<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 Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company c/o NFDS
P.O. Box 419729, Kansas City, MO 64141-6729
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas, New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS
Jean Bernhard Buttner Leo R. Futia
Charles E. Reed Paul Craig Roberts
John W. Chandler
OFFICERS
Jean Bernhard Buttner F. Barry Nelson
CHAIRMAN AND PRESIDENT VICE PRESIDENT
David T. Henigson
VICE PRESIDENT, SECRETARY/TREASURER
Richard Cunniffe
VICE PRESIDENT
Jack M. Houston Stephen La Rosa
ASSISTANT ASSISTANT
SECRETARY/TREASURER SECRETARY/TREASURER
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and, accordingly, they
do not express an opinion thereon.
This unaudited report is issued for the 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). VLF506100
-----------------------------
SEMI-ANNUAL REPORT
OCTOBER 31, 1995
---------------------------
VALUE LINE
CONVERTIBLE
FUND, INC.
[LOGO]
VALUE LINE
MUTUAL FUNDS
<PAGE>
[LOGO] TO OUR VALUE LINE CONVERTIBLE FUND, INC. SHAREHOLDERS
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
We are pleased to report that the performance of the Value Line Convertible
Fund, Inc. for the 12 months through October 31, 1995, was excellent. The Fund's
total return was 14.29%, in the top third of 35 convertible funds tracked by
Lipper Analytical Services.*
In accordance with its charter, your Fund has obtained superior returns from
traditional convertible bonds and preferred stocks that can be exchanged, at the
holder's discretion, for shares of common stock. Some convertible funds, in
contrast, have invested directly in common stocks, which inherently carry more
risk than convertibles. Other funds have taken positions in securities with
mandatory conversion features, such as Automatically Convertible Equity
Securities (ACES), Dividend Enhanced Convertible Stock (DECS), and Preferred
Equity Redemption Cumulative Stock (PERCS), which lack the favorable risk/reward
characteristics of traditional convertibles.
Bull markets in both fixed-income securities and equities have buoyed the prices
of convertible securities in 1995. The returns from your Fund have exceeded
those from "straight" (i.e., non-convertible) bonds and preferred stocks.
As of October 31, 1995, your Fund was virtually fully invested in convertibles:
92.7% (with most of the remainder in cash and cash equivalents). The cash
position was as much as 30% at times during the past year, following market
surges when we took advantage of opportunities to weed out issues that no longer
appeared attractive.
In terms of yield and credit risk, your Fund's profile is excellent. The yield
remains similar to that of the convertible market as a whole and is much higher
than that of the average convertible fund, indicating that the portfolio as a
whole is tilted toward neither equity nor bond sensitivity. Of rated issues in
the Fund, the average credit rating of BB is nearly investment grade. This level
of credit quality is similar to that of convertibles in general, given that few
large corporations with top creditworthiness issue these securities.
In making investment decisions, your Fund continues to rely on the Value Line
Timeliness-TM- Ranking System, introduced in 1965 as a feature of THE VALUE LINE
INVESTMENT SURVEY. Of the 1,700 stocks covered, more than 300 have convertibles
outstanding. In addition, we are now using the new Performance-TM- Ranking
System, which was developed for the "Expanded Edition" of THE VALUE LINE
INVESTMENT SURVEY. That new publication reviews 1,800 mostly
smaller-capitalization stocks, over 100 of which have convertibles. The
Timeliness-TM- and Performance-TM- Ranks of the underlying common stocks are
incorporated into the Value Line Convertible Ranking System, which identifies
attractively priced convertibles that can be exchanged for favorably ranked
stocks.
