================================================================================
------------------
SEMI-ANNUAL REPORT
------------------
August 31, 1997
------------------
The
Value Line
Tax Exempt
Fund, Inc.
[LOGO]
----------
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
The Value Line Tax Exempt Fund, Inc.
To Our Value Line Tax
================================================================================
To Our Shareholders:
During the past six months ended August 31, 1997, prices of fixed-income
securities have increased as interest rates have declined. Long-term, tax-exempt
interest rates, as measured by the Bond Buyer's Index 40-Bond Index, declined
from 5.76% on February 28, 1997 to 5.55% on August 31, 1997. During this same
period, long-term taxable rates, as measured by the 30-year Treasury bond,
declined a similar amount from 6.80% to 6.61%. The subdued inflationary
environment, the declining Federal deficit, and the strong U.S. dollar have
contributed to the decline in interest rates. The Federal Reserve has taken no
action to raise interest rates since March 1997 in spite of continued economic
growth, and this too has contributed to the positive performance of fixed-income
securities during the past six months. As of September 26, 1997, the Bond
Buyer's 40-Bond Index declined further to 5.46%, close to its recent low of
5.34% on October 15, 1993, and the 30-year Treasury bond declined to 6.38%,
still over half a percentage point away from the recent low of 5.79% reached on
October 15, 1993.
High Yield Portfolio
The primary objective of the Value Line Tax Exempt High-Yield Portfolio is to
provide investors with maximum income exempt from federal income taxes, without
undue risk to principal. During the six-months ended August 31, 1997, the fund's
total return was 3.75%. Since its inception in March, 1984, the total return for
the High-Yield Portfolio, assuming the reinvestment of all dividends over that
period, was 197.34%. This is equivalent to an average annual total return of
8.45%. The fund's SEC yield as of August 31, 1997 was 4.65% and exceeded the
average SEC yield of 4.27% for all general municipal bond funds ranked by Lipper
Analytical Services.
Your Fund's total return for the January 1, 1997 through August 31, 1997 period
was 4.71% compared to 5.06% for the Lehman Brothers Municipal Bond Index* during
the same time period. Management's emphasis on high-grade securities (which have
lower yields than more speculative grade bonds) has contributed to the
below-index performance. The difference in yields between high-grade and lower
rated bonds is narrow and your management does not believe that purchasing lower
grade securities warrants the risk. Investors are reminded that your Fund's
performance is net of management fees and expenses and that the index has no
such charges.
Your Fund's management continues to emphasize bonds with high credit ratings and
with call protection in order to maintain and maximize shareholder income
without sacrificing safety of principal. Over 98% of the your Fund's bonds are
rated A or better by the major credit agencies, such as Moody's Investors
Service and Standard and Poor's Corporation. In addition, 28% of the portfolio
is invested in non-callable bonds. The portfolio's highest concentrations of
investment are in the insured and housing-revenue sectors.
Money Market Portfolio
The objective of the Tax Exempt Money Market Portfolio is to preserve principal
by investing in high-quality, tax-exempt short-term securities which have a high
degree of liquidity so as to ensure a constant net asset value of $1.00 per
share. The portfolio consists only of securities which carry the highest two
ratings of the major credit-rating agencies. The annualized yield was 2.73% as
of August 31, 1997, equivalent to a 4.52% taxable yield for those in the 39.6%
tax bracket.
Unlike long-term rates, short-term tax-exempt rates, as measured by the Bond
Buyer's One-year Note Index, increased from 3.61% on February 28, 1997 to 3.82%
on August 31, 1997. However, during this same period of time, the yield on
one-year taxable Treasury bills declined from 5.67% to 5.56%.
The municipal bond market is one of the most fragmented and complex sectors of
the American capital markets. We
- --------------------------------------------------------------------------------
2
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Exempt Fund Shareholders
================================================================================
believe that most investors seeking tax-free income are best served by a mutual
fund, whose advantages include professional management, diversification,
liquidity, low transaction costs, accurate record-keeping, automatic
reinvestment of dividends, and availability in small-dollar amounts. In addition
to these features, The Value Line Tax Exempt Fund has the additional advantage
of carrying no sales or redemption fees; it is a true no-load fund.
We thank you for your continued confidence in Value Line, and we look forward to
serving your investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
October 22, 1997
- --------------------------------------------------------------------------------
* The Lehman Brothers Municipal Bond Index is a total-return performance
benchmark for the long-term, investment-grade, tax-exempt bond market.
Investment-grade bonds are rated Baa or higher by Moody's or BBB or higher
by Standard & Poor's. Returns and attributes for the index are calculated
semi-monthly using approximately 25,000 municipal bonds, which are priced
by Muller Data Corporation. The returns for the Index do not reflect
expenses, which are deducted from the Fund's returns.
Economic Observations
The economy continues to push ahead, with such important indicators as the level
of manufacturing activity and the rate of employment growth exhibiting a
reasonably good degree of strength. Such trends, and a continuing healthy level
of consumer confidence, suggest that growth will average 2.5%-3.0% during the
closing half of the year. Thereafter, we would expect the expansion pace to
moderate somewhat, with real, inflation-adjusted GDP growth holding in the range
of 2.0%-2.5% in 1998.
Inflation, meanwhile, continues to be remarkably subdued. This healthy pricing
trend, which is all the more impressive given the longevity of the business
upcycle, is, moreover, unlikely to change dramatically in the months ahead.
Underscoring our optimism in this area is the earlier hammering out of a budget
package which should reduce the government's need to borrow to finance the
deficit and the fact that there is still a lack of serious shortages on either
the labor or the raw-materials fronts.
