VALUE LINE TAX EXEMPT FUND INC
N-30D, 1999-10-28
Previous: TOFUTTI BRANDS INC, 10QSB/A, 1999-10-28
Next: WHITE CLOUD EXPLORATION INC, 8-K, 1999-10-28




================================================================================

                    ---------------------------------------
                               SEMI-ANNUAL REPORT
                    ---------------------------------------
                                 August 31, 1999
                    ---------------------------------------

]

                                       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
- --------------------------------------------------------------------------------

To Our Shareholders:

During  the past six  months  ended  August  31,  1999,  prices of  fixed-income
securities declined as interest rates increased.  Long-term, tax-exempt interest
rates,  as measured by the Bond Buyer's  40-Bond Index,  increased from 5.17% on
February  26th to 5.78% on  August  31st.  During  this same  period,  long-term
taxable  rates,  as measured by the 30-year  Treasury  bond,  rose from 5.58% to
6.06%.  Two  increases  in the  Federal  Funds rate of 0.25% each by the Federal
Reserve Board, the continued strength in the economy,  and fears of inflationary
pressures  have  contributed  to the rise in interest  rates.  As a result,  the
decline in interest  rates that  occurred in the  preceding  six months has been
reversed.  As of August 31st the Bond Buyer's  40-Bond Index was yielding  5.78%
compared to 5.11% a year before and the 30-year Treasury bond was 6.06% compared
to 5.27% a year earlier.

Treasury bonds have  outperformed  tax-exempt  bonds during the past six months.
The 30-year  Treasury bond's yield increased 0.48% vs 0.61% for the Bond Buyer's
40-Bond Index. The superior  performance of Treasury bonds vis-a-vis  tax-exempt
bonds is a result of several  factors.  The tax-exempt  market has experienced a
large supply of new issues and a decline in institutional  demand.  In contrast,
the  Treasury  market has  experienced  strong  demand from  institutions  and a
decline in supply due to government Budget surpluses.  As a result, the ratio of
tax-exempt  yields to Treasury  yields  remains high.  Recently,  the yield on a
triple-A rated 30-year  tax-exempt bond was 5.67% which is over 93% of the 6.08%
yield of the 30-year  Treasury  bond.  This high ratio offers  investors a solid
opportunity to realize relatively high tax-exempt income.


National Bond Portfolio

On July 1, 1999, the name National Bond  Portfolio  replaced the name High Yield
Portfolio.   The  current  name  more   accurately   reflects  the  quality  and
diversification  of the  securities  in the Fund.  The primary  objective of the
Value Line Tax Exempt  National  Bond  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, 1999, the fund's total return
was -2.86%. Since its inception in March 1984, the total return for the National
Bond Portfolio, assuming the reinvestment of all dividends over that period, was
210.54%.  This is  equivalent  to an average  annual total return of 7.75%.  The
Fund's SEC yield as of August 31, 1999 was 4.85%,  significantly higher than the
average SEC yield of 4.34% for all general municipal bond funds ranked by Lipper
Analytical Services.

During the past six months, the difference between high and low investment grade
securities has increased significantly.  As a result, your Fund's management has
increased  its  allocation of assets to low  investment  grade  securities.  The
higher  yields  of these  securities  will  increase  the  Fund's  return to the
shareholder  while  still  maintaining  a  predominantly  high-grade  portfolio.
Specifically,  over 81% of the Fund's  bonds are rated AA or better by the major
credit  agencies,  such as Moody's  Investors  Service and  Standard  and Poor's
Corporation, 6% are rated A, 9% are rated Baa or BBB, and 4% are not rated. Your
management  continues  to  emphasize  call  protection  in order to maintain the
income over time for the  shareholder.  Specifically,  35% of the  portfolio  is
invested in  non-callable  bonds.  The  Portfolio's  highest  concentrations  of
investments are in the insured, housing-revenue, and industrial-revenue sectors,
respectively.


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 that have a high
degree of  liquidity  so as to ensure a  constant  net asset  value of $1.00 per
share.  The Portfolio  only  consists of  securities  that carry the highest two
ratings of the major credit-rating  agencies.  The annualized yield was 2.00% as
of August 31,


- --------------------------------------------------------------------------------
2
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.

Tax Exempt Fund Shareholders
- --------------------------------------------------------------------------------

1999,  which is  equivalent  to a 3.31% taxable yield for those in the 39.6% tax
bracket.  The average  maturity of the Portfolio was 31 days. It is management's
intention  to maintain a short  average  maturity as long as there are  concerns
that the Federal Reserve Board will raise interest rates.

Short-term  tax-exempt  rates,  as measured by the Bond  Buyer's  One-year  Note
Index,  rose from 2.88% on February  25th to 3.67% on August  31st.  During this
same period of time,  the yield on  one-year  taxable  Treasury  bills rose from
4.87% to 5.28%.

The municipal bond market is one of the most  fragmented and complex  sectors of
the American  capital markets.  We 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  7, 1999

Income  from the  Portfolio's  may be subject  to State and Local  Taxes and the
Alternative Minimum Tax.


Economic Observations

The economy is picking up some renewed strength as we head into the final months
of  1999.  Evidence  of this  increased  business  activity  can be found in the
accelerating  rate of consumer  spending,  the  ongoing  strength in the housing
market, booming auto sales, and a modest uptick in manufacturing.  Overall, this
recent  firming in the key consumer and  industrial  markets  suggests  that GDP
growth,  which slowed to a very modest 1.6% in the second quarter,  will average
better than 3% during the final six months of the year, unless serious Year 2000
dislocations develop.  Inflationary  pressures,  meanwhile,  are now starting to
build,  although,  as yet, we are not  forecasting  a dramatic  change in trend.
Nevertheless,  the sharp runup in oil prices in recent months, the escalation in
wage costs,  and the jump in mortgage rates all indicate that the cost of living
is  increasing.  A gradual  uptrend in pricing  now seems  likely  over the next
several  quarters.  The  Federal  Reserve,  taking  note of  these  rising  cost
pressures,  is likely to edge toward a more  restrictive  monetary course in the
months ahead, with perhaps an additional interest rate boost in the cards.


