================================================================================
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ANNUAL REPORT
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March 31, 1998
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Value Line
Asset
Allocation
Fund, Inc.
[LOGO]
---------------
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Asset Allocation Fund, Inc.
To Our Value Line Asset
================================================================================
Dear Shareholder:
We're pleased to report that the Value Line Asset Allocation Fund extended its
superb track record in the fiscal year ended March 31, 1998. Since inception on
August 24, 1993, your Fund remains the #1 performer among 78 funds in the
"flexible" fund category compiled by Lipper Analytical Services.
Your Fund's fiscal 1998 total return of 37.36% compared with a total return of
48.01% for the unmanaged Standard & Poor's 500 Stock Index and a total return of
12.39% for the unmanaged Lehman Brothers Government/Corporate Bond Index. This
performance was achieved despite an allocation to stocks of only about 45% of
total assets during the first seven months of the fiscal year, April through
October 1997. In November and December, we gradually raised the stock allocation
to 60%. January through March 1998 saw further increased investment in stocks by
the Fund, which ended the fiscal year with 78% of its assets invested in stocks,
18% in bonds, and 4% in cash equivalents. Asset allocation is determined by
Value Line's proprietary stock and bond models, which take into account a number
of economic and financial variables. Our stock model began to take a more
favorable view of the market in November, after interest rates declined and
stock prices fell back from their highs in response to the economic difficulties
in Asia.
A disciplined stock selection strategy is the key to your Fund's success. We
emphasize equities with strong earnings momentum and strong price momentum. Any
hint of a near-term problem in a stock impels us to seriously considering
selling. This strategy may not succeed for every stock in every instance--no
strategy does--but it puts the odds in our favor. We let these odds work for us
by spreading our bets over many stocks in many different industries. Very few
holdings make up even 0.5% of the Fund's total assets. The portfolio contains
about 300 stocks in all, and this wide diversification helps to hold down the
Fund's risk exposure. In addition, we generally strive to keep investment in the
volatile technology sector down to 20% of stockholdings or less. As to the size
of companies that we invest in, small-capitalization stocks currently represent
nearly one-half of the holdings, with the remainder weighted more toward mid-cap
stocks than large-cap equities.
Stock prices have risen strongly, and the market probably holds above-average
risk at the moment. We remain confident that our allocation models will alert us
to the right time to reduce the Fund's stock investments, but we will rely as
always on our disciplined stock-selection strategy to maximize returns and
minimize risk.
Thank you for investing with us.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
May 6, 1998
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2
<PAGE>
Value Line Asset Allocation Fund, Inc.
Allocation Fund Shareholders
================================================================================
Economic Observations
The business expansion continues to proceed at a healthy clip, as we make our
way through the second quarter of the year. True, the uptrend is unlikely to be
as uniformly strong in the current period and during the second half of the year
as it was in the opening quarter, when growth exceeded 4%. But, with most of the
key consumer and industrial indicators still in relatively good shape, and with
inflation continuing to be under control, growth could still average a solid
2.5%, or so, over the balance of the year. What's more, we would expect both
producer (or wholesale) and consumer prices to evidence little upward pressure.
The wild card in this forecast, of course, remains the Pacific Rim, which
continues to face the daunting task of turning itself around economically.
Obviously, the problems afflicting that part of the globe will lead to gradual
reductions in demand for goods and services produced in the United States.
Nonetheless, assuming that the affected nations take corrective actions in a
timely fashion, so that the situation eventually starts to stabilize, little
more than minor dislocations should be apparent here. At this juncture, we feel
that the current long business expansion can go on for several more years.
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3
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Value Line Asset Allocation Fund, Inc.
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE VALUE LINE ASSET ALLOCATION FUND, INC., LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX AND THE S&P INDEX
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Value Line Asset Lehman Aggregate
Allocation Fund S & P 500 Bond Index
--------------- --------- ----------
06/30/93 $10,000 $10,000 $10,000
09/30/93 $10,480 $10,051 $10,080
12/31/93 $10,596 $10,284 $10,051
03/31/94 $10,415 $ 9,897 $ 9,737
06/30/94 $10,275 $ 9,939 $ 9,615
09/30/94 $10,898 $10,425 $ 9,663
12/31/94 $10,961 $10,423 $ 9,669
03/31/95 $11,818 $11,435 $10,182
06/30/95 $12,757 $12,523 $10,843
09/30/95 $14,104 $13,515 $11,050
12/31/95 $14,919 $14,326 $11,565
03/31/96 $15,970 $15,094 $11,294
06/30/96 $17,383 $15,770 $11,347
09/30/96 $18,231 $16,254 $11,547
12/31/96 $18,888 $17,607 $11,901
03/31/97 $18,764 $18,082 $11,798
06/30/97 $20,635 $21,239 $12,231
09/30/97 $22,836 $22,831 $12,638
12/31/97 $22,852 $23,487 $13,010
03/31/98 $25,774 $26,763 $13,212
From 8/24/93 to 3/31/98
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. The Lehman Brothers Government/Corporate Bond
Index is an unmanaged index that generally represents the U.S. Bond market, with
issues having an average maturity of 9.8 years. The graphic representation
includes interest reinvested.
Performance Data:*
Average
Annual Total
Return
---------
1 year ended 3/31/98................... 37.36%
3 years ended 3/31/98.................. 29.68%
From 8/24/93 (commencement
of operations) to 3/31/98............ 22.85%
* The performance data quoted represent past performance and are no guarantee
of future performance. The average annual total return 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.
