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 811-3835
--------
Value Line Centurion Fund, Inc.
- ---------------------------------------------------
(Exact name of registrant as specified in charter)
220 East 42nd Street, New York, N.Y. 10017
- --------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-907-1500
------------
Date of fiscal year end: December 31, 2003
-----------------
Date of reporting period: December 31, 2003
-----------------
Item 1. Reports to Stockholders.
- ------- ------------------------
A copy of the Annual Report to Stockholders for the period ended is
included with this Form.
Item 2. Code of Ethics
- ------- --------------
(a) The Registrant has adopted a Code of Ethics that applies to
its Principal Executive Officers and Principal Financial and
Accounting Officer.
(f) Pursuant to item 10(a), the Registrant is attaching as an
exhibit a copy of it's Code of Ethics that applies to it's
Principal Executive Officers and Principal Financial and
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 John W. Chandler, a member
of the Registrant's Audit Committee, as the Registrant's Audit Committee
Financial Expert. Mr. Chandler is an independent director who is a senior
consultant with Academic Search Consultation Service. He spent most of his
professional career at Williams College, where he served as a faculty member,
Dean of the Faculty, and President (1973-85). He also served as President of
Hamilton College (1968-73), and as President of the Association of American
Colleges and Universities (1985-90). He has previously served as Trustee
Emeritus and Chairman of the Board of Trustees of Duke University.
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 or 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 2003 - $29,140; Audit Fees 2002 - $39,074
(b) Audit-Related fees - None
(c) Tax Preparation Fees 2003 - $6,090; Tax Preparation Fees 2002
- $4,020
(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 during 2003 and 2002 were pre-approved by the
committee.
(e) (2) not applicable. (f) Not applicable.
(g) Aggregate Non-Audit Fees 2003 - $6,090; Aggregate Non-Audit
Fees 2002 - $4,020
(h) Not applicable.
Item 9. 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 the date
within 90 days of 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 10. Exhibits.
- -------- ---------
(a) Code of Ethics for Principal Executive and Senior Financial
Officers attached hereto as Exhibit 100.COE.
(b) (1) Certification pursuant to Rule 30a-2 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.(Registrant)
Value Line Centurion Fund, Inc.
By /s/ Jean B. Buttner
-------------------------------------
Jean B. Buttner, President
Date: March 8, 2004
-------------------------------------
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/ Jean B. Buttner
-------------------------------------------------------------------------
Jean B. Buttner, President, Principal Executive Officer
By: /s/ David T. Henigson
-------------------------------------------------------------------------
David T. Henigson, Vice President, Treasurer, Principal Financial Officer
Date: March 8, 2004
-------------------------------------
VALUE LINE CENTURION FUND
[PHOTO]
Brett R. Mitstifer, CFA (seated), Senior Portfolio Manager, Centurion Team
Leader; Nancy L. Bendig, Senior Portfolio Manager; Sigourney B. Romaine, Jr.,
CFA, Portfolio Manager
OBJECTIVE: Long-term growth of capital
PORTFOLIO: At least 90% common stocks
INCEPTION: November 15, 1983
NET ASSETS AT DECEMBER 31, 2003: $355,434,729
Q: HOW DID THE VALUE LINE CENTURION FUND PERFORM IN 2003?
A: The Fund generated a total return of 19.49%(1) for the year ended December
31, 2003. This compares with a total return of 28.68% for the S&P 500
Index.(2) While the Fund underperformed the S&P 500 for the year, it
outperformed during the first and third quarters. The Fund's holdings that
generated favorable performance during the first and third quarters, high
quality companies with proven earnings growth, caused the underperformance
during the second and fourth quarters as lower quality companies with less
predictable earnings streams lead the markets in those periods.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE LAST YEAR?