- --------------------------------------------------------------------------------
                                                                               3
<PAGE>

The Value Line Tax Exempt Fund, Inc.

To Our Value Line Tax Exempt Fund Shareholders
- --------------------------------------------------------------------------------

Performance Data:*

NATIONAL BOND PORTFOLIO

                                                                    Growth of
                                                      Average       an Assumed
                                                       Annual      Investment of
                                                    Total Return     $10,000
                                                    ------------     -------
 1 year ended 6/30/99 ........................          1.76%        $10,176
 5 years ended 6/30/99 .......................          6.24%        $13,535
10 years ended 6/30/99 .......................          6.53%        $18,816

MONEY MARKET PORTFOLIO

                                                                    Growth of
                                                      Average       an Assumed
                                                       Annual      Investment of
                                                    Total Return     $10,000
                                                    ------------     -------
 1 year ended 6/30/99 ........................          2.19%        $10,219
 5 years ended 6/30/99 .......................          2.58%        $11,356
10 years ended 6/30/99 .......................          3.01%        $13,456

*    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. The average annual total
     returns for the one-year,  five-year, and ten-year periods ended August 31,
     1999, for the National Bond  Portfolio and the Money Market  Portfolio were
     -1.42%, 5.52%, and 6.34% and 2.15%, 2.58% and 2.95%, respectively.


- --------------------------------------------------------------------------------
4
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.

<TABLE>
<CAPTION>
Schedule of Investments (unaudited)                                                      August 31, 1999
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      National Bond Portfolio                              Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>                                                                              <C>         <C>
LONG-TERM MUNICIPAL SECURITIES (95.0%)

             Alabama (.8%)
$ 1,250,000  Colbert County-Northwest, Health Care Authority,
               Hospital Revenue Refunding, Helen Keller Hospital, 8.75%, 6/1/09   Baa        $ 1,310,562

             Alaska (5.8%)
  2,040,000  Energy Authority, Power Revenue Refunding,
               Bradley Lake Third Ser. 6.00%, 7/1/14...........................   Aaa          2,146,590
             Housing Finance Corp.:
     60,000    Collateral Mortgage Obligation, Veteran's 1st Ser.,
                 Veteran's Mortgage Program, 7.45%, 12/1/29....................   Aaa             60,972
  2,000,000  Mortgage Revenue, Refunding, Ser. A-1, 5.50%, 12/1/17 ............   Aaa          1,937,160
  6,000,000  Valdez, Marine Terminal Revenue, Refunding BP Pipeline Inc.,
               Project , Ser. B, 5.50%, 10/1/28................................   Aa2          5,659,920
                                                                                             -----------
                                                                                               9,804,642

             Arizona (4.2%)
             Maricopa County, Industrial Development Authority:
  3,355,000    Multi-Family Housing, Multi-Family Housing Revenue,
                 Ser. A, 5.10%, 1/1/33.........................................   Aaa          2,983,065
  3,895,000    Single-Family Housing, Single-Family Housing Revenue,
                 Ser. B, 4.75%, 12/1/30........................................   Aaa          4,107,511
                                                                                             -----------
                                                                                               7,090,576

             California (1.9%)
  1,690,000  Pleasant Hill, Redevelopment Agency, Residential Mortgage Revenue,
               Refunding, 5.75%, 8/1/11........................................   AA*          1,707,170
  1,500,000  San Bernardino County, Single Family Mortage Revenue,
               Home Mortgage, Ser. A, 5.00%, 12/1/31...........................   Aaa          1,550,535
                                                                                             -----------
                                                                                               3,257,705

             Colorado (4.1%)
  4,055,000  Denver, City & County, Single Family Mortgage Revenue,
               7.00%, 8/1/10 ..................................................   Aaa          4,499,874
  2,400,000  Water Reserve Power Development Authority, Clean Water Revenue,
               Ser. A, 5.13%, 9/1/14...........................................   Aaa          2,330,328
                                                                                             -----------
                                                                                               6,830,202

             District of Columbia (1.8%)
  3,000,000  General Obligation, Ser. A, 5.50%, 6/1/11.........................   AAA          3,054,330
</TABLE>


- --------------------------------------------------------------------------------
                                                                               5
<PAGE>

The Value Line Tax Exempt Fund, Inc.

<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      National Bond Portfolio                              Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>                                                                               <C>         <C>
             Florida (.6%)
$ 1,000,000  Miami, Dade County, Housing Finance Authority,
               Home Ownership Mortgage, Ser. A, 5.20%, 10/1/31.................   Aaa         $  988,260

             Georgia (.1%)
     85,000  Residential Finance Authority, Single Family Insured Mortgage,
               Revenue, Subser. C, 8.00%, 12/1/16..............................   Aa              87,134

             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          4,257,120

             Illinois (8.6%)
             Chicago:
  2,000,000  Development Financial Authority, Solid Waste Disposal Revenue,
               Management Inc. Project, 5.05%, 1/1/10..........................   Ba1          1,866,760
  2,000,000  Lakefront Millennium Package Facilities, 5.75%, 1/1/23............   Aaa          2,028,180
  2,400,000  Metropolitan Housing Development Corp. Mortgage Revenue,
               Ser. A, 6.85%, 7/1/22...........................................   AA*          2,545,008
  3,000,000  Refunding Emergency Telephone System, 5.25%, 1/1/20...............   Aaa          2,855,790
             Single Family Mortgage Revenue, Collateralized:
  1,500,000    Ser. A, 4.70%, 10/1/17..........................................   Aaa          1,508,880
  1,500,000    Ser. C-1, 6.30%, 9/1/29.........................................   Aaa          1,560,855
  2,000,000  University Illinois, Partnership Utility,
               Infrastructure Projects, 5.25%, 8/15/14.........................   Aaa          1,939,500
                                                                                             -----------
                                                                                              14,304,973

             Indiana (2.2%)
  3,000,000  Office Building Commission, Capital Complex, Revenue,
               Ser. B, 7.40%, 7/1/15...........................................   Aaa          3,613,470

             Iowa (2.9%)
  1,115,000  Finance Authority, Single Family, Revenue Mortgage,
               Ser. B, 7.45%, 7/1/23...........................................   Aaa          1,157,615
  3,305,000  Muscatine, Electric Revenue, 6.70%, 1/1/13........................   Aaa          3,655,033
                                                                                             -----------
                                                                                               4,812,648

             Louisiana (1.2%)
  2,000,000  Housing Finance Agency, Mortgage Revenue, Single Family,
               Ser. B, 5.55%, 6/1/24...........................................   Aaa          1,937,080
</TABLE>

- --------------------------------------------------------------------------------
6
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.

