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 _811-03835_
Value Line Centurion 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: December 31, 2011
Item I. Reports to Stockholders.
A copy of the Annual Report to Stockholders for the period ended 12/31/11 is included with this Form.
■ | Value Line Centurion Fund, Inc. | Annual Report To Contractowners |
![(Photo Stephen E. Grant)](https://capedge.com/proxy/N-CSR/0001188112-12-000601/t72360001_v1.jpg)
Stephen E. Grant, |
Portfolio Manager |
Objective: |
Long-term growth |
of capital |
Inception Date: |
November 15, 1983 |
Net Assets at |
December 31, 2011: |
$129,028,960 |
Portfolio |
Composition at |
December 31, 2011: |
(Percentage of Total |
Net Assets) |
![(PIE CHART)](https://capedge.com/proxy/N-CSR/0001188112-12-000601/t72360002_v1.jpg)
An Update from Fund Management (Unaudited)
We are pleased to report that the Value Line Centurion Fund, Inc. (the “Fund”) earned a total return of 5.02% for the year ending December 31, 2011. That compared with a total return of 2.11% for the benchmark index, the Standard & Poor’s 500. Contributing to the superior performance was good stock selection in the Consumer Discretionary, Consumer Staples and Industrials sectors. In addition, the Fund avoided the losing stocks in the banking industry.
It is gratifying that the Fund has now completed two strong years of performance since its revamping in 2009. At that time, we broadened the Fund’s stock selection universe to encompass the 1,200 or so stocks in the top three Ranks of the Value Line Timeliness Ranking System. This has allowed greater diversification of the portfolio, which reduces exposure to any single economic sector. It has also resulted in decreased turnover of portfolio holdings, which lowers trading expenses. At the same time, we handed the reins to our senior portfolio manager who has demonstrated widely recognized success managing other equity portfolios in our fund family for over twenty years, including Value Line Strategic Asset Management Trust.
The Fund’s newly expanded stock selection criteria allow us to implement our disciplined investment strategy to full advantage. We invest in proven winners—those companies that have established five to ten year records of superior relative earnings growth and stock price growth. This is truly a portfolio of growth stocks. We also look for companies demonstrating strong short term, quarter to quarter, relative earnings momentum and stock price momentum. If a holding later falters on these measures, we do not hesitate to replace it with a stock showing superior strength.
The Fund invests in companies of all sizes. Its approximately 185 holdings are well-diversified in that respect, comprised of about one third large capitalization companies, one third mid-cap and one third small-cap. In addition, the portfolio is widely diversified across many industries.
We will maintain our time-tested investment discipline. Thank you for investing with us.
Top Ten Holdings (As of 12/31/2011) (Unaudited)
Company | Percentage of Total Net Assets | |
AutoZone, Inc. | 1.84% | |
Panera Bread Co. Class A | 1.64% | |
Rollins, Inc. | 1.60% | |
Yum! Brands, Inc. | 1.50% | |
Edwards Lifesciences Corp. | 1.45% | |
TJX Companies, Inc. (The) | 1.29% | |
NewMarket Corp. | 1.20% | |
Check Point Software Technologies Ltd. | 1.19% | |
FMC Corp. | 1.15% | |
Church & Dwight Co., Inc. | 1.09% |
About information in this report:
• | It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested. |
• | The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S. stocks that is generally considered to be representative of U.S. stock market activity. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund. |
VALUE LINE CENTURION FUND, INC. | 1 |
■ | Value Line Centurion Fund, Inc. | Annual Report To Contractowners |
Sector Weightings vs. Index (As of 12/31/2011) (Unaudited)
![(BAR CHART)](https://capedge.com/proxy/N-CSR/0001188112-12-000601/t72360003_v1.jpg)
Average Annual Total Returns (For periods ended 12/31/2011) (Unaudited)
1 | 3 | 5 | 10 | Since Inception | |
Yr | Yrs | Yrs | Yrs | 11/15/1983 | |
Value Line Centurion Fund, Inc. | 5.02% | 13.69% | (2.09)% | 0.46% | 7.72% |
S&P 500 Index | 2.11% | 14.11% | (0.25)% | 2.92% | 10.20% |
All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.
Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.
Growth of a Hypothetical $10,000 Investment (Unaudited)
To give you a comparison, this chart shows you the performance of a hypothetical $10,000 investment made 10 years ago in the Fund and in the S&P 500 Index (the “Index”). Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
![(LINE GRAPHIC)](https://capedge.com/proxy/N-CSR/0001188112-12-000601/t72360004_v1.jpg)
2 | VALUE LINE CENTURION FUND, INC. |
■ | Value Line Centurion Fund, Inc. | Annual Report To Contractowners |
Fund Expenses (Unaudited)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example below is based on an investment of $1,000 invested on July 1, 2011 and held for six months ended December 31, 2011.
Actual Expenses
The first line in the table 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 entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s 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.
