dates or
within a specific period. The Fund's right to exercise a standby commitment will
be unconditional and unqualified. A standby commitment is not transferable by
the Fund, and therefore terminates if the Fund sells the security to a third
party. The Fund may pay for certain standby commitments either in cash or by
paying a higher price for portfolio securities which are acquired subject to
such a commitment, thereby reducing the yield to maturity otherwise available
for the same securities. The Fund will enter into standby commitments only with
banks and securities dealers which, in the opinion of the Adviser, present
minimal credit risks. The Fund's ability to exercise a standby commitment will
depend on the ability of the broker-dealer or bank to pay for the securities if
the standby commitment is exercised. In the event that a broker-dealer or bank
should default on its obligation to repurchase the security, the Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere.
LENDING SECURITIES. The Fund may lend limited amounts of its portfolio
securities to broker-dealers or institutional investors which the Adviser deems
qualified, but only when the borrower
6
<PAGE>
agrees to maintain cash collateral with the Fund equal at all times to at least
100% of the value of the loaned securities and accrued interest. The Fund will
continue to receive interest on the lent securities and will invest the cash
collateral in readily marketable short-term obligations of high quality, thereby
earning additional interest. Interest on loaned municipal securities received by
the borrower and paid over to the Fund will not be exempt from federal income
taxes in the hands of the Fund. The Fund will not lend securities if, as a
result, the aggregate of such loans in each Portfolio would exceed 10% of the
value of that Portfolio's total assets. The Fund may terminate such loans at any
time.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of investment restrictions which may not be
changed without shareholder approval. These are set forth under "Investment
Restrictions" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The management and affairs of the Fund are supervised by the Fund's Board of
Directors. The Fund's officers conduct and supervise the daily business
operations of the Fund. The Fund's investment decisions are made by an
investment committee of employees of the Adviser. The Fund's Annual Report
contains a discussion on the Fund's performance, which will be made available
upon request and without charge.
THE ADVISER. The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co., Inc. ("AB&Co.").
The Adviser was formed as part of a reorganization of AB&Co., a sole
proprietorship formed in 1931 which became a New York corporation in 1946.
AB&Co. currently owns approximately 81% of the outstanding shares of the
Adviser's common stock. Jean Bernhard Buttner, Chairman, President and Chief
Executive Officer of the Adviser, owns a majority of the voting stock of AB&Co.
All of the non-voting stock is owned by or for the benefit of members of the
Bernhard family and certain employees and former employees of the Adviser and
AB&Co. The Adviser currently acts as investment adviser to the other Value Line
funds and furnishes investment counseling services to private and institutional
accounts with combined assets in excess of $4 billion. Value Line Securities,
Inc., the Fund's distributor, is a subsidiary of the Adviser. The Adviser
manages the Fund's investments, provides various administrative services and
supervises the Fund's daily business affairs, subject to the authority of the
Directors. The Adviser is paid an advisory fee at an annual rate of 1/2 of 1% of
the Fund's average daily net assets during the year. For more information about
the Fund's management fees and expenses, see the "Summary of Fund Expenses" on
page 2.
CALCULATION OF NET ASSET VALUE
The net asset value per share of each Portfolio for purposes of both
purchases and redemptions is determined once daily as of the close of trading of
the first session of the New York Stock Exchange (currently 4:00 p.m., New York
time) on each day that the New York Stock Exchange is open for trading except on
days on which no orders to purchase, sell or redeem Fund shares have been
received. The holidays on which the New York Stock Exchange is closed currently
are New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per
share is determined by dividing the total value of the investments and other
assets of each Portfolio, less any liabilities, by the total outstanding shares
of such Portfolio.
7
<PAGE>
HIGH-YIELD PORTFOLIO. Bonds and other fixed-income securities of the
High-Yield Portfolio are valued on the basis of prices provided by an
independent pricing service approved by the Board of Directors. Because of the
large number of outstanding issues of municipal bonds, the majority of issues do
not trade each day; therefore, recent last sale prices are not always available.
In valuing such securities, the pricing service generally takes into account
institutional-size trading in similar groups of securities and any developments
related to specific securities. Securities are valued by the pricing service at
the most recent available bid prices provided by investment dealers when such
prices are readily available and are representative of the bid side of the
market. (The municipal bond market is typically a "dealer" market, meaning that
investment dealers buy and sell bonds for their own accounts rather than for
customers. As a result, the "spreads" or differences between bid and asked
prices for certain municipal bonds may differ substantially among dealers.)
The methods used by the pricing service and the valuations so established
are periodically reviewed by the officers of the Fund under the general
supervision of the Board of Directors. There are a number of pricing services
available and the Directors, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part. Short-term instruments maturing within 60 days of
the date of purchase will be valued at amortized cost, unless this does not
represent fair value. Other assets and securities for which no quotations are
readily available will be valued in good faith at their fair value using methods
determined by the Board of Directors.
MONEY MARKET PORTFOLIO. It is the policy of the Money Market Portfolio to
attempt to maintain a net asset value of $1.00 per share for purposes of sales
and redemptions. The instruments held by the Money Market Portfolio are valued
on the basis of amortized cost which does not take into account unrealized
capital gains or losses. This involves valuing an instrument at cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument. Thus, if the use of amortized cost by the Portfolio resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
the Portfolio would be able to obtain a somewhat higher yield than would result
from investment in a fund utilizing solely market values, and existing investors
in the Portfolio would receive less investment income. The converse would apply
in a period of rising interest rates.
The valuation of securities based upon their amortized cost and the
commitment to maintain the Portfolio's per share net asset value of $1.00 is
permitted by Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act"). The rule requires that the Fund maintain a dollar-weighted average
portfolio maturity for the Money Market Portfolio of 90 days or less, purchase
instruments which have remaining maturities of 397 days or less only (except
those which have a maturity in excess of 397 days but which permit the holder to
demand payment at any time or at a specified time within 397 days), and invest
only in securities determined by the Adviser (or where appropriate by the Board
of Directors) to present minimal credit risks and that are, at the time of
acquisition, eligible securities. The Directors have established procedures
designed to achieve this objective including a review of the portfolio's
holdings by the Directors, at such intervals as they may deem appropriate, to
determine whether the portfolio's net asset value calculated by using available
market quotations deviates from $1.00 per share based on amortized cost. The
extent of any deviation will be examined by the Directors and if such deviation
exceeds 1/2 of 1%, the Directors will promptly consider what action, if
8
<PAGE>
any, will be initiated. In the event the Directors determine that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, they have agreed to take such corrective
action as they regard as necessary and appropriate, including selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends, making a special capital
distribution, redeeming shares in kind, or establishing a net asset value per
share by using available market quotations.
HOW TO BUY SHARES
Shares of each Portfolio of the Fund are sold at net asset value next
calculated after receipt of a purchase order. The minimum initial investment is
$1,000 for each portfolio selected; the minimum for subsequent investments is
$250. Orders for the purchase of shares of the Money Market Portfolio become
effective when payment for the order has been received prior to 4:00 p.m., New
York time, in the form of federal funds or has been converted to federal funds
and accepted by the Fund. The Fund is credited with federal funds on the
following business day if the investment is made by federal funds wire. Payments
transmitted by other than bank wire may take longer to be converted to federal
funds. Investments transmitted by check are normally converted into federal
funds on the second business day following receipt. Orders for the purchase of
shares of the High-Yield Portfolio become effective upon receipt of the
completed and signed purchase application and a check and will be effected at
the net asset value next computed after receipt.
If an order to purchase shares is cancelled due to nonpayment or because the
investor's check does not clear, the purchaser will be responsible for any loss
incurred by the Fund or Value Line Securities by reason of such cancellation. If
the purchaser is a shareholder, Value Line Securities reserves the right to
redeem sufficient shares from the shareholder's account to protect the Fund
against loss.
The Fund may refuse any order for the purchase of shares. Share certificates
will not be issued unless specifically requested in writing.
MAIL. Send your check payable to "NFDS--Agent" to Value Line Funds, c/o
National Financial Data Services, Inc., P.O. Box 419729, Kansas City, MO
64141-6729. Initial investments should be accompanied by a completed and signed
purchase application specifying in which portfolio you are purchasing shares.
Shareholders may add to their Fund account at any time ($250 minimum for
each portfolio selected) by mailing a check payable to NFDS-- Agent to Value
Line Funds, c/o National Financial Data Services, Inc., P.O. Box 419729, Kansas
City, MO 64141-6729. Subsequent investments should include the "next payment"
stub which is a part of the confirmation statement.
IMPORTANT: Shares of the Fund purchased by check may not be redeemed
until the Fund is reasonably assured of the final collection of such
check, currently determined to be up to 15 days for personal checks.
9
<PAGE>
WIRE PURCHASE--$1000 MINIMUM. An investor should call 1-800-243-2729 to
obtain an account number. After receiving an account number, instruct your
commercial bank to wire transfer "federal funds" via the Federal Reserve System
as follows:
State Street Bank and Trust Company
Boston, MA. ABA #011000028
Attn: Mutual Fund Division
DDA #99049868
The Value Line Tax Exempt Fund, Inc.
A/C # _____________________
Shareholder's name and account information
Tax ID #_____________________
NOTE: A COMPLETED AND SIGNED APPLICATION MUST BE MAILED IMMEDIATELY AND
RECEIVED BY NFDS BEFORE IT CAN HONOR ANY WITHDRAWAL OR EXCHANGE TRANSACTIONS.
After your account has been opened, you may wire additional investments in
the same manner.
For an initial investment made by federal funds wire purchase, the wire must
include a valid social security number or tax identification number. Investors
purchasing shares in this manner will have 30 days after purchase to provide the
certification and signed account application. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn on only U.S. banks.
Until receipt of the above, any distributions from the account will be subject
to 31% withholding.
SUBSEQUENT TELEPHONE PURCHASES (HIGH-YIELD PORTFOLIO ONLY). Upon completion
of the telephone purchase authorization section of the account application,
shareholders who own shares of the High-Yield Portfolio with a current value of
$500 or more may also make additional investments in amounts of $250 or more or
up to twice the value of their shares by calling 1-800-243-2729 between 9:00
a.m. and 4:00 p.m. New York time. Such orders will be priced at the closing net
asset value on the day received and payment will be due within three business
days. If payment is not received within the required time or a purchaser's check
does not clear, the order is subject to cancellation and the purchaser will be
responsible for any loss incurred by the Fund or Value Line Securities.
BROKER/DEALERS. If you wish, you may purchase or redeem shares through
registered broker-dealers other than through Value Line Securities.
Broker-dealers who process such orders for their customers may charge a fee for
these services. Broker-dealers are responsible for promptly transmitting
purchase and redemption orders to the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends consisting of substantially all of the net
investment income of each Portfolio each business day, payable to shareholders
of record of the Portfolio at the close of the previous business day. Shares
begin earning income on the day following the effective date of purchase. Income
earned by the Fund on weekends, holidays, and other days on which the Fund is
closed for business is declared as a dividend on the next day on which the Fund
is open for business. In the Money Market Portfolio, dividends are automatically
reinvested each day in additional shares. The Money Market Portfolio does not
anticipate having any net realized long-term capital gains or losses. Dividends
credited to a shareholder's account in the High-Yield Portfolio are distributed
10
<PAGE>
monthly. The Fund expects to distribute any net realized capital gains in the
High-Yield Portfolio at least annually. Income dividends and capital gains
distributions paid by the High-Yield Portfolio are automatically reinvested in
additional shares unless specifically requested in cash.
PERFORMANCE INFORMATION
The Fund may from time to time include information regarding its total
return performance or yield in advertisements or in information furnished to
existing or prospective shareholders.
HIGH-YIELD PORTFOLIO: When information regarding total return is furnished,
it will be based upon changes in the High-Yield Portfolio's net asset value and
will assume the reinvestment of all capital gains distributions and income
dividends. It will take into account nonrecurring charges, if any, which the
High-Yield Portfolio may incur but will not take into account any income taxes
due on High-Yield Portfolio non-tax-exempt distributions.
When information regarding "yield" is furnished it will refer to the net
investment income per share generated by an investment in the High-Yield
Portfolio over a thirty-day period. This income will then be annualized by
assuming that the amount of income generated by the investment during that
thirty-day period is generated each 30 days over one year and assuming that the
income is reinvested every six months.
MONEY MARKET PORTFOLIO: Current annualized yield for the Money Market
Portfolio is based upon the seven calendar days ending on the date of
calculation (the "base period"). The total net investment income during the base
period on a hypothetical pre-existing account having a balance of one share at
the beginning of the base period is divided by the value of the account at the
beginning of that period. This base period return is multiplied by 365/7 to
obtain the current annualized yield. Net investment income will not include
either realized capital gains and losses or unrealized appreciation and
depreciation, but the average price per share will include any changes in net
asset value during the base period. The effective yield for the Money Market
Portfolio will reflect the compounding of the current yield. Effective yields
are computed by adding one to the base period return, raising the sum to a power
equal to 365 divided by 7, and subtracting one from this result.
Net investment income of the Money Market Portfolio, for dividend and yield
calculation purposes, consists of interest income accrued, plus or minus
amortization of purchase discounts or premiums which may occur upon purchases of
securities, minus accrued expenses (including estimates) incurred since the
previous calculation.
The table below illustrates the total return performance of each Portfolio
for the periods indicated by showing the value of a hypothetical $1,000
investment made at the beginning of each period. The information contained in
the table has been computed by applying each Portfolio's average annual
11
<PAGE>
total return to the hypothetical $1,000 investment. The table assumes
reinvestment of all capital gains distributions and income dividends, but does
not take into account income taxes which may be payable on any taxable Fund
distributions or dividends.
