<PAGE>
INVESTMENT ADVISER SEMI-ANNUAL REPORT
Value Line, Inc. JUNE 30, 1995
220 East 42nd Street, New York, NY 10017-5891
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street, New York, NY 10017-5891
CUSTODIAN BANK
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT THE VALUE LINE
State Street Bank and Trust Company c/o NFDS SPECIAL
P.O. Box 419729, Kansas City, MO 64141-6729 SITUATIONS
FUND, INC.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas, New York, N.Y. 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS
Jean Bernhard Buttner Leo R. Futia
Charles E. Reed Paul Craig Roberts
John W. Chandler
OFFICERS
Jean Bernhard Buttner Peter A. Shraga
CHAIRMAN PRESIDENT
David T. Henigson
VICE PRESIDENT, SECRETARY/TREASURER
Scott M. Bruce
VICE PRESIDENT
Jack M. Houston Stephen La Rosa
ASSISTANT ASSISTANT
SECRETARY/TREASURER SECRETARY/TREASURER
[Logo]
The financial statements included herein have been
taken from the records of the Fund without examination VALUE LINE
by the independent accountants and accordingly they do MUTUAL FUNDS
not express an opinion thereon.
This unaudited report is issued for the information of
shareholders. It is not authorized for distribution to
prospective investors unless preceded or accompanied
by a currently effective prospectus of the Fund
(obtainable from the Distributor).
VLF 50688
<PAGE>
TO OUR VALUE LINE SPECIAL
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The stock market turned in a stellar performance during the first half of
1995. And despite the fact that the greater part of this strength was centered
among the larger-capitalization issues, The Value Line Special Situations Fund
acquitted itself quite well during the period. In the first six months of 1995,
the unmanaged Standard & Poor's 500 Index, a good barometer of large-stock
performance and the benchmark against which most equity mutual funds are
measured, registered a total return (including dividends) of 20.2%. The Russell
2000 Index, a measure of small-cap stock performance, on the other hand,
finished the half with a 13.3% gain--impressive, but well short of the
performance of the S&P 500 and other large-cap indexes. The Value Line Special
Situations Fund, restrained by its current bias toward smaller companies but
aided by its ample representation in the strong technology sector, finished
midway between the two indexes, providing shareholders with a first-half return
of 16.7%.
The composition of The Special Situations Fund's portfolio--and, hence, its
performance in the first half--continues to reflect the decision made in October
1992 to place a greater emphasis on investment in emerging-growth type special
situations (smaller, younger companies with innovative technologies, products,
market niches, etc.), versus those of the "classic" variety (companies involved
in turnarounds, restructurings, takeovers, or other nonrecurring developments
that are likely to cause their stocks to rise in value). This decision was based
on the belief that economic and stock-market conditions in the period thereafter
were likely to be particularly favorable for emerging-growth type special
situations. We are pleased to say that this decision has proven to be a
prescient one to date. Although the performance of The Special Situations Fund
trailed that of the Standard & Poor's 500 during the first half, the Fund has
recently received repeated recognition in the press as one of the
best-performing funds over the past 12 months in both the mid-cap and
aggressive-growth categories. Even more gratifying, The Value Line Special
Situations Fund had the honor of being selected by FORTUNE Magazine as one of
the best mutual funds for creating wealth--after considering taxes and sales
commissions--over the past three years. We are proud of this recognition and
will continue to strive to create wealth for you, our shareholders, in the
months and years ahead.
As we navigate the second half of 1995, however, we are doing so with a
greater degree of caution than guided our actions earlier in the year. Stocks
have come a long way in the year to date. We are looking for the economy to
grow at a slower pace over the next six to nine months than during the first
quarter. This anticipated slower growth carries with it the specter of possible
earnings disappointments--and the stock-price declines they can create. The
Special Situations Fund closed the first half with just under 11% of its assets
in cash and equivalents. We expect that this percentage will have risen
significantly by the time this report reaches shareholders' hands.
