================================================================================
--------------
ANNUAL REPORT
--------------
April 30, 2000
--------------
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:
It is with pleasure that we report that your Fund achieved a total return of
33.21% for the fiscal year ended April 30, 2000. The Fund's performance exceeded
that of both its peer group and the unmanaged Value Line Convertible Index,
which includes over 600 convertible securities and is representative of the
convertible market.
FYE
4/30/00
------
o Value Line Convertible Fund.................................. 33.21%
o Lipper Convertible Peer Group Average........................ 26.67%
o Value Line Convertible Index................................. 8.40%
o S&P 500...................................................... 8.55%
o Lehman Brothers Gov/Corp..................................... 0.95%
Since last year's report, the financial markets, led by the NASDAQ and the
red-hot technology stocks, have rocketed to incredibly lofty levels, even taking
into account the recent correction. The NASDAQ peaked at a record 5048 before
ending the April 30 fiscal year at 3860, up 52% for the year. The small cap
Russell 2000 recovered well, with a performance gain of 18%. The Dow Jones
Industrial Average, however, slipped 1% as so-called "old economy" stocks fell
out of favor.
Treasury bond prices, however, fell precipitously with yields jumping from 4.95%
to 5.66%, as the Federal Reserve shifted toward a less accommodative monetary
policy and began to raise interest rates in order to preempt inflation and cool
a strengthening economy. Interest rates as represented by the 10-year Treasury
Note climbed 1.45 percentage points, to peak at 6.80% before closing the fiscal
year at 6.20%
Your Fund's performance benefited from a strong weighting in the top performing
semiconductor, telecommunications and computer sectors, as well as the leaning
toward smaller capitalization companies. Your Fund also benefits from an expense
ratio of 1.00% that compares favorably with the convertible funds industry
average of 1.54%.
Periodic bouts of market turbulence are rarely a pleasant experience. Occasional
fluctuations in performance are the price investors usually pay to reap
long-term financial rewards. Conversely, this past year's strong performance of
the convertible asset class more than offset the anemic results of the prior
year. This reinforces our belief that, over the long run, it is sensible to
balance the risks in an investment portfolio with a mix of stocks & bonds,
including convertibles, to achieve the appropriate degree of overall risk.
Value Line will continue to strive to deliver competitive returns in convertible
securities by seeking those securities that offer a favorable risk/return
profile with attractive investment fundamentals.
We thank you for your confidence in the Fund and look forward to serving your
future investment needs.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
May 15, 2000
--------------------------------------------------------------------------------
2
<PAGE>
Value Line Convertible Fund, Inc.
Convertible Fund Shareholders
--------------------------------------------------------------------------------
Economic Observations
The American economy continues to perform well as we approach midyear. Evidence
of this healthy level of business activity can be found in the strong pace of
manufacturing, the continued steady gains in personal income, and the high
levels of employment and correspondingly low rate of unemployment. Overall, we
estimate that GDP growth will average 4.0%-4.5% during the now-ending second
quarter. Thereafter, we would expect the pace of economic activity to moderate
somewhat in the final half and during the opening months of 2001, as the
succession of interest-hikes voted for by the Federal Reserve finally begins to
have its hoped-for effect.
Inflationary pressures, meanwhile, continue to be held in check for the most
part, with strong increases in productivity and ongoing technological
innovations being at least partially responsible for this comparative pricing
stability. Nevertheless, a sustained increase in cost pressures could still
evolve over the next few quarters, particularly if energy prices rise further
and the expected late-2000 moderation in GDP growth does not evolve as we
expect. The Federal Reserve, taking note of this potential for higher prices,
meanwhile, is likely to pursue a relatively restrictive monetary path in the
months ahead. As such, we now expect the lead bank to vote at least one
additional interest rate increase over the course of the current year.