Interest rates, meantime, reflecting the current, relatively moderate pace of
economic growth and the subdued pricing structure, are unlikely to increase much
over the next few months. Nevertheless, we caution that given the seeming
resiliency of the business expansion, an inflation-wary Federal Reserve will
probably not shy away from tightening the monetary reins if the present pricing
stability gives way. And an upward move in rates, if sufficiently pronounced,
would be poorly received, in our opinion, by both the stock and the bond markets
and, as well, by the U.S. economy down the road. The recent increase in
volatility in the financial markets suggests that many are now questioning
whether the current, benign environment can last much longer. We think a
cautious investment strategy is now in order.
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3
<PAGE>
The Value Line Tax Exempt Fund, Inc.
To Our Value Line Tax Exempt Fund Shareholders
================================================================================
Performance Data:*
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
--------- ---------
<S> <C> <C>
1 year ended 6/30/97............. 7.42% $10,742
5 years ended 6/30/97............ 5.95% $13,350
10 years ended 6/30/97............ 7.26% $20,146
<CAPTION>
MONEY MARKET PORTFOLIO
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
--------- ---------
<S> <C> <C>
1 year ended 6/30/97............. 2.59% $10,259
5 years ended 6/30/97............ 2.30% $11,207
10 years ended 6/30/97............ 3.51% $14,115
</TABLE>
* The average annual total returns for the one-year, five-year, and ten-year
periods ended August 31, 1997, for the High-Yield Portfolio and the Money
Market Portfolio were 8.32%, 5.95%, and 7.30% and 2.58%, 2.32% and 3.48%,
respectively. The performance data quoted represent past performance and
are no guarantee of future performance. The average annual total returns
and growth of an assumed investment of $10,000 include dividends reinvested
and capital gains distributions accepted in shares. The investment return
and principal value of an investment will fluctuate so that an investment,
when redeemed, may be worth more or less than its original cost.
- --------------------------------------------------------------------------------
4
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) August 31, 1997
==========================================================================================================================
Principal
Amount High-Yield Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES (94.4%)
ALABAMA (.7%)
$1,250,000 Colbert County-Northwest, Health Care Authority, Hospital Revenue
Refunding, Helen Keller Hospital, 8.75%, 6/1/09............................. NR $ 1,376,000
ALASKA (.5%)
210,000 Housing Finance Corp., Collateral Mortgage Obligation,
Veteran's 1st Ser., Veteran's Mortgage Program, 7.45%, 12/1/29 ............ Aaa 216,455
700,000 Student Loan Corp., Student Loan Revenue, Ser. A, 5.55%, 7/1/10............... Aaa 707,028
------------
923,483
ARKANSAS (1.0%)
Development Finance Authority, Single Family Mortgage, Revenue:
1,180,000 Correction Facilities Revenue, 5.40%, 10/1/11............................... Aaa 1,201,346
600,000 Single Family Mortgage Revenue Replacement, Ser. C, 8.125%, 8/1/14.......... A+* 617,370
------------
1,818,716
CALIFORNIA (2.0%)
3,670,000 Pleasant Hill, Redevelopment Agency, Residential Mortgage Revenue,
Refunding, 5.75%, 8/1/11.................................................... AA* 3,718,334
COLORADO (4.9%) Denver, City & County:
2,000,000 Airport Revenue, Refunding, Ser. E, 6.00%, 11/15/11......................... Aaa 2,184,460
4,055,000 Single Family Mortgage Revenue, 7.00%, 8/1/10............................... Aaa 4,644,556
2,000,000 E-470 Public Highway Authority, Revenue, Ser. A, 5.75%, 9/1/14................ Aaa 2,113,880
345,000 Housing Finance Authority, Single Family, Revenue, Residential,
Ser. C, 8.75%, 9/1/17....................................................... Aa1 355,654
------------
9,298,550
GEORGIA (.5%)
1,000,000 Residential Finance Authority, Single Family Insured Mortgage,
Revenue, Subser. C, 8.00%, 12/1/16......................................... Aa 1,042,650
HAWAII (2.5%)
4,000,000 Department of Budget and Finance, Special Purpose Mortgage Revenue,
Kapiolani Health Care System, 6.40%, 7/1/13................................. Aaa 4,731,680
</TABLE>
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5
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
==========================================================================================================================
Principal
Amount High-Yield Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ILLINOIS (14.8%)
Chicago:
$8,200,000 O'Hare International Airport, Revenue Refunding, 2nd Lien,
Ser. C-1, 5.00%, 1/1/18.................................................. Aaa $ 7,701,194
1,000,000 Single Family Mortgage Revenue, Collateralized,
Ser. B, 5.10%, 9/1/07.................................................... Aaa 996,120
1,000,000 Skyway Toll Bridge Revenue, Refunding, 5.50%, 1/1/23 ....................... Aaa 989,140
General Obligations:
2,500,000 Refunding, 5.125%, 12/1/17.................................................. Aaa 2,397,900
4,000,000 5.25%, 7/1/22............................................................... Aaa 3,859,880
Housing Development Authority:
4,500,000 Multi Family, Ser. 91-A, 8.25%, 7/1/16...................................... A1 4,838,310
2,340,000 Residential Mortgage Revenue, Ser. A, 7.00%, 8/1/17......................... Aa2 2,414,576
1,500,000 Regional Transportation Authority, Ser. A, 8.00%, 6/1/17...................... Aaa 1,983,195
