FORM N-CSR
CERTIFIED SHAREHOLDERS REPORT OF REGISTERED MANAGEMENT INESTMENT COMPANIES
Investment Company Act file number 811-2287
Exact name of registrant as specified in charter Valley Forge Fund, Inc.
Address of principal executive offices 1375 Anthony Wayne Dr
Wayne PA 19087
Name and address of agent for service Bernard B. Klawans
1375 Anthony Wayne Dr
Wayne PA 19087
Registrants telephone number, including area code 610-688-6839
Date of fiscal year end: 12/31/04
Date of reporting period: 01/01/04 to 06/30/04
Item 1. Report to Shareholders.
Valley Forge Fund
1375 Anthony Wayne Dr.
Wayne PA 19087
June 30, 2004
Dear Shareholder:
Your Fund started 2004 at $8.89 per share. Results show that our net asset
per share declined slighty to $8.76 representing a decrease in value of 1.46%
so far this year ascompared to the Dow Jones Industrial Average that has declin-
ed 0.18%.
In the 2003 annual report, a modest sell off in the market was considered with a
"best guess" tp occur in the April/May period. This happened about on schedule.
In response, your Fund has now invested an additional $800,00 to bring its
security holdings to 74% of total asssets.
Alan Greenspan has stated that the current upswing in business has further to
go. Your Fund agrees wirh Mr. Greenspan and feels that the market will follow
the business expansion to realize a reasonable increase in the Fund's net asset
value per share over the next several months.
Financial figures for the six months ended June 30, 2004 are attached.
Respectfully submitted,
Bernard B. Klawans
President
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VALLEY FORGE FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2004
COMMON STOCKS: 74.2% Shares Value
Conglomerates 5.3%
Time Warner * 10,000 $ 324,000
General Electric Corp. 10,000 179,900
___________
499,800
Manufacturing 19.5%
Abitibi Consolidated (Canadian) 60,000 412,800
Cisco Systems * 15,000 355,500
EMC Corporation * 15,000 171,000
Fedders Corp. 20,000 87,000
General Motors 10,000 465,900
Newell Rubbernaid 15,000 351,750
___________
1,843,950
Metals 7.7%
Barrick Gold Corp (Canadian) 20,000 396,400
Coeur D'Alene Mines * 13,000 52,910
IMCO Recycling Inc. * 21,000 280,734
___________
$ 730,044
Miscellaneous 14.9%
Alexander & Baldwin Inc. 10,000 334,500
Arrow Electronics 10,000 268,200
Duke Energy 10,000 202,900
Federal Argic Mtg Corp. Cl C Non Vtg 10 000 239,000
Hercules Incorporated * 30,000 365,700
___________
1,410,600
Retailers 18.0%
Home Depot Incorporated 10,000 352,000
McDonalds Corp 15,000 390,000
Pep Boys 20,000 507,000
Supervalu Inc. 15,000 459,150
___________
1,708,150
Telecommunications 8.8%
ADC Telecommunications * 40,000 198,800
American Telephone & Telegraph Corp. Corp. 5,000 73,150
Comcast Corp. New Cl A 20,000 562,000
___________
833,950
___________
Total Common Stocks (COST $7,726,438) $7,026,494
___________
SHORT TERM INVESTMENT: 23.1%
Commerce Bank Certs of Dep 2.23% ** 2,189,757
_________
Total Short-term Investment (COST $2,189,767) $2,189,767
___________
Total Securities (COST $9,916,205) 9,216,261
===========
* Non-income producing during the year ** Redeemable upon request
The accompanying footnotes are an integral part of these unaudited financial
statements
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VALLEY FORGE FUND
STATEMENT OF ASSETS & LIABILITIES - JUNE 30, 2004
Assets: Investments in securities at value (cost $9,916,205) $9,216,261
Cash and cash equivalents 232,224
Dividends and interest receivable 16,938
__________
Total Assets 9,465,423
__________
Liabilities:
__________
Total Liabilities 0
Net Assets: $9,465,423
==========
Composition of Net Assets: Shares of common stock $ 1,080
Paid in capital less par 10,111,203
Undistributed net income 53,084
Net unrealized depreciation of securities ( 699,944)
__________
Net Assets (equivalent to $8.76 per share based on 1,080,731
shares outstading) (Note 4) $9,523,509
==========
STATEMENT OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2004