We appreciate your confidence in The Value Line Special Situations Fund and
look forward to serving your investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
--------------------------
Jean Bernhard Buttner
CHAIRMAN
July 16, 1995
2
<PAGE>
SITUATIONS FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
ECONOMIC OBSERVATIONS
The economy slowed to a virtual crawl in the second quarter, with real,
inflation-adjusted gross domestic product rising by a scant 0.5%. This narrow
increase in growth, which follows much healthier expansion rates of 5.1% and
2.7% in the final quarter of 1994 and the first three months of this year,
respectively, was fueled principally by a mild pickup in consumer spending.
Sharply lower levels of housing construction and somewhat weaker auto production
numbers were the quarter's main depressants.
The recent slowing in business activity, however, is likely to prove short-lived
as recent data show that consumer spending is continuing to pick up, while the
sharp reduction in mortgage rates over the past several months seems to be
injecting some life into the housing market. Assuming that these positive trends
persist, we would expect economic growth to accelerate in the third and fourth
quarters. A moderate carryover effect is likely through at least the opening
months of 1996. The risk of recession, which seemed very real just a short time
ago, has lessened noticeably, in the past month or two.
But the news isn't all good. For example, the pending improvement on the
economic front is likely to dissuade the Federal Reserve Board from trimming
interest rates aggressively in the months ahead, since the added stimulus of
substantially lower borrowing costs would, presumably, not be needed. If that's
the case, the stock market, which continues to be partially underpinned by the
expectation of further interest-rate reductions, would have a key support
mechanism removed.
* PERFORMANCE DATA:
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
-------------- ----------------------
1 year ended 6/30/95 38.16% $13,816
5 years ended 6/30/95 9.37% $15,646
10 years ended 6/30/95 8.11% $21,812
*THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL-GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE
OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ITS ORIGINAL COST.
3
<PAGE>
PORTFOLIO HIGHLIGHTS
AT JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
- --------------------------------------------------------------------------------
DOLLARS PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
- --------------------------------------------------------------------------------
Komag, Inc. 60,000 $3,120 3.3%
Silicon Graphics, Inc. 67,000 2,672 2.8
LSI Logic Corp. 66,000 2,582 2.7
Xilinx, Inc. 26,000 2,444 2.5
Vencor, Inc. 75,000 2,362 2.5
U.S. Robotics Corp. 20,000 2,180 2.3
Cerner Corp. 35,000 2,144 2.2
Cordis Corp. 32,000 2,136 2.2
Cheesecake Factory, Inc. 82,500 2,124 2.2
Digital Equipment Corp. 50,000 2,038 2.1
- --------------------------------------------------------------------------------
FIVE LARGEST INDUSTRY CATEGORIES*
- --------------------------------------------------------------------------------
DOLLARS PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
- --------------------------------------------------------------------------------
Computer & Peripherals $14,778 15.4%
Computer Software & Services 12,621 13.2
Semiconductor 9,837 10.3
Medical Services 9,302 9.7
Medical Supplies 7,871 8.2
- --------------------------------------------------------------------------------
FIVE LARGEST SECURITY PURCHASES* +
- --------------------------------------------------------------------------------
COST
ISSUE (IN THOUSANDS)
- --------------------------------------------------------------------------------
FTP Software, Inc. $1,103
Microtouch Systems, Inc. 1,080
Penn Treaty American Corp. 920
Bombay Co., Inc. 910
Olympic Financial Ltd. 600
- --------------------------------------------------------------------------------
FIVE LARGEST SECURITY SALES* +
- --------------------------------------------------------------------------------
PROCEEDS
ISSUE (IN THOUSANDS)
- --------------------------------------------------------------------------------
Chiron Corp. $1,618
U.S. Robotics Corp. 1,510
Avid Technology Inc. 1,173
Linear Technology Corp. 1,139
Xircom, Inc. 1,069
- --------------------------------------------------------------------------------
* EXCLUSIVE OF FIXED-INCOME SECURITIES.
+ FOR THE SIX MONTHS ENDED 6/30/95.
