------------------
SEMI-ANNUAL REPORT
------------------
October 31, 1997
------------------
Value Line
Convertible
Fund, Inc.
[LOGO]
VALUE LINE
No Load
Mutual
Funds
<PAGE>
Value Line Convertible Fund, Inc.
To Our Value Line
================================================================================
To Our Shareholders:
We are pleased to report that the total return for the Value Line Convertible
Fund, Inc. (the "Fund") for the six months ending October 31, 1997 was 15.0%
The stock market has exhibited volatile behavior during the past six months. A
strong summer rally, led by energy and technology stocks, was followed by a
sharp downturn in October, including a 554 one-day plunge in the Dow Jones
Industrials, as investors worried about the potential negative fallout from the
spreading Asian currency crisis. The subsequent flight to quality saw U.S.
Treasury securities rally strongly with the yield on the 30-year Treasury
declining from a high of nearly 6.8% in the summer to about 6.0% at the end of
October. This bond market rally, coupled with the ongoing strength in the U.S.
economy and bailout plans for some of the battered Asian currencies, sparked a
rebound in the U.S. stock market in November. The Dow Jones Industrial Average
rallied more than 1,000 points to within a few percentage points of its summer
high.
Convertible securities are a typically less volatile investment vehicle than
common stocks. The higher current yield gives protection against a downward move
in the price of the underlying common stock, while the conversion feature offers
some participation in the upward move of the stock. Thus the Fund offers an
attractive alternative to investors looking for appreciation, yet wary of the
occasional wild gyrations of the stock market.
In making investment decisions, the managers of your Fund rely on the Value Line
TimelinessTM Ranking System, which has enjoyed more than thirty years of success
in picking stocks that outperform the overall market. The stock ranks provided
by the Ranking System are then incorporated into the Value Line Convertible
Ranking System, a proprietary process that identifies attractively priced
convertible securities. The combination of these two systems helps the Fund's
managers to identify attractively priced convertible securities of favorably
ranked stocks. We are currently moving the Fund into more liquid convertible
securities, while also maintaining positions with reasonably high current
yields, which offer downside protection. The Fund's cash position is
approximately 12%, with most of the balance in convertible securities.
We thank you for your interest in the Value Line Convertible Fund, and we look
forward to serving your investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
December 10, 1997
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line Convertible Fund, Inc.
Convertible Fund Shareholders
================================================================================
Economic Observations
In contrast to many parts of the world, the basic underpinnings of the U.S.
economy appear to be quite sound. Here's a rundown:
Economic Growth: After a strong first three quarters of 1997, in which growth
comfortably exceeded 3%, the economy seems to be proceeding at a less frenetic
pace. Importantly, this more modest rate of business improvement should prove to
be equally sustainable. Overall, we see the domestic economy, which probably
grew at an approximate 2.5% rate during the final quarter of 1997, moving ahead
at a somewhat more deliberate 2.0%-2.3% pace in the new year. For now, we
believe that the still unfolding financial crises in Asia will have only a
moderate dampening effect on this country's economic expansion.
Inflation: Here, too, moderation should be a prevailing theme, with prices
likely to continue rising at a subdued pace in the months ahead. The ongoing
lack of serious labor, energy, and raw materials shortages underscore much of
our optimism on the pricing front.
Interest Rates: As has been the case with the economy and inflation, the low
level of interest rates has been a pivotal source of support for the financial
markets in this country. But will rates continue to provide support? The answer
here will depend largely on the upcoming trends in economic growth and
inflation. Should both hold at moderate, nonthreatening levels, as we expect,
the Federal Reserve will probably opt to keep borrowing costs about where they
are through at least the early part of the new year.
Performance Data:*
Average Growth of
Annual an Assumed
Total Investment
Return of $10,000
------ ----------
1 year ended 9/30/97........................... 22.06% $12,206
5 years ended 9/30/97.......................... 15.34% 20,413
10 years ended 9/30/97.......................... 10.87% 28,070
* 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. The average annual total
returns at October 31, 1997 for the one-year, five-year and 10-year periods
were 18.36%, 14.59%, and 13.56%, respectively.
- --------------------------------------------------------------------------------
3
<PAGE>
Value Line Convertible Fund, Inc.
Schedule of Investments (unaudited)
================================================================================
Principal
Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS & NOTES (56.3%)
AIR TRANSPORT (4.3%)
$1,750,000 Reno Air, Inc.
9%, 9/30/02..................................... $ 1,732,500
2,000,000 World Airways, Inc.