<TABLE>
<CAPTION>
                                                                                         August 31, 1999
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      National Bond Portfolio                              Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>                                                                               <C>       <C>
             Maine (.3%)
$   500,000  State Street Housing Preservation Corp., Multifamily Housing Revenue,
               100 State Street Project, Ser. A, 7.50%, 1/1/19.................   A*         $   527,555

             Maryland (.4%)
    600,000  Northeast Waste Disposal Authority, Solid Waste Revenue,
               Montgomery County, Project A, 6.30%, 7/1/16.....................   A2             620,898

             Massachusetts (3.8%)
  4,500,000  State Devolpment Finance Agency Revenue, Boston University,
               Ser. P, 6.00%, 5/15/59..........................................   A3           4,470,570
  2,250,000  State Turnpike Authority, Highway Systems Revenue Ser. A,
               5.00%, 1/1/37...................................................   Aaa          1,957,837
                                                                                             -----------
                                                                                               6,428,407

             Michigan (2.4%)
  2,000,000  Housing Development Authority, Single Family Mortgage Revenue,
               Ser. C, 5.95%, 12/1/14..........................................   AA+*         2,041,560
  2,000,000  Wayne Charter County, Airport Revenue, Detroit Met, 5.25%, 12/1/14   Aaa          1,922,720
                                                                                             -----------
                                                                                               3,964,280

             Mississippi (1.8%)
             Development Bank Special Obligation,
               Capital Projects & Equipment Acquisition:
  1,000,000      Ser. A-1, 5.875%, 7/1/24......................................   Aaa          1,016,330
  1,250,000      Ser. A-2, 5.00%, 7/1/24.......................................   Aaa          1,129,813
  1,000,000  Home Corp, Single Family Revenue Mortgage, Ser. A, 5.25%, 6/1/30..   Aaa            895,200
                                                                                             -----------
                                                                                               3,041,343

             Missouri (1.4%)
  2,245,000  Housing Development Commission, Single Family Mortgage,
               Revenue, Ser. E-1, 6.45%, 9/1/29................................   AAA*         2,408,099

             Nebraska (1.1%)
  1,760,000  Investment Finance Authority, Single Family Mortgage,
               Revenue, Ser. A, 5.977%, 9/1/16.................................   Aaa          1,779,061

             New Hampshire (.1%)
    125,000  Housing Finance Authority, Single Family Residential Mortgage,
               Ser. B, 7.75%, 7/1/23...........................................   Aa3            130,418
</TABLE>

- --------------------------------------------------------------------------------
                                                                               7
<PAGE>

The Value Line Tax Exempt Fund, Inc.

<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      National Bond Portfolio                              Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>                                                                               <C>         <C>
             New Jersey (1.8%)
$ 3,000,000  East Orange, Board of Education, Certificate
               Participation, 5.50%, 8/1/12 ...................................   Aaa        $ 3,058,260

             New York (2.6%)
    $80,000  New York City, General Obligations, Ser. F, 8.20%, 11/15/04.......   A3              87,228
             New York State:
  1,000,000    Dormitory Authority, Hospital, Montefiore Medical Center,
                 5.25%, 8/1/19.................................................   Aaa            978,090
  3,010,000    Medical Care Facilities Finance Agency, Hospital and Nursing Home,
                 Mortgage Revenue Ser. D, 6.35%, 2/15/12.......................   Aa2          3,247,459
                                                                                             -----------
                                                                                               4,312,777

             North Carolina (.9%)
  1,500,000  Municipal Power Agency, No 1 Catawba, Electric Revenue,
               5.20%, 1/1/00 ..................................................   Aaa          1,507,305

             Ohio (2.2%)
  4,000,000  State Solid Waste Disposal Revenue, USG Corp. Project,
               5.65%, 3/1/33 ..................................................   Ba2          3,641,560

             Oregon (4.6%)
             Klamath Falls Electric Revenue Refunding:
  3,000,000    5.50%, 1/1/07...................................................   NR           2,916,120
  2,900,000    5.75%, 1/1/13...................................................   NR           2,771,095
  2,000,000  Portland, Bond Antic Notes, Ser. A, 3.75%,12/15/99................   MIG-1        2,001,360
                                                                                             -----------
                                                                                               7,688,575

             Rhode Island (.4%)
    595,000  Housing and Mortgage Finance Corp., Homeownership Opportunity:
               Ser. 3-A, 7.80%, 10/1/10........................................   Aa2            617,188

             South Carolina (1.2%)
  2,100,000  Three Rivers, Solid Waste Authority, Solid Waste Disposal Facilities,
               Revenue, 5.30%, 1/1/27..........................................   Aaa          1,949,682

             South Dakota (.7%)
  1,195,000  Housing Development Authority, Homeownership Mortgage,
               Ser. A, 5.40%, 5/1/14...........................................   Aa1          1,195,729

             Texas (15.1%)
  3,080,000  Austin, Hotel Occupancy Tax Revenue, Refunding, 5.625%, 11/15/19..   Aaa          3,052,188
  3,000,000  Brownsville, Utility System, Revenue, 6.25%, 9/1/14...............   Aaa          3,250,200
  2,550,000  Frisco, Independant School District Refunding, 5.75%, 8/15/17.....   Aaa          2,374,769
</TABLE>