4
<PAGE>
SCHEDULE OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (IN THOUSANDS)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.1%)
COMPUTER &
PERIPHERALS (15.4%)
50,000 *Equipment Corp. $ 2,038
40,000 *FTP Software, Inc. 1,200
75,000 *In Focus Systems, Inc. 2,025
60,000 *Komag, Inc. 3,120
50,000 *Microtouch Systems, Inc. 1,028
42,500 *Pinnacle Micro, Inc. 515
67,000 *Silicon Graphics, Inc. 2,672
20,000 *U.S. Robotics Corp. 2,180
-------
14,778
COMPUTER SOFTWARE &
SERVICES (13.2%)
22,000 *BMC Software, Inc. 1,699
100,000 *Caere Corp. 875
30,000 *Catalina Marketing Corp. 1,609
35,000 *Cerner Corp. 2,144
25,000 *Integrated Systems, Inc. Class "A" 631
30,000 *Progress Software Corp. 1,560
25,000 *Softdesk, Inc. 512
40,000 *Softkey International, Inc. 1,275
25,000 *Wind River Systems, Inc. 303
50,000 *Wonderware Corp. 2,013
-------
12,621
DRUG (7.9%)
50,000 *Dura Pharmaceuticals, Inc. 941
34,500 *Elan Corporation, P.L.C. (ADR) 1,406
35,000 *Genentech, Inc. 1,702
36,000 *Genetics Institute, Inc. 1,215
45,000 *Marsam Pharmaceuticals, Inc. 855
70,000 *Mycogen Corp. 577
40,000 *Roberts Pharmaceutical Corp. 880
-------
7,576
ELECTRICAL EQUIPMENT (1.0%)
50,000 *Ultralife Batteries, Inc. 913
ELECTRONICS (0.8%)
80,000 *Quickturn Design Systems, Inc. 710
FINANCIAL SERVICES (2.8%)
45,000 *Insurance Auto Auctions, Inc. 1,316
50,000 *Olympic Financial Ltd. 834
52,500 Transmedia Network, Inc. 499
-------
2,649
HOME APPLIANCE (0.5%)
24,000 *Recoton Corp. 468
HOTEL/GAMING (0.9%)
60,000 *Casino Data Systems 863
INDUSTRIAL SERVICES (0.4%)
30,000 *ClinTrials Research, Inc. 397
INSURANCE-LIFE (1.0%)
75,000 *Penn Treaty American Corp. 956
MACHINERY (1.8%)
40,000 *Varity Corp. 1,760
MEDICAL SERVICES (9.7%)
50,000 *Apogee, Inc. 938
75,000 Caremark International, Inc. 1,500
40,000 Columbia/HCA Healthcare Corp. 1,730
29,200 *Coram Healthcare Corp. 412
20,000 *Horizon Healthcare Corp. 358
50,000 *Orthodontic Centers of America, Inc. 1,212
10,000 *Pacific Physician Services, Inc. 130
40,000 *Quantum Health Resources, Inc. 660
75,000 *Vencor, Inc. 2,362
-------
9,302
MEDICAL SUPPLIES (8.2%)
32,000 *Cordis Corp. 2,136
55,000 *I-Stat Corp. 2,008
50,000 *Isolyser Co., Inc. 1,787
40,000 *Steris Corp. 1,940
-------
7,871
5
<PAGE>
SCHEDULE OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- --------------------------------------------------------------------------------
<S> <C> <C>
NATURAL GAS-DIVERSIFIED (1.3%)
60,000 KCS Energy, Inc. $ 1,283
OFFICE EQUIPMENT
& SUPPLIES (1.5%)
40,000 *Viking Office Products, Inc. 1,465
RESTAURANT (3.4%)
45,000 Applebee's International, Inc. 1,159
82,500 *Cheesecake Factory, Inc. 2,124
-------
3,283
RETAIL--SPECIAL LINES (1.6%)
100,000 *Bombay Co., Inc. 788
50,000 *Leslie's Poolmart 750
-------
1,538
SEMICONDUCTOR (10.3%)
50,000 *Cyrix Corp. 1,206
75,000 *Integrated Circuit Systems, Inc. 1,106
66,000 *LSI Logic Corp. 2,582
17,000 Linear Technology Corp. 1,122
27,000 *Maxim Integrated Products, Inc. 1,377
26,000 *Xilinx, Inc. 2,444
-------
9,837
TELECOMMUNICATIONS
EQUIPMENT (1.9%)
75,000 *VeriFone, Inc. 1,838
TELECOMMUNICATIONS
SERVICE (5.5%)
75,000 *Nextel Communications, Inc. Class "A" 1,059
57,000 *Paging Network, Inc. 1,952
70,500 *Vanguard Cellular Systems, Inc.
