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SEMI-ANNUAL REPORT
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August 31, 1999
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]
The
Value Line
Tax Exempt
Fund, Inc.
[LOGO]
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VALUE LINE
No-Load
Mutual
Funds
<PAGE>
The Value Line Tax Exempt Fund, Inc.
To Our Value Line
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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,
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2
<PAGE>
The Value Line Tax Exempt Fund, Inc.
Tax Exempt Fund Shareholders
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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.
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3
<PAGE>
The Value Line Tax Exempt Fund, Inc.
To Our Value Line Tax Exempt Fund Shareholders
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Performance Data:*
NATIONAL BOND PORTFOLIO
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
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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
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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.
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4
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) August 31, 1999
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Principal
Amount National Bond Portfolio Rating Value
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<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
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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
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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
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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
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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>
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5
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
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Principal
Amount National Bond Portfolio Rating Value
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<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
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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
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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>
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6
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
August 31, 1999
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Principal
Amount National Bond Portfolio Rating Value
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<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
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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
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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
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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>
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7
<PAGE>
The Value Line Tax Exempt Fund, Inc.
<TABLE>
<CAPTION>
Schedule of Investments (unaudited)
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Principal
Amount National Bond Portfolio Rating Value
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<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
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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
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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>
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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
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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
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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
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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
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8,559,700
</TABLE>
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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
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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
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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
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TOTAL SHORT-TERM MUNICIPAL SECURITIES ........................... 9,300,000
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TOTAL MUNICIPAL SECURITIES (100.6%) (Cost $170,545,148) .......... 168,135,923
EXCESS OF LIABILITIES OVER CASH
AND OTHER ASSETS (-.6%) ........................................ (972,445)
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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
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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
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1,930,132
</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>
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
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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.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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