A: When the market rally began, following the removal of uncertainty
surrounding the war with Iraq, investors made a shift toward riskier
companies before there was evidence that these companies had seen any real
improvement in their businesses. The Value Line Timeliness Ranking System
favors stocks with strong relative earnings growth, positive earnings
surprise and strong relative price momentum. The leaders during the early
phase of the rally did not rank well, and, therefore, were not represented
in the Fund. Technology stocks, especially telecom equipment, are an
example of stocks that were underweighted due to poor fundamentals and low
Timeliness ranks. The health care sector was overweighted in the Fund
during this period due to strong relative earnings, but the stocks and
sector lagged.
- --------------------------------------------------------------------------------
"The Value Line Timeliness Ranking System favors stocks with strong relative
earnings growth, positive earnings surprise and strong relative price momentum."
- --------------------------------------------------------------------------------
As the year progressed, companies with more cyclicality to their earnings
began to rise in the Ranking System. By the conclusion of the year, the
technology, basic material and industrial sectors migrated to overweighted
positions due to their strong relative earnings performance. Conversely, health
care and financial companies have seen their exposure decline due to weaker
relative earnings growth and the effect of rising interest rates.
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: We believe that the U.S. economy will continue to grow at a strong pace
during 2004. GDP growth of 4.6% is expected as the economy continues to get
a boost from strong housing demand, an active consumer sector and
strengthening industrial spending. Inflation, excluding energy and
commodities, should remain benign throughout 2004 and further discussion of
deflation is unwarranted. The much-anticipated recovery in payroll
employment has been elusive to date, but should materialize this year.
Given the backdrop of modest inflation and slow payroll growth, the Federal
Open Market Committee (FOMC) is, at worst, expected to begin raising
interest rates during the second half of 2004.
Corporations should post another year of strong earnings due to the
continued leverage provided by cost cutting, and, finally, some top-line
improvement. Earnings-per-share growth for the S&P 500 will likely be in the
10-15% range, which is favorable for further stock market appreciation. Although
future stock market performance is impossible to predict, the fourth year of the
presidential election cycle has historically favored a rising stock market,
albeit less than the third year of the cycle. However, our proprietary model has
turned more neutral toward equities following the significant rise that has
already taken place in the markets.
From a security selection perspective, the Fund will continue to seek out
those companies that have the best relative earnings growth and momentum, while
avoiding those with deteriorating results.
- --------------------
(1) 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 the 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. Returns represent past performance
and are not indicative of future results. 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. Current performance may be lower or higher than the
data quoted.
(2) 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. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund.
- --------------------------------------------------------------------------------
1
VALUE LINE CENTURION FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
The Value Line Centurion Fund S&P 500 Index
12/83 9180.00 12242.00
12/84 8419.00 12996.10
12/85 11108.40 17097.70
12/86 12982.40 20284.70
12/87 12611.10 21353.70
12/88 13567.00 24887.70
12/89 17839.20 32754.70
12/90 18831.10 31755.70
12/91 28657.10 41431.70
12/92 30356.50 44588.80
12/93 33152.30 49083.30
12/94 32419.70 49731.20
12/95 45413.50 68420.20
12/96 53288.20 84129.50
12/97 64686.50 112195.00
12/98 82455.90 144260.00
12/99 105733.00 174613.00
12/00 92548.20 158706.00
12/01 77425.90 139836.00
12/02 59672.10 108932.00
12/03 71293.00 140174.00
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in the Value Line Centurion Fund
and in the S&P 500 Index.