2,650,000 Sales Tax Revenue, Ser. P, 6.50%, 6/15/22..................................... Aa3 3,037,536
------------
28,217,851
INDIANA (2.2%)
3,000,000 Office Building Commission, Capital Complex, Revenue,
Ser. B, 7.40%, 7/1/15....................................................... Aaa 3,740,820
500,000 South Newton, School Building Corp., Refunding,
First Mortgage, 5.60%, 1/15/17.............................................. Aaa 514,320
------------
4,255,140
IOWA (2.4%)
1,700,000 Finance Authority, Single Family, Revenue Mortgage,
Ser. B, 7.45%, 7/1/23....................................................... Aaa 1,795,914
2,500,000 Muscatine, Electric Revenue, 6.70%, 1/1/13.................................... Aaa 2,792,150
------------
4,588,064
MAINE (2.4%)
Housing Authority, Mortgage Purchase Program:
1,000,000 Ser. D-3, 8.15%, 11/15/11................................................... Aa2 1,039,390
2,800,000 Ser. D-4, 7.55%, 11/15/19................................................... Aa2 2,952,600
500,000 State Street Housing Preservation Corp., Multifamily Housing Revenue,
100 State Street Project, Ser. A, 7.50%, 1/1/19............................. A* 541,465
------------
4,533,455
MASSACHUSETTS (3.1%)
3,175,000 Housing Revenue, Refunding, Single Family, Ser 26, 4.45%, 12/1/24............. Aa 3,134,296
2,710,000 Residential Development, Ser H, 6.75%, 5/15/15................................ Aaa 2,870,540
------------
6,004,836
</TABLE>
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6
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
August 31, 1997
==========================================================================================================================
Principal
Amount High-Yield Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MICHIGAN (1.1%)
$2,000,000 Housing Development Authority, Single Family Mortgage,
Revenue, Ser. C, 5.95%, 12/1/14............................................ AA+* $ 2,044,460
MINNESOTA (1.6%)
Housing Finance Agency, Refunding:
2,740,000 Rental Housing, Ser. D, 5.80%, 8/1/11....................................... Aaa 2,799,677
225,000 Single Family Mortgage, Ser. D, 4.55%, 7/1/25............................... Aa2 223,862
------------
3,023,539
NEBRASKA (2.0%)
3,615,000 Investment Finance Authority, Single Family Mortgage,
Revenue, Ser. A, 5.977%, 9/30/16............................................ Aaa 3,753,201
NEW HAMPSHIRE (.1%)
190,000 Housing Finance Authority, Single Family Residential Mortgage,
Ser. B, 7.75%, 7/1/23....................................................... Aa 202,840
NEW JERSEY (1.0%)
Housing and Mortgage Finance Agency, Home Buyer, Revenue:
340,000 Ser. G, 4.625%, 4/1/15...................................................... Aaa 336,716
585,000 Ser. H, 4.625%, 10/1/18..................................................... Aaa 583,573
1,000,000 Newark, School District, Qualified Bond Act, 5.30%, 9/1/10+................... Aaa 1,010,830
------------
1,931,119
NEW YORK (10.1%) New York City:
General Obligations:
630,000 Ser. F, 8.20%, 11/15/04................................................... Baa1 716,392
1,000,000 Ser. A, 5.25%, 8/1/10..................................................... Aaa 1,003,480
New York State:
Dormitory Authority, Revenue:
240,000 Court Facilities Lease, Ser. A, 5.625%, 5/15/13........................... Baa1 240,946
1,500,000 Long Island University, Asset Guaranty, FSA Insured, 5.50%, 9/1/20........ Aaa 1,476,915
1,000,000 Millard Fillmore Hospital, FSA Insured, 5.20%, 2/1/10..................... Aaa 997,420
1,500,000 Refunding, Rochester Institute of Technology, 5.30%, 7/1/17............... Aaa 1,479,240
Medical Care Facilities Finance Agency:
3,900,000 Hospital and Nursing Home, Mortgage Revenue, Ser. D,
6.35%, 2/15/12......................................................... Aa2 4,312,776
4,100,000 Presbyterian Hospital, Ser. A, Revenue Refunding, 5.50%, 8/15/24.......... Aa 4,020,829
</TABLE>
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7
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
==========================================================================================================================
Principal
Amount High-Yield Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 945,000 Mortgage Agency Revenue, Homeowner Mortgage,
Ser. 30-A, 4.375%, 10/1/23............................................... Aa2 $ 926,941
4,000,000 Urban Development Corp., Refunding, Corporate Purpose,
Senior Lien, 5.50%, 7/1/26............................................... Aaa 4,002,920
-----------
19,177,859
NORTH CAROLINA (1.4%)
2,510,000 Housing Finance Agency, Ser U, 6.375%, 9/1/22................................. Aa 2,578,749
OKLAHOMA (3.5%)
315,000 Housing Finance Agency, Single Family Mortgage, Revenue,
Class A, 7.99675%, 8/1/18.................................................. AAA* 334,773
5,745,000 McGee Creek Authority, Water Revenue, 6.00%, 1/1/23........................... Aaa 6,259,350
-----------
6,594,123
OREGON (4.6%)
8,695,000 Eugene, Trojan Nuclear Project, Revenue, 5.90%, 9/1/09........................ Aa1 8,704,043
PENNSYLVANIA (.4%)
650,000 York County, Solid Waste & Refuse Authority, Industrial Development
Revenue, Resource Recovery Project, Ser. A, 8.20%, 12/1/14................. A 674,264
PUERTO RICO (1.3%)
2,500,000 Electric Power Authority, Power Revenue, Ser. AA, 5.375%, 7/1/27.............. Aaa 2,461,450
RHODE ISLAND (1.6%)
2,000,000 Health & Educational Building Corp., Revenue Refunding,
Roger Williams University, 5.375%, 11/15/24................................ AAA* 1,940,060
1,000,000 Housing and Mortgage Finance Corp., Homeownership Opportunity,
Ser. 3A, 7.80%, 10/1/10.................................................... Aa2 1,069,750