- --------------------------------------------------------------------------------
8
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
                                                                                         August 31, 1999
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      National Bond Portfolio                              Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>                                                                               <C>       <C>
             Harris County:
$ 3,000,000    Health Facilities Development Corp, 5.50%, 6/1/13...............   Aaa       $  3,005,460
  5,035,000    Hospital District, Mortgage Revenue, 7.40%, 2/15/10.............   Aaa          5,782,798
  3,000,000  Lubbock, Housing Finance Corp., Single Family Mortgage Revenue,
               Ser. A, 8.00%, 10/1/21..........................................   AAA*         3,894,810
  3,000,000  Matagorda County, Navy District No 1, Revenue Refunding,
               Reliant Energy Project B, 5.95, 5/1/30..........................   Baa1         2,881,440
    800,000  Travis County, Health Facilities Development Corp., Hospital Revenue,
               Daughters of Charity, 5.90%, 11/15/07...........................   Aa             833,608
    190,000  Veterans Housing Assistance, Ser. B-4, 6.20%, 12/1/14.............   Aa1            192,451
                                                                                             -----------
                                                                                              25,267,724

             Utah (.8%)
             Housing Finance Agency, Single Family Mortgage:
    105,000    Ser. C-3, 7.55%, 7/1/23.........................................   AAA*           108,915
    310,000    Ser. D-3, 7.55%, 7/1/23.........................................   AAA*           321,833
  1,000,000  Water Finance Agency, Revenue, Pooled, Loan Financing Project,
               Ser. A, 5.40%, 10/1/24..........................................   Aaa            951,220
                                                                                             -----------
                                                                                               1,381,968

             Vermont (2.1%)
  4,000,000  Educational & Health Buildings, Finance Agency, Revenue,
               Middlebury College Project, 5.00%, 11/1/38......................   Aa3          3,452,080

             Virginia (4.0%)
  2,000,000  Hanover County, Industrial Development Authority,
               Memorial Regional Medical Center Project, 6.375%, 8/15/18.......   Aaa          2,186,960
  4,600,000  Pocahontas Parkway Association, Route 895,
               Connector Toll Road Revenue, Ser. A, 5.25%, 8/15/07.............   Baa3         4,576,264
                                                                                             -----------
                                                                                               6,763,224

             Washington (5.1%)
  5,000,000  Central Puget Sound, Regional Sales Tax & Motor Vehicle Excise
               Tax Reveune, 5.25%, 2/1/21......................................   Aaa          4,759,050
  1,000,000  Chelan County, Public Utilities District No. 001, Consolidated Revenue,
               Chelan Hydro Division I, Ser. A, 5.60%, 7/1/32..................   Aa3            968,860
  3,000,000  Snohomish County, Public Utilities District No. 001,
               Electric Revenue Refunding, 5.375%, 12/1/24.....................   Aaa          2,831,790
                                                                                             -----------
                                                                                               8,559,700
</TABLE>

- --------------------------------------------------------------------------------
                                                                               9
<PAGE>

The Value Line Tax Exempt Fund, Inc.

<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      National Bond Portfolio                              Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>                                                                               <C>       <C>
             Wisconsin (5.1%)
             Health and Educational Facilities Authority, Revenue:
               Aurora Health Care Inc.,
 $2,000,000      5.25%, 8/15/17................................................   Aaa       $  1,884,600
  4,000,000      Ser. A, 5.60%, 2/15/29........................................   A-*          3,568,400
             Housing and Economic Development Authority:
  3,000,000    Housing Revenue, Refunding, Ser C, 5.80%, 11/1/13...............   Aaa          3,059,310
                                                                                            ------------
                                                                                               8,512,310
             Wyoming (.4%)
    695,000  Green River, Sweetwater County, Joint Powers Water Board,
               Revenue Refunding Ser. B, 4.50%, 3/1/14.........................   Aaa            679,078
                                                                                            ------------

             TOTAL LONG-TERM MUNICIPAL SECURITIES  ............................              158,835,923

SHORT-TERM MUNICIPAL SECURITIES (5.6%)
  1,000,000  Brazos River Authority, Texas, Pollution Control Revenue, Refunding,
               Ser. A, 3.10%, 3/1/26...........................................   VMIG1-(1)    1,000,000
  1,300,000  Hammond Indiana, Pollution Control Revenue, Refunding,
               Amoco Oil Project, 2.95%, 2/1/22................................   VMIG1-(1)    1,300,000
  1,200,000  New York City, Municipal Water Finance Authority & Sewer Systems
               Revenue Ser. C, 2.80%, 6/15/23..................................   VMIG1-(1)    1,200,000
             New York State:
  3,000,000    Dormatory Authority Revenue Memorial Sloan, Ser. D, 3.10%, 7/1/19  VMIG1-(2)    3,000,000
  1,800,000    Local Government Assistance Corp. Ser. D, 3.10%, 4/1/25.........   VMIG1-(2)    1,800,000
  1,000,000  Sabine River Authority, Texas, Pollution Control Revenue,
               Refunding, Ser. A, 3.30%, 7/1/22................................   Aa2          1,000,000
                                                                                            ------------
             TOTAL SHORT-TERM MUNICIPAL SECURITIES  ...........................                9,300,000
                                                                                            ------------
             TOTAL MUNICIPAL SECURITIES (100.6%) (Cost $170,545,148) ..........              168,135,923
             EXCESS OF LIABILITIES OVER CASH
               AND OTHER ASSETS (-.6%) ........................................                 (972,445)
                                                                                            ------------
             NET ASSETS (100.0%) ..............................................             $167,163,478
                                                                                            ============
             NET ASSET VALUE, OFFERING AND REDEMPTION PRICE,
               PER SHARE OUTSTANDING ..........................................             $      10.22
                                                                                            ============
</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, 1999.