PORTFOLIO COMPOSITION BY
ECONOMIC SECTOR AS OF DECEMBER 31, 2003
[PIE CHART]
Cash & Equivalents 4.80%
Equity 95.20%
- ------------------------------------------------------
TOP 10 HOLDINGS AS OF DECEMBER 31, 2003
(HOLDINGS ARE SUBJECT TO CHANGE)
Percent of
Company
Total Net Assets
- ------------------------------------------------------
1. Apache Corp. 2.3%
- ------------------------------------------------------
2. Stryker Corp. 2.2%
- ------------------------------------------------------
3. Dell Inc. 2.2%
- ------------------------------------------------------
4. Capital One Financial Corp. 2.1%
- ------------------------------------------------------
5. Electronic Arts Inc. 2.0%
- ------------------------------------------------------
6. Lowe's Cos Inc. 1.9%
- ------------------------------------------------------
7. Aetna Inc. 1.9%
- ------------------------------------------------------
8. Golden West Financial Corp. 1.9%
- ------------------------------------------------------
9. L-3 Communications Holdings 1.9%
- ------------------------------------------------------
10. Symantec Corp. 1.9%
- ------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED DECEMBER 31, 2003
1 3 5 10 SINCE
INCEPTION DATE YEAR YEARS YEARS YEARS INCEPTION
- --------------------------------------------------------------------------------------------------
Value Line Centurion Fund 11/15/83 19.49% -8.33% -2.87% 7.96% 10.25%
</Table>
(1) 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 the variable annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not indicative of future results. Investment return and
principal value will fluctuate so that the value of an investor's shares,
when redeemed, may be worth more or less than the original cost. The return
figures shown do not reflect the deduction of taxes that a shareholder may
pay on distributions or redemption of shares. Current performance may be
lower or higher than the data quoted.
- --------------------------------------------------------------------------------
2
/ / Value Line Centurion Fund
Schedule of Investments
December 31, 2003
COMMON STOCKS -- 95.2%
Shares Value
- -----------------------------------------------------------------------------
AEROSPACE/DEFENSE -- 1.9%
130,000 L-3 Communications Holdings, Inc.* $ 6,676,800
- -----------------------------------------------------------------------------
AIR TRANSPORT -- 0.4%
80,000 Continental Airlines, Inc. Class "B"* 1,301,600
- -----------------------------------------------------------------------------
APPAREL -- 0.1%
30,000 Guess?, Inc.* 362,100
- -----------------------------------------------------------------------------
AUTO PARTS -- 1.8%
45,000 American Axle & Manufacturing
Holdings, Inc.* 1,818,900
75,000 Lear Corp. 4,599,750
------------
6,418,650
- -----------------------------------------------------------------------------
BANK -- 4.2%
100,000 Commerce Bancorp, Inc. 5,268,000
70,000 State Street Corporation 3,645,600
100,000 Zions Bancorporation 6,133,000
------------
15,046,600
- -----------------------------------------------------------------------------
BEVERAGE-ALCOHOLIC -- 1.2%
130,000 Constellation Brands, Inc. Class "A"* 4,280,900
- -----------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.4%
52,000 Genentech, Inc.* 4,865,640
- -----------------------------------------------------------------------------
CABLE TV -- 1.0%
100,000 EchoStar Communications Corp.
Class "A"* 3,400,000
- -----------------------------------------------------------------------------
COMPUTER & PERIPHERALS -- 2.2%
225,000 Dell, Inc.* 7,641,000
- -----------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES -- 5.6%
85,000 Adobe Systems, Inc. 3,340,500
100,000 Cadence Design Systems, Inc.* 1,798,000
90,000 Cognizant Technology Solutions Corp. Class "A"* 4,107,600
190,000 Symantec Corp.* 6,583,500
23,000 Transaction Systems Architects, Inc. Class "A"* 520,490
100,000 VERITAS Software Corp.* 3,716,000
------------
20,066,090
- -----------------------------------------------------------------------------
DIVERSIFIED COMPANIES -- 1.6%
80,000 Fortune Brands, Inc. 5,719,200
- -----------------------------------------------------------------------------
DRUG -- 3.9%
65,000 Chiron Corp.* 3,704,350