Class "A" 1,692
40,000 *Xpedite Systems, Inc. 560
-------
5,263
-------
TOTAL COMMON STOCKS
(Cost $51,317) 85,371
VALUE
(IN THOUSANDS
NUMBER OF EXCEPT PER
WARRANTS SHARE AMOUNT)
- --------------------------------------------------------------------------------
WARRANTS (0%)
40,515 *Westwood One, Inc.
-expires September 4, 1997 $ 63
-------
TOTAL WARRANTS (COST $5) 63
-------
TOTAL INVESTMENT SECURITIES (89.1%)
(COST $51,322) 85,434
-------
SHORT-TERM
INVESTMENTS (12.2%)
Principal Amount
(IN THOUSANDS)
$11,705 Federal Home Loan Mortgage Corp.
Discount Notes 6.10%, 7/03/95 11,701
-------
TOTAL SHORT-TERM INVESTMENTS
(COST $11,701) 11,701
-------
EXCESS OF LIABILITIES OVER CASH
AND RECEIVABLES (-1.3%) (1,287)
-------
NET ASSETS (100%) $95,848
-------
-------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($95,848,000 DIVIDED BY 5,086,840 SHARES OUTSTANDING $ 18.84
-------
-------
<FN>
* NON-INCOME PRODUCING
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
6
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
AT JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS
(IN THOUSANDS)
EXCEPT PER-
SHARE AMOUNT)
------------
<S> <C>
ASSETS:
Investment securities, at value
(Cost - $51,322) . . . . . . . . . . . . . $ 85,434
Short-term investments (Cost - $11,701). . . 11,701
Cash . . . . . . . . . . . . . . . . . . . . 62
Receivable for capital shares sold . . . . . 2
---------
TOTAL ASSETS. . . . . . . . . . . . . 97,199
---------
LIABILITIES:
Payable for securities purchased . . . . . . 1,225
Payable for capital shares repurchased . . . 2
Accrued expenses:
Advisory fee . . . . . . . . . . . . . . . 57
Other. . . . . . . . . . . . . . . . . . . 67
---------
TOTAL LIABILITIES . . . . . . . . . . 1,351
---------
NET ASSETS:
Capital stock, at $1.00 par value
(authorized 100,000,000, outstanding
5,086,840 shares). . . . . . . . . . . . 5,087
Additional paid-in capital . . . . . . . . . 52,224
Accumulated investment loss - net. . . . . . (157)
Undistributed net realized gain
on investments . . . . . . . . . . . . . . 4,582
Unrealized net appreciation of investments . 34,112
---------
NET ASSETS. . . . . . . . . . . . . . $ 95,848
---------
---------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
OUTSTANDING SHARE
($95,848,000 DIVIDED BY 5,086,840
SHARES OUTSTANDING). . . . . . . . . . . . $ 18.84
---------
---------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS
(IN THOUSANDS)
------------
<S> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . $ 324
Dividends. . . . . . . . . . . . . . . . . . 11
---------
TOTAL INCOME . . . . . . . . . . . . . . . 335
---------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . 333
Transfer agent . . . . . . . . . . . . . . . 64
Auditing and legal fees. . . . . . . . . . . 24
Postage. . . . . . . . . . . . . . . . . . . 16
Registration fees. . . . . . . . . . . . . . 15
Telephone and wire charges . . . . . . . . . 15
Printing and stationery. . . . . . . . . . . 11
Directors' fees and expenses . . . . . . . . 6
Custodian fees . . . . . . . . . . . . . . . 5
Insurance, dues, and other . . . . . . . . . 3
---------
TOTAL EXPENSES . . . . . . . . . . . . 492
---------
INVESTMENT LOSS - NET. . . . . . . . . . . . (157)
---------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS - NET:
Realized Gain - Net. . . . . . . . . . . . 4,635
Change in Unrealized Appreciation. . . . . 9,466
---------
NET REALIZED GAIN AND CHANGE IN
UNREALIZED APPRECIATION ON INVESTMENTS . . 14,101
---------
NET INCREASE IN NET ASSETS FROM
OPERATIONS . . . . . . . . . . . . . . . . $ 13,944
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATIONS:
Investment loss - net. . . . . . . . . . . . . . . . . . . . . . . $ (157) $ (397)
Realized gain on investments - net . . . . . . . . . . . . . . . . 4,635 1,856
Change in unrealized appreciation. . . . . . . . . . . . . . . . . 9,466 (460)
---------- ----------
Net increase in net assets from operations . . . . . . . . . . . . 13,944 999
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Realized gain from investment transactions - net . . . . . . . . . - (5,095)
---------- ----------
- (5,095)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares . . . . . . . . . . . . . . . . . . . 9,102 29,681