Beginning Account Value July 1, 2011 | Ending Account Value December 31, 2011 | Expenses Paid During Period* | Annualized Expense Ratio | |||||||||||||
Actual | $ | 1,000 | $ | 922.85 | $ | 4.61 | 0.95 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.41 | $ | 4.84 | 0.95 | % |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the Fund’s most recent fiscal half-year). This expense ratio may differ from the expense ratio shown in the financial highlights. |
VALUE LINE CENTURION FUND, INC. | 3 |
■ | Value Line Centurion Fund, Inc. |
Schedule of Investments |
December 31, 2011 | |||||||
Shares | Value | ||||||
Common Stocks — 98.4% | |||||||
Consumer Discretionary — 21.6% | |||||||
7,300 | AutoZone, Inc. * | $ | 2,372,281 | ||||
7,800 | Bed Bath & Beyond, Inc. * | 452,166 | |||||
15,100 | BorgWarner, Inc. * | 962,474 | |||||
21,800 | Brinker International, Inc. | 583,368 | |||||
12,500 | Buckle, Inc. (The) | 510,875 | |||||
8,100 | Buffalo Wild Wings, Inc. * | 546,831 | |||||
3,900 | Chipotle Mexican Grill, Inc. * | 1,317,186 | |||||
11,400 | Coach, Inc. | 695,856 | |||||
17,400 | Darden Restaurants, Inc. | 793,092 | |||||
16,400 | Deckers Outdoor Corp. * | 1,239,348 | |||||
9,200 | Dick’s Sporting Goods, Inc. | 339,296 | |||||
24,000 | DIRECTV Class A * | 1,026,240 | |||||
12,500 | Dollar Tree, Inc. * | 1,038,875 | |||||
13,000 | Domino’s Pizza, Inc. * | 441,350 | |||||
4,500 | Fossil, Inc. * | 357,120 | |||||
9,000 | Genuine Parts Co. | 550,800 | |||||
14,000 | Gildan Activewear, Inc. | 263,060 | |||||
14,400 | Hanesbrands, Inc. * | 314,784 | |||||
26,000 | Johnson Controls, Inc. | 812,760 | |||||
20,100 | LKQ Corp. * | 604,608 | |||||
4,000 | Lululemon Athletica, Inc. * | 186,640 | |||||
8,600 | McDonald’s Corp. | 862,838 | |||||
2,000 | Netflix, Inc. * | 138,580 | |||||
8,000 | New Oriental Education & Technology Group, Inc. ADR * | 192,400 | |||||
7,600 | NIKE, Inc. Class B | 732,412 | |||||
3,000 | O’Reilly Automotive, Inc. * | 239,850 | |||||
15,000 | Panera Bread Co. Class A * | 2,121,750 | |||||
10,100 | Penn National Gaming, Inc. * | 384,507 | |||||
2,800 | Priceline.com, Inc. * | 1,309,588 | |||||
10,000 | Starbucks Corp. | 460,100 | |||||
4,000 | Tim Hortons, Inc. | 193,680 | |||||
25,700 | TJX Companies, Inc. (The) | 1,658,935 | |||||
5,600 | Ulta Salon, Cosmetics & Fragrance, Inc. * | 363,552 | |||||
7,700 | Under Armour, Inc. Class A * | 552,783 | |||||
15,500 | Warnaco Group, Inc. (The) * | 775,620 | |||||
5,400 | Wynn Resorts Ltd. | 596,646 | |||||
32,800 | Yum! Brands, Inc. | 1,935,528 | |||||
27,927,779 | |||||||
Consumer Staples — 10.4% | |||||||
1,800 | Boston Beer Co., Inc. (The) Class A * | 195,408 | |||||
4,700 | British American Tobacco PLC ADR | 445,936 | |||||
8,500 | Bunge Ltd. | 486,200 | |||||
14,000 | Casey’s General Stores, Inc. | 721,140 | |||||
30,800 | Church & Dwight Co., Inc. | 1,409,408 | |||||
12,800 | Corn Products International, Inc. | 673,152 | |||||
8,500 | Costco Wholesale Corp. | 708,220 | |||||
24,200 | Diamond Foods, Inc. | 780,934 | |||||
34,000 | Flowers Foods, Inc. | 645,320 | |||||
16,000 | General Mills, Inc. | 646,560 | |||||
18,600 | Green Mountain Coffee Roasters, Inc. * | 834,210 | |||||
11,200 | Herbalife Ltd. | 578,704 | |||||
41,000 | Hormel Foods Corp. | 1,200,890 | |||||
21,500 | J&J Snack Foods Corp. | 1,145,520 | |||||
3,800 | Mead Johnson Nutrition Co. | 261,174 |
Shares | Value | ||||||
Consumer Staples — 10.4% (Continued) | |||||||
7,000 | Molson Coors Brewing Co. Class B | $ | 304,780 | ||||
7,400 | PepsiCo, Inc. | 490,990 | |||||
4,000 | Ruddick Corp. | 170,560 | |||||
18,000 | TreeHouse Foods, Inc. * | 1,176,840 | |||||
7,000 | Whole Foods Market, Inc. | 487,060 | |||||
13,363,006 | |||||||
Energy — 1.4% | |||||||
5,000 | Cabot Oil & Gas Corp. | 379,500 | |||||
2,500 | Core Laboratories N.V. | 284,875 | |||||
4,000 | Devon Energy Corp. | 248,000 | |||||
9,700 | Enbridge, Inc. | 362,877 | |||||
16,100 | Southwestern Energy Co. * | 514,234 | |||||
1,789,486 | |||||||
Financials — 3.8% | |||||||
8,000 | Affiliated Managers Group, Inc. * | 767,600 | |||||
22,800 | AFLAC, Inc. | 986,328 | |||||
2,600 | Axis Capital Holdings Ltd. | 83,096 | |||||
6,000 | Bank of Montreal | 328,860 | |||||
3,200 | BlackRock, Inc. | 570,368 | |||||
4,800 | M&T Bank Corp. | 366,432 | |||||
10,200 | Royal Bank of Canada | 519,792 | |||||
16,600 | Stifel Financial Corp. * | 532,030 | |||||
12,600 | T. Rowe Price Group, Inc. | 717,570 | |||||
4,872,076 | |||||||
Health Care — 14.6% | |||||||
13,000 | Alexion Pharmaceuticals, Inc. * | 929,500 | |||||
11,600 | Allergan, Inc. | 1,017,784 | |||||
3,200 | Bio-Rad Laboratories, Inc. Class A * | 307,328 | |||||
7,000 | C.R. Bard, Inc. | 598,500 | |||||
14,000 | Catalyst Health Solutions, Inc. * | 728,000 | |||||
20,000 | Cerner Corp. * | 1,225,000 | |||||
23,700 | Computer Programs & Systems, Inc. | 1,211,307 | |||||
7,300 | DaVita, Inc. * | 553,413 | |||||
4,000 | DENTSPLY International, Inc. | 139,960 | |||||
26,400 | Edwards Lifesciences Corp. * | 1,866,480 | |||||
11,100 | Endo Pharmaceuticals Holdings, Inc. * | 383,283 | |||||
24,000 | Express Scripts, Inc. * | 1,072,560 | |||||
12,700 | Henry Schein, Inc. * | 818,261 | |||||
6,300 | IDEXX Laboratories, Inc. * | 484,848 | |||||
1,200 | Intuitive Surgical, Inc. * | 555,612 | |||||
14,000 | Medco Health Solutions, Inc. * | 782,600 | |||||
8,900 | Mednax, Inc. * | 640,889 | |||||
3,800 | Mettler-Toledo International, Inc. * | 561,298 | |||||
10,700 | Novo Nordisk A/S ADR | 1,233,282 | |||||
17,400 | Owens & Minor, Inc. | 483,546 | |||||
3,800 | Techne Corp. | 259,388 | |||||
18,000 | Teva Pharmaceutical Industries Ltd. ADR | 726,480 | |||||
9,000 | Thermo Fisher Scientific, Inc. * | 404,730 | |||||
12,000 | UnitedHealth Group, Inc. | 608,160 | |||||
16,900 | Universal Health Services, Inc. Class B | 656,734 | |||||
11,000 | Volcano Corp. * | 261,690 | |||||
2,600 | Waters Corp. * | 192,530 | |||||
3,000 | WellPoint, Inc. | 198,750 | |||||
18,901,913 |
4 | See Notes to Financial Statements. |
■ | Value Line Centurion Fund, Inc. |
Schedule of Investments (Continued) |
December 31, 2011 | |||||||