HIGH-YIELD PORTFOLIO
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
TOTAL
RETURN
-------------
<S> <C> <C>
For the year ended February 28, 1995.............................. $ 1,006 .64 %
For the 5 years ended February 28, 1995........................... 1,412 7.15 %
For the 10 years ended February 28, 1995.......................... 2,271 8.55 %
MONEY MARKET PORTFOLIO
<CAPTION>
AVERAGE
ANNUAL
TOTAL
RETURN
-------------
<S> <C> <C>
For the year ended February 28, 1995.............................. $ 1,022 2.22 %
For the 5 years ended February 28, 1995........................... 1,161 3.03 %
For the 10 years ended February 28, 1995.......................... 1,464 3.88 %
</TABLE>
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc. and other industry or financial publications such as KIPLINGER'S PERSONAL
FINANCE, MONEY MAGAZINE, FINANCIAL WORLD, MORNINGSTAR, PERSONAL INVESTORS,
FORBES, FORTUNE, BUSINESS WEEK, WALL STREET JOURNAL, INVESTOR'S BUSINESS DAILY,
IBC/DONOGHUE'S MONEY FUND REPORT, and BARRON'S. The Fund may compare the
performance of either portfolio to that of other mutual funds with similar
investment objectives and to other relevant indices. From time to time, articles
about the Fund regarding its performance or ranking may appear in national
publications. Some of these publications may publish their own rankings or
performance reviews of mutual funds, including the Fund. Reference to or
reprints of such articles may be used in the Fund's promotional literature.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the current yield or total return for a
portfolio for any period should not be considered as a representation of what an
investment may earn or what an investor's total return or yield may be in any
future period.
TAXES
The Fund will advise shareholders annually as to the federal income tax
status of dividends and distributions paid by each portfolio during the calendar
year.
FEDERAL INCOME TAX ASPECTS. The Fund will distribute substantially all of
its net investment income each year as dividends. The Fund intends to invest in
tax-exempt securities so that it will qualify to pay "exempt-interest dividends"
(as defined in the Internal Revenue Code) to shareholders. The Fund's dividends
payable from net tax-exempt interest earned from securities will qualify as
exempt-interest dividends if, among other things, at the close of each quarter
of the taxable year of the Fund, at least 50% of the value of the Fund's total
assets consist of securities which are tax-exempt obligations of the states or
their political subdivisions.
12
<PAGE>
Exempt-interest dividends distributed to shareholders are not includable in
the shareholder's gross income for federal income tax purposes. The percentage
of income that is tax-exempt is applied uniformly to all distributions made
during each calendar year and thus is an annual average for the Fund rather than
a day-by-day determination for each shareholder. Distributions of net investment
income received by the Fund from investments in debt securities other than
tax-exempt securities, and any net realized short-term capital gains distributed
by the Fund, will be taxable to shareholders as ordinary income and will not be
eligible for the dividends-received deduction for corporations. Long-term
capital gains distributions, if any, to shareholders are taxable as long-term
capital gains without regard to the period of time the shareholder has held the
shares in the Fund. Any distributions of non-tax-exempt net investment income
and net realized capital gains, whether reinvested in Fund shares or received in
cash, will generally be subject to taxation for federal income tax purposes.
Additionally, if a shareholder realizes a loss on the sale or redemption of
shares held for six months or less, the loss to the extent of exempt-interest
dividends received by the shareholder will be disallowed for federal income tax
purposes. Furthermore, any such loss may be subject to additional restrictions
to the extent the Fund's income is treated as long-term capital gain.
Interest income derived from specified "private activity" obligations held
by the Fund, if any, may be subject to the alternative minimum tax. The Fund
will not treat interest income from these securities as tax-exempt for purposes
of measuring compliance with the 80% fundamental investment policy described
under "INVESTMENT OBJECTIVE AND POLICIES". To the extent that the Fund invests
in these securities, shareholders, depending on their own tax status, may be
subject to alternative minimum tax on that part of the Funds' distributions
derived from these securities. (Consult your tax adviser for information on
whether the alternative minimum tax applies to you.) Also, dividends from the
Fund may give rise to the alternative minimum tax for some corporate
shareholders under the "adjusted current earnings" rules of the Code.
Interest on indebtedness which is incurred or continued to purchase or carry
shares of a mutual fund which distributes exempt-interest dividends during the
year, such as the Fund, is not deductible for federal income tax purposes.
Further, the Fund may not be an appropriate investment for persons who are
"substantial users" of facilities financed by industrial development bonds held
by the Fund or are "related persons" to such users; such persons should consult
their tax advisor before investing in the Fund.
Under the Omnibus Budget Reconciliation Act of 1993, all or a portion of the
Fund's gain from the sale or redemption of tax-exempt obligations acquired after
April 30, 1993 attributable to market discount will be treated as ordinary
income rather than capital gain. This rule may increase the amount of ordinary
income dividends received by shareholders.
Each Portfolio of the Fund will be treated as a separate entity for federal
income tax purposes.
STATE AND LOCAL TAX ASPECTS. Dividends derived from non-tax-exempt net
investment income and net realized capital gains will generally be subject to
tax at the state and local levels where such taxes are imposed. Moreover,
exempt-interest dividends for federal income tax purposes may not be exempt
under the laws of a particular state or local taxing authority. It is
recommended that you consult your tax advisor for information in this regard.
The Fund will notify shareholders annually of the percentage and source, on a
state-by-state basis, of interest income earned on tax-exempt securities held by
each Portfolio during the preceding year.
13
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value after National Financial Data Services, Inc. ("NFDS") receives a request
in proper form. The value of shares of the High-Yield Portfolio on redemption
may be more or less than the shareholder's cost, depending upon the market value
of the Portfolio's assets at the time. A shareholder holding certificates for
shares must surrender the certificate properly endorsed with signature
guaranteed. A signature guarantee may be executed by any "eligible" guarantor.
Eligible guarantors include domestic banks, savings associations, credit unions,
member firms of a national securities exchange, and participants in the New York
Stock Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. A
guarantee from a notary public is not an acceptable source. The signature on any
request for redemption of shares not represented by certificates, or on any
stock power in lieu thereof, must be similarly guaranteed. In each case the
signature or signatures must correspond to the name in which the account is
registered. Additional documentation may be required when shares are registered
in the name of a corporation, agent or fiduciary. For further information, you
should contact NFDS.
The Fund does not make a redemption charge but shares redeemed through
brokers or dealers may be subject to a service charge by such firms. A check in
payment of redemption proceeds will be mailed within seven days following
receipt of all required documents. However, payment may be postponed under
unusual circumstances such as when normal trading is not taking place on the New
York Stock Exchange. The proceeds of any redemptions will not be sent until the
check (including a certified or cashier's check) used for investment has been
cleared for payment by the investor's bank.
If the Board of Directors determines that it is in the best interests of the
Fund, the Fund may redeem, upon prior written notice at net asset value, all
shareholder accounts which due to redemptions fall below $500 in net asset
value. In such event, an investor will have 30 days to increase the shares in
his account to the minimum level.
BY TELEPHONE OR WIRE (MONEY MARKET PORTFOLIO ONLY). You may redeem shares
by telephone or wire instructions to NFDS by so indicating on the initial
application. Payment will normally be transmitted on the business day following
receipt of your instructions to the bank account at a member bank of the Federal
Reserve System you have designated on your initial purchase application. The
Fund employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. These procedures include requiring some form of personal
identification prior to acting upon instructions received by telephone. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. Any loss will be borne by the investor. Heavy
wire traffic may delay the arrival of a wire until after public hours at your
bank. Telephone or wire redemptions must be in amounts of $1,000 or more and
your instructions must include your name and account number. The number to call
before the close of business on the New York Stock Exchange is 1-800-243-2729.
Procedures for redeeming Fund shares by telephone may be modified or terminated
without notice at any time by the Fund.
BY CHECK (MONEY MARKET PORTFOLIO ONLY). You may elect this method of
redemption by so indicating on the initial application and you will be provided
a supply of checks by NFDS. These checks may be made payable to the order of any
person in any amount of $500 or more. When your check is presented for payment,
the Fund will redeem a sufficient number of full and fractional shares
14
<PAGE>
in your account to cover the amount of the check. Dividends will be earned by
the shareholder on the check proceeds until it clears. Checks will be returned
unpaid if there are insufficient shares to meet the withdrawal amount.
This method of redemption requires that your shares must remain in an open
account and that no share certificates are issued and outstanding. You cannot
close your account through the issuance of a check because the exact balance at
the time your check clears will not be known when you write the check.
If you use this privilege you will be required to sign a signature card
which will subject you to State Street Bank and Trust Company's rules and
regulations governing checking accounts. The authorization form which you must
sign also contains a provision relieving the bank, NFDS, the Fund, Value Line
Securities and the Adviser from liability for loss, if any, which you may
sustain arising out of a non-genuine instruction pursuant to this redemption
feature. Any additional documentation required to assure a genuine redemption
must be maintained on file with NFDS in such a current status as NFDS may deem
necessary. A new form properly signed and with the signature guaranteed must be
received and accepted by NFDS before authorized redemption instructions already
on file with NFDS can be changed.
An additional supply of checks will be furnished upon request. There
presently is no charge to the shareholder for these checks or their clearance.
However, the Fund and NFDS reserve the right to make reasonable charges and to
terminate or modify any or all of the services in connection with this privilege
at any time and without prior notice. NFDS will impose a $5 fee for stopping
payment of a check upon your request or if NFDS cannot honor the check due to
insufficient funds or for other valid reasons.
IMPORTANT: Shares purchased by check may not be redeemed until the Fund is
reasonably assured of the final collection of the purchase check, currently
determined to be up to 15 days.
INVESTOR SERVICES
VALU-MATIC-REGISTERED TRADEMARK-. The Fund offers a free, pre-authorized
check service to its shareholders through which monthly investments of $25 or
more are automatically made into the shareholder's Fund account. Further
information regarding this service can be obtained from Value Line Securities by
calling 1-800-223-0818.
THE VALUE LINE MONTHLY INVESTMENT PLAN (THE "MIP"). The Fund offers a free
service to its shareholders through which monthly investments may be made
automatically into the shareholder's Fund account. The MIP is similar to
Valu-Matic (see "Investor Services--Valu-Matic") in that the shareholder can
authorize the Fund to debit the shareholder's bank account monthly for the
purchase of Fund shares on or about the 3rd or 18th of each month. Under the
MIP, the Fund's minimum initial investment of $1,000 will be waived. The MIP
requires a minimum investment of $40 per month for the purchase of Fund shares.
The Fund reserves the right to close an account in the event that the MIP is
discontinued by the shareholder before the account reaches $1,000 in value, at
the then current net asset value. The shareholder will then have thirty days
after receipt of written notice to increase the account to the minimum required,
or to reactivate the MIP, in order to avoid having the account closed.
15
<PAGE>
To establish the MIP option, complete the appropriate sections of the
Account Application, and include a voided, unsigned check from the bank account
to be debited.
The Fund reserves the right to discontinue offering the MIP at anytime.
EXCHANGE OF SHARES. The shares of one portfolio may be exchanged for shares
of the other portfolio or for the shares of another Value Line fund in any
identically registered account without cost. Shares of those other funds with a
net asset value of $1,000 or more may likewise be exchanged for shares of either
of the Fund's Portfolios without cost. The privilege to exchange Fund shares
enables investors to acquire shares in a fund with different investment
objectives when they believe that a shift between funds is an appropriate
investment decision. Exchange of Fund shares is available to investors who
reside in any State in which the fund shares being acquired may legally be sold.
Exchanges of shares will generally result in the realization of a capital gain
or loss for Federal income tax purposes. The tax consequences may differ when
shares have been purchased under a Keogh, IRA, 403(b)(7) or other tax-sheltered
retirement plan. A shareholder should consult with his tax adviser with respect
to the exchange of Fund shares.
BY TELEPHONE: A Telephone Exchange Authorization is provided as part of the
Application accompanying this Prospectus. You may make telephone exchanges
provided that (i) you have elected the telephone exchange option on the original
application, (ii) the registration on the two accounts will be identical, and
(iii) the shares to be exchanged are not in certificate form. Neither the Fund,
NFDS nor Value Line Securities will be responsible for the authenticity of
exchange instructions received by telephone or telegraph that are believed to be
genuine. NFDS must receive telephone exchange instructions prior to 4:00 p.m.,
New York time, if the shares to be purchased are to receive that day's net asset
value price. To make an exchange, call 1-800-243-2729. Although it has not been
a problem in the past, shareholders should be aware that a telephone exchange
may be difficult during periods of major economic or market changes.
IN WRITING: Exchange requests may also be made in writing and should be
sent to NFDS, the Fund's Shareholder Servicing Agent. If certificates have been
issued to you for the shares to be exchanged, they should be submitted with your
request.
An exchange involves a redemption of all or a portion of your shares in the
Fund and the investment of the redemption proceeds in shares of the other fund
which you have selected. The redemption will be made at the net asset value of
the shares to be redeemed next determined after your exchange request is
received in proper order. The shares of the fund to be acquired will be
purchased at the net asset value of those shares next determined after
acceptance of the purchase order by that fund. However, in the event shares of
one or more of these funds are being exchanged for shares of the Money Market
Portfolio or The Value Line Cash Fund, Inc. and the shares (including shares in
accounts under the control of one investment adviser) have a value in excess of
$500,000, then, at the discretion of the Adviser, the shares to be purchased
will be purchased at the closing price up to the seventh day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption. In order to prevent abuse of the exchange privilege, the Fund
also reserves the right to terminate the exchange privilege of any account
making more than eight exchanges a year. (An exchange OUT of The Value Line Cash
Fund, Inc. or the Money Market Portfolio is not counted for this purpose.) The
exchange privilege may be modified or terminated at any time, and any of the
Value
16
<PAGE>
Line funds may discontinue offering its shares generally or in any particular
state without prior notice. Copies of the prospectuses for the other Value Line
funds may be obtained from Value Line Securities by calling 1-800-223-0818.