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4
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments March 31, 1998
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Shares Value
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COMMON STOCKS (78.3%)
ADVERTISING (0.7%)
13,000 Big Flower Press
Holdings, Inc.* ........................ $ $394,875
10,400 Omnicom Group, Inc. ...................... 489,450
-----------
884,325
AEROSPACE/DEFENSE (1.4%)
9,750 AAR Corp. ................................ 265,688
21,500 Aeroflex Inc.* ........................... 284,875
11,000 Kellstrom Industries, Inc.* .............. 277,062
3,000 Primex Technologies, Inc. ................ 138,000
8,500 Special Devices, Inc.* ................... 242,250
10,000 Thiokol Corp. ............................ 483,125
-----------
1,691,000
AIR TRANSPORT (2.1%)
12,000 Airborne Freight Corp. ................... 451,500
5,000 ASA Holdings, Inc. ....................... 184,063
12,000 Comair Holdings, Inc. .................... 318,000
8,500 Expeditors International of
Washington, Inc. ....................... 364,437
12,000 Mesaba Holdings, Inc.* ................... 377,250
5,000 Midwest Express
Holdings, Inc.* ........................ 245,000
7,000 SkyWest, Inc. ............................ 255,500
12,000 Southwest Airlines Co. ................... 354,750
-----------
2,550,500
APPAREL (0.5%)
3,500 Jones Apparel Group, Inc.* ............... 192,719
7,000 Tommy Hilfiger Corp.* .................... 420,437
-----------
613,156
AUTO & TRUCK (0.5%)
10,200 Navistar International Corp.* ............ 357,000
4,000 PACCAR Inc. .............................. 238,250
-----------
595,250
AUTO PARTS--ORIGINAL
EQUIPMENT (0.9%)
8,000 Arvin Industries, Inc. ................... 327,500
9,000 Gentex Corp.* ............................ 305,438
5,800 Lear Corp.* .............................. 326,975
3,000 Tower Automotive, Inc.* .................. 135,000
-----------
1,094,913
AUTO PARTS--
REPLACEMENT (0.7%)
8,000 Federal-Mogul Corp. ...................... 425,500
5,000 SPX Corp.* ............................... 381,562
6,000 Wynns International, Inc. ................ 136,500
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943,562
BANK (0.3%)
11,000 North Fork
Bancorporation, Inc..................... 424,875
BANK--MIDWEST (0.5%)
4,000 Northern Trust Corp. ..................... 299,000
8,600 Norwest Corp. ............................ 357,438
-----------
656,438
BEVERAGE--
ALCOHOLIC (0.3%)
7,000 Canandaigua Brands, Inc.
Class "A"*.............................. 399,875
BUILDING
MATERIALS (1.1%)
10,500 Elcor Corp. .............................. 282,188
3,000 Martin Marietta Materials, Inc. .......... 129,562
5,000 Masco Corp. .............................. 297,500
9,000 TJ International, Inc. ................... 288,000
13,500 Thomas Industries, Inc. .................. 300,375
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1,297,625
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5
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments
================================================================================
Shares Value
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CABLE TV (0.3%)
12,000 Tele-Communications, Inc.
TCI Group Series "A"* .................. $ 373,125
CEMENT &
AGGREGATES (0.4%)
10,000 Centex Construction
Products, Inc. ........................... 364,375
2,000 Southdown, Inc. .......................... 139,375
-----------
503,750
CHEMICAL--
DIVERSIFIED (0.2%)
7,000 Dexter Corp. ............................. 289,625
CHEMICAL--
SPECIALTY (0.5%)
3,500 LeaRonal Inc. ............................ 101,938
11,000 NL Industries, Inc.* ..................... 191,812
4,800 Tredegar Industries, Inc. ................ 347,700
-----------
641,450
COAL/ALTERNATE
ENERGY (0.4%)
10,000 AES Corp.* ............................... 524,375
COMPUTER &
PERIPHERALS (1.6%)
13,000 Digi International Inc.* ................. 358,312
10,000 EMC Corp.* ............................... 378,125
6,000 Gateway 2000, Inc.* ...................... 281,625
9,000 Pinnacle Systems, Inc.* .................. 340,875
7,000 Rainbow Technologies, Inc.* .............. 180,250
20,000 Unisys Corp.* ............................ 380,000
-----------
1,919,187
COMPUTER SOFTWARE
& SERVICES (7.5%)
7,000 Analytical Surveys, Inc.* . .............. 358,750
6,400 Autodesk, Inc. ........................... 276,000
9,700 Cadence Design
Systems, Inc.* ......................... 335,863
5,000 CIBER, Inc.* ............................. 349,687
8,500 Compuware Corp.* ......................... 419,688
7,000 Computer Horizons Corp.* ................. 351,750
7,000 DST Systems, Inc.* ....................... 367,938
7,000 Documentum, Inc.* ........................ 378,875
7,500 Engineering Animation Inc.* .............. 311,250
7,000 FactSet Research
Systems, Inc.* ......................... 248,500
6,000 Hyperion Software Corp.* ................. 265,500
7,000 Information Management
Resources, Inc.* ....................... 412,125
6,000 JDA Software Group, Inc.* . .............. 318,750
7,500 Keane, Inc.* ............................. 423,750
6,300 Legato Systems, Inc.* .................... 374,063
26,000 Medaphis Corp.* .......................... 271,375
9,000 Mercury Interactive Corp.* ............... 328,500
6,500 Paychex, Inc. ............................ 374,969
11,000 PeopleSoft, Inc.* ........................ 579,562
11,000 Platinum Software Corp.* ................. 255,750
4,000 Policy Management
Systems Corp.* ......................... 321,250
8,000 Progress Software Corp.* ................. 240,000
6,000 Saville Systems,
PLC (ADR)* ............................. 307,500
10,000 Siebel Systems Inc.* ..................... 287,500
8,500 SunGard Data Systems Inc.* ............... 312,906
15,000 Timberline Software Corp. ................ 235,313
5,700 Veritas Software Corp.* .................. 337,012
6,000 Visio Corp.* ............................. 258,000
-----------
9,302,126
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6
<PAGE>
Value Line Asset Allocation Fund, Inc.