Shares | Value | ||||||
Industrials — 20.9% | |||||||
26,000 | AMETEK, Inc. | $ | 1,094,600 | ||||
7,800 | C.H. Robinson Worldwide, Inc. | 544,284 | |||||
12,000 | Canadian National Railway Co. | 942,720 | |||||
3,400 | Carlisle Companies, Inc. | 150,620 | |||||
20,000 | Chicago Bridge & Iron Co. N.V. | 756,000 | |||||
12,400 | CLARCOR, Inc. | 619,876 | |||||
6,300 | Clean Harbors, Inc. * | 401,499 | |||||
22,700 | Danaher Corp. | 1,067,808 | |||||
19,000 | Donaldson Co., Inc. | 1,293,520 | |||||
18,000 | Eaton Corp. | 783,540 | |||||
5,200 | Elbit Systems Ltd. | 211,380 | |||||
4,400 | Esterline Technologies Corp. * | 246,268 | |||||
11,200 | Exelis, Inc. | 101,360 | |||||
12,000 | Fastenal Co. | 523,320 | |||||
7,800 | FedEx Corp. | 651,378 | |||||
9,500 | Gardner Denver, Inc. | 732,070 | |||||
9,200 | Graco, Inc. | 376,188 | |||||
8,250 | HEICO Corp. | 482,460 | |||||
14,200 | IDEX Corp. | 526,962 | |||||
14,800 | IHS, Inc. Class A * | 1,275,168 | |||||
16,400 | Iron Mountain, Inc. | 505,120 | |||||
5,600 | ITT Corp. | 108,248 | |||||
8,000 | J.B. Hunt Transport Services, Inc. | 360,560 | |||||
11,300 | Kansas City Southern * | 768,513 | |||||
15,400 | Kirby Corp. * | 1,013,936 | |||||
9,000 | L-3 Communications Holdings, Inc. | 600,120 | |||||
3,000 | Middleby Corp. (The) * | 282,120 | |||||
8,000 | Parker Hannifin Corp. | 610,000 | |||||
3,000 | Precision Castparts Corp. | 494,370 | |||||
15,000 | Republic Services, Inc. | 413,250 | |||||
93,200 | Rollins, Inc. | 2,070,904 | |||||
11,800 | Roper Industries, Inc. | 1,025,066 | |||||
15,100 | Stericycle, Inc. * | 1,176,592 | |||||
7,000 | Toro Co. (The) | 424,620 | |||||
8,000 | Union Pacific Corp. | 847,520 | |||||
13,100 | �� | United Technologies Corp. | 957,479 | ||||
7,000 | Valmont Industries, Inc. | 635,530 | |||||
4,000 | Verisk Analytics, Inc. Class A * | 160,520 | |||||
3,500 | W.W. Grainger, Inc. | 655,165 | |||||
24,000 | Waste Connections, Inc. | 795,360 | |||||
11,200 | Xylem, Inc. | 287,728 | |||||
26,973,742 | |||||||
Information Technology — 12.7% | |||||||
22,600 | Accenture PLC Class A | 1,202,998 | |||||
6,000 | Acme Packet, Inc. * | 185,460 | |||||
13,800 | Advent Software, Inc. * | 336,168 | |||||
8,000 | Alliance Data Systems Corp. * | 830,720 | |||||
7,700 | Amphenol Corp. Class A | 349,503 | |||||
4,500 | Anixter International, Inc. * | 268,380 | |||||
12,600 | ANSYS, Inc. * | 721,728 | |||||
6,200 | Ariba, Inc. * | 174,096 | |||||
1,700 | Baidu, Inc. ADR * | 197,999 | |||||
29,300 | Check Point Software Technologies Ltd. * | 1,539,422 | |||||
20,300 | Cognizant Technology Solutions Corp. Class A * | 1,305,493 | |||||
7,800 | Equinix, Inc. * | 790,920 | |||||
5,400 | F5 Networks, Inc. * | 573,048 | |||||
1,100 | Google, Inc. Class A * | 710,490 |
Shares | Value | ||||||
Information Technology — 12.7% (Continued) | |||||||
22,900 | Informatica Corp. * | $ | 845,697 | ||||
2,800 | MasterCard, Inc. Class A | 1,043,896 | |||||
8,100 | MICROS Systems, Inc. * | 377,298 | |||||
12,000 | Netgear, Inc. * | 402,840 | |||||
17,400 | Open Text Corp. * | 889,836 | |||||
8,000 | Rackspace Hosting, Inc. * | 344,080 | |||||
7,800 | Salesforce.com, Inc. * | 791,388 | |||||
16,800 | Solera Holdings, Inc. | 748,272 | |||||
7,000 | SuccessFactors, Inc. * | 279,090 | |||||
3,000 | Teradata Corp. * | 145,530 | |||||
11,000 | TIBCO Software, Inc. * | 263,010 | |||||
7,700 | VMware, Inc. Class A * | 640,563 | |||||
7,800 | Wright Express Corp. * | 423,384 | |||||
16,381,309 | |||||||
Materials — 9.5% | |||||||
11,700 | Albemarle Corp. | 602,667 | |||||
22,200 | Ball Corp. | 792,762 | |||||
5,100 | CF Industries Holdings, Inc. | 739,398 | |||||
38,800 | Crown Holdings, Inc. * | 1,302,904 | |||||
10,400 | Cytec Industries, Inc. | 464,360 | |||||
17,200 | FMC Corp. | 1,479,888 | |||||
7,800 | NewMarket Corp. | 1,545,258 | |||||
12,200 | Packaging Corp. of America | 307,928 | |||||
10,800 | Praxair, Inc. | 1,154,520 | |||||
10,200 | Rock-Tenn Co. Class A | 588,540 | |||||
14,000 | Scotts Miracle-Gro Co. (The) Class A | 653,660 | |||||
15,100 | Sigma-Aldrich Corp. | 943,146 | |||||
31,600 | Silgan Holdings, Inc. | 1,221,024 | |||||
12,600 | Valspar Corp. (The) | 491,022 | |||||
12,287,077 | |||||||
Telecommunication Services — 0.9% | |||||||
9,500 | American Tower Corp. Class A | 570,095 | |||||
12,400 | Crown Castle International Corp. * | 555,520 | |||||
1,125,615 | |||||||
Utilities — 2.6% | |||||||
15,500 | ITC Holdings Corp. | 1,176,140 | |||||
9,000 | NSTAR | 422,640 | |||||
9,000 | Oneok, Inc. | 780,210 | |||||
23,300 | Questar Corp. | 462,738 | |||||
13,200 | Wisconsin Energy Corp. | 461,472 | |||||
3,303,200 | |||||||
Total Common Stocks And Total Investment Securities — 98.4% (Cost $91,775,356) | $ | 126,925,203 | |||||
Cash And Other Assets In Excess Of Liabilities —1.6% | 2,103,757 | ||||||
Net Assets —100.0% | $ | 129,028,960 | |||||
Net Asset Value Per Outstanding Share ($129,028,960 ÷ 10,275,259 shares outstanding) | $ | 12.56 |
* | Non-income producing. |
ADR | American Depositary Receipt. |
See Notes to Financial Statements. | 5 |
■ | Value Line Centurion Fund, Inc. |
Statement of Assets and Liabilities |
December 31, 2011 | ||||
ASSETS: | ||||
Investment securities, at value (Cost - $91,775,356) | $ | 126,925,203 | ||
Cash | 771,285 | |||
Receivable for securities sold | 1,502,624 | |||
Dividends receivable | 71,523 | |||
Other | 15,129 | |||
Receivable for capital shares sold | 3,641 | |||
Prepaid expenses | 2,534 | |||
Total Assets | 129,291,939 | |||
LIABILITIES: | ||||
Payable for capital shares redeemed | 130,344 | |||
Accrued expenses: | ||||
Advisory fee | 55,181 | |||
Service and distribution plan fees | 27,598 | |||
Other | 49,856 | |||
Total Liabilities | 262,979 | |||
Net Assets | $ | 129,028,960 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock, at $1.00 par value (authorized 50,000,000, outstanding 10,275,259 shares) | $ | 10,275,259 | ||
Additional paid-in capital | 165,778,455 | |||
Accumulated net investment loss | (369 | ) | ||
Accumulated net realized loss on investments and foreign currency | (82,174,211 | ) | ||