SYSTEMATIC CASH WITHDRAWAL PLAN. A shareholder who has invested a minimum
of $5,000 in one of the Portfolios, or whose shares have attained that value,
may request a transfer of his shares to a Value Line Systematic Cash Withdrawal
Account which NFDS will maintain in his name on the Fund's books. Under the
Systematic Cash Withdrawal Plan (the "Plan"), the shareholder will request that
NFDS, acting as his agent, redeem monthly or quarterly a sufficient number of
shares so as to provide for payment to him, or someone he designates, of any
specified dollar amount (minimum $25). All certificated shares must be placed on
deposit under the Plan and dividends and capital gains distributions, if any,
are automatically reinvested at net asset value. The Plan will automatically
terminate when all shares in the account have been redeemed. The shareholder may
at any time terminate the Plan, change the amount of the regular payment, or
request liquidation of the balance of his account on written notice to NFDS. The
Fund may terminate the Plan at any time on written notice to the shareholder.
ADDITIONAL INFORMATION
The Fund is an open-end, diversified management investment company
incorporated in Maryland in 1983. The Fund's authorized capital consists of
200,000,000 shares of common stock, $.01 par value, allocated to the Money
Market Portfolio and the High-Yield Portfolio by the Board of Directors. Each
share is entitled to one vote on all matters submitted to shareholders. Shares
of each Portfolio have equal voting rights and no preferences as to conversion,
exchange, retirement or any other feature. Fund shares are fully paid and
nonassessable, are fully transferable when issued and have no pre-emptive
rights. Additional portfolios may be offered in the future but such additional
offerings would not affect the interests of current shareholders in the existing
Portfolios.
INQUIRIES. All inquiries regarding the Fund should be directed to the Fund
at the telephone numbers or address set forth on the cover page of this
Prospectus. Shareholders inquiries regarding their accounts and account balances
should be directed to National Financial Data Services, Inc., servicing agent
for State Street Bank and Trust Company, the Fund's transfer agent,
1-800-243-2729. Shareholders should note that they may be required to pay a fee
for special requests such as historical transcripts of an account. Our Info-Line
provides the latest account information 24 hours a day, every day, and is
available to shareholders with push button phones. The Info-Line toll-free
number is 1-800-243-2739.
WITHHOLDING. Mutual funds are required to withhold 31% of taxable
dividends, distributions of capital gains and redemption proceeds in accounts
without a valid social security or tax identification number. You must provide
this information when you complete the Fund's application and certify that you
are not currently subject to backup withholding. The Fund reserves the right to
close by redemption accounts for which the holder fails to provide a valid
social security or tax identification number.
SHAREHOLDER MEETINGS. The Fund does not intend to hold routine annual
meetings of shareholders. However, special meetings of shareholders will be held
as required by law for purposes such as changing fundamental policies or
approving an advisory agreement.
17
<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 FUNDseeks 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 net 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 presently 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, low-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. The Fund is available to investors only through the
purchase of Guardian Investor, a tax deferred variable annuity, or ValuePlus, 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 E. 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.
18
<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
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
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
----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of Fund Expenses....................... 2
Financial Highlights........................... 3
Investment Objective and Policies.............. 4
Investment Restrictions........................ 7
Management of the Fund......................... 7
Calculation of Net Asset Value................. 7
How to Buy Shares.............................. 9
Dividends and Distributions.................... 10
Performance Information........................ 11
Taxes.......................................... 12
How to Redeem Shares........................... 14
Investor Services.............................. 15
Additional Information......................... 17
</TABLE>
- -------------------------------------------
PROSPECTUS
- -------------------
July 1, 1995
The Value Line
Tax Exempt
Fund, Inc.
(800) 223-0818
[SIG]
<PAGE>
THE VALUE LINE TAX EXEMPT FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 800-243-2729
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1995
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and must be
read in conjunction with the Prospectus of The Value Line Tax Exempt Fund, Inc.
(the "Fund") dated July 1, 1995, a copy of which may be obtained without charge
by writing or telephoning the Fund.
----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Investment Objective and Policies.................................................... B-1
Municipal Securities................................................................. B-2
Investment Restrictions.............................................................. B-3
Directors and Officers............................................................... B-5
The Adviser.......................................................................... B-6
Portfolio Transactions............................................................... B-7
How to Buy Shares.................................................................... B-8
Suspension of Redemptions............................................................ B-8
Taxes................................................................................ B-9
Performance Data..................................................................... B-10
Additional Information............................................................... B-12
Financial Statements................................................................. B-12
Security Ratings..................................................................... B-12
</TABLE>
----------
INVESTMENT OBJECTIVE AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVE AND POLICIES" IN THE FUND'S PROSPECTUS)
The Fund is a no-load, diversified, open-end management investment company
whose primary investment objective is to provide investors with the maximum
income exempt from federal income
B-1
<PAGE>
taxes while avoiding undue risk to principal. The Fund seeks to achieve its
objective by offering two separate and distinct portfolios, the Money Market
Portfolio and the High-Yield Portfolio (collectively, the "Portfolios"). The
High-Yield and The Money Market portfolios will have substantially all of their
assets invested in investment-grade municipal securities and Eligible
Securities, (as such is defined in the Prospectus), respectively, the interest
on which is deemed exempt from federal income tax. (The term "municipal
securities" is discussed below.)
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The value of the underlying
securities will always be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement. The Fund will make payment
for such securities only upon physical delivery or evidence of book-entry
transfer to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. It is expected that repurchase
agreements will give rise to income which will not qualify as tax-exempt income
when distributed by the Fund. The Board of Directors monitors the
creditworthiness of parties with which the Fund enters into repurchase
agreements.
While the Fund has no plans to do so during the current year, it may enter
into reverse repurchase agreements, which involve the sale of securities held by
the Fund with an agreement to repurchase the securities at an agreed-upon price,
date and interest payment.
MUNICIPAL SECURITIES
Municipal securities are debt issues of governmental bodies, other than the
U.S. government, within the United States, including securities issued by or on
behalf of states, territories, and possessions of the United States, by the
District of Columbia, and by political subdivisions and their duly constituted
agencies and instrumentalities. The interest on these issues generally is not
includable in "gross income" for federal income tax purposes, subject, however,
to many exceptions and limitations. The purpose of these issues is to obtain
funds for various public uses, including the construction, repair, or
improvement of various public facilities, such as airports, bridges, highways,
housing, hospitals, mass transit, schools, streets, waterworks and sewage
systems.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. GENERAL OBLIGATION bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
interest and principal. REVENUE bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
revenues from a special excise tax or other specific source, but not from
general tax revenues. Revenue bonds include
B-2
<PAGE>
tax-exempt industrial revenue bonds that generally do not have the pledge of the
credit of the issuer but are supported by revenues from a taxable corporation
that operates a facility that was financed by the funds from the bond issue, and
the pledge, if any, of real and personal property so financed as security for
such payment. There are also a variety of hybrid and special types of municipal
securities that have characteristics of both general obligation and revenue
bonds.
Municipal notes are short-term obligations issued to obtain temporary funds
for states, cities, municipalities, and municipal agencies. These notes include
tax, revenue and bond anticipation notes that provide temporary funds until the
anticipated taxes, revenues, or bond proceeds, respectively, are received by the
issuer. Other municipal notes include construction loan notes and short-term
discount notes. Certain project notes, issued by a state or local housing
authority, are secured by the full faith and credit of the United States.
Municipal commercial paper consists of very short-term negotiable notes, which
provide seasonal working capital needs or interim construction financing. The
commercial paper and tax and revenue anticipation notes are paid from general
revenues or may be refinanced with long-term debt.
Legislation to restrict or eliminate the federal income tax exemption for
interest on municipal securities has, from time to time, been introduced before
Congress. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be adversely affected. In such
event, the Fund would re-evaluate its investment objective and submit possible
changes in the structure of the Fund for the consideration of the shareholders.
STANDBY COMMITMENTS. The Fund will only enter into standby commitments in
the Money Market Portfolio and solely for the purpose of facilitating portfolio
liquidity (including flexibility in disposing of portfolio securities acquired
with a view to their disposition prior to their stated maturity). The Fund will
not acquire standby commitments with a view to exercising them at a time when
the exercise price may exceed the current value of the underlying securities. If
the exercise price of a standby commitment held by the Fund should exceed the
current value of the underlying securities, the Fund may refrain from exercising
the standby commitment in order to avoid causing the issuer of the standby
commitment to sustain a loss and thereby jeopardizing the Fund's business
relationship with the issuer. The acquisition of a standby commitment will not
affect the valuation of the underlying security, which will continue to be
valued in accordance with the amortized cost method. The maturity of a municipal
security purchased by the Fund will not be considered shortened by any standby
commitment to which such security is subject. Therefore, standby commitments
will not affect the dollar-weighted average maturity of the Fund's Money Market
Portfolio.
INVESTMENT RESTRICTIONS
The policies set forth below are fundamental policies of the Fund and may
not be changed without the affirmative vote of a majority of the outstanding
voting securities of the Fund. As used in this Statement of Additional
Information and in the Prospectus, a "majority of the outstanding voting
securities of the Fund" means the lesser of (1) the holders of more than 50% of
the outstanding shares of capital stock of the Fund or (2) 67% of the shares
present if more than 50% of the shares are present at a meeting in person or by
proxy.
B-3
<PAGE>
The Fund may not:
1. Borrow money in either Portfolio, except from banks on a temporary
basis or via entering into reverse repurchase agreements for extraordinary
or emergency purposes or to facilitate redemptions and in amounts not
exceeding 10% of the total assets of that Portfolio, or mortgage, pledge or
hypothecate the assets of any Portfolio except as may be necessary in
connection with such borrowings. Securities will not be purchased while
borrowings are outstanding.
2. Purchase equity securities or securities convertible into equity
securities.
3. Engage in the underwriting of securities, except to the extent that
the Fund may be deemed an underwriter as to restricted securities under the
Securities Act of 1933 in selling portfolio securities.
4. Invest in real estate, although the Fund may invest in municipal
securities secured by real estate or interests therein.
5. Invest in commodities or commodity contracts or purchase securities
of other investment companies.
6. Make loans to other persons except as provided under "Lending
Securities" in the Prospectus or in connection with the purchase of debt
obligations or by investment in repurchase agreements, provided that
repurchase agreements maturing in more than seven days when taken together
with other illiquid assets do not exceed 10% of the Fund's assets.
7. Purchase securities of any issuer (except securities issued or
guaranteed by the U.S. government, or any of its agencies or
instrumentalities) in any Portfolio if as a result more than 5% of the total
assets of that Portfolio would be invested in the securities of such issuer.
8. Purchase more than 10% of the outstanding publicly issued debt
obligations of any issuer, or invest in companies for the purpose of
exercising control.
9. Purchase securities of any issuer (other than agencies and
instrumentalities of the U.S. government) having a record of less than three
years of continuous operation including predecessors if more than 5% of the
Fund's assets would be invested in such securities.
10. Purchase or retain the securities of any issuer if, to the knowledge
of the Fund, those officers and directors of the Fund, and of the Adviser,
who each owns more than 1/2 of 1% of the outstanding securities of such
issuer, together own more than 5% of such securities.
11. Purchase securities on margin or sell securities short, or
participate on a joint or a joint and several basis in any trading account
in securities.
12. Write, purchase or sell puts (except for standby commitments), calls
or combinations thereof or purchase interests in oil, gas or other mineral
exploration or development programs or leases.
13. Invest more than 25% of its total assets in the securities of
issuers conducting their principal business activities in any one industry.
B-4
<PAGE>
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ----------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 60 of Directors, Officer of Value Line, Inc. (the "Adviser")
President and Chief and Value Line Publishing, Inc. Chairman of
Executive Officer the Value Line Funds and Value Line
Securities, Inc. (the "Distributor").
John W. Chandler Director Consultant, Academic Search Consultation
2801 New Mexico Ave., N.W. Service, Inc. since 1992; Consultant,
Washington, DC 20007 Korn/Ferry International 1990-1992. Trustee
Age 71 Emeritus and Chairman (1993-1994) of Duke
University; President Emeritus, Williams
College.
*Leo R. Futia Director Retired Chairman and Chief Executive Officer
201 Park Avenue South of The Guardian Life Insurance Company of
New York, NY 10003 America and Director since 1970. Director
Age 75 (Trustee) of The Guardian Insurance & Annuity
Company, Inc., Guardian Investor Services
Corporation and the Guardian-sponsored mutual
funds.
Charles E. Reed Director Retired. Formerly, Senior Vice President of
3200 Park Avenue General Electric Co.; Director Emeritus of
Bridgeport, CT 06604 People's Bank, Bridgeport, CT.
Age 81
Paul Craig Roberts Director Distinguished Fellow, Cato Institute, since
505 S. Fairfax Street 1993; formerly, William E. Simon Professor of
Alexandria, VA 22320 Political Economy, Center for Strategic and
Age 56 International Studies; Director, A. Schulman
Inc. (plastics) since 1992.
Charles Heebner Vice President Director of Fixed Income with the Adviser
Age 59 since 1989.