65,000 Gilead Sciences, Inc.* 3,779,100
185,000 Mylan Laboratories, Inc. 4,673,100
50,000 Pfizer, Inc. 1,766,500
------------
13,923,050
- -----------------------------------------------------------------------------
E-COMMERCE -- 0.2%
15,000 FileNet Corp.* 406,200
23,000 WebEx Communications, Inc.* 462,300
------------
868,500
- -----------------------------------------------------------------------------
EDUCATIONAL SERVICES -- 1.5%
80,000 Apollo Group, Inc. Class "A"* 5,440,000
- -----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.9%
125,000 Rockwell Automation, Inc. 4,450,000
100,000 Thomas & Betts Corp.* 2,289,000
------------
6,739,000
- -----------------------------------------------------------------------------
ENTERTAINMENT -- 1.3%
100,000 Clear Channel Communications, Inc. 4,683,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
ENTERTAINMENT TECHNOLOGY -- 2.0%
150,000 Electronic Arts Inc.* $ 7,167,000
- -----------------------------------------------------------------------------
ENVIRONMENTAL -- 0.2%
35,000 Tetra Tech, Inc.* 870,100
- -----------------------------------------------------------------------------
FINANCIAL SERVICES-DIVERSIFIED -- 5.0%
120,000 Capital One Financial Corp. 7,354,800
66,666 Countrywide Financial Corp. 5,056,667
125,000 Knight Trading Group, Inc.* 1,830,000
145,000 MBNA Corp. 3,603,250
------------
17,844,717
- -----------------------------------------------------------------------------
GROCERY -- 0.5%
25,000 Whole Foods Market, Inc. 1,678,250
- -----------------------------------------------------------------------------
HEALTHCARE INFORMATION SYSTEMS -- 0.1%
15,000 IDX Systems Corp.* 402,300
- -----------------------------------------------------------------------------
HOMEBUILDING -- 3.5%
50,000 Centex Corp. 5,382,500
50,000 Pulte Homes, Inc. 4,681,000
50,000 Standard Pacific Corp. 2,427,500
------------
12,491,000
- -----------------------------------------------------------------------------
HOTEL/GAMING -- 2.1%
80,000 GTECH Holdings Corp. 3,959,200
100,000 International Game Technology 3,570,000
------------
7,529,200
- -----------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 1.1%
125,000 Amdocs Ltd.* 2,810,000
50,000 Navigant Consulting, Inc.* 943,000
------------
3,753,000
- -----------------------------------------------------------------------------
INFORMATION SERVICES -- 0.5%
35,000 Getty Images, Inc.* 1,754,550
- -----------------------------------------------------------------------------
INSURANCE-PROPERTY/CASUALTY -- 0.9%
125,000 American Financial Group, Inc. 3,307,500
- -----------------------------------------------------------------------------
INTERNET -- 3.3%
225,000 E*TRADE FINANCIAL Corp.* 2,846,250
200,000 EarthLink, Inc.* 2,000,000
100,000 eBay, Inc.* 6,459,000
30,000 1-800-FLOWERS.COM, Inc.
Class "A"* 331,800
------------
11,637,050
- -----------------------------------------------------------------------------
MACHINERY -- 1.7%
100,000 Donaldson Co., Inc. 5,916,000
- -----------------------------------------------------------------------------
MEDICAL SERVICES -- 2.8%
100,000 Aetna Inc. 6,758,000
100,000 Humana Inc.* 2,285,000
30,000 Odyssey HealthCare, Inc.* 877,800
------------
9,920,800
- -----------------------------------------------------------------------------
MEDICAL SUPPLIES -- 6.0%
10,000 Advanced Neuromodulation Systems, Inc.* 459,800
50,000 AmerisourceBergen Corp. 2,807,500
15,000 Ocular Sciences, Inc.* 430,650
100,000 Patterson Dental Co.* 6,416,000
90,000 Stryker Corp. 7,650,900
50,000 Zimmer Holdings, Inc.* 3,520,000
------------
21,284,850
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
3
Value Line Centurion Fund
Schedule of Investments (Continued)
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
METALS & MINING-DIVERSIFIED -- 1.0%
45,000 Phelps Dodge Corp.* $ 3,424,050
- -----------------------------------------------------------------------------
NATURAL GAS -- DIVERSIFIED -- 2.1%
65,000 Devon Energy Corp. 3,721,900
20,000 Patina Oil & Gas Corp. 979,800
100,000 XTO Energy, Inc. 2,830,000
------------
7,531,700
- -----------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES -- 1.2%
150,000 Staples, Inc.* 4,095,000
- -----------------------------------------------------------------------------