Performance Data:*
Average Value of
Annual an Assumed
Total Investment
Return of $10,000
------ ----------
1 year ended 3/31/00 ......................... 41.86% $ 14,186
5 years ended 3/31/00 ........................ 18.91% 23,778
10 years ended 3/31/00 ........................ 14.56% 38,934
* 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 April 30, 2000 for the one-year, five-year and ten-year periods
were 33.21%, 16.85%, and 13.99%, respectively.
--------------------------------------------------------------------------------
3
<PAGE>
Value Line Convertible Fund, Inc.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
--------------------------------------------------------------------------------
Comparison of a change in value of a $10,000 investment in the
Value Line Convertible Fund, Inc. and the S&P 500 Index+
Value Line
S&P 500 Index Convertible Fund, Inc.
------------- ----------------------
4/90 $ 10,000 $ 10,000
7/90 $ 10,864 $ 10,585
10/90 $ 9,363 $ 9,089
1/91 $ 10,696 $ 10,154
4/91 $ 11,767 $ 10,998
7/91 $ 12,258 $ 11,407
10/91 $ 12,504 $ 12,215
1/92 $ 13,123 $ 12,911
4/92 $ 13,417 $ 12,803
7/92 $ 13,825 $ 13,189
10/92 $ 13,748 $ 13,572
1/93 $ 14,511 $ 14,825
4/93 $ 14,656 $ 15,128
7/93 $ 15,032 $ 15,976
10/93 $ 15,803 $ 16,464
1/94 $ 16,380 $ 16,834
4/94 $ 15,436 $ 15,961
7/94 $ 15,808 $ 15,986
10/94 $ 16,414 $ 15,915
1/95 $ 16,467 $ 15,938
4/95 $ 18,132 $ 17,004
7/95 $ 19,935 $ 18,290
10/95 $ 20,754 $ 18,190
1/96 $ 22,834 $ 19,740
4/96 $ 23,611 $ 21,437
7/96 $ 23,238 $ 21,134
10/96 $ 25,755 $ 22,660
1/97 $ 28,849 $ 23,660
4/97 $ 29,542 $ 23,322
7/97 $ 35,350 $ 26,156
10/97 $ 34,024 $ 26,822
1/98 $ 36,610 $ 27,264
4/98 $ 41,676 $ 29,162
7/98 $ 42,169 $ 27,988
10/98 $ 41,505 $ 25,167
1/99 $ 48,504 $ 28,144
4/99 $ 50,770 $ 27,809
7/99 $ 50,688 $ 28,489
10/99 $ 52,159 $ 30,663
1/00 $ 53,523 $ 37,004
4/00 $ 55,912 $ 37,046
--------------------------------------------------------------------------------
From 5/1/90 to 4/30/00
+ The Standard & Poor's 500 Index is an unmanaged index that is
representative of the larger-capitalization stocks traded in the United
States. The presentation includes reinvested dividends.
--------------------------------------------------------------------------------
4
<PAGE>
Value Line Convertible Fund, Inc.
Schedule of Investments April 30, 2000
================================================================================
Principal
Amount Value
--------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS & NOTES (53.0%)
ADVERTISING (1.3%)
$ 500,000 Getty Images, Inc. Series
144A, 5%, 3/15/07*.................. $ 358,750
1,000,000 Young & Rubicam, Inc.
Series 144A,
3%, 1/15/05*........................ 985,000
------------
1,343,750
CABLE TV (1.5%)
1,000,000 EchoStar Communications
Corp. Series 144A,
4 7/8%, 1/1/07*..................... 1,520,000
COMPUTER &
PERIPHERALS (1.7%)
1,500,000 Juniper Networks, Inc.
4 3/4%, 3/15/07..................... 1,374,375
500,000 Redback Networks, Inc.
Series 144A,
5%, 4/1/07*......................... 353,750
------------
1,728,125
COMPUTER SOFTWARE
& SERVICES (7.9%)
500,000 Affiliated Computer
Services, Inc.
4%, 3/15/05......................... 481,250
500,000 BEA Systems, Inc. Series
144A, 4%, 12/15/06*................. 770,000
500,000 CheckFree Holdings Corp.