Net unrealized appreciation of investments and foreign currency translations | 35,149,826 | |||
Net Assets | $ | 129,028,960 | ||
Net Asset Value Per Outstanding Share ($129,028,960 ÷ 10,275,259 shares outstanding) | $ | 12.56 |
Statement of Operations | ||||
For the Year Ended | ||||
December 31, 2011 | ||||
INVESTMENT INCOME: | ||||
Dividends (net of foreign withholding tax of $20,517) | $ | 1,239,849 | ||
Interest | 2,200 | |||
1,242,049 | ||||
Expenses: | ||||
Advisory fee | 689,231 | |||
Service and distribution plan fees | 551,385 | |||
Auditing and legal fees | 103,788 | |||
Custodian fees | 33,509 | |||
Directors’ fees and expenses | 27,508 | |||
Printing and postage | 19,654 | |||
Insurance | 17,252 | |||
Other | 18,129 | |||
Total Expenses Before Fees Waived and Custody Credits | 1,460,456 | |||
Less: Service and Distribution Plan Fees Waived | (206,769 | ) | ||
Less: Custody Credits | (238 | ) | ||
Net Expenses | 1,253,449 | |||
Net Investment Loss | (11,400 | ) | ||
Net Realized and Unrealized Gain/(Loss) on | ||||
Investments and Foreign Exchange Transactions: | ||||
Net Realized Gain | 16,209,107 | |||
Change in Net Unrealized Appreciation/(Depreciation) | (9,371,095 | ) | ||
Net Realized Gain and Change in Net Unrealized Appreciation/(Depreciation) on Investments and Foreign Exchange Transactions | 6,838,012 | |||
NET INCREASE IN NET ASSETS FROM OPERATIONS | $ | 6,826,612 |
6 | See Notes to Financial Statements. |
■ | Value Line Centurion Fund, Inc. |
Statement of Changes in Net Assets |
Years Ended December 31, | ||||||||
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (11,400 | ) | $ | 113,833 | |||
Net realized gain on investments and foreign currency | 16,209,107 | 9,938,850 | ||||||
Change in net unrealized appreciation/(depreciation) | (9,371,095 | ) | 19,136,525 | |||||
Net increase in net assets from operations | 6,826,612 | 29,189,208 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income | — | (113,184 | ) | |||||
Net realized gain from investment transactions | — | (2,689,445 | ) | |||||
Decrease in net assets from distribution to shareholders | — | (2,802,629 | ) | |||||
Capital Share Transactions: | ||||||||
Proceeds from sale of shares | 7,775,135 | 4,221,072 | ||||||
Proceeds from reinvestment of dividends to shareholders | — | 2,802,629 | ||||||
Cost of shares redeemed | (20,291,349 | ) | (23,392,870 | ) | ||||
Net decrease in net assets from capital share transactions | (12,516,214 | ) | (16,369,169 | ) | ||||
Total Increase/(Decrease) in Net Assets | (5,689,602 | ) | 10,017,410 | |||||
NET ASSETS: | ||||||||
Beginning of year | $ | 134,718,562 | $ | 124,701,152 | ||||
End of year | $ | 129,028,960 | $ | 134,718,562 | ||||
Accumulated net investment loss and distribution in excess of net investment income, respectively, at end of year | $ | (369 | ) | $ | (163 | ) |
See Notes to Financial Statements. | 7 |
■ | Value Line Centurion Fund, Inc. |
Financial Highlights |
Selected data for a share of capital stock outstanding throughout each year:
Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value, beginning of year | $ | 11.96 | $ | 9.72 | $ | 8.75 | $ | 21.36 | $ | 18.96 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income/(loss) | — | (3) | — | (3) | (0.01 | ) | (0.03 | ) | (0.02 | ) | ||||||||||
Net gains or (losses) on securities (both realized and unrealized) | 0.60 | 2.48 | 0.98 | (9.09 | ) | 3.89 | ||||||||||||||
Total from investment operations | 0.60 | 2.48 | 0.97 | (9.12 | ) | 3.87 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | — | (0.01 | ) | — | — | — | ||||||||||||||
Distributions from net realized gains | — | (0.23 | ) | — | (3.49 | ) | (1.47 | ) | ||||||||||||
Total distributions | — | (0.24 | ) | — | (3.49 | ) | (1.47 | ) | ||||||||||||
Net asset value, end of year | $ | 12.56 | $ | 11.96 | $ | 9.72 | $ | 8.75 | $ | 21.36 | ||||||||||
Total return* | 5.02 | % | 25.75 | % | 11.09 | % | (49.27 | )% | 20.72 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (in thousands) | $ | 129,029 | $ | 134,719 | $ | 124,701 | $ | 127,166 | $ | 291,949 | ||||||||||
Ratio of expenses to average net assets(1) | 1.06 | % | 1.05 | %(4) | 1.06 | % | 1.00 | % | 0.96 | % | ||||||||||
Ratio of expenses to average net assets(2) | 0.91 | % | 0.85 | %(5) | 0.91 | % | 0.84 | % | 0.79 | % | ||||||||||
Ratio of net investment income/(loss) to average net assets | (0.01 | )% | 0.09 | % | (0.08 | )% | (0.19 | )% | (0.09 | )% | ||||||||||
Portfolio turnover rate | 25 | % | 27 | % | 121 | % | 272 | % | 200 | % |
* | Total returns do not reflect the effects of charges deducted under the terms of Guardian Insurance and Annuity Company, Inc.’s (GIAC) variable contracts. Including such charges would reduce the total returns for all periods shown. |
(1) | Ratio reflects expenses grossed up for custody credit arrangement and grossed up for the waiver of a portion of the service and distribution plan fees by the Distributor. The ratio of expenses to average net assets net of custody credits, but exclusive of the fee waivers, would have been 0.99% and 0.95% for the years ended December 31, 2008 and December 31, 2007, respectively, and would have been unchanged for the other years shown. |
(2) | Ratio reflects expenses net of the custody credit arrangement and net of the waiver of a portion of the service and distribution plan fees by the Distributor. |
(3) | Amount is less than $.01 per share. |
(4) | Ratio reflects expenses grossed up for the reimbursement by Value Line, Inc. of certain expenses incurred by the Fund. |
(5) | Ratio reflects expenses net of the reimbursement of Expenses by Value Line, Inc. of certain expenses incurred by the Fund. |
8 | See Notes to Financial Statements. |
■ | Value Line Centurion Fund, Inc. |
Notes to Financial Statements |
December 31, 2011
1. Significant Accounting Policies
Value Line Centurion Fund, Inc. (the “Fund”) is an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended, whose primary investment objective is long-term growth of capital. The Fund’s portfolio will usually consist of common stocks ranked 1, 2 or 3 for year-ahead performance by the Value Line Timeliness Ranking System.