8%, 8/26/04*.................................... 1,980,000
-------------
3,712,500
BANK (2.0%)
1,500,000 First State Bancorporation
7 1/2%, 4/30/17................................. 1,777,500
CABLE TV (2.3%)
2,370,000 Tele-Communications
International, Inc.
4 1/2%, 2/15/06 ................................ 1,993,763
COMPUTER &
PERIPHERALS (3.1%)
1,000,000 Adaptec, Inc.
4 3/4%, 2/1/04.................................. 1,170,000
1,000,000 Quantum Corp.
7%, 8/1/04...................................... 1,043,750
500,000 Read-Rite Corp.
6 1/2%, 9/1/04.................................. 448,750
-------------
2,662,500
COMPUTER SOFTWARE
& SERVICES (2.4%)
2,000,000 MacNeal-Schwendler Corp.
7 7/8%, 8/18/04................................. 2,045,000
DRUG (2.5%)
3,000,000 ALZA Corp., zero coupon,
7/14/14......................................... 1,286,250
1,000,000 IVAX Corp.
6 1/2%, 11/15/01................................ 875,000
-------------
2,161,250
ELECTRONICS (1.8%)
500,000 Reptron Electronics, Inc.
6 3/4%, 8/1/04.................................. 449,375
1,040,000 Telxon Corp.
5 3/4%, 1/1/03.................................. 1,145,300
-------------
1,594,675
ELECTRIC UTILITY--
CENTRAL (1.0%)
1,000,000 NorAm Energy Corp.
6%, 3/15/12..................................... 905,000
ENVIRONMENTAL
(2.7%)
2,000,000 United States Filter Corp.
4 1/2%, 12/15/01................................ 2,340,000
FINANCIAL SERVICES
(0.7%)
500,000 Loews Corp.
3 1/8%, 9/15/07................................. 569,375
HOTEL/GAMING
(1.2%)
1,000,000 CapStar Hotel Co.
4 3/4%, 10/15/04................................ 1,022,500
INSURANCE--
DIVERSIFIED (1.3%)
2,000,000 Fidelity National Financial,
Inc. zero coupon,
2/15/09 ........................................ 1,175,000
INSURANCE-
PROPERTY/
CASUALTY (3.1%)
3,000,000 Fremont General Corp.
zero coupon, 10/12/13........................... 2,711,250
- --------------------------------------------------------------------------------
4
<PAGE>
Value Line Convertible Fund, Inc.
October 31, 1997
================================================================================
Principal
Amount Value
- --------------------------------------------------------------------------------
MEDICAL SERVICES
(3.1%)
1,000,000 NovaCare, Inc.
5 1/2%, 1/15/00................................. $ 952,500
1,000,000 PhyCor, Inc.
4 1/2%, 2/15/03................................. 912,500
1,000,000 PhyMatrix Corp.
6 3/4%, 6/15/03................................. 867,500
-------------
2,732,500
OILFIELD SERVICES/
EQUIPMENT (6.5%)
1,250,000 Baker Hughes, Inc. zero
coupon, 5/5/08.................................. 1,117,187
3,000,000 Key Energy Group, Inc.
5%, 9/15/04*.................................... 3,041,250
1,250,000 Parker Drilling Co.
5 1/2%, 8/1/04.................................. 1,490,625
-------------
5,649,062
PUBLISHING (2.1%)
2,000,000 World Color Press, Inc.
6%, 10/1/07..................................... 1,867,500
R.E.I.T. (2.5%)
1,000,000 Capstone Capital Corp.
6.55%, 3/14/02.................................. 940,000
1,000,000 Developers Diversified
Realty Corp.
7%, 8/15/99..................................... 1,216,250
-------------
2,156,250
RETAIL--SPECIAL
LINES (1.9%)
500,000 Inacom Corp.
4 1/2%, 11/1/04................................. 505,000
1,000,000 Jumbosports Inc.
4 1/4%, 11/1/00................................. 661,250
500,000 Michaels Stores, Inc.
6 3/4%, 1/15/03................................. 505,000
-------------
1,671,250
SHOE (0.9%)
1,000,000 Converse, Inc.
7%, 6/1/04...................................... 775,000
TELECOMMUNICATION
SERVICES (3.1%)
1,000,000 General DataComm
Industries, Inc.
7 3/4%, 9/30/02*................................ 1,297,500
1,000,000 MIDCOM Communications,
Inc. 8 1/4%, 8/15/03............................ 260,000
3,000,000 U.S. Cellular Corp.
zero coupon, 6/15/15 ........................... 1,125,000
-------------
2,682,500
TOBACCO (1.1%)
1,000,000 Standard Commercial Corp.
