<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1996
FILE NO. 2-12663
FILE NO. 811-719
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 85 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 85 /X/
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THE VALUE LINE SPECIAL
SITUATIONS FUND, INC.
(EXACT NAME OF REGISTRATION AS SPECIFIED IN CHARTER)
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's Telephone Number, including Area Code: (212) 907-1500
David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
Peter D. Lowenstein
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
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It is proposed that this filing will become effective (check
appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of rule 485
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Pursuant to the provisions of Rule 24f-2(a)(1) under the Investment Company Act
of 1940, Registrant has registered an indefinite number of shares of capital
stock under the Securities Act of 1933. Registrant filed its Rule 24f-2 Notice
for the year ended December 31, 1995 on or about February 6, 1996.
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<PAGE>
THE VALUE LINE SPECIAL SITUATIONS FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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<C> <S> <C>
PART A (PROSPECTUS)
Item 1. Cover Page............................................. Cover Page
Item 2. Synopsis............................................... Omitted
Item 3. Condensed Financial Information........................ Summary of Fund Expenses; Financial
Highlights
Item 4. General Description of Registrant...................... Cover Page; Investment Objective and
Policies; Investment Restrictions;
Additional Information
Item 5. Management of the Fund................................. Summary of Fund Expenses; Management of
the Fund; Additional Information
Item 6. Capital Stock and Other Securities..................... Dividends, Distributions and Taxes;
Additional Information
Item 7. Purchase of Securities Being Offered................... How to Buy Shares; Calculation of Net
Asset Value; Investor Services
Item 8. Redemption or Repurchase of Securities................. How to Redeem Shares
Item 9. Pending Legal Proceedings.............................. Not Applicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
Item 10. Cover Page............................................. Cover Page
Item 11. Table of Contents...................................... Table of Contents
Item 12. General Information and History........................ Additional Information (Part A)
Item 13. Investment Objectives and Policies..................... Investment Objectives and Policies;
Investment Restrictions
Item 14. Management of the Fund................................. Directors and Officers
Item 15. Control Persons and Principal Holders of Securities.... Management of the Fund (Part A);
Directors and Officers
Item 16. Investment Advisory and Other Services................. Management of the Fund (Part A); The
Adviser
Item 17. Brokerage Allocation................................... Management of the Fund (Part A);
Brokerage Arrangements
Item 18. Capital Stock and Other Securities..................... Additional Information (Part A)
Item 19. Purchase, Redemption and Pricing of Securities Being
Offered.............................................. How to Buy Shares; Suspension of
Redemptions; Calculation of Net Asset
Value (Part A)
Item 20. Tax Status............................................. Taxes
Item 21. Underwriters........................................... Not Applicable
Item 22. Calculation of Performance Data........................ Performance Information (Part A);
Performance Data
Item 23. Financial Statements................................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
<TABLE>
<S> <C>
THE
VALUE LINE PROSPECTUS
SPECIAL SITUATIONS May 1, 1996
FUND, INC.
</TABLE>
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
The Value Line Special Situations Fund, Inc. (the
"Fund") is a no-load investment company whose primary
investment objective is long-term growth of capital.
The Fund invests primarily in a broadly diversified
list of "special situations."
The Fund invests substantially all of its assets in
common stocks or securities convertible into common
stock. From time to time, a portion of the Fund's
assets may be invested in debt securities, short-term
indebtedness, bonds or preferred stocks or may be held
in cash.
The Fund's investment adviser is Value Line, Inc. (the
"Adviser").
Shares of the Fund are offered at net asset value.
There are no sales charges or redemption fees.
This Prospectus sets forth concise information about the Fund that a
prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information about
the Fund is contained in a Statement of Additional Information, dated
May 1, 1996, which has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. A copy
of the Statement of Additional Information may be obtained at no charge
by writing or telephoning the Fund at the address or telephone numbers
listed above.