Raymond Cowen Vice President Assistant Research Director with the
Age 74 Adviser.
David T. Henigson Vice President, Compliance Officer and since 1992, Vice
Age 37 Secretary and President and Director of the Adviser. Di-
Treasurer rector and Vice President of the Distributor.
<FN>
- ------------------------
* "Interested" Director as defined in the Investment Company Act of 1940 (the
"1940 Act").
</TABLE>
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
B-5
<PAGE>
Directors and certain officers of the Fund are also directors/trustees and
officers of other investment companies for which the Adviser acts as investment
adviser. Directors who are officers or employees of the Adviser receive no
remuneration from the Fund. The following table sets forth information regarding
compensation of Directors by the Fund and by the Fund and the twelve other Value
Line Funds of which each of the Directors is a director or trustee for the
fiscal year ended February 28, 1995. Directors who are officers or employees of
the Adviser do not receive any compensation from the Fund or any of the Value
Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSON FROM FUND OF FUND EXPENSES RETIREMENT (13) FUNDS
- -------------------------------------------- --------------- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner............................. $ -0- N/A N/A $ -0-
John W. Chandler............................ 2,740 N/A N/A 35,620
Leo R. Futia................................ 2,740 N/A N/A 35,620
Charles E. Reed............................. 2,740 N/A N/A 35,620
Paul Craig Roberts.......................... 2,740 N/A N/A 35,620
</TABLE>
The Adviser and/or affiliated companies at February 28, 1995 owned 2,307,680
shares of the High-Yield Portfolio common shares, representing 9.94% of the
outstanding shares, and 227,404 shares of the Money Market Portfolio common
shares, representing .88% of the outstanding shares. At that date officers and
directors of the Fund as a group owned 343,198 shares of the High Yield
Portfolio, representing 1.48% of the outstanding shares, and 2,321 shares of the
Money Market Portfolio, representing .01% of the outstanding shares. In
addition, Richard Peck, P.O. Box 1418, Sarasota, Florida 34230, owned 1,900,805
shares of the Money Market Portfolio, representing 7.92% of the outstanding
shares.
THE ADVISER
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
The Fund's investment adviser is Value Line, Inc. (the "Adviser"). The
investment advisory agreement between the Fund and the Adviser dated August 10,
1988 provides for a monthly advisory fee computed at the annual rate of 1/2 of
1% of the Fund's average daily net assets during the year. The fee is allocated
to the Portfolios based on the relative net assets of each. During its fiscal
years ended in February 1993, 1994 and 1995, the Fund paid or accrued to the
Adviser advisory fees of $1,703,280, $1,631,617 and $1,370,791, respectively. In
the computation of the advisory fee, the net amount of any tender fees received
by Value Line Securities, Inc., the Fund's Distributor, from acting as tendering
broker with respect to any portfolio securities of the Fund will be subtracted
from the advisory fee. In addition, the Adviser shall reimburse the Fund for
expenses (exclusive of interest, taxes, brokerage expenses and extraordinary
expenses) which in any year exceed the limits prescribed by any state in which
shares of the Fund are qualified for sale. Presently, the most restrictive
limitation is 2.5% of the first $30 million of average daily net assets, 2% of
the next $70 million and 1.5% on any excess over $100 million.
B-6
<PAGE>
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal and
accounting fees, fees and expenses in connection with qualification under
federal and state securities laws and costs of shareholder reports and proxy
materials. The Fund has agreed that it will use the words "Value Line" in its
name only so long as Value Line, Inc. serves as investment adviser to the Fund.
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment advisory
services to private and institutional accounts with combined assets in excess of
$4 billion.
Certain of the Adviser's clients may have investment objectives similiar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients on the same day. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may
from time to time own securities which are also held in the Portfolios of the
Fund. The Adviser has imposed rules upon itself and such persons requiring
monthly reports of security transactions for their respective accounts and
restricting trading in various types of securities in order to avoid possible
conflicts of interest.
PORTFOLIO TRANSACTIONS
Portfolio securities are purchased from and sold to parties acting as either
principal or agent. Newly-issued securities ordinarily are purchased directly
from the issuer or from an underwriter; other purchases and sales usually are
placed with those dealers from whom it appears that the best price and execution
will be obtained. Usually no brokerage commissions, as such, are paid by the
Fund for such purchases and sales, although the price paid usually includes an
undisclosed compensation to the dealer acting as agent. The prices paid to
underwriters of newly-issued securities usually include a concession paid by the
issuer to the underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price. The Fund
paid no brokerage commissions in fiscal 1993, 1994 or 1995.
Transactions are allocated to various dealers by the Adviser in its best
judgment. The primary consideration is prompt and effective execution of orders
at the most favorable price. Subject to that primary consideration, dealers may
be selected for research, statistical or other services to enable the Adviser to
supplement its own research and analysis with the views and information of other
securities firms.
B-7
<PAGE>
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Adviser in advising other funds and
accounts it manages and, conversely, research services furnished to the Adviser
by brokers in connection with the other funds and accounts it manages may be
used by the Adviser in advising the Fund. Since such research services are
supplementary to the research efforts of the Adviser and must be analyzed and
reviewed by it, the receipt of such information is not expected to materially
reduce its overall expenses.
HOW TO BUY SHARES
(SEE ALSO "CALCULATION OF NET ASSET VALUE", "HOW TO BUY SHARES" AND
"INVESTOR SERVICES" IN THE FUND'S PROSPECTUS)
The Fund reserves the right to reduce or waive the minimum purchase
requirements in certain cases such as under The Value Line Monthly Investment
Plan and pursuant to payroll deduction plans, etc., where subsequent and
continuing purchases are contemplated.
The Fund has a distribution agreement with Value Line Securities, Inc.,
pursuant to which Value Line Securities acts as principal underwriter and
distributor of the Fund for the sale and distribution of its shares. Value Line
Securities is a wholly-owned subsidiary of the Adviser. Value Line Securities,
Inc. receives no compensation for its services under the agreement. Value Line
Securities also serves as distributor to the other Value Line funds.
AUTOMATIC PURCHASES. The Fund offers two free services to its shareholders:
Valu-matic Bank Check Program and Value Line Monthly Investment Plan through
which monthly investments are automatically made into the shareholder's Value
Line account. The Fund's Transfer Agent debits via automated clearing house or
draws a check each month on the shareholder's checking account and invests the
money in full and fractional shares. The purchase is confirmed directly to the
shareholder (who will also receive his cancelled check or debit memo each month
with his bank statement). The required forms to enroll in these programs are
available upon request from Value Line Securities, Inc.
SUSPENSION OF REDEMPTIONS
The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period by the Fund under the following conditions
authorized by the 1940 Act: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday closing, or
(b) during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal by
the Fund of securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for the Fund to determine the fair value of its net assets;
(3) for such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
B-8
<PAGE>
TAXES
(SEE "DIVIDENDS AND DISTRIBUTIONS" AND "TAXES" IN THE FUND'S PROSPECTUS)
The Fund intends to continue to qualify as a regulated investment company
under the Internal Revenue Code (the "Code"). During the Fund's last fiscal
year, the Fund so qualified. By so qualifying, the Fund is not subject to
federal income tax on its net investment income or net realized capital gains
which are distributed to shareholders.
Distributions of net tax-exempt income, in the form of "exempt-interest
dividends", are excludable from the shareholder's income for federal income tax
purposes (except as provided below) if the Fund qualifies to pay exempt-interest
dividends. Distributions of other investment income and any realized short-term
capital gains are taxable to shareholders as ordinary income. The Fund does not
anticipate that any distributions will be eligible for the dividends-received
deduction for corporate shareholders.
Distributions of realized long-term capital gains are taxable to
shareholders as long-term capital gain, regardless of the length of time the
shares of the Fund have been held by such shareholders and regardless of whether
the distribution is received in cash or is reinvested in additional Fund shares.
The computation of net capital gains takes into account any capital loss
carryforward of the Fund. For federal income tax purposes the Money Market
Portfolio had a capital loss carryover at February 28, 1995, of $27,649 which
will expire in 2000; the High-Yield Portfolio had a capital loss carryover of
$4,644,892 which will expire in 2003. To the extent future capital gains are
offset by such capital losses, neither Portfolio anticipates distributing any
such gains to its shareholders.
Investments in the Fund generally would not be suitable for non-taxable
entities, such as tax-exempt institutions, qualified retirement plans, H.R. 10
plans and individual retirement accounts since such investors would not gain any
additional federal tax benefit from receiving tax-exempt income.
The Code may require a shareholder who receives exempt-interest dividends to
treat as taxable income a portion of certain otherwise non-taxable social
security and railroad retirement benefit payments. Furthermore, that portion of
any dividend paid by the Fund which represents income derived from private
activity bonds held by the Fund may not retain its tax-exempt status in the
hands of a shareholder who is a "substantial user" of a facility financed by
such bonds, or a "related person". Moreover, some or all of the Fund's dividends
may be a specific preference item or a component of an adjustment item, for
purposes of determining federal alternative minimum taxes. Additionally, the
receipt of Fund dividends and distributions may affect (1) a corporate
shareholder's federal "environmental" tax liability and (2) a Subchapter S
corporate shareholder's federal "excess net passive income" tax liability.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date), or under special rules, an average cost. Under
certain circumstances, a loss on the sale or redemption of shares held for six
months or less may be treated as a long-term capital loss to the extent that the
Fund distributed long-term capital gain dividends on such
B-9
<PAGE>
shares. Moreover, a loss on sale or redemption of Fund shares will be disallowed
to the extent the shareholder purchases other shares of the Fund within 30 days
before or after the date the shares are sold or redeemed.
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
All distributions including distributions of exempt-interest dividends,
whether received in Fund shares or cash, must be reported by each shareholder on
his federal income tax return. Although exempt-interest dividends are reportable
on one's tax return, those dividends are excludable from the investor's taxable
income for federal income tax purposes. Under the Code, dividends declared by
the Fund in October, November and December of any calendar year, and payable to
shareholders of record in such month, shall be deemed to have been received by
the shareholder on December 31 of such calendar year if such dividend is
actually paid in January of the following calendar year.
A distribution by the Fund reduces the Fund's net asset value per share.
Such a distribution may be taxable to the shareholder as ordinary income or
capital gain as described above, even though, from an investment standpoint, it
may constitute a return of capital. In particular, investors should be careful
to consider the tax implications of buying shares just prior to a distribution.
The price of shares purchased at the time at the net asset value per share
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will then receive a return of capital upon the distribution
which may nevertheless be taxable to them.
For shareholders who fail to furnish to the Fund their social security or
taxpayer identification numbers and certain related information, taxable
dividends, distributions of capital gains and redemption proceeds paid by the
Fund may be subject to a 31% federal income tax withholding requirement. If the
withholding provisions are applicable, any such dividends or capital gains
distributions to these shareholders, whether taken in cash or reinvested in
additional Fund shares, and any redemption proceeds will be reduced by the
amounts required to be withheld.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) and is not intended to be a
complete discussion of all federal tax consequences. Shareholders are advised to
consult with their tax advisors concerning the application of federal, state and
local taxes to investments in the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual total return over the most recent four calendar quarters
and the period from the Fund's inception of operations. The Fund may also
advertise aggregate total return information for different periods of time.
B-10
<PAGE>
A portfolio's average annual total return is determined by reference to a
hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
T =#ERV/P - 1
n
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the end of
the period.
</TABLE>
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
As stated in the Prospectus, the Fund may also quote its current yield in
advertisements and investor communications. The yield computation for the Money
Market Portfolio is described in the Prospectus.
The yield computation for the High-Yield Portfolio is determined by dividing
the net investment income per share earned during the period by the maximum
offering price per share on the last day of the period and annualizing the
resulting figure, according to the following formula:
<TABLE>
<S> <C> <C> <C>
Yield = 2 a - b +1 6 -1
( ) cd
</TABLE>
<TABLE>
<S> <C> <C> <C>
where: a = dividends and interest earned during the period (calculated as required by
the Securities and Exchange Commission);
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on the last day of the period.
</TABLE>
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in advertising by the Fund.
The Fund may also, from time to time, include a reference to its current
quarterly or annual distribution rate in investor communications and sales
literature preceded or accompanied by a Prospectus, reflecting the amounts
actually distributed to shareholders which could include capital gains and other
items of income not reflected in the Fund's yield, as well as interest and
dividend income received by the Fund and distributed to shareholders (which is
reflected in the Fund's yield).
All calculations of the Fund's distribution rate are based on the
distributions per share which are declared, but not necessarily paid, during the
fiscal year. The distribution rate is determined by dividing the distributions
declared during the period by the maximum offering price per share on the last
day of the period and annualizing the resulting figure. In calculating its
distribution rate, the Fund
B-11
<PAGE>
uses the same assumptions that apply to its calculation of yield. The
distribution rate does not reflect capital appreciation or depreciation in the
price of the Fund's shares and should not be considered to be a complete
indicator of the return to the investor on his investment.
The Fund's current yield, distribution rate and total return may be compared
to relevant indices, including U.S. tax-exempt bond indices and data from Lipper
Analytical Services, Inc., or Standard & Poor's Indices. From time to time,
evaluations of the Fund's performance by independent sources may also be used in
advertisements and in information furnished to present or prospective investors
in the Fund.