OILFIELD SERVICES/EQUIPMENT -- 0.7%
45,000 Schlumberger Ltd. 2,462,400
- -----------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.2%
130,000 Georgia-Pacific Corp. 3,987,100
10,000 Potlatch Corp. 347,700
------------
4,334,800
- -----------------------------------------------------------------------------
PETROLEUM-PRODUCING -- 2.3%
100,000 Apache Corp. 8,110,000
- -----------------------------------------------------------------------------
PHARMACY SERVICES -- 2.5%
150,000 CVS Corp. 5,418,000
100,000 Walgreen Co. 3,638,000
------------
9,056,000
- -----------------------------------------------------------------------------
PRECIOUS METALS -- 1.4%
100,000 Newmont Mining Corp. 4,861,000
- -----------------------------------------------------------------------------
PRECISION INSTRUMENT -- 1.0%
125,000 Agilent Technologies, Inc.* 3,655,000
- -----------------------------------------------------------------------------
RETAIL BUILDING SUPPLY -- 2.0%
125,000 Lowe's Companies, Inc. 6,923,750
- -----------------------------------------------------------------------------
RETAIL-SPECIAL LINES -- 1.9%
100,000 Best Buy Co., Inc. 5,224,000
80,000 Pacific Sunwear of California, Inc.* 1,689,600
------------
6,913,600
- -----------------------------------------------------------------------------
SECURITIES BROKERAGE -- 3.0%
70,000 Legg Mason, Inc. 5,402,600
70,000 Lehman Brothers Holdings Inc. 5,405,400
------------
10,808,000
- -----------------------------------------------------------------------------
SEMICONDUCTOR -- 3.8%
80,000 Cypress Semiconductor Corp.* 1,708,800
70,000 International Rectifier Corp.* 3,458,700
80,000 National Semiconductor Corp.* 3,152,800
100,000 QLogic Corp.* 5,160,000
------------
13,480,300
- -----------------------------------------------------------------------------
SEMICONDUCTOR CAPITAL EQUIPMENT -- 0.9%
100,000 Lam Research Corp.* 3,230,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
SHOE -- 0.1%
20,000 K-Swiss, Inc. Class "A" $ 481,200
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.6%
175,000 Cisco Systems, Inc.* 4,250,750
50,000 QUALCOMM Incorporated 2,696,500
60,000 UTStarcom, Inc.* 2,224,200
------------
9,171,450
- -----------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.6%
200,000 Nextel Communications, Inc. Class "A"* 5,612,000
- -----------------------------------------------------------------------------
THRIFT -- 2.9%
65,000 Golden West Financial Corp. 6,707,350
95,000 New York Community Bancorp, Inc. 3,614,750
------------
10,322,100
- -----------------------------------------------------------------------------
TOILETRIES/COSMETICS -- 1.7%
75,000 Avon Products, Inc. 5,061,750
50,000 Nu Skin Enterprises, Inc. Class "A" 854,500
------------
5,916,250
- -----------------------------------------------------------------------------
TRUCKING/TRANSPORTATION LEASING -- 1.4%
40,000 Forward Air Corp.* 1,100,000
140,000 Hunt (J.B.) Transport Services, Inc.* 3,781,400
------------
4,881,400
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT SECURITIES -- 95.2%
(COST $289,926,082) 338,258,447
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.6%
(INCLUDING ACCRUED INTEREST)
Principal
Amount Value
- -----------------------------------------------------------------------------
$16,400,000 Collateralized by $15,763,000 U.S. Treasury Bonds,
5.50%, due 8/15/28, with a value of $16,740,799
(with UBS Warburg LLC, 0.84%, dated 12/31/03,
due 1/2/04, delivery value $16,400,765)
(COST $16,400,383) $ 16,400,383
- -----------------------------------------------------------------------------
EXCESS OF CASH AND OTHER
ASSETS OVER LIABILITIES -- 0.2% 775,899
- -----------------------------------------------------------------------------
NET ASSETS -- 100.0% $355,434,729
- -----------------------------------------------------------------------------
NET ASSET VALUE PER OUTSTANDING SHARE
($355,434,729 / 19,583,578 SHARES OUTSTANDING) $ 18.15
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
4
/ / Value Line Centurion Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
- -------------------------------------------------------------
ASSETS:
Investment securities, at value (cost
$289,926,082) $338,258,447
Repurchase agreement (cost $16,400,383) 16,400,383
Cash 94,932