Investment Income: Dividends (net of foreign taxes) $ 43,845
Interest 29,271
Miscellaneous (2,763)
__________
Total Income: 70,333
Expenses: Investment advisory fee (Note 2) 47,564
Non-interested directors' fees and expenses 1,089
Other expenses 662
Printing and mailing expenses 2,610
Registration fees 1,240
Taxes 1,350
__________
Total Expenses: 54,515
__________
Net Investment Income: 15,818
__________
Realized Gain of (Loss) from Investments:
Net realized gain on investment securities (5,895)
Net decrease in unrealized depreciation on investment securities (151,408)
__________
Net Realized and Unrealized Gain from Investments: (157,303)
__________
Net Increase (Decrease) in Net Assets Resulting from Operations: $ (141,485)
==========
The accompanying notes are an integral part of these unaudited financial
statements
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VALLEY FORGE FUND
STATEMENT OF CHANGES IN NET ASSETS - SIX MONTHS ENDED JUNE 30, 2004 & 2003
06/30/04 06/04/03
Increase (Decrease) in Net Assets from Operations:
Investment income - net $ 15,818 $ 76,239
Net realized gain (los) from investment transactions (5,895) 35,580
Unrealized appreciation (depreciation) of investments (151,408) 403,024
__________ __________
Net Inc.(Decrease) in Net Assets from Operations (141,485) 514,843
Distributions to shareholders 0 0
Share transactions (Note 4) 83,399 181,576
__________ __________
Total Increase in Net Assets (58,086) 696,419
Net Assets: Beginning of period $9,523,509 $7,333,997
__________ __________
End of period $9,465,423 $8,030,416
========== ==========
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2004
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - Organization: The Valley
Forge Fund, Inc. (the "Fund"), is a non-diversified open-end management invest-
ment company registered under the Investment Company Act of 1940, as amended.
The Fund's investment objective is to provide appreciation through investment
in common stocks and securities convertible into common stocks. The following
summarizes significant accounting policies employed by the Fund.
Security Valuation: Securities are valued at the last reported sales price or
in the case of securities where there is no reported last sale, the closing bid
price. Securities for which market quotations are not readily available are
valued at their fair values as determined in good faith by or under the super-
vision of the Company's Board of Directors in accordance with methods that have
been authorized by the Board. Short-term investments with maturities of 60
days or less are valued at amortize which approximates market value.
Securities Transactions & Investment Income: Security transactions are recorded
on the dates transactions are entered into (the trade dates). Realized gains
& losses on security transactions are determined on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is deter-
mined on the accrual basis. Discount on fixed income securities is amortized.
Dividends and Distributions to Shareholders: The Fund records all dividends and
distributions payable to shareholders on the ex-dividend date. Permanent book
and tax differences relating to shareholder distributions may result in re-
classifications to paid in capital and may affect the per-share allocation be-
tween net investment income and realized and unrealized gain/loss. Undistribu-
ted net investment income and accumulated undistributed net realized gain/loss
on investment transactions may include temporary book and tax differences which
reverse in subsequent periods. Any taxable income or gain remaining at fiscal
year end is distributed in the following year.
Federal Income Taxes: It is the Fund's intention to qualify as a regulated in-
vestment company and distribute all of its taxable income. The Fund has com-
plied to date with the provisions of the Internal Revenue Code applicable to
investment companies and accordingly, no provision for Federal income taxes is
required in the financial statements.