7 1/4%, 3/31/07................................. 922,500
THRIFT (4.5%)
500,000 Bay View Capital Corp.
9 1/8%, 8/15/07................................. 515,000
2,000,000 BankAtlantic Bancorp, Inc.
6 3/4%, 7/1/06.................................. 3,377,500
-------------
3,892,500
OTHER (2.2%)
500,000 Assisted Living Concepts,
Inc. 6%, 11/1/02................................ 555,625
1,250,000 Republic of Italy-Istituto
Mazionale delle
Assicurazioni Sp.A,
5%, 6/28/01 .................................... 1,340,625
-------------
1,896,250
TOTAL CONVERTIBLE CORPORATE BONDS
& NOTES
(Cost $46,850,795) ................................ 48,915,625
-------------
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line Convertible Fund, Inc.
Schedule of Investments (unaudited)
================================================================================
Shares Value
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (26.9%)
BANK (5.2%)
20,000 BCP International
Bank Ltd.
$4.00 exchangeable
Series "A" ..................................... $ 1,457,500
16,000 Matewan Bancshares, Inc.
$1.875 Series "A"............................... 433,000
70,000 National Australia Bank,
Ltd. 7.875% Cap Units
exchangeable Pfd. .............................. 1,946,875
8,900 Union Planters Corp.
$2.00 Series "E"................................ 666,387
-------------
4,503,762
ENTERTAINMENT (1.4%)
20,000 Chancellor Media Corp.
$3.00 Pfd.*..................................... 1,197,500
HOTEL/GAMING (0.6%)
20,000 FelCor Suite Hotels Inc.
$1.95 Series "A" ............................... 577,500
INSURANCE--
DIVERSIFIED (1.7%)
20,000 PennCorp Financial Group,
Inc. $3.375 Pfd................................. 1,505,000
NATURAL GAS--
DIVERSIFIED (1.4%)
10,000 Williams Companies, Inc.
(The) $3.50 Pfd................................. 1,198,750
R.E.I.T. (4.0%)
20,000 CRIIMI MAE, Inc.
10 7/8%, Series "B"............................. 725,000
10,000 Dynex Capital Inc
9.73% Series "C"................................ 308,750
14,000 Excel Realty Trust, Inc.
$2.125 Series "A" .............................. 406,000
40,000 Oasis Residential, Inc.
$2.25 Pfd. Series "A" .......................... 972,500
40,000 Thornburg Mortgage Asset
Corp. 9.68%, Series "A" ........................ 1,050,000
-------------
3,462,250
ETAIL STORE (1.4%)
50,000 Prime Retail, Inc.
$2.125, Series "B".............................. 1,226,562
STEEL (2.2%)
40,000 USX Capital Trust,
6 3/4% Pfd...................................... 1,900,000
TELECOMMUNICATION
SERVICES (6.3%)
20,000 ICG Communications, Inc.
6 3/4%, exchangeable Pfd.*...................... 1,090,000
10,365 IXC Communications, Inc.
7 1/4%, Jr. Pfd. ............................... 1,497,743
10,000 Salomon, Inc. 61/4%,
exchangeable Notes
Series "CSN" ................................... 540,000
20,000 WorldCom Inc. 8%,
Depositary shares (1)........................... 2,340,000
-------------
5,467,743
OTHER (2.7%)
80,000 Kapson Senior Quarters
Corp. 8% Pfd.*.................................. 2,360,000
-------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $20,146,609) ................................ 23,399,067
-------------
- --------------------------------------------------------------------------------
6
<PAGE>
Value Line Convertible Fund, Inc.
October 31, 1997
================================================================================
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (4.6%)
CEMENT &
AGGREGATES (2.4%)
37,775 Southdown, Inc...................................... $ 2,091,791
DRUG (0.0%)
1,053 Crescendo Pharmaceuticals
Corp. Class "A"+................................ 11,912
ELECTRONICS (0.3%)
9,300 Safeguard Scientifics,
Inc.+........................................... 288,300
NATURAL GAS--
DIVERSIFIED (0.7%)
10,000 Diamond Offshore
Drilling, Inc................................... 622,500
THRIFT (1.2%)
77,321 BankUnited Financial
Corp. Class A+.................................. 1,014,838
OTHER (0.0%)
1,860 OAO Technology Solutions
Inc., rights expire
11/25/97+ ...................................... 7,440
-------------
TOTAL COMMON
STOCKS
(Cost $2,906,958) ................................. 4,036,781
-------------
TOTAL INVESTMENT
SECURITIES (87.8%)
(Cost $69,904,362) ................................ 76,351,473
-------------
Principal
Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (13.7%)
(including accrued interest)
$11,900,000 Collateralized by $11,814,000
U.S. Treasury Note 5.875%,
due 11/30/01 with a value
of $12,151,205 (with UBS
Securities, LLC, 5.63%,
dated 10/31/97, due
11/3/97, delivery value
$11,905,583).................................... $ 11,901,861
EXCESS OF LIABILITIES
OVER CASH AND
RECEIVABLES (-1.5%) .............................................. (1,295,409)
------------
NET ASSETS (100.0%) .............................................. $ 86,957,925
============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($86,957,925 / 5,914,370
shares outstanding) .............................................. $ 14.70
============
* Pursuant to Rule 144A under the Securities Act of 1933, this security can
only be sold to qualified institutional investors.