Receivable for securities sold 6,782,146
Dividends receivable 107,487
Prepaid insurance expense 8,281
Receivable for capital shares sold 2,695
------------
TOTAL ASSETS 361,654,371
------------
LIABILITIES:
Payable for securities purchased 5,840,931
Payable for capital shares repurchased 89,358
Accrued expenses:
Advisory fee 149,696
Service and distribution plan fees 119,757
Other 19,900
------------
TOTAL LIABILITIES 6,219,642
------------
NET ASSETS $355,434,729
============
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000,
outstanding 19,583,578 shares) $ 19,583,578
Additional paid-in capital 308,576,172
Accumulated net realized loss on investments (21,057,386)
Net unrealized appreciation of investments 48,332,365
------------
NET ASSETS $355,434,729
============
NET ASSET VALUE PER OUTSTANDING SHARE
($355,434,729 / 19,583,578 shares
outstanding) $ 18.15
============
STATEMENT OF OPERATIONS
Year Ended December 31, 2003
- -------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 2,412,121
Interest 299,584
-----------
Total Income 2,711,705
-----------
EXPENSES:
Investment advisory fee 1,689,849
Service and distribution plan fees 1,351,879
GIAC administrative service fee 118,990
Auditing and legal fees 63,492
Custodian fees 49,163
Insurance and dues 36,473
Directors' fees and expenses 20,110
Other 16,383
-----------
Total Expenses Before Custody Credits 3,346,339
Less: Custody Credits (1,093)
-----------
Net Expenses 3,345,246
-----------
NET INVESTMENT LOSS (633,541)
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain 48,416,930
Change in net unrealized appreciation 12,000,159
-----------
NET REALIZED GAIN AND CHANGE IN NET UNREALIZED
APPRECIATION ON INVESTMENTS 60,417,089
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $59,783,548
===========
- --------------------------------------------------------------------------------
See notes to financial statements.
5
/ / Value Line Centurion Fund
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
--------------------------------
2003 2002
------------ -------------
OPERATIONS:
Net investment loss $ (633,541) $ (247,915)
Net realized gain (loss) on investments 48,416,930 (33,315,887)
Change in net unrealized appreciation 12,000,159 (77,884,159)
------------ -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 59,783,548 (111,447,961)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 13,366,869 13,769,421
Cost of shares repurchased (56,366,694) (87,473,344)
------------ -------------
NET DECREASE FROM CAPITAL SHARE TRANSACTIONS (42,999,825) (73,703,923)
------------ -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 16,783,723 (185,151,884)
NET ASSETS:
Beginning of year 338,651,006 523,802,890
------------ -------------
End of year $355,434,729 $ 338,651,006
============ =============
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
/ / Value Line Centurion Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
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 or
2 for year-ahead performance by The Value Line Investment Survey, one of the
nation's major investment advisory services.
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 Fund in the
preparation of its financial statements.
(A) Security Valuation
Securities listed on a securities exchange are valued at the closing sales
price 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 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. Other assets and securities for which market valuations are not readily
available are valued at fair value as the Board of Directors may determine in
good faith.
(B) Repurchase Agreements
In connection with transactions in repurchase agreements, the Fund's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
(C) Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders. Therefore, no federal income tax
provision is required.
(D) 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 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.
(E) Investments
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, is earned from settlement date and recognized on the accrual basis.
Dividend income is recorded on the ex-dividend date.
(F) 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 in
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.