This is an unaudited financial statement
- 4 -
VALLEY FORGE FUND
NOTES TO FINANCIAL STATEMENTS (Continued) - JUNE 30, 2004
Use of Estimates: 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 increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
2. MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES - Under the terms of the
investment management agreement, Valley Forge Management Corp. ("the Manager")
has agreed to provide the Fund investment management services and be respons-
ible for the day to day operations of the Fund. The Manager will receive a fee,
payable monthly, for proiding investment advice at anannual rate of 1% based on
the average daily assets of the Fund. The fee will be accrued daily and paid
monthly. A management fee of $47,564 was paid for the six months ended June 30,
2004.
The Manager also provided transfer agency, portfolio pricing, administration,
accounting, financial reporting, tax accounting, and compliance services to the
Fund at no charge for the six months ended June 30, 2004. Mr. Bernard Klawans
is the sole owner, director and officer of the Manager and is President of the
Fund.
3. INVESTMENT TRANSACTIONS - Purchases and sales of investment securities
(excluding short-term securities) for the six months ended June 30, 2004 were
$3,222,002 and $586,593 respectively. At the end of this period, net unreal-
ized depreciation for Federal income tax purposes aggregated $699,944 of which
$542,542 related to unrealized appreciation of securities and $1,242.486 related
to unrealized depreciation of securities. The cost of investments at June 30,
2004 for Federal income tax purposes was $9,916,205, excluding short-term
investments.
5. CAPITAL SHARE TRANSACTIONS - As of JUNE 30, 2004, there were 10,000,000
shares of $.001 per value capital stock authorized. The total par value and
paid-in capital equaled $10,112,283. Transactions in capital stock were as
follows for the six months ended:
June 30, 2004 June 30, 2003
Shares Amount Shares Amount
------------------ ------------------
Shares sold 51,772 $ 459,818 47,068 $ 337,178
Shares issued in dividend reinvestment 0 0 0 0
Shares redeemed (42,316) (376,419) (22,130) (155,602)
_________________________________________
Net increase (decrease) 9,456 $ 83,399 24,938 $ 181,576
=========================================
5. PROXY VOTING - You may call 1-800-552-1948 or go onto the SEC's web site
(http://xxx.sec.gov)to obtain a description of the Fund's voting policies amd
procedures.
6. FEDERAL INCOME TAXES - Income and long-term capital gsain distributions are
determined in accordance with Federal income tax regulations, which may differ
from accounting principles generally accepted in the United States. As of June
30, 2004 the taxable components of distributable earnings were:
Undistributed ordinary income $ 33,471
Undistributed long-term capital gain $ 18,693
Undistributed depreciation $ (699,944)
- 5 -
VALLEY FORGE FUND
NOTES TO FINANCIAL STATEMENTS (Continued) - JUNE 30, 2004
The tax character of distributions paid during the years ended December 31, 2003
and 2002 were as follows:
2003 2002
Ordinary income $104,992 $172,157
Long-term capital gain $ 52,206 $ 0
FINANCIAL HIGHLIGHTS
6 Mon
ended Year Ended
06/04 December 31
2004 2003 2002 2001 2000
PER SHARE DATA:
Net Asset Value, Beginning of Year $ 8.89 $ 7.18 $ 7.98 $ 7.00 $ 7.83
Income from Investment Operations:
Net investment Income 0.01 0.12 0.15 0.31 0.36
Net security realized & unrealized gains (0.14) 1.74 (0.78) 0.99 (0.32)
________________________________________
Total Inc {Loss} from Investment Ops (0.13) 1.86 (0.63) 1.30 0.04
Less Distributions (0.00) <0.15> (0.17) (0.32) (0.87)
Net Asset Value, End of Year 8.76 8.89 $ 7.18 $ 7.98 $ 7.00
Total Return (1.46)% 25.91% (7.89)% 18.57% 0.48%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.58% 1.32% 1.24% 1.26% 1.40%
Net Investment Income 0.17% 1.31% 2.30% 3.90% 4.30%
SUPPLEMENTAL DATA:
Net Assets, End of Year in Thousands $ 9,465 $ 9,523 $ 7,334 $ 7,182 $ 6,234
Portfolio Turnover Rate 6.17% 16.27% 43.10% 75.45% 59.90%
The accompaning notes are an integral part of these unaudited financial
statements
- 6 -
BOARD OF DIRECTORS INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the Directors of the Fund
are set forth below. The SAI includes additional information about the Fund's
Directors, and is available without charge, by calling 1-800-548-1942. Each
Director may be contacted ny writing to the director c/o Valley Forge Fund,
Inc., P.O. Box 262, Valley Forge, PA 19481.