Proceeds from reinvestment of distributions to shareholders. . . . - 4,534
Cost of shares repurchased . . . . . . . . . . . . . . . . . . . . (17,375) (31,327)
---------- ----------
(Decrease) Increase from capital-share transactions. . . . . . . . (8,276) 2,888
---------- ----------
TOTAL INCREASE (DECREASE). . . . . . . . . . . . . . . . . . . . . . . 5,668 (1,208)
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . 90,180 91,388
---------- ----------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,848 $ 90,180
---------- ----------
---------- ----------
Accumulated Investment Loss - net,
at end of period . . . . . . . . . . . . . . . . . . . . . . . . $ (157) $ -
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. 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 and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales prices on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or which are
not readily marketable and all other assets of the Fund are valued at fair value
as the Board of Directors may determine in good faith. Short-term instruments
with maturities of 60 days or less at the date of purchase are valued at
amortized cost, which approximates market value.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income-tax or excise-tax provision is required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted
for on the date the securities are purchased or sold. Interest income is accrued
as earned. Realized gains and losses on sales of securities are calculated for
financial accounting and federal income-tax purposes on the identified-cost
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
(E) AMORTIZATION. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
(F) RECLASSIFICATION OF CAPITAL ACCOUNTS. The Fund accounts for and reports
distributions to shareholders in accordance with statement of position 93-2:
Determination, Disclosures and Financial Statement Presentation of Income,
Capital Gains and Return of Capital Distributions by Investment Companies.
Accordingly "book/tax" differences which are considered permanent in nature are
reclassified within the capital accounts based on their federal tax-basis
treatment. During the year ended December 31, 1994, the Fund reclassified
$397,000 of net investment loss to additional paid-in capital.
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS, AND
DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows (in thousands, except per-share
amount):
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DEC. 31,
(UNAUDITED) 1994
-----------------------------
<S> <C> <C>
Shares sold. . . . . . . . . . . . . . . . . 538 1,798
Shares issued to shareholders
in reinvestment of
distributions. . . . . . . . . . . . . . . - 284
-----------------------------
538 2,082
Shares repurchased . . . . . . . . . . . . . 1,033 1,892
-----------------------------
Net (decrease) increase. . . . . . . . . . . (495) 190
-----------------------------
-----------------------------
Distributions per share from
net realized gains . . . . . . . . . . . . . $ - $ .962
-----------------------------
-----------------------------
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
PURCHASES:
Investment Securities. . . . . $ 6,891
---------
---------
SALES:
Investment Securities. . . . . $ 12,907
---------
---------
</TABLE>
At June 30, 1995, the aggregate cost of investment securities and short-term
investments for federal income-tax purposes was $63,023,000. The aggregate
appreciation and depreciation of investments at June 30, 1995, based on a
comparison of investment values and their costs for federal income-tax purposes,
was $36,659,000 and $2,547,000, respectively, resulting in a net appreciation of
$34,112,000.
For federal income-tax purposes, realized losses incurred after October 31,
within the fiscal year, if so elected by the Fund, are deemed to arise on the
first day of the Fund's following fiscal year. The Fund incurred and elected to
defer net capital losses of approximately $52,000 during the year ended December
31, 1994. To the extent future capital gains are offset by such capital losses,
the Fund does not anticipate distributing any such gains to the shareholders.