Looking ahead, we are essentially neutral toward both stocks and bonds. We take
comfort, however, from the yields of convertibles, which suggest higher total
* THE TOTAL RETURN OF 14.29% FOR THE VALUE LINE CONVERTIBLE FUND, INC. FOR
THE 12 MONTHS ENDED OCTOBER 31, 1995, WAS 10TH HIGHEST AMONG 35 CONVERTIBLE
FUNDS TRACKED BY LIPPER ANALYTICAL SERVICES. FOR THE FIVE YEARS THROUGH
SEPTEMBER 30, 1995, THE FUND'S COMPOUNDED ANNUAL RETURN OF 14.23% WAS 12TH AMONG
19 CONVERTIBLE FUNDS, ACCORDING TO LIPPER. OVER THE 10-YEAR PERIOD THROUGH
SEPTEMBER 30, 1995, THE COMPOUNDED RETURN OF 11.03% ACHIEVED BY THE FUND WAS
FIFTH AMONG FIVE CONVERTIBLE FUNDS TRACKED BY LIPPER FOR THE FULL 10 YEARS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RETURNS; THE INVESTMENT RETURN AND
THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE; AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE VALUE LINE
CONVERTIBLE FUND, INC. CHARGES NEITHER SALES NOR REDEMPTION FEES.
2
<PAGE>
returns from this sector than from equities if the stock market weakens.
We thank you for your interest in the Value Line Convertible Fund, and we look
forward to serving your investment needs in the future.
Yours truly
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
December 8, 1995
PERFORMANCE DATA*:
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
-------------- ---------------------
1 year ended
9/30/95. . . . . . . 15.55% $ 11,555
5 years ended
9/30/95. . . . . . . 14.23% $ 19,450
10 years ended
9/30/95. . . . . . . 11.03% $ 28,480
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN 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.
- --------------------------------------------------------------------------------
ECONOMIC OBSERVATIONS
Most signs now point to a slowdown in the rate of economic growth over the next
several months. Several key industrial indicators are now trending lower, and
this is causing manufacturers to become more cautious in their outlook. At the
same time, consumers, burdened with a heavy debt load, are becoming more
selective in their purchasing plans. Not surprisingly, retailers are not
stocking their shelves the way they did earlier in the business expansion.
Taken together, these developments suggest that the economy, which grew by
better than 4% in the third quarter, will expand by little more than half that
rate in the final three months of 1995 and the opening quarter of 1996.
Moreover, we think the economy will retain this calm, orderly growth character
throughout 1996. Perhaps the most distinguishing characteristic of the
five-year-old business expansion has been the notable lack of excess on the
growth side. Thus, while the automobile industry, the housing sector, and the
key industrial markets have all participated in the advance, none has veered out
of control. As a result, potentially inflationary labor and raw-materials
shortages have not developed. Hence, the Federal Reserve, which has had to
respond to higher prices in the past by clamping down hard on the monetary
brakes, has been able to be more gentle this time around.
On balance, we think little will change over the next several quarters.
Specifically, we would look for growth and inflation to hold within a comforting
2%-3% band. We also see interest rates remaining near current levels, with a
further slight decline being perhaps more likely than an increase. Finally, we
expect corporate profits to edge higher, on balance, over the next 12 to 15
months. Altogether, this scenario should not presage troubling times for
equity- or fixed-income-market participants in the months ahead, nor should it
lull investors into thinking future gains will come easily.
3
<PAGE>
VALUE LINE CONVERTIBLE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) OCTOBER 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS &
NOTES (70.9%)
<C> <S> <C>
AIR TRANSPORT (4.5%)
$ 500,000 AMR Corp. 6 1/8%, 11/1/24. . . . . . . . . $ 490,625
1,000,000 Air Express International
Corp. 6%, 1/15/03. . . . . . . . . . . . 1,030,000
1,000,000 Delta Air Lines Inc. 3.23%,
6/15/03. . . . . . . . . . . . . . . . . 881,250
----------
2,401,875
BANK (2.8%)
500,000 Banco De Galicia Y
Buenos Aires S.A. 7%, 8/1/02 . . . . . . 403,750
1,000,000 Fifth Third Bancorp 4 1/4%
1/15/98. . . . . . . . . . . . . . . . . 1,066,250
----------
1,470,000
BROADCASTING/CABLE
TV (1.5%)
750,000 Scandinavian Broadcasting
Systems S.A. 7.25%, 8/1/05 . . . . . . . . 801,562
BUILDING & CONTRUCTION (1.5%)
1,500,000 Empresas ICA Sociedad
Controlodora S.A. de C.V.
5%, 3/15/04 . . . . . . . . . . . . . 802,500
COMPUTER AND
PERIPHERALS (0.9%)
500,000 Conner Peripherals, Inc.