ADDITIONAL INFORMATION
EXPERTS
The financial statements of the Fund and the financial highlights included
in the Fund's Annual Report to Shareholders and incorporated by reference in
this Statement of Additional Information have been so incorporated by reference
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
CUSTODIAN
The Fund employs State Street Bank and Trust Company, Boston, MA as
custodian for the Fund. The custodian's responsibilities include safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities, and collecting interest and dividends on the Fund's
investments. The custodian does not determine the investment policies of the
Fund or decide which securities the Fund will buy or sell.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended February 28, 1995,
including the financial highlights for each of the five fiscal years in the
period ended February 28, 1995 appearing in the 1995 Annual Report to
Shareholders and the report thereon of Price Waterhouse LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information.
The Fund's 1995 Annual Report to Shareholders is enclosed with this
Statement of Additional Information.
SECURITY RATINGS
RATINGS OF MUNICIPAL SECURITIES
MOODY'S INVESTORS SERVICE, INC. AAA-- the "best quality". AA--"high quality
by all standards", but margins of protection or other elements make long-term
risks appear somewhat larger than Aaa rated municipal bonds. A--"upper medium
grade obligations". Security for principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future. BAA--"medium grade"; neither highly protected nor poorly
secured; interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; lack outstanding
investment characteristics and in fact may have speculative characteristics as
well.
B-12
<PAGE>
STANDARD & POOR'S CORPORATION. AAA--"obligations of the highest quality".
AA--issues with investment characteristics "only slightly less marked than those
of the prime quality issues." A-- "the third strongest capacity for payment of
debt service". Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings because, with respect
to general obligations bonds, there is some weakness which, under certain
adverse circumstances, might impair the ability of the issuer to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional, and stability of the pledged revenues
could show some variations because of increased competition or economic
influences in revenues. BBB--the lowest "investment grade" security rating. The
difference between A and BBB ratings is that the latter shows more than one
fundamental weakness, or one very substantial fundamental weakness. With respect
to revenue bonds, debt coverage is only fair. Stability of the pledged revenues
could show substantial variations, with the revenue flow possibly being subject
to erosion over time.
RATINGS OF MUNICIPAL NOTES
MOODY'S INVESTORS SERVICE, INC. MIG-1: the best quality. MIG-2: high
quality, with margins for protection ample although not so large as in the
preceding group. MIG-3: favorable quality, with all security elements accounted
for, but lacking the undeniable strength of the preceding grades. Market access
for refinancing, in particular, is likely to be less well established.
STANDARD & POOR'S CORPORATION. SP-1: Very strong capacity to pay principal
and interest. SP-2: Satisfactory capacity to pay principal and interest.
RATINGS OF COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE, INC. PRIME-1: highest quality; PRIME-2: higher
quality.
STANDARD & POOR'S CORPORATION. A-1: A very strong degree of safety. A-2:
Strong degree of safety.
RATINGS OF CORPORATIONS
The Value Line financial strength rating of A++, A+, A or B++ indicates that
the company is within the financially strongest one-half of the approximately
3,500 companies followed by the Standard and Expanded Editions of The Value Line
Investment Survey.
The Value Line ratings are based upon computer analysis of a number of key
variables that measure (a) financial leverage, (b) business risk and (c) company
size plus, in the Standard Editing The Value Line Investment Survey, the
judgment of senior analysts regarding factors that cannot be quantified
across-the-board for all stocks. The primary variables that are indexed and
studied include equity coverage of debt, equity coverage of intangibles, "quick
ratio," accounting methods, variability of return, quality of fixed charge
coverage, stock price stability, and company size.
B-13
<PAGE>
THE VALUE LINE TAX EXEMPT FUND, INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements
Included in Part A of this Registration Statement:
Financial Highlights for each of the ten years in the period ended
February 28, 1995.
Incorporated by reference in Part B of this Registration Statement:*
Schedule of Investments at February 28, 1995
Statement of Assets and Liabilities at February 28, 1995
Statement of Operations for the year ended February 28, 1995
Statements of Changes in Net Assets for the years ended February 28,
1995 and February 28, 1994
Financial Highlights for each of the five years in the period ended
February 28, 1995
Notes to Financial Statements
Report of Independent Accountants
Statements, schedules and historical information other than those listed
above have been omitted since they are either not applicable or are not
required.
- ----------
* Incorporated by reference from the Annual Report to Shareholders for the year
ended February 28, 1995.
b. Exhibits
16. Calculation of Performance Data--Exhibit 1
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of February 28, 1995, there were 7,397 record holders of the Registrant's
Capital Stock ($1.00 par value).
ITEM 27. INDEMNIFICATION.
Incorporated by reference from Post-Effective Amendment No. 4 (filed with
the Commission June 24, 1987).
C-1
<PAGE>
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individuals, trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 29.
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- ---------------------------- ---------------------------------- ---------------------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, Chairman of the Board and Chief Executive
President and Chief Officer of Arnold Bernhard & Co., Inc. and
Executive Officer Value Line Publishing, Inc. Chairman of the
Value Line Funds and Value Line Securities,
Inc.
Samuel Eisenstadt Senior Vice President and Director
David T. Henigson Vice President, Treasurer and Vice President and a Director of Arnold
Director Bernhard & Co., Inc. and the Distributor
Howard A. Brecher Secretary and Director Secretary and Treasurer of Arnold Bernhard &
Co., Inc.
Harold Bernard, Jr. Director Administrative Law Judge
Arnold Van H. Bernhard Director Self-Employed
William S. Kanaga Director Retired Chairman of the Advisory Board of
Ernst & Young
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison,
attorneys.
</TABLE>
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Value Line Securities, Inc., acts as principal underwriter for the
following Value Line Funds, including the Registrant: The Value Line
Fund, Inc.; The Value Line Income Fund, Inc.; The Value Line Special
Situations Fund, Inc.; Value Line Leveraged Growth Investors, Inc.; The
Value Line Cash Fund, Inc.; Value Line U.S. Government Securities Fund,
Inc.; Value Line Centurion Fund, Inc.; The Value Line Tax Exempt Fund,
Inc.; Value Line Convertible Fund, Inc.; Value Line Aggressive Income
Trust; Value Line New York Tax Exempt Trust; Value Line Strategic Asset
Management Trust; The Value Line Adjustable Rate U.S. Government
Securities Fund, Inc.; Value Line Small-Cap Growth Fund, Inc.; Value Line
Asset Allocation Fund, Inc.
(b)
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
- -------------------------- ----------------------- ------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board Chairman of the Board,
President
David Henigson Vice President, Vice President,
Secretary, Treasurer Secretary and Treasurer
and Director
Stephen LaRosa Asst. Vice President Asst. Treasurer
</TABLE>
The business address of each of the officers and directors is 220 East
42nd Street, New York, NY 10017-5891.
(c) Not applicable.
C-3
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc., 220 East 42nd St., New York, NY 10017 for records pursuant
to Rule 31a-1(b)(4),(5),(6),(7),(10),(11), Rule 31a-(i). State Street Bank and
Trust Company, c/o NFDS, P.O. Box 419729, Kansas City, MO 64141 for records
pursuant to Rule 31a-1(b)(2)(iv), State Street Bank and Trust Company, 225
Franklin Street, Boston, MA 02110 for all other records.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
--------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information, constituting parts of this Post-Effective
Amendment No. 12 to the registration statement on Form N-1A (the "Registration
Statement"), of our report dated April 19, 1995, relating to the financial
statements and financial highlights appearing in the February 28, 1995 Annual
Report to Shareholders of The Value Line Tax Exempt Fund, Inc., which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the headings "Additional Information" and "Financial Statements" in
the Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 15, 1995
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies, that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 15th day of June, 1995.
THE VALUE LINE TAX EXEMPT FUND, INC.
By: /s/ DAVID T. HENIGSON
.................................
DAVID T. HENIGSON
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- --------------------------------------------- -----------------
<C> <S> <C>
* JEAN B. BUTTNER Chairman and Director; President; Chief June 15, 1995
(JEAN B. BUTTNER) Executive Officer
* JOHN W. CHANDLER Director June 15, 1995
(JOHN W. CHANDLER)
* LEO R. FUTIA Director June 15, 1995
(LEO R. FUTIA)
*CHARLES E. REED Director June 15, 1995
(CHARLES E. REED)
* PAUL CRAIG ROBERTS Director June 15, 1995
(PAUL CRAIG ROBERTS)
/s/ DAVID T. HENIGSON Secretary and Treasurer; Principal Financial June 15, 1995
............................................ and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
* By /s/ DAVID T. HENIGSON
.................................
(DAVID T. HENIGSON,
Attorney-in-fact)
C-5
<PAGE>
EXHIBIT 16
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