Series 144A, 6 1/2%,
12/1/06*............................ 471,875
1,000,000 Citrix Systems Inc. Zero
Coupon, 3/22/19..................... 855,000
250,000 Comverse Technology,
Inc. 4 1/2%, 7/1/05................. 1,031,875
500,000 i2 Technologies, Inc.
5 1/4%, 12/15/06.................... 930,000
500,000 Rational Software Corp.
Series 144A,
5%, 2/1/07*......................... 669,375
500,000 Siebel Systems, Inc.
5 1/2%, 9/15/06..................... 1,383,125
500,000 USinternetworking, Inc.
7%, 11/1/04......................... 841,250
250,000 Veritas Software Corp.
1.856%, 8/13/06..................... 764,375
------------
8,198,125
DRUG (4.8%)
1,000,000 Athena Neurosciences, Inc.
4 3/4%, 11/15/04.................... 1,305,000
500,000 Cor Theraputics, Inc.
Series 144A,
5%, 3/1/07*......................... 608,125
500,000 CuraGen Corp. Series
144A, 6%, 2/2/07*................... 294,375
500,000 Human Genome Sciences,
Inc. Series 144A,
3 3/4%, 3/15/07*.................... 292,500
250,000 ImClone Systems, Inc.
Series 144A,
5 1/2%, 3/1/05*..................... 236,250
500,000 Inhale Therapeutic
Systems
6 3/4%, 10/13/06.................... 997,500
500,000 Invitrogen Corp. Series
144A, 5 1/2%, 3/1/07*............... 442,500
600,000 Millennium
Pharmaceuticals, Inc.
5 1/2%, 1/15/07..................... 633,000
500,000 ViroPharma, Inc. Series
144A, 6%, 3/1/07*................... 196,250
------------
5,005,500
--------------------------------------------------------------------------------
5
<PAGE>
Value Line Convertible Fund, Inc.
Schedule of Investments
================================================================================
Principal
Amount Value
--------------------------------------------------------------------------------
ELECTRICAL
EQUIPMENT (0.5%)
$ 500,000 Semtech Corp.
Series 144A,
4 1/2%, 2/1/07*..................... $ 489,375
ELECTRONICS (4.6%)
500,000 ACT Manufacturing, Inc.
Series 144A,
7%, 4/15/07*........................ 510,000
500,000 Gilat Satellite Networks
Ltd. Series 144A,
4 1/4%, 3/15/05*..................... 360,625
1,000,000 SCI Systems, Inc.
3%, 3/15/07......................... 1,146,250
250,000 Safeguard Scientifics, Inc.
5%, 6/15/06......................... 466,875
500,000 Sanmina Corp.
4 1/4%, 5/1/04...................... 739,375
2,000,000 Solectron Corp. Zero
Coupon, 1//27/19.................... 1,540,000
------------
4,763,125
ENTERTAINMENT
(1.2%)
1,000,000 Clear Channel
Communications, Inc.
2 5/8%, 4/1/03...................... 1,275,000
FOREIGN
TELECOMMUNICATIONS
(1.6%)
500,000 Global TeleSystems
Group, Inc.
5 3/4%, 7/1/10...................... 329,375
1,000,000 Telefonos de Mexico S.A.
de CV 4 1/4%, 6/15/04............... 1,375,000
------------
1,704,375
INSURANCE--
PROPERTY/
CASUALTY (2.6%)
1,000,000 Berkshire Hathaway, Inc.
1%, 12/2/01......................... 2,675,000
INTERNET (3.0%)
2,000,000 America Online, Inc.
Zero Coupon, 12/6/19................ 1,050,000
500,000 At Home Corp.
Series 144A,
4 3/4%, 12/15/06*................... 332,500
500,000 DoubleClick Inc.
4 3/4%, 3/15/06..................... 966,875
500,000 Internet Capital Group,
Inc. 5 1/2%, 12/21/04............... 321,875
150,000 VerticalNet, Inc.