6 1/2%, 3/1/02 . . . . . . . . . . . . . . 486,875
COMPUTER SOFTWARE
& SERVICES (8.1%)
4,500,000 Automatic Data Processing,
Inc. zero coupon, 2/20/12. . . . . . . . 2,143,125
250,000 C-Cube Microsystems, Inc.
5 7/8%, 11/1/05. . . . . . . . . . . . . 310,313
2,250,000 Softkey International,
Inc. 5 1/2%, 11/1/00*. . . . . . . . . . 1,890,000
----------
4,343,438
DIVERSIFIED COMPANIES (3.7%)
1,360,000 Thermo Electron Corp. 5%, 4/15/01. . . . . 1,975,400
DRUG (0.9%)
$ 500,000 IVAX Corp. 6 1/2%, 11/15/01. . . . . . . . $ 492,500
ELECTRICAL EQUIPMENT (1.7%)
1,000,000 Magnetek, Inc. 8%, 9/15/01 . . . . . . . . 930,000
ENVIRONMENTAL (1.0%)
500,000 United States Filter Corp. 6%,
9/15/05* . . . . . . . . . . . . . . . . 527,500
HOTEL/GAMING (0.9%)
500,000 Argosy Gaming Corp. 12%, 6/1/01. . . . . . 491,250
INDUSTRIAL SERVICES (1.0%)
500,000 Career Horizons Inc. 7%, 11/1/02*. . . . . 507,500
INSURANCE-DIVERSIFIED (4.4%)
1,500,000 AEGON N.V. 4 3/4%, 11/1/04 . . . . . . . . 2,011,875
1,000,000 Mutual Risk Management Ltd.
zero coupon, 10/30/15* . . . . . . . . . 350,000
----------
2,361,875
MACHINERY (5.1%)
1,000,000 Albany International Corp.
5 1/4%, 3/15/02. . . . . . . . . . . . . 917,500
1,450,000 Raymond Corp. 6 1/2%,
12/15/03 . . . . . . . . . . . . . . . . 1,816,125
----------
2,733,625
MEDICAL SUPPLIES (1.2%)
500,000 AMSCO International, Inc.
6 1/2%, 10/15/02 . . . . . . . . . . . . 477,500
150,000 Bindley Western Industries,
Inc. 6 1/2%, 10/1/02 . . . . . . . . . . 153,375
----------
630,875
METALS AND
MINING-DIVERSIFIED (0.7%)
500,000 Agnico-Eagle Mines Ltd.
3 1/2%, 1/27/04. . . . . . . . . . . . . 383,750
OFFICE EQUIPMENT AND
SUPPLIES (1.0%)
500,000 Staples, Inc. 4 1/2%, 10/1/00* . . . . . . 508,750
4
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
PAPER AND
FOREST PRODUCTS (1.0%)
$ 500,000 Sappi Ltd. 7 1/2%, 8/1/02. . . . . . . . . $ 508,125
PETROLEUM-INTEGRATED (1.8%)
1,000,000 USX-Marathon Group 7%, 6/15/17 . . . . . . 937,500
PRECISION INSTRUMENTS (1.3%)
500,000 Thermo Instrument Systems, Inc.
3 3/4%, 9/15/00. . . . . . . . . . . . . 680,000
REIT (4.8%)
500,000 Camden Property Trust
7.33%, 4/1/01. . . . . . . . . . . . . . 473,125
1,500,000 Haagan (Alexander) Properties
Inc. 7 1/2%, 1/15/01 . . . . . . . . . . 1,237,500
1,000,000 Malan Realty Investors, Inc.
9 1/2%, 7/15/04. . . . . . . . . . . . . 848,750
----------
2,559,375
RECREATION (4.2%)
2,125,000 Coleman Worldwide Corp.
zero coupon, 5/27/13 . . . . . . . . . . 642,812
500,000 Sports & Recreation, Inc.
4 1/4%, 11/1/00. . . . . . . . . . . . . 336,250
1,233,700 Time Warner, Inc. 8 3/4%
1/10/15. . . . . . . . . . . . . . . . . 1,283,048
----------
2,262,110
RETAIL-SPECIAL LINES (4.4%)
500,000 General Host Corp. 8%,
2/15/02 Sub Nt. Conv.. . . . . . . . . . 460,625
700,000 Pier 1 Imports, Inc. 6 7/8%, 4/1/02. . . . 719,250
1,250,000 Waban, Inc. 6 1/2%, 7/1/02 . . . . . . . . 1,171,875
----------
2,351,750
RETAIL STORE (3.8%)
1,050,000 Carter Hawley Hale Stores, Inc.