The following significant accounting policies are in conformity with generally accepted accounting principles for investment companies. Such policies are consistently followed by the Fund in the preparation of its financial statements. Generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
(A) Security Valuation
Securities listed on a securities exchange are valued at the closing sales prices on the date as of which the net asset value is being determined. Securities traded on the 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 market 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. Securities for which market quotations are not readily available or that are not readily marketable and all other assets of the Fund are valued at fair value as the Board of Directors may determine in good faith. In addition, the Fund may use the fair value of a security when the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of a security due to factors affecting one or more relevant securities markets or the specific issuer.
(B) Fair Value Measurements
The Fund follows fair valuation accounting standards (FASB ASC 820-10) which establish 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 in 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 following table summarizes the inputs used to value the Fund’s investments in securities as of December 31, 2011:
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets Common Stocks | $ | 126,925,203 | $ | 0 | $ | 0 | $ | 126,925,203 | ||||||||
Total Investments in Securities | $ | 126,925,203 | $ | 0 | $ | 0 | $ | 126,925,203 |
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04, “Fair Value Measurements and Disclosures (Topic 820) -Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles related to measuring fair value, and requires additional disclosures about fair value measurements.
Specifically, the guidance specifies that the concepts of highest and best use and valuation premise in a fair value measurement are only relevant when measuring the fair value of nonfinancial assets whereas they are not relevant when measuring the fair value of financial assets and liabilities.
Required disclosures are expanded under the new guidance, especially for fair value measurements that are categorized within Level 3 of the fair value hierarchy, for which quantitative information about the unobservable inputs used, and a narrative description of the valuation processes in place and sensitivity of recurring Level 3 measurements to changes in unobservable inputs will be required. Entities will also be required to disclose the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position but for which the fair value is required to be disclosed.
9
■ | Value Line Centurion Fund, Inc. |
Notes to Financial Statements (Continued) |
December 31, 2011
ASU 2011-04 is effective for annual periods beginning after December 15, 2011 and is to be applied prospectively. The Fund is currently assessing the impact of this guidance on its financial statements.
The Fund follows 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 fair value hierarchy.
For the year ended December 31, 2011, there was no significant transfer activity between Level 1 and Level 2.
For the year ended December 31, 2011, there were no Level 3 investments. The Schedule of Investments includes a breakdown of the Schedule’s investments by category.
(C) Repurchase Agreements
In connection with transactions in repurchase agreements, the Fund’s custodian takes possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, it is the Fund’s policy to mark-to-market on a daily basis to ensure the adequacy of the collateral. In the event of default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. There were no open repurchase agreements at December 31, 2011.
(D) Federal Income Taxes
It is the policy of the Fund 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 its investment income and capital gains to its shareholders. Therefore, no provision for federal income tax is required.
Management has analyzed the Fund’s tax positions taken on federal and state income tax returns for all open tax years (fiscal years ended December 31, 2008 through December 31, 2011), and has concluded that no provision for federal or state income tax is required in the Fund’s financial statements. The Fund’s 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) Dividends and Distributions
It is the Fund’s policy to distribute to its shareholders, as dividends and as capital gains distributions, all the net investment income for the year and all the net capital gains realized by the Fund, if any. Such distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. All dividends or distributions will be payable in shares of the Fund at the net asset value on the ex-dividend date. This policy is, however, subject to change at any time by the Board of Directors.
(F) Securities Transactions and Income
Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income on investments, adjusted for amortization of discount and premium, if applicable, is earned from settlement date and recognized on the accrual basis. Dividend income is recorded on the ex-dividend date.
(G) Foreign Currency Translation
The books and records of the Fund 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 on the valuation date. The Fund does 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 Fund, 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.
10
■ | Value Line Centurion Fund, Inc. |
Notes to Financial Statements (Continued) |
December 31, 2011
(H) Representations and Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
(I) Foreign Taxes
The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund 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) Subsequent Events
Management has evaluated all subsequent transactions and events through the date on which these financial statements were issued, and except as already included in the notes to these financial statements, has determined that no additional items require disclosure.