-----------
3,009,810
SOUTH CAROLINA (2.0%)
1,225,000 Piedmont, Municipal Power Agency, Electric Power Agency,
Refunding, 6.75%, 1/1/19................................................... Aaa 1,441,543
2,450,000 Three Rivers, Solid Waste Authority, Solid Waste Disposal Facilities,
Revenue, 5.30%, 1/1/27..................................................... Aaa 2,378,852
-----------
3,820,395
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
August 31, 1997
==========================================================================================================================
Principal
Amount High-Yield Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOUTH DAKOTA (4.2%)
$5,100,000 Heartland Consumers Power District, Electric Revenue,
Refunding, 6.00%, 1/1/17................................................... Aaa $ 5,502,390
Housing Development Authority, Homeownership Mortgage:
1,500,000 Ser. A, 5.40%, 5/1/14....................................................... Aa1 1,521,030
1,000,000 Ser. F, 5.70%, 5/1/17....................................................... Aa1 990,690
-----------
8,014,110
TEXAS (9.7%)
2,000,000 Austin, Utilities System Revenue, Refunding, 5.00%, 11/15/10.................. Aaa 1,982,880
2,000,000 Bell County, Health Facilities Development Corp., Revenue Refunding,
Central Texas Pooled Health, Ser. A, 4.75%, 10/1/23........................ AA-* 2,014,900
3,000,000 Harris County, Hospital District, Mortgage Revenue, 7.40%, 2/15/10............ Aaa 3,577,680
5,645,000 Houston, Housing Finance Corp., Single Family Mortgage Revenue,
Refunding, Ser. A, 5.95%, 12/1/10.......................................... Aaa 5,799,504
3,000,000 Lubbock, Housing Finance Corp., Single Family Mortgage Revenue,
Refunding, Ser. 1989A, 8.00%, 10/1/21...................................... AAA* 4,028,880
1,000,000 Travis County, Health Facilities Development Corp., Hospital Revenue,
Daughters of Charity, 5.90%, 11/15/07...................................... Aa 1,059,000
-----------
18,462,844
UTAH (1.3%)
Housing Finance Agency, Single Family Mortgage:
390,000 Ser. C-3, 7.55%, 7/1/23..................................................... AA* 412,218
1,025,000 Ser. D-3, 7.55%, 7/1/23..................................................... AA* 1,081,959
1,000,000 Ser. B-2, CL-I, 5.30%, 7/1/27............................................... Aaa 1,016,560
-----------
2,510,737
VIRGINIA (1.7%)
3,000,000 Housing Development Authority, Commonwealth Mortgage,
Subser. H-2, 6.85%, 7/1/14................................................. Aa1 3,210,960
WASHINGTON (1.5%)
500,000 Douglas County, Public Utility District No. 1,
Wells Hydroelectric Revenue, 4.00%, 9/1/18................................. A 447,130
2,500,000 Grant County, Public Utility District No. 2, Priest Rapids Hydro
Electric Revenue, Second Series, Ser. A, 5.50%, 1/1/16..................... Aaa 2,501,750
-----------
2,948,880
</TABLE>
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9
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
==========================================================================================================================
Principal
Amount High-Yield Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WISCONSIN (6.9%)
$3,000,000 Clean Water Revenue, Ser. 1, 6.875%, 6/1/11................................... Aa2 $ 3,541,170
Housing and Economic Development Authority:
1,785,000 Home Ownership Revenue, Refunding, Ser. A, 6.00%, 3/1/17.................... Aa2 1,828,215
7,595,000 Housing Revenue, Refunding, Ser C, 5.80%, 11/1/13........................... Aaa 7,728,672
------------
13,098,057
WYOMING (1.4%)
2,750,000 Community Development Authority, Housing Revenue,
Ser. 4, 5.70%, 6/1/17...................................................... Aa2 2,749,725
------------
TOTAL LONG-TERM MUNICIPAL SECURITIES ....................................................... 179,479,924
------------
SHORT-TERM MUNICIPAL SECURITIES (3.7%)
2,100,000 Berkley County, South Carolina, Exempt Facilities Industrial Revenue,
AMOCO Chemical Co. Project, 3.80%, 10/1/23................................. A1+*(1) 2,100,000
1,200,000 Jackson County, Mississippi, Port Facility Revenue, Refunding,
Chevron USA, Inc. Project, 3.70%, 6/1/23................................... P1(2) 1,200,000
1,300,000 Maricopa County, Arizona, Pollution Control Revenue, Refunding,
Arizona Public Service Co., Ser. B, 3.70%, 5/1/29.......................... P-1(1) 1,300,000
2,400,000 Raleigh-Durham, North Carolina, Airport Authority, Special Facilities
Revenue, Refunding, American Airlines, Ser. B, 3.75%, 11/1/15.............. A1+*(1) 2,400,000
------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES ...................................................... 7,000,000
------------
TOTAL MUNICIPAL SECURITIES (98.1%) (Cost $180,632,792) ..................................... 186,479,924
EXCESS OF CASH AND OTHER ASSETS OVER LIABILITIES (1.9%) .................................... 3,595,611
------------
NET ASSETS (100.0%) ........................................................................ $190,075,535
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE,
PER SHARE OUTSTANDING .................................................................... $ 10.91
============
</TABLE>
Rated by Moody's Investors Service except for those marked by an asterisk (*)
which are rated by Standard & Poor's.
Variable rate notes are considered short-term obligations. Interest rates change
periodically every (1) 1 day or (2) 7 days. These securities are payable on
demand on interest rate refix dates and are secured by either letters of credit
or other credit support agreements from banks. The rates listed are as of August
31, 1997.