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases..................................................... None
Sales Load on Reinvested Dividends.......................................... None
Deferred Sales Load......................................................... None
Redemption Fees............................................................. None
Exchange Fee................................................................ None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees............................................................. .75%
12b-1 Fees.................................................................. None
Other Expenses.............................................................. .31%
Total Fund Operating Expenses............................................... 1.06%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:....... $11 $34 $58 $129
</TABLE>
The foregoing is based upon the expenses for the year ended December 31,
1995, and is designed to assist investors in understanding the various costs and
expenses that an investor in the Fund will bear directly or indirectly. Actual
expenses in the future may be greater or less than these shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The following information on selected per share data and ratios, with
respect to each of the five years in the period ended December 31, 1995, and the
related financial statements have been audited by Price Waterhouse LLP,
independent accountants, whose unqualified report thereon appears in the Fund's
Annual Report to Shareholders which is incorporated by reference in the
Statement of Additional Information. This information should be read in
conjunction with the financial statements and notes thereto which appear in the
Fund's Annual Report to Shareholders available from the Fund without charge.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR.............. $16.15 $16.95 $15.69 $16.41 $12.72 $13.49 $11.25 $10.99 $15.07 $14.37
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM
INVESTMENT
OPERATIONS:
Net investment
income (loss)..... .06 (.07) (.13) (.05) .04 .13 .27 .09 .06 .06
Net gains or
losses
on securities
(both
realized and
unrealized)....... 4.58 .23 2.14 (.52) 4.56 (.73) 2.19 .26 (1.46) .68
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations........ 4.64 .16 2.01 (.57) 4.60 (.60) 2.46 .35 (1.40) .74
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from
net investment
income............ (.06) -- -- --# (.05) (.17) (.22) (.09) (.12) (.04)
Distributions from
net
realized gains.... (4.49) (.96) (.75) (.15) (.86) -- -- -- (2.56) --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions..... (4.55) (.96) (.75) (.15) (.91) (.17) (.22) (.09) (2.68) (.04)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END
OF YEAR........... $16.24 $16.15 $16.95 $15.69 $16.41 $12.72 $13.49 $11.25 $10.99 $15.07
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL RETURN........ 28.96% 1.03% 12.99% -3.45% 36.61% -4.45% 21.93% 3.17% -9.09% 5.11%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
year
(in thousands).... $ 98,408 $ 90,180 $ 91,388 $101,094 $129,044 $103,851 $116,783 $112,399 $123,756 $193,629
Ratio of operating
expenses to
average
net assets........ 1.06% 1.10% 1.06% 1.09% 1.04% 1.11% 1.08% 1.16% 1.01% 1.02%
Ratio of net
investment
(loss) income to
average net
assets............ .32% (.46)% (.79)% (.33)% .24% .92% 1.84% .68% .26% .29%
Portfolio turnover
rate.............. 10% 37% 39% 43% 37% 33% 66% 59% 41% 73%
</TABLE>
- ------------
(#) Dividend paid was less than one cent per share.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The primary investment objective of the Fund is long-term growth of capital.
No consideration is given to current income in the choice of investments. The
Fund will at all times keep not less than 80% of the market value of its assets
(other than cash and U.S. government securities) invested in "special
situations". This is a fundamental policy of the Fund which along with its
investment objective cannot be changed without shareholder approval. There can
be no assurance that the Fund will achieve its investment objective. There are
risks in all investments, including any stock investment, and in all mutual
funds that invest in stocks.
BASIC INVESTMENT STRATEGY
The Fund seeks to achieve its investment objective by investing
substantially all of its assets in a diversified portfolio of common stocks or
securities convertible into common stock. However, a portion of its assets may
be held from time to time in cash, debt securities, bonds or preferred stocks
when the Adviser deems such a position appropriate in the light of economic or
market conditions. The Fund may also purchase restricted securities, write
covered call options and enter into repurchase agreements.
In selecting securities for purchase or sale, the Adviser may rely on the
Value Line Timeliness-TM- Ranking System (if a ranking is available for that
particular stock) which has evolved after many years of research and has been
used in substantially its present form since 1965. It is based upon historical
prices and reported earnings, recent earnings and price momentum and the degree
to which the last reported earnings deviated from estimated earnings. The
Timeliness Rankings are published weekly in the Standard Edition of The Value
Line Investment Survey for approximately 1,700 stocks. On a scale of 1 (highest)
to 5 (lowest), the Rankings compare the Adviser's estimate of the probable
market performance of each stock during the coming twelve months relative to all
1,700 stocks under review. The Rankings are updated weekly to reflect the most
recent information. The Rankings do not eliminate market risk, but the Adviser
believes that they provide objective standards for determining whether the
market is undervaluing or overvaluing a particular security. Reliance upon the
Rankings, whenever feasible, is a fundamental policy of the Fund which may not
be changed without shareholder approval. Reliance on the Rankings is no
assurance that the Fund will perform more favorably than the market in general
over any particular period.
"SPECIAL SITUATIONS". A "special situation" as that term is used in this
Prospectus refers to the security of a company in which an unusual and possibly
non-repetitive development is taking place which in the opinion of the Adviser
will probably cause the security to attain a higher market value independently,
to a degree, of the trend of the securities markets in general. Since every
"special situation" to some extent involves a break with past experience, the
uncertainties in the appraisal of future value and risk of possible loss are
greater than in the case of old, well-established companies carrying on
according to long-established patterns. However, for the same reason, the
Adviser believes that "special situations" offer greater than average
appreciation potential.