2. Capital Share Transactions, Dividends and Distributions
Shares of the Fund are available to the public only through the purchase of certain contracts issued by The Guardian Insurance and Annuity Company, Inc. (GIAC). Transactions in capital stock were as follows:
Year Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2011 | 2010 | |||||||
Shares sold | 603,741 | 409,296 | ||||||
Shares issued in reinvestment of distributions | — | 282,239 | ||||||
Shares redeemed | (1,596,163 | ) | (2,254,801 | ) | ||||
Net increase/(decrease) | (992,422 | ) | (1,563,266 | ) | ||||
Dividends per share from net investment income | $ | — | $ | 0.0095 | ||||
Distribution per share from net realized gains | $ | — | $ | 0.2259 |
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities, were as follows:
Year Ended | ||||
December 31, | ||||
2011 | ||||
Purchases: | ||||
Investment Securities | $ | 34,135,052 | ||
Sales: | ||||
Investment Securities | $ | 40,476,528 |
4. Income Taxes
At December 31, 2011, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 92,162,503 | ||
Gross tax unrealized appreciation | $ | 37,519,179 | ||
Gross tax unrealized depreciation | ($ | 2,756,479 | ) | |
Net tax unrealized appreciation on investments | $ | 34,762,700 | ||
Capital loss carryforward, expires | ||||
December 31, 2016 | ($ | 25,713,617 | ) | |
December 31, 2017 | ($ | 56,057,485 | ) |
During the year ended December 31, 2011, as permitted under federal income tax regulations, the Fund utilized $16,100,359 of capital loss carryforwards and elected to defer $369 of late year ordinary losses and $15,962 of post-October net short-term capital losses to the next taxable year.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (“the Act”) was signed by the President. Under the Act, net capital losses recognized by the Fund after December 31, 2010, may get carried forward indefinitely, and retain their character as short-term and/or long term losses. Prior to this Act, pre-enactment net capital losses incurred by the Fund were carried forward for eight years and treated as short-term losses. The Act requires under the transition that post-enactment net capital loses are used before pre-enactment net capital losses.
To the extent that current or future capital gains are offset by capital losses, the Fund does not anticipate distributing any such gains to shareholders.
It is uncertain whether the Fund will be able to realize the benefits of the losses before they expire.
The differences between book basis and tax basis unrealized appreciation/depreciation on investments were primarily attributed to wash sales.
11
■ | Value Line Centurion Fund, Inc. |
Notes to Financial Statements (Continued) |
December 31, 2011
The tax composition of distributions to shareholders for the years ended December 31, 2011 and December 31, 2010 were as follows:
2011 | 2010 | |||||||
Ordinary income | $ | — | $ | 2,802,629 |
Permanent book-tax differences relating to the current year were reclassified within the composition of the net asset accounts. The Fund decreased accumulated net investment loss by $11,194, increased accumulated realized loss by $10,149, and decreased additional paid-in-capital by $1,045. Net assets are not affected by these reclassifications. These reclasses were primarily due to differing treatments of foreign currency translation and net operation losses.
5. Investment Advisory Fee, Service and Distribution Fees and Transactions With Affiliates
An advisory fee of $689,231 was paid or payable to EULAV Asset Management (the “Adviser”) for the year ended December 31, 2011. This was computed at an annual rate of 0.50% of the average daily net assets of the Fund during the year and paid monthly. The Adviser provides research, investment programs, supervision of the investment portfolio and pays costs of administrative services, office space, equipment and compensation of administrative, bookkeeping, and clerical personnel necessary for managing the affairs of the Fund. The Adviser also provides persons, satisfactory to the Fund’s Board of Directors, to act as officers and employees of the Fund and pays their salaries.
The Fund has 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”) in advertising, marketing and distributing the Fund’s shares and for servicing the Fund’s shareholders at an annual rate of 0.40% of the Fund’s average daily net assets. For the year ended December 31, 2011, fees amounting to $551,385, before fee waivers, were accrued under the Plan. Effective May 23, 2006 the Distributor waived 0.15% of the 12b-1 fee. Effective May 1, 2007 through April 30, 2012, the Distributor contractually agreed to reduce the fee under the Plan by 0.15% for one year periods. For the year ended December 31, 2011, the fees waived amounted to $206,769. The Distributor has no right to recoup previously waived amounts.
For the year ended December 31, 2011, the Fund’s expenses were reduced by $238 under a custody credit arrangement with the custodian.
Direct expenses of the Fund are charged to the Fund while common expenses of the Value Line Funds are allocated proportionately based upon the Funds’ respective net assets. The Fund bears all other costs and expenses.
Certain officers and a Trustee of the Adviser are also officers and a director of the Fund.
12
■ | Value Line Centurion Fund, Inc. |
Report of Independent Registered Public Accounting Firm |
To the Board of Directors and Shareholders of Value Line Centurion Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Value Line Centurion Fund, Inc. (the “Fund”) at December 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2011 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 17, 2012
13
■ | Value Line Centurion Fund, Inc. |
Annual Report (unaudited) |
FACTORS CONSIDERED BY THE BOARD IN APPROVING CONTINUANCE OF
THE INVESTMENT ADVISORY AGREEMENT
FOR VALUE LINE CENTURION FUND, INC.
The Investment Company Act of 1940 (the “1940 Act”) requires the Board of Directors (the “Board”), including a majority of Directors who are not “interested persons” of Value Line Centurion Fund, Inc. (the “Fund”), as that term is defined in the 1940 Act (the “Independent Directors”), to annually consider the continuance of the Fund’s investment advisory agreement (“Agreement”) with its investment adviser, EULAV Asset Management.1
In considering whether the continuance of the Agreement was in the best interests of the 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 the Agreement. At meetings held throughout the year, including the meeting specifically focused upon the review of the Agreement, the Independent Directors met in executive sessions separately from the non-Independent Director of the Fund and any officers of the Adviser. In selecting the Adviser and approving the continuance of the Agreement, the Independent Directors relied upon the assistance of counsel to the Independent Directors.