7
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,
2003 2002
------------ ------------
Shares sold 806,744 776,258
Shares repurchased (3,514,933) (5,056,767)
---------- ----------
Net decrease (2,708,189) (4,280,509)
========== ==========
3 -- PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
YEAR ENDED
DECEMBER 31,
2003
------------
PURCHASES:
Investment Securities $402,154,302
============
SALES:
Investment Securities $435,421,715
============
4 -- INCOME TAXES
At December 31, 2003, information on the tax components of capital is as
follows:
Cost of investment for tax purposes $307,000,510
============
Gross tax unrealized appreciation $ 50,621,644
Gross tax unrealized depreciation (2,963,324)
------------
Net tax unrealized appreciation on
Investments $ 47,658,320
============
Capital loss carryforward
Expires December 31, 2010 $(20,383,341)
============
Net realized gains/losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales. To the extent future
capital gains are offset by capital losses, the Fund does not anticipate
distributing any such gains to the shareholders.
Permanent book-tax differences are reclassified within the composition of
net asset accounts. During 2003, the Fund reclassified $633,541 from accumulated
net investment loss to additional paid-in-capital. Net assets were not affected
by this reclassification.
5 -- INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES AND TRANSACTIONS WITH
INTERESTED PARTIES
An advisory fee of $1,689,849 was paid or payable to Value Line, Inc. (the
"Adviser"), the Fund's investment adviser, for the year ended December 31, 2003.
This was computed at the rate of 1/2 of 1% 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 and wages. The Fund bears all other costs and expenses.
The Fund has a Service and Distribution Plan (the "Plan") adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, for the payment of
certain expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.40% of the Fund's average daily net assets. For the year ended
December 31, 2003, fees amounting to $1,351,879 were paid or payable to the
Distributor under this plan.
For the year ended December 31, 2003, the Fund's expenses were reduced by
$1,093 under a custody credit arrangement with the Custodian.
Certain officers and directors of the Adviser and Value Line Securities,
Inc. (the "Distributor" and a registered broker/dealer) are also officers and
directors of the Fund. During the year ended December 31, 2003 the Fund paid
brokerage commissions totaling $520,520 to the Distributor which clears its
transactions through unaffiliated brokers.
The Fund had an agreement with GIAC that ended on April 30, 2003, to
reimburse GIAC for expenses incurred in performing administrative and internal
accounting functions in connection with the establishment of contract-owner
accounts and their ongoing maintenance, printing and distribution of shareholder
reports and providing ongoing shareholder servicing functions. Such
reimbursement was limited to an amount no greater than $18.00 times the average
number of accounts at the end of each quarter during the year. For the four
month period ended April 30, 2003, the Fund paid $118,990 in connection with
such services rendered by GIAC.
8
/ / Value Line Centurion Fund
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2003 2002 2001 2000 1999
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR........... $ 15.19 $ 19.71 $ 27.25 $ 36.09 $ 30.44
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment (loss) income............... (.03) (.01) .05 .04 .03
Net gains (loss) on securities (both
realized and unrealized)................. 2.99 (4.51) (4.48) (3.69) 8.13
-------- -------- -------- -------- --------
Total from investment operations........... 2.96 (4.52) (4.43) (3.65) 8.16
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income....... -- -- (.04) (.03) (.09)
Distributions from net realized gains...... -- -- (3.00) (5.16) (2.42)
Tax return of capital...................... -- -- (.07) -- --
-------- -------- -------- -------- --------
Total distributions........................ -- -- (3.11) (5.19) (2.51)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR................. $ 18.15 $ 15.19 $ 19.71 $ 27.25 $ 36.09
-------- -------- -------- -------- --------
TOTAL RETURN**............................... 19.49% (22.93)% (16.35)% (12.47)% 28.23%
-------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)..... $355,435 $338,651 $523,803 $733,303 $971,372
Ratio of expenses to average net
assets(1)................................ .99% .76% .59% .59% .59%
Ratio of net investment (loss) income to
average net assets....................... (0.19)% (0.06)% 0.20% 0.12% 0.08%
Portfolio turnover rate.................... 129% 126% 141% 76% 64%
</Table>
** Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
(1) Ratio reflects expenses grossed up for custody credit arrangement. The
ratio of expenses to average net assets net of custody credits would not
have changed.