The particular development (actual or prospective) which may qualify a
security as a "special situation" may be one of many different types. For
example: a technological improvement or important discovery or acquisition
which, if the expectation for it materialized, would effect a substantial change
in the company's business; a recapitalization or other development involving a
security exchange or conversion; a merger, liquidation or distribution of cash,
securities or other assets; a breakup or workout of a holding company; payment
on account of arrears; litigation which, if resolved favorably, would improve
the value of the company's stock; a new or changed management; or material
changes in management policies. The fact, if it exists, that an increase in
4
<PAGE>
the company's earnings, dividends or business is expected, or that a given
security is considered to be undervalued, is not in itself sufficient to qualify
a security as a "special situation". A "special situation" often involves a
comparatively small company which is not well known and which has not been
closely watched by investors generally, but it may also involve a large company.
MISCELLANEOUS INVESTMENT PRACTICES
COVERED CALL OPTIONS. The Fund may write covered call options on stocks
held in its portfolio ("covered options") in an attempt to earn additional
income on its portfolio or to partially offset an expected decline in the price
of a security. When the Fund writes a covered call option, it gives the
purchaser of the option the right to buy the underlying security at the price
specified in the option (the "exercise price") at any time during the option
period. If the option expires unexercised, the Fund will realize income to the
extent of the amount received for the option (the "premium"). If the option is
exercised, a decision over which the Fund has no control, the Fund must sell the
underlying security to the option holder at the exercise price. By writing a
covered option, the Fund foregoes, in exchange for the premium less the
commission ("net premium"), the opportunity to profit during the option period
from an increase in the market value of the underlying security above the
exercise price. The Fund will not write call options in an aggregate amount
greater than 25% of its net assets.
The Fund will purchase call options only to close out a position. When an
option is written on securities in the Fund's portfolio and it appears that the
purchaser of that option is likely to exercise the option and purchase the
underlying security, it may be considered appropriate to avoid liquidating the
Fund's position, or the Fund may wish to extinguish a call option sold by it so
as to be free to sell the underlying security. In such instances the Fund may
purchase a call option on the same security with the same exercise price and
expiration date which had been previously written. Such a purchase would have
the effect of closing out the option which the Fund has written. The Fund
realizes a gain if the amount paid to purchase the call option is less than the
premium received for writing a similar option and a loss if the amount paid to
purchase a call option is greater than the premium received for writing a
similar option. Generally, the Fund realizes a short-term capital loss if the
amount paid to purchase the call option with respect to a stock is greater than
the premium received for writing the option. If the underlying security has
substantially risen in value, it may be difficult or expensive to purchase the
call option for the closing transaction.
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The Fund will make payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. The Board of Directors
monitors the creditworthiness of parties with which the Fund enters into
repurchase agreements.
5
<PAGE>
RISK FACTORS
Investors should be aware of the following:
- There are risks in all investments, including any stock investment, and in
all mutual funds. The Fund's net asset value will fluctuate to reflect the
investment performance of the securities held by the Fund.
- The value a shareholder receives upon redemption may be greater or lesser
than the value of such shares when acquired.
- The use of investment techniques such as investing in repurchase
agreements involves greater risk than does an investment in a fund that
does not engage in such activities.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of investment restrictions which may not be
changed without shareholder approval. These are set forth in the Statement of
Additional Information and provide, among other things, that the Fund may not
(a) borrow in excess of 10% of the value of its assets and then only as a
temporary measure;
(b) purchase securities (other than U.S. government securities) if the
purchase would cause the Fund, at the time, to have more than 5% of the value of
its total assets invested in the securities of any one company or to own more
than 10% of the outstanding voting securities of any one company; or
(c) invest 25% or more of the value of the Fund's assets in securities of
issuers in one particular industry.
MANAGEMENT OF THE FUND
The management and affairs of the Fund are supervised by the Fund's Board of
Directors. The Fund's officers conduct and supervise the daily business
operations of the Fund. The Fund's investment decisions are made by an
investment committee of employees of the Adviser. The Fund's Annual Report
contains a discussion on the Fund's performance, which will be made available
upon request and without charge.
THE ADVISER. The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co., Inc. ("AB&Co.").
The Adviser was formed as part of a reorganization of AB&Co., a sole
proprietorship formed in 1931 which became a New York corporation in 1946.
AB&Co. currently owns approximately 81% of the outstanding shares of the
Adviser's common stock. Jean Bernhard Buttner, Chairman, President and Chief
Executive Officer of the Adviser, owns a majority of the voting stock of AB&Co.
All of the non-voting stock is owned by or for the benefit of members of the
Bernhard family and employees and former employees of AB&Co. or the Adviser. The
Adviser currently acts as investment adviser to the other Value Line mutual
funds and furnishes investment advisory services to private and institutional
accounts with combined assets in excess of $5 billion. Value Line Securities,
Inc., the Fund's distributor, is a subsidiary of the Adviser. The Adviser
manages the Fund's investments, provides various administrative services and
supervises the Fund's daily business affairs, subject to the authority of the
Board of Directors. The Adviser is paid an advisory fee at an annual rate of
0.75% of the Fund's average daily net assets during the year. Although this fee
is higher than that paid by many other investment companies, it is not unusually
high for investment companies with a similar investment objective. For more
information about the Fund's management fees and expenses, see the "Summary of
Fund Expenses" on page 2.