+ Non income producing
(1) Represents 1/100th of a share of Conv. Pfd.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
7
<PAGE>
Value Line Convertible Fund, Inc.
Statement of Assets and Liabilities
at October 31, 1997 (unaudited)
================================================================================
Assets:
Investment securities, at value
(Cost--$69,904,362) ..................................... $76,351,473
Short-term investments
(Cost-$11,901,861) ...................................... 11,901,861
Cash ...................................................... 73,858
Interest and dividends receivable ......................... 577,882
Receivable for capital shares sold ........................ 45,009
-----------
Total Assets .......................................... 88,950,083
-----------
Liabilities:
Payable for securities purchased .......................... 1,675,000
Payable for capital shares
repurchased ............................................. 219,235
Accrued expenses:
Advisory fee ............................................ 56,801
Other ................................................... 41,122
-----------
Total Liabilities ..................................... 1,992,158
-----------
Net Assets ................................................ $86,957,925
-----------
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000,
outstanding 5,914,370 shares) ........................... $ 5,914,370
Additional paid-in capital ................................ 68,903,748
Undistributed investment
income--net ............................................. 605,468
Accumulated net realized gain
on investments .......................................... 5,087,228
Unrealized net appreciation of
investments ............................................. 6,447,111
-----------
Net Assets ................................................ $86,957,925
===========
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($86,957,925 / 5,914,370
shares outstanding) ................................... $ 14.70
===========
Statement of Operations
for the six months ended October 31, 1997 (unaudited)
================================================================================
Investment Income:
Interest ............................................... $ 1,744,617
Dividend (Net of foreign
withholding taxes of $11,341) ........................ 632,713
------------
Total Income ....................................... 2,377,330
------------
Expenses:
Advisory fee ........................................... 304,145
Auditing and legal fees ................................ 21,160
Transfer agent ......................................... 18,400
Registration and filing fees ........................... 14,613
Custodian fees ......................................... 10,738
Printing and stationery ................................ 9,200
Directors' fees and expenses ........................... 9,200
Postage ................................................ 4,600
Telephone .............................................. 3,680
Insurance, dues and other .............................. 2,429
------------
Total Expenses before
Custody Credits .................................. 398,165
Less: Custody Credits .............................. (3,378)
------------
Total Expenses ..................................... 394,787
------------
Investment Income -- Net ............................... 1,982,543
------------
Realized and Unrealized Gain on
Investments -- Net:
Realized Gain--Net ................................. 3,557,162
Change in Unrealized
Appreciation ..................................... 5,145,700
------------
Net Realized Gain and Change
in Unrealized Appreciation
on Investments ....................................... 8,702,862
------------
Net Increase in Net Assets
from Operations ...................................... $ 10,685,405
============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8
<PAGE>
<TABLE>
Value Line Convertible Fund, Inc.
Statement of Changes in Net Assets
for the six months ended October 31, 1997 (unaudited) and for the year ended April 30, 1997
==================================================================================================
<CAPTION>
Six Months Ended Year Ended
October 31, 1997 April 30,
(unaudited) 1997
--------------------------------
<S> <C> <C>
Operations:
Investment income--net ........................................ $ 1,982,543 $ 3,416,967
Realized gain on investments--net ............................. 3,557,162 7,919,219
Change in unrealized appreciation ............................. 5,145,700 (5,752,019)
------------------------------
Net increase in net assets from operations .................... 10,685,405 5,584,167
------------------------------
Distributions to Shareholders:
Investment income--net ........................................ (1,817,640) (3,158,289)
Realized gains on investments ................................. -- (7,350,053)
------------------------------
Total distributions ........................................... (1,817,640) (10,508,342)
------------------------------
Capital Share Transactions:
Net proceeds from sale of shares .............................. 41,211,150 95,369,317
Net proceeds from reinvestment of distributions to shareholders 1,395,682 8,470,140
Cost of shares repurchased .................................... (33,200,477) (102,851,591)
------------------------------
Increase from capital share transactions ...................... 9,406,355 987,866
------------------------------
Total Increase (Decrease) ....................................... 18,274,120 (3,936,309)
Net Assets:
Beginning of period ........................................... 68,683,805 72,620,114
------------------------------
End of period ................................................. $ 86,957,925 $ 68,683,805
==============================
Undistributed Investment Income-- net, at end of period ......... $ 605,468 $ 440,565
==============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line Convertible Fund, Inc.