5 1/4%, 9/27/04..................... 441,000
------------
3,112,250
MEDICAL SERVICES
(0.6%)
250,000 Affymetrix, Inc.
5%, 10/1/06......................... 318,438
500,000 Wellpoint Health
Networks, Inc.
Zero Coupon, 7/2/19................. 340,000
------------
658,438
MEDICAL SUPPLIES
(1.2%)
1,000,000 Centocor, Inc.
4 3/4%, 2/15/05..................... 1,240,000
OILFIELD SERVICES/
EQUIPMENT (1.1%)
1,000,000 Diamond Offshore Drilling,
Inc. 3 3/4%, 2/15/07................ 1,143,750
--------------------------------------------------------------------------------
6
<PAGE>
Value Line Convertible Fund, Inc.
April 30, 2000
================================================================================
Principal
Amount Value
--------------------------------------------------------------------------------
PETROLEUM--
INTEGRATED (0.5%)
$ 500,000 Kerr-McGee Corp.
5 1/4%, 2/15/10..................... $ 540,000
PETROLEUM--
PRODUCING (1.1%)
2,000,000 Anadarko Petroleum Corp.
Zero Coupon, 3/07/20................ 1,165,000
R.E.I.T. (0.9%)
1,000,000 Healthcare Realty Trust,
Inc. 6.55%, 3/14/02................. 897,500
RETAIL--
SPECIAL LINES
(0.9%)
1,000,000 AnnTaylor Stores Corp.
0.55%, 6/18/19...................... 413,750
500,000 Charming Shoppes, Inc.
7 1/2%, 7/15/06..................... 506,250
------------
920,000
RETAIL STORE (1.2%)
1,000,000 Costco Companies Inc.
Zero Coupon, 8/19/17................ 1,268,750
SEMICONDUCTOR
(7.7%)
500,000 ASM Lithography
Holding N.V.
Series 144A,
4 1/4%, 11/30/04*................... 613,125
250,000 Advanced Energy
Industries, Inc.
5 1/4%, 11/15/06.................... 385,937
500,000 Amkor Technology, Inc.
Series 144A,
5%, 3/15/07*........................ 611,250
250,000 Burr-Brown Corp.
Series 144A,
4 1/4%, 2/15/07*.................... 325,313
250,000 Conexant Systems, Inc.
4 1/4%, 5/1/06...................... 665,625
250,000 Cypress Semiconductor
Corp. 4%, 2/1/05.................... 331,875
500,000 General Semiconductor,
Inc. 5 3/4%, 12/15/06............... 692,500
500,000 LSI Logic Corp.
4%, 2/15/05......................... 565,625
500,000 Lattice Semiconductor
Corp. 4 3/4%, 11/1/06............... 863,750
500,000 Level One
Communications, Inc.
4%, 9/1/04.......................... 2,067,500
1,000,000 Vitesse Semiconductor
Corp. Series 144A,
4%, 3/15/05*........................ 868,750
------------
7,991,250
SEMICONDUCTOR
CAPITAL
EQUIPMENT (0.9%)
500,000 Kulicke & Soffa Industries,
Inc. 4 3/4%, 12/15/06............... 921,250
TELECOMMUNICATIONS
EQUIPMENT (1.0%)
500,000 American Tower Corp.
2 1/4%, 10/15/09.................... 695,000
500,000 Efficient Networks, Inc.
Series 144A,
5%, 3/15/05*........................ 329,375
------------
1,024,375
--------------------------------------------------------------------------------
7
<PAGE>
Value Line Convertible Fund, Inc.
Schedule of Investments
================================================================================
Principal
Amount Value
--------------------------------------------------------------------------------
TELECOMMUNICATION
SERVICES (5.2%)
$1,000,000 Bell Atlantic Financial
Services Inc.
Series 144A,
4 1/4%, 9/15/05*.................... $ 1,257,500
200,000 CoreComm Ltd.