6
<PAGE>
BROKERAGE. The Fund pays a portion of its total brokerage commissions to
Value Line Securities, Inc., which clears transactions for the Fund through
unaffiliated broker-dealers.
CALCULATION OF NET ASSET VALUE
The net asset value of the Fund's shares for purposes of both purchases and
redemptions is determined once daily as of the close of trading of the first
session of the New York Stock Exchange (currently 4:00 p.m., New York time) on
each day that the New York Stock Exchange is open for trading except on days on
which no orders to purchase, sell or redeem Fund shares have been received. The
New York Stock Exchange is currently closed on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share is determined by dividing the total
value of the investments and other assets of the Fund, less any liabilities, by
the total outstanding shares. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales price 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.
HOW TO BUY SHARES
PURCHASE BY CHECK. To buy shares, send a check made payable to "NFDS-Agent"
and a completed and signed application form to Value Line Funds, c/o NFDS, P.O.
Box 419729, Kansas City, MO 64141-6729. For assistance in completing the
application and for information on pre-authorized telephone purchases, call
Value Line Securities at 1-800-223-0818 during New York business hours. Upon
receipt of the completed and signed purchase application and a check, National
Financial Data Services, Inc. ("NFDS"), the Fund's shareholder servicing agent,
will buy full and fractional shares (to three decimal places) at the net asset
value next computed after the funds are received and will confirm the investment
to the investor. Subsequent investments may be made by attaching a check to the
confirmation's "next payment" stub, by telephone or by federal funds wire.
Investors may also buy shares through broker-dealers other than Value Line
Securities. Such broker-dealers may charge investors a reasonable service fee.
Neither Value Line Securities nor the Fund receives any part of such fees when
charged (and which can be avoided by investing directly). If an order to
purchase shares is cancelled due to nonpayment or because the purchaser's check
does not clear, the purchaser will be responsible for any loss incurred by the
Fund or Value Line Securities by reason of such cancellation. If the purchaser
is a shareholder, Value Line Securities reserves the right to redeem sufficient
shares from the shareholder's account to protect the Fund against loss. Minimum
orders are $1,000 for an initial purchase and $100 for each subsequent purchase.
The Fund may refuse any order for the purchase of shares.
7
<PAGE>
WIRE PURCHASE--$1,000 MINIMUM. An investor should call 1-800-243-2729 to
obtain an account number. After receiving an account number, instruct your
commercial bank to wire transfer "federal funds" via the Federal Reserve System
as follows:
State Street Bank and Trust Company, Boston, MA
ABA # 011000028
Attn: Mutual Fund Division
DDA # 99049868
Value Line Special Situations Fund
A/C # ________________________
Shareholder's name and account information
Tax ID # ________________________
NOTE: A COMPLETED AND SIGNED APPLICATION MUST BE MAILED IMMEDIATELY AND
RECEIVED BY NFDS BEFORE IT CAN HONOR ANY WITHDRAWAL OR EXCHANGE TRANSACTIONS.
After your account has been opened, you may wire additional investments in
the same manner.
For an initial investment made by federal funds wire purchase, the wire must
include a valid social security number or tax identification number. Investors
purchasing shares in this manner will then have 30 days after purchase to
provide the certification and signed account application. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn on only U.S.
banks. Until receipt of the above, any distributions from the account will be
subject to 31% withholding.
SUBSEQUENT TELEPHONE PURCHASES--$250 MINIMUM. Upon completion of the
telephone purchase authorization section of the account application,
shareholders who own Fund shares with a current value of $500 or more may also
purchase additional shares in amounts of $250 or more up to twice the value of
their shares by calling 1-800-243-2729 between 9:00 a.m. and 4:00 p.m. New York
time. Such orders will be priced at the closing net asset value on the day
received and payment will be due within three business days. If payment is not
received within the required time or a purchaser's check does not clear, the
order is subject to cancellation and the purchaser will be responsible for any
loss incurred by the Fund or Value Line Securities. Shares may not be purchased
by telephone for a tax-sheltered retirement plan.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund distributes net investment income and any net realized capital
gains to shareholders at least annually. Income dividends and capital gains
distributions are automatically reinvested in additional shares of the Fund
unless the shareholder has requested otherwise. Because the Fund intends to
distribute all of its net investment income and capital gains to shareholders,
it is not expected that the Fund will be required to pay any federal income
taxes. However, shareholders of the Fund normally will have to pay federal
income taxes, and any applicable state or local taxes, on the dividends and
capital gains distributions they receive from the Fund (whether or not
reinvested in additional Fund shares). Shareholders will be informed annually of
the amount and nature of the Fund's income and distributions.