Notes to Financial Statements (unaudited) October 31, 1997
================================================================================
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 whose investment objective is to seek high current
income together with capital appreciation. The Fund seeks to accomplish its
objective by investing primarily in convertible securities.
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. 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 which 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 investments that mature in less than 60 days are valued
at amortized cost if their original maturity was 60 days or less, or by
amoritzing their value on the 61st day prior to maturity, if their original term
exceeds 60 days.
(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. Interest income is accrued
as earned. Realized gains and losses on sales of securities are calculated for
financial accounting and federal income tax purposes on the identified-cost
basis. 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.
- --------------------------------------------------------------------------------
10
<PAGE>
Value Line Convertible Fund, Inc.
Notes to Financial Statements (unaudited) October 31, 1997
================================================================================
2. Capital Share Transactions.
Transactions in capital stock were as follows:
Six Months
Ended Year
October 31, Ended
1997 April 30,
(unaudited) 1997
---------------------------
Shares sold ................................ 2,882,734 6,848,012
Shares issued to shareholders
in reinvestment
of dividends ............................. 97,515 640,516
---------------------------
2,980,249 7,488,528
Shares repurchased ......................... 2,321,377 7,382,823
---------------------------
Net increase ............................... 658,872 105,705
===========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months
October 31, 1997
(unaudited)
--------------
PURCHASES:
Investment Securities ................................ $76,556,895
===========
SALES OR REDEMPTIONS:
Investment Securities ................................ $51,480,344
===========
At October 31, 1997, the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes was $81,806,223. The aggregate
appreciation and depreciation of investments at October 31, 1997, based on a
comparison of investment values and their costs for federal income tax purposes,
was $7,837,260 and $1,390,149 respectively, resulting in a net appreciation of
$6,447,111.
4. Investment Advisory Contract, Management Fees, and Transactions with
Affiliates
An advisory fee of $304,145 was paid or payable to Value Line, Inc. (the
Adviser), for the six months ended October 31, 1997. 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, 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.
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 and/or affiliated companies owned 174,301 shares of the Fund's
capital stock, representing 2.9% of the outstanding shares at October 31, 1997.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Convertible Fund, Inc.
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Years Ended April 30,
Oct. 31, 1997 ------------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
---------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................... $ 13.07 $ 14.10 $ 11.79 $ 12.26 $ 13.80 $ 12.24
-----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................. .34 .70 .66 .74 .71 .62
Net gains or losses on securities
(both realized and unrealized) ...... 1.61 .50 2.33 (.02) .11 1.54
-----------------------------------------------------------------------------
Total from investment operations ...... 1.95 1.20 2.99 .72 .82 2.16
-----------------------------------------------------------------------------
Less distributions:
Dividends from investment
income--net ......................... (.32) (.645) (.68) (.76) (.69) (.60)
Distributions from capital gains ...... -- (1.585) -- (.43) (1.67) --
-----------------------------------------------------------------------------
Total distributions ................... (.32) (2.230) (.68) (1.19) (2.36) (.60)
-----------------------------------------------------------------------------
Net asset value, end of period ............ $ 14.70 $ 13.07 $ 14.10 $ 11.79 $ 12.26 $ 13.80
=============================================================================
Total return .............................. 15.01%+ 8.80% 26.07% 6.53% 5.50% 18.16%
=============================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) .......................... $ 86,958 $ 68,684 $ 72,620 $ 50,523 $ 49,823 $ 43,936
Ratio of expenses to average
net assets .............................. .99%*(1) 1.01%(1) 1.08% 1.08% 1.07% 1.10%
Ratio of net investment income
to average net assets ................... 4.93%* 4.94% 5.14% 6.13% 5.32% 4.80%
Portfolio turnover rate ................... 78%+ 164% 129% 87% 142% 146%
Average commissions paid per
share of stock investments
purchased/sold .......................... $ .0500 $ .0500(2)
</TABLE>
(1) Before custody credits.
(2) Disclosure effective for fiscal years beginning on or after 9/1/95.
+ Not annualized.
* Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Bruce H. Alston
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant 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 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).
VLF710227