See Notes to Financial Statements

- --------------------------------------------------------------------------------
10
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
                                                                                         August 31, 1999
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      Money Market Portfolio                               Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>          <C>                                                                  <C>         <C>
SHORT-TERM MUNICIPAL SECURITIES (95.8%)

             Arizona (3.5%)
$   500,000  Maricopa County, Pollution Control Revenue, Refunding,
               Arizona Public Service Co., Ser B, 2.95%, 5/1/29................   P-1(1)      $  500,000

             District of Columbia (5.0%)
    700,000  General Obligation, Refunding, Ser. A-1, 3.05%, 10/1/07...........   VMIG-1(1)      700,000

             Illinois (7.1%)
    600,000  Southwestern Development Authority, Solid Waste Disposal Revenue,
               Shell Oil Co., Wood River Project, 3.05%, 8/1/21................   VMIG-1(1)      600,000
    405,000  Wabash County, Community United School District No. 348,
               4.25%, 12/1/99..................................................   Aaa            405,987
                                                                                              ----------
                                                                                               1,005,987

             Indiana (5.3%)
    750,000  Fort Wayne, Economic Development, Income Tax Revenue,
               3.10%, 12/1/99..................................................   Aaa            749,513

             Louisiana (4.2%)
    600,000  Saint Charles Parish, Pollution Control Revenue,
               Shell Oil Co. Project, Ser. A, 3.05%, 10/1/22...................   VMIG-1(1)      600,000

             Michigan (5.0%)
    700,000  Strategic Fund, Pollution Control Revenue, Refunding,
               Consumers Power Project, Ser. A, 2.95%, 4/15/18.................   P-1(1)         700,000

             Minnesota (5.0%)
    700,000  Northern Municipal Power Agency, Electric System Revenue,
               Refunding, Ser A, 7.25%, 1/1/00.................................   Aaa            713,755

             New York (13.7%)
    330,000  Franklin County, Industrial Development Agency, Civic Facility Revenue,
               Alice Hyde Hospital Association Project, 4.00%, 10/1/99.........    AA*           330,132
             New York City:
    200,000    General Obligations, Subser. A-5, 2.80%, 8/1/15.................   VMIG-1(1)      200,000
    700,000    Municipal Water Finance Authority, Water & Sewer System,
                 Revenue, Ser C, 2.80%, 6/15/23................................   VMIG-1(1)      700,000
    700,000  New York State, Housing Finance Agency, Revenue,
               HSG-70 Battery Place, ser A, 3.20%, 11/1/31.....................   VMIG-1(2)      700,000
                                                                                              ----------
                                                                                               1,930,132
</TABLE>

- --------------------------------------------------------------------------------
                                                                              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>
             North Carolina (5.0%)
  $ 700,000  Municipal Power Agency, No 1, Catawba Electric, Revenue,
               Refunding, 5.20%, 1/1/00........................................   Aaa         $  704,418

             Pennsylvania (2.1%)
    300,000  Chester County, General Obligation, 4.95%, 12/15/99...............   Aa2            300,139

             Texas (19.7%)
    290,000  Coastal Bend, Health Facilities Development Corp.,
               Incarnate World Health System, Revenue, Ser. A, 3.25%, 11/15/99.   Aaa            290,000
             Harris County, Health Facilities Development Corp. Revenue:
    600,000    Special Facilities, Texas Medical Center Project, 3.10%, 2/15/22   VMIG-1(1)      600,000
    600,000    Texas Childrens Hospital, 3.30%, 10/1/29........................   VMIG-1(2)      600,000
    700,000  Sabine River Authority, Pollution Control Revenue,
               Texas Utilities Project, Ser. A, 3.30%, 7/1/22..................   Aaa(2)         700,000
    600,000  Trinity River Authority, Pollution Control Revenue,
               Texas Utilities Electric Co. Project, Ser. A, 3.10%, 3/1/26.....    VMIG-1(1)     600,000
                                                                                              ----------
                                                                                               2,790,000

             Utah (3.5%)
    500,000  Emery County, Pollution Control Revenue, Refunding,
               Pacificorp Project, 3.00%, 11/1/24..............................   VMIG-1(1)      500,000

             Washington (8.1%)
    250,000  Aberdeen, Special Revenue, Stafford Creek Correction
               Center Project, 4.00%, 11/1/99..................................   Aaa            250,325
    500,000  Health Care Facilities Authority, Revenue,
               Empire Health Services, Spokane, 5.00%, 11/1/99.................   Aaa            501,449
    400,000  Higher Education Facilities Authority, Revenue, Refunding,
               Whitworth College Project, 3.25%, 10/1/99.......................   Aaa            400,000
                                                                                              ----------
                                                                                               1,151,774

             Wisconsin (5.0%)
    700,000  La Crosse Pollution Control Revenue, Refunding Dairyland
               Power Coop Ser. B, 2.80%, 2/1/15................................   Aaa(1)         700,000
</TABLE>


- --------------------------------------------------------------------------------
12
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
                                                                                         August 31, 1999
- --------------------------------------------------------------------------------------------------------
 Principal
  Amount                      Money Market Portfolio                               Rating        Value
- --------------------------------------------------------------------------------------------------------
<S>          <C>                                                                  <C>        <C>

             Wyoming (3.5%)
$   500,000  Lincoln County, Pollution Control Revenue, Exxon Project,
               Ser. C, 2.90%, 7/1/17...........................................   Aaa(1)     $   500,000
                                                                                             -----------

             TOTAL SHORT-TERM MUNICIPAL SECURITIES (95.8%)
               (Cost $13,545,718) .............................................               13,545,718

             EXCESS OF CASH AND OTHER ASSETS
               OVER LIABILITIES (4.2%) ........................................                  600,145
                                                                                             -----------

             NET ASSETS (100.0%) ..............................................              $14,145,863
                                                                                             ===========

             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, 1999.



See Notes to Financial Statements.


- --------------------------------------------------------------------------------
                                                                              13
<PAGE>

The Value Line Tax Exempt Fund, Inc.