THE VALUE LINE TAX EXEMPT HIGH YIELD
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/ 1/90 1,000.00 10.2300 97.752 97.752 1,000.00
3/30/90 10.1700 98.381 0.065 6.40 0.000 0.00 0.629 1,000.53
4/30/90 10.0300 99.037 0.067 6.58 0.000 0.00 0.656 993.34
5/31/90 10.1600 99.683 0.066 6.56 0.000 0.00 0.646 1,012.78
6/29/90 10.1800 100.272 0.060 6.00 0.000 0.00 0.589 1,020.77
7/31/90 10.2600 100.926 0.067 6.71 0.000 0.00 0.654 1,035.50
8/31/90 10.0100 101.584 0.065 6.59 0.000 0.00 0.658 1,016.86
9/28/90 9.9700 102.176 0.058 5.90 0.000 0.00 0.592 1,018.69
10/31/90 10.0400 102.881 0.069 7.08 0.000 0.00 0.705 1,032.93
11/30/90 10.1900 103.495 0.061 6.26 0.000 0.00 0.614 1,054.61
12/31/90 10.1700 104.129 0.062 6.45 0.000 0.00 0.634 1,058.99
12/31/90 10.1700 104.129 1,058.99
1/31/91 10.2400 104.753 0.061 6.39 0.000 0.00 0.624 1,072.67
2/28/91 10.2000 105.299 0.053 5.57 0.000 0.00 0.546 1,074.05
3/28/91 10.1800 105.862 0.054 5.73 0.000 0.00 0.563 1,077.68
4/30/91 10.3000 106.513 0.063 6.71 0.000 0.00 0.651 1,097.08
5/31/91 10.3400 107.106 0.058 6.13 0.000 0.00 0.593 1,107.48
6/28/91 10.2400 107.675 0.054 5.83 0.000 0.00 0.569 1,102.59
7/31/91 10.3100 108.318 0.062 6.63 0.000 0.00 0.643 1,116.76
8/30/91 10.4000 108.905 0.056 6.10 0.000 0.00 0.587 1,132.61
9/30/91 10.4900 109.528 0.060 6.54 0.000 0.00 0.623 1,148.95
10/31/91 10.5200 110.126 0.057 6.29 0.000 0.00 0.598 1,158.53
11/29/91 10.4500 110.709 0.055 6.09 0.000 0.00 0.583 1,156.91
12/31/91 10.6800 111.283 0.055 6.13 0.000 0.00 0.574 1,188.50
12/31/91 10.6800 111.283 1,188.50
1/31/92 10.5900 111.818 0.051 5.67 0.000 0.00 0.535 1,184.15
2/28/92 10.5900 112.318 0.047 5.29 0.000 0.00 0.500 1,189.45
3/31/92 10.5200 112.916 0.056 6.29 0.000 0.00 0.598 1,187.88
4/30/92 10.5700 113.499 0.055 6.16 0.000 0.00 0.583 1,199.68
5/29/92 10.6600 114.036 0.050 5.72 0.000 0.00 0.537 1,215.62
6/30/92 10.8000 114.640 0.057 6.52 0.000 0.00 0.604 1,238.11
7/31/92 11.1400 115.193 0.054 6.16 0.000 0.00 0.553 1,283.25
8/31/92 10.8900 115.765 0.054 6.23 0.000 0.00 0.572 1,260.68
9/30/92 10.8300 116.336 0.053 6.18 0.000 0.00 0.571 1,259.92
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/30/92 10.5700 116.891 0.050 5.87 0.000 0.00 0.555 1,235.54
11/30/92 10.7900 117.476 0.054 6.31 0.000 0.00 0.585 1,267.57
12/31/92 10.8600 118.034 0.052 6.06 0.000 0.00 0.558 1,281.85
12/31/92 10.8600 118.034 1,281.85
1/29/93 10.8900 118.544 0.047 5.55 0.000 0.00 0.510 1,290.94
2/26/93 11.2900 119.080 0.051 6.05 0.000 0.00 0.536 1,344.41
3/31/93 11.0800 119.669 0.055 6.53 0.000 0.00 0.589 1,325.93
4/30/93 11.1800 120.216 0.051 6.11 0.000 0.00 0.547 1,344.01
5/28/93 11.1800 120.709 0.046 5.51 0.000 0.00 0.493 1,349.53
6/30/93 11.2900 121.305 0.056 6.73 0.000 0.00 0.596 1,369.53
7/30/93 11.2100 121.830 0.048 5.88 0.000 0.00 0.525 1,365.71
8/31/93 11.4400 122.384 0.052 6.34 0.000 0.00 0.554 1,400.07
9/30/93 11.5300 122.913 0.050 6.10 0.000 0.00 0.529 1,417.19
10/29/93 11.5000 123.403 0.046 5.63 0.000 0.00 0.490 1,419.13
11/30/93 11.0800 126.259 0.053 6.48 0.204 25.17 2.856 1,398.95
12/31/93 11.2700 126.798 0.048 6.08 0.000 0.00 0.539 1,429.01
12/31/93 11.2700 126.798 1,429.01
1/31/94 11.3600 127.341 0.049 6.17 0.000 0.00 0.543 1,446.59
2/28/94 10.9700 127.908 0.049 6.22 0.000 0.00 0.567 1,403.15
3/31/94 10.3900 128.497 0.048 6.12 0.000 0.00 0.589 1,335.08
4/29/94 10.3600 129.065 0.046 5.88 0.000 0.00 0.568 1,337.11
5/31/94 10.4400 129.673 0.049 6.35 0.000 0.00 0.608 1,353.79
6/30/94 10.3100 130.258 0.047 6.03 0.000 0.00 0.585 1,342.96
7/29/94 10.4500 130.802 0.044 5.68 0.000 0.00 0.544 1,366.88
8/31/94 10.4200 131.422 0.049 6.46 0.000 0.00 0.620 1,369.42
9/30/94 10.2000 132.025 0.047 6.15 0.000 0.00 0.603 1,346.65
10/31/94 9.9600 132.643 0.047 6.16 0.000 0.00 0.618 1,321.12
11/30/94 9.6600 133.875 0.048 6.34 0.042 5.56 1.232 1,293.23
12/30/94 9.8900 134.503 0.046 6.21 0.000 0.00 0.628 1,330.23
12/31/94 9.8900 134.503 1,330.23
1/31/95 10.1500 135.156 0.049 6.63 0.000 0.00 0.653 1,371.83
2/28/95 10.4000 135.784 0.048 6.53 0.000 0.00 0.628 1,412.15
2/28/95 10.4000 135.784 1,412.15
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1 + T) n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,412.15
n = Number of Time Periods 5.00
T = Average Annual Total Return 7.15%
Overall Total Return 41.22%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
VALUE LINE TAX EXEMPT MONEY MARKET
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/ 1/90 1,000.00 1.0000 1,000.000 1,000.000 1,000.00
3/30/90 1.0000 1,004.350 0.004 4.35 0.000 0.00 4.350 1,004.35
4/30/90 1.0000 1,009.050 0.005 4.70 0.000 0.00 4.700 1,009.05
5/31/90 1.0000 1,013.660 0.005 4.61 0.000 0.00 4.610 1,013.66
6/29/90 1.0000 1,017.740 0.004 4.08 0.000 0.00 4.080 1,017.74
7/31/90 1.0000 1,022.280 0.004 4.54 0.000 0.00 4.540 1,022.28
8/31/90 1.0000 1,026.690 0.004 4.41 0.000 0.00 4.410 1,026.69
9/28/90 1.0000 1,030.920 0.004 4.23 0.000 0.00 4.230 1,030.92
10/31/90 1.0000 1,035.970 0.005 5.05 0.000 0.00 5.050 1,035.97
11/30/90 1.0000 1,040.410 0.004 4.44 0.000 0.00 4.440 1,040.41
12/31/90 1.0000 1,045.270 0.005 4.86 0.000 0.00 4.860 1,045.27
12/31/90 1.0000 1,045.270 1,045.27
1/31/91 1.0000 1,049.440 0.004 4.17 0.000 0.00 4.170 1,049.44
2/28/91 1.0000 1,052.790 0.003 3.35 0.000 0.00 3.350 1,052.79
3/28/91 1.0000 1,056.190 0.003 3.40 0.000 0.00 3.400 1,056.19
4/30/91 1.0000 1,060.320 0.004 4.13 0.000 0.00 4.130 1,060.32
5/31/91 1.0000 1,064.100 0.004 3.78 0.000 0.00 3.780 1,064.10
6/28/91 1.0000 1,067.280 0.003 3.18 0.000 0.00 3.180 1,067.28
7/31/91 1.0000 1,070.840 0.003 3.56 0.000 0.00 3.560 1,070.84
8/30/91 1.0000 1,074.240 0.003 3.40 0.000 0.00 3.400 1,074.24
9/30/91 1.0000 1,077.950 0.003 3.71 0.000 0.00 3.710 1,077.95
10/31/91 1.0000 1,081.180 0.003 3.23 0.000 0.00 3.230 1,081.18
11/29/91 1.0000 1,084.120 0.003 2.94 0.000 0.00 2.940 1,084.12
12/31/91 1.0000 1,087.630 0.003 3.51 0.000 0.00 3.510 1,087.63
12/31/91 1.0000 1,087.630 1,087.63
1/31/92 1.0000 1,090.480 0.003 2.85 0.000 0.00 2.850 1,090.48
2/28/92 1.0000 1,092.700 0.002 2.22 0.000 0.00 2.220 1,092.70
3/31/92 1.0000 1,095.560 0.003 2.86 0.000 0.00 2.860 1,095.56
4/30/92 1.0000 1,098.270 0.002 2.71 0.000 0.00 2.710 1,098.27
5/29/92 1.0000 1,100.880 0.002 2.61 0.000 0.00 2.610 1,100.88
6/30/92 1.0000 1,103.350 0.002 2.47 0.000 0.00 2.470 1,103.35
7/31/92 1.0000 1,105.290 0.002 1.94 0.000 0.00 1.940 1,105.29
8/31/92 1.0000 1,107.190 0.002 1.90 0.000 0.00 1.900 1,107.19
9/30/92 1.0000 1,109.350 0.002 2.16 0.000 0.00 2.160 1,109.35
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/30/92 1.0000 1,111.260 0.002 1.91 0.000 0.00 1.910 1,111.26
11/30/92 1.0000 1,113.260 0.002 2.00 0.000 0.00 2.000 1,113.26
12/31/92 1.0000 1,115.180 0.002 1.92 0.000 0.00 1.920 1,115.18
12/31/92 1.0000 1,115.180 1,115.18
1/29/93 1.0000 1,116.760 0.001 1.58 0.000 0.00 1.580 1,116.76
2/26/93 1.0000 1,118.270 0.001 1.51 0.000 0.00 1.510 1,118.27
3/31/93 1.0000 1,119.940 0.001 1.67 0.000 0.00 1.670 1,119.94
4/30/93 1.0000 1,121.340 0.001 1.40 0.000 0.00 1.400 1,121.34
5/28/93 1.0000 1,122.720 0.001 1.38 0.000 0.00 1.380 1,122.72
6/30/93 1.0000 1,124.280 0.001 1.56 0.000 0.00 1.560 1,124.28
7/30/93 1.0000 1,125.660 0.001 1.38 0.000 0.00 1.380 1,125.66
8/31/93 1.0000 1,127.230 0.001 1.57 0.000 0.00 1.570 1,127.23
9/30/93 1.0000 1,128.720 0.001 1.49 0.000 0.00 1.490 1,128.72
10/29/93 1.0000 1,130.160 0.001 1.44 0.000 0.00 1.440 1,130.16
11/30/93 1.0000 1,131.690 0.001 1.53 0.000 0.00 1.530 1,131.69
12/31/93 1.0000 1,133.120 0.001 1.43 0.000 0.00 1.430 1,133.12
12/31/93 1.0000 1,133.120 1,133.12
1/31/94 1.0000 1,134.590 0.001 1.47 0.000 0.00 1.470 1,134.59
2/28/94 1.0000 1,135.960 0.001 1.37 0.000 0.00 1.370 1,135.96
3/31/94 1.0000 1,137.390 0.001 1.43 0.000 0.00 1.430 1,137.39
4/29/94 1.0000 1,138.900 0.001 1.51 0.000 0.00 1.510 1,138.90
5/31/94 1.0000 1,140.860 0.002 1.96 0.000 0.00 1.960 1,140.86
6/30/94 1.0000 1,142.580 0.002 1.72 0.000 0.00 1.720 1,142.58
7/29/94 1.0000 1,144.300 0.002 1.72 0.000 0.00 1.720 1,144.30
8/31/94 1.0000 1,146.450 0.002 2.15 0.000 0.00 2.150 1,146.45
9/30/94 1.0000 1,148.610 0.002 2.16 0.000 0.00 2.160 1,148.61
10/31/94 1.0000 1,150.720 0.002 2.11 0.000 0.00 2.110 1,150.72
11/30/94 1.0000 1,153.120 0.002 2.40 0.000 0.00 2.400 1,153.12
12/30/94 1.0000 1,155.810 0.002 2.69 0.000 0.00 2.690 1,155.81
12/31/94 1.0000 1,155.810 1,155.81
1/31/95 1.0000 1,158.530 0.002 2.72 0.000 0.00 2.720 1,158.53
2/28/95 1.0000 1,161.110 0.002 2.58 0.000 0.00 2.580 1,161.11
2/28/95 1.0000 1,161.110 1,161.11
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1 + T) n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,161.11
n = Number of Time Periods 5.00
T = Average Annual Total Return 3.03%
Overall Total Return 16.11%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
VALUE LINE TAX EXEMPT MONEY MARKET
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/ 1/94 1,000.00 1.0000 1,000.00 1,000.000 1,000.00
3/31/94 1.0000 1,001.260 0.001 1.26 0.000 0.00 1.260 1,001.26
4/29/94 1.0000 1,002.590 0.001 1.33 0.000 0.00 1.330 1,002.59
5/31/94 1.0000 1,004.310 0.002 1.72 0.000 0.00 1.720 1,004.31
6/30/94 1.0000 1,005.830 0.002 1.52 0.000 0.00 1.520 1,005.83
7/29/94 1.0000 1,007.340 0.002 1.51 0.000 0.00 1.510 1,007.34
8/31/94 1.0000 1,009.230 0.002 1.89 0.000 0.00 1.890 1,009.23
9/30/94 1.0000 1,011.130 0.002 1.90 0.000 0.00 1.900 1,011.13
10/31/94 1.0000 1,012.990 0.002 1.86 0.000 0.00 1.860 1,012.99
11/30/94 1.0000 1,015.110 0.002 2.12 0.000 0.00 2.120 1,015.11
12/30/94 1.0000 1,017.480 0.002 2.37 0.000 0.00 2.370 1,017.48
12/31/94 1.0000 1,017.480 1,017.48
1/31/95 1.0000 1,019.880 0.002 2.40 0.000 0.00 2.400 1,019.88
2/28/95 1.0000 1,022.150 0.002 2.27 0.000 0.00 2.270 1,022.15
2/28/95 1.0000 1,022.150 1,022.15
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1 + T) n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,022.15
n = Number of Time Periods 1.00
T = Average Annual Total Return 2.22%
Overall Total Return 2.22%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
THE VALUE LINE TAX EXEMPT HIGH YIELD
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/ 1/94 1,000.00 10.9700 91.158 91.158 1,000.00
3/31/94 10.3900 91.578 0.048 4.36 0.000 0.00 0.420 951.50
4/29/94 10.3600 91.982 0.046 4.19 0.000 0.00 0.404 952.93
5/31/94 10.4400 92.416 0.049 4.53 0.000 0.00 0.434 964.82
6/30/94 10.3100 92.833 0.047 4.30 0.000 0.00 0.417 957.11