+ When issued security
See Notes to Financial Statements
- --------------------------------------------------------------------------------
10
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
August 31, 1997
==========================================================================================================================
Principal
Amount Money Market Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES (101.8%)
ARIZONA (5.2%)
$1,000,000 Maricopa County, Pollution Control Revenue, Refunding,
Arizona Public Service Co., Ser B, 3.70%, 5/1/29............................ P1(1) $ 1,000,000
ARKANSAS (5.2%)
Development Finance Authority:
500,000 Correctional Facilities Revenue, Refunding, 3.60%, 11/15/97................. Aaa 500,000
500,000 Drivers License Revenue, State Police Headquarters & Wireless
Data Equipment, 3.80%, 6/1/98............................................ Aaa 500,000
-----------
1,000,000
GEORGIA (8.9%)
500,000 Clarke County, Hospital Authority Revenue Certificates, Refunding,
Athens Regional Medical Project, 3.90%, 1/1/98.............................. Aaa 500,321
300,000 Hapeville, Development Authority, Industrial Development Revenue,
Hapeville Hotel Ltd., 3.70%, 11/1/15........................................ P1(1) 300,000
Monroe County, Development Authority, Pollution Control Revenue:
600,000 Georgia Power Company, 2nd Ser., 3.75%, 7/1/25.............................. VMIG1(1) 600,000
300,000 Gulf Power Company Plant, 2nd Ser., 3.75%, 9/1/24........................... P1(1) 300,000
-----------
1,700,321
IOWA (4.7%)
School Cash Anticipation Program, School Corporations, Warrant Certificates:
400,000 Ser. B, 4.25%, 1/30/98...................................................... MIG1 400,957
500,000 Ser. A, 4.50%, 6/26/98...................................................... MIG1 502,751
-----------
903,708
LOUISIANA (15.2%)
1,000,000 Lake Charles Parish, Harbor and Terminal District, Port Facilities
Revenue, Refunding, 3.75%, 11/1/11.......................................... Aa1(1) 1,000,000
500,000 New Orleans, Public Improvements, Ser. A, 5.625%, 12/1/97..................... Aaa 502,204
500,000 Public Facilities Authority, School Board Advance Funding Program,
Ser. A, 4.50%, 9/24/97...................................................... SP1+* 500,182
900,000 Saint Charles Parish, Pollution Control Revenue, Shell Oil Co. Project,
Ser. A, 3.80%, 10/1/22...................................................... VMIG1(1) 900,000
-----------
2,902,386
</TABLE>
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11
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
==========================================================================================================================
Principal
Amount Money Market Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MICHIGAN (5.2%)
$1,000,000 Strategic Fund, Pollution Control Revenue, Refunding,
Consumers Power Project, Ser. A, 3.70%, 4/15/18............................. P1(1) $ 1,000,000
MINNESOTA (2.6%)
500,000 School Districts, Tax and Aid Anticipation Borrowing Project,
Certificates of Participation, Ser. B, 3.65%, 3/10/98....................... MIG1 500,000
MISSISSIPPI (3.1%)
600,000 Jackson County, Port Facility Revenue, Refunding, Chevron USA, Inc.
Project, 3.70%, 6/1/23...................................................... P1(2) 600,000
NEVADA (2.6%)
500,000 Las Vegas, General Obligation, Recreation Bonds, 3.65%, 2/1/98................ Aaa 500,000
NEW JERSEY (2.1%)
400,000 Economic Development Authority, Economic Development Revenue,
Dow Chemical, Ser. A, 3.00%, 5/1/01......................................... P1(1) 400,000
NEW YORK (5.8%) New York City:
600,000 General Obligations, Subser. A-5, 3.70%, 8/1/15............................. VMIG1(1) 600,000
500,000 Municipal Assistance Corp., Ser. G, 4.50%, 7/1/98........................... Aa2 502,407
-----------
1,102,407
SOUTH DAKOTA (2.6%)
500,000 Housing Development Authority, Homeownership Mortgage,
Ser. B, 3.75%, 5/1/17 (Mandatory Put Back 3/26/98).......................... VMIG1 500,000
TEXAS (17.8%)
Brazos River Authority, Pollution Control Revenue, Refunding:
900,000 Ser. A, 3.80%, 3/1/26....................................................... VMIG1(1) 900,000
300,000 Ser. B, 3.90%, 6/1/30....................................................... VMIG1(1) 300,000
600,000 Harris County, Health Facilities Development Corp., Special Facilities
Revenue, Texas Medical Center Project, 3.85%, 2/15/22....................... VMIG1(1) 600,000
390,000 Highland Park, Independent School District, Refunding, 3.70%, 2/15/98......... Aaa 390,000
500,000 Irving, General Obligation, Refunding, 4.10%, 3/15/98......................... Aaa 501,061
205,000 Kingsbridge, Municipal Utility District, Refunding, 3.95%, 9/1/97............. Aaa 205,000
500,000 Tax and Revenue Anticipation Notes, dated 9/2/97, 4.75%, 8/31/98.............. MIG1 504,405
-----------
3,400,466
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
August 31, 1997
==========================================================================================================================
Principal
Amount Money Market Portfolio Rating Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTAH (5.2%)
$1,000,000 Emery County, Pollution Control Revenue, Refunding,
Pacificorp Project, 3.75%, 11/1/24......................................... VMIG1(1) $ 1,000,000
WISCONSIN (5.2%)
500,000 Delavan-Darien School District, Bond Anticipation Notes,
4.15%, 4/15/98............................................................. MIG1 500,708
500,000 Kaukauna Area School District, Brown, Calumet and
Outagamie Counties, Bond Anticipation Notes, 4.35%, 2/26/98................ SP1* 500,518
------------
1,001,226
WYOMING (10.4%)
Lincoln County, Pollution Control Revenue, Exxon Project:
700,000 Ser. D, 3.70%, 11/1/14..................................................... P1(1) 700,000
900,000 Ser. C, 3.80%, 7/1/17...................................................... Aaa(1) 900,000
400,000 Platte County, Pollution Control Revenue, Tri-State Gas & Electric,
Ser. B, 3.75%, 7/1/14...................................................... P1(1) 400,000
------------
2,000,000
------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES (101.8%)
(Cost $19,510,514) ....................................................................... 19,510,514
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS (-1.8%) ................................... (341,897)
------------
NET ASSETS (100.0%) ....................................................................... $ 19,168,617
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE,
PER OUTSTANDING SHARE .................................................................... $ 1.00
============
</TABLE>
Rated by Moody's Investors Service except for those marked by an asterisk (*)
which are rated by Standard & Poor's.