6 1/4%, 12/31/00 . . . . . . . . . . . . 1,044,750
500,000 Federated Department Stores,
Inc. 9.72%, 2/15/04. . . . . . . . . . . 500,000
500,000 Federated Department Stores,
Inc. 5%, 10/1/03 . . . . . . . . . . . . 492,500
----------
2,037,250
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OR SHARES VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
SECURITIES BROKERAGE (2.6%)
$1,450,000 Waterhouse Investor Services,
Inc. 6%,12/15/03 . . . . . . . . . . . . $ 1,382,937
SEMICONDUCTOR (5.5%)
100,000 Integrated Device Technology, Inc.
5 1/2%, 6/1/02 . . . . . . . . . . . . . 98,000
1,750,000 Motorola, Inc. zero coupon, 9/27/13. . . . 1,406,563
500,000 National Semiconductor Corp.
6 1/2%, 10/1/02* . . . . . . . . . . . . 491,250
1,000,000 VLSI Technology, Inc. 8 1/4%,
10/1/05. . . . . . . . . . . . . . . . . 951,250
----------
2,947,063
TELECOMMUNICATIONS
SERVICE (0.6%)
925,000 United States Cellular Corp.
zero coupon, 6/15/15 . . . . . . . . . . 326,063
----------
TOTAL CONVERTIBLE
CORPORATE BONDS & NOTES
(Cost $37,205,567) . . . . . . . . . . . 37,841,448
----------
CONVERTIBLE PREFERRED STOCKS (22.8%)
AIR TRANSPORT (1.0%)
10,000 Delta Air Lines Inc.
Series "C" $3.50 Pfd.. . . . . . . . . . 553,750
COMPUTER SOFTWARE
& SERVICES (4.4%)
35,000 General Motors Corp.
Series "C" $3.25 Pfd.. . . . . . . . . . 2,345,000
INSURANCE-DIVERSIFIED (1.1%)
10,000 Penncorp Financial
Group, Inc. $3.375 Pfd.. . . . . . . . . 602,500
INSURANCE-LIFE (1.8%)
20,000 Conseco, Inc. Series "D" $3.25 Pfd.. . . . 960,000
5
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
METALS AND
MINING-DIVERSIFIED (1.0%)
20,000 Freeport-McMoran Copper &
Gold Inc. $1.75 Pfd. . . . . . . . . . . $ 505,000
NATURAL GAS-DIVERSIFIED (0.9%)
10,000 Valero Energy Corp. $3.125 Pfd.. . . . . . 503,750
PAPER & FOREST PRODUCTS (2.0%)
22,200 James River Corp. of Virginia Series "K"
exchangeable $3.375 Pfd. . . . . . . . . 1,090,575
PETROLEUM-INTEGRATED (5.0%)
40,000 Occidental Petroleum Corp.
$3.00 Pfd. . . . . . . . . . . . . . . . 2,260,000
8,100 USX-Marathon Group $3.25 Pfd.. . . . . . . 382,725
----------
2,642,725
PETROLEUM-PRODUCING (1.0%)
20,000 Lomak Petroleum, Inc. 8 1/8%
Exchange Pfd.* . . . . . . . . . . . . . 505,000
R.E.I.T. (0.9%)
20,000 Security Capital Pacific Trust
Series "A" $1.75 Pfd.. . . . . . . . . . 475,000
RETAIL-SPECIAL LINES (0.7%)
10,000 TJX Companies, Inc.
Series "C" $3.125 Pfd. . . . . . . . . . 400,000
STEEL-INTEGRATED (2.2%)
12,000 WHX Corporation
Series "A" $3.25 Pfd.. . . . . . . . . . 529,500
15,000 WHX Corporation
Series "B" $3.75 Pfd.. . . . . . . . . . 630,000
----------
1,159,500
TRUCKING/TRANSP.