Interested Directors & Officers
Name, Address Position Term of Office Principal Other
and Age with Fund and Length of Occupation Directorships
Time Served Past 5 Years
Bernard B. Klawans Director Elected for One Year President of None
Age 83 President Served Since Incep- Valley Forge
of Fund tion Mar. 15, 1971 Fund
William A. Texter Director Elected for One Year Retired Mgr. None
Age 58 of Fund Served Since PECO Energy
Jan 30, 2001
Sandra K. Texter Treasurer Elected for One Year System Analyst None
Age 54 Served Since with
Jan. 30,2001 Lockeed Martin
Independent Directors
Victor J. Belanger Director Elected for One Year Retired Chief None
Age 64 Served Since Financial Off
Aug. 18, 1980 Linearizer Tech
Dr. James P. King Director Elected for One Year President None
Age 72 Served Since Incep- Desilube
tion Mar. 15 1971 Tech Inc.
Donald A. Peterson Director Elected for One Year Program Manager None
Age 64 Served Since DRS Technologies
Aug. 15, 1094
"Interested persons" in the Fund as defined in the Investment Company Act of
1940 are Mr. Klawans because of his ownership of the Fund's Investment Adviser
and Sandra Texter because she is the daughter of Mr. Klawans. Mr. Texter is an
"interested person" because he is the spouse of Mrs.Texter.
- 7 -
Item 2. Code of Ethics.
Item 3. Audit Committee Financial Expert.
The Fund is small and has had a flawless financial record since inception 34
years ago. The current principal executive officer has prepared all financial
documents ever issued by the Fund, and has been doing so since the Fund's for-
mation. The current Fund auditor is Michael Baranowsky of Sanville & Company,
whose reports and communications indicate total satisfacation with the reports
he has received. Victor Belanger, retired Chief Financial Officer, Linearizer
Technology Inc. in Hamilton NJ is an "independent" member of the Board of
Directors of the Valley Forge Fund who has performed several independent audits
including those of the Fund's securities held in self custodianship in the past
twenty years. He always reported satisfactory findings to the Board of Direct-
ors. This 33 year record is believed to be sufficient rational to preclude the
need for an Audit Committee or an Audit Committee Financial Expert to monitor
future Fund finances unless the Fund should exceed 15 million in total assets.
Items 4-8. (Reserved)
Item 9. Controls and Procedures.
Bernard B. Klawans is the president of the Fund. He handles all financial mat-
ters of the Fund and has provided excellent internal control procedures to pro-
duce accuracy and safety in all financial matters involving Fund operations. He
is also president and owner of the Investment Adviser, the Valley Forge Manage-
ment Corporation that has provided the function of Transfer Agent "pro bono" to
the Fund. He has provided the additional control of requiring the signatures of
either the Treasureer, Sandra Texter or Ellen Klawans that holds no position in
the Fund or Adviser as well as his on all checks issued by the Fund.
Auditors have reviewed the Internal Control exercised by the Fund every year
since it was installed as a filing requirement by the Securities & Exchange
Commission and found it to be satisfactory for a small (less that 15 million
dollars in total assets) fund.
- 8 -
Item 10. Exhibits.
A. Code of Ethics.
Filed under Item 2 Code of Ethics above
B. Certification.
- 10 -