March 31, 1998
================================================================================
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED COMPANIES (1.9%)
6,000 Danaher Corp. ............................ $ 455,625
2,500 NACCO Industries, Inc. ................... 335,000
8,000 Nortek, Inc.* ............................ 256,000
5,500 Sequa Corp.* ............................. 406,656
10,000 Tyco International, Ltd. ................. 546,250
8,000 Varlen Corp. ............................. 308,000
-----------
2,307,531
DRUG (2.5%)
6,000 Biovail Corp. International* ............. 289,500
8,550 ICN Pharmaceuticals Inc. ................. 421,087
5,000 Incyte Pharmacuticals Inc.* .............. 233,750
6,500 MedImmune, Inc.* ......................... 358,313
3,200 Merck & Co., Inc. ........................ 410,800
6,000 NBTY, Inc.* .............................. 364,500
6,500 Quintiles Transnational
Corp.* ................................. 313,219
6,000 Schering-Plough Corp. .................... 490,125
5,500 Sepracor Inc.* ........................... 234,437
-----------
3,115,731
ELECTRICAL EQUIPMENT (0.8%)
7,000 C & D Technologies, Inc. ................. 364,438
7,000 Kuhlman Corp. ............................ 340,812
7,500 Technitrol Inc. .......................... 293,906
-----------
999,156
ELECTRONICS (1.0%)
10,000 Gemstar International
Group Ltd.* ............................ 300,000
8,400 Lexmark International
Group, Inc. Class "A" .................. 379,050
7,200 Symbol Technologies, Inc. ................ 354,150
9,000 Telxon Corp. ............................. 238,500
-----------
1,271,700
ENTERTAINMENT (1.6%)
14,544 Chancellor Media Corp.* .................. 667,206
5,000 Clear Channel
Communications, Inc.* .................. 490,000
8,000 Jacor Communications, Inc.* .............. 472,000
6,000 Sinclair Broadcast
Group, Inc. Class "A"* ................. 345,750
-----------
1,974,956
ENVIRONMENTAL (0.7%)
11,000 Allied Waste Industries, Inc.* ........... 274,656
7,000 American Disposal
Services, Inc.* ........................ 264,250
6,300 USA Waste Services, Inc.* . .............. 280,744
-----------
819,650
FINANCIAL
SERVICES (0.8%)
13,000 AMRESCO, Inc.* ........................... 425,750
9,500 Mutual Risk Management Ltd.321,813
5,000 Newcourt Credit Group Inc. ............... 250,000
-----------
997,563
FOOD PROCESSING (1.0%)
10,000 Interstate Bakeries Corp. ................ 323,125
12,000 Michael Foods, Inc. ...................... 321,000
9,350 Suiza Foods Corp.* ....................... 575,025
-----------
1,219,150
FOOD WHOLESALERS (0.2%)
7,425 U.S. Foodservice* ........................ 273,333
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7
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments
================================================================================
Shares Value
- --------------------------------------------------------------------------------
FURNITURE/HOME
FURNISHINGS (2.2%)
7,000 CORT Business Services
Corp.* ................................... $ 332,500
9,500 Department 56, Inc.* ..................... 361,000
8,000 Ethan Allen Interiors, Inc. .............. 478,000
12,500 Furniture Brands
International, Inc.* ..................... 402,344
8,000 HON Industries, Inc. ..................... 294,000
10,000 Miller (Herman), Inc. .................... 335,312
13,000 Mohawk Industries, Inc.* ................. 409,500
7,000 Winsloew Furniture, Inc.* . .............. 154,000
-----------
2,766,656
GROCERY (1.4%)
7,800 Albertson's, Inc. ........................ 410,475
8,000 Kroger Co.* .............................. 369,500
11,600 Safeway Inc.* ............................ 428,475
7,500 Whole Foods Market, Inc.* . .............. 523,125
-----------
1,731,575
HEALTHCARE
INFORMATION
SYSTEM (0.9%)
7,400 HBO & Co. ................................ 446,775
15,000 HealthPlan Services Corp. ................ 394,688
4,000 Shared Medical
Systems Corp. .......................... 313,500
-----------
1,154,963
HOME APPLIANCE (0.3%)
8,500 Maytag Corp. ............................. 406,406
HOMEBUILDING (1.6%)
8,000 Centex Corp. ............................. 305,000
16,000 D.R. Horton, Inc. ........................ 340,000
8,000 Fairfield Communities, Inc.* ............. 176,500
10,000 Kaufman & Broad
Home Corp. ............................. 325,625
9,500 NVR, Inc.* ............................... 299,844
12,000 Ryland Group Inc. ........................ 331,500
13,000 Standard Pacific Corp. ................... 197,437
-----------
1,975,906
HOTEL/GAMING (0.3%)
2,775 Promus Hotel Corp.* ...................... 132,506
10,000 Rio Hotel & Casino, Inc.* . .............. 259,375
-----------
391,881
HOUSEHOLD
PRODUCTS (0.5%)
7,000 Lancaster Colony Corp. ................... 297,063
7,000 Sunbeam Corp. ............................ 308,437
-----------
605,500
INDUSTRIAL
SERVICES (3.3%)
5,000 ABM Industries, Inc. ..................... 155,313
6,000 Central Parking Corp. .................... 286,500
8,500 Computer Learning
Centers, Inc.* ......................... 142,375
12,000 Labor Ready Inc.* ........................ 386,250
7,000 MSC Industrial Direct
Co., Inc. Class "A"* ................... 379,312
6,000 Metzler Group Inc.* ...................... 298,500
7,500 On Assignment Inc.* ...................... 222,188
17,000 Personnel Group of
America Inc.* ............................ 386,750
18,000 RCM Technologies Inc.* ................... 483,750
6,600 Robert Half
International, Inc.* ................... 316,800
12,500 Romac International, Inc.* ............... 343,750
10,000 Source Services Corp.* ................... 276,250
15,000 Western Staff Services, Inc.* ............ 356,250
-----------
4,033,988
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8
<PAGE>
Value Line Asset Allocation Fund, Inc.
March 31, 1998
================================================================================
Shares Value
- --------------------------------------------------------------------------------
INSURANCE--
DIVERSIFIED (1.9%)
4,800 CMAC Investment Corp. .................... $ 320,400
3,500 Exel Ltd. ................................ 271,250
12,100 Fidelity National Financial Inc. ......... 444,675
10,600 Horace Mann Educators Corp. .............. 372,325
8,000 LandAmerica Financial
Group, Inc. ............................ 362,000
2,000 Stewart Information
Services Corp. ......................... 61,500
12,000 Triad Guaranty Inc.* ..................... 492,000
-----------
2,324,150
INSURANCE--PROPERTY/
CASUALTY (1.1%)
4,000 Executive Risk Inc. ...................... 285,000
5,300 Fremont General Corp. .................... 311,706
6,200 Mercury General Corp. .................... 387,888
8,000 State Auto Financial Corp. ............... 318,000
-----------
1,302,594
INTERNET (1.1%)
6,000 Excite Inc.* ............................. 305,625
12,000 IDT Corp.* ............................... 450,000
14,000 Infoseek Corp.* .......................... 252,875
8,000 Sapient Corp.* ........................... 379,000
-----------
1,387,500
MACHINERY (2.7%)
5,000 Aeroquip-Vickers Inc. .................... 289,063
12,400 Applied Power, Inc. Class "A" ............ 477,400
11,500 Chart Industries, Inc. ................... 342,125
6,000 Commercial Intertech Corp. ............... 143,250
12,000 Gardner Denver
Machinery Inc.* ........................ 355,500
10,000 Gehl Co.* ................................ 213,750
9,000 Gencor Industries, Inc. .................. 261,562
9,000 Graco Inc. ............................... 272,813
30,000 International Comfort
Products Corp. ......................... 266,250
12,000 MotivePower Industries, Inc.* ............ 331,500
14,000 Terex Corp.* ............................. 378,875
-----------
3,332,088
MANUFACTURED HOUSING/
RECREATIONAL
VEHICLES (0.6%)
7,000 Fleetwood Enterprises, Inc. .............. 325,937
10,000 Monaco Coach Corp.* ...................... 392,500
-----------
718,437
MEDICAL SERVICES (2.8%)
15,000 Cyberonics Inc.* ......................... 478,125
3,000 Express Scripts Inc.
Class "A"* ............................. 254,344
20,000 Hanger Orthopedic
Group, Inc.* ........................... 336,250
16,000 Hooper Holmes, Inc. ...................... 342,000
11,000 Osteotech Inc.* .......................... 284,625
13,000 PSS World Medical Inc.* .................. 305,500
8,000 Renal Care Group, Inc.* .................. 304,000
10,000 Res Care Inc.* ........................... 372,500
7,000 Rexall Sundown Inc.* ..................... 238,437
8,000 Total Renal Care
Holdings, Inc.* ........................ 266,500
4,600 Universal Health Services,
Inc. Class "B"* ........................ 265,650
-----------
3,447,931
MEDICAL
SUPPLIES (2.4%)
4,000 AmeriSource Health Corp.
Class "A"* ............................. 240,500
8,200 Arterial Vascular
Engineering Inc.* ...................... 300,325
10,000 Cholestech Corp.* ........................ 150,000
12,000 Cooper Companies, Inc.* .................. 509,250
5,000 Guidant Corp. ............................ 366,875
14,000 ICU Medical Inc.* ........................ 211,750
6,000 Safeskin Corp.* .......................... 443,250
4,300 Sofamor/Danek Group Inc.* . .............. 366,575
6,300 STERIS Corp.* ............................ 340,200
-----------
2,928,725
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9
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments
================================================================================
Shares Value
- --------------------------------------------------------------------------------
METAL
FABRICATING (0.3%)
7,200 Trinity Industries, Inc. ................. $ 395,100
NEWSPAPER (0.3%)
5,000 New York Times Co.
Class "A" .............................. 350,000
OFFICE EQUIPMENT &
SUPPLIES (1.3%)
18,400 Day Runner Inc.* ......................... 409,400
12,000 Office Depot Inc..* ...................... 373,500
7,500 United Stationers Inc.* .................. 463,594
3,000 Xerox Corp. .............................. 319,312
-----------
1,565,806
OILFIELD SERVICES/
EQUIPMENT (0.1%)
6,000 Tuboscope Inc.* .......................... 114,000
PACKAGING &
CONTAINER (0.3%)
5,000 Sealed Air Corp.* ........................ 327,500
PAPER & FOREST
PRODUCTS (0.3%)
11,000 Mail-Well, Inc.* ......................... 416,625
PETROLEUM--
PRODUCING (0.1%)
5,000 Basin Exploration Inc.* .................. 103,125
PRECISION
INSTRUMENT (0.8%)
8,000 IFR Systems Inc. ......................... 178,000
15,000 Newport Corp. ............................ 296,250
4,000 VWR Scientific
Products Corp.* ........................ 141,250
7,200 Waters Corp.* ............................ 359,550
-----------
975,050
PUBLISHING (1.1%)
5,500 CMG Informaion
Services, Inc.* ........................ 318,656
7,000 Consolidated Graphics,
Inc.* .................................. 405,125
18,000 Hollinger International, Inc.
Class "A" .............................. 299,250
9,000 Meredith Corp. ........................... 379,125
-----------
1,402,156
RAILROAD (0.2%)
17,000 Johnstown America
Industries, Inc.* ...................... 278,375
RECREATION (1.5%)
9,000 Action Performance
Companies, Inc.* ....................... 316,688
9,000 Bally Total Fitness
Holding Corp.* ......................... 283,500
6,000 Carnival Corp. Class "A" ................. 418,500
8,000 First Years Inc. ......................... 281,000
9,000 Harley-Davidson Inc. ..................... 297,000
13,000 THQ, Inc.* ............................... 303,875
-----------
1,900,563
RESTAURANT (1.6%)
19,000 Brinker International Inc.* .............. 415,625
6,420 CKE Restaurants, Inc. .................... 235,935
13,000 Landry's Seafood
Restaurants, Inc.* ..................... 399,750
10,500 ShowBiz Pizza Time, Inc.* . .............. 349,781
7,000 Sonic Corp.* ............................. 234,500
15,000 WSMP, Inc.* .............................. 318,750
-----------
1,954,341
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<PAGE>
Value Line Asset Allocation Fund, Inc.
March 31, 1998
================================================================================
Shares Value
- --------------------------------------------------------------------------------
RETAIL--SPECIAL
LINES (6.1%)
10,500 American Eagle
Outfitters Inc.* ....................... $ 462,000
18,000 Ashworth Inc.* ........................... 308,250
8,000 Barnes & Noble Inc.* ..................... 312,000
7,500 Bed Bath & Beyond Inc.* .................. 346,406
9,000 Best Buy Co., Inc.* ...................... 599,625
5,000 Brylane Inc.* ............................ 280,313
7,000 Dollar Tree Stores Inc.* ................. 371,875
11,000 Dress Barn, Inc. (The)* .................. 316,250
14,000 Fingerhut Companies, Inc. ................ 363,125
10,000 Fossil Inc.* ............................. 323,750
5,000 Garden Ridge Corp.* ...................... 108,125
9,000 General Nutrition
Companies, Inc.* ....................... 357,750
8,000 Goody's Family
Clothing, Inc.* ........................ 354,000
7,000 Insight Enterprises Inc.* . .............. 284,375
6,000 Lands' End, Inc.* ........................ 221,250
5,000 Linens `N' Things, Inc.* ................. 274,687
12,000 Media Arts Group Inc.* ................... 237,000
8,000 Michaels Stores Inc.* .................... 299,000
3,500 Payless ShoeSource Inc.* ................. 263,375
16,500 Pier 1 Imports, Inc. ..................... 447,563
9,000 TJX Companies, Inc. ...................... 407,250
6,000 Tandy Corp. .............................. 282,000
7,000 Wet Seal Inc.* ........................... 264,687
-----------
7,484,656
RETAIL BUILDING
SUPPLIES (0.4%)
6,200 Lowe's Companies, Inc. ................... 435,162
RETAIL STORE (4.1%)
5,000 Ames Department
Stores, Inc.* .......................... 105,625
13,000 Bon Ton Stores Inc.* ..................... 198,250
6,000 Buckle, Inc.* ............................ 300,750
4,700 Consolidated Stores Corp.* ............... 201,806
8,000 Costco Companies, Inc.* .................. 427,000
3,000 Dayton-Hudson Corp. ...................... 264,000
12,000 Family Dollar Stores, Inc. ............... 456,000
12,500 Fred's Inc. .............................. 310,938
3,500 Kohl's Corp.* ............................ 286,125
9,500 Meyer (Fred), Inc.* ...................... 438,781
7,500 99 Cents Only Stores* .................... 262,031
6,250 Pacific Sunwear of
California, Inc.* ...................... 259,375
9,000 Party City Corp.* ........................ 304,875
8,200 Stage Stores Inc.* ....................... 423,325
12,000 Trans World
Entertainment Corp.* ................... 333,000
9,000 Wal-Mart Stores, Inc. .................... 457,313
-----------
5,029,194
SEMICONDUCTOR (0.9%)
7,000 Integrated Circuit
Systems, Inc.* ......................... 146,563
14,000 Integrated Device
Technology Inc.* ....................... 196,875
8,000 QLogic Corp.* ............................ 284,000
6,000 Siliconix Inc.* .......................... 225,000
6,000 Vitesse Semiconductor Corp.* ............. 282,937
-----------
1,135,375
SHOE (0.5%)
12,000 Maxwell Shoe, Co., Inc.
Class "A"* ............................. 189,750
10,000 Rocky Shoes & Boots, Inc.* ............... 160,625
11,000 Wolverine World Wide, Inc. ............... 310,750
-----------
661,125
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments
================================================================================
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS
EQUIPMENT (0.7%)
7,500 AFC Cable Systems, Inc.* ................. $ 291,563
15,000 Applied Signal
Technology Inc.* ....................... 270,000
7,000 Tekelec* ................................. 317,625
-----------
879,188
TELECOMMUNICATIONS
SERVICE (2.6%)
6,000 AirTouch
Communications Inc.* ................... 293,625
9,000 Aliant Communications Inc. ............... 306,000
5,000 Century Telephone
Enterprises Inc. ....................... 305,625
5,600 Dycom Industries, Inc.* .................. 157,150
9,000 GeoTel
Communications Corp.* .................. 248,625
9,000 ICG Communications Inc.* ................. 335,250
17,000 Mobile Telecommunication
Technologies Corp.* .................... 380,375
5,000 Pacific Gateway
Exchange Inc.* ......................... 286,250
8,000 SmartTalk TeleSevices Inc.* .............. 255,500
8,500 United Video Satellite
Group, Inc. Class "A"* ................. 361,250
7,000 World Access Inc.* ....................... 227,500
-----------
3,157,150
TEXTILE (0.8%)
11,000 Crown Crafts Inc. ........................ 230,313
8,000 Interface Inc. Class "A" ................. 332,500
9,200 Pillowtex Corp. .......................... 445,625
-----------
1,008,438
TOBACCO (0.3%)
7,000 Universal Corp. .......................... 308,437
TOILETRIES/
COSMETICS (0.2%)
12,000 Chattem Inc.* ............................ 303,000
TRUCKING/
TRANSPORTATION &
LEASING (0.3%)
10,000 MS Carriers Inc.* ........................ 338,750
-----------
TOTAL COMMON STOCKS
(Cost $73,942,014) ....................... 96,715,343
-----------
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Asset Allocation Fund, Inc.
March 31, 1998
================================================================================
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (11.1%)
$3,000,000 United States Treasury
Notes 6-3/8%, 5/15/00................... $ 3,044,460
5,000,000 United States Treasury
Notes 6-1/2%, 5/31/02................... 5,144,700
2,000,000 Unites States Treasury
Notes 5-7/8%, 11/15/05.................. 2,015,060
3,000,000 United States Treasury
Bonds 7-1/4%, 8/15/22................... 3,462,090
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $13,068,982) ..................... 13,666,310
------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (6.7%)
2,000,000 Federal Home Loan Banks
5.625%, 3/19/01......................... 1,989,460
1,000,000 Federal Home Loan Banks
5.40%, 1/15/03.......................... 981,480
3,400,000 Federal Home Loan
Mortgage Corp. 7.10%,
4/10/07................................. 3,655,816
1,600,000 Federal National Mortgage
Association 6.50%,
7/16/07 ................................ 1,655,312
------------
TOTAL U.S.
GOVERNMENT
AGENCY
OBLIGATIONS
(Cost $8,231,230) ........................ 8,282,068
------------
TOTAL INVESTMENT
SECURITIES (96.1%)
(Cost $95,242,226) ....................... 118,663,721
------------
REPURCHASE
AGREEMENT (4.0%)
(including accrued interest)
$4,900,000 Collateralized by $3,565,000
U.S. Treasury Bonds 12%,
5/15/05, with a value of
$5,008,006. (with
Morgan Stanley & Co.,
Inc. 5.92%, dated
3/31/98, due 4/1/98,
delivery value
$4,900,806)............................. 4,900,806
------------
EXCESS OF LIABILITIES
OVER CASH AND
OTHER ASSETS (-0.1%) ................ (76,321)
------------
NET ASSETS (100%) ................... $123,488,206
============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE,
PER OUTSTANDING SHARE
($123,488,206 / 7,568,988
shares outstanding) ................. $ 16.32
============
* Non-income producing.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<PAGE>
Value Line Asset Allocation Fund, Inc.