Variable rate notes are considered short-term obligations. Interest rates change
periodically every (1) 1 day (2) 7 days. These securities are payable on demand
on interest rate refix dates and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of August
31, 1997.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Statement of Assets and Liabilities
at August 31, 1997 (unaudited)
================================================================================
Portfolio
-----------------------
High- Money
Yield Market
-------- --------
(Dollars in thousands
except per share amount)
Assets:
Investment securities, at value
(Cost $180,633 and amortized
cost $19,511) ................................. $186,480 $ 19,511
Cash ............................................ 18 86
Receivable for securities sold .................. 4,968 --
Interest receivable ............................. 2,231 129
Receivable for capital shares sold .............. 811 3
-------- --------
Total Assets ................................ 194,508 19,729
-------- --------
Liabilities:
Payable for securities purchased ................ 3,974 504
Dividends payable to shareholders ............... 264 --
Payable for capital shares repurchased .......... 15 5
Accrued expenses:
Advisory fee .................................. 81 8
Other ......................................... 98 43
-------- --------
Total Liabilities ........................... 4,432 560
-------- --------
Net Assets: ................................. $190,076 $ 19,169
======== ========
Net Assets:
Capital stock, at $.01 par value
(Authorized 65,000,000 shares
and 125,000,000 shares,
respectively, outstanding
17,415,247 shares and 19,197,379
shares
respectively) ................................. $ 174 $ 192
Additional paid-in capital ...................... 182,630 19,005
Undistributed net investment income ............. 15 3
Accumulated net realized gain (loss)
on investments ................................ 1,410 (31)
Unrealized net appreciation of
investments ................................... 5,847 --
-------- --------
Net Assets .................................. $190,076 $ 19,169
======== ========
Net Asset Value, Offering and
Redemption Price per
Outstanding Share ......................... $ 10.91 $ 1.00
======== ========
Statement of Operations
for the Six Months Ended August 31, 1997 (unaudited)
================================================================================
Portfolio
----------------------
High- Money
Yield Market
------- -------
Dollars
(in thousands)
Investment Income:
Interest income .................................. $ 5,389 $ 357
------- -------
Expenses:
Advisory fee ..................................... 482 49
Transfer agent fees .............................. 28 11
Custodian fees ................................... 22 2
Printing and stationery .......................... 19 4
Auditing and legal fees .......................... 18 16
Registration and filing fees ..................... 9 8
Postage .......................................... 7 2
Directors' fees and expenses ..................... 4 4
Other ............................................ 28 7
------- -------
Total expenses before custody
credits .................................... 617 103
Less: custody credits ........................ (6) (1)
------- -------
Net Expenses ................................. 611 102
------- -------
Net Investment Income ............................ 4,778 255
------- -------
Net Realized and Unrealized Loss on
Investments:
Net Realized Gain .............................. 682 --
Change in Unrealized Appreciation .............. 1,680 --
------- -------
Net Realized Gain and Change in
Unrealized Appreciation on
Investments .................................... 2,362 --
------- -------
Net Increase in Net Assets
from Operations ................................ $ 7,140 $ 255
======= =======
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Statement of Changes in Net Assets
for the Six Months Ended August 31, 1997 (unaudited), and for the Year Ended
February 28, 1997
================================================================================
<TABLE>
<CAPTION>
High-Yield Portfolio Money Market Portfolio
-----------------------------------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
August 31, 1997 February 28, August 31, 1997 February 28,
(unaudited) 1997 (unaudited) 1997
-----------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operations:
Net investment income ........................................ $ 4,778 $ 10,690 $ 255 $ 531
Net realized gain (loss) on investments ...................... 682 755 -- (1)
Change in net unrealized appreciation ........................ 1,680 (1,721) -- --
-------------------------------------------------------------
Net increase in net assets from operations ................... 7,140 9,724 255 530
-------------------------------------------------------------
Distributions to Shareholders:
Net investment income ........................................ (4,763) (10,690) (253) (531)
-------------------------------------------------------------
Capital Share Transactions:
Net proceeds from sale of shares ............................. 10,529 146,110 4,100 14,044
Net proceeds from reinvestment of distribution
to shareholders ............................................ 3,018 6,978 253 531
Cost of shares repurchased ................................... (19,489) (181,241) (4,854) (16,683)
-------------------------------------------------------------
Net decrease in net assets from capital
share transactions ......................................... (5,942) (28,153) (501) (2,108)
-------------------------------------------------------------
Total Decrease in Net Assets ................................... (3,565) (29,119) (499) (2,109)
Net Assets:
Beginning of period .......................................... 193,641 222,760 19,668 21,777
-------------------------------------------------------------
End of period ................................................ $ 190,076 $ 193,641 $ 19,169 $ 19,668
=============================================================
Net Undistributed Investment
Income at end of period ...................................... $ 15 $ -- $ 2 $ --
=============================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
15
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The Value Line Tax Exempt Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company, comprised of the High Yield and Money Market
Portfolios. The primary investment objective of the High Yield Portfolio is to
provide investors with the maximum income exempt from federal income taxes while
avoiding undue risk to principal by investing primarily in investment-grade
municipal securities. The primary objective of the Money Market Portfolio is to
preserve principal and provide income by investing in high-quality, tax-exempt
money market instruments. The ability of the issuers of the securities held by
the Fund to meet their obligations may be affected by economic or political
developments in a specific state or region. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.