PERFORMANCE INFORMATION
The Fund may from time to time include information regarding its total
return performance in advertisements or in information furnished to existing or
prospective shareholders. When information regarding total return is furnished,
it will be based upon changes in the Fund's net asset
8
<PAGE>
value, and will assume the reinvestment of all capital gains distributions and
income dividends. It will take into account nonrecurring charges, if any, which
the Fund may incur but will not take into account income taxes due on Fund
distributions.
The table below illustrates the total return performance of the Fund for the
periods indicated by showing the value of a hypothetical $1,000 investment made
at the beginning of each period. The information contained in the table has been
computed by applying the Fund's average annual total return to the hypothetical
$1,000 investment. The table assumes reinvestment of all capital gains
distributions and income dividends, but does not take into account income taxes
due on Fund distributions or dividends.
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
TOTAL RETURN
------------
<S> <C> <C>
For the year ended December 31, 1995............................... $ 1,290 28.96 %
For the five years ended December 31, 1995......................... $ 1,942 14.19 %
For the ten years ended December 31, 1995.......................... $ 2,230 8.35 %
</TABLE>
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc. and other industry or financial publications. The Fund may compare its
performance to that of other mutual funds with similar investment objectives and
to stock or other relevant indices. From time to time, articles about the Fund
regarding its performance or ranking may appear in national publications such as
Kiplinger's Personal Finance, Money Magazine, Financial World, Morningstar,
Personal Investors, Forbes, Fortune, Business Week, Wall Street Journal,
Investor's Business Daily, Donoghue and Barron's. Some of these publications may
publish their own rankings or performance reviews of mutual funds, including the
Fund. Reference to or reprints of such articles may be used in the Fund's
promotional literature.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after NFDS receives a request in proper form. ALL REQUESTS
FOR REDEMPTION SHOULD BE SENT TO NFDS, P.O. BOX 419729, KANSAS CITY, MO.
64141-6729. The value of shares of the Fund on redemption may be more or less
than the shareholder's cost, depending upon the market value of the Fund's
assets at the time. A shareholder holding certificates for shares must surrender
the certificates properly endorsed with signature guaranteed. A signature
guarantee may be executed by any "eligible" guarantor. Eligible guarantors
include domestic banks, savings associations, credit unions, member firms of a
national securities exchange, and participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. You should verify with the
institution that they are an acceptable (eligible) guarantor prior to signing. A
guarantee from a Notary Public is not an acceptable source. The signature on any
request for redemption of shares not represented by certificates, or on any
stock power in lieu thereof, must be similarly guaranteed. In each case the
signature or signatures must correspond to the names in which the account is
registered. Additional documentation may be required when shares are registered
in the name of a corporation, agent or fiduciary. For further information, you
should contact NFDS.
9
<PAGE>
The Fund does not make a redemption charge, but shares redeemed through
brokers or dealers may be subject to a service charge by such firms. A check for
the redemption proceeds will be mailed within seven days following receipt of
all required documents. However, payment may be postponed under unusual
circumstances such as when normal trading is not taking place on the New York
Stock Exchange. In addition, shares purchased by check may not be redeemed for
up to 15 days following the purchase date.
If the Board of Directors determines that it is in the best interests of the
Fund, the Fund may redeem, upon prior written notice, at net asset value all
shareholder accounts which, due to redemptions, fall below $500 in net asset
value. In such event, an investor will have 30 days to increase the shares in
his account to the minimum level.
The Fund will ordinarily pay in cash all redemptions by any shareholder of
record. However, the Fund has reserved the right under the Investment Company
Act of 1940 to make payment in whole or in part in securities of the Fund, if
the Directors determine that such action is in the best interests of the other
shareholders. Under such circumstances, the Fund will, nevertheless, pay to each
shareholder of record in cash all redemptions by such shareholder, during any
90-day period, up to the lesser of $250,000 or 1% of the Fund's net assets.
Securities delivered in payment of redemptions are valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities may incur brokerage costs on their sales.
INVESTOR SERVICES
VALU-MATIC.-REGISTERED TRADEMARK- The Fund offers a free service to its
shareholders, Valu-Matic-Registered Trademark-, through which monthly
investments of $25 or more may be made automatically into the shareholder's Fund
account. The shareholder authorizes the Fund to debit the shareholders's bank
account monthly for the purchase of Fund shares on or about the 3rd or 18th of
each month. Further information regarding this service can be obtained from
Value Line Securities by calling 1-800-223-0818.
EXCHANGE OF SHARES. Shares of the Fund may be exchanged for shares of the
other Value Line funds in any identically registered account on the basis of the
respective net asset values next computed after receipt of the exchange order.
No telephone exchanges can be made for less than $1,000. If shares of the Fund
are being exchanged for shares of The Value Line Cash Fund, Inc. or The Value
Line Tax Exempt Fund--Money Market Portfolio and the shares (including shares in
accounts under the control of one investment advisor) have a value in excess of
$500,000, then, at the discretion of the Adviser, the shares to be purchased
will be purchased at the closing price on the third business day following the
redemption of the shares being exchanged to allow the Fund to utilize normal
securities settlement procedures in transferring the proceeds of the redemption.
The exchange privilege may be exercised only if the shares to be acquired
may be sold in the investor's State. Prospectuses for the other funds may be
obtained from Value Line Securities by calling 1-800-223-0818. Each such
exchange involves a redemption and a purchase for tax purposes. Broker-dealers
are not prohibited from charging a commission for handling the exchange of Fund
shares. To avoid paying such a commission, send the request in proper form to
NFDS. The Fund reserves the right to terminate the exchange privilege of any
account making more than eight exchanges a year. (An exchange out of The Value
Line Cash Fund, Inc., or The Value Line Tax Exempt Fund--Money Market Portfolio
is not counted for this purpose.) The exchange privilege may be modified or
terminated at any time, and any of the Value Line funds may discontinue offering
its shares generally or in any particular State without prior notice. To make an
exchange, call 1-800-243-2729. Although it has not been a problem in the past,
shareholders should be aware that a telephone exchange may be difficult during
periods of major economic or market changes.
10
<PAGE>
SYSTEMATIC CASH WITHDRAWAL PLAN. A shareholder who has invested a minimum
of $5,000 in the Fund, or whose shares have attained that value, may request a
transfer of his shares to a Value Line Systematic Cash Withdrawal Account which
NFDS will maintain in his name on the Fund's books. Under the Systematic Cash
Withdrawal Plan ("the Plan") the shareholder will request that NFDS, acting as
his agent, redeem monthly or quarterly a sufficient number of shares to provide
for payment to him, or someone he designates, of any specified dollar amount
(minimum $25). All certificated shares must be placed on deposit under the Plan
and dividends and capital gains distributions, if any, are automatically
reinvested at net asset value. The Plan will automatically terminate when all
shares in the account have been redeemed. The shareholder may at any time
terminate the Plan, change the amount of the regular payment, or request
liquidation of the balance of his account on written notice to NFDS. The Fund
may terminate the Plan at any time on written notice to the shareholder.
TAX-SHELTERED RETIREMENT PLANS. Shares of the Fund may be purchased for
various types of retirement plans. For more complete information, contact Value
Line Securities at 1-800-223-0818 during New York business hours.
ADDITIONAL INFORMATION
The Fund is an open-end, diversified management investment company
incorporated in Delaware in 1956 and reincorporated in Maryland in 1972. The
Fund has 100,000,000 authorized shares of common stock, $1 par value. Each share
has one vote with fractional shares voting proportionately. Shares have no
preemptive rights, are freely transferable, are entitled to dividends as
declared by the Directors, and, if the Fund were liquidated, would receive the
net assets of the Fund.
INQUIRIES. All inquiries regarding the Fund should be directed to the Fund
at the telephone numbers or address set forth on the cover page of this
Prospectus. Inquiries from shareholders regarding their accounts and account
balances should be directed to National Financial Data Services, Inc., servicing
agent for State Street Bank and Trust Company, the Fund's transfer agent,
1-800-243-2729. Shareholders should note they may be required to pay a fee for
special requests such as historical transcripts of an account. Our Info-Line
provides the latest account information 24 hours a day, every day, and is
available to shareholders with pushbutton phones. The Info-Line toll-free number
is 1-800-243-2739.
WITHHOLDING. Mutual funds are required to withhold 31% of dividends,
distributions of capital gains and redemption proceeds from accounts without a
valid social security or tax identification number. You must provide this
information when you complete the Fund's application and certify that you are
not currently subject to backup withholding. The Fund reserves the right to
close by redemption accounts for which the holder fails to provide a valid
social security or tax identification number.
SHAREHOLDER MEETINGS. The Fund does not intend to hold routine annual
meetings of shareholders. However, special meetings of shareholders will be held
as required by law, for purposes such as changing fundamental policies or
approving an advisory agreement.
11
<PAGE>
THE VALUE LINE FAMILY OF 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 INVESTORS' 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 to
its net 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.
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 corporate 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
individual 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.
1992--VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing in a diversified portfolio of
investment-grade debt securities with a dollar-weighted average portfolio
maturity of between three and ten years.
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.
1995--VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
- ------------------------------
*ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
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
<PAGE>
INVESTMENT ADVISER
Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of Fund Expenses....................... 2
Financial Highlights........................... 3
Investment Objective and Policies.............. 4
Risk Factors................................... 6
Investment Restrictions........................ 6
Management of the Fund......................... 6
Calculation of Net Asset Value................. 7
How to Buy Shares.............................. 7
Dividends, Distributions and Taxes............. 8
Performance Information........................ 8
How to Redeem Shares........................... 9
Investor Services.............................. 10
Additional Information......................... 11
The Value Line Family of Funds................. 12
</TABLE>
- -------------------------------------------
PROSPECTUS
- ------------------
MAY 1, 1996
The Value Line
Special
Situations
Fund, Inc.
(800) 223-0818
[LOGO]
<PAGE>
THE VALUE LINE SPECIAL SITUATIONS FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and must be
read in conjunction with the Prospectus of The Value Line Special Situations
Fund, Inc. (the "Fund") dated May 1, 1996, a copy of which may be obtained
without charge by writing or telephoning the Fund.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Investment Objective and Policies................................................... B-1
Investment Restrictions............................................................. B-2
Directors and Officers.............................................................. B-4
The Adviser......................................................................... B-6
Brokerage Arrangements.............................................................. B-7
How to Buy Shares................................................................... B-8
Suspension of Redemptions........................................................... B-8
Taxes............................................................................... B-9
Performance Data.................................................................... B-11
Additional Information.............................................................. B-10
Financial Statements................................................................ B-11
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVE AND POLICIES" IN THE FUND'S PROSPECTUS)
The Fund will not concentrate its investments in any particular industry but
reserves the right to invest up to 25% of its total assets (taken at market
value) in any one industry. The Fund does not invest for the purposes of
management or control of companies whose securities the Fund owns. It is the
policy of the Fund to purchase and hold securities which are believed to have
potential for long-term capital appreciation. The Fund generally does not
attempt to realize short-term trading profits.
B-1
<PAGE>
The policies set forth in the Fund's Prospectus and in this Statement of
Additional Information and the policies set forth below under "Investment
Restrictions" are, unless otherwise indicated, fundamental policies of the Fund
and may not be changed without the affirmative vote of a majority of the
outstanding voting securities of the Fund. As used in this Statement of
Additional Information and in the Prospectus, a "majority of the outstanding
voting securities of the Fund" means the lesser of (1) the holders of more than
50% of the outstanding shares of capital stock of the Fund or (2) 67% of the
shares present if more than 50% of the shares are present at a meeting in person
or by proxy.
MISCELLANEOUS INVESTMENT PRACTICES
RESTRICTED SECURITIES. On occasion, the Fund may purchase securities which
would have to be registered under the Securities Act of 1933 if they were to be
publicly distributed. However, it will not do so if the value of such securities
and other securities which are not readily marketable (including repurchase
agreements maturing in more than seven days) would exceed 10% of the market
value of its total assets. It is management's policy to permit the occasional
acquisition of such restricted securities only if (except in the case of
short-term, non-convertible debt securities) there is an agreement by the issuer
to register such securities, ordinarily at the issuer's expense, when requested
to do so by the Fund. The acquisition in limited amounts of restricted
securities is believed to be helpful toward the attainment of the Fund's
investment objective of capital appreciation without unduly restricting its
liquidity or freedom in the management of its portfolio. However, because
restricted securities may only be sold privately or in an offering registered
under the Securities Act of 1933, or pursuant to an exemption from such
registration, substantial time may be required to sell such securities, and
there is greater than usual risk of price decline prior to sale.
In addition, the Fund may purchase certain restricted securities ("Rule 144A
securities") for which there is a secondary market of qualified institutional
buyers, as contemplated by Rule 144A under the Securities Act of 1933. Rule 144A
provides an exemption from the registration requirements of the Securities Act
for the resale of certain restricted securities to qualified institutional
buyers.
The Adviser, under the supervision of the Board of Directors, will consider
whether securities purchased under Rule 144A are liquid or illiquid for purposes
of the Fund's limitation on investment in securities which are not readily
marketable or are illiquid. Among the factors to be considered are the frequency
of trades and quotes, the number of dealers and potential purchasers, dealer
undertakings to make a market and the nature of the security and the time needed
to dispose of it.
To the extent that the liquid Rule 144A securities that the Fund holds
become illiquid, due to lack of sufficient qualified institutional buyers or
market or other conditions, the percentage of the Fund's assets invested in
illiquid assets would increase. The Adviser, under the supervision of the Board
of Directors, will monitor the Fund's investments in Rule 144A securities and
will consider appropriate measures to enable the Fund to maintain sufficient
liquidity for operating purposes and to meet redemption requests.
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Engage in arbitrage transactions, short sales, purchases on margin
or participate on a joint or joint and several basis in any trading account
in securities.
B-2
<PAGE>
(2) Purchase or sell any put or call options or any combination thereof,
except that the Fund may write and sell covered call option contracts on
securities owned by the Fund. The Fund may also purchase call options for
the purpose of terminating its outstanding obligations with respect to
securities upon which covered call option contracts have been written (i.e.,
"closing purchase transactions").