Statement of Assets and Liabilities
at August 31, 1999 (unaudited)
- --------------------------------------------------------------------------------

                                                              Portfolio
                                                      -------------------------
                                                       National       Money
                                                         Bond         Market
                                                      -------------------------
                                                         (Dollars in thousands
                                                        except per share amount)

Assets:
Investment securities, at value
  (Cost $170,545 and amortized
  cost $13,546) ................................      $ 168,136       $  13,546
Cash ...........................................          1,675              53
Receivable for securities sold .................          4,036             700
Interest receivable ............................          1,890              85
Receivable for capital shares sold .............              1              35
                                                      ---------       ---------
    Total Assets ...............................        175,738          14,419
                                                      ---------       ---------
Liabilities:
Payable for securities purchased ...............          8,111              --
Dividends payable to shareholders ..............            231               1
Payable for capital shares
  repurchased ..................................             57             210
Accrued expenses:
  Advisory fee .................................             71               6
  Other ........................................            105              56
                                                      ---------       ---------
    Total Liabilities ..........................          8,575             273
                                                      ---------       ---------
Net Assets .....................................      $ 167,163       $  14,146
                                                      =========       =========
Net Assets:
Capital stock, at $.01 par value
  (Authorized  65,000,000 shares
  and 125,000,000 shares,
  respectively; outstanding 16,353,394
  shares and 14,183,688 shares,
  respectively) ................................      $     164       $     142
Additional paid-in capital .....................        171,093          14,041
Accumulated net realized loss
  on investments ...............................         (1,685)            (37)
Unrealized net depreciation of
  investments ..................................         (2,409)             --
                                                      ---------       ---------
Net Assets .....................................      $ 167,163       $  14,146
                                                      =========       =========
Net Asset Value, Offering and
  Redemption Price per
  Outstanding Share ............................      $   10.22       $    1.00
                                                      =========       =========


Statement of Operations
for the Six Months Ended August 31, 1999 (unaudited)
- --------------------------------------------------------------------------------

                                                              Portfolio
                                                      -------------------------
                                                       National       Money
                                                         Bond         Market
                                                      -------------------------
                                                               Dollars
                                                            (in thousands)

Investment Income:
Interest income ....................................    $   4,494     $     256
                                                        ---------     ---------
Expenses:
Advisory fee .......................................          440            38
Transfer agent fees ................................           27            10
Auditing and legal fees ............................           23            16
Printing and stationery ............................           22             5
Custodian fees .....................................           19             2
Postage ............................................            6             2
Registration and filing fees .......................            6             5
Directors' fees and expenses .......................            4             4
Other ..............................................           14            12
                                                        ---------     ---------
    Total expenses before custody
      credits ......................................          561            94
    Less: custody credits ..........................          (11)           (1)
                                                        ---------     ---------
    Net Expenses ...................................          550            93
                                                        ---------     ---------

Net Investment Income ..............................        3,944           163
                                                        ---------     ---------

Net Realized and Unrealized Gain
  (Loss) on Investments:
    Net Realized (Loss) ............................       (2,609)           --
    Change in Unrealized
      Appreciation (Depreciation) ..................       (6,874)           --
                                                        ---------     ---------

Net Realized (Loss) and
  Change in Unrealized
  Appreciation (Depreciation)
  on Investments ...................................       (9,483)           --
                                                        ---------     ---------

Net (Decrease) Increase in
  Net Assets from Operations .......................    $  (5,539)    $     163
                                                        =========     =========


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, 1999 (unaudited),
and for the Year Ended February 28, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                             National Bond Portfolio      Money Market Portfolio
                                                         ----------------------------------------------------------
                                                            Six Months                   Six Months
                                                              Ended        Year Ended      Ended        Year Ended
                                                         August 31, 1999  February 28, August 31, 1999 February 28,
                                                           (unaudited)        1999      (unaudited)        1999
                                                         ----------------------------------------------------------
                                                                            (Dollars in thousands)
<S>                                                        <C>            <C>            <C>            <C>
Operations:
  Net investment income ..............................     $   3,944      $   8,718      $     163      $     384
  Net realized (loss) gain on investments ............        (2,609)         3,136             --             (6)
  Change in net unrealized appreciation (depreciation)        (6,874)        (2,615)            --             --
                                                         ----------------------------------------------------------
  Net decrease/increase in net assets from operations         (5,539)         9,239            163            378
                                                         ----------------------------------------------------------

Distributions to Shareholders:
  Net investment income ..............................        (3,992)        (8,669)          (164)          (384)
  Net realized gains .................................            --         (4,526)            --             --
                                                         ----------------------------------------------------------
  Net decrease in net assets from distributions ......        (3,992)       (13,195)          (164)          (384)
                                                         ----------------------------------------------------------

Capital Share Transactions:
  Net proceeds from sale of shares ...................         6,548         12,460          3,316          8,084
  Net proceeds from reinvestment of distributions
    to shareholders ..................................         2,598          8,910            164            384
  Cost of shares repurchased .........................       (14,469)       (23,506)        (4,589)        (9,964)
                                                         ----------------------------------------------------------
  Net decrease in net assets from capital
    share transactions ...............................        (5,323)        (2,136)        (1,109)        (1,496)
                                                         ----------------------------------------------------------

Total Decrease in Net Assets .........................       (14,854)        (6,092)        (1,110)        (1,502)

Net Assets:
  Beginning of period ................................       182,017        188,109         15,256         16,758
                                                         ----------------------------------------------------------
  End of period ......................................     $ 167,163      $ 182,017      $  14,146      $  15,256
                                                         ==========================================================
Undistributed Net Investment
  Income at end of period ............................     $      --      $      48      $      --      $       1
                                                         =========================================================
</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 National Bond and Money Market
Portfolios.  The primary investment  objective of the National Bond 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  Valuation:  National Bond 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 judgment 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 dividends 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 National Bond 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  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


- --------------------------------------------------------------------------------
16
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.