LEASING (0.8%)
5,000 Interpool Inc. 5.75% Pfd.. . . . . . . . . 446,250
----------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $11,445,263). . . . . . . . . . . . 12,189,050
----------
<CAPTION>
- --------------------------------------------------------------------------------
NO. OF WARRANTS OR
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
WARRANTS (0.5%)
10,000 Bank of New York Inc.,
expire 11/29/98. . . . . . . . . . . . . $ 267,500
----------
TOTAL WARRANTS
(Cost $295,000) . . . . . . . . . . . . . 267,500
----------
TOTAL INVESTMENT
SECURITIES (94.2%)
(Cost $48,945,830). . . . . . . . . . . . 50,297,998
----------
REPURCHASE AGREEMENT (7.3%)
(INCLUDING ACCRUED INTEREST)
$ 3,900,000 Collateralized by $3,615,000 U.S. Treasury
Notes, 7 3/4%, due 2/15/01, with a value of
$3,983,155 (With Morgan Stanley & Co.,
Incorporated 5.85%, dated 10/31/95,
due 11/1/95, delivery value
$3,900,634). . . . . . . . . . . . . . . . 3,900,634
EXCESS OF LIABILITIES OVER CASH AND
RECEIVABLES (-1.5%). . . . . . . . . . . . . . . . . . (805,132)
----------
NET ASSETS (100.0%). . . . . . . . . . . . . . . . . . $53,393,500
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER OUTSTANDING SHARE ($53,393,500 DIVIDED BY
4,348,054 SHARES OUTSTANDING). . . . . . . . . . . . . $ 12.28
-----------
-----------
</TABLE>
* PURSUANT TO RULE 144A UNDER THE SECURITIES ACT OF 1933, THIS SECURITY CAN BE
SOLD ONLY TO QUALIFIED INSTITUTIONAL INVESTORS.
+ NON-INCOME PRODUCING
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
STATEMENT OF ASSETS AND
LIABILITIES AT
OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment securities, at value
(Cost-$48,945,830) . . . . . . . . . . . . . . . . $ 50,297,998
Repurchase agreements
(Cost-$3,900,634) . . . . . . . . . . . . . . . . 3,900,634
Cash . . . . . . . . . . . . . . . . . . . . . . . . 70,408
Receivable for securities sold . . . . . . . . . . . 1,884,934
Interest and dividends receivable. . . . . . . . . . 567,151
Receivable for capital shares sold . . . . . . . . . 21,594
------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . 56,742,719
------------
LIABILITIES:
Payable for securities purchased . . . . . . . . . . 3,283,383
Payable for capital shares repurchased . . . . . . . 1,693
Accrued expenses:
Advisory fee . . . . . . . . . . . . . . . . . . . 34,565
Other. . . . . . . . . . . . . . . . . . . . . . . 29,578
------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . 3,349,219
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . 53,393,500
------------
------------
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
4,348,054 shares) . . . . . . . . . . . . . . . . 4,348,054
Additional paid-in capital. . . . . . . . . . . . . 49,114,266
Undistributed investment income-net . . . . . . . . 267,690
Accumulated net realized loss on
investments. . . . . . . . . . . . . . . . . . . . (1,688,678)
Unrealized net appreciation of investments. . . . . 1,352,168
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . $ 53,393,500
------------
------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE ($53,393,500
DIVIDED BY 4,348,054 SHARES OUTSTANDING) . . . . $ 12.28
------------
------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED
OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 1,500,869
Dividends . . . . . . . . . . . . . . . . . . . . . . 250,719
------------
TOTAL INCOME . . . . . . . . . . . . . . . . . . 1,751,588
------------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . 203,396
Auditing and legal fees. . . . . . . . . . . . . . . . 22,061
Transfer agent . . . . . . . . . . . . . . . . . . . . 20,519
Registration and filing fees . . . . . . . . . . . . . 12,867
Printing and stationery. . . . . . . . . . . . . . . . 12,835
Directors' fees and expenses . . . . . . . . . . . . . 5,802
Custodian fees . . . . . . . . . . . . . . . . . . . . 6,661
Telephone . . . . . . . . . . . . . . . . . . . . . . 4,457
Postage & other. . . . . . . . . . . . . . . . . . . . 4,305
------------
TOTAL EXPENSES . . . . . . . . . . . . . . . . . 292,903
------------
INVESTMENT INCOME-NET. . . . . . . . . . . . . . . . . 1,458,685
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS-NET:
Realized Gain-Net . . . . . . . . . . . . . . . . . 1,396,988
Change in Unrealized
Appreciation . . . . . . . . . . . . . . . . . . . 708,587
------------
NET REALIZED GAIN AND CHANGE IN
UNREALIZED APPRECIATION ON
INVESTMENTS . . . . . . . . . . . . . . . . . . . . . 2,105,575
------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . $ 3,564,260
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMETNS
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1995
(UNAUDITED), AND FOR THE YEAR ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
OCTOBER 31, 1995 ENDED
(UNAUDITED) APRIL 30, 1995
------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income-net . . . . . . . . . . . . . . . . $ 1,458,685 $ 2,939,994
Realized gain (loss) on investments-net . . . . . . . 1,396,988 (3,085,606)
Change in unrealized appreciation . . . . . . . . . . 708,587 3,169,098
------------- -------------
Net increase in net assets from operations. . . . . . 3,564,260 3,023,486
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income-net . . . . . . . . . . . . . . . . (1,439,021) (3,046,333)
Realized gains on investments . . . . . . . . . . . . -- (1,656,367)
------------- -------------
Total distributions . . . . . . . . . . . . . . . . . (1,439,021) (4,702,700)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares. . . . . . . . . . . 5,874,391 9,276,461
Net proceeds from reinvestment of distributions
to shareholders. . . . . . . . . . . . . . . . . . . 1,173,826 3,984,512
Cost of shares repurchased. . . . . . . . . . . . . . (6,303,324) (10,881,849)
------------- -------------
Increase from capital share transactions. . . . . . . 744,893 2,379,124
------------- -------------
Total Increase . . . . . . . . . . . . . . . . . . . . 2,870,132 699,910
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 50,523,368 49,823,458
------------- -------------
End of period . . . . . . . . . . . . . . . . . . . . $ 53,393,500 $ 50,523,368
------------- -------------
------------- -------------
Undistributed Investment Income-net, at end of period. $ 267,690 $ 248,026
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Value Line Convertible Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements.
(A) SECURITY VALUATION. The Fund's securities are valued by an independent
pricing service approved by the Fund's Board of Directors. Securities for which
quotations are not available from the pricing service are valued at the mean
between the latest available and representative asked and bid prices provided by
dealers in such securities. Securities for which market quotations are not
readily available or that are not readily marketable and all other assets of the
Fund are valued at fair value as the Board of Directors may determine in good
faith. Short-term instruments with maturities of 60 days or less at the date of
purchase are valued at amortized cost, which approximates market value.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code of 1986, as amended, applicable to
regulated investment companies, and to distribute all of its taxable income to
its shareholders. Therefore, no federal income-tax or excise-tax provision is
required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses on sales of securities are calculated for financial accounting and
Federal income-tax purposes on the identified cost basis. Interest income is
accrued as earned. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Distributions are determined in accordance with income-tax regulations, which
may differ from generally accepted accounting principles.
(E) AMORTIZATION. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
2. CAPITAL SHARE TRANSACTIONS.
Transactions in capital stock were as follows:
Six Months
Ended Year Ended
October 31, 1995 April 30,
(UNAUDITED) 1995
----------- ----------
Shares sold. . . . . . . . . . . . . . 477,680 793,187
Shares issued to shareholders in
reinvestment of dividends . . . . . . 95,578 351,729
---------- ----------
573,258 1,144,916
Shares repurchased . . . . . . . . . . 508,774 924,107
---------- ----------
Net increase . . . . . . . . . . . . . 64,484 220,809
---------- ----------
---------- ----------
9
<PAGE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding repurchase agreements,
for the six months ended October 31, 1995, were as follows:
Six Months
Ended
October 31, 1995
(UNAUDITED)
-----------------
PURCHASES:
Investment Securities $ 31,509,367
-----------------
-----------------
SALES OR REDEMPTIONS:
Investment Securities $ 22,109,194
-----------------
-----------------
At October 31, 1995, the aggregate cost of investment securities and repurchase
agreement for Federal income-tax purposes was $52,846,464. The aggregate
appreciation and depreciation of investments at October 31, 1995, based on a
comparison of investment values and their costs for Federal income-tax purposes,
was $2,583,524 and $1,231,356, respectively, resulting in a net appreciation of
$1,352,168.