(A) Security Valuations: High-Yield Portfolio -- The investments are valued each
business day by an independent pricing service ("Service") approved by the Board
of Directors. Investments for which quoted bid prices in the judgement of the
Service are readily available and are representative of the bid side of the
market are valued at quotations obtained by the Service from dealers in such
securities. Other investments (which constitute a majority of the portfolio
securities) are valued by the Service, based on methods that include
consideration of yields or prices of municipal securities of comparable quality,
coupon, maturity, and type; indications as to values from dealers; and general
market conditions. Short-term instruments maturing within 60 days are valued at
amortized cost, which approximates 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 -- Securities are valued on the basis of amortized cost,
which approximates market value and 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. The valuation of securities based upon their amortized
cost is permitted by Rule 2a-7 under the Investment Company Act of 1940. The
rule requires that the Portfolio maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase instruments that have remaining maturities
of 13 months or less only, and invest only in securities determined by the Board
of Directors to be of good quality, with minimal credit risks. The Directors
have established procedures designed to achieve these objectives.
(B) Distributions: It is the policy of the Fund to declare daily from net
investment income. In the Money Market Portfolio, dividends are automatically
reinvested each day in additional shares. Dividends credited to a shareholder's
account in the High-Yield Portfolio are distributed monthly. 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. The Fund expects to distribute any net realized capital gains in
either Portfolio at least annually.
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income-tax
regulations, which may differ from generally accepted
- --------------------------------------------------------------------------------
16
<PAGE>
The Value Line Tax Exempt Fund, Inc.
August 31, 1997
================================================================================
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment. Temporary differences do not require
reclassification.
(C) Federal Income Taxes: It is the policy of the Fund to qualify as a regulated
investment company, which can distribute tax-exempt dividends, by complying with
the provisions available to certain investment companies, as defined in
applicable sections of the Internal Revenue Code, and to distribute all of its
investment income and capital gains to its shareholders. Therefore, no provision
for federal income tax or excise tax is required in the accompanying financial
statements.
(D) Investments: Securities transactions are recorded on a trade-date basis.
Realized gains and losses from securities transactions are recorded on the
identified-cost basis. Interest income, adjusted for amortization of premium and
accretion of original-issue discounts, when appropriate, in accordance with
federal income-tax regulations, is earned from settlement date and recognized on
the accrual basis. Additionally, when appropriate, the Fund recognizes market
discount when the securities are disposed. Securities purchased or sold on a
when-issued or delayed-delivery basis may be settled a month or more after the
trade date.
(E) Expenses: Expenses directly attributable to each Portfolio are charged to
that Portfolio's operations; expenses that are applicable to both Portfolios are
allocated between them.
2. Capital Share Transactions Transactions in capital stock were as follows:
High-Yield Portfolio
-----------------------
Six Months
Ended Year
August 31, Ended
1997 February 28,
(unaudited) 1997
-----------------------
(in thousands)
Shares sold .................................. 973 13,694
Shares issued to shareholders
in reinvestment of dividends ............... 279 654
-----------------------
1,252 14,348
Shares repurchased ........................... (1,800) (16,971)
-----------------------
Net decrease ................................. (548) (2,623)
=======================
Money Market Portfolio
-----------------------
Six Months
Ended Year
August 31, Ended
1997 February 28,
(unaudited) 1997
-----------------------
(in thousands)
Shares sold 4,100 14,044
Shares issued to shareholders
in reinvestment of dividends 253 531
-----------------------
4,353 14,575
Shares repurchased (4,854) (16,683)
-----------------------
Net decrease (501) (2,108)
=======================
- --------------------------------------------------------------------------------
17
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Notes to Financial Statements (unaudited)
================================================================================
3. Purchases and Sales of Securities
Purchases and sales of municipal securities were as follows:
High-Yield Portfolio
----------------
Six Months Ended
August 31, 1997
(unaudited)
----------------
(in thousands)
PURCHASES:
Long-term obligations $101,820
Short-term obligations 48,200
--------
$150,020
========
MATURITIES OR SALES:
Long-term obligations $105,723
Short-term obligations 55,350
--------
$161,073
========
Money Market
Portfolio
----------------
Six Months Ended
August 31, 1997
(unaudited)
----------------
(in thousands)
PURCHASES:
Municipal short-term obligations $14,015
========
MATURITIES OR SALES:
Municipal short-term obligations $14,921
========
At August 31, 1997, the aggregate cost of investments for federal income-tax
purposes was $180,632,792 for the High-Yield Portfolio and $19,510,514 for the
Money Market Portfolio.
The aggregate appreciation and depreciation of investments in the High-Yield
Portfolio at August 31, 1997, based on a comparison of investment values and
their costs for federal income-tax purposes, is $6,367,095 and $519,963,
respectively, resulting in a net unrealized appreciation of $5,847,132. There
was no unrealized appreciation or depreciation in the Money Market Portfolio.
For federal income-tax purposes the High-Yield Portfolio had a net realized gain
at February 28, 1997, after utilizing prior year's carry forward losses of
$23,412, which it intends to distribute to its shareholders, and the Money
Market Portfolio had a capital-loss carryover at February 28, 1997, of $29,932,
of which $27,649 will expire in 2000, $998 in 2004 and $1,285 in 2005. Any net
capital losses incurred after October 31, within the Portfolio's tax year, if so
elected by either Portfolio, are deemed to arise on the first day of that
Portfolio's next taxable year. Accordingly, the Money Market Portfolio has
elected to defer $1,415 of net capital losses incurred after October 31, 1996.
To the extent future capital gains are offset by such capital losses, the
Portfolio does not anticipate distributing any such gains to its shareholders.
4. Investment Advisory Contract and Transactions with Affiliates
An advisory fee of $481,913 and $48,971 was paid or payable on the High-Yield
Portfolio and the Money Market Portfolio, respectively, to Value Line, Inc. (the
Adviser), for the six months ended August 31, 1997. This was computed at the
annual rate of 1/2 of 1% of the average daily net asset value of the portfolios
of the Fund for the year. The Adviser provides research, investment programs,
and supervision of the investment portfolio and pays costs of administrative
services, office space, equipment, and compensation of administrative,
bookkeeping, and clerical personnel necessary for managing the affairs of the
Fund. The Adviser also provides persons, satisfactory to the Fund's Board of
Directors, to act as officers of the Fund and pays their salaries and wages. The
Fund bears all other
- --------------------------------------------------------------------------------
18
<PAGE>
The Value Line Tax Exempt Fund, Inc.