                                                                 August 31, 1999
- --------------------------------------------------------------------------------

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,  in accordance with federal  income-tax
regulations, is earned from settlement date and recognized on the accrual basis.
Additionally,  the Fund  recognizes  market  discount  when the  securities  are
disposed.  Securities purchased or sold on 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:

                                                        National Bond Portfolio
                                                       -------------------------
                                                       Six Months
                                                          Ended        Year
                                                        August 31,     Ended
                                                          1999      February 28,
                                                       (unaudited)      1999
                                                       -------------------------
                                                             (in thousands)

Shares sold ..................................             621            1,137
Shares issued to shareholders in
  reinvestment of distributions ..............             246              815
                                                       -------------------------
                                                           867            1,952
Shares repurchased ...........................          (1,365)          (2,142)
                                                       -------------------------
Net decrease .................................            (498)            (190)
                                                       =========================

                                                        Money Market Portfolio
                                                       -------------------------
                                                       Six Months
                                                          Ended        Year
                                                        August 31,     Ended
                                                          1999      February 28,
                                                       (unaudited)      1999
                                                       -------------------------
                                                             (in thousands)

Shares sold ..................................           3,316            8,084
Shares issued to shareholders in
  reinvestment of distributions ..............             164              384
                                                       -------------------------
                                                         3,480            8,468
Shares repurchased ...........................          (4,589)          (9,964)
                                                       -------------------------
Net decrease .................................          (1,109)          (1,496)
                                                       =========================

3.   Purchases and Sales of Securities

Purchases and sales of municipal securities were as follows:

                                                         National Bond Portfolio
                                                         -----------------------
                                                            Six Months Ended
                                                             August 31, 1999
                                                               (unaudited)
                                                            ----------------
                                                             (in thousands)
PURCHASES:
Long-term obligations ..................................      $    191,088
Short-term obligations .................................            26,600
                                                              ------------
                                                              $    217,688
                                                              ============
MATURITIES OR SALES:
Long-term obligations ..................................      $    189,248
Short-term obligations .................................            24,300
                                                              ------------
                                                              $    213,548
                                                              ============

                                                              Money Market
                                                               Portfolio
                                                         -----------------------
                                                            Six Months Ended
                                                             August 31, 1999
                                                               (unaudited)
                                                            ----------------
                                                             (in thousands)
Purchases:
Municipal short-term obligations ........................     $      8,875
                                                              ============
maturities or Sales:
Municipal short-term obligations ........................     $     10,370
                                                              ============


- --------------------------------------------------------------------------------
                                                                              17
<PAGE>

The Value Line Tax Exempt Fund, Inc.


Notes to Financial Statements (unaudited)                        August 31, 1999
- --------------------------------------------------------------------------------

At August 31, 1999,  the aggregate  cost of  investments  for federal income tax
purposes was  $170,545,148  for the National Bond Portfolio and  $13,545,718 for
the Money Market Portfolio.

The aggregate  appreciation and depreciation of investments in the National Bond
Portfolio at August 31, 1999,  based on a comparison  of  investment  values and
their costs for federal  income tax purposes,  was  $1,551,229  and  $3,960,454,
respectively,  resulting in a net unrealized  depreciation of $2,409,225.  There
was no unrealized appreciation or depreciation in the Money Market Portfolio.

For federal  income tax purposes the Money Market  Portfolio  had a capital loss
carryover  at February  28, 1999,  of $37,266,  of which  $27,649 will expire in
2000,  $998 in 2004,  $1,285 in 2005,  $2,067 in 2006 and $5,267 in 2007. 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 $439,819 and $38,041 was paid or payable by the National Bond
Portfolio and the Money Market Portfolio, respectively, to Value Line, Inc. (the
"Adviser")  for the six months ended  August 31, 1999.  This was computed at the
annual rate of .50 of 1% of the average daily net asset values of the portfolios
of the Fund  during  the  period.  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  costs  and  expenses  of its
organization and operation.

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, 1999, the Adviser and/or affiliated companies owned 290,321 shares
of  the  National  Bond  Portfolio  common  shares,  representing  1.78%  of the
outstanding  shares.  In addition,  certain  officers and  directors of the Fund
owned 346  shares  of the  National  Bond  Portfolio,  representing  .00% of the
outstanding shares and 1,404 shares of the Money Market Portfolio,  representing
 .01% of the outstanding shares.


- --------------------------------------------------------------------------------
18
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.

Financial Highlights
- --------------------------------------------------------------------------------

Selected data for a share of capital stock outstanding throughout each period:

<TABLE>
<CAPTION>
                                                                                  NATIONAL BOND PORTFOLIO
                                          For the Six
                                          Months Ended                     Years Ended on Last Day of February,
                                         August 31, 1999 ------------------------------------------------------------------------
                                           (unaudited)      1999             1998            1997             1996         1995
                                         ----------------------------------------------------------------------------------------
<S>                                      <C>             <C>              <C>             <C>              <C>           <C>
Net asset value, beginning
  of period .........................      $10.80          $11.04           $10.78          $10.82           $10.40        $10.97
                                         ----------------------------------------------------------------------------------------
  Income from investment
    operations:
    Net investment income ...........         .24             .52              .54             .55              .55           .57
    Net losses or gains on securities
      (both realized and unrealized)         (.58)            .03              .36            (.04)             .42          (.53)
                                         ----------------------------------------------------------------------------------------
    Total from investment
      operations ....................        (.34)            .55              .90             .51              .97           .04
                                         ----------------------------------------------------------------------------------------
  Less distributions:
    Dividends from net investment
      income ........................        (.24)           (.52)            (.54)           (.55)            (.55)         (.57)
    Distributions from capital gains           --            (.27)            (.10)             --               --          (.04)
                                         ----------------------------------------------------------------------------------------
      Total distributions ...........        (.24)           (.79)            (.64)           (.55)            (.55)         (.61)
                                         ----------------------------------------------------------------------------------------
Net asset value, end of period ......      $10.22          $10.80           $11.04          $10.78           $10.82        $10.40
                                         ========================================================================================
Total return ........................       (2.86%)+       4.88 %             8.56%           4.86%            9.55%          .64%
                                         ========================================================================================

Ratios/Supplemental Data
Net assets, end of period
  (in thousands) ....................    $167,163        $182,017         $188,109        $193,641         $222,760      $241,467
Ratio of expenses to
  average net assets ................         .64%(2)*        .63%(2)*         .63%(1)         .60%(1)          .62%          .61%
Ratio of net investment income to
  average net assets ................        4.47%*          4.71%            4.98%           5.13%            5.22%         5.54%
Portfolio turnover rate .............         114%+           192%             119%             73%              95%           60%
</TABLE>

 +  Not annualized, for six month period only.
 *  Annualized.
(1) Before offset of custody credits.
(2) Ratio reflects expenses grossed up for custody credit arrangement. The ratio
    of expenses net of custody  credits  would have been .63% for the six months
    ended August 31, 1999 and .62% for the year ended February 28, 1999.