For Federal income-tax purposes, the Fund had a net capital-loss carryover at
April 30, 1995, of approximately $1,277,569, which will expire in the year 2003.
Realized losses incurred after October 31, if so elected by the Fund, are deemed
to arise on the first day of the following fiscal year. The Fund incurred and
elected to defer losses of approximately $1,808,039. To the extent future
capital gains are offset by such capital losses, the Fund does not anticipate
distributing any such gains to the shareholders.
4. INVESTMENT ADVISORY CONTRACT,
MANAGEMENT FEES,
AND TRANSACTIONS WITH AFFILIATES
An advisory fee of $203,396 was paid or payable to Value Line, Inc. (the
"Adviser"), for the six months ended October 31, 1995. This was computed at the
rate of 3/4 of 1% of average daily net assets during the period and paid
monthly. The Adviser provides research, investment programs, and supervision of
the investment portfolio and pays costs of administrative services, office
space, equipment, and compensation of administrative, bookkeeping, and clerical
personnel necessary for managing the affairs of the Fund. The Adviser also
provides persons, satisfactory to the Fund's Board of Directors, to act as
officers and employees of the Fund and pays their salaries and wages. The Fund
bears all other costs and expenses. If the aggregate expenses of the Fund,
other than taxes, interest, brokerage commissions, and extraordinary expenses,
exceed the expense limitation imposed by any state in which the Fund's shares
are sold, the advisory fee will be reduced by the amount of such excess, or the
amount of such excess will be refunded. No reimbursement was required for the
six months ended October 31, 1995.
A fee of $2,880 for printing services was paid to the Advisor for the six months
ended October 31, 1995.
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.
The Advisor owned 494,195 shares of the Fund's capital stock, representing 11%
of the outstanding shares at October 31, 1995. In addition, certain officers
and directors of the Fund owned 4,886 shares of the Fund, representing .1% of
the outstanding shares.
10
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER-SHARE DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED YEARS ENDED APRIL 30,
OCT. 31, 1995 -----------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
------------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . $11.79 $12.26 $13.80 $12.24 $11.07 $10.90
-------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .33 .74 .71 .62 .65 .62
Net gains or losses on securities
(both realized and unrealized) . . . . . . . . . . . .49 ( .02) .11 1.54 1.13 .38
-------- ------- ------- ------- ------- -------
Total from investment operations . . . . . . . . . . .82 .72 .82 2.16 1.78 1.00
-------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from investment income-net . . . . . . . . ( .33) ( .76) ( .69) ( .60) (.61) ( .83)
Distributions from capital gains . . . . . . . . . . - ( .43) (1.67) - - -
-------- ------- ------- ------- ------- -------
Total distributions. . . . . . . . . . . . . . . . . (.33) (1.19) (2.36) ( .60) ( .61) ( .83)
-------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . $12.28 $11.79 $12.26 $13.80 $12.24 $11.07
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 6.97%+ 6.53% 5.50% 18.16% 16.42% 9.98%
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) . . . . . . . $53,394 $50,523 $49,823 $43,936 $37,177 $36,553
Ratio of expenses to average net assets. . . . . . . . 1.09%* 1.08% 1.07% 1.10% 1.14% 1.19%
Ratio of net investment income to
average net assets. . . . . . . . . . . . . . . . . . 5.42%* 6.13% 5.32% 4.80% 5.45% 5.50%
Portfolio turnover rate. . . . . . . . . . . . . . . . 54%+ 87% 142% 146% 140% 216%
</TABLE>
+ NOT ANNUALIZED.
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth
of capital by investing not less than 80% of its assets in "special situations."
No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS'S sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking
System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income securities.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City, and federal
income taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* invests in stocks, bonds,
and cash equivalents according to computer trend models developed by Value Line.
The objective is to professionally manage the optimal allocation of these
investments at all times.
1992 -- VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing primarily in a diversified
portfolio of investment-grade debt securities.
1993 -- VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds, and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
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 THE 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. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
12