4. INVESTMENT ADVISORY CONTRACT,
MANAGEMENT FEES, AND TRANSACTIONS
WITH AFFILIATES
An advisory fee of $333,000 was paid or payable to Value Line, Inc., the Fund's
investment adviser ("Adviser"), for the six months ended June 30, 1995. This was
computed at the rate of 3/4 of 1% of the average daily net assets during the
year and paid monthly. The Adviser provides research, investment programs, and
supervision of the investment portfolio and pays costs of 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. If the aggregate
expenses of the Fund, other than taxes, interest, brokerage commissions, and
extraordinary expenses, exceed the expense limitation imposed by any state in
which the Fund's shares are sold, the advisory fee will be reduced by the amount
of such excess, or the amount of such excess will be refunded. No such
reimbursement was required for the six months ended June 30, 1995.
A fee of $1,860 for printing services was paid or payable to the Adviser for the
six months ended June 30, 1995.
Certain officers and directors of the Adviser and its wholly owned subsidiary,
Value Line Securities, Inc. (the Fund's distributor and a registered
broker/dealer), are also officers and a director of the Fund. During the six
months ended June 30, 1995, the Fund paid brokerage commissions totalling $5,000
to the distributor, which clears its transactions through unaffiliated brokers.
The Adviser and/or affiliated companies owned 307,000 shares of the Fund's
capital stock, representing 6.0% of the outstanding shares at June 30, 1995. In
addition, certain officers and directors of the Fund owned 5,959 shares of the
Fund, representing 0.1% of the outstanding shares.
10
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended December 31,
(unaudited) ------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . $ 16.15 $ 16.95 $ 15.69 $ 16.41 $ 12.72 $ 13.49
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) income . . . . . . . (.03) (.07) (.13) (.05) .04 .13
Net gains (or losses) on securities
(both realized and unrealized). . . . . 2.72 .23 2.14 (.52) 4.56 (.73)
-------- -------- -------- -------- -------- --------
Total from investment operations . . . . . 2.69 .16 2.01 (.57) 4.60 (.60)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income . . . - - - # (.05) (.17)
Distributions from capital gains . . . . . - (.96) (.75) (.15) (.86) -
-------- -------- -------- -------- -------- --------
Total distributions. . . . . . . . . . . . - (.96) (.75) (.15) (.91) (.17)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . $ 18.84 $ 16.15 $ 16.95 $ 15.69 $ 16.41 $ 12.72
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN . . . . . . . . . . . . . . . . . 16.66%+ 1.03% 12.99% -3.45% 36.61% -4.45%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) . . $ 95,848 $ 90,180 $ 91,388 $101,094 $129,044 $103,851
Ratio of operating expenses to average
net assets . . . . . . . . . . . . . . . . 1.10%* 1.10% 1.06% 1.09% 1.04% 1.11%
Ratio of net investment income (loss)
to average net assets. . . . . . . . . . . (.35)%* (.46)% (.79)% (.33)% .24% .92%
Portfolio turnover rate. . . . . . . . . . . 9%+ 37% 39% 43% 37% 33%
<FN>
# Dividend paid was less than one cent per share
+ Not annualized
* Annualized
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
THE VALUE LINE FAMILY FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with
modest current income by investing substantially all of its assets in common
stocks or securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND's primary investment objective is income,
as high and dependable as is consistent with reasonable growth. Capital growth
to increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term
growth of capital by investing not less than 80% of its assets in "special
situations". No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTOR'S sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current
income consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income
without undue risk to principal. Under normal conditions, at least 80% of the
value of its assets will be invested in issues of the U.S. Government and its
agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND seeks long-term growth of capital as its
sole objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance. The Fund is available to investors only through
the purchase of Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income securities.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York
taxpayers with maximum income exempt from New York State, New York City and
federal income taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST invests in stocks, bonds
and cash equivalents according to computer trend models developed by Value Line.
The objective is to professionally manage the optimal allocation of these
investments at all times. The Fund is available to investors only through the
purchase of the Guardian Investor, a tax deferred variable annuity, or Value
Plus, a variable life insurance policy.
1992 -- THE VALUE LINE ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND seeks
high current income consistent with low volatility of principal by investing
primarily in adjustable rate U.S. Government securities.
1993 -- VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
- --------------------------------------------------------------------------------
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL
1-800-223-0818, 24 HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
12