See Notes to Financial Statements

- --------------------------------------------------------------------------------
                                                                              19
<PAGE>

The Value Line Tax Exempt Fund, Inc.

Financial 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, 1999 ------------------------------------------------------------------------
                                           (unaudited)      1999             1998            1997             1996         1995
                                         ----------------------------------------------------------------------------------------
<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 .......          .01               .02              .03             .03              .03           .02
                                         ----------------------------------------------------------------------------------------
  Less distributions:
    Dividends from net investment
      income ....................         (.01)             (.02)            (0.3)           (.03)            (.03)         (.02)
                                         ----------------------------------------------------------------------------------------
Net asset value, end of period ..        $1.00             $1.00            $1.00           $1.00            $1.00         $1.00
                                         ========================================================================================
Total return ....................         1.41%+            2.39%            2.65%           2.56%            2.92%         2.22%
                                         ========================================================================================

Ratios/Supplemental Data
Net assets, end of period
  (in thousands) ................      $14,146           $15,256          $16,758         $19,688          $21,777       $25,681
Ratio of expenses to
  average net assets ............         1.24%(2)*         1.18%(2)         1.03%(1)        1.00%(1)         1.01%          .89%
Ratio of net investment income to
  average net assets ............         2.13%*            2.38%            2.63%           2.54%            2.89%         2.17%
</TABLE>

 +  Not annualized, for six month period only.
 *  Annualized.
(1) Before offset of custody credits.
(2) Ratio reflects expenses grossed up for custody credit arrangement. The ratio
    of expenses net of custody  credits would have been 1.22% for the six months
    ended August 31, 1999 and 1.16% for the year ended February 28, 1999.






See Notes to Financial Statements


- --------------------------------------------------------------------------------
20
<PAGE>

                                            The Value Line Tax Exempt Fund, Inc.

                          Other Information (unaudited)
- --------------------------------------------------------------------------------
Year 2000. Like other mutual funds, the Fund could be adversely  affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate  date-related  information and data from and after January
1, 2000.  This is  commonly  known as the "Year 2000  Problem."  The  Adviser is
taking steps that it believes are  reasonably  designed to address the Year 2000
Problem  with  respect  to the  computer  systems  that  it uses  and to  obtain
satisfactory  assurances  that  comparable  steps are being  taken by the Fund's
other major service providers.  At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.

The Year 2000  Problem is  expected  to impact  corporations,  which may include
issuers of portfolio  securities held by the Fund, to varying degrees based upon
various  factors,  including,  but not  limited to, the  corporation's  industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.



- --------------------------------------------------------------------------------
                                                                              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>

The Value Line Tax Exempt Fund, Inc.

                         The Value Line Family of Funds
- --------------------------------------------------------------------------------

1950--The Value Line Fund seeks long-term growth of capital. Current income is a
secondary objective.

1952--Value  Line  Income and Growth  Fund's  primary  investment  objective  is
income,  as high and dependable as is consistent with reasonable  risk.  Capital
growth to increase total return is a secondary objective.

1956--The Value Line Special  Situations Fund seeks long-term growth of capital.
No consideration is given to current income in the choice of investments.

1972--Value  Line Leveraged  Growth  Investors' sole investment  objective is to
realize capital growth.

1979--The  Value Line Cash Fund, a money market fund,  seeks to secure as high a
level  of  current  income  as is  consistent  with  maintaining  liquidity  and
preserving capital.

1981--Value  Line U.S.  Government  Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be  invested  in  securities  issued or  guaranteed  by the U.S.
Government and its agencies and instrumentalities.

1983--Value Line Centurion Fund* seeks long-term growth of capital.

1984--The Value Line Tax Exempt Fund seeks to provide investors with the maximum
income exempt from federal  income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: The Money Market Portfolio
and The National Bond Portfolio.

1985--Value  Line  Convertible  Fund seeks high  current  income  together  with
capital  appreciation  primarily from convertible  securities  ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.

1986--Value Line Aggressive Income Trust seeks to maximize current income.

1987--Value  Line New York Tax Exempt Trust seeks to provide New York  taxpayers
with the maximum  income  exempt from New York State,  New York City and federal
income taxes while avoiding undue risk to principal.

1987--Value Line Strategic Asset Management  Trust* seeks to achive a high total
investment return consistent with reasonable risk.

1993--Value  Line  Small-Cap  Growth Fund invests  primarily in common stocks or
securities  convertible  into common  stock,  with its primary  objective  being
long-term growth of capital.

1993--Value  Line Asset  Allocation  Fund seeks  high total  investment  return,
consistent  with  reasonable  risk. The Fund invests in stocks,  bonds and money
market instruments utilizing quantitative modeling to determine the asset mix.

1995--Value  Line U.S.  Multinational  Company  Fund's  investment  objective is
maximum total return. It invests primarily in securities of U.S.  companies that
have significant sales from international operations.

*  Only  available  through the  purchase of Guardian  Investor,  a tax deferred
   variable annuity, or ValuePlus, a variable life insurance policy.

For more  complete  information  about any of the Value  Line  Funds,  including
charges and expenses,  send for a prospectus from Value Line  Securities,  Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call  1-800-223-0818,  24
hours  a day,  7  days a  week,  or  visit  us at  www.valueline.com.  Read  the
prospectus carefully before you invest or send money.


- --------------------------------------------------------------------------------
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           PricewaterhouseCoopers LLP
ACCOUNTANTS           1177 Avenue of the Americas
                      New York, NY 10036-2798

LEGAL COUNSEL         Peter D. Lowenstein, Esq.
                      Two Greenwich Plaza, Suite 100
                      Greenwich, CT 06830

BOARD OF              Jean Bernhard Buttner
Directors             John W. Chandler
                      David H. Porter
                      Paul Craig Roberts
                      Nancy-Beth Sheerr

OFFICERS              Jean Bernhard Buttner
                      Chairman and President
                      Charles Heebner
                      Vice President
                      Raymond S. Cowen
                      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).

                                                                          507373



© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission