UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file Number 811-02277
Value Line Income and Growth Fund, Inc. | |
(Exact name of registrant as specified in charter) |
7 Times Square, New York, N.Y. 10036 | |
(Address of principal executive offices) (Zip Code) |
Registrant’s telephone number, including area code: 212-907-1900
Date of fiscal year end: December 31
Date of reporting period: June 30, 2014
Item I. Reports to Stockholders.
A copy of the Semi-Annual Report to Stockholders for the period ended 6/30/14 is included with this Form.
Semi - Annual Report
June 30, 2014
Value Line Premier Growth Fund, Inc. |
(VALSX) |
The Value Line Fund, Inc. |
(VLIFX) |
Value Line Income and Growth Fund, Inc. |
(VALIX) |
Value Line Larger Companies Fund, Inc. |
(VALLX) |
Value Line Core Bond Fund |
(VAGIX) |
This audited report is issued for information to 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).
unless preceded or accompanied by a currently effective prospectus of the Fund (obtainable from the Distributor).
#00116881 |
Table of Contents |
President’s Letter with Economic, and Market Commentary | 3 | |
Value Line Premier Growth Fund, Inc.: | ||
Manager Discussion of Fund Performance | 6 | |
Portfolio Highlights | 8 | |
Schedule of Investments | 9 | |
The Value Line Fund, Inc.: | ||
Manager Discussion of Fund Performance | 11 | |
Portfolio Highlights | 13 | |
Schedule of Investments | 14 | |
Value Line Income and Growth Fund, Inc.: | ||
Manager Discussion of Fund Performance | 16 | |
Portfolio Highlights | 19 | |
Schedule of Investments | 20 | |
Value Line Larger Companies Fund, Inc.: | ||
Manager Discussion of Fund Performance | 27 | |
Portfolio Highlights | 29 | |
Schedule of Investments | 30 | |
Value Line Core Bond Fund: | ||
Manager Discussion of Fund Performance | 32 | |
Portfolio Highlights | 34 | |
Schedule of Investments | 35 | |
Statements of Assets and Liabilities | 42 | |
Statements of Operations | 43 | |
Statements of Changes in Net Assets | 44 | |
Financial Highlights | 48 | |
Notes to Financial Statements | 50 | |
Fund Expenses | 58 | |
Factors Considered | 59 |
2 |
President’s Letter (unaudited) |
Dear Fellow Shareholders:
We are pleased to present you with this semi-annual report for Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., Value Line Income and Growth Fund, Inc., Value Line Larger Companies Fund, Inc. and Value Line Core Bond Fund (individually, a “Fund” and collectively, the “Funds”) for the six months ended June 30, 2014.
The six months ended June 30, 2014 were rewarding ones for the equity, hybrid and fixed income Value Line Funds, as both equities and fixed income generated positive returns. Generally low market volatility and recovery in U.S. economic growth in the second quarter of 2014, following severe winter weather that dampened growth in the first calendar quarter, helped support market gains. The semi-annual period was also highlighted by several of the Funds being recognized for their long-term performance and attractive risk profiles.
● | Value Line Premier Growth Fund, Inc. outpaced its peers for the five- and ten-year periods ended June 30, 2014, as noted by leading independent mutual fund advisory service Lipper Inc.1 (multi-cap growth category). Lipper also awarded its top Lipper Leader rating of 5 to the Fund for Preservationi versus its peers as of June 30, 2014. Additionally, the Fund earned an Overall four-star rating from Morningstar2 in the mid-cap growth category among 635 funds as of June 30, 2014 based on risk-adjusted returns. Morningstar gave the Fund a Risk rating of Low.ii |
● | The Value Line Fund, Inc. was given a Risk rating of Lowiv by Morningstar as of June 30, 2014. |
● | Value Line Income and Growth Fund, Inc. outpaced its peers for the six-month and one-, three-, five- and ten-year periods ended June 30, 2014, as noted by Lipper Inc.1 (mixed-asset target allocation moderate category). Lipper also awarded its top Lipper Leader rating of 5 to the Fund for Consistent Returniii versus its peers as of June 30, 2014. Additionally, the Fund earned an Overall four-star rating from Morningstar2 in the moderate allocation category among 730 funds as of June 30, 2014 based on risk-adjusted returns. Morningstar gave the Fund a Risk rating of Below Average.vi |
● | Value Line Larger Companies Fund, Inc. was given a Risk rating of Below Averagevii by Morningstar as of June 30, 2014. |
● | Value Line Core Bond Fund outpaced its peers for the three-, five- and ten-year periods ended June 30, 2014, as noted by Lipper Inc.1 (investment grade debt category). Lipper also awarded its top Lipper Leader rating of 5 to the Fund for Total Returnv versus its peers as of June 30, 2014. |
Also a highlight of the semi-annual period was welcoming Cindy Starke to our portfolio management team after Mark Spellman left the firm in February 2014 to pursue other opportunities. Prior to joining us in June 2014, Cindy was a portfolio manager and equity analyst at Spears Abacus Advisors from 2012 to 2014. From 2010 to 2012, she was an equity analyst with Conative Capital Management, and from 2007 to 2009, a managing director, portfolio manager and equity analyst at Barrett Associates. From 1999 to 2007, she was managing director, portfolio manager and equity analyst at NewBridge Partners and Victory NewBridge. Cindy currently serves as portfolio manager of Value Line Larger Companies Fund, Inc. and as a co-portfolio manager of Value Line Income and Growth Fund, Inc.
On the following pages, the Funds’ portfolio managers discuss the management of their respective Funds during the semi-annual period. The discussions highlight key factors influencing recent performance of the Funds. You will also find a schedule of investments and financial statements for each of the Funds.
Before reviewing the performance of your individual mutual fund investment(s), we encourage you to take a brief look at the major factors affecting the financial markets over the six months ended June 30, 2014, especially given the newsworthy events of the semi-annual period. With the positive performance results of the Funds during the first half of 2014, we also invite you to take this time to consider a broader diversification strategy by including additional Value Line Funds, which you can read about on the following pages, in your investment portfolio. You can also find out more about the entire family of Value Line Funds at our website, www.vlfunds.com, newly redesigned to be even more informative, user-friendly and comprehensive.
Economic Review
U.S. real Gross Domestic Product (GDP) got off to a slow start in 2014, contracting at a 2.9% annualized rate from January through March. This was the biggest decline in the pace of U.S. economic growth since the first quarter of 2009. Part of the decline was due to the unusually harsh winter weather conditions throughout much of the nation. In turn, consumer spending grew at the weakest pace in five years, restrained further by a drop in health care outlays. Such low health care spending was largely unexpected, as the U.S. Bureau of Economic Analysis had earlier estimated that major provisions of President Obama’s signature health care law would result in increased medical spending by consumers. Second quarter GDP numbers are widely expected to show a significant increase over those of the first quarter, supported by what many anticipate to be some upside surprises in the labor and housing markets as well as in consumer confidence.
Inflation remained modest through the semi-annual period though inching up to hover around the Federal Reserve’s (the Fed’s) target of 2.0%. The headline Consumer Price Index (CPI) rose 2.1% over the 12 months ended June 30, 2014 before seasonal adjustment. Core inflation, which excludes food and energy and which is the price measure tied to consumer spending watched most closely by the Fed, was up 1.9% in June 2014 from a year earlier. Limited wage growth was a key contributor to the relatively benign inflation scenario.
3 |
(continued) |
The U.S. saw moderate but unspectacular job growth. While the unemployment rate declined from 6.7% at the close of 2013 to 6.1% at the end of June 2014, job creation was lackluster, with hiring generally concentrated in sectors representative of low-wage jobs. Still, the consumer looked more positively on the U.S. economy overall, with the Consumer Confidence Index rising from 78.1 in December 2013 to 85.2 in June 2014, its highest level since January 2008. Consumers indicated that they expect business conditions to improve, and their assessment of the job market also grew more favorable.
Against this backdrop of disappointing economic growth but declining unemployment and still modest inflation, the Fed left the targeted federal funds rate unchanged throughout the semi-annual period. By the end of June 2014, the majority of Fed governors saw the first interest rate hike likely to occur in 2015. Despite expectations for improved economic activity in the second half of 2014, Fed Chair Janet Yellen reaffirmed the Fed’s commitment to maintaining accommodative monetary policy until a more robust recovery can be sustained. While there were pockets of economic strength and lower unemployment, these trends were not as strong as the Fed had hoped. Meanwhile, the Fed’s bond-buying program was tapered by $10 billion per month each month since January 2014, with the wind-down targeted for completion in October 2014.
Equity Market Review
U.S. equities, as measured by the S&P 500® Index3, posted a solid gain of 7.14% during the six months ended June 30, 2014, despite the weak U.S. economic data early in the calendar year. Indeed, even with a weak January 2014, the S&P 500® Index experienced a sixth consecutive quarterly gain, a record not matched since 1998. The U.S. equity market’s climb to new highs through the end of June 2014, amidst low volatility and improved economic data in the second calendar quarter, was supported by many U.S. corporate earnings announcements reflecting top-line growth, even as overall management guidance for 2014 was less optimistic than consensus.
All ten sectors of the S&P 500® Index posted positive absolute performance for the semi-annual period, with the utilities, energy and health care sectors leading the way. Consumer discretionary, industrials, telecommunication services and financials were the weakest sectors during the semi-annual period.
Fixed Income Market Review
In contrast to a challenging 2013, the broad U.S. fixed income market, as measured by the Barclays U.S. Aggregate Bond Index4, posted a solid positive return of 3.93% during the semi-annual period. The yield curve flattened, as intermediate-term and longer-term yields declined and shorter-term maturities edged up. The yield on the bellwether 10-year U.S. Treasury note fell approximately 51 basis points during the semi-annual period, while the yield on the 30-year U.S. Treasury declined approximately 62 basis points. (A basis point is 1/100th of a percentage point.) The 30-year U.S. Treasury bond’s especially strong performance stemmed both from low inflation and from a flood of buyers looking for relative safety away from the comparatively slower economic growth seen in the European Union and the BRIC nations (Brazil, Russia, India and China).
Weak first quarter GDP, lackluster job growth and inflation hovering around the Fed’s target level of 2% kept interest rates low during the semi-annual period. A combination of low interest rates and low market volatility led many investors on a search for yield, benefiting the performance of spread, or non-U.S. Treasury, sectors, particularly in the middle and lower credit rating bands, and causing U.S. Treasuries to lag in comparison. Corporate bonds, both investment grade and high yield, and securitized debt most significantly outperformed U.S. Treasuries during the semi-annual period. Another factor supporting investors’ heightened risk tolerance was the progress made in several European countries toward better economic conditions.
* * *
We thank you for trusting us to be a part of your long-term, comprehensive investment strategy. We appreciate your confidence in the Value Line Funds and look forward to serving your investment needs in the years ahead just as we have been helping to secure generations’ financial futures for more than 60 years—based on solid fundamentals, sound investment principles and the power of disciplined and rigorous analytics. If you have any questions or would like additional information on these or other Value Line Funds, we invite you to contact your investment representative or visit us at www.vlfunds.com.
Sincerely, | |
/s/ Mitchell Appel | |
Mitchell Appel | |
President of the Value Line Funds |
4 |
(continued) |
Past performance does not guarantee future results. Investment return and principal value of an investment can fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost; and that current performance may be lower or higher than the performance data quoted. Investors should carefully consider the investment objective, risks, charges and expense of a fund. This and other important information about a fund is contained in the fund’s prospectus. A copy of our funds’ prospectuses can be obtained free of charge by going to our website at www.vlfunds.com or calling 800.243.2729.
1 | Lipper Leader ratings are derived from highly sophisticated formulas that analyze funds against clearly defined criteria. Funds are compared to similar funds, and only those that trust stand out are awarded Lipper Leader status. Funds are ranked against their peers on each of four measures: Total Return, Consistent Return, Preservation and Expense. A fifth measure, Tax Efficiency, applies in the United States. Scores are subject to change every month and are calculated for the following periods: 3-year, 5-year, 10-year and overall. The overall calculation is based on an equal-weighted average of percentile ranks for each measure over 3-year, 5-year and 10-year periods (if applicable). For each measure, the highest 20% of funds in each peer group are named Lipper Leaders. The next 20% receive a rating of 4: the middle 20% are rated 3: the next 20% are rated 2; and the lowest 20% are rated 1. | |
i | For Value Line Premier Growth Fund, Inc.: Preservation 5 rating for 3-year (10,893 funds), 5-year (9,123 funds) and overall (10,893 funds) periods ended June 30, 2014; 4 rating for 10-year (5,423 funds) period ended June 30, 2014. | |
iii | For Value Line Income and Growth Fund, Inc.: Consistent 5 rating for 10-year (254 funds) and overall (445 funds) periods ended June 30, 2014; 4 rating for 3-year (445 funds) and five-year (385 funds) periods ended June 30, 2014. | |
v | For Value Line Core Bond Fund: Total Return 5 rating for 5-year (400 funds), 10-year (288 funds) and overall (466 funds) periods ended June 30, 2014; 3 rating for 3-year (466 funds) period ended June 30, 2014. | |
2 | The Morningstar RatingTM for funds methodology rates funds based on an enhanced Morningstar Risk-Adjusted Return measure, which also accounts for the effects of all sales charges, loads, or redemption fees. Funds are ranked by their Morningstar Risk-Adjusted Return scores and stars are assigned using the following scale: 5 stars for top 10%; 4 starts next 22.5%; 3 stars next 35%; 2 stars next 22.5%; 1 star for bottom 10%. Funds are rated for up to three periods: the trailing three-, five- and 10-years. For a fund that does not change categories during the evaluation period, the overall rating is calculated using the following weights: At least 3 years, but less than 5 years uses 100% three-year rating. At least 5 years but less than 10 years uses 60% five-year ratings/40% three-year rating. At least 10 years uses 50% ten-year rating/30% five-year rating/20% three-year rating. | |
ii | For Value Line Premier Growth Fund, Inc.: Four-star rating for 3-year (635 funds), 5-year (574 funds), 10-year (417 funds) and Overall (635 funds) periods ended June 30, 2014. All in the mid-cap growth category. Morningstar Risk: Low for the 3-year and 5-year periods ended June 30, 2014; Below Average for the 10-year and Overall periods ended June 30, 2014. | |
iv | For The Value Line Fund, Inc.: Morningstar Risk: Low for the 3-year, 5-year and Overall periods ended June 30, 2014; Below Average for the 10-year period ended June 30, 2014. | |
vi | For Value Line Income and Growth Fund: Four-star rating for 10-year (423 funds) and Overall (730 funds) periods ended June 30, 2014; 3-star rating for 3-year (730 funds) and 5-year (649 funds) periods ended June 30, 2014. All in the moderate allocation category. Morningstar Risk: Below Average for the 3-year, 5-year, 10-year and Overall periods ended June 30, 2014. | |
vii | For Value Line Larger Companies Fund, Inc.: Morningstar Risk: Below Average for the 3-year, 5-year, 10-year and Overall periods ended June 30, 2014. | |
3 | The S&P 500® Index consists of 500 stocks that are traded on the New York Stock Exchange, American Stock Exchange and the NASDAQ national Market System and is representative of the broad stock market. This is an unmanaged index and does not reflect charges, expenses or taxes, and it is not possible to directly invest in this index. | |
4 | The Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS. This is an unmanaged index and does not reflect charges, expenses or taxes, which are deducted from the Fund’s return. It is not possible to directly invest in this index. |
5 |
VALUE LINE PREMIER GROWTH FUND, INC. |
INVESTMENT OBJECTIVE AND STRATEGY
The Fund primarily seeks long-term growth of capital.
To achieve the Fund’s goal, the Fund’s investment adviser invests at least 80% of the Fund’s net assets in a diversified portfolio of U.S. equity securities with favorable growth prospects. In selecting securities for purchase or sale, the Adviser generally analyzes the issuer of a security using fundamental factors such as growth potential and earnings estimates and quantitative factors such as historical earnings, earnings momentum and price momentum. The Fund may invest in small, mid or large capitalization companies, including foreign companies. There are no set limitations of investments according to a company’s size, or to a sector weighting.
Manager Discussion of Fund Performance |
Below, Value Line Premier Growth Fund, Inc. portfolio manager Stephen E. Grant discusses the Fund’s performance and positioning for the six months ended June 30, 2014.
How did the Fund perform during the semi-annual period?
The Fund generated a cumulative total return of 4.35% during the six months ended June 30, 2014. This compares to the 7.14% return of the Fund’s benchmark, the S&P 500® Index, during the same annual period.
What key factors were responsible for the Fund’s performance during the six-month reporting period?
The Fund generated solid absolute gains but underperformed the S&P 500® Index during the six-month reporting period due to both stock selection and sector allocation decisions overall.
Also, while the semi-annual period ended June 30, 2014 saw gains for the equity market, value stocks outperformed growth stocks, and large-cap stocks outperformed small-cap stocks. Relative to the benchmark, both of these factors acted as headwinds to Fund results, as the Fund concentrates its holdings on growth-oriented stocks and on stocks with an average market capitalization well below that of the S&P 500® Index.
Which equity market sectors most significantly affected Fund performance?
Stock selection in information technology, industrials and energy detracted from the Fund’s performance most during the semi-annual period. Having underweighted allocations to the strongly performing information technology and energy sectors and having an overweighted exposure to the weaker industrials sector also hurt. In information technology, the Fund held no positions in the strongly performing large-cap stocks in the sector, including Apple, Microsoft, Intel and Facebook, each of which saw their shares climb double-digits during the semi-annual period. The Fund was overweighted, however, in global payment solutions company MasterCard, whose shares declined on profit-taking after being one of the Fund’s best performers in 2013. We trimmed the Fund’s position in MasterCard during the semi-annual period because it had grown into a larger holding than we were comfortable with after its prior year’s growth. A sizable position in application software developer Ansys also hurt, as its shares fell. In industrials, positions in engineering and constructing firm Chicago Bridge & Iron, electronic instruments manufacturer Ametek, aerospace and defense parts manufacturer Precision Castparts and human resources and financial consulting services provider Towers Watson each dampened results, as each saw share price declines during the semi-annual period. We trimmed the Fund’s position in Towers Watson during the semi-annual period because of signs that its long-term earnings and stock price growth may be slowing. In energy, an underweighted exposure to the oil services industry particularly hurt, as the Fund held no positions in either Schlumberger or Halliburton, both of which saw robust gains during the semi-annual period.
Partially offsetting these detractors were the positive contributions made by effective stock selection in the financials and telecommunication services sectors. Having an underweighted allocation to the weakly-performing financials sector also helped. In financials, a position in India’s HDFC Bank, whose shares rallied strongly, boosted the Fund’s relative results. Not holding positions in laggards Citigroup and JPMorgan Chase also buoyed Fund performance. In telecommunication services, a position in wireless communications infrastructure owner and operator SBA Communications was a particularly strong performer.
Which stocks detracted significantly from the Fund’s performance during the semi-annual period?
During the semi-annual period, among the stocks that detracted most from the Fund’s relative performance was MasterCard, already mentioned. Positions in TJX Companies, a discount apparel and home fashion retailer, and LKQ, an automotive products and services wholesaler, also detracted significantly, each suffering from quarterly earnings reports that were weaker than forecast.
6 |
(continued) |
What were some of the Fund’s best-performing individual stocks?
Among the individual stocks that contributed most to the Fund’s relative results were pharmaceuticals company Novo Nordisk, Indian bank HDFC Bank and life science equipment firm Idexx Laboratories.
Novo Nordisk performed well on continued strong earnings results that drove a quadrupling of its stock price since the Fund established a position in its shares five years ago. HDFC Bank, mentioned earlier as an outstanding performer in the financials sector, had been one of the Fund’s weakest performers in 2013. Its shares rebounded during the semi-annual period as investors regained confidence in India and its improving economy. Shares of Idexx Laboratories rose on continued strong earnings results that drove an 800%-plus gain in its stock price since we established a Fund position in its shares more than a decade ago.
Avoiding a position in diversified industrials and financial services conglomerate General Electric, whose shares fell during the semi-annual period, further boosted the Fund’s relative results.
How did the Fund use derivatives and similar instruments during the reporting period?
The Fund did not use derivatives during the reporting period.
Did the Fund make any significant purchases or sales during the semi-annual period?
During the semi-annual period, we initiated a Fund position in consumer products manufacturing giant Procter & Gamble in recognition of its consistent long-term growth record in earnings and stock price, generated by its powerful product portfolio. We added to the Fund’s positions in diversified defense company General Dynamics and information services provider IHS, as each continued to deliver good earnings and stock price growth.
We sold the Fund’s position in natural food supermarket owner and operator Whole Foods Market because its quarterly earnings reports began to disappoint. We also exited the Fund’s position in Internet exchange services provider Equinix because of reduced consistency and predictability in its earnings and stock price.
Were there any notable changes in the Fund’s weightings during the six-month period?
There were no material changes in the Fund’s sector weightings during the six-month period ended June 30, 2014.
How was the Fund positioned relative to its benchmark index at the end of June 2014?
As of June 30, 2014, the Fund was overweighted relative to the S&P 500® Index in the industrials and materials sectors. The Fund was underweighted relative to the S&P 500® Index in the energy, financials and information technology sectors and rather neutrally weighted relative to the Index in the consumer discretionary, consumer staples, health care, utilities, telecommunication services sectors on the same date.
What is your tactical view and strategy for the months ahead?
Regardless of market conditions, we intend to stay true to our time-tested investment discipline going forward, seeking to invest in companies that have demonstrated a solid history of consistent growth in both their earnings and stock price. In our view, these companies possess attractive portfolios of proprietary products and services that give them strong market positions and make them less vulnerable to swings in national and international economic conditions. At the same time, we believe the underlying stocks of these companies tend to be less volatile than the average stock in the S&P 500® Index. By maintaining our investment discipline, the Fund has historically provided a smoother ride to investors than its peer group averages. Putting aside short-term ebbs and flows in the equity market, we believe the Fund’s investments are likely to continue to provide superior returns to our shareholders over the long term.
7 |
Value Line Premier Growth Fund, Inc. |
Portfolio Highlights at June 30, 2014 (unaudited) |
Ten Largest Holdings
Issue | Shares | Value | Percentage of Net Assets | |||||||
Alexion Pharmaceuticals, Inc. | 37,800 | $ | 5,906,250 | 1.5 | % | |||||
Alliance Data Systems Corp. | 19,400 | 5,456,250 | 1.4 | % | ||||||
Roper Industries, Inc. | 36,000 | 5,256,360 | 1.3 | % | ||||||
AMETEK, Inc. | 96,750 | 5,058,090 | 1.3 | % | ||||||
Danaher Corp. | 61,000 | 4,802,530 | 1.2 | % | ||||||
Ecolab, Inc. | 43,000 | 4,787,620 | 1.2 | % | ||||||
MasterCard, Inc. Class A | 63,000 | 4,628,610 | 1.2 | % | ||||||
Henry Schein, Inc. | 38,800 | 4,604,396 | 1.2 | % | ||||||
AMBEV S.A. ADR | 650,000 | 4,576,000 | 1.2 | % | ||||||
Kirby Corp. | 39,000 | 4,568,460 | 1.2 | % | ||||||
Asset Allocation – Percentage of Net Assets |
Sector Weightings – Percentage of Total Investment Securities* |
*Sector weightings exclude short-term investments.
8 |
Value Line Premier Growth Fund, Inc. Schedule of Investments (unaudited) |
Shares | Value | ||||||
COMMON STOCKS (98.3%) | |||||||
CONSUMER DISCRETIONARY (9.3%) | |||||||
8,400 | AutoZone, Inc. * | $ | 4,504,416 | ||||
56,000 | BorgWarner, Inc. | 3,650,640 | |||||
44,000 | Brinker International, Inc. | 2,140,600 | |||||
10,500 | Buckle, Inc. (The) (1) | 465,780 | |||||
2,000 | Buffalo Wild Wings, Inc. * | 331,420 | |||||
51,000 | Dick’s Sporting Goods, Inc. | 2,374,560 | |||||
10,000 | Domino’s Pizza, Inc. | 730,900 | |||||
23,000 | Genuine Parts Co. | 2,019,400 | |||||
11,200 | Gildan Activewear, Inc. | 659,456 | |||||
27,000 | Johnson Controls, Inc. | 1,348,110 | |||||
112,000 | LKQ Corp. * | 2,989,280 | |||||
18,000 | O’Reilly Automotive, Inc. * | 2,710,800 | |||||
40,000 | Starbucks Corp. | 3,095,200 | |||||
68,600 | TJX Companies, Inc. (The) | 3,646,090 | |||||
21,600 | VF Corp. | 1,360,800 | |||||
33,600 | Wolverine World Wide, Inc. (1) | 875,616 | |||||
44,000 | Yum! Brands, Inc. | 3,572,800 | |||||
36,475,868 | |||||||
CONSUMER STAPLES (9.3%) | |||||||
650,000 | AMBEV S.A. ADR | 4,576,000 | |||||
81,000 | BRF S.A. ADR | 1,969,110 | |||||
17,000 | British American Tobacco PLC ADR | 2,024,360 | |||||
21,300 | Brown-Forman Corp. Class B | 2,005,821 | |||||
17,600 | Bunge Ltd. | 1,331,264 | |||||
48,400 | Church & Dwight Co., Inc. | 3,385,580 | |||||
16,800 | Coca-Cola Femsa, S.A.B. de C.V. ADR (1) | 1,908,816 | |||||
18,000 | Costco Wholesale Corp. | 2,072,880 | |||||
23,400 | Energizer Holdings, Inc. | 2,855,502 | |||||
89,812 | Flowers Foods, Inc. | 1,893,237 | |||||
20,000 | Fomento Economico Mexicano S.A.B. de C.V. ADR | 1,873,000 | |||||
64,000 | General Mills, Inc. | 3,362,560 | |||||
43,000 | Hormel Foods Corp. | 2,122,050 | |||||
3,000 | McCormick & Co., Inc. | 214,770 | |||||
29,000 | PepsiCo, Inc. | 2,590,860 | |||||
14,000 | Procter & Gamble Co. (The) | 1,100,260 | |||||
22,000 | Reynolds American, Inc. | 1,327,700 | |||||
36,613,770 | |||||||
ENERGY (5.7%) | |||||||
4,400 | CNOOC Ltd. ADR | 788,876 | |||||
14,600 | Core Laboratories N.V. | 2,439,076 | |||||
22,000 | Enbridge, Inc. | 1,044,340 |
Shares | Value | ||||||
ENERGY (5.7%) (continued) | |||||||
29,873 | EQT Corp. | $ | 3,193,424 | ||||
70,000 | FMC Technologies, Inc.* | 4,274,900 | |||||
51,400 | Noble Energy, Inc. | 3,981,444 | |||||
12,000 | Oceaneering International, Inc. | 937,560 | |||||
5,000 | Oil States International, Inc. * | 320,450 | |||||
32,000 | ONEOK, Inc. | 2,178,560 | |||||
5,346 | Pioneer Natural Resources Co. | 1,228,564 | |||||
26,000 | TransCanada Corp. | 1,240,720 | |||||
24,600 | Ultrapar Participacoes S.A. ADR | 580,560 | |||||
22,208,474 | |||||||
FINANCIALS (11.0%) | |||||||
8,000 | ACE Ltd. | 829,600 | |||||
21,000 | Affiliated Managers Group, Inc. * | 4,313,400 | |||||
52,600 | AFLAC, Inc. | 3,274,350 | |||||
3,000 | Alleghany Corp. * | 1,314,360 | |||||
36,000 | American Tower Corp. REIT | 3,239,280 | |||||
45,000 | Arch Capital Group Ltd. * | 2,584,800 | |||||
8,316 | Banco de Chile ADR (1) | 666,195 | |||||
1,300 | Bank of Montreal | 95,667 | |||||
22,100 | Bank of Nova Scotia | 1,471,860 | |||||
4,700 | BlackRock, Inc. | 1,502,120 | |||||
9,400 | Brown & Brown, Inc. | 288,674 | |||||
9,400 | Camden Property Trust REIT | 668,810 | |||||
3,200 | Canadian Imperial Bank of Commerce (1) | 291,136 | |||||
23,200 | Equity Lifestyle Properties, Inc. REIT | 1,024,512 | |||||
14,153 | Essex Property Trust, Inc. REIT | 2,617,031 | |||||
1,400 | Everest Re Group Ltd. | 224,686 | |||||
1 | Gaming and Leisure Properties, Inc. REIT | 34 | |||||
75,500 | HDFC Bank Ltd. ADR | 3,534,910 | |||||
22,000 | M&T Bank Corp. | 2,729,100 | |||||
8,000 | PartnerRe Ltd. | 873,680 | |||||
27,000 | Portfolio Recovery Associates, Inc. * | 1,607,310 | |||||
5,000 | Principal Financial Group, Inc. | 252,400 | |||||
29,000 | ProAssurance Corp. | 1,287,600 | |||||
21,500 | Prudential Financial, Inc. | 1,908,555 | |||||
26,000 | Royal Bank of Canada | 1,857,180 | |||||
10,000 | Stifel Financial Corp. * | 473,500 | |||||
17,000 | T. Rowe Price Group, Inc. | 1,434,970 | |||||
8,000 | Taubman Centers, Inc. REIT | 606,480 | |||||
14,800 | Toronto-Dominion Bank (The) | 760,868 | |||||
30,000 | Wells Fargo & Co. | 1,576,800 | |||||
43,309,868 | |||||||
Shares | Value | ||||||
HEALTH CARE (12.9%) | |||||||
37,800 | Alexion Pharmaceuticals, Inc. * | $ | 5,906,250 | ||||
17,200 | Allergan, Inc. | 2,910,584 | |||||
15,200 | Bayer AG ADR | 2,147,304 | |||||
14,500 | Becton, Dickinson & Co. | 1,715,350 | |||||
1,100 | Bio-Rad Laboratories, Inc. Class A * | 131,681 | |||||
11,800 | Bio-Reference Laboratories, Inc. * | 356,596 | |||||
17,000 | C.R. Bard, Inc. | 2,431,170 | |||||
16,000 | Catamaran Corp. * | 706,560 | |||||
54,000 | Cerner Corp. * | 2,785,320 | |||||
5,400 | Cooper Cos., Inc. (The) | 731,862 | |||||
4,000 | DaVita HealthCare Partners, Inc. * | 289,280 | |||||
10,000 | DENTSPLY International, Inc. | 473,500 | |||||
46,000 | Express Scripts Holding Co. * | 3,189,180 | |||||
38,800 | Henry Schein, Inc. * | 4,604,396 | |||||
24,000 | IDEXX Laboratories, Inc. * | 3,205,680 | |||||
15,000 | McKesson Corp. | 2,793,150 | |||||
20,400 | Mednax, Inc. * | 1,186,260 | |||||
15,300 | Mettler-Toledo International, Inc. * | 3,873,654 | |||||
6,500 | MWI Veterinary Supply, Inc. * | 922,935 | |||||
89,000 | Novo Nordisk A/S ADR | 4,110,910 | |||||
4,000 | ResMed, Inc. (1) | 202,520 | |||||
23,000 | Teva Pharmaceutical Industries Ltd. ADR | 1,205,660 | |||||
29,000 | Thermo Fisher Scientific, Inc. | 3,422,000 | |||||
8,000 | Universal Health Services, Inc. Class B | 766,080 | |||||
7,000 | WellPoint, Inc. | 753,270 | |||||
50,821,152 | |||||||
INDUSTRIALS (28.9%) | |||||||
25,300 | Acuity Brands, Inc. | 3,497,725 | |||||
96,750 | AMETEK, Inc. | 5,058,090 | |||||
39,200 | AZZ, Inc. | 1,806,336 | |||||
59,800 | Canadian National Railway Co. | 3,888,196 | |||||
1,000 | Canadian Pacific Railway Ltd. | 181,140 | |||||
31,000 | Chicago Bridge & Iron Co. N.V. | 2,114,200 | |||||
5,000 | Civeo Corp. * | 125,150 | |||||
35,000 | CLARCOR, Inc. | 2,164,750 | |||||
10,000 | Clean Harbors, Inc. * | 642,500 | |||||
61,000 | Danaher Corp. | 4,802,530 | |||||
56,000 | Donaldson Co., Inc. | 2,369,920 | |||||
26,000 | EnerSys | 1,788,540 | |||||
14,800 | Equifax, Inc. | 1,073,592 | |||||
18,000 | Esterline Technologies Corp. * | 2,072,160 | |||||
30,000 | Fastenal Co. (1) | 1,484,700 | |||||
10,000 | FedEx Corp. | 1,513,800 |
See Notes to Financial Statements. |
9 |
June 30, 2014 |
Shares | Value | ||||||
COMMON STOCKS (continued) (98.3%) | |||||||
INDUSTRIALS (28.9%) (continued) | |||||||
8,000 | Flowserve Corp. | $ | 594,800 | ||||
27,000 | General Dynamics Corp. | 3,146,850 | |||||
6,000 | Graco, Inc. | 468,480 | |||||
29,062 | HEICO Corp. | 1,509,480 | |||||
48,850 | IDEX Corp. | 3,944,149 | |||||
18,600 | IHS, Inc. Class A * | 2,523,462 | |||||
19,000 | ITT Corp. | 913,900 | |||||
33,000 | J.B. Hunt Transport Services, Inc. | 2,434,740 | |||||
21,000 | Kansas City Southern | 2,257,710 | |||||
39,000 | Kirby Corp. * | 4,568,460 | |||||
7,000 | L-3 Communications Holdings, Inc. | 845,250 | |||||
26,000 | Lincoln Electric Holdings, Inc. | 1,816,880 | |||||
8,000 | Oshkosh Corp. | 444,240 | |||||
33,000 | Parker Hannifin Corp. | 4,149,090 | |||||
17,800 | Precision Castparts Corp. | 4,492,720 | |||||
66,500 | Republic Services, Inc. | 2,525,005 | |||||
9,000 | Rockwell Automation, Inc. | 1,126,440 | |||||
54,000 | Rollins, Inc. | 1,620,000 | |||||
36,000 | Roper Industries, Inc. | 5,256,360 | |||||
50,700 | Rush Enterprises, Inc. Class A * | 1,757,769 | |||||
4,000 | Snap-on, Inc. | 474,080 | |||||
37,600 | Stericycle, Inc. * | 4,452,592 | |||||
23,000 | Teledyne Technologies, Inc. * | 2,234,910 | |||||
66,000 | Toro Co. (The) | 4,197,600 | |||||
8,900 | Towers Watson & Co. Class A | 927,647 | |||||
40,000 | Union Pacific Corp. | 3,990,000 | |||||
36,000 | United Technologies Corp. | 4,156,200 | |||||
12,700 | Valmont Industries, Inc. (1) | 1,929,765 | |||||
12,600 | W.W. Grainger, Inc. | 3,203,802 | |||||
42,800 | Wabtec Corp. | 3,534,852 | |||||
67,600 | Waste Connections, Inc. | 3,281,980 | |||||
113,362,542 | |||||||
INFORMATION TECHNOLOGY (9.5%) | |||||||
25,000 | Accenture PLC Class A | 2,021,000 | |||||
19,400 | Alliance Data Systems Corp. * | 5,456,250 |
Shares | Value | ||||||
INFORMATION TECHNOLOGY (9.5%) (continued) | |||||||
30,800 | Amphenol Corp. Class A | $ | 2,967,272 | ||||
9,700 | Anixter International, Inc. | 970,679 | |||||
60,000 | ANSYS, Inc. * | 4,549,200 | |||||
17,000 | Automatic Data Processing, Inc. | 1,347,760 | |||||
76,000 | Cognizant Technology Solutions Corp. Class A * | 3,717,160 | |||||
24,400 | Fiserv, Inc. * | 1,471,808 | |||||
63,000 | MasterCard, Inc. Class A | 4,628,610 | |||||
11,200 | MICROS Systems, Inc. * | 760,480 | |||||
75,000 | Salesforce.com, Inc. * | 4,356,000 | |||||
51,000 | Trimble Navigation Ltd. * | 1,884,450 | |||||
6,800 | Ultimate Software Group, Inc. (The) * | 939,556 | |||||
20,300 | WEX, Inc. * | 2,130,891 | |||||
37,201,116 | |||||||
MATERIALS (8.3%) | |||||||
15,000 | Air Products & Chemicals, Inc. | 1,929,300 | |||||
8,000 | Airgas, Inc. | 871,280 | |||||
3,600 | Albemarle Corp. | 257,400 | |||||
26,700 | AptarGroup, Inc. | 1,789,167 | |||||
20,000 | Ball Corp. | 1,253,600 | |||||
11,800 | BASF SE ADR | 1,374,700 | |||||
29,000 | Crown Holdings, Inc. * | 1,443,040 | |||||
43,000 | Ecolab, Inc. | 4,787,620 | |||||
40,000 | FMC Corp. | 2,847,600 | |||||
5,400 | NewMarket Corp. | 2,117,394 | |||||
31,000 | Praxair, Inc. | 4,118,040 | |||||
24,000 | Rockwood Holdings, Inc. | 1,823,760 | |||||
20,200 | Scotts Miracle-Gro Co. (The) Class A | 1,148,572 | |||||
30,000 | Sigma-Aldrich Corp. | 3,044,400 | |||||
12,800 | Syngenta AG ADR | 957,440 | |||||
39,000 | Valspar Corp. (The) | 2,971,410 | |||||
32,734,723 | |||||||
TELECOMMUNICATION SERVICES (1.0%) | |||||||
40,000 | SBA Communications Corp. Class A * | 4,092,000 |
Shares | Value | ||||||
UTILITIES (2.4%) (continued) | |||||||
165,600 | Cia de Saneamento Basico do Estado de Sao Paulo ADR | $ | 1,775,232 | ||||
60,000 | ITC Holdings Corp. | 2,188,800 | |||||
17,400 | MDU Resources Group, Inc. | 610,740 | |||||
8,000 | NextEra Energy, Inc. | 819,840 | |||||
52,000 | Questar Corp. | 1,289,600 | |||||
14,000 | Sempra Energy | 1,465,940 | |||||
26,800 | Wisconsin Energy Corp. | 1,257,456 | |||||
9,407,608 | |||||||
TOTAL COMMON STOCKS (Cost $177,257,743) (98.3%) | 386,227,121 | ||||||
SHORT-TERM INVESTMENTS (1.6%) | |||||||
MONEY MARKET FUNDS (1.6%) |
6,285,972 | State Street Institutional Liquid Reserves Fund | 6,285,972 | |||||
TOTAL SHORT-TERM INVESTMENTS (Cost $6,285,972) (1.6%) | 6,285,972 | ||||||
TOTAL INVESTMENT SECURITIES (99.9%) (Cost $183,543,715) | $ | 392,513,093 |
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%) | 450,401 | |||
NET ASSETS (100%) | $ | 392,963,494 | ||
NET ASSET VALUE OFFERING AND REDEMPTION PRICE, PER OUTSTANDING SHARE ($392,963,494 ÷ 11,079,978 shares outstanding) | $ | 35.47 |
* | Non-income producing. | |
(1) | A portion or all of the security was held on loan. As of June 30, 2014, the market value of the securities on loan was $6,545,741. | |
ADR | American Depositary Receipt. | |
REIT | Real Estate Investment Trust. |
The following table summarizes the inputs used to value the Fund’s investments in securities as of June 30, 2014 (See Note 1B):
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks* | $ | 386,227,121 | $ | — | $ | — | $ | 386,227,121 | ||||||||
Short-Term Investments | — | 6,285,972 | — | 6,285,972 | ||||||||||||
Total Investments in Securities | $ | 386,227,121 | $ | 6,285,972 | $ | — | $ | 392,513,093 |
* See Schedule of Investments for further classification.
See Notes to Financial Statements.
10 |
THE VALUE LINE FUND, INC. |
INVESTMENT OBJECTIVE AND STRATEGY
The Fund’s primary investment objective is long-term growth of capital. Current income is a secondary investment objective.
To achieve the Fund’s investment objectives the Advisor invests substantially all of the Fund’s net assets in common stocks. While the Fund is actively managed by the Adviser, the Adviser relies primarily on the rankings of companies by the Value Line Timeliness™ Ranking System (the “Ranking System”) in selecting securities for purchase or sale. The Fund’s investments principally are selected from common stocks ranked 1, 2 or 3 by the Ranking System at the time of purchase. The Adviser will determine the percentage of the Fund’s assets invested in each stock based on the stock’s relative attractiveness.
Manager Discussion of Fund Performance
Below, The Value Line Fund, Inc. portfolio manager Stephen E. Grant discusses the Fund’s performance and positioning for the six months ended June 30, 2014.
How did the Fund perform during the semi-annual period?
The Fund generated a cumulative total return of 4.15% during the six months ended June 30, 2014. This compares to the 7.14% return of the Fund’s benchmark, the S&P 500® Index, during the same annual period.
What key factors were responsible for the Fund’s performance during the six-month reporting period?
The Fund generated solid absolute gains but underperformed the S&P 500® Index during the six-month reporting period due to both stock selection and sector allocation decisions overall.
Also, while the semi-annual period ended June 30, 2014 saw gains for the equity market, value stocks outperformed growth stocks, and large-cap stocks outperformed small-cap stocks. Relative to the benchmark, both of these factors acted as headwinds to Fund results, as the Fund concentrates its holdings on growth-oriented stocks and on stocks with an average market capitalization well below that of the S&P 500® Index.
Which equity market sectors most significantly affected Fund performance?
Stock selection in information technology, industrials and energy detracted from the Fund’s performance most during the semi-annual period. Having underweighted allocations to the strongly performing information technology and energy sectors and having an overweighted exposure to the weaker industrials sector also hurt. In information technology, the Fund held no positions in the strongly performing large-cap stocks in the sector, including Apple, Microsoft, Intel and Facebook, each of which saw their shares climb double-digits during the semi-annual period. The Fund was overweighted, however, in global payment solutions company MasterCard, whose shares declined on profit-taking after being one of the Fund’s best performers in 2013. A sizable position in application software developer Ansys also hurt, as its shares fell. In industrials, positions in engineering and constructing firm Chicago Bridge & Iron, pest control services provider Rollins and railroad systems operator Kansas City Southern each dampened results, as each saw share price declines during the semi-annual period. In energy, an underweighted exposure to the oil services industry particularly hurt, as the Fund held no positions in either Schlumberger or Halliburton, both of which saw robust gains during the semi-annual period.
Partially offsetting these detractors were the positive contributions made by effective stock selection in the financials and telecommunication services sectors. Having an underweighted allocation to the weakly-performing financials sector also helped. In financials, not holding positions in laggards Citigroup and JPMorgan Chase buoyed Fund performance most. In telecommunication services, a position in wireless communications infrastructure owner and operator SBA Communications was a particularly strong performer.
Which stocks detracted significantly from the Fund’s performance during the semi-annual period?
During the semi-annual period, among the stocks that detracted most from the Fund’s relative performance were TJX Companies, a discount apparel and home fashion retailer; LKQ, an automotive products and services wholesaler; and Dicks Sporting Goods, a sporting goods retailer. Each suffered during the semi-annual period from quarterly earnings reports that were weaker than forecast.
What were some of the Fund’s best-performing individual stocks?
Among the individual stocks that contributed most to the Fund’s relative results were specialty pharmaceuticals firm Allergan, pharmaceuticals company Novo Nordisk and diversified energy company ONEOK.
11 |
(continued) |
Allergan benefited from a takeover bid from Valeant Pharmaceuticals International. Novo Nordisk performed well on continued strong earnings results that drove a quadrupling of its stock price since the Fund established a position in its shares five years ago. ONEOK benefited from ongoing strong operating performance.
How did the Fund use derivatives and similar instruments during the reporting period?
The Fund did not use derivatives during the reporting period.
Did the Fund make any significant purchases or sales during the semi-annual period?
During the semi-annual period, we initiated a Fund position in consumer products manufacturing giant Procter & Gamble in recognition of its consistent long-term growth record in earnings and stock price, generated by its powerful product portfolio. We established a Fund position in application software developer Ultimate Software Group for similar reasons, seeking to take advantage of what we believed to be a short-term drop in its stock price during the spring 2014 sell-off of high growth stocks. We added to the Fund’s position in information services provider IHS, as it continued to deliver good earnings and stock price growth.
We sold the Fund’s position in natural food supermarket owner and operator Whole Foods Market because its quarterly earnings reports began to disappoint. We also exited the Fund’s position in Internet exchange services provider Equinix because of reduced consistency and predictability in its earnings and stock price.
Were there any notable changes in the Fund’s weightings during the six-month period?
There were no material changes in the Fund’s sector weightings during the six-month period ended June 30, 2014.
How was the Fund positioned relative to its benchmark index at the end of June 2014?
As of June 30, 2014, the Fund was overweighted relative to the S&P 500® Index in the industrials and materials sectors. The Fund was underweighted relative to the S&P 500® Index in the energy, financials and information technology sectors and rather neutrally weighted relative to the Index in the consumer discretionary, health care, consumer staples, utilities and telecommunication services sectors on the same date.
What is your tactical view and strategy for the months ahead?
Regardless of market conditions, we intend to stay true to our time-tested investment discipline going forward, seeking to invest in companies that have demonstrated a solid history of consistent growth in both their earnings and stock price. In our view, these companies possess attractive portfolios of proprietary products and services that give them strong market positions and make them less vulnerable to swings in national and international economic conditions. At the same time, we believe the underlying stocks of these companies tend to be less volatile than the average stock in the S&P 500® Index. By maintaining our investment discipline, the Fund has historically provided a smoother ride to investors than its peer group averages. Putting aside short-term ebbs and flows in the equity market, we believe the Fund’s investments are likely to continue to provide superior returns to our shareholders over the long term.
12 |
The Value Line Fund, Inc. |
Portfolio Highlights at June 30, 2014 (unaudited) |
Ten Largest Holdings
Issue | Shares | Value | Percentage of Net Assets | ||||||||
Alliance Data Systems Corp. | 8,300 | $ | 2,334,375 | 1.9 | % | ||||||
Rollins, Inc. | 75,600 | 2,268,000 | 1.8 | % | |||||||
AutoZone, Inc. | 4,000 | 2,144,960 | 1.7 | % | |||||||
Novo Nordisk A/S ADR | 45,500 | 2,101,645 | 1.7 | % | |||||||
Yum! Brands, Inc. | 24,800 | 2,013,760 | 1.6 | % | |||||||
AMETEK, Inc. | 36,750 | 1,921,290 | 1.5 | % | |||||||
Church & Dwight Co., Inc. | 26,000 | 1,818,700 | 1.4 | % | |||||||
Alexion Pharmaceuticals, Inc. | 11,600 | 1,812,500 | 1.4 | % | |||||||
Roper Industries, Inc. | 12,400 | 1,810,524 | 1.4 | % | |||||||
Kirby Corp. | 14,700 | 1,721,958 | 1.4 | % |
Asset Allocation – Percentage of Net Assets
Sector Weightings – Percentage of Total Investment Securities*
*Sector weightings exclude short-term investments.
13 |
The Value Line Fund, Inc. Schedule of Investments (unaudited) |
Shares | Value | ||||||
COMMON STOCKS (97.6%) | |||||||
CONSUMER DISCRETIONARY (10.9%) | |||||||
4,000 | AutoZone, Inc. * | $ | 2,144,960 | ||||
13,600 | BorgWarner, Inc. | 886,584 | |||||
17,400 | Brinker International, Inc. | 846,510 | |||||
6,000 | Buckle, Inc. (The) (1) | 266,160 | |||||
7,600 | Buffalo Wild Wings, Inc. * | 1,259,396 | |||||
16,800 | Dick’s Sporting Goods, Inc. | 782,208 | |||||
3,800 | Domino’s Pizza, Inc. | 277,742 | |||||
5,700 | Gildan Activewear, Inc. | 335,616 | |||||
33,000 | LKQ Corp. * | 880,770 | |||||
3,200 | O’Reilly Automotive, Inc. * | 481,920 | |||||
7,400 | Penn National Gaming, Inc. * | 89,836 | |||||
9,300 | Starbucks Corp. | 719,634 | |||||
32,000 | TJX Companies, Inc. (The) | 1,700,800 | |||||
10,400 | VF Corp. | 655,200 | |||||
16,800 | Wolverine World Wide, Inc. | 437,808 | |||||
24,800 | Yum! Brands, Inc. | 2,013,760 | |||||
13,778,904 | |||||||
CONSUMER STAPLES (11.4%) | |||||||
3,100 | Boston Beer Co., Inc. (The) Class A * | 692,912 | |||||
4,900 | British American Tobacco PLC ADR | 583,492 | |||||
4,000 | Bunge Ltd. | 302,560 | |||||
11,400 | Casey’s General Stores, Inc. | 801,306 | |||||
26,000 | Church & Dwight Co., Inc. | 1,818,700 | |||||
9,000 | Costco Wholesale Corp. | 1,036,440 | |||||
7,500 | Energizer Holdings, Inc. | 915,225 | |||||
40,500 | Flowers Foods, Inc. | 853,740 | |||||
19,000 | General Mills, Inc. | 998,260 | |||||
33,000 | Hormel Foods Corp. | 1,628,550 | |||||
15,700 | Ingredion, Inc. | 1,178,128 | |||||
18,100 | J&J Snack Foods Corp. | 1,703,572 | |||||
9,000 | PepsiCo, Inc. | 804,060 | |||||
8,000 | Procter & Gamble Co. (The) | 628,720 | |||||
6,000 | Reynolds American, Inc. | 362,100 | |||||
14,307,765 | |||||||
ENERGY (3.8%) | |||||||
2,000 | Core Laboratories N.V. | 334,120 | |||||
14,000 | Enbridge, Inc. | 664,580 | |||||
10,000 | EQT Corp. | 1,069,000 | |||||
5,600 | FMC Technologies, Inc.* | 341,992 | |||||
13,400 | Noble Energy, Inc. | 1,037,964 | |||||
3,600 | Oceaneering International, Inc. | 281,268 | |||||
15,000 | ONEOK, Inc. | 1,021,200 | |||||
4,750,124 | |||||||
FINANCIALS (5.5%) | |||||||
8,000 | Affiliated Managers Group, Inc.* | 1,643,200 | |||||
12,000 | AFLAC, Inc. | 747,000 |
Shares | Value | ||||||
FINANCIALS (5.5%) (continued) | |||||||
9,000 | American Tower Corp. REIT | $ | 809,820 | ||||
2,000 | BlackRock, Inc. | 639,200 | |||||
3,500 | Crown Castle International Corp. REIT | 259,910 | |||||
6,300 | M&T Bank Corp. | 781,515 | |||||
4,400 | MetLife, Inc. | 244,464 | |||||
5,000 | Prudential Financial, Inc. | 443,850 | |||||
8,000 | Royal Bank of Canada | 571,440 | |||||
4,900 | Stifel Financial Corp. * | 232,015 | |||||
6,600 | T. Rowe Price Group, Inc. | 557,106 | |||||
6,929,520 | |||||||
HEALTH CARE (13.0%) | |||||||
11,600 | Alexion Pharmaceuticals, Inc. * | 1,812,500 | |||||
9,600 | Allergan, Inc. | 1,624,512 | |||||
5,800 | C.R. Bard, Inc. | 829,458 | |||||
8,740 | Catamaran Corp. * | 385,959 | |||||
17,400 | Cerner Corp. * | 897,492 | |||||
800 | Cooper Cos., Inc. (The) | 108,424 | |||||
1,500 | DaVita HealthCare Partners, Inc. * | 108,480 | |||||
3,900 | DENTSPLY International, Inc. | 184,665 | |||||
15,340 | Express Scripts Holding Co. * | 1,063,522 | |||||
12,700 | Henry Schein, Inc. * | 1,507,109 | |||||
6,400 | IDEXX Laboratories, Inc. * | 854,848 | |||||
5,600 | McKesson Corp. | 1,042,776 | |||||
16,800 | Mednax, Inc. * | 976,920 | |||||
4,700 | Mettler-Toledo International, Inc.* | 1,189,946 | |||||
45,500 | Novo Nordisk A/S ADR | 2,101,645 | |||||
10,000 | Teva Pharmaceutical Industries Ltd. ADR | 524,200 | |||||
10,200 | Thermo Fisher Scientific, Inc. | 1,203,600 | |||||
16,416,056 | |||||||
INDUSTRIALS (30.7%) | |||||||
7,800 | Acuity Brands, Inc. | 1,078,350 | |||||
36,750 | AMETEK, Inc. | 1,921,290 | |||||
22,200 | Canadian National Railway Co. | 1,443,444 | |||||
800 | Canadian Pacific Railway Ltd. | 144,912 | |||||
4,400 | Carlisle Companies, Inc. | 381,128 | |||||
10,000 | Chicago Bridge & Iron Co. N.V. | 682,000 | |||||
15,000 | CLARCOR, Inc. | 927,750 | |||||
6,000 | Clean Harbors, Inc.* | 385,500 | |||||
20,700 | Danaher Corp. | 1,629,711 | |||||
31,000 | Donaldson Co., Inc. | 1,311,920 | |||||
4,800 | Equifax, Inc. | 348,192 | |||||
2,400 | Esterline Technologies Corp.* | 276,288 | |||||
8,000 | Fastenal Co. (1) | 395,920 | |||||
5,000 | FedEx Corp. | 756,900 | |||||
9,900 | General Dynamics Corp. | 1,153,845 |
Shares | Value | ||||||
INDUSTRIALS (30.7%) (continued) | |||||||
7,300 | Graco, Inc. | $ | 569,984 | ||||
13,983 | HEICO Corp. | 726,277 | |||||
16,200 | IDEX Corp. | 1,307,988 | |||||
6,000 | IHS, Inc. Class A * | 814,020 | |||||
5,850 | ITT Corp. | 281,385 | |||||
6,800 | J.B. Hunt Transport Services, Inc. | 501,704 | |||||
8,200 | Kansas City Southern | 881,582 | |||||
14,700 | Kirby Corp.* | 1,721,958 | |||||
5,400 | L-3 Communications Holdings, Inc. | 652,050 | |||||
4,000 | Lincoln Electric Holdings, Inc. | 279,520 | |||||
6,900 | Middleby Corp. (The) * | 570,768 | |||||
3,500 | Oshkosh Corp. | 194,355 | |||||
10,400 | Parker Hannifin Corp. | 1,307,592 | |||||
5,700 | Precision Castparts Corp. | 1,438,680 | |||||
21,300 | Republic Services, Inc. | 808,761 | |||||
2,800 | Rockwell Automation, Inc. | 350,448 | |||||
75,600 | Rollins, Inc. | 2,268,000 | |||||
12,400 | Roper Industries, Inc. | 1,810,524 | |||||
12,000 | Stericycle, Inc. * | 1,421,040 | |||||
6,000 | Teledyne Technologies, Inc.* | 583,020 | |||||
15,600 | Toro Co. (The) | 992,160 | |||||
9,600 | Union Pacific Corp. | 957,600 | |||||
11,400 | United Technologies Corp. | 1,316,130 | |||||
4,200 | Valmont Industries, Inc. (1) | 638,190 | |||||
4,900 | W.W. Grainger, Inc. | 1,245,923 | |||||
11,500 | Wabtec Corp. | 949,785 | |||||
25,300 | Waste Connections, Inc. | 1,228,315 | |||||
38,654,909 | |||||||
INFORMATION TECHNOLOGY (10.7%) | |||||||
17,800 | Accenture PLC Class A | 1,438,952 | |||||
8,300 | Alliance Data Systems Corp.* | 2,334,375 | |||||
7,000 | Amphenol Corp. Class A | 674,380 | |||||
2,700 | Anixter International, Inc. | 270,189 | |||||
13,500 | ANSYS, Inc.* | 1,023,570 | |||||
8,000 | Automatic Data Processing, Inc. | 634,240 | |||||
28,000 | Cognizant Technology Solutions Corp. Class A * | 1,369,480 | |||||
3,200 | Fidelity National Information Services, Inc. | 175,168 | |||||
6,400 | Fiserv, Inc. * | 386,048 | |||||
23,000 | MasterCard, Inc. Class A | 1,689,810 | |||||
2,800 | MICROS Systems, Inc. * | 190,120 | |||||
17,600 | Open Text Corp. | 843,744 | |||||
24,000 | Salesforce.com, Inc. * | 1,393,920 | |||||
3,000 | Ultimate Software Group, Inc. (The) * | 414,510 | |||||
6,100 | WEX, Inc. * | 640,317 | |||||
13,478,823 |
See Notes to Financial Statements. |
14 |
June 30, 2014 |
Shares | Value | ||||||
COMMON STOCKS (97.6%) (continued) | |||||||
MATERIALS (9.6%) | |||||||
3,000 | Airgas, Inc. | $ | 326,730 | ||||
12,000 | Ball Corp. | 752,160 | |||||
25,600 | Crown Holdings, Inc.* | 1,273,856 | |||||
12,000 | Ecolab, Inc. | 1,336,080 | |||||
22,400 | FMC Corp. | 1,594,656 | |||||
1,800 | NewMarket Corp. | 705,798 | |||||
10,000 | Packaging Corp. of America | 714,900 | |||||
10,300 | Praxair, Inc. | 1,368,252 | |||||
11,000 | Scotts Miracle-Gro Co. (The) Class A | 625,460 | |||||
11,400 | Sigma-Aldrich Corp. | 1,156,872 | |||||
25,900 | Silgan Holdings, Inc. | 1,316,238 | |||||
12,400 | Valspar Corp. (The) | 944,756 | |||||
12,115,758 | |||||||
UTILITIES (2.0%) | |||||||
30,000 | ITC Holdings Corp. | 1,094,400 | |||||
4,000 | NextEra Energy, Inc. | 409,920 | |||||
23,000 | Questar Corp. | 570,400 | |||||
10,900 | Wisconsin Energy Corp. | 511,428 | |||||
2,586,148 | |||||||
TOTAL COMMON STOCKS (Cost $64,432,786) (97.6%) | 123,018,007 |
Shares | Value | ||||||
SHORT-TERM INVESTMENTS (2.4%) | |||||||
MONEY MARKET FUNDS (2.4%) | |||||||
3,025,809 | State Street Institutional Liquid Reserves Fund | $ | 3,025,809 | ||||
TOTAL SHORT-TERM INVESTMENTS (Cost $3,025,809) (2.4%) | 3,025,809 | ||||||
TOTAL INVESTMENT SECURITIES (100.0%) (Cost $67,458,595) | $ | 126,043,816 | |||||
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS (0.0%) | (52,340 | ) | |||||
NET ASSETS (100%) | $ | 125,991,476 | |||||
NET ASSET VALUE OFFERING AND REDEMPTION PRICE, PER OUTSTANDING SHARE ($125,991,476 ÷ 8,962,383 shares outstanding) | $ | 14.06 |
* | Non-income producing. | |
(1) | A portion or all of the security was held on loan. As of June 30, 2014, the market value of the securities on loan was $1,300,270. | |
ADR | American Depositary Receipt. | |
REIT | Real Estate Investment Trust. |
The following table summarizes the inputs used to value the Fund’s investments in securities as of June 30, 2014 (See Note 1B):
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks* | $ | 123,018,007 | $ | — | $ | — | $ | 123,018,007 | ||||||||
Short-Term Investments | — | 3,025,809 | — | 3,025,809 | ||||||||||||
Total Investments in Securities | $ | 123,018,007 | $ | 3,025,809 | $ | — | $ | 126,043,816 |
* See Schedule of Investments for further classification.
See Notes to Financial Statements. |
15 |
VALUE LINE INCOME AND GROWTH FUND, INC. |
INVESTMENT OBJECTIVE AND STRATEGY
The Fund’s primary investment objective is income, as high and dependable as is consistent with reasonable risk. Capital growth to increase total return is a secondary objective.
To achieve the Fund’s goals, the Adviser invests not less than 50% of the Fund’s net assets in common or preferred stocks or securities convertible into common stock which may or may not pay dividends. The balance of the Fund’s net assets are primarily invested in U.S. government securities, money market securities and investment grade debt securities rated at the time of purchase from the highest (AAA) to medium (BBB) quality. Although the Fund can invest in companies of any size, it generally invests in U.S. securities issued by larger, more established companies (those with a market capitalization of more than $5 billion).
Manager Discussion of Fund Performance
Effective February 2014, Stephen E. Grant replaced Mark T. Spellman as portfolio manager responsible for the equity portion of the Fund. Effective June 2014, Cindy Starke joined Mr. Grant in sharing that equity portfolio management responsibility. Below, Value Line Income and Growth Fund, Inc. portfolio managers Cindy Starke, Stephen E. Grant and Liane Rosenberg discuss the Fund’s performance and positioning for the six months ended June 30, 2014.
How did the Fund perform during the semi-annual period?
The Fund generated a cumulative total return of 5.53% during the six months ended June 30, 2014. This compares to the 6.04% return of the Fund’s blended benchmark, comprised 60% of the S&P 500® Index and 40% of the Barclays U.S. Aggregate Bond Index (the Barclays Index), during the same semi-annual period.
What key factors were responsible for the Fund’s performance during the six-month reporting period?
The Fund benefited from effective asset allocation. Throughout the six-month reporting period, the Fund was overweighted equities and underweighted fixed income. With U.S. equities, as measured by the S&P 500® Index, up 7.14% during the semi-annual period, and bonds, as measured by the Barclays Index, posting a return of 3.93%, this asset allocation clearly added value.
Security selection overall within the equity and fixed income portions of the Fund also proved beneficial. However, the Fund’s allocation to cash during a period of rallying markets and a small weighting in convertible equities were a drag on the Fund’s relative performance.
Which equity market sectors most significantly affected Fund performance?
Stock selection in the consumer staples, health care and industrials sectors contributed most positively to the Fund’s results. Only partially offsetting these positive contributors was stock selection in the information technology, materials, energy and utilities sectors, which detracted.
What were some of the Fund’s best-performing individual stocks?
Contributing most to the Fund’s relative results were two pharmaceuticals companies—Actavis and Teva Pharmaceuticals—and semiconductor company Avago Technologies, each of which generated robust double-digit gains during the semi-annual period. Actavis’ shares were up on the news of its accretive acquisition of Forest Laboratories. In addition to anticipated cost savings, we believe the combined company should result in greater product diversification and higher sales growth. Shares of Teva Pharmaceuticals rose after receiving FDA approval for a three-times-a-week version of its leading multiple sclerosis treatment, Copaxone. This approval was an important catalyst, as it gave the company time to convert existing patients on their daily Copaxone treatment before a generic version is approved. Avago Technologies’ shares rose sharply based on good results and the accretive benefits and diversification gains from its acquisition of LSI.
Which stocks detracted significantly from the Fund’s performance during the semi-annual period?
During the semi-annual period, the stocks that detracted most from the Fund’s performance were office products superstore Staples, construction and engineering firm Chicago Bridge & Iron and master limited partnership engaged in natural gas transportation and storage Boardwalk Pipeline Partners LP, each of which experienced double-digit share price declines. Shares of Staples dropped, as the company’s same-store sales and gross margins fell short of expectations. In our view, Staples’ business appears to be in a secular decline. Seeing further downside risk, we sold the Fund’s position in Staples by the end of the semi-annual period. Chicago Bridge & Iron’s shares sold off following a weaker than expected first quarter 2014 earnings report. We maintained the Fund’s position in the firm, however, as the shortfall appeared to us to be timing-related rather than any fundamental problem with the company’s business. Boardwalk Pipeline Partners LP saw its shares decline after announcing disappointing earnings results and guidance that fell short of expectations. We sold the Fund’s position in Boardwalk Pipeline Partners LP by the end of the semi-annual period.
16
(continued) |
Did the equity portion of the Fund make any significant purchases or sales?
During the semi-annual period, we initiated positions in Starbucks, Estee Lauder Companies and Visa. Starbucks is the world’s leading coffee retailer with more than 20,000 locations around the globe. The company generates revenues from its company-owned stores, licensed stores, consumer packaged goods business and food service operations. With a loyal and expanding global customer base, we believe the company is well positioned to grow both its sales and earnings during the coming years. We established a Fund position in Estee Lauder Companies, a leading company in the global prestige beauty product market. Estee Lauder Companies owns a diversified portfolio of well-known beauty brands that, in our view, stand to benefit from growing global disposable incomes and an aging global population. The Fund purchased shares of Visa, a leading global payments technology company. Visa is well positioned, in our view, to be one of the winners in the secular transition to digital payments from checks and cash. Some analysts estimate that the digital payments opportunity is only 15% penetrated globally.
In addition to those sales already mentioned, we sold the Fund’s position in discount retailer Target, as the company’s sales growth remained challenged, and it appeared that e-commerce competition continued to impact its in-store customer traffic. We eliminated the Fund’s position in consumer foods manufacturer General Mills, as we felt its shares were fully valued, and we had grown concerned about slowing U.S. sales. We exited the Fund’s position in global logistics company Expeditors International of Washington, as we saw what we considered to be downside risk in its margins and earnings.
Were there any notable changes in the equity portion of the Fund’s weightings during the six-month period?
During the semi-annual period, we decreased weightings in the financials and materials sectors, and we increased positions in the consumer discretionary and information technology sectors.
How was the equity portion of the Fund positioned relative to its benchmark index at the end of June 2014?
��
As of June 30, 2014, the Fund was overweighted relative to the S&P 500® Index in the telecommunication services and utilities sectors. The Fund was underweighted relative to the S&P 500® Index in the materials sector and was rather neutrally weighted to the S&P 500® Index in the consumer discretionary, consumer staples, energy, financials, health care, industrials and information technology sectors on the same date.
What was the duration strategy of the fixed income portion of the Fund?
Given the market’s low volatility and the 10-year U.S. Treasury’s narrow trading range, especially during the second calendar quarter, we kept the Fund’s duration in a relatively tight band of 1/4 year either longer or shorter than that of the Barclays Index. Duration is a measure of the Fund’s sensitivity to changes in interest rates.
While duration positioning had an overall neutral impact on results during the semi-annual period, yield curve positioning detracted. Longer duration assets were the best performers during the semi-annual period, and the fixed income portion of the Fund had an underweighted exposure to the long-term end of the yield curve. Yield curve indicates the spectrum of maturities within a particular sector.
Which fixed income market segments most significantly affected Fund performance?
Overall, the fixed income portion of the Fund outperformed its benchmark, the Barclays Index. The biggest positive contributors to performance were investment grade and high yield corporate bonds. During the semi-annual period, higher risk assets outperformed lower risk assets, and the fixed income portion of the Fund was significantly overweight investment grade corporate bonds relative to the Barclays Index, while maintaining a significant underweight to U.S. Treasuries. Investment grade corporate bonds outperformed U.S. Treasuries by approximately 300 basis points during the semi-annual period. (A basis point is 1/100th of a percentage point.) Within corporate credit, we also maintained an out-of-benchmark exposure to high yield corporate bonds. This high yield corporate bond exposure had a positive impact on relative results, as high yield corporate bonds outperformed the Barclays Index by approximately 150 basis points during the semi-annual period. U.S. Treasuries, particularly those on the short-term end of the yield curve, were the weakest performers during the semi-annual period, and so the fixed income portion of the Fund’s underweight to these holdings proved prudent as well.
17
(continued) |
Were there any notable changes in the fixed income portion of the Fund’s weightings during the six-month period?
The most significant sector shifts in the fixed income portion of the Fund encompassed a reduction in U.S. Treasuries with a similar incremental increase in corporate bonds, both investment grade and high yield. To a more modest degree, exposure to securitized assets edged up, with the increased exposure coming from commercial mortgage-backed securities. We also modestly increased the fixed income portion of the Fund’s exposures to sovereign debt and taxable municipal bonds during the six-month period.
How was the fixed income portion of the Fund positioned relative to its benchmark index at the end of June 2014?
As of June 30, 2014, the fixed income portion of the Fund was overweight relative to the Barclays Index in investment grade corporate bonds and in securitized debt. It also maintained its out-of-benchmark exposure to high yield corporate bonds. The fixed income portion of the Fund was underweight relative to the Barclays Index in U.S. Treasuries and supranational agency debt and was rather neutrally weighted to the benchmark index in asset-backed securities, sovereign debt and taxable municipal bonds on the same date.
How did the Fund’s overall asset allocation shift from beginning to end of the semi-annual period?
At the end of December 2013, the Fund had a weighting of 66% in stocks, 4% in bonds convertible into common stocks, 22% in fixed income securities and 8% in cash equivalents. By the end of June 2014, allocation had changed little. At June 30, 2014, the Fund had a weighting of 69% in stocks, 3% in bonds convertible into common stocks, 22% in fixed income securities and 6% in cash equivalents.
How did the Fund use derivatives and similar instruments during the reporting period?
The Fund did not use derivatives during the reporting period.
What is your tactical view and strategy for the months ahead?
With short-term interest rates and inflation still low, we believe there are many stocks that offer attractive dividend income and capital appreciation potential. We intend to continue to build a diversified equity portfolio of high quality companies with good balance sheets and cash flow generation led by vetted management teams. We also intend to continue to monitor the pace of economic growth, the job market and the inflation rate, as these factors, along with potential changes to the Fed’s stance on the economy and its timeline on raising interest rates, are likely to impact the Fund’s equity holdings. We remained comfortable at the end of the semi-annual period with the Fund’s underweighted allocation to fixed income, as we saw better return potential in other asset classes.
As always, our goal is to preserve capital in the near term while generating solid total return (i.e., income plus capital appreciation) over the long term and across economic cycles.
18
Value Line Income and Growth Fund, Inc. Portfolio Highlights at June 30, 2014 (unaudited) |
Ten Largest Holdings
Percentage of | |||||||||||||
Issue | Shares | Value | Net Assets | ||||||||||
Intel Corp. | 129,000 | $ | 3,986,100 | 1.2 | % | ||||||||
Johnson & Johnson | 36,100 | 3,776,782 | 1.1 | % | |||||||||
Schlumberger Ltd. | 31,200 | 3,680,040 | 1.1 | % | |||||||||
Raytheon Co. | 38,900 | 3,588,525 | 1.0 | % | |||||||||
Microsoft Corp. | 84,800 | 3,536,160 | 1.0 | % | |||||||||
Starbucks Corp. | 45,000 | 3,482,100 | 1.0 | % | |||||||||
Exxon Mobil Corp. | 33,000 | 3,322,440 | 1.0 | % | |||||||||
Charles Schwab Corp. (The) | 120,000 | 3,231,600 | 0.9 | % | |||||||||
JPMorgan Chase & Co. | 55,600 | 3,203,672 | 0.9 | % | |||||||||
Discover Financial Services | 51,000 | 3,160,980 | 0.9 | % |
Asset Allocation – Percentage of Net Assets
Sector Weightings – Percentage of Total Investment Securities*
*Sector weightings exclude short-term investments. | |
19
Value Line Income and Growth Fund, Inc. |
Schedule of Investments (unaudited) |
Shares | Value | ||||||
COMMON STOCKS (68.9%) | |||||||
CONSUMER DISCRETIONARY (8.8%) | |||||||
25,300 | Brinker International, Inc. | $ | 1,230,845 | ||||
40,000 | Comcast Corp. Class A | 2,133,200 | |||||
30,200 | DIRECTV * | 2,567,302 | |||||
20,000 | Discovery Communications, Inc. Class A * | 1,485,600 | |||||
30,000 | Harley-Davidson, Inc. | 2,095,500 | |||||
15,000 | Harman International Industries, Inc. | 1,611,450 | |||||
13,600 | Home Depot, Inc. | 1,101,056 | |||||
27,000 | Las Vegas Sands Corp. | 2,057,940 | |||||
35,000 | Lowe’s Cos., Inc. | 1,679,650 | |||||
32,000 | Macy’s, Inc. | 1,856,640 | |||||
28,300 | McDonald’s Corp. | 2,850,942 | |||||
45,000 | Starbucks Corp. | 3,482,100 | |||||
12,700 | Time Warner Cable, Inc. | 1,870,710 | |||||
44,000 | TJX Companies, Inc. (The) | 2,338,600 | |||||
24,400 | Walt Disney Co. (The) | 2,092,056 | |||||
30,453,591 | |||||||
CONSUMER STAPLES (7.1%) | |||||||
41,200 | Coca-Cola Co. (The) | 1,745,232 | |||||
33,400 | CVS Caremark Corp. | 2,517,358 | |||||
35,400 | Dr. Pepper Snapple Group, Inc. | 2,073,732 | |||||
28,000 | Estee Lauder Companies, Inc. (The) Class A | 2,079,280 | |||||
29,600 | Ingredion, Inc. | 2,221,184 | |||||
42,900 | Kroger Co. (The) | 2,120,547 | |||||
26,300 | PepsiCo, Inc. | 2,349,642 | |||||
33,000 | Procter & Gamble Co. (The) | 2,593,470 | |||||
27,300 | Wal-Mart Stores, Inc. | 2,049,411 | |||||
39,000 | Walgreen Co. | 2,891,070 | |||||
46,000 | Whole Foods Market, Inc. | 1,776,980 | |||||
24,417,906 | |||||||
ENERGY (7.5%) | |||||||
21,500 | Chevron Corp. | 2,806,825 | |||||
27,300 | ConocoPhillips | 2,340,429 | |||||
24,000 | Diamond Offshore Drilling, Inc.(1) | 1,191,120 | |||||
45,455 | Ensco PLC Class A | 2,525,934 | |||||
21,000 | Enterprise Products Partners L.P. | 1,644,090 | |||||
33,000 | Exxon Mobil Corp. | 3,322,440 | |||||
16,100 | Hess Corp. | 1,592,129 | |||||
25,600 | Royal Dutch Shell PLC ADR (1) | 2,227,456 | |||||
31,200 | Schlumberger Ltd. | 3,680,040 | |||||
29,500 | Total S.A. ADR | 2,129,900 | |||||
27,400 | TransCanada Corp. | 1,307,528 | |||||
24,000 | Transocean Ltd. (1) | 1,080,720 | |||||
25,848,611 | |||||||
FINANCIALS (10.3%) | |||||||
9,700 | Ameriprise Financial, Inc. | 1,164,000 | |||||
27,300 | Bank of Montreal | 2,009,007 |
Shares | Value | ||||||
FINANCIALS (10.3%) (continued) | |||||||
6,800 | BlackRock, Inc. | $ | 2,173,280 | ||||
23,000 | Canadian Imperial Bank of Commerce (1) | 2,092,540 | |||||
24,400 | Capital One Financial Corp. | 2,015,440 | |||||
120,000 | Charles Schwab Corp. (The) | 3,231,600 | |||||
51,000 | Discover Financial Services | 3,160,980 | |||||
53,760 | Hartford Financial Services Group, Inc. | 1,925,146 | |||||
25,400 | Health Care REIT, Inc. | 1,591,818 | |||||
55,600 | JPMorgan Chase & Co. | 3,203,672 | |||||
16,600 | PartnerRe Ltd. | 1,812,886 | |||||
114,000 | People’s United Financial, Inc. | 1,729,380 | |||||
29,200 | Prudential Financial, Inc. | 2,592,084 | |||||
33,100 | State Street Corp. | 2,226,306 | |||||
71,200 | U.S. Bancorp | 3,084,384 | |||||
31,200 | Wells Fargo & Co. | 1,639,872 | |||||
35,652,395 | |||||||
HEALTH CARE (9.2%) | |||||||
35,000 | AbbVie, Inc. | 1,975,400 | |||||
13,700 | Actavis PLC * | 3,055,785 | |||||
10,000 | Allergan, Inc. | 1,692,200 | |||||
17,700 | Amgen, Inc. | 2,095,149 | |||||
22,400 | Bristol-Myers Squibb Co. | 1,086,624 | |||||
18,000 | Edwards Lifesciences Corp. * | 1,545,120 | |||||
30,000 | Gilead Sciences, Inc.* | 2,487,300 | |||||
36,100 | Johnson & Johnson | 3,776,782 | |||||
28,000 | Medtronic, Inc. | 1,787,167 | |||||
47,800 | Merck & Co., Inc. | 2,765,230 | |||||
93,388 | Pfizer, Inc. | 2,771,756 | |||||
33,200 | Sanofi-Aventis ADR | 1,765,244 | |||||
37,237 | Teva Pharmaceutical Industries Ltd. ADR | 1,951,964 | |||||
10,000 | Thermo Fisher Scientific, Inc. | 1,180,000 | |||||
24,000 | UnitedHealth Group, Inc. | 1,962,000 | |||||
31,897,721 | |||||||
INDUSTRIALS (7.7%) | |||||||
49,100 | ADT Corp. (The) (1) | 1,715,554 | |||||
19,400 | Canadian National Railway Co. | 1,261,388 | |||||
35,000 | Chicago Bridge & Iron Co. N.V. | 2,387,000 | |||||
23,400 | Cintas Corp. | 1,486,836 | |||||
13,000 | FedEx Corp. | 1,967,940 | |||||
10,600 | General Dynamics Corp. | 1,235,430 | |||||
10,700 | Lockheed Martin Corp. | 1,719,811 | |||||
15,600 | MSC Industrial Direct Co., Inc. Class A | 1,491,984 | |||||
9,600 | Northrop Grumman Corp. | 1,148,448 | |||||
38,900 | Raytheon Co. | 3,588,525 | |||||
52,100 | Republic Services, Inc. | 1,978,237 | |||||
25,300 | Tyco International Ltd. | 1,153,680 | |||||
25,400 | Union Pacific Corp. | 2,533,650 | |||||
24,000 | United Technologies Corp. | 2,770,800 | |||||
26,439,283 | |||||||
Shares | Value | ||||||
INFORMATION TECHNOLOGY (13.3%) | |||||||
105,000 | Activision Blizzard, Inc. | $ | 2,341,500 | ||||
32,000 | Apple, Inc. | 2,973,760 | |||||
32,000 | Avago Technologies Ltd. | 2,306,240 | |||||
34,000 | Cognizant Technology Solutions Corp. Class A * | 1,662,940 | |||||
47,300 | eBay, Inc. * | 2,367,838 | |||||
93,442 | EMC Corp. | 2,461,262 | |||||
40,000 | Facebook, Inc. Class A * | 2,691,600 | |||||
5,400 | Google, Inc. Class A * | 3,157,218 | |||||
3,900 | Google, Inc. Class C * | 2,243,592 | |||||
30,000 | Harris Corp. | 2,272,500 | |||||
129,000 | Intel Corp. | 3,986,100 | |||||
15,000 | International Business Machines Corp. | 2,719,050 | |||||
84,800 | Microsoft Corp. | 3,536,160 | |||||
45,500 | Oracle Corp. | 1,844,115 | |||||
34,300 | QUALCOMM, Inc. | 2,716,560 | |||||
30,000 | SAP AG ADR (1) | 2,310,000 | |||||
19,400 | TE Connectivity Ltd. | 1,199,696 | |||||
14,000 | Visa, Inc. Class A | 2,949,940 | |||||
45,740,071 | |||||||
MATERIALS (0.7%) | |||||||
28,000 | E.I. du Pont de Nemours & Co. | 1,832,320 | |||||
34,600 | OCI Partners L.P. | 735,250 | |||||
2,567,570 | |||||||
TELECOMMUNICATION SERVICES (2.1%) | |||||||
88,000 | AT&T, Inc. | 3,111,680 | |||||
55,000 | BCE, Inc. | 2,494,800 | |||||
36,100 | Verizon Communications, Inc. | 1,766,373 | |||||
7,372,853 | |||||||
UTILITIES (2.2%) | |||||||
24,900 | AGL Resources, Inc. | 1,370,247 | |||||
25,400 | American Electric Power Company, Inc. | 1,416,558 | |||||
53,000 | American States Water Co. | 1,761,190 | |||||
36,300 | Wisconsin Energy Corp. | 1,703,196 | |||||
39,100 | Xcel Energy, Inc. | 1,260,193 | |||||
7,511,384 | |||||||
TOTAL COMMON STOCKS (Cost $159,744,165) (68.9%) | 237,901,385 | ||||||
PREFERRED STOCKS (0.0%) | |||||||
FINANCIALS (0.0%) | |||||||
5,000 | MetLife, Inc., Series B, 6.50% (1) | 127,700 | |||||
TOTAL PREFERRED STOCKS (Cost $125,000) (0.0%) | 127,700 |
See Notes to Financial Statements. |
20
June 30, 2014 |
Shares | Value | ||||||
CONVERTIBLE PREFERRED STOCKS (0.7%) | |||||||
CONSUMER STAPLES (0.2%) | |||||||
4,000 | Bunge Ltd., 4.88% | $ | 415,800 | ||||
2,500 | Post Holdings, Inc., 3.75% (1) (2) | 295,368 | |||||
711,168 | |||||||
FINANCIALS (0.5%) | |||||||
6,000 | AMG Capital Trust II, Convertible Fixed, 5.15% | 376,875 | |||||
250 | Huntington Bancshares, Inc., Series A, 8.50% (1) | 333,117 | |||||
1,000 | KeyCorp, Series A, 7.75% | 131,050 | |||||
16,000 | MetLife, Inc., 5.00% (1) | 511,360 | |||||
250 | Wells Fargo & Co., Series L, 7.50% | 303,500 | |||||
2,000 | Weyerhaeuser Co., Series A, 6.38% (1) | 113,500 | |||||
1,769,402 | |||||||
HEALTH CARE (0.0%) | |||||||
1,800 | National Healthcare Corp., Series A, 0.80% | 26,910 | |||||
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,797,801) (0.7%) | 2,507,480 | ||||||
Principal | |||||||
Amount | Value | ||||||
ASSET-BACKED SECURITIES (0.2%) | |||||||
$ | 243,706 | Ford Credit Auto Lease Trust, Series 2013-B, Class A2B, 0.42%, 1/15/16 (3) | 243,791 | ||||
250,000 | Honda Auto Receivables Owner Trust, Series 2013-4, Class A3, 0.69%, 9/18/17 | 250,453 | |||||
TOTAL ASSET-BACKED SECURITIES (Cost $494,185) (0.2%) | 494,244 | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (1.5%) | |||||||
300,000 | Banc of America Commercial Mortgage Trust, Series 2006-2, Class A4, 5.92%, 5/10/45 (3) | 321,500 | |||||
100,000 | Bear Stearns Commercial Mortgage Securities Trust, Series 2007-T26, Class A4, 5.47%, 1/12/45 (3) | 110,134 | |||||
250,000 | Citigroup Commercial Mortgage Trust, Series 2006-C5, Class A4, 5.43%, 10/15/49 | 271,169 |
Principal Amount | Value | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (1.5%) (continued) | |||||||
$ | 500,000 | Commercial Mortgage Trust, Series 2007-GG9, Class A4,5.44%, 3/10/39 | $ | 545,583 | |||
500,000 | FHLMC Multifamily Structured Pass-Through Certificates, Series K710, Class A2, 1.88%, 5/25/19 | 500,471 | |||||
200,000 | FREMF Mortgage Trust, Series 2012-K711, Class B, 3.68%, 8/25/45 (2) (3) | 207,373 | |||||
250,000 | FREMF Mortgage Trust, Series 2014-K715, Class B, 4.12%, 2/25/46 (2) (3) | 261,658 | |||||
120,000 | FREMF Mortgage Trust, Series 2013-K713, Class B, 3.27%, 4/25/46 (2) (3) | 121,130 | |||||
244,483 | GNMA, Series 2013-12, Class AB, 1.83%, 11/16/52 | 236,443 | |||||
250,000 | GNMA, Series 2013-12, Class B, 2.45%, 11/16/52 (3) | 236,618 | |||||
350,000 | GS Mortgage Securities Trust, Series 2006-GG6, Class A4, 5.55%, 4/10/38 (3) | 369,785 | |||||
228,775 | JP Morgan Chase Commercial Mortgage Securities Trust, Series 2005-CB12, Class A3A2,4.93%, 9/12/37 | 228,742 | |||||
191,562 | JP Morgan Chase Commercial Mortgage Securities Trust, Series 2007-CB20, Class A1A, 5.75%, 2/12/51 (3) | 213,905 | |||||
273,075 | ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A1A, 5.17%, 12/12/49 | 294,877 | |||||
250,000 | ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A3, 5.17%, 12/12/49 | 269,033 | |||||
250,000 | ML-CFC Commercial Mortgage Trust, Series 2007-6, Class A4, 5.49%, 3/12/51 (3) | 274,590 | |||||
246,355 | Thornburg Mortgage Securities Trust,Series 2005-1, Class A3, 2.24%, 4/25/45 (3) | 249,991 |
Principal | |||||||
Amount | Value | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (1.5%) (continued) | |||||||
$ | 250,000 | UBS-Barclays Commercial Mortgage Trust, Series 2012-C4, Class A5, 2.85%, 12/10/45 | $ | 245,511 | |||
250,000 | Wells Fargo Commercial Mortgage Trust, Series 2013-LC12, Class B, 4.44%, 7/15/46 (3) | 261,418 | |||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $5,297,457) (1.5%) | 5,219,931 | ||||||
CORPORATE BONDS & NOTES (9.0%) | |||||||
BASIC MATERIALS (0.9%) | |||||||
200,000 | ArcelorMittal, Senior Unsecured Notes, 5.00%, 2/25/17 | 211,500 | |||||
250,000 | Celanese U.S. Holdings LLC, Guaranteed Notes, 4.63%, 11/15/22 | 251,250 | |||||
250,000 | Glencore Funding LLC, Guaranteed Notes, 4.13%, 5/30/23 (2) | 251,085 | |||||
250,000 | LYB International Finance B.V., Guaranteed Notes, 4.00%, 7/15/23 | 262,454 | |||||
250,000 | Mosaic Co. (The), Senior Unsecured Notes, 5.45%, 11/15/33 | 280,134 | |||||
375,000 | PPG Industries, Inc., Senior Unsecured Notes, 3.60%, 11/15/20 | 393,955 | |||||
560,000 | Southern Copper Corp., Senior Unsecured Notes, 6.38%, 7/27/15 | 590,128 | |||||
150,000 | Southern Copper Corp., Senior Unsecured Notes, 7.50%, 7/27/35 | 174,619 | |||||
250,000 | Steel Dynamics, Inc., Guaranteed Notes, 6.13%, 8/15/19 | 271,875 | |||||
250,000 | Vale Overseas Ltd., Guaranteed Notes, 5.63%, 9/15/19 | 281,176 | |||||
100,000 | Vale S.A., Senior Unsecured Notes, 5.63%, 9/11/42 | 97,970 | |||||
3,066,146 | |||||||
COMMUNICATIONS (0.9%) | |||||||
250,000 | America Movil S.A.B. de C.V., Senior Unsecured Notes, 3.13%, 7/16/22 | 246,000 | |||||
100,000 | CenturyLink, Inc., Series P, Senior Unsecured Notes, 7.60%, 9/15/39 | 100,375 |
See Notes to Financial Statements. |
21
Schedule of Investments (unaudited) (continued) |
Principal Amount | Value | ||||||
CORPORATE BONDS & NOTES (9.0%) (continued) | |||||||
COMMUNICATIONS (0.9%) (continued) | |||||||
$ | 150,000 | Comcast Corp., Guaranteed Notes, 6.40%, 3/1/40 | $ | 192,300 | |||
250,000 | DIRECTV Holdings LLC/ DIRECTV Financing Co., Inc., Guaranteed Notes, 3.80%, 3/15/22 | 258,154 | |||||
250,000 | Harris Corp., Senior Unsecured Notes, 4.40%, 12/15/20 | 268,725 | |||||
200,000 | MetroPCS Wireless, Inc., Guaranteed Notes, 6.63%, 11/15/20 | 213,500 | |||||
200,000 | Motorola Solutions, Inc., Senior Unsecured Notes, 6.00%, 11/15/17 | 227,092 | |||||
250,000 | Netflix, Inc., Senior Unsecured Notes, 5.75%, 3/1/24 (2) | 261,250 | |||||
150,000 | Rogers Communications, Inc., Guaranteed Notes, 5.00%, 3/15/44 | 156,422 | |||||
250,000 | Telefonica Emisiones SAU, Guaranteed Notes, 5.88%, 7/15/19 | 289,847 | |||||
250,000 | Time Warner, Inc., Guaranteed Notes, 3.15%, 7/15/15 | 256,895 | |||||
150,000 | Verizon Communications, Inc., Senior Unsecured Notes, 1.25%, 11/3/14 | 150,455 | |||||
300,000 | Verizon Communications, Inc., Senior Unsecured Notes, 2.50%, 9/15/16 | 309,223 | |||||
250,000 | Viacom, Inc., Senior Unsecured Notes, 3.88%, 4/1/24 | 254,049 | |||||
3,184,287 | |||||||
CONSUMER, CYCLICAL (1.0%) | |||||||
250,000 | CVS Caremark Corp., Senior Unsecured Notes, 6.60%, 3/15/19 | 294,353 | |||||
275,000 | D.R. Horton, Inc., Guaranteed Notes, 6.50%, 4/15/16 | 297,688 | |||||
250,000 | Delphi Corp., Guaranteed Notes, 6.13%, 5/15/21 | 279,400 | |||||
99,000 | Kia Motors Corp., Senior Unsecured Notes, 3.63%, 6/14/16 (2) | 103,663 | |||||
Principal Amount | Value | ||||||
CONSUMER, CYCLICAL (1.0%) (continued) | |||||||
$ | 205,000 | Lennar Corp., Series B, Guaranteed Notes, 5.60%, 5/31/15 | $ | 212,175 | |||
500,000 | Lowe’s Cos., Inc., Senior Unsecured Notes, 2.13%, 4/15/16 | 513,485 | |||||
150,000 | Macy’s Retail Holdings, Inc., Guaranteed Notes, 4.38%, 9/1/23 | 158,958 | |||||
100,000 | Nissan Motor Acceptance Corp., Senior Unsecured Notes, 2.35%, 3/4/19 (2) | 100,707 | |||||
500,000 | Nordstrom, Inc., Senior Unsecured Notes, 4.75%, 5/1/20 | 553,240 | |||||
250,000 | Wyndham Worldwide Corp., Senior Unsecured Notes, 3.90%, 3/1/23 | 251,139 | |||||
500,000 | Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Senior Unsecured Notes, 5.38%, 3/15/22 | 520,625 | |||||
3,285,433 | |||||||
CONSUMER, NON-CYCLICAL (1.0%) | |||||||
150,000 | ADT Corp. (The), Senior Unsecured Notes, 2.25%, 7/15/17 | 148,125 | |||||
250,000 | Amgen, Inc., Senior Unsecured Notes, 2.13%, 5/15/17 | 256,235 | |||||
250,000 | Boston Scientific Corp., Senior Unsecured Notes, 2.65%, 10/1/18 | 255,558 | |||||
250,000 | Celgene Corp., Senior Unsecured Notes, 2.30%, 8/15/18 | 254,045 | |||||
250,000 | Cigna Corp., Senior Unsecured Notes, 2.75%, 11/15/16 | 259,628 | |||||
150,000 | Constellation Brands, Inc., Guaranteed Notes, 3.75%, 5/1/21 | 149,063 | |||||
150,000 | Edwards Lifesciences Corp., Senior Unsecured Notes, 2.88%, 10/15/18 | 153,285 | |||||
250,000 | Express Scripts Holding Co., Guaranteed Notes, 3.50%, 11/15/16 | 265,447 | |||||
200,000 | HCA, Inc., Senior Secured Notes, 6.50%, 2/15/20 | 225,000 | |||||
250,000 | HJ Heinz Co., Secured Notes, 4.25%, 10/15/20 | 251,562 | |||||
500,000 | Humana, Inc., Senior Notes, 6.45%, 6/1/16 | 550,725 | |||||
Principal Amount | Value | ||||||
CONSUMER, NON-CYCLICAL (1.0%) (countinued) | |||||||
$ | 250,000 | Kroger Co. (The), Senior Unsecured Notes, 3.40%, 4/15/22 | $ | 253,389 | |||
250,000 | Kroger Co. (The), Senior Unsecured Notes, 5.15%, 8/1/43 | 270,072 | |||||
300,000 | Mylan, Inc., Senior Unsecured Notes, 1.35%, 11/29/16 | 300,500 | |||||
3,592,634 | |||||||
ENERGY (1.0%) | |||||||
150,000 | Anadarko Petroleum Corp., Senior Unsecured Notes, 6.38%, 9/15/17 | 172,701 | |||||
150,000 | DCP Midstream Operating L.P., Guaranteed Notes, 2.50%, 12/1/17 | 154,304 | |||||
150,000 | Devon Energy Corp., Senior Unsecured Notes, 2.40%, 7/15/16 | 154,717 | |||||
350,000 | Devon Energy Corp., Senior Unsecured Notes, 1.88%, 5/15/17 | 356,046 | |||||
150,000 | Energy Transfer Partners L.P., Senior Unsecured Notes, 9.00%, 4/15/19 | 191,688 | |||||
200,000 | Ensco PLC, Senior Unsecured Notes, 4.70%, 3/15/21 | 217,878 | |||||
500,000 | Enterprise Products Operating LLC, Guaranteed Notes, 4.85%, 8/15/42 | 517,044 | |||||
100,000 | Hess Corp., Senior Unsecured Notes, 5.60%, 2/15/41 | 116,279 | |||||
250,000 | Marathon Oil Corp., Senior Unsecured Notes, 2.80%, 11/1/22 | 242,984 | |||||
100,000 | Petrobras Global Finance B.V., Guaranteed Notes, 3.11%, 3/17/20 (1) (3) | 102,745 | |||||
250,000 | Petrobras Global Finance B.V., Guaranteed Notes, 6.25%, 3/17/24 | 266,100 | |||||
97,000 | Plains Exploration & Production Co., Guaranteed Notes, 6.88%, 2/15/23 | 113,490 | |||||
100,000 | Rowan Companies, Inc., Guaranteed Notes, 7.88%, 8/1/19 | 122,127 | |||||
250,000 | Spectra Energy Partners L.P., Senior Unsecured Notes, 4.75%, 3/15/24 | 270,853 |
See Notes to Financial Statements. |
22 |
June 30, 2014 |
Principal Amount | Value | ||||||
CORPORATE BONDS & NOTES (9.0%) (continued) | |||||||
ENERGY (1.0%) (continued) | |||||||
$ | 200,000 | Tesoro Corp., Guaranteed Notes, 4.25%, 10/1/17 | $ | 209,000 | |||
100,000 | Valero Energy Corp., Guaranteed Notes, 6.63%, 6/15/37 | 124,253 | |||||
100,000 | Whiting Petroleum Corp., Guaranteed Notes, 5.00%, 3/15/19 | 105,250 | |||||
3,437,459 | |||||||
FINANCIAL (3.4%) | |||||||
200,000 | Aircastle Ltd., Senior Unsecured Notes, 4.63%, 12/15/18 | 206,000 | |||||
150,000 | Ally Financial, Inc., Guaranteed Notes, 4.63%, 6/26/15 | 154,875 | |||||
250,000 | American Express Co., Senior Unsecured Notes, 0.82%, 5/22/18 (3) | 251,868 | |||||
250,000 | American International Group, Inc., Senior Unsecured Notes, 4.88%, 6/1/22 | 278,391 | |||||
150,000 | Australia & New Zealand Banking Group Ltd., Subordinated Notes, 4.50%, 3/19/24 (2) | 153,959 | |||||
250,000 | Bancolombia S.A., Senior Unsecured Notes, 5.95%, 6/3/21 | 275,625 | |||||
200,000 | Bank of China Hong Kong Ltd., Senior Unsecured Notes, 3.75%, 11/8/16 (2) | 209,615 | |||||
250,000 | Bank of Montreal MTN, Senior Unsecured Notes, 2.50%, 1/11/17 | 260,070 | |||||
150,000 | Bank of New York Mellon Corp. (The), Senior Unsecured Notes, 5.45%, 5/15/19 | 172,842 | |||||
250,000 | Berkshire Hathaway, Inc., Senior Unsecured Notes, 3.75%, 8/15/21 (1) | 267,707 | |||||
290,000 | BlackRock, Inc., Series 2, Senior Unsecured Notes, 5.00%, 12/10/19 | 331,012 | |||||
250,000 | Boston Properties L.P., Senior Unsecured Notes, 3.13%, 9/1/23 | 242,775 | |||||
250,000 | BPCE S.A., Guaranteed Notes, 2.50%, 12/10/18 | 253,416 | |||||
Principal Amount | Value | ||||||
FINANCIAL (3.4%) (continued) | |||||||
$ | 200,000 | Branch Banking & Trust Co., Senior Unsecured Notes, 1.05%, 12/1/16 | $ | 200,486 | |||
250,000 | CIT Group, Inc., Senior Unsecured Notes, 5.00%, 5/15/17 | 266,406 | |||||
100,000 | Citigroup, Inc., Subordinated Notes, 5.30%, 5/6/44 | 104,305 | |||||
100,000 | CNA Financial Corp., Senior Unsecured Notes, 3.95%, 5/15/24 | 102,915 | |||||
350,000 | Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, Guaranteed Notes, 3.95%, 11/9/22 | 355,820 | |||||
250,000 | Credit Agricole S.A., Senior Unsecured Notes, 2.13%, 4/17/18 (2) | 252,232 | |||||
100,000 | Deutsche Bank AG, Senior Unsecured Notes, 1.40%, 2/13/17 | 100,508 | |||||
100,000 | Digital Realty Trust L.P., Guaranteed Notes, 5.25%, 3/15/21 (1) | 107,423 | |||||
250,000 | EPR Properties, Guaranteed Notes,5.25%, 7/15/23 | 260,065 | |||||
200,000 | First Horizon National Corp., Senior Unsecured Notes, 5.38%, 12/15/15 | 211,572 | |||||
500,000 | Ford Motor Credit Co. LLC, Senior Unsecured Notes, 2.38%, 1/16/18 | 510,755 | |||||
250,000 | General Electric Capital Corp. MTN, Senior Unsecured Notes, 1.00%, 8/11/15 (3) | 251,792 | |||||
300,000 | Goldman Sachs Group, Inc. (The), Senior Unsecured Notes, 5.75%, 10/1/16 | 330,085 | |||||
200,000 | Goldman Sachs Group, Inc. (The), Subordinated Notes, 6.75%, 10/1/37 | 240,607 | |||||
250,000 | Hartford Financial Services Group, Inc. (The), Senior Unsecured Notes, 4.00%, 10/15/17 | 269,766 | |||||
150,000 | Hospitality Properties Trust, Senior Unsecured Notes, 4.65%, 3/15/24 | 157,185 | |||||
250,000 | Host Hotels & Resorts L.P., Senior Unsecured Notes, 5.25%, 3/15/22 | 275,610 | |||||
150,000 | Itau Unibanco Holding S.A., Subordinated Notes, 5.50%, 8/6/22 | 153,630 | |||||
Principal Amount | Value | ||||||
FINANCIAL (3.4%) (continued) | |||||||
$ | 150,000 | Jefferies Group LLC, Senior Unsecured Notes, 8.50%, 7/15/19 | $ | 187,500 | |||
150,000 | Jefferies Group LLC, Senior Unsecured Notes, 6.25%, 1/15/36 | 156,971 | |||||
500,000 | JPMorgan Chase & Co., Senior Unsecured Notes, 4.50%, 1/24/22 | 547,869 | |||||
100,000 | Macquarie Bank Ltd., Senior Unsecured Notes, 5.00%, 2/22/17 (2) | 108,980 | |||||
500,000 | Morgan Stanley, Senior Unsecured Notes, 4.75%, 3/22/17 | 544,369 | |||||
250,000 | Nomura Holdings, Inc. GMTN, Senior Unsecured Notes, 2.75%, 3/19/19 | 254,325 | |||||
200,000 | PNC Funding Corp., Guaranteed Notes, 3.30%, 3/8/22 | 203,962 | |||||
500,000 | Regions Financial Corp., Senior Unsecured Notes, 2.00%, 5/15/18 | 498,239 | |||||
150,000 | Royal Bank of Scotland Group PLC, Senior Unsecured Notes, 1.88%, 3/31/17 | 151,336 | |||||
250,000 | Santander Holdings USA, Inc., Senior Unsecured Notes, 3.00%, 9/24/15 | 256,784 | |||||
250,000 | Societe Generale S.A., Senior Unsecured Notes, 5.20%, 4/15/21 (1) | 282,261 | |||||
100,000 | Standard Chartered PLC, Subordinated Notes, 5.70%, 3/26/44 (2) | 104,816 | |||||
250,000 | State Street Corp., Senior Unsecured Notes, 1.35%, 5/15/18 | 247,202 | |||||
500,000 | Wells Fargo & Co. MTN, Senior Unsecured Notes, 3.50%, 3/8/22 | 516,813 | |||||
168,000 | Wells Fargo Bank NA, Subordinated Notes, 4.80%, 11/1/14 | 170,575 | |||||
150,000 | Weyerhaeuser Co., Senior Unsecured Notes, 7.38%, 10/1/19 | 184,708 | |||||
100,000 | Weyerhaeuser Co., Senior Unsecured Notes, 6.95%, 10/1/27 | 125,427 | |||||
100,000 | XLIT Ltd., Guaranteed Notes, 5.25%, 12/15/43 | 109,967 | |||||
11,861,421 |
See Notes to Financial Statements. |
23 |
Schedule of Investments (unaudited) (continued) |
Principal Amount | Value | ||||||
CORPORATE BONDS & NOTES (9.0%) (continued) | |||||||
INDUSTRIAL (0.5%) | |||||||
$ | 100,000 | Lafarge S.A., Senior Unsecured Notes, 6.20%, 7/9/15 (2) | $ | 104,750 | |||
254,000 | Masco Corp., Senior Unsecured Notes, 6.13%, 10/3/16 | 279,718 | |||||
250,000 | Rock-Tenn Co., Guaranteed Notes, 4.90%, 3/1/22 | 272,874 | |||||
150,000 | Textron, Inc., Senior Unsecured Notes, 6.20%, 3/15/15 | 156,118 | |||||
314,000 | Thermo Fisher Scientific, Inc., Senior Unsecured Notes, 3.20%, 3/1/16 | 326,193 | |||||
500,000 | Union Pacific Corp., Senior Unsecured Notes, 4.00%, 2/1/21 | 545,032 | |||||
1,684,685 | |||||||
TECHNOLOGY (0.1%) | |||||||
50,000 | Altera Corp., Senior Unsecured Notes, 1.75%, 5/15/17 | 50,558 | |||||
100,000 | Intel Corp., Senior Unsecured Notes, 4.25%, 12/15/42 | 97,979 | |||||
150,000 | Oracle Corp., Senior Unsecured Notes, 5.00%, 7/8/19 | 171,062 | |||||
100,000 | Seagate HDD Cayman, Guaranteed Notes, 4.75%, 1/1/25 (2) | 99,250 | |||||
418,849 | |||||||
UTILITIES (0.2%) | |||||||
100,000 | Exelon Generation Co. LLC, Senior Unsecured Notes, 5.20%, 10/1/19 | 112,465 | |||||
250,000 | Florida Power & Light Co., 4.05%, 6/1/42 | 247,732 | |||||
250,000 | South Carolina Electric & Gas Co., 4.35%, 2/1/42 | 257,754 | |||||
617,951 | |||||||
TOTAL CORPORATE BONDS & NOTES (Cost $30,540,094) (9.0%) | 31,148,865 | ||||||
CONVERTIBLE CORPORATE BONDS & NOTES (2.6%) | |||||||
COMMUNICATIONS (0.3%) | |||||||
300,000 | Equinix, Inc., Convertible Fixed, 4.75%, 6/15/16 | 765,750 | |||||
Principal Amount | Value | ||||||
CONVERTIBLE CORPORATE BONDS & NOTES (2.6%) (continued) | |||||||
COMMUNICATIONS (0.3%) (continued) | |||||||
$ | 100,000 | VeriSign, Inc., Junior Subordinated Debentures, 3.25%, 8/15/37 (2) | $ | 151,688 | |||
917,438 | |||||||
CONSUMER, CYCLICAL (0.2%) | |||||||
150,000 | Home Inns & Hotels Management, Inc., Senior Notes, 2.00%, 12/15/15 (2) | 148,031 | |||||
200,000 | MGM Resorts International, Guaranteed Senior Notes, 4.25%, 4/15/15 | 293,625 | |||||
300,000 | Navistar International Corp., Senior Subordinated Notes, 3.00%, 10/15/14 | 303,000 | |||||
744,656 | |||||||
CONSUMER, NON-CYCLICAL (0.6%) | |||||||
1,000,000 | Alere, Inc., Convertible Fixed, 3.00%, 5/15/16 | 1,106,875 | |||||
100,000 | Gilead Sciences, Inc., Convertible Fixed, Series D, 1.63%, 5/1/16 | 364,500 | |||||
300,000 | Insulet Corp., Senior Unsecured Notes, 3.75%, 6/15/16 | 455,437 | |||||
123,000 | Salix Pharmaceuticals Ltd., Senior Unsecured Notes, 2.75%, 5/15/15 | 328,641 | |||||
2,255,453 | |||||||
ENERGY (0.2%) | |||||||
250,000 | Goodrich Petroleum Corp., Senior Unsecured Notes, 5.00%, 10/1/29 | 257,031 | |||||
800,000 | Peabody Energy Corp., Junior Subordinate Debentures, 4.75%, 12/15/41 (1) | 600,500 | |||||
857,531 | |||||||
FINANCIAL (0.3%) | |||||||
300,000 | Fidelity National Financial, Inc., Senior Unsecured Notes, 4.25%, 8/15/18 | 492,187 | |||||
100,000 | ProLogis, Guaranteed Notes, 3.25%, 3/15/15 | 111,938 | |||||
200,000 | SL Green Operating Partnership L.P., Convertible Fixed, 3.00%, 10/15/17 (2) | 275,250 | |||||
Principal Amount | Value | ||||||
FINANCIAL (0.3%) (continued) | |||||||
$ | 200,000 | Tower Group, Inc., Senior Notes Convertible, 5.00%, 9/15/14 | $ | 172,500 | |||
1,051,875 | |||||||
INDUSTRIAL (0.5%) | |||||||
100,000 | AGCO Corp., Senior Subordinated Notes, 1.25%, 12/15/36 | 137,438 | |||||
150,000 | Alliant Techsystems, Inc., Guaranteed Notes, 3.00%, 8/15/24 | 268,596 | |||||
250,000 | Bristow Group, Inc., Guaranteed Notes, 3.00%, 6/15/38 | 316,719 | |||||
200,000 | EnerSys, Senior Notes, 3.38%, 6/1/38 (4) | 344,625 | |||||
300,000 | Trinity Industries, Inc., Subordinated Notes Convertible, 3.88%, 6/1/36 | 558,562 | |||||
1,625,940 | |||||||
TECHNOLOGY (0.5%) | |||||||
350,000 | CSG Systems International, Inc., Senior Subordinate Debenture, 3.00%, 3/1/17 (2) | 434,438 | |||||
150,000 | Intel Corp., Junior Subordinated Notes, 3.25%, 8/1/39 | 231,375 | |||||
200,000 | Lam Research Corp., Senior Unsecured Notes, 1.25%, 5/15/18 (1) | 273,250 | |||||
150,000 | SanDisk Corp., Senior Unsecured Notes, 1.50%, 8/15/17 | 305,156 | |||||
200,000 | Xilinx, Inc., Senior Notes, 2.63%, 6/15/17 | 331,375 | |||||
1,575,594 | |||||||
TOTAL CONVERTIBLE CORPORATE BONDS & NOTES (Cost $6,639,788) (2.6%) | 9,028,487 | ||||||
FOREIGN GOVERNMENT OBLIGATIONS (0.2%) | |||||||
250,000 | International Bank for Reconstruction & Development, Senior Unsecured Notes, 0.50%, 4/15/16 | 250,214 | |||||
250,000 | Mexico Government International Bond, Senior Unsecured Notes, 5.13%, 1/15/20 (1) | 283,250 |
See Notes to Financial Statements. |
24 |
June 30, 2014 |
Principal Amount | Value | ||||||
FOREIGN GOVERNMENT OBLIGATIONS (0.2%) (countined) | |||||||
$ | 250,000 | Poland Government International Bond, Senior Unsecured Notes, 4.00%, 1/22/24 | $ | 259,375 | |||
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $772,042) (0.2%) | 792,839 | ||||||
LONG-TERM MUNICIPAL SECURITIES (0.4%) | |||||||
CALIFORNIA (0.1%) | |||||||
250,000 | San Francisco Bay Area Rapid Transit District, Revenue Bonds, Series B, 4.09%, 7/1/32 | 242,670 | |||||
NEW YORK (0.1%) | |||||||
250,000 | City of New York, General Obligation Unlimited, Subser. D2, 2.60%, 8/1/20 | 251,552 | |||||
185,000 | Metropolitan Transportation Authority, Build America Bonds, Revenue Bonds, Ser. C-1, 5.12%, 11/15/19 | 203,887 | |||||
455,439 | |||||||
TEXAS (0.2%) | |||||||
250,000 | Dallas Independent School District Qualified School Construction Notes, General Obligation Limited, 5.05%, 8/15/33 | 266,650 | |||||
250,000 | Tarrant County Cultural Education Facilities Finance Corp., Revenue Bonds, Baylor Health Care System Project, Series C, 4.45%, 11/15/43 | 233,405 | |||||
500,055 | |||||||
TOTAL LONG-TERM MUNICIPAL SECURITIES (Cost $1,208,368) (0.4%) | 1,198,164 | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%) | |||||||
500,000 | FHLB, 1.13%, 3/10/17 | 504,072 | |||||
250,000 | FHLB, 3.13%, 12/8/17 | 265,629 | |||||
175,000 | FHLB, 2.75%, 6/8/18 | 184,288 | |||||
250,000 | FHLB, 1.63%, 2/27/19 | 249,228 | |||||
415,000 | FHLB, 4.13%, 12/13/19 | 463,645 | |||||
1,000,000 | FHLB, 3.25%, 6/9/23 | 1,038,706 | |||||
Principal Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%) (countined) | |||||||
$ | 445,940 | FHLMC, Series 4151, Class PA, 2.00%, 1/15/33 | $ | 441,391 | |||
107,156 | FHLMC Gold PC Pool #A46044, 5.00%, 7/1/35 | 118,585 | |||||
334,275 | FHLMC Gold PC Pool #A47613, 5.00%, 11/1/35 | 369,925 | |||||
95,801 | FHLMC Gold PC Pool #A89430, 4.50%, 10/1/39 | 103,709 | |||||
243,192 | FHLMC Gold PC Pool #C09055, 4.00%, 12/1/43 | 257,983 | |||||
342,890 | FHLMC Gold PC Pool #J17969, 3.00%, 2/1/27 | 355,848 | |||||
121,115 | FHLMC Gold Pool #A84814, 4.50%, 3/1/39 | 131,112 | |||||
726,880 | FHLMC Gold Pool #A86830, 4.50%, 6/1/39 | 786,881 | |||||
98,231 | FHLMC Gold Pool #A96997, 4.50%, 2/1/41 | 106,374 | |||||
364,215 | FHLMC Gold Pool #A97264, 4.00%, 2/1/41 | 386,367 | |||||
388,264 | FHLMC Gold Pool #C09027, 3.00%, 2/1/43 | 383,461 | |||||
72,002 | FHLMC Gold Pool #G08521, 3.00%, 1/1/43 | 71,111 | |||||
962,213 | FHLMC Gold Pool #J13314, 3.50%, 10/1/25 | 1,019,938 | |||||
825,930 | FHLMC Gold Pool #Q04096, 4.00%, 10/1/41 | 876,166 | |||||
172,870 | FHLMC Gold Pool #Q06884, 3.50%, 3/1/42 | 177,921 | |||||
106,293 | FHLMC Gold Pool #Q11077, 3.50%, 9/1/42 | 109,398 | |||||
500,000 | FNMA, 2.00%, 9/21/15 | 510,243 | |||||
500,000 | FNMA, 0.38%, 12/21/15 | 500,544 | |||||
1,000,000 | FNMA, 0.88%, 5/21/18 | 983,216 | |||||
382,411 | FNMA Pool #745275, 5.00%, 2/1/36 | 425,364 | |||||
43,509 | FNMA Pool #832199, 4.50%, 7/1/35 | 47,140 | |||||
483,582 | FNMA Pool #844809, 5.00%, 11/1/35 | 537,749 | |||||
66,557 | FNMA Pool #973333, 4.50%, 2/1/38 | 72,111 | |||||
247,015 | FNMA Pool #AA0466, 4.50%, 2/1/39 | 267,849 | |||||
14,209 | FNMA Pool #AB1259, 5.00%, 7/1/40 | 15,806 | |||||
Principal Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%) (countined) | |||||||
$ | 386,387 | FNMA Pool #AB1796, 3.50%, 11/1/40 | $ | 398,359 | |||
239,911 | FNMA Pool #AB2660, 3.50%, 5/1/21 | 254,565 | |||||
157,138 | FNMA Pool #AB3218, 3.50%, 7/1/31 | 164,317 | |||||
655,433 | FNMA Pool #AB3900, 3.00%, 11/1/26 | 681,676 | |||||
23,951 | FNMA Pool #AB3943, 4.00%, 11/1/41 | 25,474 | |||||
414,633 | FNMA Pool #AB5231, 2.50%, 5/1/27 | 421,760 | |||||
237,595 | FNMA Pool #AC5822, 4.50%, 5/1/40 | 257,421 | |||||
388,705 | FNMA Pool #AD7128, 4.50%, 7/1/40 | 421,187 | |||||
249,721 | FNMA Pool #AD8529, 4.50%, 8/1/40 | 270,654 | |||||
856,692 | FNMA Pool #AE9759, 4.00%, 12/1/40 | 910,464 | |||||
239,544 | FNMA Pool #AH2084, 4.00%, 12/1/40 | 254,579 | |||||
430,144 | FNMA Pool #AH4493, 4.50%, 2/1/41 | 466,038 | |||||
603,076 | FNMA Pool #AH6186, 4.00%, 2/1/41 | 640,929 | |||||
379,629 | FNMA Pool #AH8932, 4.50%, 4/1/41 | 411,484 | |||||
1,050,531 | FNMA Pool #AJ9278, 3.50%, 12/1/41 | 1,083,082 | |||||
30,610 | FNMA Pool #AK6513, 4.00%, 3/1/42 | 32,546 | |||||
604,222 | FNMA Pool #AL0160, 4.50%, 5/1/41 | 654,805 | |||||
841,577 | FNMA Pool #AL0657, 5.00%, 8/1/41 | 935,628 | |||||
77,847 | FNMA Pool #AL3192, 5.00%, 5/1/42 | 86,581 | |||||
412,894 | FNMA Pool #AQ1853, 3.00%, 11/1/42 | 408,372 | |||||
472,339 | FNMA Pool #AS0865, 2.50%, 10/1/28 | 480,429 | |||||
189,968 | FNMA Pool #AS1529, 3.00%, 1/1/29 | 197,575 | |||||
78,068 | FNMA Pool #AT8849, 4.00%, 6/1/43 | 82,968 | |||||
236,390 | FNMA Pool #AU3621, 3.00%, 7/1/43 | 233,801 | |||||
444,840 | FNMA Pool #AU5409, 3.00%, 8/1/43 | 439,969 | |||||
296,486 | FNMA Pool #AU6562, 3.50%, 12/1/43 | 305,672 | |||||
97,846 | FNMA Pool #AU7025, 3.00%, 11/1/43 | 96,774 | |||||
51,502 | FNMA Pool #MA0406, 4.50%, 5/1/30 | 56,533 |
See Notes to Financial Statements. |
25 |
Schedule of Investments (unaudited) (continued) |
Principal Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%) (countined) | |||||||
$ | 189,355 | FNMA Pool #MA0577, 3.50%, 11/1/20 | $ | 200,931 | |||
449,509 | FNMA REMIC Trust Series 2013-18, Class AE, 2.00%, 3/25/28 | 445,329 | |||||
304,982 | FNMA REMIC Trust Series 2013-41, Class WD, 2.00%, 11/25/42 | 296,111 | |||||
250,000 | FNMA Pool TBA, 4.50%, 7/1/44 | 270,742 | |||||
116,149 | GNMA I Pool #539285, 3.00%, 5/15/42 | 117,253 | |||||
134,077 | GNMA I Pool #744842, 3.00%, 5/15/42 | 135,352 | |||||
242,070 | GNMA II Pool #MA1520, 3.00%, 12/20/43 | 244,758 | |||||
490,045 | GNMA II Pool #MA1521, 3.50%, 12/20/43 | 511,266 | |||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $24,514,077) (7.2%) | 24,657,144 | ||||||
U.S. TREASURY OBLIGATIONS (3.0%) | |||||||
1,000,000 | U.S. Treasury Bonds, 5.25%, 2/15/29 | 1,281,875 | |||||
350,000 | U.S. Treasury Bonds, 3.13%, 11/15/41 | 339,172 | |||||
250,000 | U.S. Treasury Bonds, 2.75%, 8/15/42 | 223,594 | |||||
900,000 | U.S. Treasury Bonds, 2.88%, 5/15/43 | 822,375 | |||||
200,000 | U.S. Treasury Bonds, 3.75%, 11/15/43 | 216,000 | |||||
400,000 | U.S. Treasury Notes, 0.50%, 10/15/14 | 400,500 | |||||
Principal Amount | Value | ||||||
U.S. TREASURY OBLIGATIONS (3.0%) (countined) | |||||||
$ | 600,000 | U.S. Treasury Notes, 0.38%, 4/30/16 | $ | 599,813 | |||
250,000 | U.S. Treasury Notes, 1.50%, 6/30/16 | 255,156 | |||||
900,000 | U.S. Treasury Notes, 1.00%, 10/31/16 | 908,437 | |||||
500,000 | U.S. Treasury Notes, 0.88%, 11/30/16 | 503,086 | |||||
100,000 | U.S. Treasury Notes, 0.63%, 5/31/17 | 99,336 | |||||
680,000 | U.S. Treasury Notes, 0.75%, 12/31/17 | 671,394 | |||||
350,000 | U.S. Treasury Notes, 0.75%, 3/31/18 | 343,875 | |||||
900,000 | U.S. Treasury Notes, 1.38%, 9/30/18 | 898,875 | |||||
1,000,000 | U.S. Treasury Notes, 1.38%, 11/30/18 | 997,188 | |||||
100,000 | U.S. Treasury Notes, 1.38%, 2/28/19 | 99,266 | |||||
550,000 | U.S. Treasury Notes, 3.63%, 2/15/20 | 604,957 | |||||
250,000 | U.S. Treasury Notes, 1.25%, 2/29/20 | 242,422 | |||||
300,000 | U.S. Treasury Notes, 2.25%, 4/30/21 | 302,953 | |||||
150,000 | U.S. Treasury Notes, 2.00%, 2/15/23 | 145,641 | |||||
300,000 | U.S. Treasury Notes, 2.50%, 5/15/24 | 299,578 | |||||
TOTAL U.S. TREASURY OBLIGATIONS (Cost $10,108,015) (3.0%) | 10,255,493 | ||||||
Shares | Value | ||||||
SHORT-TERM INVESTMENTS (6.5%) | |||||||
MONEY MARKET FUNDS (6.5%) | |||||||
22,438,909 | State Street Institutional Liquid Reserves Fund | $ | 22,438,909 | ||||
TOTAL SHORT-TERM INVESTMENTS (Cost $22,438,909) (6.5%) | 22,438,909 | ||||||
TOTAL INVESTMENT SECURITIES (100.2%) (Cost $263,679,901) | $ | 345,770,641 | |||||
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS (-0.2%) | (605,953 | ) | |||||
NET ASSETS (100%) | $ | 345,164,688 | |||||
NET ASSET VALUE OFFERING AND REDEMPTION PRICE, PER OUTSTANDING SHARE ($345,164,688 ÷ 33,534,342 shares outstanding) | $ | 10.29 |
* | Non-income producing. | |
(1) | A portion or all of the security was held on loan. As of June 30, 2014, the market value of the securities on loan was $13,742,949. | |
(2) | Pursuant to Rule 144A under the Securities Act of 1933, this security can only be sold to qualified institutional investors. | |
(3) | The rate shown on floating rate securities is the rate at the end of the reporting period. The rate changes monthly. | |
(4) | Step Bond - The rate shown is as of June 30, 2014 and will reset at a future date. | |
ADR | American Depositary Receipt. | |
FHLB | Federal Home Loan Bank. | |
FHLMC | Federal Home Loan Mortgage Corp. | |
FNMA | Federal National Mortgage Association. | |
GMTN | Global Medium Term Note. | |
GNMA | Government National Mortgage Association. | |
MTN | Medium Term Note. | |
REIT | Real Estate Investment Trust. | |
TBA | To Be Announced. |
The following table summarizes the inputs used to value the Fund’s investments in securities as of June 30, 2014 (See Note 1B):
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Common Stocks* | $ | 237,901,385 | $ | — | $ | — | $ | 237,901,385 | ||||||||
Preferred Stocks* | 127,700 | — | — | 127,700 | ||||||||||||
Convertible Preferred Stocks* | 1,835,237 | 672,243 | — | 2,507,480 | ||||||||||||
Asset-Backed Securities | — | 494,244 | — | 494,244 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 5,219,931 | — | 5,219,931 | ||||||||||||
Corporate Bonds & Notes* | — | 31,148,865 | — | 31,148,865 | ||||||||||||
Convertible Corporate Bonds & Notes* | — | 9,028,487 | — | 9,028,487 | ||||||||||||
Foreign Government Obligations | — | 792,839 | — | 792,839 | ||||||||||||
Long-Term Municipal Securities* | — | 1,198,164 | — | 1,198,164 | ||||||||||||
U.S. Government Agency Obligations | — | 24,657,144 | — | 24,657,144 | ||||||||||||
U.S. Treasury Obligations | — | 10,255,493 | — | 10,255,493 | ||||||||||||
Short-Term Investments | — | 22,438,909 | — | 22,438,909 | ||||||||||||
Total Investments in Securities | $ | 239,864,322 | $ | 105,906,319 | $ | — | $ | 345,770,641 |
* See Schedule of Investments for further classification. |
See Notes to Financial Statements. |
26 |
VALUE LINE LARGER COMPANIES FUND, INC. |
INVESTMENT OBJECTIVE AND STRATEGY
The Fund’s investment objective is to realize capital growth.
To achieve the Fund’s investment objective the Adviser invests substantially all of the Fund’s assets in common stock. While the Fund is actively managed by the Adviser, the Adviser relies primarily on the rankings of companies by the Value Line Timeliness™ Ranking System (the “Ranking System”) in selecting securities for purchase or sale. The Fund’s investments usually, as measured by the number and total value of purchases, are selected from common stocks of the 100 largest companies by capitalization that are ranked 1, 2, or 3 by the Ranking System. The Adviser will determine the percentage of the Fund’s assets invested in each stock based on the stock’s relative attractiveness.
Manager Discussion of Fund Performance |
Effective June 2014, Cindy Starke replaced Mark T. Spellman as portfolio manager responsible for the Fund. Below, Value Line Larger Companies Fund, Inc. portfolio manager Cindy Starke discusses the Fund’s performance and positioning for the six months ended June 30, 2014.
How did Value Line Larger Companies Fund perform during the semi-annual period?
The Fund generated a cumulative total return of 5.51% during the six months ended June 30, 2014. This compares to the 7.14% return of the Fund’s benchmark, the S&P 500® Index, during the same semi-annual period.
What key factors were responsible for the Fund’s performance during the six-month reporting period?
While the Fund generated solid absolute gains, its underperformance of the S&P 500® Index during the six-month reporting period can be attributed primarily to stock selection overall. Having a position, albeit modest, in cash during a period when the equity market rallied, also detracted. Sector allocation as a whole had a rather neutral impact.
Which equity market sectors most significantly affected Fund performance?
Stock selection in information technology detracted from the Fund’s performance, more than offsetting the positive effect of having an overweighted allocation to the strongly performing sector. Having an underweighted allocation to energy, which outpaced the S&P 500® Index during the semi-annual period, and an overweighted allocation to consumer discretionary, which was the weakest performing sector in the S&P 500® Index during the reporting period, also dampened results.
Partially offsetting these detractors were the positive contributions made by effective stock selection in the health care, energy and consumer discretionary sectors. Having an underweighted allocation to the financials sector, which lagged the S&P 500® Index during the semi-annual period, also boosted relative results.
Which stocks detracted significantly from the Fund’s performance during the semi-annual period?
During the semi-annual period, the stocks that detracted most from the Fund’s performance were leading home security company ADT, semiconductor device developer ARM Holdings and global off-price apparel and home fashion retailer TJX Companies. ADT’s shares sold off sharply early in 2014 after reporting disappointing results. The company’s results were impacted by high rates of customer attrition coupled with increasing costs of acquiring new subscribers. We sold the Fund’s position in ADT by the end of the reporting period. Shares of ARM Holdings fell significantly due to weaker than expected royalties in the fourth quarter of 2013. Its shipments were impacted by an inventory correction. TJX Companies performed poorly during the semi-annual period, as its sales were impacted by the harsh winter weather and a lukewarm consumer. At the end of the reporting period, we continued to believe the company had a good long-term track record of delivering results, and we felt it was still well positioned for longer-term sales and earnings growth. Thus, we added to the Fund’s position in TJX Companies on its share price weakness.
What were some of the Fund’s best-performing individual stocks?
The individual stocks that contributed most to the Fund’s relative results were oil and gas exploration and production company EOG Resources, multi-specialty health care company Allergan and pharmaceuticals manufacturer Actavis, each of which posted robust double-digit gains during the semi-annual period. EOG Resources performed well along with the broad energy sector, as oil prices rose. Shares of Allergan were up strongly on news of Valeant Pharmaceuticals’ hostile bid for the company. Actavis saw its shares soar on the news of its accretive acquisition of Forest Laboratories. In addition to anticipated cost savings, we believe the combined company should result in greater product diversification and higher sales growth.
27 |
(continued) |
How did the Fund use derivatives and similar instruments during the reporting period?
The Fund did not use derivatives during the reporting period.
Did the Fund make any significant purchases or sales during the semi-annual period?
During the semi-annual period, we initiated a Fund position on a pullback in the shares of Discover Communications, a leading global media company known for its nonfiction content. We established a Fund position in Estee Lauder Companies, a leading company in the global prestige beauty product market. Estee Lauder Companies owns a diversified portfolio of well-known beauty brands that, in our view, stand to benefit from growing global disposable incomes and an aging global population.
We sold the Fund’s position in discount retailer Target, as the company’s sales growth remained challenged, and it appeared that e-commerce competition continued to impact its in-store customer traffic. We eliminated the Fund’s position in consumer foods manufacturer General Mills, as we felt its shares were fully valued, and we had grown concerned about slowing U.S. sales. We exited the Fund’s position in global logistics company Expeditors International of Washington, as we saw what we considered to be downside risk in its margins and earnings.
Were there any notable changes in the Fund’s weightings during the six-month period?
There were several notable changes in the Fund’s weightings during the six-month period ended June 30, 2014. We increased the Fund’s weightings in the consumer discretionary and health care sectors and decreased the Fund’s weightings in the financials and telecommunication services sectors.
How was the Fund positioned relative to its benchmark index at the end of June 2014?
As of June 30, 2014, the Fund was overweighted relative to the S&P 500® Index in the consumer discretionary, information technology, materials and health care sectors. The Fund was underweighted relative to the S&P 500® Index in the financials, consumer staples, energy, telecommunication services and utilities sectors and rather neutrally weighted relative to the Index in the industrials sector on the same date.
What is your tactical view and strategy for the months ahead?
As we look toward the second half of 2014, we intend to continue to look for and to emphasize leading larger-capitalization growth stocks that generally are ranked in the higher categories of 1, 2 or 3 in the Value Line Timeliness™ Ranking System. As of June 30, 2014, a majority of the Fund’s assets were in stocks that met these criteria. We intend to seek investments in a diversified portfolio of high quality companies that we believe are well positioned to grow sales and earnings over the next few years. As always, our goal is to generate solid returns through capital growth across market cycles.
28 |
Value Line Larger Companies Fund, Inc. |
Portfolio Highlights at June 30, 2014 (unaudited) |
Ten Largest Holdings
Issue | Shares | Value | Percentage of Net Assets | |||||||
Apple, Inc. | 55,500 | $ | 5,157,615 | 2.4 | % | |||||
Google, Inc. Class A | 7,700 | 4,501,959 | 2.1 | % | ||||||
Actavis PLC | 20,000 | 4,461,000 | 2.1 | % | ||||||
Starbucks Corp. | 55,000 | 4,255,900 | 2.0 | % | ||||||
Visa, Inc. Class A | 20,000 | 4,214,200 | 1.9 | % | ||||||
QUALCOMM, Inc. | 50,000 | 3,960,000 | 1.8 | % | ||||||
Cognizant Technology Solutions Corp. Class A | 80,000 | 3,912,800 | 1.8 | % | ||||||
Biogen Idec, Inc. | 12,000 | 3,783,720 | 1.7 | % | ||||||
DIRECTV | 42,000 | 3,570,420 | 1.6 | % | ||||||
EOG Resources, Inc. | 30,000 | 3,505,800 | 1.6 | % | ||||||
Asset Allocation – Percentage of Net Assets |
Sector Weightings – Percentage of Total Investment Securities* |
*Sector weightings exclude short-term investments. |
29 |
Value Line Larger Companies Fund, Inc. Schedule of Investments (unaudited) |
Shares | Value | ||||||
COMMON STOCKS (97.6%) | |||||||
CONSUMER DISCRETIONARY (19.8%) | |||||||
6,000 | Amazon.com, Inc. * | $ | 1,948,680 | ||||
5,000 | AutoZone, Inc. * | 2,681,200 | |||||
60,000 | Comcast Corp. Class A | 3,199,800 | |||||
42,000 | DIRECTV * | 3,570,420 | |||||
30,000 | Discovery Communications, Inc. Class A * | 2,228,400 | |||||
30,000 | Harley-Davidson, Inc. | 2,095,500 | |||||
20,000 | Harman International Industries, Inc. | 2,148,600 | |||||
40,000 | Las Vegas Sands Corp. | 3,048,800 | |||||
40,000 | NIKE, Inc. Class B | 3,102,000 | |||||
2,600 | Priceline Group, Inc. (The) * | 3,127,800 | |||||
55,000 | Starbucks Corp. | 4,255,900 | |||||
58,000 | TJX Companies, Inc. (The) | 3,082,700 | |||||
90,000 | Urban Outfitters, Inc. * | 3,047,400 | |||||
36,000 | Walt Disney Co. (The) | 3,086,640 | |||||
28,000 | Yum! Brands, Inc. | 2,273,600 | |||||
42,897,440 | |||||||
CONSUMER STAPLES (7.0%) | |||||||
24,000 | Costco Wholesale Corp. | 2,763,840 | |||||
45,000 | CVS Caremark Corp. | 3,391,650 | |||||
40,000 | Estee Lauder Companies, Inc. (The) Class A | 2,970,400 | |||||
46,000 | Monster Beverage Corp. * | 3,267,380 | |||||
31,000 | PepsiCo, Inc. | 2,769,540 | |||||
15,162,810 | |||||||
ENERGY (6.6%) | |||||||
37,000 | Cameron International Corp. * | 2,505,270 | |||||
30,000 | EOG Resources, Inc. | 3,505,800 | |||||
26,000 | Exxon Mobil Corp. | 2,617,680 | |||||
28,000 | Schlumberger Ltd. | 3,302,600 | |||||
47,000 | TransCanada Corp. | 2,242,840 | |||||
14,174,190 | |||||||
FINANCIALS (6.4%) | |||||||
23,000 | American Tower Corp. REIT | 2,069,540 | |||||
9,500 | BlackRock, Inc. | 3,036,200 | |||||
37,000 | Capital One Financial Corp. | 3,056,200 | |||||
40,000 | Franklin Resources, Inc. | 2,313,600 | |||||
58,000 | JPMorgan Chase & Co. | 3,341,960 | |||||
13,817,500 | |||||||
HEALTH CARE (17.0%) | |||||||
20,000 | Actavis PLC * | 4,461,000 | |||||
20,000 | Allergan, Inc. | 3,384,400 | |||||
12,000 | Biogen Idec, Inc. * | 3,783,720 |
Shares | Value | ||||||
HEALTH CARE (17.0%) (continued) | |||||||
54,000 | Cerner Corp. * | $ | 2,785,320 | ||||
26,000 | Edwards Lifesciences Corp. * | 2,231,840 | |||||
36,000 | Express Scripts Holding Co. * | 2,495,880 | |||||
36,000 | Gilead Sciences, Inc. * | 2,984,760 | |||||
16,000 | McKesson Corp. | 2,979,360 | |||||
12,000 | Medivation, Inc. * | 924,960 | |||||
75,000 | Novo Nordisk A/S ADR | 3,464,250 | |||||
14,000 | Perrigo Co. PLC | 2,040,640 | |||||
19,000 | Thermo Fisher Scientific, Inc. | 2,242,000 | |||||
38,000 | UnitedHealth Group, Inc. | 3,106,500 | |||||
36,884,630 | |||||||
INDUSTRIALS (10.8%) | |||||||
24,000 | Boeing Co. (The) | 3,053,520 | |||||
34,000 | Danaher Corp. | 2,676,820 | |||||
21,000 | FedEx Corp. | 3,178,980 | |||||
9,000 | General Dynamics Corp. | 1,048,950 | |||||
13,000 | Precision Castparts Corp. | 3,281,200 | |||||
40,000 | Tyco International Ltd. | 1,824,000 | |||||
28,000 | Union Pacific Corp. | 2,793,000 | |||||
22,000 | United Technologies Corp. | 2,539,900 | |||||
50,000 | Verisk Analytics, Inc. Class A * | 3,001,000 | |||||
23,397,370 | |||||||
INFORMATION TECHNOLOGY (23.3%) | |||||||
140,000 | Activision Blizzard, Inc. | 3,122,000 | |||||
55,500 | Apple, Inc. | 5,157,615 | |||||
49,700 | ARM Holdings PLC ADR | 2,248,428 | |||||
80,000 | Cognizant Technology Solutions Corp. Class A * | 3,912,800 | |||||
62,000 | eBay, Inc. * | 3,103,720 | |||||
95,000 | EMC Corp. | 2,502,300 | |||||
40,000 | Facebook, Inc. Class A * | 2,691,600 | |||||
7,700 | Google, Inc. Class A * | 4,501,959 | |||||
3,700 | Google, Inc. Class C * | 2,128,536 | |||||
33,900 | Intuit, Inc. | 2,729,967 | |||||
54,000 | Oracle Corp. | 2,188,620 | |||||
50,000 | QUALCOMM, Inc. | 3,960,000 | |||||
49,000 | Salesforce.com, Inc. * | 2,845,920 | |||||
29,900 | SAP AG ADR (1) | 2,302,300 | |||||
20,000 | Visa, Inc. Class A | 4,214,200 | |||||
28,000 | VMware, Inc. Class A * | 2,710,680 | |||||
50,320,645 | |||||||
MATERIALS (4.7%) | |||||||
33,000 | E.I. du Pont de Nemours & Co. | 2,159,520 | |||||
25,000 | Ecolab, Inc. | 2,783,500 | |||||
25,000 | Monsanto Co. | 3,118,500 | |||||
16,000 | Praxair, Inc. | 2,125,440 | |||||
10,186,960 |
Shares | Value | ||||||
TELECOMMUNICATION SERVICES (1.0%) | |||||||
50,000 | BCE, Inc. | $ | 2,268,000 | ||||
UTILITIES (1.0%) | |||||||
28,333 | Duke Energy Corp. | 2,102,025 | |||||
TOTAL COMMON STOCKS (Cost $133,534,291) (97.6%) | 211,211,570 | ||||||
SHORT-TERM INVESTMENTS (2.4%) | |||||||
MONEY MARKET FUNDS (2.4%) | |||||||
5,214,511 | State Street Institutional Liquid Reserves Fund | 5,214,511 | |||||
TOTAL SHORT-TERM INVESTMENTS (Cost $5,214,511) (2.4%) | 5,214,511 | ||||||
TOTAL INVESTMENT SECURITIES (100.0%) (Cost $138,748,802) | $ | 216,426,081 | |||||
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS (0.0%) | (20,397 | ) | |||||
NET ASSETS (100%) | $ | 216,405,684 | |||||
NET ASSET VALUE OFFERING AND REDEMPTION PRICE, PER OUTSTANDING SHARE ($216,405,684 ÷ 8,019,602 shares outstanding) | $ | 26.98 |
* | Non-income producing. |
(1) | A portion or all of the security was held on loan. As of June 30, 2014, the market value of the securities on loan was $2,302,300. |
ADR | American Depositary Receipt. |
REIT | Real Estate Investment Trust. |
See Notes to Financial Statements. |
30 |
June 30, 2014 |
The following table summarizes the inputs used to value the Fund’s investments in securities as of June 30, 2014 (see Note 1B):
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks* | $ | 211,211,570 | $ | — | $ | — | $ | 211,211,570 | ||||||||
Short-Term Investments | — | 5,214,511 | — | 5,214,511 | ||||||||||||
Total Investment in Securities | $ | 211,211,570 | $ | 5,214,511 | $ | — | $ | 216,426,081 |
* See Schedule of Investments for further classification.
See Notes to Financial Statements. |
31 |
VALUE LINE CORE BOND FUND |
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Fund is to maximize current income. Capital appreciation is a secondary objective but only when consistent with the Fund’s primary objective.
The Fund invests primarily in a diversified portfolio of primarily investment grade, fixed income obligations, including securities issued or guaranteed by the U.S. government, its agencies or instrumentalities (U.S. government securities), mortgage-backed securities, asset-backed securities, corporate bonds, and other fixed income securities. Under normal circumstances, the Fund invests at least 80% of its assets in fixed income securities. The Fund invests in debt securities of any maturity, and there is no limit on the Fund’s maximum average portfolio maturity.
Manager Discussion of Fund Performance |
Below, Value Line Core Bond Fund’s portfolio managers Liane Rosenberg and Jeffrey D. Geffen discuss the Fund’s performance and positioning for the six months ended June 30, 2014.
How did the Fund perform during the semi-annual period?
The Fund generated a cumulative total return of 3.52% during the six months ended June 30, 2014. This compares to the 3.93% return of the Fund’s benchmark, the Barclays U.S. Aggregate Bond Index (the “Barclays Index”), during the same semi-annual period.
What key factors were responsible for the Fund’s performance during the six-month reporting period?
The Fund closely tracked its benchmark, the Barclays Index, as the positive contributions made by sector allocation decisions overall were offset by the detracting effect of yield curve positioning. Issue selection produced mixed results, and duration positioning had a rather neutral impact during the reporting period overall.
Which fixed income market sectors most significantly affected Fund performance?
Sector allocation overall contributed positively to the Fund’s results during the reporting period. A significantly overweighted allocation to corporate bonds relative to the Barclays Index, especially those rated BBB, particularly boosted relative results. An out-of-benchmark exposure to high yield corporate bonds also added value. Further, a notably underweighted allocation to U.S. Treasuries relative to the Barclays Index helped, as U.S. Treasuries underperformed spread, or non-U.S. Treasury, sectors during the reporting period. Only partially offsetting these positive contributors was the detracting effect of having an overweighted allocation to commercial mortgage-backed securities (CMBS), as CMBS lagged not only U.S. Treasuries during the semi-annual period but the corporate bond sector and the broader securitized debt sector as well. Having an underweighted exposure, albeit a modest one, to long-dated U.S. Treasuries also hurt, as 30-year U.S. Treasuries were the best performers in the Barclays Index during the reporting period, posting a return of more than 13% for the six months ended June 30, 2014.
Issue selection generated mixed results. Several of the Fund’s longer-maturity corporate bond holdings posted especially strong returns—of more than 12%—including corporate bonds issued by Comcast, Enterprise Products and Kroger. A position in a long-dated taxable municipal bond of Tarrant County also generated a return in excess of 12% during the reporting period. However, since higher-risk securities generally turned in the best performance, some of the Fund’s strongest credits, including those issued by Microsoft and Toyota, posted rather lackluster returns during the semi-annual period. Positions in securities with maturities of less than three years, including U.S. Treasuries and corporate bonds rated A or higher, including high quality banks and industrials, generally detracted as well.
What was the Fund’s duration strategy?
Duration positioning in the Fund had a rather neutral effect on the Fund’s performance relative to the Barclays Index during the reporting period. Given the market’s low volatility and the 10-year U.S. Treasury’s narrow trading range, especially during the second calendar quarter, we kept the Fund’s duration in a relatively tight band of 1/4 year either longer or shorter than that of the Barclays Index. Duration is a measure of the Fund’s sensitivity to changes in interest rates.
How did yield curve positioning decisions affect the Fund’s performance?
Yield curve positioning detracted from the Fund’s performance given an underweighting relative to the Barclays Index in the strongly performing long-term end of the U.S. Treasury yield curve, or spectrum of maturities. This was somewhat offset by the Fund’s prudently underweighted position in securities with maturities of less than three years, which significantly lagged the performance of longer-dated securities.
32 |
(continued) |
How did the Fund use derivatives and similar instruments during the reporting period?
The Fund did not use derivatives during the reporting period.
Were there any notable changes in the Fund’s weightings during the semi-annual period?
We increased the Fund’s exposure to spread product, including investment grade and high yield corporate bonds and the securitized sector, given continued low interest rates and accommodative Federal Reserve (Fed) policy. We also increased the Fund’s exposure to the long-term end of the yield curve based on expectations of low inflation. However, this change was not enough of a shift to have fully participated in the dramatic flattening seen at the long-term end of the yield curve. A flattening yield curve is one in which the differential in yields of securities with various maturities narrows. We reduced the Fund’s exposure to the belly, or intermediate segment, of the corporate bond yield curve, which was helpful to this sector’s performance within the Fund during this period when the yield curve flattened.
As mentioned earlier, low market volatility prompted us to keep the Fund’s duration within a 1/4 year shorter or longer than that of the Barclays Index during the semi-annual period. Low market volatility also resulted in only moderate portfolio turnover. We did sell a position in a bond issued by International Game Technology due to heightened merger and acquisition rumors. We also sold several higher quality names due to what we believed to be limited opportunity for spread tightening. These sales included positions in the corporate bonds of Microsoft, Home Depot, Wells Fargo and John Deere.
How was the Fund positioned relative to its benchmark index at the end of June 2014?
At the end of June 2014, the Fund was overweight relative to the Barclays Index in the investment grade corporate bond sector and in the securitized sector. The Fund also maintained its out-of-benchmark exposure to high yield corporate bonds. As of June 30, 2014, the Fund was underweight the Barclays Index in U.S. Treasuries and supranational agency debt and held rather neutral weightings compared to the Barclays Index in asset-backed securities, sovereign debt and taxable municipal bonds. The Fund had an approximately 2% allocation to cash equivalents at the end of the reporting period.
What is your tactical view and strategy for the months ahead?
In our view, how far the U.S. economy rebounds from its weak first quarter 2014 is likely to be a key determinant for fixed income performance in the months ahead. Should the economy indeed bounce back strongly, such expansion may accelerate the Fed’s anticipated schedule for increasing interest rates. Other key economic variables likely to affect Fed policy include job creation, unemployment rates and inflationary pressures. In turn, any shift in Fed policy, either more or less accommodative, will almost surely affect the fixed income market given its sensitivity to changes in interest rates and potentially to the ending of the quantitative easing program.
Given this view, at the end of the reporting period, we continued to favor corporate bonds, especially those rated BBB, for their incremental yield. However, given how tight spreads, or yield differentials compared to U.S. Treasuries, are, we would not be inclined to increase the Fund’s already overweighted allocation to corporate bonds but would rather expect to maintain exposure near levels seen at the end of June 2014. Should the equity market outlook weaken, we might look to reduce the Fund’s high yield corporate bond exposure. Also, escalating tensions in the Middle East and in Ukraine could prompt a flight to quality, which could, in turn, lead us to trim the Fund’s position in both investment grade and high yield corporate bonds and add to its position in U.S. Treasuries.
As we continue to seek to maximize current income, we maintain a long-term investment perspective.
33 |
Value Line Core Bond Fund |
Portfolio Highlights at June 30, 2014 (unaudited) |
Ten Largest Holdings
Principal | Percentage of | |||||||||||
Issue | Amount | Value | Net Assets | |||||||||
FNMA Pool #MA1107, 3.50%, 7/1/32 | $ | 1,324,671 | $ | 1,388,982 | 1.7 | % | ||||||
U.S. Treasury Notes, 2.75%, 2/15/24 | 1,050,000 | 1,073,871 | 1.3 | % | ||||||||
GNMA II Pool #5260, 4.50%, 12/20/41 | 934,541 | 1,022,196 | 1.2 | % | ||||||||
FNMA Pool #AB5231, 2.50%, 5/1/27 | 817,181 | 831,226 | 1.0 | % | ||||||||
FHLMC Gold PC Pool #A95803, 4.00%, 12/1/40 | 732,221 | 776,758 | 0.9 | % | ||||||||
Commercial Mortgage Trust, Series 2007-GG9, Class A4, 5.44%, 3/10/39 | 700,000 | 763,816 | 0.9 | % | ||||||||
FNMA Pool #AB8144, 5.00%, 4/1/37 | 641,213 | 713,199 | 0.9 | % | ||||||||
U.S. Treasury Bonds, 2.00%, 1/15/26 | 597,160 | 703,576 | 0.8 | % | ||||||||
U.S. Treasury Notes, 0.75%, 12/31/17 | 700,000 | 691,141 | 0.8 | % | ||||||||
U.S. Treasury Bonds, 3.63%, 8/15/43 | 625,000 | 660,156 | 0.8 | % |
Asset Allocation – Percentage of Net Assets
Sector Weightings – Percentage of Total Investment Securities* |
*Sector weightings exclude short-term investments. |
Coupon Distribution
Percentage of | |||
Fund’s Investments | |||
Less than 4% | 42.9 | % | |
4-4.99% | 22.2 | % | |
5-5.99% | 22.7 | % | |
6-6.99% | 8.4 | % | |
7-7.99% | 3.6 | % | |
8-8.99% | 0.2 | % |
34 |
Value Line Core Bond Fund Schedule of Investments (unaudited) |
Principal Amount | Value | ||||||
ASSET-BACKED SECURITIES (1.5%) | |||||||
$ | 292,448 | Ford Credit Auto Lease Trust, Series 2013-B, Class A2B, 0.42%, 1/15/16 (1) | $ | 292,549 | |||
350,000 | Ford Credit Auto Owner Trust, Series 2013-D, Class A3, 0.67%, 4/15/18 | 350,098 | |||||
245,000 | Ford Credit Floorplan Master Owner Trust A, Series 2013-1, Class A1, 0.85%, 1/15/18 | 245,816 | |||||
350,000 | Honda Auto Receivables Owner Trust, Series 2013-4, Class A3, 0.69%, 9/18/17 | 350,635 | |||||
TOTAL ASSET-BACKED SECURITIES (COST $1,238,166) (1.5%) | 1,239,098 | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (8.1%) | |||||||
300,000 | Bear Stearns Commercial Mortgage Securities Trust, Series 2007-T26, Class A4, 5.47%, 1/12/45 (1) | 330,402 | |||||
350,000 | Citigroup Commercial Mortgage Trust, Series 2006-C5, Class A4, 5.43%, 10/15/49 | 379,637 | |||||
700,000 | Commercial Mortgage Trust, Series 2007-GG9, Class A4, 5.44%, 3/10/39 | 763,816 | |||||
200,000 | FREMF Mortgage Trust, Series 2012-K711, Class B, 3.68%, 8/25/45 (1) (2) | 207,373 | |||||
250,000 | FREMF Mortgage Trust, Series 2014-K715, Class B, 4.12%, 2/25/46 (1) (2) | 261,658 | |||||
200,000 | FREMF Mortgage Trust, Series 2013-K713, Class B, 3.27%, 4/25/46 (1) (2) | 201,883 | |||||
300,000 | GNMA, Series 2010-155, Class B, 2.53%, 6/16/39 | 307,891 | |||||
342,277 | GNMA, Series 2013-12, Class AB, 1.83%, 11/16/52 | 331,020 | |||||
600,000 | GNMA, Series 2013-12, Class B, 2.45%, 11/16/52 (1) | 567,883 |
Principal Amount | Value | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (8.1%) (continued) | |||||||
$ | 437,820 | GNMA, Series 2012-125, Class AB, 2.11%, 2/16/53 (1) | $ | 419,307 | |||
152,517 | JP Morgan Chase Commercial Mortgage Securities Trust, Series 2005-CB12, Class A3A2, 4.93%, 9/12/37 | 152,495 | |||||
268,186 | JP Morgan Chase Commercial Mortgage Securities Trust, Series 2007-CB20, Class A1A, 5.75%, 2/12/51 (1) | 299,467 | |||||
332,241 | ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A1A, 5.17%, 12/12/49 | 358,767 | |||||
300,000 | ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A3, 5.17%, 12/12/49 | 322,840 | |||||
300,000 | ML-CFC Commercial Mortgage Trust, Series 2007-6, Class A4, 5.49%, 3/12/51 (1) | 329,509 | |||||
250,000 | Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C8, Class A2, 1.69%, 12/15/48 | 247,384 | |||||
200,000 | Morgan Stanley Capital I Trust, Series 2012-C4, Class A4, 3.24%, 3/15/45 | 203,363 | |||||
196,347 | Sequoia Mortgage Trust, Series 2004-8, Class A1, 0.85%, 9/20/34 (1) | 188,417 | |||||
219,523 | Structured Adjustable Rate Mortgage Loan Trust, Series 2004-6, Class 4A2, 2.39%, 6/25/34 (1) | 211,826 | |||||
307,943 | Thornburg Mortgage Securities Trust, Series 2005-1, Class A3, 2.24%, 4/25/45 (1) | 312,488 | |||||
350,000 | Wells Fargo Commercial Mortgage Trust, Series 2013-LC12, Class B, 4.44%, 7/15/46 (1) | 365,984 | |||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $6,880,814) (8.1%) | 6,763,410 |
Principal Amount | Value | ||||||
CORPORATE BONDS & NOTES (47.2%) | |||||||
BASIC MATERIALS (3.5%) | |||||||
$ | 100,000 | ArcelorMittal, Senior Unsecured Notes, 5.00%, 2/25/17 | $ | 105,750 | |||
200,000 | ArcelorMittal, Senior Unsecured Notes, 7.50%, 10/15/39 | 220,000 | |||||
250,000 | Celanese U.S. Holdings LLC, Guaranteed Notes, 4.63%, 11/15/22 | 251,250 | |||||
250,000 | Glencore Funding LLC, Guaranteed Notes, 4.13%, 5/30/23 (2) | 251,085 | |||||
300,000 | LYB International Finance B.V., Guaranteed Notes, 4.00%, 7/15/23 | 314,945 | |||||
250,000 | Methanex Corp., Senior Unsecured Notes, 3.25%, 12/15/19 | 255,966 | |||||
500,000 | Mosaic Co. (The), Senior Unsecured Notes, 5.45%, 11/15/33 | 560,268 | |||||
150,000 | Southern Copper Corp., Senior Unsecured Notes, 7.50%, 7/27/35 | 174,619 | |||||
250,000 | Steel Dynamics, Inc., Guaranteed Notes, 6.13%, 8/15/19 | 271,875 | |||||
350,000 | Vale Overseas Ltd., Guaranteed Notes, 5.63%, 9/15/19 | 393,646 | |||||
100,000 | Vale S.A., Senior Unsecured Notes, 5.63%, 9/11/42 | 97,970 | |||||
2,897,374 | |||||||
COMMUNICATIONS (5.4%) | |||||||
250,000 | America Movil S.A.B. de C.V., Guaranteed Notes, 5.00%, 3/30/20 | 277,168 | |||||
150,000 | CenturyLink, Inc., Series P, Senior Unsecured Notes, 7.60%, 9/15/39 | 150,563 | |||||
500,000 | Comcast Corp., Guaranteed Notes, 4.25%, 1/15/33 | 513,617 | |||||
350,000 | DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Guaranteed Notes, 3.80%, 3/15/22 | 361,416 | |||||
500,000 | MetroPCS Wireless, Inc., Guaranteed Notes, 6.63%, 11/15/20 | 533,750 |
See Notes to Financial Statements. |
35
June 30, 2014 |
Principal Amount | Value | ||||||
CORPORATE BONDS & NOTES (47.2%) (continued) | |||||||
COMMUNICATIONS (5.4%) (continued) | |||||||
$ | 400,000 | Motorola Solutions, Inc., Senior Unsecured Notes, 6.00%, 11/15/17 | $ | 454,183 | |||
250,000 | Netflix, Inc., Senior Unsecured Notes, 5.75%, 3/1/24 (2) | 261,250 | |||||
250,000 | Rogers Communications, Inc., Guaranteed Notes, 5.00%, 3/15/44 | 260,703 | |||||
200,000 | Sprint Communications, Inc., Senior Unsecured Notes, 6.00%, 12/1/16 | 217,750 | |||||
100,000 | Telecom Italia Capital S.A., Guaranteed Notes, 7.72%, 6/4/38 | 115,250 | |||||
200,000 | Telecom Italia SpA, Senior Unsecured Notes, 5.30%, 5/30/24 (2) | 200,750 | |||||
250,000 | Telefonica Emisiones SAU, Guaranteed Notes, 5.88%, 7/15/19 | 289,847 | |||||
450,000 | Verizon Communications, Inc., Senior Unsecured Notes, 2.50%, 9/15/16 | 463,834 | |||||
150,000 | Verizon Communications, Inc., Senior Unsecured Notes, 6.55%, 9/15/43 | 188,766 | |||||
200,000 | Viacom, Inc., Senior Unsecured Notes, 3.88%, 4/1/24 | 203,239 | |||||
4,492,086 | |||||||
CONSUMER, CYCLICAL (4.2%) | |||||||
300,000 | CVS Caremark Corp., Senior Unsecured Notes, 6.60%, 3/15/19 | 353,224 | |||||
500,000 | D.R. Horton, Inc., Guaranteed Notes, 6.50%, 4/15/16 | 541,250 | |||||
250,000 | Delphi Corp., Guaranteed Notes, 6.13%, 5/15/21 | 279,400 | |||||
250,000 | Ford Motor Co., Senior Unsecured Notes, 7.45%, 7/16/31 | 334,232 | |||||
275,000 | Kia Motors Corp., Senior Unsecured Notes, 3.63%, 6/14/16 (2) | 287,953 |
Principal | |||||||
Amount | Value | ||||||
CONSUMER, CYCLICAL (4.2%) (continued) | |||||||
$ | 200,000 | Lear Corp., Guaranteed Notes, 5.38%, 3/15/24 | $ | 205,500 | |||
250,000 | Macy’s Retail Holdings, Inc., Guaranteed Notes, 4.38%, 9/1/23 | 264,930 | |||||
100,000 | Nissan Motor Acceptance Corp., Senior Unsecured Notes, 2.35%, 3/4/19 (2) | 100,707 | |||||
150,000 | Ryland Group, Inc. (The), Guaranteed Notes, 6.63%, 5/1/20 | 162,750 | |||||
300,000 | Starwood Hotels & Resorts Worldwide, Inc., Senior Unsecured Notes, 3.13%, 2/15/23 | 287,021 | |||||
250,000 | Suburban Propane Partners L.P./Suburban Energy Finance Corp., Senior Unsecured Notes, 5.50%, 6/1/24 | 253,125 | |||||
250,000 | Wyndham Worldwide Corp., Senior Unsecured Notes, 3.90%, 3/1/23 | 251,139 | |||||
200,000 | Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Senior Unsecured Notes, 7.75%, 8/15/20 | 218,000 | |||||
3,539,231 | |||||||
CONSUMER, NON-CYCLICAL (4.9%) | |||||||
208,000 | ADT Corp. (The), Senior Unsecured Notes, 2.25%, 7/15/17 | 205,400 | |||||
400,000 | Amgen, Inc., Senior Unsecured Notes, 2.50%, 11/15/16 | 414,305 | |||||
250,000 | Boston Scientific Corp., Senior Unsecured Notes, 2.65%, 10/1/18 | 255,558 | |||||
350,000 | Celgene Corp., Senior Unsecured Notes, 4.00%, 8/15/23 | 364,492 | |||||
200,000 | Cigna Corp., Senior Unsecured Notes, 2.75%, 11/15/16 | 207,703 | |||||
200,000 | Constellation Brands, Inc., Guaranteed Notes, 4.25%, 5/1/23 | 200,750 | |||||
150,000 | Edwards Lifesciences Corp., Senior Unsecured Notes, 2.88%, 10/15/18 | 153,285 |
Principal Amount | Value | ||||||
CONSUMER, NON-CYCLICAL (4.9%) (continued) | |||||||
$ | 250,000 | Express Scripts Holding Co., Guaranteed Notes, 3.50%, 11/15/16 | $ | 265,447 | |||
250,000 | Express Scripts Holding Co., Guaranteed Notes, 4.75%, 11/15/21 | 276,695 | |||||
300,000 | HCA, Inc., Senior Secured Notes, 6.50%, 2/15/20 | 337,500 | |||||
250,000 | HJ Heinz Co., Secured Notes, 4.25%, 10/15/20 | 251,563 | |||||
250,000 | Humana, Inc., Senior Unsecured Notes, 3.15%, 12/1/22 | 245,349 | |||||
350,000 | Kroger Co. (The), Senior Unsecured Notes, 5.15%, 8/1/43 | 378,101 | |||||
350,000 | Mylan, Inc., Senior Unsecured Notes, 1.35%, 11/29/16 | 350,583 | |||||
150,000 | Mylan, Inc., Senior Unsecured Notes, 5.40%, 11/29/43 | 161,528 | |||||
4,068,259 | |||||||
ENERGY (6.5%) | |||||||
150,000 | Access Midstream Partners L.P./ACMP Finance Corp., Guaranteed Notes, 4.88%, 5/15/23 | 158,063 | |||||
300,000 | Anadarko Petroleum Corp., Senior Unsecured Notes, 6.38%, 9/15/17 | 345,402 | |||||
200,000 | Antero Resources Corp., Guaranteed Notes, 5.13%, 12/1/22 (2) | 205,500 | |||||
250,000 | Chesapeake Energy Corp., Guaranteed Notes, 4.88%, 4/15/22 | 258,750 | |||||
250,000 | DCP Midstream Operating L.P., Guaranteed Notes, 2.50%, 12/1/17 | 257,173 | |||||
350,000 | Devon Energy Corp., Senior Unsecured Notes, 1.20%, 12/15/16 | 351,061 | |||||
200,000 | Energy Transfer Partners L.P., Senior Unsecured Notes, 5.95%, 10/1/43 | 226,473 | |||||
200,000 | Ensco PLC, Senior Unsecured Notes, 4.70%, 3/15/21 | 217,878 |
See Notes to Financial Statements. |
36
Schedule of Investments (unaudited) (continued) |
Principal | |||||||
Amount | Value | ||||||
CORPORATE BONDS & NOTES (47.2%) (continued) | |||||||
ENERGY (6.5%) (continued) | |||||||
$ | 200,000 | Enterprise Products Operating LLC, Guaranteed Notes, 4.85%, 8/15/42 | $ | 206,818 | |||
200,000 | Hess Corp., Senior Unsecured Notes, 5.60%, 2/15/41 | 232,558 | |||||
500,000 | Kinder Morgan Energy Partners L.P., Senior Unsecured Notes, 2.65%, 2/1/19 | 506,045 | |||||
200,000 | Petrobras Global Finance B.V., Guaranteed Notes, 3.11%, 3/17/20 (1) (3) | 205,490 | |||||
200,000 | Petrobras Global Finance B.V., Guaranteed Notes, 6.25%, 3/17/24 | 212,880 | |||||
250,000 | Phillips 66, Guaranteed Notes, 4.30%, 4/1/22 | 270,576 | |||||
130,000 | Plains Exploration & Production Co., Guaranteed Notes, 6.88%, 2/15/23 | 152,100 | |||||
200,000 | Rowan Companies, Inc., Guaranteed Notes, 7.88%, 8/1/19 | 244,253 | |||||
150,000 | SandRidge Energy, Inc., Guaranteed Notes, 7.50%, 3/15/21 | 162,563 | |||||
350,000 | Spectra Energy Partners L.P., Senior Unsecured Notes, 4.75%, 3/15/24 | 379,194 | |||||
250,000 | Tesoro Corp., Guaranteed Notes, 4.25%, 10/1/17 | 261,250 | |||||
300,000 | Valero Energy Corp., Guaranteed Notes, 6.63%, 6/15/37 | 372,760 | |||||
200,000 | Whiting Petroleum Corp., Guaranteed Notes, 5.00%, 3/15/19 | 210,500 | |||||
5,437,287 | |||||||
FINANCIAL (18.3%) | |||||||
250,000 | Aircastle Ltd., Senior Unsecured Notes, 4.63%, 12/15/18 | 257,500 | |||||
200,000 | Ally Financial, Inc., Guaranteed Notes, 4.63%, 6/26/15 | 206,500 | |||||
250,000 | American Express Co., Senior Unsecured Notes, 0.82%, 5/22/18 (1) | 251,868 |
Principal | |||||||
Amount | Value | ||||||
FINANCIAL (18.3%) (continued) | |||||||
$ | 500,000 | American International Group, Inc. MTN, Senior Unsecured Notes, 5.85%, 1/16/18 | $ | 570,791 | |||
200,000 | Australia & New Zealand Banking Group Ltd., Subordinated Notes, 4.50%, 3/19/24 (2) | 205,279 | |||||
300,000 | Bancolombia S.A., Senior Unsecured Notes, 5.95%, 6/3/21 | 330,750 | |||||
250,000 | Bank of America Corp., Series L, Senior Unsecured Notes, 1.35%, 11/21/16 | 250,735 | |||||
250,000 | Bank of China Hong Kong Ltd., Senior Unsecured Notes, 3.75%, 11/8/16 (2) | 262,018 | |||||
500,000 | BlackRock, Inc., Series 2, Senior Unsecured Notes, 5.00%, 12/10/19 | 570,710 | |||||
250,000 | BPCE S.A., Guaranteed Notes, 2.50%, 12/10/18 | 253,416 | |||||
300,000 | Branch Banking & Trust Co., Senior Unsecured Notes, 1.05%, 12/1/16 | 300,728 | |||||
150,000 | CIT Group, Inc., Senior Unsecured Notes, 5.00%, 8/15/22 | 155,250 | |||||
350,000 | Citigroup, Inc., Senior Unsecured Notes, 1.70%, 7/25/16 | 354,601 | |||||
350,000 | Citigroup, Inc., Subordinated Notes, 5.30%, 5/6/44 | 365,067 | |||||
200,000 | CNA Financial Corp., Senior Unsecured Notes, 3.95%, 5/15/24 | 205,830 | |||||
500,000 | Cooperatieve Centrale Raiffeisen- Boerenleenbank BA, Guaranteed Notes, 3.95%, 11/9/22 | 508,314 | |||||
250,000 | Credit Agricole S.A., Senior Unsecured Notes, 2.13%, 4/17/18 (2) | 252,232 | |||||
250,000 | Crown Castle International Corp., Senior Unsecured Notes, 4.88%, 4/15/22 | 258,438 | |||||
200,000 | Digital Realty Trust L.P., Guaranteed Notes, 5.25%, 3/15/21 (3) | 214,846 |
Principal | |||||||
Amount | Value | ||||||
FINANCIAL (18.3%) (continued) | |||||||
$ | 350,000 | EPR Properties, Guaranteed Notes, 5.25%, 7/15/23 | $ | 364,091 | |||
250,000 | Essex Portfolio L.P., Guaranteed Notes, 3.38%, 1/15/23 (2) | 246,511 | |||||
300,000 | First Horizon National Corp., Senior Unsecured Notes, 5.38%, 12/15/15 | 317,359 | |||||
300,000 | Ford Motor Credit Co. LLC, Senior Unsecured Notes, 1.72%, 12/6/17 | 300,122 | |||||
250,000 | General Electric Capital Corp. MTN, Senior Unsecured Notes, 1.00%, 8/11/15 (1) | 251,792 | |||||
250,000 | General Motors Financial Co., Inc., Guaranteed Notes, 2.75%, 5/15/16 | 253,750 | |||||
290,000 | Goldman Sachs Group, Inc. (The), Senior Unsecured Notes, 5.75%, 10/1/16 | 319,082 | |||||
200,000 | Goldman Sachs Group, Inc. (The), Subordinated Notes, 6.75%, 10/1/37 | 240,607 | |||||
350,000 | Hartford Financial Services Group, Inc. (The), Senior Unsecured Notes, 4.00%, 10/15/17 | 377,673 | |||||
350,000 | Hospitality Properties Trust, Senior Unsecured Notes, 4.65%, 3/15/24 | 366,765 | |||||
250,000 | Host Hotels & Resorts L.P., Senior Unsecured Notes, 5.25%, 3/15/22 | 275,610 | |||||
150,000 | HSBC Holdings PLC, Senior Unsecured Notes, 4.00%, 3/30/22 | 159,584 | |||||
250,000 | Icahn Enterprises L.P./Icahn Enterprises Finance Corp., Guaranteed Notes, 3.50%, 3/15/17 | 252,813 | |||||
300,000 | Itau Unibanco Holding S.A., Subordinated Notes, 5.50%, 8/6/22 | 307,260 | |||||
150,000 | Jefferies Group LLC, Senior Unsecured Notes, 8.50%, 7/15/19 | 187,500 |
See Notes to Financial Statements. |
37
June 30, 2014 |
Principal | |||||||
Amount | Value | ||||||
CORPORATE BONDS & NOTES (47.2%) (continued) | |||||||
FINANCIAL (18.3%) (continued) | |||||||
$ | 200,000 | Jefferies Group LLC, Senior Unsecured Notes, 6.25%, 1/15/36 | $ | 209,294 | |||
250,000 | KeyCorp. MTN, Senior Unsecured Notes, 5.10%, 3/24/21 | 283,276 | |||||
160,000 | Macquarie Bank Ltd., Senior Unsecured Notes, 5.00%, 2/22/17 (2) | 174,368 | |||||
250,000 | Macquarie Bank Ltd., Senior Unsecured Notes, 2.60%, 6/24/19 (2) | 251,580 | |||||
500,000 | Morgan Stanley, Senior Unsecured Notes, 4.75%, 3/22/17 | 544,370 | |||||
300,000 | Nomura Holdings, Inc. GMTN, Senior Unsecured Notes, 2.75%, 3/19/19 | 305,189 | |||||
500,000 | PNC Funding Corp., Guaranteed Notes, 5.13%, 2/8/20 | 571,136 | |||||
500,000 | ProLogis L.P., Guaranteed Notes, 2.75%, 2/15/19 | 509,428 | |||||
250,000 | Regions Financial Corp., Senior Unsecured Notes, 2.00%, 5/15/18 | 249,120 | |||||
250,000 | Royal Bank of Scotland Group PLC, Senior Unsecured Notes, 1.88%, 3/31/17 | 252,227 | |||||
500,000 | Santander Holdings USA, Inc., Senior Unsecured Notes, 3.00%, 9/24/15 | 513,568 | |||||
250,000 | Societe Generale S.A., Senior Unsecured Notes, 5.20%, 4/15/21 (3) | 282,261 | |||||
150,000 | Standard Chartered PLC, Subordinated Notes, 5.70%, 3/26/44 (2) | 157,224 | |||||
350,000 | Wachovia Corp., Subordinated Notes, 5.63%, 10/15/16 | 385,698 | |||||
300,000 | Weyerhaeuser Co., Senior Unsecured Notes, 7.38%, 10/1/19 | 369,416 | |||||
200,000 | XLIT Ltd., Guaranteed Notes, 5.25%, 12/15/43 | 219,933 | |||||
15,273,480 |
Principal Amount | Value | ||||||
INDUSTRIAL (2.8%) | |||||||
$ | 350,000 | Alliant Techsystems, Inc., Guaranteed Notes, 6.88%, 9/15/20 | $ | 378,000 | |||
350,000 | Briggs & Stratton Corp., Guaranteed Notes, 6.88%, 12/15/20 . | 391,125 | |||||
250,000 | Burlington Northern Santa Fe LLC, Senior Unsecured Notes, 3.05%, 3/15/22 | 251,227 | |||||
200,000 | Lafarge S.A., Senior Unsecured Notes, 6.20%, 7/9/15 (2) | 209,500 | |||||
200,000 | Masco Corp., Senior Unsecured Notes, 7.13%, 3/15/20 | 235,344 | |||||
133,000 | Owens Corning, Inc., Guaranteed Notes, 6.50%, 12/1/16 | 148,329 | |||||
350,000 | Rock-Tenn Co., Guaranteed Notes, 4.90%, 3/1/22 | 382,023 | |||||
300,000 | Textron, Inc., Senior Unsecured Notes, 6.20%, 3/15/15 | 312,236 | |||||
2,307,784 | |||||||
TECHNOLOGY (0.7%) | |||||||
150,000 | Altera Corp., Senior Unsecured Notes, 2.50%, 11/15/18 | 152,304 | |||||
150,000 | Oracle Corp., Senior Unsecured Notes, 5.00%, 7/8/19 | 171,062 | |||||
200,000 | Seagate HDD Cayman, Guaranteed Notes, 4.75%, 1/1/25 (2) | 198,500 | |||||
100,000 | Xerox Corp., Senior Unsecured Notes, 2.80%, 5/15/20 | 99,838 | |||||
621,704 | |||||||
UTILITIES (0.9%) | |||||||
300,000 | Exelon Generation Co. LLC, Senior Unsecured Notes, 5.20%, 10/1/19 | 337,395 | |||||
380,000 | Florida Power & Light Co., 4.95%, 6/1/35 . | 429,089 | |||||
766,484 | |||||||
TOTAL CORPORATE BONDS & NOTES (Cost $38,592,519) (47.2%) | 39,403,689 |
Principal Amount | Value | ||||||
FOREIGN GOVERNMENT OBLIGATIONS (0.8%) | |||||||
$ | 300,000 | Mexico Government International Bond, Senior Unsecured Notes, 5.13%, 1/15/20 (3) | $ | 339,900 | |||
350,000 | Poland Government International Bond, Senior Unsecured Notes, 4.00%, 1/22/24 | 363,125 | |||||
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $676,199) (0.8%) | 703,025 | ||||||
LONG-TERM MUNICIPAL SECURITIES (1.4%) | |||||||
NEW YORK (0.4%) | |||||||
300,000 | City of New York, General Obligation Unlimited, Subser. D2, 2.60%, 8/1/20 | 301,863 | |||||
TEXAS (0.9%) | |||||||
500,000 | Tarrant County Cultural Education Facilities Finance Corp., Revenue Bonds, Baylor Health Care System Project, Series C, 4.45%, 11/15/43 | 466,810 | |||||
250,000 | Dallas Independent School District Qualified School Construction Notes, General Obligation Limited, 5.05%, 8/15/33 | 266,650 | |||||
733,460 | |||||||
VIRGINIA (0.1%) | |||||||
100,000 | City of Norfolk, Taxable Build America Bonds, General Obligation Unlimited, Series B, 5.91%, 3/1/29 | 122,122 | |||||
TOTAL LONG-TERM MUNICIPAL SECURITIES (Cost $1,166,663) (1.4%) | 1,157,445 | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.2%) | |||||||
500,000 | FHLMC, 2.00%, 8/25/16 | 515,051 |
See Notes to Financial Statements. |
38
Schedule of Investments (unaudited) (continued) |
Principal | |||||||
Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.2%) (continued) | |||||||
$ | 87,174 | FHLMC Gold PC Pool #A29526, 5.00%, 1/1/35 | $ | 96,471 | |||
58,629 | FHLMC Gold PC Pool #A29633, 5.00%, 1/1/35 | 65,007 | |||||
56,295 | FHLMC Gold PC Pool #A56491, 5.00%, 1/1/37 | 62,299 | |||||
732,221 | FHLMC Gold PC Pool #A95803, 4.00%, 12/1/40 | 776,758 | |||||
182,107 | FHLMC Gold PC Pool #A97264, 4.00%, 2/1/41 | 193,184 | |||||
18,948 | FHLMC Gold PC Pool #B12822, 5.00%, 3/1/19 | 20,121 | |||||
8,553 | FHLMC Gold PC Pool #B17398, 4.50%, 12/1/19 | 9,090 | |||||
43,161 | FHLMC Gold PC Pool #B18034, 4.50%, 4/1/20 | 45,783 | |||||
103,030 | FHLMC Gold PC Pool #C09004, 3.50%, 7/1/42 | 106,040 | |||||
22,726 | FHLMC Gold PC Pool #C91413, 3.50%, 12/1/31 | 23,762 | |||||
490,566 | FHLMC Gold PC Pool #C91749, 4.00%, 1/1/34 | 525,450 | |||||
1,759 | FHLMC Gold PC Pool #E92226, 5.00%, 11/1/17 | 1,867 | |||||
2,386 | FHLMC Gold PC Pool #E92829, 5.00%, 12/1/17 | 2,533 | |||||
27,249 | FHLMC Gold PC Pool #E93499, 5.00%, 12/1/17 | 28,925 | |||||
3,411 | FHLMC Gold PC Pool #E98960, 5.00%, 9/1/18 | 3,621 | |||||
261,280 | FHLMC Gold PC Pool #G06224, 3.50%, 1/1/41 | 268,913 | |||||
41,620 | FHLMC Gold PC Pool #G08184, 5.00%, 1/1/37 | 46,059 | |||||
5,501 | FHLMC Gold PC Pool #G11986, 5.00%, 4/1/21 | 5,942 | |||||
7,887 | FHLMC Gold PC Pool #G12319, 5.00%, 6/1/21 | 8,521 |
Principal | |||||||
Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.2%) (continued) | |||||||
$ | 438,261 | FHLMC Gold PC Pool #G14216, 3.50%, 7/1/21 | $ | 464,550 | |||
47,230 | FHLMC Gold PC Pool #G18044, 4.50%, 3/1/20 | 50,190 | |||||
7,388 | FHLMC Gold PC Pool #J00118, 5.00%, 10/1/20 | 7,873 | |||||
145,674 | FHLMC Gold PC Pool #J00139, 5.00%, 10/1/20 | 155,247 | |||||
39,441 | FHLMC Gold PC Pool #J03233, 5.00%, 8/1/21 | 42,598 | |||||
379,286 | FHLMC Gold PC Pool #J11587, 4.00%, 1/1/25 | 407,374 | |||||
37,761 | FHLMC Gold PC Pool #Q01181, 4.50%, 6/1/41 | 40,911 | |||||
133,234 | FHLMC Gold PC Pool #Q06307, 3.50%, 2/1/42 | 137,126 | |||||
210,301 | FHLMC Gold PC Pool #Q08903, 3.50%, 6/1/42 | 216,444 | |||||
458,589 | FHLMC Gold PC Pool #Q11556, 3.00%, 10/1/42 | 452,912 | |||||
467,784 | FHLMC Gold PC Pool #Q14593, 3.00%, 1/1/43 | 462,716 | |||||
149,969 | FHLMC Pool #783022, 2.38%, 2/1/35 (1) | 160,150 | |||||
83,828 | FHLMC REMIC Trust Series 2643, Class ME, 3.50%, 3/15/18 | 85,334 | |||||
500,000 | FNMA, 1.10%, 7/11/17 | 500,129 | |||||
17,184 | FNMA Pool #254383, 7.50%, 6/1/32 | 20,271 | |||||
47,625 | FNMA Pool #254476, 5.50%, 9/1/32 | 53,590 | |||||
39,005 | FNMA Pool #254684, 5.00%, 3/1/18 | 41,383 | |||||
97,635 | FNMA Pool #255496, 5.00%, 11/1/34 | 108,661 | |||||
7,936 | FNMA Pool #255580, 5.50%, 2/1/35 | 8,919 | |||||
4,532 | FNMA Pool #258149, 5.50%, 9/1/34 | 5,083 | |||||
28,930 | FNMA Pool #412682, 6.00%, 3/1/28 | 32,937 | |||||
4,036 | FNMA Pool #511823, 5.50%, 5/1/16 | 4,287 |
Principal Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.2%) (continued) | |||||||
$ | 188 | FNMA Pool #568625, 7.50%, 1/1/31 | $ | 194 | |||
30,261 | FNMA Pool #571090, 7.50%, 1/1/31 | 30,810 | |||||
1,666 | FNMA Pool #573935, 7.50%, 3/1/31 | 1,776 | |||||
14,814 | FNMA Pool #622373, 5.50%, 12/1/16 | 15,733 | |||||
25,291 | FNMA Pool #623503, 6.00%, 2/1/17 | 26,215 | |||||
109,139 | FNMA Pool #626440, 7.50%, 2/1/32 | 124,159 | |||||
13,674 | FNMA Pool #631328, 5.50%, 2/1/17 | 14,522 | |||||
1,362 | FNMA Pool #638247, 5.50%, 5/1/17 | 1,447 | |||||
1,292 | FNMA Pool #643277, 5.50%, 4/1/17 | 1,372 | |||||
11,537 | FNMA Pool #685183, 5.00%, 3/1/18 | 12,240 | |||||
1,897 | FNMA Pool #688539, 5.50%, 3/1/33 | 2,129 | |||||
21,678 | FNMA Pool #703936, 5.00%, 5/1/18 | 23,002 | |||||
42,121 | FNMA Pool #726889, 5.50%, 7/1/33 | 47,274 | |||||
97,997 | FNMA Pool #735224, 5.50%, 2/1/35 | 110,147 | |||||
24,434 | FNMA Pool #763393, 5.50%, 2/1/34 | 27,337 | |||||
5,370 | FNMA Pool #769682, 5.00%, 3/1/34 | 5,984 | |||||
70,093 | FNMA Pool #769862, 5.50%, 2/1/34 | 78,732 | |||||
1,095 | FNMA Pool #778141, 5.00%, 5/1/34 | 1,217 | |||||
975 | FNMA Pool #789150, 5.00%, 10/1/34 | 1,088 | |||||
12,918 | FNMA Pool #797154, 5.50%, 11/1/34 | 14,586 | |||||
34,535 | FNMA Pool #801063, 5.50%, 11/1/34 | 38,752 | |||||
27,029 | FNMA Pool #803675, 5.50%, 12/1/34 | 30,341 | |||||
28,885 | FNMA Pool #804683, 5.50%, 12/1/34 | 32,316 | |||||
173,670 | FNMA Pool #815813, 2.49%, 2/1/35 (1) | 185,616 | |||||
164,984 | FNMA Pool #919584, 6.00%, 6/1/37 | 185,706 | |||||
478,808 | FNMA Pool #932525, 5.00%, 2/1/40 | 534,882 | |||||
460,409 | FNMA Pool #974965, 5.00%, 4/1/38 | 511,607 | |||||
28,919 | FNMA Pool #AA2531, 4.50%, 3/1/39 | 31,337 |
See Notes to Financial Statements. |
39
June 30, 2014 |
Principal Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.2%) (continued) | |||||||
$ | 413,652 | FNMA Pool #AB2346, 4.50%, 2/1/41 | $ | 448,437 | |||
817,181 | FNMA Pool #AB5231, 2.50%, 5/1/27 | 831,226 | |||||
396,791 | FNMA Pool #AB5716, 3.00%, 7/1/27 | 412,679 | |||||
641,213 | FNMA Pool #AB8144, 5.00%, 4/1/37 | 713,199 | |||||
438,835 | FNMA Pool #AC8908, 4.50%, 1/1/40 | 475,676 | |||||
36,140 | FNMA Pool #AD1035, 4.50%, 2/1/40 | 39,164 | |||||
183,178 | FNMA Pool #AD6374, 5.00%, 5/1/40 | 203,831 | |||||
207,330 | FNMA Pool #AD7136, 5.00%, 7/1/40 | 230,540 | |||||
168,402 | FNMA Pool #AD8536, 5.00%, 8/1/40 | 187,282 | |||||
223,722 | FNMA Pool #AE1853, 4.00%, 8/1/40 | 237,764 | |||||
187,224 | FNMA Pool #AH8932, 4.50%, 4/1/41 | 202,934 | |||||
49,130 | FNMA Pool #AI0620, 4.50%, 5/1/41 | 53,230 | |||||
477,967 | FNMA Pool #AJ5311, 4.50%, 11/1/41 | 517,851 | |||||
263,392 | FNMA Pool #AJ5888, 4.50%, 11/1/41 | 286,289 | |||||
382,011 | FNMA Pool #AJ9278, 3.50%, 12/1/41 | 393,848 | |||||
612,365 | FNMA Pool #AO7977, 3.00%, 6/1/27 | 636,884 | |||||
412,725 | FNMA Pool #AQ0287, 3.00%, 10/1/42 | 408,205 | |||||
130,556 | FNMA Pool #AR2174, 3.00%, 4/1/43 | 129,128 | |||||
415,583 | FNMA Pool #AR6394, 3.00%, 2/1/43 | 411,031 | |||||
491,153 | FNMA Pool #MA0641, 4.00%, 2/1/31 | 528,365 | |||||
1,324,671 | FNMA Pool #MA1107, 3.50%, 7/1/32 | 1,388,982 | |||||
400,000 | FNMA Pool TBA, 2.50%, 7/1/29 | 406,312 | |||||
550,000 | FNMA Pool TBA, 3.50%, 7/1/44 | 566,156 | |||||
300,000 | FNMA Pool TBA, 4.00%, 7/1/44 | 318,375 | |||||
300,000 | FNMA Pool TBA, 4.50%, 7/1/44 | 324,891 | |||||
30,248 | FNMA REMIC Trust Series 2003-38, Class TC, 5.00%, 3/25/23 | 31,515 | |||||
179,803 | FNMA REMIC Trust Series 2013-18, Class AE, 2.00%, 3/25/28 | 178,131 |
Principal Amount | Value | ||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (26.2%) (continued) | |||||||
$ | 436,479 | GNMA, Series 2011-136, Class GB, 2.50%, 5/20/40 | $ | 440,066 | |||
1,970 | GNMA I Pool #429786, 6.00%, 12/15/33 | 2,276 | |||||
41,425 | GNMA I Pool #548880, 6.00%, 12/15/31 | 46,599 | |||||
28,222 | GNMA I Pool #551762, 6.00%, 4/15/32 | 32,327 | |||||
3,126 | GNMA I Pool #557681, 6.00%, 8/15/31 | 3,516 | |||||
14,955 | GNMA I Pool #582415, 6.00%, 11/15/32 | 17,293 | |||||
58,880 | GNMA I Pool #583008, 5.50%, 6/15/34 | 66,429 | |||||
46,704 | GNMA I Pool #605025, 6.00%, 2/15/34 | 52,534 | |||||
18,265 | GNMA I Pool #605245, 5.50%, 6/15/34 | 20,506 | |||||
32,083 | GNMA I Pool #610944, 5.50%, 4/15/34 | 35,859 | |||||
38,580 | GNMA I Pool #622603, 6.00%, 11/15/33 | 43,399 | |||||
5,382 | GNMA I Pool #626480, 6.00%, 2/15/34 | 6,163 | |||||
35,956 | GNMA II Pool #3645, 4.50%, 12/20/19 | 37,869 | |||||
934,541 | GNMA II Pool #5260, 4.50%, 12/20/41 | 1,022,196 | |||||
242,070 | GNMA II Pool #MA1520, 3.00%, 12/20/43 | 244,758 | |||||
300,000 | GNMA II Pool TBA, 4.00%, 7/1/44 | 321,047 | |||||
500,000 | GNMA II Pool TBA, 4.50%, 7/1/44 | 545,957 | |||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $21,583,420) (26.2%) | 21,855,322 | ||||||
U.S. TREASURY OBLIGATIONS (10.8%) | |||||||
U.S. TREASURY NOTES & BONDS (10.8%) | |||||||
350,000 | U.S. Treasury Bonds, 7.88%, 2/15/21 | 478,516 | |||||
597,160 | U.S. Treasury Bonds, 2.00%, 1/15/26 (4) | 703,576 | |||||
150,000 | U.S. Treasury Bonds, 5.25%, 11/15/28 | 192,141 | |||||
500,000 | U.S. Treasury Bonds, 4.38%, 2/15/38 | 596,953 | |||||
250,000 | U.S. Treasury Bonds, 4.38%, 5/15/40 | 299,805 | |||||
350,000 | U.S. Treasury Bonds, 3.75%, 8/15/41 | 380,187 | |||||
200,000 | U.S. Treasury Bonds, 2.88%, 5/15/43 | 182,750 |
Principal Amount | Value | ||||||
U.S. TREASURY OBLIGATIONS (10.8%) (continued) | |||||||
U.S. TREASURY NOTES & BONDS (10.8%) (continued) | |||||||
$ | 625,000 | U.S. Treasury Bonds, 3.63%, 8/15/43 | $ | 660,156 | |||
225,000 | U.S. Treasury Bonds, 3.75%, 11/15/43 | 243,000 | |||||
275,000 | U.S. Treasury Bonds, 3.63%, 2/15/44 | 290,211 | |||||
150,000 | U.S. Treasury Notes, 1.38%, 11/30/15 | 152,426 | |||||
400,000 | U.S. Treasury Notes, 0.25%, 2/29/16 | 399,609 | |||||
350,000 | U.S. Treasury Notes, 1.50%, 6/30/16 | 357,219 | |||||
150,000 | U.S. Treasury Notes, 1.00%, 8/31/16 | 151,547 | |||||
250,000 | U.S. Treasury Notes, 0.88%, 12/31/16 | 251,308 | |||||
200,000 | U.S. Treasury Notes, 0.75%, 3/15/17 (3) | 200,000 | |||||
700,000 | U.S. Treasury Notes, 0.75%, 12/31/17 | 691,141 | |||||
300,000 | U.S. Treasury Notes, 1.38%, 12/31/18 | 298,758 | |||||
250,000 | U.S. Treasury Notes, 1.50%, 2/28/19 | 249,590 | |||||
100,000 | U.S. Treasury Notes, 1.50%, 3/31/19 | 99,773 | |||||
500,000 | U.S. Treasury Notes, 3.13%, 5/15/19 | 536,211 | |||||
150,000 | U.S. Treasury Notes, 2.63%, 8/15/20 | 156,094 | |||||
400,000 | U.S. Treasury Notes, 2.25%, 4/30/21 | 403,937 | |||||
1,050,000 | U.S. Treasury Notes, 2.75%, 2/15/24 | 1,073,870 | |||||
9,048,778 | |||||||
TOTAL U.S. TREASURY OBLIGATIONS (Cost $9,101,328) (10.8%) | 9,048,778 | ||||||
Shares | Value | ||||||
SHORT-TERM INVESTMENTS (6.3%) | |||||||
MONEY MARKET FUNDS (6.3%) | |||||||
5,227,604 | State Street Institutional Liquid Reserves Fund | 5,227,604 | |||||
TOTAL SHORT-TERM INVESTMENTS (Cost $5,227,604) (6.3%) | 5,227,604 |
See Notes to Financial Statements. |
40
Schedule of Investments (unaudited) (continued) |
Shares | Value | ||||
TOTAL INVESTMENT SECURITIES (102.3%) (Cost $84,466,713) | $ | 85,398,371 | |||
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS (-2.3%) | (1,916,947 | ) | |||
NET ASSETS (100%) | $ | 83,481,424 | |||
NET ASSET VALUE OFFERING AND REDEMPTION PRICE, PER OUTSTANDING SHARE ($83,481,424 ÷ 16,777,292 shares outstanding) | $ | 4.98 |
(1) | The rate shown on floating rate and discount securities represents the yield or rate at the end of the reporting period. | |
(2) | Pursuant to Rule 144A under the Securities Act of 1933, this security can only be sold to qualified institutional investors. | |
(3) | A portion or all of the security was held on loan. As of June 30, 2014, the market value of the securities on loan was $1,198,169. | |
(4) | Treasury Inflation Protected Security (TIPS). | |
FHLMC | Federal Home Loan Mortgage Corp. | |
FNMA | Federal National Mortgage Association. | |
GMTN | Global Medium Term Note. | |
GNMA | Government National Mortgage Association. | |
MTN | Medium Term Note. | |
REIT | Real Estate Investment Trust. | |
TBA | To Be Announced. |
The following table summarizes the inputs used to value the Fund’s investments in securities as of June 30, 2014 (See Note 1B):
Investment in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 1,239,098 | $ | — | $ | 1,239,098 | ||||||||
Commercial Mortgage-Backed Securities | — | 6,763,410 | — | 6,763,410 | ||||||||||||
Corporate Bonds & Notes* | — | 39,403,689 | — | 39,403,689 | ||||||||||||
Foreign Government Obligations | — | 703,025 | — | 703,025 | ||||||||||||
Long-Term Municipal Securities* | — | 1,157,445 | — | 1,157,445 | ||||||||||||
U.S. Government Agency Obligations | — | 21,855,322 | — | 21,855,322 | ||||||||||||
U.S. Treasury Obligations | — | 9,048,778 | — | 9,048,778 | ||||||||||||
Short-Term Investments | — | 5,227,604 | — | 5,227,604 | ||||||||||||
Total Investments in Securities | $ | — | $ | 85,398,371 | $ | — | $ | 85,398,371 |
* See Schedule of Investments for further classification.
See Notes to Financial Statements. |
41
Statements of Assets and Liabilities at June 30, 2014 (unaudited) |
Value | Value | Value Line | ||||||||||||||||||
Line Premier | The | Line Income | Larger | Value Line | ||||||||||||||||
Growth | Value Line | and Growth | Companies | Core | ||||||||||||||||
Fund, Inc. | Fund, Inc. | Fund, Inc. | Fund, Inc. | Bond Fund | ||||||||||||||||
Assets: | ||||||||||||||||||||
Investments in securities, at value* | $ | 392,513,093 | $ | 126,043,816 | $ | 345,770,641 | $ | 216,426,081 | $ | 85,398,371 | ||||||||||
Cash | — | 5,195 | 14,812 | 8,892 | — | |||||||||||||||
Cash collateral received for securities on loan (Note 1J) | 6,696,523 | 1,327,000 | 14,009,948 | 2,347,150 | 1,222,250 | |||||||||||||||
Receivable for securities sold | 453,129 | — | 5,294,884 | 8,135,568 | 76,925 | |||||||||||||||
Interest and dividends receivable | 437,675 | 63,873 | 821,449 | 184,367 | 623,454 | |||||||||||||||
Receivable for capital shares sold | 30,624 | 92 | 75,024 | 100 | 8,060 | |||||||||||||||
Prepaid expenses | 21,289 | 15,292 | 20,565 | 16,205 | 12,124 | |||||||||||||||
Receivable for securities lending income | 4,952 | 807 | 14,840 | 2,747 | 269 | |||||||||||||||
Other receivables | — | 808 | 128 | — | — | |||||||||||||||
Total Assets | 400,157,285 | 127,456,883 | 366,022,291 | 227,121,110 | 87,341,453 | |||||||||||||||
Liabilities: | ||||||||||||||||||||
Payable upon return of securities on loan (Note 1J) | 6,696,523 | 1,327,000 | 14,009,948 | 2,347,150 | 1,222,250 | |||||||||||||||
Payable for securities purchased | — | — | 6,527,228 | 8,162,285 | 2,489,852 | |||||||||||||||
Payable for capital shares redeemed | 120,152 | 7,006 | 36,246 | 9,099 | 83,452 | |||||||||||||||
Dividends payable to shareholders | — | — | — | — | 16,850 | |||||||||||||||
Accrued expenses: | ||||||||||||||||||||
Advisory fee | 242,771 | 71,304 | 187,579 | 132,474 | 27,464 | |||||||||||||||
Service and distribution plan fees | 80,924 | 25,844 | 56,452 | 26,495 | 13,732 | |||||||||||||||
Directors’ fees and expenses | 850 | 403 | 783 | 556 | 322 | |||||||||||||||
Other | 52,571 | 33,850 | 39,367 | 37,367 | 6,107 | |||||||||||||||
Total Liabilities | 7,193,791 | 1,465,407 | 20,857,603 | 10,715,426 | 3,860,029 | |||||||||||||||
Net Assets | $ | 392,963,494 | $ | 125,991,476 | $ | 345,164,688 | $ | 216,405,684 | $ | 83,481,424 | ||||||||||
Net assets consist of: | ||||||||||||||||||||
Capital stock, at $1.00, $1.00, $1.00, $1.00 and $0.01 par value, respectively (authorized 100,000,000, 50,000,000, 75,000,000, 50,000,000 and unlimited shares, respectively) | $ | 11,079,978 | $ | 8,962,383 | $ | 33,534,342 | $ | 8,019,602 | $ | 167,773 | ||||||||||
Additional paid-in capital | 156,007,901 | 97,989,396 | 215,319,140 | 144,890,669 | 83,301,738 | |||||||||||||||
Undistributed net investment income | 293,270 | 146,517 | 215,321 | 1,412,353 | 32,713 | |||||||||||||||
Accumulated net realized gain/(loss) on investments and foreign currency | 16,612,649 | (39,692,042 | ) | 14,004,555 | (15,594,689 | ) | (952,458 | ) | ||||||||||||
Net unrealized appreciation of: | ||||||||||||||||||||
Investments and foreign currency translations | 208,969,696 | 58,585,222 | 82,091,330 | 77,677,749 | 931,658 | |||||||||||||||
Net Assets | $ | 392,963,494 | $ | 125,991,476 | $ | 345,164,688 | $ | 216,405,684 | $ | 83,481,424 | ||||||||||
Shares Outstanding | 11,079,978 | 8,962,383 | 33,534,342 | 8,019,602 | 16,777,292 | |||||||||||||||
Net Asset Value, Offering and Redemption Price per Outstanding Share | $ | 35.47 | $ | 14.06 | $ | 10.29 | $ | 26.98 | $ | 4.98 | ||||||||||
* Includes securities on loan of | $ | 6,545,741 | $ | 1,300,270 | $ | 13,742,949 | $ | 2,302,300 | $ | 1,198,169 | ||||||||||
Cost of investments | $ | 183,543,715 | $ | 67,458,595 | $ | 263,679,901 | $ | 138,748,802 | $ | 84,466,713 |
See Notes to Financial Statements. |
42 |
Statements of Operations |
for the Six Months Ended June 30, 2014 (unaudited) |
Value | Value | Value Line | ||||||||||||||||||
Line Premier | The | Line Income | Larger | Value Line | ||||||||||||||||
Growth | Value Line | and Growth | Companies | Core | ||||||||||||||||
Fund, Inc. | Fund, Inc. | Fund, Inc. | Fund, Inc. | Bond Fund | ||||||||||||||||
Investment Income: | ||||||||||||||||||||
Dividends (net of foreign withholding tax of $84,069, $12,778, $59,890, $43,893 and $0, respectively) | $ | 2,618,379 | $ | 833,970 | $ | 3,009,084 | $ | 1,626,675 | $ | — | ||||||||||
Interest | 253 | 33 | 1,180,753 | 149 | 1,198,341 | |||||||||||||||
Securities lending income | 35,504 | 5,729 | 65,800 | 13,948 | 1,280 | |||||||||||||||
Total Income | 2,654,136 | 839,732 | 4,255,637 | 1,640,772 | 1,199,621 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Advisory fee | 1,455,789 | 424,644 | 1,100,055 | 783,587 | 209,515 | |||||||||||||||
Service and distribution plan fees | 485,263 | 153,788 | 413,562 | 261,196 | 104,757 | |||||||||||||||
Sub-transfer agent fees | 43,406 | 2,880 | 24,635 | 5,114 | — | |||||||||||||||
Custodian fees | 36,149 | 15,260 | 45,470 | 18,971 | 29,448 | |||||||||||||||
Auditing and legal fees | 87,330 | 32,245 | 74,476 | 48,850 | 80,765 | |||||||||||||||
Transfer agent fees | 73,383 | 41,114 | 59,003 | 46,876 | 38,190 | |||||||||||||||
Directors’ fees and expenses | 43,055 | 13,543 | 35,937 | 23,130 | 9,237 | |||||||||||||||
Printing and postage | 68,372 | 34,404 | 55,764 | 39,030 | 35,393 | |||||||||||||||
Registration and filing fees | 20,096 | 14,753 | 19,635 | 16,051 | 16,409 | |||||||||||||||
Insurance | 20,632 | 6,529 | 17,440 | 10,963 | 3,786 | |||||||||||||||
Other | 27,391 | 10,176 | 23,012 | 15,248 | 7,745 | |||||||||||||||
Total Expenses Before Fees Waived (Note 6) | 2,360,866 | 749,336 | 1,868,989 | 1,269,016 | 535,245 | |||||||||||||||
Less: Service and Distribution Plan Fees Waived | — | — | (82,712 | ) | (104,478 | ) | (20,951 | ) | ||||||||||||
Less: Advisory Fees Waived | — | — | — | — | (41,903 | ) | ||||||||||||||
Net Expenses | 2,360,866 | 749,336 | 1,786,277 | 1,164,538 | 472,391 | |||||||||||||||
Net Investment Income | 293,270 | 90,396 | 2,469,360 | 476,234 | 727,230 | |||||||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Exchange Transactions: | ||||||||||||||||||||
Net Realized Gain/(Loss) From: | ||||||||||||||||||||
Investments | 14,862,704 | 3,244,983 | 11,198,569 | 19,384,940 | (79,694 | ) | ||||||||||||||
Foreign currency transactions | (2,747 | ) | 210 | (1,042 | ) | (752 | ) | — | ||||||||||||
14,859,957 | 3,245,193 | 11,197,527 | 19,384,188 | (79,694 | ) | |||||||||||||||
Change in Net Unrealized Appreciation/(Depreciation) of: | ||||||||||||||||||||
Investments | 1,249,557 | 1,668,300 | 4,572,736 | (8,473,420 | ) | 2,177,679 | ||||||||||||||
Foreign currency transactions | 256 | 1 | 520 | 325 | — | |||||||||||||||
1,249,813 | 1,668,301 | 4,573,256 | (8,473,095 | ) | 2,177,679 | |||||||||||||||
Net Realized Gain and Change in Net Unrealized Appreciation/(Depreciation) on Investments and Foreign Exchange Transactions | 16,109,770 | 4,913,494 | 15,770,783 | 10,911,093 | 2,097,985 | |||||||||||||||
Net Increase in Net Assets from Operations | $ | 16,403,040 | $ | 5,003,890 | $ | 18,240,143 | $ | 11,387,327 | $ | 2,825,215 |
See Notes to Financial Statements. |
43 |
Statement of Changes in Net Assets for the Six Months Ended June 30, 2014 (unaudited) and for the Year Ended December 31, 2013 |
Value Line Premier Growth Fund, Inc. | ||||||||
Six Months Ended | Year Ended | |||||||
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
Operations: | ||||||||
Net investment income/(loss) | $ | 293,270 | $ | (86,871 | ) | |||
Net realized gain on investments and foreign currency | 14,859,957 | 25,565,126 | ||||||
Change in net unrealized appreciation/(depreciation) on investments and foreign currency translations | 1,249,813 | 62,182,392 | ||||||
Net increase in net assets from operations | 16,403,040 | 87,660,647 | ||||||
Distributions to Shareholders from: | ||||||||
Net investment income | — | — | ||||||
Net realized gain from investment transactions | — | (27,662,900 | ) | |||||
Total distributions | — | (27,662,900 | ) | |||||
Share Transactions: | ||||||||
Proceeds from sale of shares | 8,105,475 | 36,026,126 | ||||||
Proceeds from reinvestment of dividends and distributions to shareholders | — | 26,690,717 | ||||||
Cost of shares redeemed | (33,617,973 | ) | (58,077,559 | ) | ||||
Net increase/(decrease) in net assets from capital share transactions | (25,512,498 | ) | 4,639,284 | |||||
Total increase/(decrease) in net assets | (9,109,458 | ) | 64,637,031 | |||||
Net Assets: | ||||||||
Beginning of period | 402,072,952 | 337,435,921 | ||||||
End of period | $ | 392,963,494 | $ | 402,072,952 | ||||
Undistributed net investment income included in net assets, at end of period | $ | 293,270 | $ | — | ||||
Capital Share Transactions: | ||||||||
Shares sold | 237,749 | 1,144,091 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | — | 790,836 | ||||||
Shares redeemed | (986,328 | ) | (1,807,035 | ) | ||||
Net increase/(decrease) | (748,579 | ) | 127,892 |
See Notes to Financial Statements. |
44 |
The Value Line Fund, Inc. | Value Line Income and Growth Fund, Inc. | Value Line Larger Companies Fund, Inc. | ||||||||||||||||||||
Six Months Ended | Year Ended | Six Months Ended | Year Ended | Six Months Ended | Year Ended | |||||||||||||||||
June 30, | December 31, | June 30, | December 31, | June 30, | December 31, | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
$ | 90,396 | $ | 58,546 | $ | 2,469,360 | $ | 3,959,175 | $ | 476,234 | $ | 932,225 | |||||||||||
3,245,193 | 9,275,494 | 11,197,527 | 14,399,967 | 19,384,188 | 12,205,457 | |||||||||||||||||
1,668,301 | 22,101,204 | 4,573,256 | 37,462,194 | (8,473,095 | ) | 38,252,016 | ||||||||||||||||
5,003,890 | 31,435,244 | 18,240,143 | 55,821,336 | 11,387,327 | 51,389,698 | |||||||||||||||||
— | (526,843 | ) | (2,396,042 | ) | (3,803,097 | ) | — | (1,253,220 | ) | |||||||||||||
— | — | — | (13,525,713 | ) | — | — | ||||||||||||||||
— | (526,843 | ) | (2,396,042 | ) | (17,328,810 | ) | — | (1,253,220 | ) | |||||||||||||
1,439,216 | 2,105,661 | 13,056,568 | 17,287,138 | 1,474,122 | 1,455,686 | |||||||||||||||||
56 | 497,705 | 2,162,672 | 15,889,436 | 83 | 1,190,112 | |||||||||||||||||
(5,719,721 | ) | (18,041,621 | ) | (16,596,756 | ) | (36,676,256 | ) | (7,964,316 | ) | (25,516,390 | ) | |||||||||||
(4,280,449 | ) | (15,438,255 | ) | (1,377,516 | ) | (3,499,682 | ) | (6,490,111 | ) | (22,870,592 | ) | |||||||||||
723,441 | 15,470,146 | 14,466,585 | 34,992,844 | 4,897,216 | 27,265,886 | |||||||||||||||||
125,268,035 | 109,797,889 | 330,698,103 | 295,705,259 | 211,508,468 | 184,242,582 | |||||||||||||||||
$ | 125,991,476 | $ | 125,268,035 | $ | 345,164,688 | $ | 330,698,103 | $ | 216,405,684 | $ | 211,508,468 | |||||||||||
$ | 146,517 | $ | 56,121 | $ | 215,321 | $ | 142,003 | $ | 1,412,353 | $ | 936,119 | |||||||||||
106,392 | 178,945 | 1,307,963 | 1,821,122 | 56,643 | 65,511 | |||||||||||||||||
4 | 37,142 | 213,276 | 1,639,843 | 3 | 47,005 | |||||||||||||||||
(422,244 | ) | (1,537,052 | ) | (1,666,234 | ) | (3,887,583 | ) | (307,803 | ) | (1,157,543 | ) | |||||||||||
(315,848 | ) | (1,320,965 | ) | (144,995 | ) | (426,618 | ) | (251,157 | ) | (1,045,027 | ) |
45 |
Statement of Changes in Net Assets for the Six Months Ended June 30, 2014 (unaudited) and for the Years Ended December 31, 2013 and January 31, 2013 |
Value Line Core Bond Fund | ||||||||||||
Period from | ||||||||||||
Six Months Ended | February 1, 2013 to | Year Ended | ||||||||||
June 30, 2014 | December 31, 2013 | January 31, 2013 | ||||||||||
Operations: | ||||||||||||
Net investment income | $ | 727,230 | $ | 898,344 | $ | 1,639,618 | ||||||
Net realized gain/(loss) on investments | (79,694 | ) | (866,870 | ) | 1,779,984 | |||||||
Change in net unrealized appreciation/(depreciation) on investments | 2,177,679 | (3,263,603 | ) | (866,255 | ) | |||||||
Net increase/(decrease) in net assets from operations | 2,825,215 | (3,232,129 | ) | 2,553,347 | ||||||||
Distributions to Shareholders from: | ||||||||||||
Net investment income | (684,790 | ) | (893,166 | ) | (1,614,009 | ) | ||||||
Return of capital | — | (155,298 | ) | — | ||||||||
Net realized gain from investment transactions | — | — | (25,662 | ) | ||||||||
Total distributions | (684,790 | ) | (1,048,464 | ) | (1,639,671 | ) | ||||||
Share Transactions: | ||||||||||||
Proceeds from sale of shares | 503,828 | 1,687,477 | 2,261,091 | |||||||||
Net assets of shares issued in connection with reorganization (Note 3) | — | 73,396,078 | — | |||||||||
Proceeds from reinvestment of dividends and distributions to shareholders | 606,087 | 915,474 | 1,273,759 | |||||||||
Cost of shares redeemed | (4,814,075 | ) | (17,223,654 | ) | (6,101,213 | ) | ||||||
Net increase/(decrease) in net assets from capital share transactions | (3,704,160 | ) | 58,775,375 | (2,566,363 | ) | |||||||
Total increase/(decrease) in net assets | (1,563,735 | ) | 54,494,782 | (1,652,687 | ) | |||||||
Net Assets: | ||||||||||||
Beginning of period | 85,045,159 | 30,550,377 | 32,203,064 | |||||||||
End of period | $ | 83,481,424 | $ | 85,045,159 | $ | 30,550,377 | ||||||
Undistributed/(distributions in excess of) net investment income included in net assets, at end of period | $ | 32,713 | $ | (9,727 | ) | $ | (9,655 | ) | ||||
Capital Share Transactions; | ||||||||||||
Shares sold | 102,540 | 338,817 | 452,862 | |||||||||
Shares issued in connection with reorganization | — | 14,453,737 | — | |||||||||
Shares issued to shareholders in reinvestment of dividends | 122,634 | 185,136 | 255,621 | |||||||||
Shares redeemed | (977,317 | ) | (3,475,528 | ) | (1,222,950 | ) | ||||||
Net increase/(decrease) | (752,143 | ) | 11,502,162 | (514,467 | ) |
See Notes to Financial Statements. |
46 |
[This Page Intentionally Left Blank.]
47 |
Financial Highlights |
Selected data for a share of capital stock outstanding throughout each year:
Income/(loss) from investment operations: | Less distributions: | |||||||||||||||||||||||||||||||||||
Net gains/ | ||||||||||||||||||||||||||||||||||||
Net asset | Net | (losses) on | Dividends | Distributions | ||||||||||||||||||||||||||||||||
value, | investment | securities (both | Total from | from net | from net | Distributions | ||||||||||||||||||||||||||||||
beginning | income/ | realized and | investment | Redemption | investment | realized | from return | Total | ||||||||||||||||||||||||||||
of year | (loss) | unrealized) | operations | fees | income | gains | of capital | distributions | ||||||||||||||||||||||||||||
Value Line Premier Growth Fund, Inc. | ||||||||||||||||||||||||||||||||||||
Period ended June 30, 2014(1) | $ | 33.99 | 0.03 | 1.45 | 1.48 | — | — | — | — | — | ||||||||||||||||||||||||||
Year ended December 31, 2013 | 28.84 | 0.00 | (4) | 7.64 | 7.64 | — | — | (2.49 | ) | — | (2.49 | ) | ||||||||||||||||||||||||
Year ended December 31, 2012 | 26.48 | 0.09 | 4.59 | 4.68 | — | (0.09 | ) | (2.23 | ) | — | (2.32 | ) | ||||||||||||||||||||||||
Year ended December 31, 2011 | 26.82 | (0.08 | ) | 1.30 | 1.22 | — | — | (1.56 | ) | — | (1.56 | ) | ||||||||||||||||||||||||
Year ended December 31, 2010 | 22.07 | (0.01 | )(5) | 4.79 | 4.78 | — | (0.03 | ) | — | — | (0.03 | ) | ||||||||||||||||||||||||
Year ended December 31, 2009 | 16.69 | 0.02 | 5.37 | 5.39 | — | (0.01 | ) | — | — | (0.01 | ) | |||||||||||||||||||||||||
The Value Line Fund, Inc. | ||||||||||||||||||||||||||||||||||||
Period ended June 30, 2014(1) | 13.50 | 0.01 | 0.55 | 0.56 | — | — | — | — | — | |||||||||||||||||||||||||||
Year ended December 31, 2013 | 10.36 | 0.01 | 3.19 | 3.20 | — | (0.06 | ) | — | — | (0.06 | ) | |||||||||||||||||||||||||
Year ended December 31, 2012 | 9.04 | 0.05 | 1.27 | 1.32 | — | — | — | — | — | |||||||||||||||||||||||||||
Year ended December 31, 2011 | 8.55 | (0.00 | )(4) | 0.49 | 0.49 | — | (0.00 | )(4) | — | — | (0.00 | )(4) | ||||||||||||||||||||||||
Year ended December 31, 2010 | 6.81 | 0.00 | (4) | 1.74 | 1.74 | — | — | — | — | — | ||||||||||||||||||||||||||
Year ended December 31, 2009 | 6.22 | (0.01 | ) | 0.60 | 0.59 | — | — | — | — | — | ||||||||||||||||||||||||||
Value Line Income and Growth Fund, Inc. | ||||||||||||||||||||||||||||||||||||
Period ended June 30, 2014(1) | 9.82 | 0.07 | 0.47 | 0.54 | — | (0.07 | ) | — | — | (0.07 | ) | |||||||||||||||||||||||||
Year ended December 31, 2013 | 8.67 | 0.12 | 1.57 | 1.69 | — | (0.12 | ) | (0.42 | ) | — | (0.54 | ) | ||||||||||||||||||||||||
Year ended December 31, 2012 | 8.27 | 0.13 | 0.74 | 0.87 | — | (0.13 | ) | (0.34 | ) | — | (0.47 | ) | ||||||||||||||||||||||||
Year ended December 31, 2011 | 8.46 | 0.11 | (0.19 | ) | (0.08 | ) | — | (0.11 | ) | — | — | (0.11 | ) | |||||||||||||||||||||||
Year ended December 31, 2010 | 7.75 | 0.10 | 0.71 | 0.81 | — | (0.10 | ) | — | — | (0.10 | ) | |||||||||||||||||||||||||
Year ended December 31, 2009 | 6.39 | 0.10 | 1.36 | 1.46 | — | (0.10 | ) | — | — | (0.10 | ) | |||||||||||||||||||||||||
Value Line Larger Companies Fund, Inc. | ||||||||||||||||||||||||||||||||||||
Period ended June 30, 2014(1) | 25.57 | 0.06 | 1.35 | 1.41 | — | — | — | — | — | |||||||||||||||||||||||||||
Year ended December 31, 2013 | 19.78 | 0.13 | 5.81 | 5.94 | — | (0.15 | ) | — | — | (0.15 | ) | |||||||||||||||||||||||||
Year ended December 31, 2012 | 17.34 | 0.16 | 2.40 | 2.56 | — | (0.12 | ) | — | — | (0.12 | ) | |||||||||||||||||||||||||
Year ended December 31, 2011 | 17.47 | 0.12 | (0.17 | ) | (0.05 | ) | — | (0.08 | ) | — | — | (0.08 | ) | |||||||||||||||||||||||
Year ended December 31, 2010 | 15.40 | 0.09 | 2.08 | 2.17 | — | (0.10 | ) | — | — | (0.10 | ) | |||||||||||||||||||||||||
Year ended December 31, 2009 | 13.18 | 0.10 | 2.22 | 2.32 | — | (0.10 | ) | — | — | (0.10 | ) | |||||||||||||||||||||||||
Value Line Core Bond Fund | ||||||||||||||||||||||||||||||||||||
Period ended June 30, 2014(1) | 4.85 | 0.04 | 0.13 | 0.17 | — | (0.04 | ) | — | — | (0.04 | ) | |||||||||||||||||||||||||
Period ended December 31, 2013(8) | 5.07 | 0.06 | (0.22 | ) | (0.16 | ) | — | (0.05 | ) | — | (0.01 | ) | (0.06 | ) | ||||||||||||||||||||||
Year ended January 31, 2013 | 4.92 | 0.26 | 0.15 | 0.41 | 0.00 | (4) | (0.26 | ) | (0.00 | )(4) | — | (0.26 | ) | |||||||||||||||||||||||
Year ended January 31, 2012 | 4.95 | 0.29 | (0.03 | ) | 0.26 | 0.00 | (4) | (0.29 | ) | — | — | (0.29 | ) | |||||||||||||||||||||||
Year ended January 31, 2011 | 4.70 | 0.30 | 0.25 | 0.55 | 0.00 | (4) | (0.30 | ) | — | — | (0.30 | ) | ||||||||||||||||||||||||
Year ended January 31, 2010 | 3.89 | 0.28 | 0.81 | 1.09 | 0.00 | (4) | (0.28 | ) | — | — | (0.28 | ) | ||||||||||||||||||||||||
Year ended January 31, 2009 | 4.83 | 0.32 | (0.95 | ) | (0.63 | ) | 0.00 | (4) | (0.31 | ) | — | — | (0.31 | ) |
* | Ratio reflects expenses grossed up for the custody credit arrangement, waiver of the advisory fees by the Adviser and the service and distribution plan fees by the Distributor. The custody credit arrangement was discontinued as of January 1, 2013. |
** | Ratio reflects expenses net of the custody credit arrangement, waiver of the advisory fees by the Adviser and the service and distribution plan fees by the Distributor. The custody credit arrangement was discontinued as of January 1, 2013. |
(1) | Unaudited for the six month period. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Amount is less than $0.01 per share. |
(5) | Based on average shares outstanding. |
(6) | Ratio reflects expenses grossed up for the reimbursement by Value Line, Inc. of certain expenses incurred by the Fund. |
(7) | Ratio reflects expenses net of the reimbursement by Value Line, Inc. of certain expenses incurred by the Fund. |
(8) | Period from February 1, 2013 to December 31, 2013. |
(9) | The ratio of expenses to average net assets, net of custody credits, but exclusive of the fee waivers would have been 1.48%. |
See Notes to Financial Statements. |
48 |
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||
Net assets, | gross expenses | net expenses | net investment | |||||||||||||||||||||||
Net asset | end of | to average | to average | income/(loss) to | Portfolio | |||||||||||||||||||||
value, end | Total | year | net | net | average net | turnover | ||||||||||||||||||||
of year | return | (in thousands) | assets* | assets** | assets | rate | ||||||||||||||||||||
$ | 35.47 | 4.35 | %(2) | $ | 392,963 | 1.22 | %(3) | 1.22 | %(3) | 0.15 | %(3) | 2 | %(2) | |||||||||||||
33.99 | 26.56 | % | 402,073 | 1.24 | % | 1.24 | % | (0.02 | )% | 11 | % | |||||||||||||||
28.84 | 17.80 | % | 337,436 | 1.25 | % | 1.25 | % | 0.28 | % | 15 | % | |||||||||||||||
26.48 | 4.59 | % | 298,428 | 1.24 | % | 1.24 | % | (0.28 | )% | 20 | % | |||||||||||||||
26.82 | 21.66 | % | 311,829 | 1.23 | %(6) | 1.19 | %(7) | (0.02 | )% | 16 | % | |||||||||||||||
22.07 | 32.29 | % | 347,938 | 1.22 | % | 1.22 | % | 0.11 | % | 8 | % | |||||||||||||||
14.06 | 4.15 | %(2) | 125,991 | 1.22 | %(3) | 1.22 | %(3) | 0.15 | %(3) | 4 | %(2) | |||||||||||||||
13.50 | 30.86 | % | 125,268 | 1.26 | % | 1.12 | % | 0.05 | % | 7 | % | |||||||||||||||
10.36 | 14.60 | % | 109,798 | 1.28 | % | 1.03 | % | 0.46 | % | 6 | % | |||||||||||||||
9.04 | 5.75 | % | 133,336 | 1.29 | % | 0.94 | % | (0.02 | )% | 18 | % | |||||||||||||||
8.55 | 25.55 | % | 104,200 | 1.31 | %(6) | 0.91 | %(7) | 0.02 | % | 27 | % | |||||||||||||||
6.81 | 9.49 | % | 92,680 | 1.36 | % | 1.04 | % | (0.22 | )% | 122 | % | |||||||||||||||
10.29 | 5.53 | %(2) | 345,165 | 1.13 | %(3) | 1.08 | %(3) | 1.49 | %(3) | 19 | %(2) | |||||||||||||||
9.82 | 19.55 | % | 330,698 | 1.16 | % | 1.11 | % | 1.26 | % | 27 | % | |||||||||||||||
8.67 | 10.62 | % | 295,705 | 1.19 | % | 1.14 | % | 1.48 | % | 31 | % | |||||||||||||||
8.27 | (0.90 | )% | 306,227 | 1.20 | % | 1.15 | % | 1.25 | % | 57 | % | |||||||||||||||
8.46 | 10.55 | % | 332,695 | 1.14 | %(6) | 1.05 | %(7) | 1.22 | % | 46 | % | |||||||||||||||
7.75 | 23.07 | % | 340,210 | 1.13 | % | 1.09 | % | 1.49 | % | 56 | % | |||||||||||||||
26.98 | 5.51 | %(2) | 216,406 | 1.21 | %(3) | 1.11 | %(3) | 0.46 | %(3) | 27 | %(2) | |||||||||||||||
25.57 | 30.05 | % | 211,508 | 1.25 | % | 1.06 | % | 0.48 | % | 8 | % | |||||||||||||||
19.78 | 14.82 | % | 184,243 | 1.27 | % | 1.02 | % | 0.72 | % | 17 | % | |||||||||||||||
17.34 | (0.27 | )% | 178,783 | 1.25 | % | 1.00 | % | 0.60 | % | 30 | % | |||||||||||||||
17.47 | 14.09 | % | 199,524 | 1.21 | %(6) | 0.92 | %(7) | 0.44 | % | 153 | % | |||||||||||||||
15.40 | 17.62 | % | 202,454 | 1.26 | % | 1.01 | % | 0.62 | % | 157 | % | |||||||||||||||
4.98 | 3.52 | %(2) | 83,481 | 1.28 | %(3) | 1.13 | %(3) | 1.74 | %(3) | 69 | %(2) | |||||||||||||||
4.85 | (3.13 | )%(2) | 85,045 | 1.30 | %(3) | 1.15 | %(3) | 1.17 | %(3) | 61 | %(2) | |||||||||||||||
5.07 | 8.49 | % | 30,550 | 1.62 | % | 1.32 | % | 5.18 | % | 103 | % | |||||||||||||||
4.92 | 5.48 | % | 32,203 | 1.55 | % | 1.25 | % | 5.95 | % | 50 | % | |||||||||||||||
4.95 | 12.01 | % | 34,885 | 1.48 | %(6) | 1.13 | %(7) | 6.20 | % | 42 | % | |||||||||||||||
4.70 | 28.92 | % | 37,787 | 1.56 | % | 1.13 | % | 6.51 | % | 51 | % | |||||||||||||||
3.89 | (13.42 | )% | 25,924 | 1.50 | %(9) | 0.98 | % | 7.17 | % | 39 | % |
49 |
Notes to Financial Statements (unaudited) |
1. Significant Accounting Policies
Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., Value Line Income and Growth Fund, Inc., Value Line Larger Companies Fund, Inc., and Value Line Core Bond Fund, (individually a “Fund” and collectively, the “Funds”) are each registered under the Investment Company Act of 1940, as amended, as diversified, open-end management investment companies. The primary investment objective of the Value Line Premier Growth Fund, Inc. and The Value Line Fund, Inc. is long-term growth of capital. The primary investment objective of the Value Line Income and Growth Fund, Inc. is income, as high and dependable as is consistent with reasonable risk and capital growth to increase total return is a secondary objective. The sole investment objective of the Value Line Larger Companies Fund, Inc. is to realize capital growth. The primary investment objective of the Value Line Core Bond Fund is to maximize current income. As a secondary investment objective, the Fund will seek capital appreciation, but only when consistent with its primary objective. The Value Line Funds (the “Value Line Funds”) is a family of 10 mutual funds that includes a wide range of solutions designed to meet virtually any investment goal and consists of a variety of equity, fixed income, and hybrid funds.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements.
(A) Security Valuation: Securities listed on a securities exchange are valued at the closing sales prices on the date as of which the net asset value (“NAV”) is being determined. Securities traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Stock Market are valued at the NASDAQ Official Closing Price. 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. Short-term instruments with maturities of 60 days or less at the date of purchase are valued at amortized cost, which approximates fair value. Short-term instruments with maturities greater than 60 days at the date of purchase are valued at the midpoint between the latest available and representative asked and bid prices, and commencing 60 days prior to maturity such securities are valued at amortized cost.
The Board of Directors (the “Board”) has determined that the value of bonds and other fixed income corporate securities be calculated on the valuation date by reference to valuations obtained from an independent pricing service that determines valuations for normal institutional-size trading units of debt securities, without exclusive reliance upon quoted prices. This service takes into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data in determining valuations. Bonds and fixed income securities are valued at the evaluated bid on the date as of which the NAV is being determined. Securities, other than bonds and other fixed income securities, not priced in this manner are valued at the midpoint between the latest available and representative bid and asked prices, or when stock valuations are used, at the latest quoted sale price as of the regular close of business of the New York Stock Exchange (“NYSE”) on the valuation date.
Investments in shares of open-end mutual funds, including money market funds, are valued at their daily NAV which is calculated as of the close of regular trading on the NYSE (usually 4:00 P.M. Eastern Standard Time) on each day on which the NYSE is open for business. NAV per share is determined by dividing each Fund’s total net assets by each Fund’s total number of shares outstanding at the time of calculation.
The Board has adopted procedures for valuing portfolio securities in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Adviser. A valuation committee (the “Valuation Committee”) was established by the Board to oversee the implementation of the Funds’ valuation methods and to make fair value determinations on behalf of the Board, as instructed. The Adviser monitors the continued appropriateness of methods applied and determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Adviser determines that a valuation method may no longer be appropriate, another valuation method may be selected, or the Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures set forth by the Board. The Board shall review the appropriateness of the valuation methods and these methods may be amended or supplemented from time to time by the Valuation Committee. In addition, the Funds may use the fair value of a security when the closing market price on the primary exchange where the security is traded no longer reflects the value of a security due to factors affecting one or more relevant securities markets or the specific issuer.
50 |
June 30, 2014 |
(B) Fair Value Measurements: The Funds follow fair valuation accounting standards (FASB ASC 820-10) which establishes a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below:
● | Level 1 – | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date; |
● | Level 2 – | Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; |
● | Level 3 – | Inputs that are unobservable. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Funds follow the updated provisions surrounding fair value measurements and disclosures on transfers in and out of all levels of the fair value hierarchy on a gross basis and the reasons for the transfers as well as to disclosures about the valuation techniques and inputs used to measure fair value for investments that fall in either Level 2 or Level 3 of the fair value hierarchy.
For the six months ended June 30, 2014, there were no transfers between Level 1, Level 2, and Level 3 assets for each fund.
The Funds’ policy is to recognize transfers between levels at the beginning of the reporting period.
The amounts and reasons for all transfers in and out of each level within the three-tier hierarchy are disclosed when the Funds had an amount of total transfers during the reporting period that were meaningful in relation to their net assets as of the end of the reporting period (e.g. greater than 1%). An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation techniques used.
For the six months ended June 30, 2014, there were no Level 3 investments. The Schedule of Investments includes a breakdown of the Funds’ investments by category.
(C) Repurchase Agreements: Each Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, with selected commercial banks and broker-dealers, under which the Funds acquire securities as collateral and agrees to resell the securities at an agreed upon time and at an agreed upon price. Each Fund, through the custodian or a sub-custodian, receives delivery of the underlying securities collateralizing repurchase agreements. The Funds’ 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, it is the Funds’ policy to mark-to-market the value of the underlying securities daily to ensure the adequacy of the collateral. In the event of default by either the seller or the Funds, the Master Repurchase Agreement may permit the non-defaulting party to net and close out all transactions. The Funds have 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. At period end, there were no open repurchase agreements for the Value Line Funds.
(D) Federal Income Taxes: It is the policy of each Fund to continue to qualify as a regulated investment company by complying with the provisions available to regulated investment companies, as defined in applicable sections of the Internal Revenue Code, and to distribute all of their investment income and capital gains to their shareholders. Therefore, no provision for federal income tax is required.
51 |
Notes to Financial Statements (unaudited) (continued) |
Management has analyzed the Funds’ tax positions taken on federal and state income tax returns for all open tax years (fiscal years ended December 31, 2010 through December 31, 2013), and has concluded that no provision for federal or state income tax is required in the Funds’ financial statements. The Funds’ federal and state income tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
(E) 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 basis of first in first out convention (“FIFO”). 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. Interest income, adjusted for the amortization of discount and premium, is earned from settlement date and recognized on the accrual basis. Gains and losses realized on prepayments received on mortgage-related securities are recorded as interest income.
The dividends and distributions were as follows:
Six Months Ended | ||||||||
June 30, 2014 | Year Ended | |||||||
(unaudited) | December 31, 2013 | |||||||
Value Line Premier Growth Fund, Inc. | ||||||||
Distributions per share from net realized gains | $ | — | $ | 2.4934 | ||||
The Value Line Fund, Inc. | ||||||||
Dividends per share from net investment income | $ | — | $ | 0.0570 | ||||
Value Line Income and Growth Fund, Inc. | ||||||||
Dividends per share from net investment income | $ | 0.0718 | $ | 0.1157 | ||||
Distributions per share from net realized gains | $ | — | $ | 0.4174 | ||||
Value Line Larger Companies Fund, Inc. | ||||||||
Dividends per share from net investment income | $ | — | $ | 0.1521 | ||||
Value Line Core Bond Fund | ||||||||
Dividends per share from net investment income | $ | 0.0400 | $ | 0.0537 | ||||
Distributions per share from return of capital | $ | — | $ | 0.0089 |
The Funds may purchase mortgage pass-through securities on a to-be-announced (“TBA”) basis, with payment and delivery scheduled for a future date. The Funds may enter into a TBA agreement, sell the obligation to purchase the pools stipulated in the TBA agreement prior to the stipulated settlement date and enter into a new TBA agreement for future delivery of pools of mortgage pass-through securities (a “TBA roll”). A TBA roll is treated by the Funds as a purchase transaction and a sale transaction in which the Funds realize a gain or loss. The Funds’ use of TBA rolls may cause the Funds to experience higher portfolio turnover and higher transaction costs. The Funds could be exposed to possible risk if there is an adverse market action, expenses or delays in connection with TBA transactions, or if the counterparty fails to complete the transaction.
The Value Line Core Bond Fund may invest in Treasury Inflation-Protection Securities (“TIPS”). The principal value and interest payout of TIPS are periodically adjusted according to the rate of inflation based on the Consumer Price Index. The adjustments for principal and income due to inflation are reflected in interest income in the Statements of Operations.
Income dividends and capital gains distributions are automatically reinvested in additional shares of the Fund unless the shareholder has requested otherwise. Income earned by the Fund on weekends, holidays and other days on which the Fund is closed for business is declared as a dividend on the next day on which the Fund is open for business. The Value Line Income and Growth Fund, Inc. distributes all of its net investment income quarterly and the Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., and the Value Line Larger Companies Fund, Inc. distribute all of their net investment income annually. The Value Line Core Bond fund declares and pays dividends monthly. Net realized capital gains, if any, are distributed to shareholders annually or more frequently if necessary to comply with the Internal Revenue Code.
52 |
June 30, 2014 |
(F) Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Assets and liabilities which are denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange at the valuation date. The Funds do not isolate changes in the value of investments caused by foreign exchange rate differences from the changes due to other circumstances.
Income and expenses are translated to U.S. dollars based upon the rates of exchange on the respective dates of such transactions.
Net realized foreign exchange gains or losses arise from currency fluctuations realized between the trade and settlement dates on securities transactions, the differences between the U.S. dollar amounts of dividends, interest, and foreign withholding taxes recorded by the Funds, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, other than investments, at the end of the fiscal period, resulting from changes in the exchange rates. The effect of the change in foreign exchange rates on the value of investments is included in realized gain/(loss) on investments and change in net unrealized appreciation/(depreciation) on investments.
(G) Representations and Indemnifications: In the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, management expects the risk of loss to be remote.
(H) Accounting for Real Estate Investment Trusts: The Funds own shares of Real Estate Investment Trusts (“REITs”) which report information on the source of their distributions annually. Distributions received from REITs during the year which represent a return of capital are recorded as a reduction of cost and distributions which represent a capital gain dividend are recorded as a realized long-term capital gain on investments.
(I) Foreign Taxes: The Funds may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Funds will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(J) Securities Lending: Under an agreement with State Street Bank & Trust (“State Street”), the Funds can lend their securities to brokers, dealers and other financial institutions approved by the Board. By lending their investment securities, the Funds attempt to increase their net investment income through receipt of interest on the loan. Any gain or loss in the market price of the securities loaned that might occur and any interest or dividends declared during the term of the loan would accrue to the account of the Funds. Risks of delay in recovery of the securities or even loss of rights in the collateral may occur should the borrower of the securities fail financially. Generally, in the event of a counter-party default, the Funds have the right to use the collateral to offset the losses incurred. The lending fees received and the Funds’ portion of the interest income earned on the cash collateral are included in the Statements of Operations.
Upon entering into a securities lending transaction, the Funds receive cash or other securities as collateral in an amount equal to or exceeding 102% of the current market value of the loaned securities. Any cash received as collateral is invested by State Street Global Advisors, acting in its capacity as securities lending agent (the “Agent”), in The Value Line Funds collateral account, which is subsequently invested into joint repurchase agreements. A portion of the dividends received on the collateral is rebated to the borrower of the securities and the remainder is split between the Agent and the Funds.
The Funds enter into joint repurchase agreements whereby their uninvested cash collateral from securities lending is deposited into a joint cash account with other funds managed by the Adviser and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest in the repurchase agreement. A repurchase agreement is accounted for as a loan by the funds to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked-to-market daily to maintain coverage of at least 100%.
At period end, there were no open joint repurchase agreements for the Value Line Funds.
53 |
Notes to Financial Statements (unaudited) (continued) |
As of June 30, 2014, the Funds loaned securities which were collateralized by cash. The value of the securities on loan and the value of the related collateral were as follows:
Total Collateral | ||||||||||||
Value of Securities | (including | |||||||||||
Fund | Loaned | Value of Collateral | Calculated Mark)* | |||||||||
Value Line Premier Growth Fund, Inc | $ | 6,545,741 | $ | 6,696,523 | $ | 6,681,773 | ||||||
The Value Line Fund, Inc. | 1,300,270 | 1,327,000 | 1,326,500 | |||||||||
Value Line Income and Growth Fund, Inc. | 13,742,949 | 14,009,948 | 14,051,350 | |||||||||
Value Line Larger Companies Fund, Inc. | 2,302,300 | 2,347,150 | 2,354,625 | |||||||||
Value Line Core Bond Fund | 1,198,169 | 1,222,250 | 1,222,625 |
* | Balances represent the end of day mark-to-market of securities lending collateral that will be reflected by the Funds as of the next business day. |
(K) Options: The Value Line Income and Growth Fund, Inc.’s investment strategy allows the use of options. The Fund utilizes options to hedge against changes in market conditions or to provide market exposure while trying to reduce transaction costs.
When the Fund writes a put or call option, an amount equal to the premiums received is included on the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option on an individual security is exercised, a gain or loss is realized for the sale of the underlying security, and the proceeds from the sale are increased by the premium originally received. If a written put option on an individual security is exercised, the cost of the security acquired is decreased by the premium originally received. As a writer of an option, a Fund bears the market risk of an unfavorable change in the price of the individual security underlying the written option. Additionally, written call options may involve the risk of limited gains.
The Fund may also purchase put and call options. When a Fund purchases a put or call option, an amount equal to the premium paid is included on the Fund’s Statement of Assets and Liabilities as an investment, and is subsequently marked-to-market to reflect the current market value of the option. If an option expires on the stipulated expiration date or if the Fund enters into a closing sale transaction, a gain or loss is realized. If the Fund exercises a call option on an individual security, the cost of the security acquired is increased by the premium paid for the call. If the Fund exercises a put option on an individual security, a gain or loss is realized from the sale of the underlying security, and the proceeds from such a sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities.
As of June 30, 2014, the Value Line Income and Growth Fund, Inc. had no open options contracts.
The Value Line Income and Growth Fund, Inc.’s written options are collateralized securities held at the Options Clearing Corporation’s account at the Fund’s custodian. The securities pledged as collateral are included on the Schedule of Investments. Such collateral is restricted from the Fund’s use.
There were no options contracts written in the Value Line Income and Growth Fund, Inc. during the period ended June 30, 2014.
(L) Subsequent Events: Management has evaluated all subsequent transactions and events through the date on which these financial statements were issued and has determined that no additional items require adjustment to or disclosure in the financial statements.
2. Investment Risks
Securities issued by U.S. Government agencies or government-sponsored enterprises may not be guaranteed by the U.S. Treasury. The Government National Mortgage Association (“GNMA” or “Ginnie Mae”), a wholly-owned U.S. Government corporation, is authorized to guarantee, with the full faith and credit of the U.S. Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA and backed by pools of mortgages insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. Government) include the Federal National Mortgage Association (“FNMA” or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but its participation certificates are not backed by the full faith and credit of the U.S. Government.
54 |
June 30, 2014 |
3. Reorganization
On December 13, 2012, the Board approved an agreement and plan of reorganization (the “Reorganization”) pursuant to which the Value Line U.S. Government Securities Fund, Inc. (the “Acquired Fund”) would merge into and become shareholders of the Value Line Core Bond Fund (the “Surviving Fund”). The Board believes the reorganization would be advantageous to the shareholders of both Funds for the reason that both Funds have similar investment objectives, improved performance and a larger and more diverse investment universe, potentially allowing for economies of scale to be realized over time.
On March 22, 2013, the Surviving Fund acquired all of the assets and assumed the liabilities of the Acquired Fund, in a tax-free exchange for Federal tax purposes, pursuant to the Reorganization approved by the Board of both Funds and shareholders of record of the Acquired Fund as of the applicable record date. All of the expenses incurred in connection with the Reorganization were paid by both the Acquired and Surviving Funds proportionately based on the Funds’ respective net assets. The total Reorganization costs are $172,439. The value of shares issued by the Surviving Fund is presented in the Statement of Changes in Net Assets. The following table sets forth the number of shares issued by the Surviving Fund, the net assets and unrealized appreciation or depreciation of the Acquired Fund immediately prior to the Reorganization, and the net assets of the Surviving Fund immediately prior to and after the Reorganization:
Shares | Net Assets | Net Assets | ||||||||||||
Date of | Surviving | Issued In | Before | After | ||||||||||
Reorganization | Fund | Acquisition | Reorganization | Reorganization | ||||||||||
3-22-13 | Value Line Core Bond Fund | 14,453,737 | $ | 29,565,559 | $ | 102,961,637 |
Acquired | ||||||||||||||
Acquired | Portfolio | |||||||||||||
Date of | Acquired | Shares | Portfolio | Unrealized | ||||||||||
Reorganization | Fund | Outstanding | Net Assets | Depreciation | ||||||||||
3-22-13 | Value Line U.S. Government Securities Fund, Inc. | 6,308,486 | $ | 73,396,078 | $ | 1,483,441 |
Assuming the Reorganization had been completed on February 1, 2013, the beginning of the period for the Surviving Fund, the Surviving Fund’s pro forma results of operations for the year ended December 31, 2013 would have been as follows:
Net investment income | $ | 1,580,309 | ||
Net loss on investments | $ | (4,057,854 | ) | |
Net decrease in net assets from operations | $ | (2,477,545 | ) |
Because the combined investment portfolios have been managed as a single integrated portfolio since the closing of the Reorganization, it is not practicable to separate the amounts of revenue and earnings of the Acquired Fund that have been included in the Surviving Fund’s Statement of Operations since March 22, 2013.
4. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as follows:
Purchases of | Sales of U.S. | |||||||||||||||
Purchases of | Sales of | U.S. Government | Government | |||||||||||||
Investment | Investment | Agency | Agency | |||||||||||||
Fund | Securities | Securities | Obligations | Obligations | ||||||||||||
Value Line Premier Growth Fund, Inc. | $ | 9,096,074 | $ | 35,322,690 | $ | — | $ | — | ||||||||
The Value Line Fund, Inc. | 4,440,843 | 9,166,217 | — | — | ||||||||||||
Value Line Income and Growth Fund, Inc. | 62,560,235 | 45,566,830 | 3,209,078 | 14,435,755 | ||||||||||||
Value Line Larger Companies Fund, Inc. | 55,039,554 | 60,045,064 | — | — | ||||||||||||
Value Line Core Bond Fund | 40,369,760 | 22,135,580 | 16,595,733 | 38,509,059 |
55 |
Notes to Financial Statements (unaudited) (continued) |
5. Income Taxes
At June 30, 2014, information on the tax components of capital is as follows:
Net tax | ||||||||||||||||
Cost of | unrealized | |||||||||||||||
investments | Gross tax | Gross tax | appreciation/ | |||||||||||||
for tax | unrealized | unrealized | (depreciation) | |||||||||||||
Fund | purposes | appreciation | depreciation | on investments | ||||||||||||
Value Line Premier Growth Fund, Inc. | $ | 183,543,715 | $ | 209,314,244 | $ | (344,866 | ) | $ | 208,969,378 | |||||||
The Value Line Fund, Inc. | 67,458,595 | 58,599,248 | (14,027 | ) | 58,585,221 | |||||||||||
Value Line Income and Growth Fund, Inc. | 263,679,901 | 83,145,918 | (1,055,178 | ) | 82,090,740 | |||||||||||
Value Line Larger Companies Fund, Inc. | 138,748,802 | 77,995,432 | (318,153 | ) | 77,677,279 | |||||||||||
Value Line Core Bond Fund | 84,466,713 | 1,485,743 | (554,085 | ) | 931,658 |
6. Investment Advisory Fee, Service and Distribution Fees and Transactions With Affiliates
Advisory fees of $1,455,789, $424,644, $1,100,055, $783,587 and $209,515 for the Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., Value Line Income and Growth Fund, Inc., Value Line Larger Companies Fund, Inc., and Value Line Core Bond Fund, respectively, were paid or payable to the Adviser for the six months ended June 30, 2014. For the Value Line Premier Growth Fund, Inc. and Value Line Larger Companies Fund, Inc. advisory fees were computed at an annual rate of 0.75% of the daily net assets during the period. For The Value Line Fund, Inc. and Value Line Income and Growth Fund, Inc. advisory fees were computed at an annual rate of 0.70% of the first $100 million of the Fund’s average daily net assets plus 0.65% of the excess thereof. For the Value Line Core Bond Fund advisory fees were computed at an annual rate of 0.50% of the Fund’s average daily net assets during the period prior to any fee waivers. The Funds advisory fees are paid monthly. The Adviser provides research, investment programs, and supervision of the investment portfolio and pays costs of administrative services, office space, equipment and compensation of administrative, bookkeeping, and clerical personnel necessary for managing the affairs of the Funds. The Adviser also provides persons, satisfactory to the Funds’ Board, to act as officers and employees of the Funds and pays their salaries. Effective February 1, 2013, and voluntarily renewed annually through June 30, 2014, the Adviser contractually agreed to waive 0.10% of the advisory fee for the Value Line Core Bond Fund. The fees waived amounted to $41,903 for the period ended June 30, 2014. The Adviser has no right to recoup previously waived amounts.
The Funds have a Service and Distribution Plan (the “Plan”), adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, which compensates EULAV Securities LLC (the “Distributor”) for advertising, marketing and distributing the Funds’ shares and for servicing the Funds’ shareholders at an annual rate of 0.25% of the Funds’ average daily net assets. For the period ended June 30, 2014, fees amounting to $485,263, $153,788, $413,562, $261,196 and $104,757 before fee waivers for the Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., Value Line Income and Growth Fund, Inc., Value Line Larger Companies Fund, Inc., and Value Line Core Bond Fund, respectively, were accrued under this Plan. Effective May 1, 2009, and voluntarily renewed annually through July 31, 2013, the Distributor contractually agreed to waive The Value Line Fund, Inc.’s 12b-1 fee by 0.25%; effective August 1, 2013, the Distributor discontinued to waive The Value Line Fund, Inc.’s 12b-1 fee. Effective March 1, 2009, and voluntarily renewed annually, the Distributor contractually agreed to reduce the fee for the Value Line Income and Growth Fund, Inc. by 0.05%. Effective May 1, 2007, and voluntarily renewed annually through July 31, 2013, the Distributor contractually agreed to waive Value Line Larger Companies Fund, Inc.’s 12b-1 fee by 0.25%; effective August 1, 2013 and voluntarily renewed annually, the Distributor contractually agreed to waive the Value Line Larger Companies Fund, Inc.’s 12b-1 fee by 0.10%. Effective June 1, 2007, and voluntarily renewed annually, the Distributor contractually agreed to reduce the 12b-1 fee by 0.10% for the Value Line Core Bond Fund. The Value Line Income and Growth Fund, Inc., Value Line Larger Companies Fund, Inc. and Value Line Core Bond Fund’s fees waived amounted to $82,712, $104,478, and $20,951, respectively, for the six months ended June 30, 2014. The Distributor has no right to recoup previously waived amounts.
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June 30, 2014 |
Effective July 5, 2012, the Funds have a Sub-Transfer Agent Plan (the “sub TA plan”) which compensates financial intermediaries that provide sub-transfer agency and related services to investors that hold their Fund shares in omnibus accounts maintained by the financial intermediaries with the Funds. The sub-transfer agency fee, which may be paid directly to the financial intermediary or indirectly via the Distributor, is equal to the lower of (i) the aggregate amount of additional transfer agency fees and expenses that the Funds would otherwise pay to the transfer agent if each subaccount in the omnibus account maintained by the financial intermediary with the Funds were a direct account with the Funds and (ii) the amount by which the fees charged by the financial intermediary for including the Funds on its platform and providing shareholder, sub-transfer agency and related services exceed the amount paid under the Funds’ Plan with respect to each Fund’s assets attributable to shares held by the financial intermediary in the omnibus account. In addition, the amount of sub-transfer agency fees payable by the Fund’s to all financial intermediaries in the aggregate is subject to a maximum cap of 0.05% of each Fund’s average daily net assets. If the sub-transfer agency fee is paid to financial intermediaries indirectly via the Distributor, the Distributor does not retain any amount thereof and such fee otherwise reduces the amount that the Distributor is contractually obligated to pay to the financial intermediary. For the six months ended June 30, 2014, fees amounting to $43,406, $2,880, $24,635 and $5,114 for the Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., Value Line Income and Growth Fund, Inc., and Value Line Larger Companies Fund, Inc., respectively, were paid under the sub TA plan.
Each Fund bears direct expenses incurred specifically on its behalf while common expenses of the Value Line Funds are allocated proportionately based upon each Fund’s respective net assets. The Funds bear all other costs and expenses.
Certain officers and a trustee of the Adviser are also officers and a director of the Funds. At June 30, 2014, the officers and directors of the Value Line Premier Growth Fund, Inc., The Value Line Fund, Inc., Value Line Income and Growth Fund, Inc., Value Line Larger Companies Fund, Inc., and Value Line Core Bond Fund as a group owned less than 1% of the outstanding shares of each Fund.
7. Other
The Value Line Income and Growth Fund, Inc. received notice that it has been named as a defendant in In re: Tribune Company Fraudulent Conveyance Litigation, Consol. MDL 11 MD 2296 (RJS), which includes two specific cases in which the Fund is named, Kirschner, as Litigation Trustee for the Tribune Litigation Trust v. Fitzsimone, et al., 12 CV 02652 (RJS) (The “Trustee Litigation”) and Deutsche Bank Trust Company Americas, in its Capacity as Successor Indenture Trustee for Certain Series of Senior Notes, et al. v. Adaly Opportunity Fund TD Securities Inc. c/o Adaly Investment Management Co., et al., No. 1:11-cv-04784-RJH (S.D.N.Y.) (the “Adaly Action”). The Adaly Action is part of a larger group of noteholder and individual creditor complaints, which were dismissed by the lower federal district court on September 23, 2013, but are now part of an appeal by counsel for some of the individual creditors. Both the Adaly Action and Trustee Litigation seek to recover alleged transfers received in connection with the purchase, repurchase or redemption of Tribune stock as a result of a 2007 leveraged buyout and tender offer. The alleged value of the proceeds received by the Fund is $490,522 (less than 1% of net assets) and the Fund will incur legal expenses in the defense of these actions. Management continues to assess the actions and has made no determination about the effect, if any, on the Fund’s net assets and results of operations.
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Fund Expenses (unaudited) |
Example
As a shareholder of the Funds, you incur ongoing costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2014 through June 30, 2014).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if transactional costs were included, your costs would have been higher.
Expenses | ||||||||||||
Beginning | Ending | paid during | ||||||||||
account value | account value | period 1/1/14 | ||||||||||
1/1/14 | 6/30/14 | thru 6/30/14* | ||||||||||
Actual | ||||||||||||
Value Line Premier Growth Fund, Inc. | $ | 1,000.00 | $ | 1,043.54 | $ | 6.16 | ||||||
The Value Line Fund, Inc. | 1,000.00 | 1,041.48 | 6.17 | |||||||||
Value Line Income and Growth Fund, Inc. | 1,000.00 | 1,055.29 | 5.50 | |||||||||
Value Line Larger Companies Fund, Inc. | 1,000.00 | 1,055.14 | 5.68 | |||||||||
Value Line Core Bond Fund | 1,000.00 | 1,035.15 | 5.69 | |||||||||
Hypothetical (5% return before expenses) | ||||||||||||
Value Line Premier Growth Fund, Inc. | 1,000.00 | 1,018.76 | 6.09 | |||||||||
The Value Line Fund, Inc. | 1,000.00 | 1,018.75 | 6.10 | |||||||||
Value Line Income and Growth Fund, Inc. | 1,000.00 | 1,019.44 | 5.41 | |||||||||
Value Line Larger Companies Fund, Inc. | 1,000.00 | 1,019.27 | 5.58 | |||||||||
Value Line Core Bond Fund | 1,000.00 | 1,019.20 | 5.64 |
* | Expenses are equal to the Funds’ annualized expense ratio of 1.22%, 1.22%, 1.08%, 1.11%, and 1.13%, respectively, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period. These expense ratios may differ from the expense ratios shown in the Financial Highlights. |
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Semi-Annual Report |
FACTORS CONSIDERED BY THE BOARD IN APPROVING CONTINUANCE OF THE INVESTMENT ADVISORY AGREEMENTS FOR THE VALUE LINE FUND, INC., VALUE LINE INCOME AND GROWTH FUND, INC., VALUE LINE LARGER COMPANIES FUND, INC., VALUE LINE PREMIER GROWTH FUND, INC., AND VALUE LINE CORE BOND FUND
The Investment Company Act of 1940 (the “1940 Act”) requires the Boards (the “Board”) of The Value Line Fund, Inc. (“Value Line Fund”), Value Line Income and Growth Fund, Inc. (“Income & Growth Fund”), Value Line Larger Companies Fund, Inc. (“Larger Companies Fund”), Value Line Premier Growth Fund, Inc. (“Premier Growth Fund”), and Value Line Core Bond Fund (“Core Bond Fund”) (each, a “Fund” and collectively, the “Funds”), including a majority of each Board’s Directors or Trustees who are not “interested persons,” as that term is defined in the 1940 Act (the “Independent Directors”), to annually consider the continuance of each Fund’s investment advisory agreement (each, an “Agreement”) with its investment adviser, EULAV Asset Management.
In considering whether the continuance of a Fund’s Agreement was in the best interests of such Fund and its shareholders, the Board requested and the Adviser provided such information as the Board deemed to be reasonably necessary to evaluate the terms of such Agreement. At meetings held throughout the year, including the meeting specifically focused upon the review of each Agreement, the Independent Directors met in executive sessions separately from the non-Independent Director of the Funds and any officers of the Adviser. In selecting the Adviser and approving the continuance of each Agreement, the Independent Directors relied upon the assistance of counsel to the Independent Directors.
Both in the meeting specifically focused upon the review of the Agreements and at other meetings, the Board, including the Independent Directors, received materials relating to the Adviser’s investment and management services under the Agreements. These materials included information for each Fund regarding: (i) the investment performance of the Fund, including comparisons to a peer group of funds representing its Performance Universe (as described below), and its benchmark index, both as classified and prepared by Lipper Inc., an independent evaluation service (“Lipper”); (ii) the investment process, portfolio holdings, investment restrictions, valuation procedures, and financial statements for the Fund; (iii) purchases and redemptions of the Fund’s shares; (iv) the general investment outlook in the markets in which the Fund invests; (v) arrangements with respect to the distribution of the Fund’s shares; (vi) the allocation and cost of the Fund’s brokerage (none of which was effected through any affiliate of the Adviser, including EULAV Securities LLC (the “Distributor”)); and (vii) the overall nature, quality and extent of services provided by the Adviser.
As part of their review, the Board requested, and the Adviser provided, additional information in order to evaluate the quality of the Adviser’s services and the reasonableness of its fees under each Agreement. In a separate executive session, the Independent Directors reviewed information for each Fund, which included data comparing: (i) the Fund’s management fee, transfer agent, sub-transfer agent (if applicable) and custodian fees, Rule 12b-1 fee, and other non-management expenses, to those incurred by a peer group of funds representing its Expense Group (as described below), and a peer group of funds representing its Expense Universe (as described below); (ii) the Fund’s expense ratio to those of its Expense Group and Expense Universe; and (iii) the Fund’s investment performance over various time periods to the average performance of the Performance Universe as well as the appropriate Lipper index, as selected objectively by Lipper (the “Lipper Index”).
In their executive session, the Independent Directors also reviewed information regarding: (a) the financial results and condition of the Adviser and the Distributor and their profitability from the services that have been performed for each Fund and the Value Line family of funds; (b) the Adviser’s investment management staffing and resources; (c) the ownership, control and day-to-day management of the Adviser; and (d) each Fund’s potential for achieving economies of scale. In support of its review of the statistical information, the Board was provided with a description of the methodology used by Lipper to determine the Expense Group, the Expense Universe and the Performance Universe to prepare its information.
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Semi-Annual Report |
The Board observed that there is a range of investment options available to shareholders of the Funds, including other mutual funds, and that each Fund’s shareholders have chosen to invest in their Fund.
Performance Universes, Expense Groups and Expense Universes.
Value Line Fund. The Performance Universe for Value Line Fund consists of the Fund and all retail and institutional multi-cap growth funds, regardless of asset size or primary channel of distribution. The Expense Group for Value Line Fund consists of the Fund, 16 other retail no-load multi-cap growth funds, and one retail no-load large-cap growth fund, as selected objectively by Lipper. The Expense Universe for the Fund consists of its Expense Group and all other retail no-load multi-cap growth funds and large-cap growth funds (excluding outliers), as selected objectively by Lipper.
Core Bond Fund. The Performance Universe for Core Bond Fund consists of the Fund and all retail and institutional core bond funds, regardless of asset size or primary channel of distribution. The Expense Group for Core Bond Fund consists of the Fund and 10 other retail no-load core bond funds, as selected objectively by Lipper. The Expense Universe for the Fund consists of its Expense Group and all other retail no-load core bond funds (excluding outliers), as selected objectively by Lipper.
Income & Growth Fund. The Performance Universe for Income & Growth Fund consists of the Fund and all retail and institutional mixed-asset target allocation moderate funds, regardless of asset size or primary channel of distribution. The Expense Group for Income & Growth Fund consists of the Fund, three other retail no-load mixed-asset target allocation moderate funds, and 11 retail no-load mixed-asset target allocation growth funds, as selected objectively by Lipper. The Expense Universe for the Fund consists of its Expense Group and all other retail no-load mixed-asset target allocation moderate funds and retail no-load mixed-asset target allocation growth funds (excluding outliers), as selected objectively by Lipper.
Larger Companies Fund. The Performance Universe for Larger Companies Fund consists of the Fund and all retail and institutional large-cap growth funds, regardless of asset size or primary channel of distribution. The Expense Group for Larger Companies Fund consists of the Fund and 12 other retail no-load large-cap growth funds, as selected objectively by Lipper. The Expense Universe for the Fund consists of its Expense Group and all other retail no-load large-cap growth funds (excluding outliers), as selected objectively by Lipper.
Premier Growth Fund. The Performance Universe for Premier Growth Fund consists of the Fund and all retail and institutional multi-cap growth funds, regardless of asset size or primary channel of distribution. The Expense Group for Premier Growth Fund consists of the Fund, 11 other retail no-load multi-cap growth funds, and one retail no-load mid-cap growth fund, as selected objectively by Lipper. The Expense Universe for the Fund consists of its Expense Group and all other retail no-load multi-cap growth funds and mid-cap growth funds (excluding outliers), as selected objectively by Lipper.
The following summarizes matters considered by the Board in connection with its continuance of each of the Agreements. However, the Board did not identify any single factor as all-important or controlling, each Director may have weighed certain factors differently, and the summary does not detail all the matters that were considered.
Investment Performance. The Board reviewed each Fund’s overall investment performance and compared it to its Performance Universe and the Lipper Index as described below for each Fund.
Value Line Fund. The Board noted that the Fund outperformed the Performance Universe average and the Lipper Index for the three-year period ended March 31, 2014. The Board also noted that the Fund’s performance for the one-year, five-year and ten-year periods ended March 31, 2014 was below the performance of the Performance Universe average and the Lipper Index.
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Core Bond Fund. The Board reviewed the Fund’s overall investment performance for various periods of time and compared it to the Performance Universe average and the Lipper Index since the change in the Fund’s investment approach from a high yield fund to a core bond fund on December 3, 2012, which the Board determined was the most relevant time period for these purposes. The Board noted that the Fund underperformed the Performance Universe average and the Lipper Index for the one-year period ended March 31, 2014. The Board also noted that the Fund outperformed the Performance Universe average but not the Lipper Index for the period December 3, 2013 to ended March 31, 2014.
Income & Growth Fund. The Board noted that the Fund outperformed the Performance Universe average and the Lipper Index for the one-year, three-year and ten-year periods ended March 31, 2014. The Board also noted that the Fund’s performance for the five-year period ended March 31, 2014 was slightly below the performance of the Performance Universe average and below the performance of the Lipper Index.
Larger Companies Fund. The Board noted that the Fund outperformed the Performance Group average for the one-year, three-year and ten-year periods and underperformed the Performance Group average for the five-year period ended March 31, 2014. The Board also noted that, similar to the average performance by the Performance Group, the Fund underperformed the Lipper Index for the one-year, three-year, five-year and ten-year periods ended March 31, 2014.
Premier Growth Fund. The Board noted that the Fund underperformed the Performance Universe average and the Lipper Index for the one-year period ended March 31, 2014. The Board also noted that the Fund outperformed the Performance Universe average and slightly underperformed the Lipper Index for the three-year period ended March 31, 2014, and that the Fund outperformed both the Performance Universe average and the Lipper Index for the five-year and ten-year periods ended March 31, 2014.
The Adviser’s Personnel and Methods. The Board reviewed the background of the portfolio managers responsible for the daily management of each Fund’s portfolio, seeking to achieve the applicable Fund’s investment objectives and adhering to such Fund’s investment strategies. The Independent Directors also engaged in discussions with the Adviser’s senior management responsible for the overall functioning of each Fund’s investment operations. The Board viewed favorably: (i) the Adviser’s use of analytic tools in support of the portfolio management, compliance and shareholder relation functions which the Adviser previously committed resources to acquire; (ii) the low turnover of the Adviser’s staff attributable in part to its actions taken to attract and retain personnel, including its ongoing improvements to employee benefit programs and previous increases in base compensation and merit-based compensation for certain staff members to be more industry competitive; and (iii) that the Adviser continues to receive the Value Line ranking systems without cost. The Board concluded that each Fund’s management team and the Adviser’s overall resources were adequate and that the Adviser had investment management capabilities and personnel essential to performing its duties under the Agreement.
Management Fee. The Board considered the Adviser’s management fee rate under each Fund’s Agreement relative to the management fee rate applicable to the funds in such Fund’s Expense Group and Expense Universe, both before and after applicable fee waivers, as described below for each Fund. The Board noted that the Adviser bears the costs of providing fund accounting services for each of the Funds as part of the management fee. The Board was informed that, unlike the management fee rates for the Funds, the management fee rates for funds in the Expense Groups and Expense Universes most likely did not cover the costs of administrative and fund accounting services being provided to funds in the Expense Groups and Expense Universes. Accordingly, each Fund’s management fee rate would compare more favorably to such other management fee rates if the costs of administrative and fund accounting services were so included. After a review of the information provided to the Board, the Board concluded that each of the Fund’s management fee rates was satisfactory for the purpose of approving continuance of each Fund’s Agreement.
Value Line Fund. Before giving effect to fee waivers applicable to certain funds in the Expense Group, the Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was lower than that of the Expense Group median. After giving effect to fee waivers applicable to certain funds, the Board also noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was lower than that of the Expense Group median and higher than that of the Expense Universe median.
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Core Bond Fund. Before giving effect to the Fund’s existing fee waiver of 0.10% of the Fund’s average daily net assets and fee waivers applicable to certain funds in the Expense Group, the Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was slightly lower than that of the Expense Group median. After giving effect to applicable fee waivers, the Board also noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was the same as that of the Expense Group median and higher than that of the Expense Universe median. The Adviser and the Board agreed to further reduce the Fund’s management fee rate by increasing the amount of the waiver of the Fund’s management fee (effective July 1, 2014) and extend the period of the contractual fee waiver for another one-year period ending June 30, 2015. This new waiver is in an amount equal to 0.20% of the Fund’s average daily net assets and effectively reduces the Fund’s management fee rate from 0.50% to 0.30% of the Fund’s average daily net assets. Such waiver cannot be changed during the contractual waiver period without the approval of the Board and the Adviser. The Board noted that, as a result of this new waiver, the management fee rate paid by the Fund will be lower than that of both the Expense Group and Expense Universe medians.
Income & Growth Fund. Before giving effect to fee waivers applicable to certain funds in the Expense Group, the Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was lower than that of the Expense Group median. After giving effect to fee waivers applicable to certain funds, the Board also noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was lower than that of the Expense Group median and slightly higher than that of the Expense Universe median.
Larger Companies Fund. Before giving effect to fee waivers applicable to certain funds in the Expense Group, the Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was slightly lower than that of the Expense Group median. After giving effect to fee waivers applicable to certain funds, the Board also noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was approximately the same as that of the Expense Group median and higher than that of the Expense Universe median.
Premier Growth Fund. Before giving effect to fee waivers applicable to certain funds in the Expense Group, the Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was lower than that of the Expense Group median. After giving effect to fee waivers applicable to certain funds, the Board also noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was approximately the same as that of the Expense Group median and higher than that of the Expense Universe median.
Expenses. The Board also considered each Fund’s total expense ratio relative to its Expense Group and Expense Universe averages as described below for each Fund. After a review of the information provided to the Board, the Board concluded that each Fund’s average expense ratio was satisfactory for the purpose of approving continuance of the Fund’s Agreement.
Value Line Fund. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s expense ratio was lower than that of the Expense Group median and higher than that of the Expense Universe median, after giving effect to fee waivers applicable to the Fund and certain funds in the Expense Group and Universe.
Core Bond Fund. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s expense ratio was higher than that of the Expense Group median and the Expense Universe median, after giving effect to fee waivers applicable to the Fund and certain funds in the Expense Group and Universe. In addition to the management fee waiver described above, the Distributor and the Board agreed to further reduce the Fund’s Rule 12b-1 fee rate (effective July 1, 2014) and extend the period of the contractual waiver for another one-year period ending June 30, 2015. This new waiver effectively reduces the Fund’s Rule 12b-1 fee rate from 0.25% to 0.10% of the Fund’s average daily net assets. Such waiver cannot be changed during the contractual waiver period without the approval of the Board and the Distributor. The Board noted that, as a result of this new waiver and the new management fee waiver described above, the Fund’s expense ratio will be lowered by 0.35% of the Fund’s average daily net assets during the waiver period.
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Income & Growth Fund. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s expense ratio was higher than that of the Expense Group median and the Expense Universe median, after giving effect to fee waivers applicable to the Fund and certain funds in the Expense Group and Expense Universe. The Board also noted the Fund’s expense ratio will be higher by 0.05% of the Fund’s average daily net assets as a result of the expiration of the existing contractual waiver of a portion of the Fund’s 12b-1 fee effective July 1, 2014.
Larger Companies Fund. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s expense ratio was lower than that of the Expense Group median and higher than that of the Expense Universe median, after giving effect to fee waivers applicable to the Fund and certain funds in the Expense Group and Universe. The Distributor and the Board agreed that the existing contractual waiver of a portion of the Fund’s Rule 12b-1 fee will continue in effect for another one-year period ending June 30, 2015. This waiver effectively reduces the Fund’s Rule 12b-1 fee rate from 0.25% to 0.15% of the Fund’s average daily net assets. Such waiver cannot be changed during the contractual waiver period without the approval of the Board and the Distributor.
Premier Growth Fund. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s expense ratio was slightly lower than that of the Expense Group median and higher than that of the Expense Universe median, after giving effect to fee waivers applicable to the Fund and certain funds in the Expense Group and Universe.
Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of other services provided by the Adviser and the Distributor. At meetings held throughout the year, the Board reviewed the resources and effectiveness of the Adviser’s overall compliance program, as well as the services provided by the Distributor. The Board viewed favorably the steps taken by the Adviser to enhance the portfolio management process, including improvements to how the Funds’ cash balances are invested and the Adviser’s hiring of a fixed income analyst, the additional resources devoted by the Adviser to enhance its and the Funds’ overall compliance program as well as steps being undertaken to enhance the shareholders’ experience with each of the Funds, such as a more robust website. The Board reviewed the services provided by the Adviser and the Distributor in supervising each of the Fund’s third-party service providers. With respect to the Value Line Fund, Income & Growth Fund, Larger Companies Fund and Premier Growth Fund only, the Board also reviewed the services of the Distributor in engaging financial intermediaries to provide sub-transfer agency and related services to shareholders who hold their shares of a Fund in omnibus accounts. The Board noted that the Distributor and the Adviser retained no portion of a Fund’s sub-transfer agency fees as compensation for these services, but the Board considered that the Fund’s payment of such fees to financial intermediaries might reduce amounts that the Distributor or the Adviser would otherwise pay out of their own resources to the financial intermediaries. Based on this review, the Board concluded that the nature, quality, cost, and extent of such other services provided by the Adviser and the Distributor were satisfactory, reliable and beneficial to each Fund’s shareholders.
Profitability. The Board considered the level of profitability of the Adviser and the Distributor with respect to each Fund individually and in the aggregate for all the funds within the Value Line group of funds, including the impact of the restructuring of the Adviser and Distributor in 2010 and certain actions taken during prior years. These actions included the reduction (voluntary in some instances, contractual or permanent in other instances) of management and/or Rule 12b-1 fees for certain funds, the Adviser’s termination of the use of soft dollar research, and the cessation of trading through the Distributor. The Board also considered the Adviser’s continued attention to the rationalization and differentiation of funds within the Value Line group of funds to better identify opportunities for savings and efficiencies among the funds. The Board concluded that the profitability of the Adviser and the Distributor with respect to each Fund, including the financial results derived from each Fund’s Agreement, was within a range the Board considered reasonable.
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Other Benefits. The Board also considered the character and amount of other direct and incidental benefits received by the Adviser and the Distributor from their association with each Fund. The Board concluded that potential “fall-out” benefits that the Adviser and the Distributor may receive, such as greater name recognition, appear to be reasonable, and may in some cases benefit the Funds.
Economies of Scale.
Value Line Fund. The Board noted the Agreement includes a breakpoint applicable to the Adviser’s fee under which the first $100 million of the Fund’s average daily net assets are subject to a fee at the rate of 0.70% and any additional assets are subject to a fee at the rate of 0.65%. The Board considered that, given the current and anticipated size of the Fund, any perceived and potential economies of scale were not yet a significant consideration for the Fund and that the addition of more break points to the fee structure was not currently necessary.
Income & Growth Fund. The Board noted the Agreement includes a breakpoint applicable to the Adviser’s fee under which the first $100 million of the Fund’s average daily net assets are subject to a fee at the rate of 0.70% and any additional assets are subject to a fee of 0.65%. The Board considered that, given the current and anticipated size of the Fund, any perceived and potential economies of scale were not yet a significant consideration for the Fund and that the addition of more break points to the fee structure was not currently necessary.
Larger Companies Fund; Premier Growth Fund; Core Bond Fund. The Board considered that, given the current and anticipated size of each Fund, any perceived and potential economies of scale were not yet a significant consideration for any of these Funds and that the addition of break points to the fee structures was not currently necessary.
Fees and Services Provided for Other Comparable Funds/Accounts Managed by the Adviser. The Board was informed by the Adviser that the Adviser does not currently manage any non-mutual fund account that has similar objectives and policies as those of the Funds.
Conclusion. The Board examined the totality of the information it was provided at the meeting specifically addressing approval of the Agreements and at other meetings held during the past year and did not identify any single controlling factor. Based on its evaluation of all material factors deemed relevant and with the advice of independent counsel, the Board concluded that the rate at which each Fund pays a management fee to the Adviser under its Agreement does not constitute a fee that is so disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arm’s-length bargaining. Further, the Board concluded that each Fund’s Agreement, and the management fee rate thereunder, is fair and reasonable and voted to continue each Agreement as in the best interest of that Fund and its shareholders.
64 |
The Value Line Family of Funds
In 1950, Value Line started its first mutual fund. Since then, knowledgeable investors have been relying on the Value Line Funds to help them build their financial futures. Over the years, Value Line Funds has evolved into what we are today – a diversified family of no-load mutual funds with a wide range of investment objectives – ranging from small, mid and large capitalization equities to fixed income. We also provide strategies that effectively combine both equities and fixed income, diligently taking into account the potential risk and reward of each investment.
* | Only available through the purchase of Guardian Investor, a tax deferred variable annuity, or ValuePlus, a variable life insurance policy. | |
** | Formerly known as the Value Line Aggressive Income Trust. | |
*** | Formerly known as the Value Line Emerging Opportunities Fund, Inc. | |
For more complete information about any of the Value Line Funds, including charges and expenses, send for a prospectus from EULAV Securities LLC, 7 Times Square, New York, New York 10036-6524 or call 1-800-243-2729, 9am–5pm CST, Monday–Friday, or visit us at www.vlfunds.com. Read the prospectus carefully before you invest or send money. |
Item 5. Audit Committee of Listed Registrants
Not Applicable.
Item 6. Investments
Not Applicable
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not Applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not Applicable
Item 10. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in rule 30a-2(c) under the Act (17 CFR 270.30a-2(c) ) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report, are appropriately designed to ensure that material information relating to the registrant is made known to such officers and are operating effectively. |
(b) | The registrant’s principal executive officer and principal financial officer have determined that there have been no significant changes in the registrant’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including corrective actions with regard to significant deficiencies and material weaknesses. |
Item 12. Exhibits.
(a) | (1) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT. |
(2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By | /s/ Mitchell E. Appel | |
Mitchell E. Appel, President |
Date: | September 9, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Mitchell E. Appel | |
Mitchell E. Appel, President, Principal Executive Officer |
By: | /s/ Emily D. Washington | |
Emily D. Washington, Treasurer, Principal Financial Officer | ||
Date: | Septeember 9, 2014 |