Statement of Assets and Liabilities
at March 31, 1998
================================================================================
Assets:
Investment securities, at value
(Cost--$95,242,226) ..................................... $118,663,721
Repurchase agreement
(Cost--$4,900,806) ...................................... 4,900,806
Cash ...................................................... 34,969
Dividends and interest receivable ......................... 426,064
Receivable for securities sold ............................ 403,268
Receivable for capital shares sold ........................ 172,253
Deferred organization costs (note 2) ...................... 5,238
------------
Total Assets ........................................ 124,606,319
------------
Liabilities:
Payable for securities purchased .......................... 805,250
Payable for capital shares repurchased .................... 178,647
Accrued expenses:
Advisory fee payable .................................... 65,611
Service and distribution plan
fees payable .......................................... 24,941
Other ................................................... 43,664
------------
Total Liabilities ................................... 1,118,113
------------
Net Assets ................................................ $123,488,206
============
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 7,568,988 shares) ........................... $ 7,569
Additional paid-in capital ................................ 97,391,982
Undistributed investment
income--net ............................................. 229,747
Accumulated net realized gain
on investments .......................................... 2,437,413
Unrealized net appreciation of
investments ............................................. 23,421,495
------------
Net Assets ................................................ $123,488,206
============
Net Asset Value, Offering and
Redemption Price, per
Outstanding Share
($123,488,206 / 7,568,988
shares outstanding) ..................................... $ 16.32
============
Statement of Operations
for the year ended March 31, 1998
================================================================================
Investment Income:
Interest income .......................................... $ 2,294,539
Dividend income (net of foreign
withholding tax of $242) ............................... 237,648
------------
Total Income ....................................... 2,532,187
------------
Expenses:
Advisory fee ............................................. 630,175
Service and distribution plan fee ........................ 242,375
Custodian fees ........................................... 60,986
Auditing and legal fees .................................. 33,061
Accounting & bookkeeping expense ......................... 32,400
Registration and filing fees ............................. 32,092
Printing ................................................. 20,430
Directors' fees and expenses ............................. 20,149
Transfer agent fees ...................................... 16,880
Amortization of deferred organization
costs (note 2) ......................................... 13,092
Insurance, dues and other ................................ 14,213
------------
Total Expenses before
Custody Credits .................................. 1,115,853
Less: Custody Credits .............................. (9,123)
------------
Net Expenses ....................................... 1,106,730
------------
Investment Income--Net ................................... 1,425,457
------------
Realized and Unrealized Gain on
Investments--Net:
Realized Gain--Net (includes
$1,024,680 loss on futures
contracts) ......................................... 10,804,109
Change in Unrealized Appreciation .................... 18,714,947
------------
Net Realized Gain and Net
Unrealized Appreciation of
Investments ............................................ 29,519,056
------------
Net Increase in Net Assets
from Operations ........................................ $ 30,944,513
============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14
<PAGE>
Value Line Asset Allocation Fund, Inc.
Statement of Changes in Net Assets
for the years ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, March 31,
1998 1997
------------------------------
<S> <C> <C>
Operations:
Investment income--net ............................................ $ 1,425,457 $ 1,306,323
Realized gain on investments--net ................................. 10,804,109 10,113,531
Net change in unrealized appreciation (depreciation) on investments 18,714,947 (1,342,707)
------------------------------
Net increase in net assets from operations ........................ 30,944,513 10,077,147
------------------------------
Distributions to Shareholders:
Investment income--net ............................................ (1,575,920) (1,023,047)
Realized gains--net ............................................... (11,263,524) (11,007,991)
------------------------------
Total distributions ............................................... (12,839,444) (12,031,038)
------------------------------
Capital Share Transactions:
Net proceeds from sale of shares .................................. 36,166,180 30,217,220
Net proceeds from reinvestment of distributions to shareholders ... 11,956,210 11,783,049
Cost of shares repurchased ........................................ (17,720,083) (20,868,278)
------------------------------
Increase from capital share transactions .......................... 30,402,307 21,131,991
------------------------------
Total Increase ...................................................... 48,507,376 19,178,100
Net Assets:
Beginning of year ................................................. 74,980,830 55,802,730
------------------------------
End of year ....................................................... $ 123,488,206 $ 74,980,830
------------------------------
Undistributed investment income-net, at end of year ................. $ 229,747 $ 380,210
==============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Asset Allocation Fund, Inc.
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
Value Line Asset Allocation Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which seeks to achieve a high total investment
return consistent with reasonable risk by investing primarily in a broad range
of common stocks, bonds and money market instruments. The Fund will attempt to
achieve its objective by following an asset allocation strategy, based on data
derived from computer models for the stock and bond markets, that shifts the
assets of the Fund among equity, debt and money market securities as the models
indicate and its investment adviser, Value Line, Inc. (the "Adviser"), deems
appropriate.
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. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales price on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
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 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 applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, 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.
- --------------------------------------------------------------------------------
16
<PAGE>
Value Line Asset Allocation Fund, Inc.
March 31, 1998
================================================================================
(F) Financial Futures Contracts. A financial futures contract is an agreement
between two parties to buy or sell financial instruments at a set price on a
future date. Upon entering into such a contract the Fund is required to pledge
to the broker cash, or U.S. Government securities, equal to the minimum "initial
margin" requirements of the applicable futures exchange. Pursuant to the
contract, the Fund agrees to receive from or to pay the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such receipts or
payments are known as "variation margin" and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The Fund may enter into futures contracts only on exchanges or boards of trade.
The exchange or board of trade acts as the counterparty to each futures
transaction, therefore, the Fund's credit risk is limited to failure of the
exchange or board of trade.
The Fund invested a portion of its liquid assets in long and short stock index
futures contracts to more fully participate in the market. Use of long futures
contracts subject the Fund to risk of loss up to the amount of the value of the
contract. Use of short futures contracts subject the Fund to unlimited risk of
loss.
As of March 31, 1998, the Fund had no outstanding futures contracts.