6%, 10/1/06......................... 256,250
500,000 ITC DeltaCom, Inc.
4 1/2%, 5/15/06..................... 694,375
1,000,000 Level 3 Communications,
Inc. 6%, 3/15/10.................... 896,250
500,000 NTL Inc. Series 144A,
5 3/4%, 12/15/09*................... 439,375
1,000,000 Nextel Communications,
Inc. Series 144A,
5 1/4%, 1/15/10*.................... 975,000
1,000,000 Primus
Telecommunications
Group, Inc. Series 144A,
5 3/4%, 2/15/07*.................... 851,250
------------
5,370,000
------------
TOTAL CONVERTIBLE
CORPORATE BONDS
& NOTES
(Cost $44,407,775) .................... $ 54,954,938
------------
Shares Value
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (21.1%)
BANK (2.1%)
10,000 Banco Commercial
Portugues S.A.
$4.00 exchangeable
Series "A".......................... $ 955,000
50,000 National Australia Bank
Ltd. Cap Units 7 7/8%,
exchangeable Pfd.................... 1,246,875
------------
2,201,875
CABLE TV (1.9%)
5,000 Adelphia Communications
Corp. 5 1/2%,
Series "D" Pfd...................... 768,750
7,000 Comcast Corp. 2%
10/15/29 (exchangeable
into Sprint Corporation--
PCS Group).......................... 730,625
2,500 Pegasus Communications
Corp. 6 1/2%,
Series "C" Pfd...................... 261,875
4,000 UnitedGlobalCom, Inc.
7%, Series "D" Pfd.................. 198,500
------------
1,959,750
ELECTRIC UTILITY--
CENTRAL (0.7%)
10,000 AES Trust III 6 3/4%,
Series 144A, Pfd.*.................. 713,125
ELECTRIC UTILITY--
WEST (0.8%)
10,000 Calpine Capital Trust
5 3/4%, Pfd......................... 841,250
ELECTRONICS (1.0%)
20,000 Titan Capital Trust 5 3/4%,
Series 144A Pfd.*................... 1,040,000
--------------------------------------------------------------------------------
8
<PAGE>
Value Line Convertible Fund, Inc.
April 30, 2000
================================================================================
Shares Value
--------------------------------------------------------------------------------
ENTERTAINMENT (0.8%)
4,000 Emmis Communications
Corp. 6 1/4%,
Series "A" Pfd...................... $ 240,000
10,000 Entercom Communications
Capital Trust 61/4%, Pfd. .......... 547,500
------------
787,500
INSURANCE--LIFE (2.2%)
40,000 MetLife Capital Trust I
8%, Pfd............................. 2,237,500
INTERNET (1.2%)
20,000 PSINet, Inc. 6 3/4%,
Series "C" Pfd...................... 925,000
5,000 Rhythms Netconnections,
Inc. 6 3/4%,
Series 144A Pfd.*................... 328,125
------------
1,253,125
PACKAGING &
CONTAINER (1.5%)
30,000 Sealed Air Corp. $2.00
exchangeable
Series "A" Pfd...................... 1,605,000
PETROLEUM--
PRODUCING (0.9%)
20,000 Apache Corp. 6 1/2%,
Series "C" Pfd...................... 886,250
RAILROAD (0.6%)
14,500 Union Pacific Capital
Trust 6 1/4%, Pfd................... 605,375
RECREATION (0.4%)
10,000 AMCV Capital Trust I
7%, Pfd............................. 428,750
TELECOMMUNICATIONS
EQUIPMENT (0.6%)
20,000 Loral Space &
Communications Ltd.
6%, Series 144A Pfd.*............... 647,500
TELECOMMUNICATION
SERVICES (5.3%)
10,000 BroadWing Inc.
6 3/4%, Pfd......................... 491,875
15,000 DECS Trust VI 6 1/4%,
exchangeable Pfd.
(exchangeable into
Metromedia
Fiber Network, Inc.) ............... 798,750
5,000 Global Crossing Ltd. 6 3/8%,
Series 144A Pfd.*................... 442,500
10,000 Globalstar
Telecommunications Ltd.