Both in the meeting that specifically addressed the continuance of the Agreement and at other meetings, the Board, including the Independent Directors, received materials relating to the Adviser’s investment and management services under the Agreement. These materials included information on: (i) the investment performance of the Fund, compared to a peer group of funds consisting of the Fund and all other multi-cap growth funds underlying variable insurance products regardless of asset size or primary channel of distribution (the “Performance Universe”), and its benchmark index, each as classified 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) sales and redemption data with respect to the Fund; (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); 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 the Agreement. In a separate executive session, the Independent Directors reviewed information, which included data comparing: (i) the Fund’s management fee rate, transfer agent and custodian fee rates, service fee (including 12b-1 fees) rates, and the rate of the Fund’s other non-management fees, to those incurred by a peer group of funds consisting of the Fund and 10 other multi-cap growth funds underlying variable insurance products (excluding outliers), as selected objectively by Lipper (“Expense Group”), and a peer group of funds consisting of the Fund, the Expense Group and all other multi-cap growth funds underlying variable insurance products (excluding outliers), as selected objectively by Lipper (“Expense Universe”); (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 the separate executive session, the Independent Directors also reviewed information regarding: (a) the financial results and condition of the Adviser both before and after its restructuring on December 23, 2010,2 and the Adviser’s and certain of its affiliates’ profitability from the services that have been performed for the 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, including representations of VLI that it does not “control” (as that term is defined in the 1940 Act) either the Adviser or Value Line Securities, Inc. (the “Distributor”) after the restructuring; and (d) the Fund’s potential for achieving economies of scale. In support of its review of the statistical information, the Board was provided with a detailed description of the methodology used by Lipper to determine the Expense Group, the Expense Universe and the Performance Universe to prepare its information.
1 | For periods prior to December 23, 2010, the term “Adviser” means the Adviser’s predecessor entities that previously served as the Fund’s adviser, EULAV Asset Management, LLC and Value Line, Inc. (“VLI”). In accordance with the 1940 Act, the Agreement had a two-year initial term ending December 2012. Nevertheless, the Board determined to consider the Agreement’s continuance annually and undertook that review in June 2011. |
2 | On December 23, 2010, the Adviser was restructured as a Delaware statutory trust and renamed EULAV Asset Management. It had formerly been organized as a limited liability company named EULAV Asset Management, LLC. |
14
■ | Value Line Centurion Fund, Inc. |
Annual Report (unaudited) |
The following summarizes matters considered by the Board in connection with its continuance of the Agreement. However, the Board did not identify any single factor as all-important or controlling, and the summary does not detail all the matters that were considered.
Investment Performance. The Board reviewed the Fund’s overall investment performance and compared it to its Performance Universe and the Lipper Index. The Board noted that the Fund outperformed the Performance Universe average and the Lipper Index for the one-year period ended March 31, 2011. The Board also noted that the Fund’s performance for the three-year, five-year and ten-year periods ended March 31, 2011 was below the performance of the Performance Universe average and the Lipper Index.
The Adviser’s Personnel and Methods. The Board reviewed the background of the portfolio manager responsible for the daily management of the Fund’s portfolio, seeking to achieve the Fund’s investment objective and adhering to the Fund’s investment strategies. The Independent Directors also engaged in discussions with the Adviser’s senior management responsible for the overall functioning of the Fund’s investment operations. The Board viewed favorably (i) the Adviser’s commitment of resources to acquire analytic tools in support of the portfolio management and compliance functions, (ii) actions taken by the Adviser to attract and retain personnel, including improvements to the Adviser’s employee benefit programs and increased merit-based compensation for certain staff members, and (iii) that the Adviser continues to receive the Value Line ranking systems without cost. The Board concluded that the 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 and Expenses. The Board considered the Adviser’s fee rate under the Agreement relative to the management fee rates applicable to the funds in the Expense Group and Expense Universe averages, both before and after applicable fee waivers. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s management fee rate was less than that of the Expense Group average and the Expense Universe average, both before and after giving effect to fee waivers applicable to certain funds in the Expense Group and Expense Universe. The Board concluded that the Fund’s management fee rate was satisfactory for the purpose of approving continuance of the Agreement.
The Board also considered the Fund’s total expense ratio relative to its Expense Group and Expense Universe averages. The Board noted that the Distributor and the Board previously agreed that the Distributor would contractually waive a portion of the Fund’s Rule 12b-1 fee, effectively reducing the Fund’s Rule 12b-1 fee rate from 0.40% to 0.25% of the Fund’s average daily net assets for the one-year period ended April 30, 2011 and that the Distributor and the Board have currently agreed to extend this contractual Rule 12b-1 fee waiver through April 30, 2012. Such waiver cannot be changed during the contractual waiver period without the Board’s approval. The Board noted that, for the most recent fiscal year for which audited financial data is available, the Fund’s expense ratio was less than that of both the Expense Group average and the Expense Universe average, after giving effect to fee waivers applicable to the Fund and certain funds in the Expense Group and Universe. The Board concluded that the average expense ratio was satisfactory for the purpose of approving continuance of the Agreement.
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 additional resources devoted by the Adviser to enhance its and the Fund’s overall compliance program as well as steps being undertaken to enhance the shareholders’ experience with the Fund, such as a more robust website. The Board reviewed the services provided by the Adviser and its affiliates in supervising the Fund’s third party service providers. Based on this review, the Board concluded that the nature, quality, cost, and extent of such other services provided by the Adviser and its affiliates were satisfactory, reliable and beneficial to the Fund’s shareholders.
Profitability. The Board considered the level of profitability of the Adviser and its affiliates with respect to the Fund individually and in the aggregate for all the funds within the Value Line group of funds, including the impact of the restructuring and certain actions taken during prior years. These actions included the reduction (voluntary in some instances and contractual 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 its affiliates with respect to the Fund, including the financial results derived from the Fund’s Agreement, were within a range the Board considered reasonable.
15
■ | Value Line Centurion Fund, Inc. |
Annual Report (unaudited) |
Other Benefits. The Board also considered the character and amount of other direct and incidental benefits received by the Adviser and its affiliates from their association with the Fund. The Board concluded that potential “fall-out” benefits that the Adviser and its affiliates may receive, such as greater name recognition, appear to be reasonable, and may in some cases benefit the Fund.
Economies of Scale. 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 break points to the fee structure was not currently necessary.
Fees and Services Provided for Other Comparable Funds/Accounts Managed by the Adviser and its Affiliates. The Board was informed by the Adviser that the Adviser does not manage any non-mutual fund account that has similar objectives and policies as those of the Fund.
Conclusion. The Board examined the totality of the information it was provided at the meeting specifically addressing approval of the Agreement 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 the Fund pays a management fee to the Adviser under the 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 the Fund’s Agreement, and the management fee rate thereunder, is fair and reasonable and voted to continue the Agreement as in the best interest of the Fund and its shareholders.