- --------------------------------------------------------------------------------
See notes to financial statements.
9
Report of Independent Auditors
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, 2003, 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 auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2003 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 10, 2004
10
/ / Value Line Centurion Fund
MANAGEMENT INFORMATION
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 14 Value
Line Funds and oversees a total of 15 portfolios. Each Director serves until his
or her successor is elected and qualified.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
LENGTH OF
TIME PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION SERVED DURING THE PAST 5 YEARS HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS*
Jean Bernhard Buttner Chairman of Since 1983 Chairman, President and Chief Value Line, Inc.
Age 69 the Board of Executive Officer of Value Line, Inc.
Directors and (the "Adviser") and Value Line
President Publishing, Inc. Chairman and
President of each of the 14 Value Line
Funds and Value Line Securities Inc.
(the "Distributor")
Marion N. Ruth Director Since 2000 Real Estate Executive: President, Ruth Value Line, Inc.
5 Outrider Road Realty (real estate broker); Director
Rolling Hills, CA 90274 of the Adviser since 2000.
Age 68
NON-INTERESTED DIRECTORS
John W. Chandler Director Since 1991 Consultant, Academic Search None
1611 Cold Spring Rd. Consultation Service, Inc. Trustee
Williamstown, MA 01267 Emeritus and Chairman (1993-1994) of
Age 80 the Board of Trustees of Duke
University; President Emeritus,
Williams College.
Frances T. Newton Director Since 2000 Customer Support Analyst, Duke Power None
4921 Buckingham Drive Company.
Charlotte, NC 28209
Age 62
Francis Oakley Director Since 2000 Professor of History, Williams Berkshire Life
54 Scott Hill Road College, 1961 to present. President Insurance Company
Williamstown, MA 01267 Emeritus since 1994 and President, of America.
Age 72 1985-1994; Chairman (1993-1997) and
Interim President (2002) of the
American Council of Learned Societies.
David H. Porter Director Since 1997 Visiting Professor of Classics, None
5 Birch Run Drive Williams College, since 1999;
Saratoga Springs, NY 12866 President Emeritus, Skidmore College
Age 68 since 1999 and President, 1987-1998.
Paul Craig Roberts Director Since 1983 Chairman, Institute for Political A. Schulman Inc.
169 Pompano St. Economy. (plastics)
Panama City Beach, FL 32413
Age 64
Nancy-Beth Sheerr Director Since 1996 Senior Financial Advisor, Hawthorne, None
1409 Beaumont Drive since 2001; Chairman, Radcliffe
Gladwyne, PA 19035 College Board of Trustees. 1990-1999.
Age 54
</Table>
11
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
LENGTH OF
TIME PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE POSITION SERVED DURING THE PAST 5 YEARS HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------------
OFFICERS
Brett Mitstifer Vice Since 2003 Portfolio Manager with the Adviser --
Age 41 President since 2003; Executive Vice President,
Hovey, Youngman Associates (investment
management), 2000-2003; Portfolio
Manager, Bankers Trust, 1997-2000.
Nancy L. Bendig Vice Since 2003 Portfolio Manager with the Adviser --
Age 48 President since 2003 and from 1993 to 1999;
Portfolio Manager-First Vice
President, Avatar Associates
(investment management), 1999-2003.
Sigourney B. Romaine Vice Since 2003 Portfolio Manager with the Adviser --
Age 59 President since 2002; Securities Analyst with
the Adviser, 1996-2002.
David T. Henigson Vice Since 1994 Director, Vice President and --
Age 46 President, Compliance Officer of the Adviser.
Secretary and Director and Vice President of the
Treasurer Distributor. Vice President, Secretary
and Treasurer of each of the 14 Value
Line Funds.
</Table>
- ---------------
* Mrs. Buttner is an "interested person" as defined in the Investment Company
Act of 1940 by virtue of her positions with the Adviser and her indirect
ownership of a controlling interest in the Adviser; Mrs. Ruth is an
interested person by virtue of being a director of the Adviser.
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY 10017.
12