7%, Series "B"
144A Pfd.*.......................... 245,000
10,000 ICG Communications, Inc.
6 3/4%, Pfd......................... 627,500
10,000 MGC Communications Inc.
7 1/4%, Series "D" Pfd.............. 472,500
2,000 McLeodUSA, Inc. 6 3/4%,
Series "A" Pfd...................... 1,250,000
20,000 MediaOne Group, Inc.
7%, exchangeable Pfd................ 911,250
7,500 Network Plus Corp.
7 1/2%, Pfd......................... 275,625
------------
5,515,000
THRIFT (1.1%)
15,000 Bank United Corp.
8%, Pfd............................. 661,875
10,000 Sovereign Capital Trust II
7 1/2%, Unit (consisting
of 1 share 7 1/2%,
preferred stock and
1 warrant to purchase
5.3355 shares common)............... 469,375
------------
1,131,250
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $20,716,892) .................... 21,853,250
------------
--------------------------------------------------------------------------------
9
<PAGE>
Value Line Convertible Fund, Inc.
Schedule of Investments
================================================================================
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS (3.5%)
COMPUTER &
PERIPHERALS (2.7%)
20,000 Cisco Systems, Inc.**.................. $ 1,386,562
10,000 EMC Corp.**............................ 1,389,375
------------
2,775,937
RETAIL BUILDING
SUPPLY (0.8%)
15,000 Home Depot, Inc. (The)................. 840,938
TELECOMMUNICATION
SERVICES (0.0%)
1,314 McLeodUSA, Inc.
Class "A"**......................... 32,855
------------
TOTAL COMMON
STOCKS
(Cost $1,427,776) ..................... 3,649,730
------------
TOTAL INVESTMENT
SECURITIES (77.6%)
(Cost $66,552,443) .................... 80,457,918
------------
Principal
Amount Value
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (23.7%)
(including accrued interest)
$8,000,000 Collateralized by $6,363,000
U.S. Treasury Bonds 8 3/4%,
due 5/15/17, with a value
of $8,218,057 (with
Warburg Dillon Read LLC,
5.68%, dated 4/28/00,
due 5/1/00, delivery
value $8,003,787)................... $ 8,003,787
8,000,000 Collateralized by $8,250,000
U.S. Treasury Notes 6 1/8%,
due 8/15/07, with a value
of $8,186,338 (with State
Street Bank & Trust
Company, 5.67%, dated
4/28/00, due 5/1/00, delivery
value $8,003,780)................... 8,003,780
8,600,000 Collateralized by $8,450,000
U.S. Treasury Bonds 8 1/4%,
due 5/15/05, with a value
of $8,773,924 (with Morgan
Stanley Dean Witter &
Co., 5.65%, dated 4/28/00,
due 5/1/00, delivery
value $8,604,049)................... 8,604,049
------------
TOTAL REPURCHASE
AGREEMENTS (Cost $24,611,616) ........................... 24,611,616
------------
EXCESS OF LIABILITIES OVER
CASH AND RECEIVABLES (-1.3%) ............................ (1,310,866)
------------
NET ASSETS (100.0%) ..................................... $103,758,668
============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($103,758,668 / 6,267,992
shares outstanding) ..................................... $ 16.55
============
* Pursuant to Rule 144A under the Securities Act of 1933, this Security can
only be sold to qualified institutional investors.
** Non-income producing.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10
<PAGE>
Value Line Convertible Fund, Inc.