7/29/94 10.4500 93.221 0.044 4.05 0.000 0.00 0.388 974.16
8/31/94 10.4200 93.662 0.049 4.60 0.000 0.00 0.441 975.96
9/30/94 10.2000 94.091 0.047 4.38 0.000 0.00 0.429 959.73
10/31/94 9.9600 94.532 0.047 4.39 0.000 0.00 0.441 941.54
11/30/94 9.6600 95.410 0.048 4.52 0.042 3.96 0.878 921.66
12/30/94 9.8900 95.857 0.046 4.42 0.000 0.00 0.447 948.03
12/31/94 9.8900 95.857 948.03
1/31/95 10.1500 96.322 0.049 4.72 0.000 0.00 0.465 977.67
2/28/95 10.4000 96.769 0.048 4.65 0.000 0.00 0.447 1,006.40
2/28/95 10.4000 96.769 1,006.40
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1 + T) n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,006.40
n = Number of Time Periods 1.00
T = Average Annual Total Return 0.64%
Overall Total Return 0.64%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
THE VALUE LINE TAX EXEMPT HIGH YIELD
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/ 1/85 1,000.00 9.9700 100.301 100.301 1,000.00
3/29/85 9.9600 101.073 0.077 7.69 0.000 0.00 0.772 1,006.69
4/30/85 10.1000 102.184 0.089 9.03 0.022 2.19 1.111 1,032.06
5/31/85 10.3800 103.004 0.083 8.51 0.000 0.00 0.820 1,069.18
6/28/85 10.4800 103.748 0.076 7.80 0.000 0.00 0.744 1,087.28
7/31/85 10.4400 104.615 0.087 9.05 0.000 0.00 0.867 1,092.18
8/30/85 10.3400 105.409 0.078 8.21 0.000 0.00 0.794 1,089.93
9/30/85 10.1600 106.285 0.084 8.90 0.000 0.00 0.876 1,079.86
10/31/95 10.3200 107.110 0.080 8.51 0.000 0.00 0.825 1,105.38
11/29/85 10.5900 107.858 0.074 7.92 0.000 0.00 0.748 1,142.22
12/31/85 10.7000 108.678 0.081 8.77 0.000 0.00 0.820 1,162.85
12/31/85 10.7000 108.678 1,162.85
1/31/86 10.9500 109.522 0.085 9.24 0.000 0.00 0.844 1,199.27
2/28/86 11.1000 110.315 0.080 8.80 0.000 0.00 0.793 1,224.50
3/31/86 11.0400 111.095 0.078 8.61 0.000 0.00 0.780 1,226.49
4/25/86 10.5900 114.852 0.000 0.00 0.358 39.79 3.757 1,216.28
4/30/86 10.5700 115.713 0.079 9.10 0.000 0.00 0.861 1,223.09
5/30/86 10.4400 116.553 0.076 8.77 0.000 0.00 0.840 1,216.81
6/30/86 10.4500 117.435 0.079 9.22 0.000 0.00 0.882 1,227.20
7/31/86 10.4500 118.271 0.074 8.74 0.000 0.00 0.836 1,235.93
8/29/86 10.7300 119.025 0.068 8.09 0.000 0.00 0.754 1,277.14
9/30/86 10.6700 119.888 0.077 9.21 0.000 0.00 0.863 1,279.20
10/31/86 10.8000 120.706 0.074 8.83 0.000 0.00 0.818 1,303.62
11/30/86 10.9200 121.446 0.067 8.08 0.000 0.00 0.740 1,326.19
12/31/86 10.8100 122.301 0.076 9.24 0.000 0.00 0.855 1,322.07
12/31/96 10.8100 122.301 1,322.07
1/30/87 11.0200 123.048 0.067 8.23 0.000 0.00 0.747 1,355.99
2/27/87 11.0100 123.823 0.069 8.53 0.000 0.00 0.775 1,363.29
3/31/87 10.9100 124.643 0.072 8.75 0.000 0.00 0.820 1,359.86
4/30/87 10.2800 125.470 0.068 8.50 0.000 0.00 0.827 1,289.83
5/13/87 10.2000 126.054 0.000 0.00 0.047 5.96 0.584 1,285.75
5/29/87 10.1100 126.868 0.065 8.23 0.000 0.00 0.814 1,282.64
6/30/87 10.3300 127.741 0.071 9.02 0.000 0.00 0.873 1,319.56
7/31/87 10.3700 128.597 0.070 8.88 0.000 0.00 0.856 1,333.55
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/87 10.3400 129.466 0.070 8.99 0.000 0.00 0.869 1,338.68
9/30/87 9.9100 130.347 0.067 8.73 0.000 0.00 0.881 1,291.74
10/30/87 9.7400 131.248 0.067 8.78 0.000 0.00 0.901 1,278.36
11/30/87 9.9200 132.140 0.067 8.75 0.000 0.00 0.892 1,310.83
12/31/87 9.9900 133.040 0.068 8.99 0.000 0.00 0.900 1,329.07
12/31/87 9.9900 133.040 1,329.07
1/29/88 10.2700 133.868 0.064 8.50 0.000 0.00 0.828 1,374.82
2/29/88 10.3100 134.750 0.068 9.09 0.000 0.00 0.882 1,389.27
3/31/88 10.1500 135.651 0.068 9.15 0.000 0.00 0.901 1,376.86
4/29/88 10.1300 136.478 0.062 8.38 0.000 0.00 0.827 1,382.52
5/31/88 10.1100 137.413 0.069 9.45 0.000 0.00 0.935 1,389.25
6/30/88 10.1900 138.284 0.065 8.88 0.000 0.00 0.871 1,409.11
7/31/88 10.1900 139.146 0.064 8.78 0.000 0.00 0.862 1,417.90
8/31/88 10.1600 140.149 0.073 10.19 0.000 0.00 1.003 1,423.91
9/30/88 10.2400 141.045 0.065 9.17 0.000 0.00 0.896 1,444.30
10/31/88 10.3300 141.967 0.067 9.52 0.000 0.00 0.922 1,466.52
11/30/88 10.2100 142.876 0.065 9.28 0.000 0.00 0.909 1,458.76
12/31/88 10.2600 143.782 0.065 9.30 0.000 0.00 0.906 1,475.20
12/31/88 10.2600 143.782 1,475.20
1/31/89 10.3500 144.751 0.070 10.03 0.000 0.00 0.969 1,498.17
2/28/89 10.2400 145.605 0.060 8.75 0.000 0.00 0.854 1,491.00
3/31/89 10.1800 146.574 0.068 9.86 0.000 0.00 0.969 1,492.12
4/30/89 10.2900 147.440 0.061 8.91 0.000 0.00 0.866 1,517.16
5/31/89 10.3500 148.464 0.072 10.60 0.000 0.00 1.024 1,536.60
6/30/89 10.4000 149.396 0.065 9.69 0.000 0.00 0.932 1,553.72
7/31/89 10.4300 150.346 0.066 9.91 0.000 0.00 0.950 1,568.11
8/31/89 10.3000 151.318 0.067 10.01 0.000 0.00 0.972 1,558.58
9/30/89 10.2700 152.243 0.063 9.50 0.000 0.00 0.925 1,563.54
10/31/89 10.2400 153.279 0.070 10.61 0.000 0.00 1.036 1,569.58
11/30/89 10.2900 154.247 0.065 9.96 0.000 0.00 0.968 1,587.20
12/29/89 10.3000 155.189 0.063 9.70 0.000 0.00 0.942 1,598.45
12/31/89 10.3000 155.189 1,598.45
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/31/90 10.2100 156.284 0.072 11.18 0.000 0.00 1.095 1,595.66
2/28/90 10.2300 157.215 0.061 9.52 0.000 0.00 0.931 1,608.31
3/30/90 10.1700 158.227 0.065 10.29 0.000 0.00 1.012 1,609.17
4/30/90 10.0300 159.282 0.067 10.58 0.000 0.00 1.055 1,597.60
5/31/90 10.1600 160.328 0.066 10.55 0.000 0.00 1.038 1,628.85
6/29/90 10.1800 161.268 0.060 9.65 0.000 0.00 0.948 1,641.71
7/31/90 10.2600 162.321 0.067 10.80 0.000 0.00 1.053 1,665.41
8/31/90 10.0100 163.379 0.055 10.59 0.000 0.00 1.058 1,638.42
9/28/90 9.9700 164.330 0.058 9.48 0.000 0.00 0.951 1,638.37
10/31/90 10.0400 165.464 0.069 11.39 0.000 0.00 1.134 1,661.26
11/30/90 10.1900 166.451 0.061 10.06 0.000 0.00 0.087 1,696.14
12/31/90 10.1700 167.472 0.062 10.38 0.000 0.00 1.021 1,703.19
12/31/90 10.1700 167.472 1,703.19
1/31/91 10.2400 168.476 0.061 10.28 0.000 0.00 1.004 1,725.19
2/28/91 10.2000 169.354 0.053 8.96 0.000 0.00 0.878 1,727.41
3/28/91 10.1800 170.260 0.054 9.22 0.000 0.00 0.908 1,733.25
4/30/91 10.3000 171.308 0.063 10.79 0.000 0.00 1.048 1,764,47
5/31/91 10.3400 172.263 0.058 9.87 0.000 0.00 0.955 1,781,20
6/28/91 10.2400 173.178 0.054 9.37 0.000 0.00 0.915 1,773.34
7/31/91 10.3100 174.213 0.062 10.67 0.000 0.00 1.035 1,796.14
8/30/91 10.4000 175.156 0.056 9.81 0.000 0.00 0.943 1,821,62
9/30/91 10.4900 176.160 0.060 10.53 0.000 0.00 1.004 1,847.92
10/31/91 10.5200 177.121 0.057 10.11 0.000 0.00 0.961 1,863.31
11/29/91 10.4500 178.059 0.055 9.80 0.000 0.00 0.938 1,860.72
12/31/91 10.6800 178.982 0.055 9.88 0.000 0.00 0.923 1,911.53
12/31/91 10.6800 178.982 1,911.33
1/31/92 10.5900 179.844 0.051 9.13 0.000 0.00 0.862 1,904.55
2/28/92 10.5900 180.649 0.047 8.52 0.000 0.00 0.805 1,913.07
3/31/92 10.5200 181.611 0.056 10.12 0.000 0.00 0.962 1,910.55
4/30/92 10.5700 182.549 0.055 9.91 0.000 0.00 0.938 1,929.54
5/29/92 10.6600 183.412 0.050 9.20 0.000 0.00 0.863 1,955.17
6/30/92 10.8000 184.382 0.057 10.48 0.000 0.00 0.970 1,991.33
7/31/92 11.1400 185.272 0.054 9.92 0.000 0.00 0.890 2,063.93
8/31/92 10.8900 186.193 0.054 10.03 0.000 0.00 0.921 2,027.64
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/92 10.8300 187.111 0.053 9.94 0.000 0.00 0.918 2,026.41
10/30/92 10.5700 188.005 0.050 9.45 0.000 0.00 0.894 1,987.21
11/30/92 10.7900 189.946 0.054 10.15 0.000 0.00 0.941 2,038.73
12/31/92 10.8600 189.843 0.052 9.74 0.000 0.00 0.897 2,061.69
12/31/92 10.8600 189.843 2,061.69
1/29/93 10.8900 190.663 0.047 8.93 0.000 0.00 0.820 2,076.32
2/26/93 11.2900 191.525 0.051 9.73 0.000 0.00 0.862 2,162.32
3/31/93 11.0800 192.473 0.055 10.50 0.000 0.00 0.948 2,132.60
4/30/93 11.1800 193.351 0.051 9.82 0.000 0.00 0.878 2,161.66
5/28/93 11.1800 194.143 0.046 8.86 0.000 0.00 0.792 2,170.52
6/30/93 11.2900 195.101 0.056 10.82 0.000 0.00 0.958 2,202.69
7/30/93 11.2100 195.945 0.048 9.46 0.000 0.00 0.844 2,196.54
8/31/93 11.4400 196.836 0.052 10.19 0.000 0.00 0.891 2,251.80
9/30/93 11.5300 197.687 0.050 9.81 0.000 0.00 0.851 2,279.33
10/29/93 11.5000 198.475 0.046 9.06 0.000 0.00 0.788 2,282.46
11/30/93 11.0800 203.069 0.053 10.42 0.204 40.48 4.594 2,250.00
12/31/93 11.2700 203.937 0.048 9.78 0.000 0.00 0.868 2,298.37
12/31/93 11.2700 203.937 2,298.37
1/31/94 11.3600 204.810 0.049 9.92 0.000 0.00 0.873 2,326.64
2/28/94 10.9700 205.722 0.049 10.00 0.000 0.00 0.912 2,256.77
3/31/94 10.3900 206.670 0.048 9.85 0.000 0.00 0.948 2,147.30
4/29/94 10.3600 207.583 0.046 9.46 0.000 0.00 0.913 2,150.56
5/31/94 10.4400 208.562 0.049 10.22 0.000 0.00 0.979 2,177.39
6/30/94 10.3100 209.503 0.047 9.70 0.000 0.00 0.941 2,159.98
7/29/94 10.4500 210.379 0.044 9.14 0.000 0.00 0.875 2,198.45
8/31/94 10.4200 211.374 0.049 10.38 0.000 0.00 0.996 2,202.52
9/30/94 10.2000 212.344 0.047 9.89 0.000 0.00 0.970 2,165.91
10/31/94 9.9600 213.339 0.047 9.91 0.000 0.00 0.995 2,124.86
11/30/94 9.6600 215.320 0.048 10.20 0.042 8.94 1.981 2,079.99
12/30/94 9.8900 216.329 0.046 9.98 0.000 0.00 1.009 2,139.49
12/31/94 9.8900 216.329 2,139.49
1/31/95 10.1500 217.379 0.049 10.66 0.000 0.00 1.050 2,206.40
2/28/95 10.4000 218.389 0.048 10.50 0.000 0.00 1.010 2,271.25
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/95 10.4000 218.389 2,271.25
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1 + T) n
Overall Total Return ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $2,271.25
n = Number of Time Periods 10.00
T = Average Annual Total Return 8.55%
Overall Total Return 127.13%
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
VALUE LINE TAX EXEMPT MONEY MARKET
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/ 1/85 1,000.00 1.0000 1,000.000 1,000.000 1,000.00
3/29/85 1.0000 1,003.850 0.004 3.85 0.000 0.00 3.850 1,003.85
4/30/85 1.0000 1,008.390 0.004 4.12 0.000 0.42 4.540 1,008.39
5/31/85 1.0000 1,012.400 0.004 4.01 0.000 0.00 4.010 1,012.40
6/28/85 1.0000 1,016.000 0.004 3.60 0.000 0.00 3.600 1,016.00
7/31/85 1.0000 1,019.760 0.004 3.76 0.000 0.00 3.760 1,019.76
8/30/85 1.0000 1,023.220 0.003 3.46 0.000 0.00 3.460 1,023.22
9/30/85 1.0000 1,027.030 0.004 3.81 0.000 0.00 3.810 1,027.03
10/31/85 1.0000 1,030.650 0.004 3.62 0.000 0.00 3.620 1,030.65
11/29/85 1.0000 1,034.030 0.003 3.38 0.000 0.00 3.380 1,034.03
12/31/85 1.0000 1,038.530 0.004 4.50 0.000 0.00 4.500 1,038.53
12/31/85 1.0000 1,038.530 1,038.53
1/31/86 1.0000 1,043.220 0.005 4.69 0.000 0.00 4.690 1,043.22
2/28/86 1.0000 1,047.760 0.004 4.54 0.000 0.00 4.540 1,047.76
3/31/86 1.0000 1,051.700 0.004 3.94 0.000 0.00 3.940 1,051.70
4/30/86 1.0000 1,055.560 0.004 3.86 0.000 0.00 3.860 1,055.56