2. Organization Costs
Costs of $66,040 incurred in connection with the Fund's organization and initial
registration have been deferred and are being amortized over sixty months
beginning at the commencement of operations of the Fund. In the event any of the
initial shares of the Fund are redeemed by the holder thereof during the
five-year amortization period, the redemption proceeds will be reduced by a pro
rata portion of any unamortized deferred organizational expenses in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
3. Capital Share Transactions
Transactions in capital stock were as follows:
Year Ended Year Ended
March 31, March 31,
1998 1997
---------------------
Shares sold ............... 2,368,020 2,033,628
Shares issued to
shareholders in
reinvestment of dividends
and distributions ....... 850,954 870,240
---------------------
3,218,974 2,903,868
Shares repurchased ........ 1,148,119 1,354,654
---------------------
Net increase .............. 2,070,855 1,549,214
=====================
4. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
Year Ended
March 31, 1998
------------
PURCHASES:
U.S. Treasury Obligations and
U.S. Government Obligations ... $ 24,202,796
Other Investment Securities ..... 132,285,335
------------
$156,488,131
============
SALES:
U.S. Treasury Obligations and
U.S. Government Obligations ... $ 23,301,976
Other Investment Securities ..... 101,899,107
------------
$125,201,083
============
At March 31, 1998, the aggregate cost of investment securities and repurchase
agreement for federal income tax purposes was $100,165,215. The aggregate
appreciation and depreciation of investments at March 31, 1998, based on a
comparison of investment values and their costs for federal income tax purposes
was $23,933,087 and $533,775, respectively, resulting in a net appreciation of
$23,399,312.
- --------------------------------------------------------------------------------
17
<PAGE>
Value Line Asset Allocation Fund, Inc.
Notes to Financial Statements March 31, 1998
================================================================================
5. Advisory Fees, Service and Distribution Plan Fees and Transactions With
Affiliates
An advisory fee of $630,175 was paid or payable to Value Line, Inc.,
the Fund's investment adviser (the "Adviser"), for the year ended March 31,
1998. The fee was computed at the rate of .65 of 1% of the daily net assets
during the year and paid monthly. The Adviser provides research, investment
programs and supervision of the investment portfolio and pays costs of certain
administrative services and office space. The Adviser also provides persons,
satisfactory to the Fund's Board of Directors, to act as officers of the Fund
and pays their salaries and wages. The Fund bears all other costs and expenses
in its organization and operation.
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets. In the year ended
March 31, 1998, fees amounting to $242,375 were paid or payable under this Plan.
Certain officers and directors of the Adviser and the Distributor, are also
officers and a director of the Fund.
During the year ended March 31, 1998, the Fund paid brokerage commissions
totalling $97,238 to the Distributor, a registered broker/dealer, which clears
its transactions through unaffiliated brokers.
At March 31, 1998, the Adviser, and/or affiliated companies, and the Value Line,
Inc. Profit Sharing Plan, owned 3,680,063 shares of the Fund's capital stock,
representing 48.6% of the outstanding shares. In addition, certain officers and
directors of the Fund owned 350,683 shares of capital stock, representing 4.6%
of the outstanding shares.
- --------------------------------------------------------------------------------
18
<PAGE>
Value Line Asset Allocation Fund, Inc.
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
August 24, 1993
(commencement
Years Ended March 31, of operations) to
-------------------------------------------------------------------- March 31,
1998 1997 1996 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 13.64 $ 14.13 $ 11.58 $ 10.37 $ 10.00
----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ................. .22 .30 .10 .08 .06(1)
Net gains or losses on securities
(both realized and unrealized) ...... 4.54 2.15 3.86 1.30 .35
----------------------------------------------------------------------------------------
Total from investment opeations ... 4.76 2.45 3.96 1.38 .41
----------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .. (.26) (.25) (.12) (.06) (.04)
Distributions from capital gains ...... (1.82) (2.69) (1.29) (.11) --
----------------------------------------------------------------------------------------
Total distributions ............... (2.08) (2.94) (1.41) (.17) (.04)
----------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 16.32 $ 13.64 $ 14.13 $ 11.58 $ 10.37
========================================================================================
Total return ............................ 37.36% 17.49% 35.13% 13.47% 4.15%+
========================================================================================
Ratios/Supplemental Data:
Net assets end of period (in thousands) . $123,488 $74,981 $55,803 $26,172 $18,989
Ratio of operating expenses to average
net assets ............................ 1.15%(2) 1.23%(2) 1.38%(2) 1.76% 0.47%*(1)
Ratio of net investment income to
average net assets .................... 1.46% 1.95% .99% .85% 1.10%*(1)
Portfolio turnover rate ................. 139% 192% 244% 211% 108%+
Average commissions paid per share of
common stock investments purchased/sold $ .0493 $ .0492(3) -- -- --
</TABLE>
(1) Net of expense reimbursement and fees waived by the Adviser. Had these
expenses been fully paid by the Fund, net investment loss per share would
have been $(.02), the ratio of expenses to average net assets would have
been 2.24%*, and the ratio of net investment loss to average net assets
would have been (0.67%)*.
(2) Before offset of custody credits.
(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.
+ Not annualized.
* Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
19
<PAGE>
Value Line Asset Allocation Fund, Inc.
Report of Independent Accountants
================================================================================
To the Shareholders and Board of Directors
of Value Line Asset Allocation 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 Asset Allocation Fund,
Inc. (the "Fund") at March 31, 1998, 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 four years in the
period then ended and for the period August 24, 1993 (commencement of
operations) through March 31, 1994, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
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 March 31, 1998 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 15, 1998
- --------------------------------------------------------------------------------
Tax Information (unaudited)
For the taxable year ended March 31, 1998, 2.53% of the ordinary income
dividends paid by the Fund qualified for the corporate dividends received
deduction available to corporate shareholders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20
<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
Francis C. Oakley
Marion N. Ruth
Frances T. Newton
OFFICERS Jean Bernhard Buttner
Chairman and President
Stephen Grant
Vice President
Bruce Alston
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).
VLF17A398