Statement of Assets and Liabilities
at April 30, 2000
================================================================================
Assets:
Investment securities, at value
(Cost--$66,552,443) .................................. $ 80,457,918
Repurchase agreements
(Cost--$24,611,616) .................................. 24,611,616
Cash ................................................... 77,369
Receivable for capital shares sold ..................... 1,188,069
Interest and dividends receivable ...................... 504,952
-------------
Total Assets ....................................... 106,839,924
-------------
Liabilities:
Payable for capital shares
repurchased .......................................... 2,965,398
Accrued expenses:
Advisory fee ......................................... 59,158
Other ................................................ 56,700
-------------
Total Liabilities .................................. 3,081,256
-------------
Net Assets ............................................. $ 103,758,668
=============
Net assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000,
outstanding 6,267,992 shares) ........................ $ 6,267,992
Additional paid-in capital ............................. 73,828,759
Undistributed net investment income .................... 379,255
Undistributed net realized gain
on investments ....................................... 9,377,187
Net unrealized appreciation
of investments ....................................... 13,905,475
-------------
Net Assets ......................................... $ 103,758,668
=============
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($103,758,668 / 6,267,992
shares outstanding) .............................. $ 16.55
=============
Statement of Operations
for the year ended April 30, 2000
================================================================================
Investment Income:
Interest ............................................... $ 2,342,605
Dividends .............................................. 853,132
-------------
Total Income ....................................... 3,195,737
-------------
Expenses:
Advisory fee ........................................... 599,379
Auditing and legal fees ................................ 39,364
Transfer agent ......................................... 37,805
Custodian fees ......................................... 29,450
Printing ............................................... 26,658
Registration and filing fees ........................... 18,773
Postage ................................................ 14,078
Directors' fees and expenses ........................... 12,438
Insurance, dues and other .............................. 8,127
Telephone .............................................. 6,583
-------------
Total Expenses before
custody credits .................................. 792,655
Less: custody credits .............................. (6,679)
-------------
Net Expenses ....................................... 785,976
-------------
Net Investment Income .................................. 2,409,761
-------------
Net Realized and Unrealized
Gain on Investments:
Net Realized Gain .................................. 15,545,541
Change in Net Unrealized
Appreciation ..................................... 5,770,571
-------------
Net Realized Gain and Change
in Net Unrealized Appreciation
on Investments ....................................... 21,316,112
-------------
Net Increase in Net Assets
from Operations ...................................... $ 23,725,873
=============
See Notes to Financial Statements.
--------------------------------------------------------------------------------
11
<PAGE>
Value Line Convertible Fund, Inc.
Statement of Changes in Net Assets
for the years ended April 30, 2000 and 1999
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 2000 April 30, 1999
-------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 2,409,761 $ 3,168,591
Net realized gain (loss) on investments ................... 15,545,541 (6,168,354)
Change in net unrealized appreciation ..................... 5,770,571 (952,017)
------------------------------
Net increase (decrease) in net assets from operations ..... 23,725,873 (3,951,780)
------------------------------
Distributions to Shareholders:
Net investment income ..................................... (2,174,561) (3,431,409)
Net realized gain from investment transactions ............ -- (3,713,370)
------------------------------
Total distributions ....................................... (2,174,561) (7,144,779)
------------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 342,538,029 176,887,275
Proceeds from reinvestment of distributions to shareholders 1,781,292 5,916,259
Cost of shares repurchased ................................ (331,389,237) (200,108,922)
------------------------------
Net increase (decrease) from capital share transactions ... 12,930,084 (17,305,388)
------------------------------
Total Increase (Decrease) in Net Assets ..................... 34,481,396 (28,401,947)
Net Assets:
Beginning of year ......................................... 69,277,272 97,679,219
------------------------------
End of year ............................................... $ 103,758,668 $ 69,277,272
==============================
Undistributed net investment income, at end of year ......... $ 379,255 $ 144,055
==============================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12
<PAGE>
Value Line Convertible Fund, Inc.
Notes to Financial Statements April 30, 2000
--------------------------------------------------------------------------------
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
amortizing 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. 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. Permanent differences are reclassified within the capital
accounts based on their federal tax basis treatment. Temporary differences do
not require reclassification.
(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.
--------------------------------------------------------------------------------
13
<PAGE>
Value Line Convertible Fund, Inc.