16
■ | Value Line Centurion Fund, Inc. |
Form N-Q |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting |
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted these proxies for the 12-month period ended June 30 is available through the Fund’s website at http://www.vlfunds.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-243-2729.
17
■ | Value Line Centurion Fund, Inc. |
Management Information |
The business and affairs of the Fund are managed by the Fund’s officers under the direction of the Board of Directors. The following table sets forth information on each Director and Officer of the Fund. Each Director serves as a director or trustee of each of the 13 Value Line Funds. Each Director serves until his or her successor is elected and qualified.
Other | ||||||||
Length of | Principal Occupation | Directorships | ||||||
Name, Address, and YOB | Position | Time Served | During the Past 5 Years | Held by Director | ||||
Interested Director* | ||||||||
Mitchell E. Appel YOB: 1970 | Director | Since 2010 | President of each of the Value Line Funds since June 2008; Chief Financial Officer of Value Line, Inc. (“Value Line”) from April 2008 to December 2010 and from September 2005 to November 2007; Director from February 2010 to December 2010; Chief Financial Officer of XTF Asset Management from November 2007 to April 2008; Chief Financial Officer of the Distributor since April 2008 and President since February 2009; President of the Adviser since February 2009, Trustee since December 2010 and Treasurer since January 2011. | None | ||||
Non-Interested Directors | ||||||||
Joyce E. Heinzerling 500 East 77th Street New York, NY 10162 YOB: 1956 | Director | Since 2008 | President, Meridian Fund Advisers LLC. (consultants) since April 2009; General Counsel, Archery Capital LLC (private investment fund) until April 2009. | Burnham Investors Trust, since 2004 (4 funds). | ||||
Francis C. Oakley 54 Scott Hill Road Williamstown, MA 01267 YOB: 1931 | Director | Since 1993 | Professor of History, Williams College, (1961-2002). Professor Emeritus since 2002; President Emeritus since 1994 and President, (1985-1994); Chairman (1993-1997) and Interim President (2002-2003) of the American Council of Learned Societies. Trustee since 1997 and Chairman of the Board since 2005, National Humanities Center. | None | ||||
David H. Porter 5 Birch Run Drive Saratoga Springs, NY 12866 YOB: 1935 | Director | Since 1997 | Professor, Skidmore College since 2008; Visiting Professor of Classics, Williams College, (1999-2008); President Emeritus, Skidmore College since 1999 and President, (1987-1998). | None | ||||
Paul Craig Roberts 169 Pompano St. Panama City Beach, FL 32413 YOB: 1939 | Director | Since 1983 | Chairman, Institute for Political Economy. | None | ||||
Nancy-Beth Sheerr 1409 Beaumont Drive Gladwyne, PA 19035 YOB: 1949 | Director | Since 1996 | Senior Financial Adviser, Veritable L.P. (Investment Adviser). | None | ||||
Daniel S. Vandivort 59 Indian Head Road Riverside, CT 06878 YOB: 1954 | Director (Chairman of Board since 2010) | Since 2008 | President, Chief Investment Officer, Weiss, Peck and Greer/Robeco Investment Management (2005-2007); Managing Director, Weiss, Peck and Greer, (1995-2005). | None |
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■ | Value Line Centurion Fund, Inc. |
Management Information (continued) |
Other | ||||||||
Length of | Principal Occupation | Directorships | ||||||
Name, Address, and YOB | Position | Time Served | During the Past 5 Years | Held by Director | ||||
Officers | ||||||||
Mitchell E. Appel YOB: 1970 | President | Since 2008 | President of each of the Value Line Funds since June 2008; Chief Financial Officer of Value Line from April 2008 to December 2010 and from September 2005 to November 2007; Director from February 2010 to December 2010; Chief Financial Officer of XTF Asset Management from November 2007 to April 2008; Chief Financial Officer of the Distributor since April 2008 and President since February 2009; President of the Adviser since February 2009, Trustee since December 2010 and Treasurer since January 2011. | |||||
Michael J. Wagner YOB: 1950 | Chief Compliance Officer | Since 2009 | Chief Compliance Officer of Value Line Funds since June 2009; President of Northern Lights Compliance Service, LLC (formerly Fund Compliance Services, LLC (2006 – present)) and Senior Vice President (2004 – 2006) and President and Chief Operations Officer (2003 – 2006) of Gemini Fund Services, LLC; Director of Constellation Trust Company until 2008. | |||||
Emily D. Washington YOB: 1979 | Treasurer and Secretary | Since 2008 | Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) of each of the Value Line Funds since August 2008 and secretary since 2010; Associate Director of Mutual Fund Accounting at Value Line until August 2008. |
The Fund’s Statement of Additional Information (SAI) includes additional information about the Fund’s Directors and is available, without charge, upon request by calling 1-800-243-2729.
* | Mr. Appel is an “interested person” as defined in the Investment Company Act of 1940 by virtue of his position with the Adviser and Distributor. |
Unless otherwise indicated, the address for each of the above officers is c/o Value Line Funds, 7 Times Square, New York, NY 10036.
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Item 2. Code of Ethics
(a) The Registrant has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer and principal accounting officer.
(f) Pursuant to item 12(a), the Registrant is attaching as an exhibit a copy of its Code of Ethics that applies to its principal executive officer, and principal financial officer and principal accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1)The Registrant has an Audit Committee Financial Expert serving on its Audit Committee.
(2) The Registrant’s Board has designated Daniel S. Vandivort, a member of the Registrant’s Audit Committee, as the Registrant’s Audit Committee Financial Expert. Mr. Vandivort is an independent director who has served as President, Chief Investment Officer to Weis, Peck and Greer/Robeco Investment Management. He has also previously served as Managing Director for Weis, Peck and Greer (1995-2005).
A person who is designated as an “audit committee financial expert” shall not make such person an "expert" for any purpose, including without limitation under Section 11 of the Securities Act of 1933 or under applicable fiduciary laws, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees 2011 - $29,701
(b) Audit-Related fees – None.
(c) Tax Preparation Fees 2011 -$14,265
(d) All Other Fees – None
(e) (1) Audit Committee Pre-Approval Policy. All services to be performed for the Registrant by PricewaterhouseCoopers LLP must be pre-approved by the audit committee. All services performed were pre-approved by the committee.
(e) (2) Not applicable.
(f) Not applicable.
(g) Aggregate Non-Audit Fees 2011 -$2,400
(h) 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) | Code of Business Conduct and Ethics for Principal Executive and Senior Financial Officers attached hereto as Exhibit 100.COE |
(b) | (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: | March 6, 2012 | |
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: | March 6, 2012 |