5/30/86 1.0000 1,059.230 0.003 3.67 0.000 0.00 3.670 1,059.23
6/30/86 1.0000 1,062.900 0.003 3.67 0.000 0.00 3.670 1,062.90
7/31/86 1.0000 1,066.520 0.003 3.62 0.000 0.00 3.620 1,066.52
8/29/86 1.0000 1,070.320 0.004 3.80 0.000 0.00 3.800 1,070.32
9/30/86 1.0000 1,073.800 0.003 3.48 0.000 0.00 3.480 1,073.80
10/31/86 1.0000 1,076.900 0.003 3.10 0.000 0.00 3.100 1,076.90
11/30/86 1.0000 1,079.750 0.003 2.85 0.000 0.00 2.850 1,079.75
12/31/86 1.0000 1,083.040 0.003 3.29 0.000 0.00 3.290 1,083.04
12/31/86 1.0000 1,083.040 1,083.04
1/30/87 1.0000 1,086.360 0.003 3.32 0.000 0.00 3.320 1,086.36
2/27/87 1.0000 1,089.670 0.003 3.31 0.000 0.00 3.310 1,089.67
3/31/87 1.0000 1,092.840 0.003 3.17 0.000 0.00 3.170 1,092.84
4/30/87 1.0000 1,096.530 0.003 3.69 0.000 0.00 3.690 1,096.53
5/ 7/87 1.0000 1,096.560 0.000 0.00 0.000 0.03 0.030 1,096.56
5/29/87 1.0000 1,100.560 0.004 4.00 0.000 0.00 4.000 1,100.56
6/30/87 1.0000 1,104.390 0.003 3.83 0.000 0.00 3.830 1,104.39
7/31/87 1.0000 1,107.880 0.003 3.49 0.000 0.00 3.490 1,107.88
8/31/87 1.0000 1,111.420 0.003 3.54 0.000 0.00 3.540 1,111.42
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/87 1.0000 1,114,980 0.003 3.56 0.000 0.00 3.560 1,114.98
10/30/87 1.0000 1,119,110 0.004 4.13 0.000 0.00 4.130 1,119.11
11/30/87 1.0000 1,123,500 0.004 4.39 0.000 0.00 4.290 1,123.50
12/29/87 1.0000 1,123,540 0.000 0.00 0.000 0.04 0.040 1,123.54
12/31/87 1.0000 1,127,890 0.004 4.35 0.000 0.00 4.350 1,127.89
12/31/87 1.0000 1,127,890 1,127.89
1/29/88 1.0000 1,131,930 0.004 4.04 0.000 0.00 4.040 1,131.93
2/29/88 1.0000 1,135,650 0.003 3.72 0.000 0.00 3.720 1,135.65
3/31/88 1.0000 1,139,630 0.004 3.98 0.000 0.00 3.980 1,139.63
4/29/88 1.0000 1,143,520 0.003 3.89 0.000 0.00 3.890 1,143.52
5/31/88 1.0000 1,147,560 0.004 4.04 0.000 0.00 4.040 1,147.56
6/30/88 1.0000 1,151,680 0.004 4.12 0.000 0.00 4.120 1,151.68
7/31/88 1.0000 1,155,760 0.004 4.08 0.000 0.00 4.080 1,155.76
8/31/88 1.0000 1,161,200 0.005 5.44 0.000 0.00 5.440 1,161.20
9/30/88 1.0000 1,165,800 0.004 4.60 0.000 0.00 4.600 1,165.80
10/31/88 1.0000 1,170,710 0.004 4.91 0.000 0.00 4.910 1,170.71
11/30/88 1.0000 1,175,430 0.004 4.72 0.000 0.00 4.720 1,175.43
12/31/88 1.0000 1,180,700 0.004 5.27 0.000 0.00 5.270 1,180.70
12/31/88 1.0000 1,180,700 1,180.70
1/31/89 1.0000 1,186,400 0.005 5.70 0.000 0.00 5.700 1,186.40
2/28/89 1.0000 1,191,210 0.004 4.81 0.000 0.00 4.810 1,191.21
3/31/89 1.0000 1,197,330 0.005 6.12 0.000 0.00 6.120 1,197.33
4/30/89 1.0000 1,203,130 0.005 5.80 0.000 0.00 5.800 1,203.13
5/31/89 1.0000 1,209,980 0.006 6.85 0.000 0.00 6.850 1,209.98
6/30/89 1.0000 1,215,690 0.005 5.71 0.000 0.00 5.710 1,215.69
7/31/89 1.0000 1,221,370 0.005 5.68 0.000 0.00 5.680 1,221.37
8/31/89 1.0000 1,227,080 0.005 5.71 0.000 0.00 5.710 1,227.08
9/30/89 1.0000 1,232,540 0.004 5.46 0.000 0.00 5.460 1,232.54
10/31/89 1.0000 1,238,600 0.005 6.06 0.000 0.00 6.060 1,238.60
11/30/89 1.0000 1,244,260 0.005 5.66 0.000 0.00 5.660 1,244.26
12/29/89 1.0000 1,249,920 0.005 5.66 0.000 0.00 5.660 1,249.92
12/31/89 1.0000 1,249,920 1,249.92
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/31/90 1.0000 1,255.800 0.005 5.88 0.000 0.00 5.880 1,255.80
2/28/90 1.0000 1,260.670 0.004 4.87 0.000 0.00 4.870 1,260.67
3/30/90 1.0000 1,266.160 0.004 5.49 0.000 0.00 5.490 1,266.16
4/30/90 1.0000 1,272.080 0.005 5.92 0.000 0.00 5.920 1,272.08
5/31/90 1.0000 1,277.890 0.005 5.81 0.000 0.00 5.810 1,277.89
6/29/90 1.0000 1,283.030 0.004 5.14 0.000 0.00 5.140 1,283.03
7/31/90 1.0000 1,288.750 0.004 5.72 0.000 0.00 5.720 1,288.75
8/31/90 1.0000 1,294.300 0.004 5.55 0.000 0.00 5.550 1,294.30
9/28/90 1.0000 1,299.630 0.004 5.33 0.000 0.00 5.330 1,299.63
10/31/90 1.0000 1,306.000 0.005 6.37 0.000 0.00 6.370 1,306.00
11/30/90 1.0000 1,311.600 0.004 5.60 0.000 0.00 5.600 1,311.60
12/31/90 1.0000 1,317.730 0.005 6.13 0.000 0.00 6.130 1,317.73
12/31/90 1.0000 1,317.730 1,317.73
1/31/91 1.0000 1,322.990 0.004 5.26 0.000 0.00 5.260 1,322.99
2/28/91 1.0000 1,327.210 0.003 4.22 0.000 0.00 4.220 1,327.21
3/28/91 1.0000 1,331.500 0.003 4.29 0.000 0.00 4.290 1,331.50
4/30/91 1.0000 1,336.700 0.004 5.20 0.000 0.00 5.200 1,336.70
5/31/91 1.0000 1,341.470 0.004 4.77 0.000 0.00 4.770 1,341.47
6/28/91 1.0000 1,345.480 0.003 4.01 0.000 0.00 4.010 1,345.48
7/31/91 1.0000 1,349.960 0.003 4.48 0.000 0.00 4.480 1,349.96
8/30/91 1.0000 1,354.250 0.003 4.29 0.000 0.00 4.290 1,354.25
9/30/91 1.0000 1,358.930 0.003 4.68 0.000 0.00 4.680 1,358.09
10/31/91 1.0000 1,363.000 0.003 4.07 0.000 0.00 4.070 1,363.00
11/29/91 1.0000 1,366.710 0.003 3.71 0.000 0.00 3.710 1,366.71
12/31/91 1.0000 1,371.140 0.003 4.43 0.000 0.00 4.430 1,371.14
12/31/91 1.0000 1,371.140 1,371.14
1/31/92 1.0000 1,374.740 0.003 3.60 0.000 0.00 3.600 1,374.74
2/28/92 1.0000 1,377.540 0.002 2.80 0.000 0.00 2.800 1,377.54
3/31/92 1.0000 1,381.150 0.003 3.61 0.000 0.00 3.610 1,381.15
4/30/92 1.0000 1,384.560 0.002 3.41 0.000 0.00 3.410 1,384.56
5/29/92 1.0000 1,387.850 0.002 3.29 0.000 0.00 3.290 1,387.85
6/30/92 1.0000 1,390.960 0.002 3.11 0.000 0.00 3.110 1,390.96
7/31/92 1.0000 1,393.410 0.002 2.45 0.000 0.00 2.450 1,393.41
8/31/92 1.0000 1,395.800 0.002 2.39 0.000 0.00 2.390 1,395.80
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/92 1.0000 1,398.530 0.002 2.73 0.000 0.00 2.730 1,398.53
10/30/92 1.0000 1,400.940 0.002 2.41 0.000 0.00 2.410 1,400.94
11/30/92 1.0000 1,403.460 0.002 2.52 0.000 0.00 2.520 1,403.46
12/31/92 1.0000 1,405.890 0.002 2.43 0.000 0.00 2.430 1,405.89
12/31/92 1.0000 1,405.890 1,405.89
1/29/93 1.0000 1,407.880 0.001 1.99 0.000 0.00 1.990 1,407.88
2/26/93 1.0000 1,409.790 0.001 1.91 0.000 0.00 1.910 1,409.79
3/31/93 1.0000 1,411.890 0.001 2.10 0.000 0.00 2.100 1,411.89
4/30/93 1.0000 1,413.660 0.001 1.77 0.000 0.00 1.770 1,413.66
5/28/93 1.0000 1,415.400 0.001 1.74 0.000 0.00 1.740 1,415.40
6/30/93 1.0000 1,417.360 0.001 1.96 0.000 0.00 1.960 1,417.36
7/30/93 1.0000 1,419.100 0.001 1.74 0.000 0.00 1.740 1,419.10
8/31/93 1.0000 1,421.080 0.001 1.98 0.000 0.00 1.980 1,421.08
9/30/93 1.0000 1,422.950 0.001 1.87 0.000 0.00 1.870 1,422.95
10/29/93 1.0000 1,424.770 0.001 1.82 0.000 0.00 1.820 1,424.77
11/30/93 1.0000 1,426.700 0.001 1.93 0.000 0.00 1.930 1,426.70
12/31/93 1.0000 1,428.500 0.001 1.80 0.000 0.00 1.800 1,428.50
12/31/93 1.0000 1,428.500 1,428.50
1/31/94 1.0000 1,430.360 0.001 1.86 0.000 0.00 1.860 1,430.36
2/28/94 1.0000 1,432.090 0.001 1.73 0.000 0.00 1.730 1,432.09
3/31/94 1.0000 1,433.890 0.001 1.80 0.000 0.00 1.800 1,433.89
4/29/94 1.0000 1,435.790 0.001 1.90 0.000 0.00 1.900 1,435.79
5/31/94 1.0000 1,438.260 0.002 2.47 0.000 0.00 2.470 1,438.26
6/30/94 1.0000 1,440.430 0.002 2.17 0.000 0.00 2.170 1,440.43
7/29/94 1.0000 1,442.590 0.002 2.16 0.000 0.00 2.160 1,442.59
8/31/94 1.0000 1,445.300 0.002 2.71 0.000 0.00 2.710 1,445.30
9/30/94 1.0000 1,448.020 0.002 2.72 0.000 0.00 2.720 1,448.02
10/31/94 1.0000 1,450.680 0.002 2.66 0.000 0.00 2.660 1,450.68
11/30/94 1.0000 1,453.710 0.002 3.03 0.000 0.00 3.030 1,453.71
12/30/94 1.0000 1,457.100 0.002 3.39 0.000 0.00 3.390 1,457.10
12/31/94 1.0000 1,457.100 1,457.10
1/31/95 1.0000 1,460.530 0.002 3.43 0.000 0.00 3.430 1,460.53
2/28/95 1.0000 1,463.790 0.002 3.26 0.000 0.00 3.260 1,463.79
<PAGE>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/95 1.0000 1,463.790 1,463.79
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(1 + T) n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,463.79
n = Number of Time Periods 10.00
T = Average Annual Total Return 3.88%
Overall Total Return 46.38%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> HIGH YIELD PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1994
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 239,010
<INVESTMENTS-AT-VALUE> 240,829
<RECEIVABLES> 3,323
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,487
<TOTAL-ASSETS> 245,639
<PAYABLE-FOR-SECURITIES> 3,496
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<OTHER-ITEMS-LIABILITIES> 676
<TOTAL-LIABILITIES> 4,172
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 245,357
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<SHARES-COMMON-PRIOR> 24,976
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<ACCUMULATED-NET-GAINS> (5,709)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,819
<NET-ASSETS> 241,467
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,976
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<EXPENSES-NET> 1,459
<NET-INVESTMENT-INCOME> 13,517
<REALIZED-GAINS-CURRENT> (5,710)
<APPREC-INCREASE-CURRENT> (7,800)
<NET-CHANGE-FROM-OPS> 7
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,517
<DISTRIBUTIONS-OF-GAINS> 987
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,140
<NUMBER-OF-SHARES-REDEEMED> 10,861
<SHARES-REINVESTED> 972
<NET-CHANGE-IN-ASSETS> (32,421)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 988
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,459
<AVERAGE-NET-ASSETS> 243,887
<PER-SHARE-NAV-BEGIN> 10.97
<PER-SHARE-NII> .568
<PER-SHARE-GAIN-APPREC> (.528)
<PER-SHARE-DIVIDEND> .568
<PER-SHARE-DISTRIBUTIONS> .042
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.40
<EXPENSE-RATIO> .61
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1994
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 25,327
<INVESTMENTS-AT-VALUE> 25,327
<RECEIVABLES> 315
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 163
<TOTAL-ASSETS> 25,805
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124
<TOTAL-LIABILITIES> 124
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,709
<SHARES-COMMON-STOCK> 25,709
<SHARES-COMMON-PRIOR> 31,735
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (28)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
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<DIVIDEND-INCOME> 0
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<DISTRIBUTIONS-OF-INCOME> 656
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,421
<NUMBER-OF-SHARES-REDEEMED> 28,103
<SHARES-REINVESTED> 656
<NET-CHANGE-IN-ASSETS> (6,026)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (28)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 151
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 269
<AVERAGE-NET-ASSETS> 30,271
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .022
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .022
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