Notes to Financial Statements April 30, 2000
--------------------------------------------------------------------------------
2. Capital Share Transactions.
Transactions in capital stock were as follows:
Year ended Year ended
April 30, April 30,
2000 1999
------------------------------
Shares sold ............................... 22,847,309 13,575,401
Shares issued to shareholders
in reinvestment of
dividends ............................... 119,957 477,763
------------------------------
22,967,266 14,053,164
Shares repurchased ........................ 22,123,684 15,226,596
------------------------------
Net increase (decrease) ................... 843,582 (1,173,432)
==============================
3 Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Year ended
April 30, 2000
--------------
PURCHASES:
Investment Securities ................................ $81,306,201
===========
SALES OR REDEMPTIONS:
Investment Securities ................................ $85,870,357
===========
At April 30, 2000 the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes was $91,164,059. The aggregate
appreciation and depreciation of investments at April 30, 2000, based on a
comparison of investment values and their costs for federal income tax purposes,
was $18,617,765 and $4,712,290 respectively, resulting in a net appreciation of
$13,905,475.
4. Investment Advisory Contract, Management Fees, and Transactions with
Affiliates
An advisory fee of $599,379 was paid or payable to Value Line, Inc. (the
Adviser), for the year ended April 30, 2000. This was computed at the annual
rate of 3/4 of 1% of average daily net assets during the year 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.
For the year ended April 30, 2000, the Fund's expenses were reduced by $6,679
under a custody credit arrangement with the Custodian.
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 Adviser and/or affiliated companies owned 451,302 shares of the Fund's
capital stock, representing 7.2% of the outstanding shares at April 30, 2000. In
addition, certain officers and directors of the Fund owned 75,856 shares of the
Fund, representing 1.2% of the outstanding shares.
--------------------------------------------------------------------------------
14
<PAGE>
Value Line Convertible Fund, Inc.
Financial Highlights
--------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Years Ended April 30,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 12.77 $ 14.80 $ 13.07 $ 14.10 $ 11.79
------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .................. .43 .57 .65 .70 .66
Net gains or losses on securities
(both realized and unrealized) ....... 3.75 (1.33) 2.50 .50 2.33
------------------------------------------------------------------------------------
Total from investment operations ....... 4.18 (.76) 3.15 1.20 2.99
------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income ............................... (.40) (.60) (.67) (.65) (.68)
Distributions from net realized gains .. -- (.67) (.75) (1.58) --
------------------------------------------------------------------------------------
Total distributions .................... (.40) (1.27) (1.42) (2.23) (.68)
------------------------------------------------------------------------------------
Net asset value, end of year ............... $ 16.55 $ 12.77 $ 14.80 $ 13.07 $ 14.10
====================================================================================
Total return ............................... 33.21% -4.64% 25.04% 8.80% 26.07%
====================================================================================
Ratios/Supplemental Data:
Net assets, end of year (in thousands) ..... $ 103,759 $ 69,277 $ 97,679 $ 68,684 $ 72,620
Ratio of expenses to average net assets .... 1.00%(2) 1.00%(1) .98%(1) 1.01%(1) 1.08%
Ratio of net investment income
to average net assets .................... 3.03% 3.98% 4.63% 4.94% 5.14%
Portfolio turnover rate .................... 127% 123% 111% 164% 129%
</TABLE>
(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 0.99%
See Notes to Financial Statements.
--------------------------------------------------------------------------------
15
<PAGE>
Value Line Convertible Fund, Inc.
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders
of Value Line Convertible Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Convertible Fund, Inc.
(the "Fund") at April 30, 2000, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 2000 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
New York, New York 10036
June 5, 2000
--------------------------------------------------------------------------------
Federal Tax Status of Distributions (unaudited)
For corporate taxpayers 9.83% of the ordinary income distributions paid during
the calendar year 1999 qualify for the corporate dividends received deductions.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
16
<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 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers 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
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Bruce H. Alston
Vice President
Nathan N. J. Grant
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
This 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).
#513515