August 31, 1997
================================================================================
costs and expenses of its organization and operation. If the aggregate expenses
of the Fund, other than taxes, interest, brokerage commissions, and
extraordinary expenses, exceed the expense limitation imposed by any state in
which the Fund sells its shares, the advisory fee will be reduced by the amount
of such excess, or the amount of such excess will be refunded. No such
reimbursement was required for the six months ended August 31, 1997.
Certain officers and directors of the Adviser and its subsidiary, Value Line
Securities, Inc. (the Fund's distributor and a registered broker/dealer), are
also officers and a Director of the Fund.
At August 31, 1997, the Adviser and/or affiliated companies owned 108,353 shares
of the High-Yield Portfolio common shares, representing .62% of the outstanding
shares. In addition, certain officers and directors of the Fund owned 152,953
shares of the High-Yield Portfolio, representing .88% of the outstanding shares
and 2,481 shares of the Money Market Portfolio, representing .01% of the
outstanding shares.
- --------------------------------------------------------------------------------
19
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Financial
================================================================================
Selected Data for a Share of Capital Stock Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
For the Six
Months Ended Years Ended on Last Day of February,
August 31, 1997 ----------------------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ......................... $ 10.78 $ 10.82 $ 10.40 $ 10.97 $ 11.29 $ 10.59
--------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ........... .270 .547 .552 .568 .598 .635
Net gains or losses on securities
(both realized and unrealized) .129 (.040) .420 (.528) (.112) .698
--------------------------------------------------------------------------------------------
Total from investment
operations .................... .399 .507 .972 .040 .486 1.333
--------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income ........................ (.269) (.547) (.552) (.568) (.602) (.633)
Distributions from capital gains -- -- -- (.042) (.204) --
--------------------------------------------------------------------------------------------
Total distributions ........... (.269) (.547) (.552) (.610) (.806) (.633)
--------------------------------------------------------------------------------------------
Net asset value, end of period ...... $ 10.91 $ 10.78 $ 10.82 $ 10.40 $ 10.97 $ 11.29
============================================================================================
Total return ........................ 3.75%+ 4.86% 9.55% .64% 4.37% 13.03%
============================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) .................... $ 190,076 $ 193,641 $ 222,760 $ 241,467 $ 237,888 $ 301,514
Ratio of expenses to
average net assets ................ .64%(1)* .60%(1) .62% .61% .58% .60%
Ratio of net investment income to
average net assets ................ 4.99%* 5.13% 5.22% 5.54% 5.30% 5.89%
Portfolio turnover rate ............. 57% 73% 95% 60% 55% 101%
</TABLE>
* Annualized
+ Not annualized, for six month period only.
(1) Before offset for custody credits.
See Notes to Financial Statements
- -------------------------------------------------------------------------------
20
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Highlights
================================================================================
Selected Data for a Share of Capital Stock Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
For the Six
Months Ended Years Ended on Last Day of February,
August 31, 1997 ----------------------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ....... .013 .025 .029 .022 .016 .023
--------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income .................... (.013) (.025) (.029) (.022) (.016) (.023)
--------------------------------------------------------------------------------------------
Net asset value, end of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============================================================================================
Total return .................... 1.30%+ 2.56% 2.92% 2.22% 1.58% 2.34%
============================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) ................ $ 19,169 $ 19,688 $ 21,777 $ 25,681 $ 31,707 $ 36,309
Ratio of expenses to
average net assets ............ 1.05%*(1) 1.00%(1) 1.01% .89% .86% .80%
Ratio of net investment income to
average net assets ............ 2.61%* 2.54% 2.89% 2.17% 1.56% 2.38%
</TABLE>
* Annualized
+ Not annualized, for six month period only.
(1) Before offset for custody credits.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
21
<PAGE>
The Value Line Tax Exempt Fund, Inc.
================================================================================
This page intentionally left blank
- --------------------------------------------------------------------------------
22
<PAGE>
The Value Line Tax Exempt Fund, Inc.
================================================================================
This page intentionally left blank
- --------------------------------------------------------------------------------
23
<PAGE>
Value Line New York Tax Exempt Trust
The Value Line Family of Funds
================================================================================
1950--The Value Line Fund seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952--The Value Line Income Fund's primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks to obtain long-term growth of
capital by investing not less than 80% of its assets in "special situations". No
consideration is given to achieving current income.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979--The Value Line Cash Fund, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value to
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984--The Value Line Tax Exempt Fund seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985--Value Line Convertible Fund seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986--Value Line Aggressive Income Trust seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income corporate securities.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal
individual income taxes while avoiding undue risk to principal.
1987--Value Line Strategic Asset Management Trust* invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times.
1993--Value Line Small-Cap Growth Fund invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993--Value Line Asset Allocation Fund seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
1995--Value Line U.S. Multinational Company Fund's investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* Only available through the purchase of Guardian Investor, a tax deferred
variable annuity, or ValuePlus, a variable life insurance policy.
For more complete information about any of the Value Line Funds, including
charges and expenses, send for a prospectus from Value Line Securities, Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call 1-800-223-0818, 24
hours a day, 7 days a week, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
24
<PAGE>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
Charles E. Reed
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Raymond S. Cowen
Vice President
Charles Heebner
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
An investment in The Value Line Tax Exempt Fund, Inc. Money Market Portfolio is
not guaranteed or insured by the U.S. government, and there is no assurance that
this portfolio will maintain its $1.00 per-share net asset value.
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and, accordingly, they
do not express an opinion thereon.
This unaudited report is issued for information of shareholders. It is not
authorized for distribution to prospective investors unless preceded or
accompanied by a currently effective prospectus of the Fund (obtainable from the
Distributor).
VLF708084