(3) Borrow money in excess of 10% of the value of its assets and then
only as a temporary measure to meet unusually heavy redemption requests or
for other extraordinary or emergency purposes. Securities will not be
purchased while borrowings are outstanding. No assets of the Fund may be
pledged, mortgaged or otherwise encumbered, transferred or assigned to
secure a debt.
(4) Engage in the underwriting of securities, except to the extent that
the Fund may be deemed an underwriter as to restricted securities under the
Securities Act of 1933 in selling portfolio securities.
(5) Invest in real estate, mortgages or illiquid securities of real
estate investment trusts although the Fund may purchase securities or
issuers which engage in real estate operations.
(6) Invest in commodities or commodity contracts.
(7) Lend money except in connection with the purchase of debt
obligations or by investment in repurchase agreements, provided that
repurchase agreements maturing in more than seven days when taken together
with other illiquid investments do not exceed 10% of the Fund's assets.
(8) Invest more than 5% of the value of its total assets in the
securities of any one issuer or purchase more than 10% of the outstanding
voting securities, or any other class of securities, of any one issuer. For
purposes of this restriction, all outstanding debt securities of an issuer
are considered as one class, and all preferred stock of an issuer is
considered as one class. This restriction does not apply to obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(9) Purchase securities of other investment companies.
(10) Invest 25% or more of its assets in securities of issuers in any
one industry.
(11) Invest more than 5% of its total assets in securities of issuers
having a record, together with predecessors, of less than three years of
continuous operation. The restriction does not apply to any obligation
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(12) Purchase or retain the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and Value
Line, Inc. (the "Adviser"), who each owns more than 0.5% of the outstanding
securities of such issuer, together own more than 5% of such securities.
(13) Invest more than 2% of the value of its total assets in warrants
(valued at the lower of cost or market), except that warrants attached to
other securities are not subject to these limitations.
B-3
<PAGE>
(14) Issue senior securities except evidences of indebtedness permitted
by restriction No. 3 above.
(15) Purchase securities for the purpose of exercising control over
another company.
In addition, management of the Fund has adopted a policy that it will not
recommend that the Fund purchase interests in oil, gas or other mineral type
development programs or leases, although the Fund may invest in the securities
of companies which operate, invest in or sponsor such programs.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
<S> <C> <C>
POSITION WITH PRINCIPAL OCCUPATIONS DURING PAST 5
NAME, ADDRESS AND AGE FUND YEARS
- ---------------------------- ----------------- ------------------------------------
*Jean Bernhard Buttner Chairman of the Chairman, President and Chief Execu-
Age 61 Board of tive Officer of the Adviser and
Directors Value Line Publishing, Inc. Chairman
of the Value Line Funds and the
Distributor.
John W. Chandler Director Consultant, Academic Search
2801 New Mexico Ave., N.W. Consultation Service, Inc. since
Washington, DC 20007 1992; Consultant, Korn/Ferry
Age 72 International, 1990-1992. Trustee
Emeritus and Chairman (1993-1994) of
Duke University; President Emeritus,
Williams College.
*Leo R. Futia Director Retired Chairman and Chief Executive
201 Park Avenue South Officer of The Guardian Life
New York, NY 10003 Insurance Company of America and
Age 76 Director since 1970. Director
(Trustee) of The Guardian Insurance
& Annuity Company, Inc., Guardian
Investor Services Corporation, and
the Guardian-sponsored mutual funds.
Charles E. Reed Director Retired. Formerly, Senior Vice
3200 Park Avenue President of General Electric Co.;
Bridgeport, CT 06604 Director Emeritus of People's Bank,
Age 82 Bridgeport, CT.
Paul Craig Roberts Director Distinguished Fellow, Cato
505 South Fairfax Street Institute, since 1993; formerly,
Alexandria, VA 22320 William E. Simon Professor of
Age 57 Political Economy, Center for
Strategic and International Studies;
Director, A. Schulman Inc.
(plastics) since 1992.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS--(CONTINUED)
POSITION WITH PRINCIPAL OCCUPATIONS DURING PAST 5
NAME, ADDRESS AND AGE FUND YEARS
- ---------------------------- ----------------- ------------------------------------
<S> <C> <C>
Peter Shraga President Securities Analyst with the Adviser.
Age 47
Scott Bruce Vice President Securities Analyst with the Adviser.
Age 32
David T. Henigson Vice President, Compliance Officer and since 1992,
Age 38 Secretary and Vice President and Director of the
Treasurer Adviser. Director and Vice President
of the Distributor.
</TABLE>
- ------------------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors and certain officers of the Fund are also directors and officers
of other investment companies for which the Adviser acts as investment adviser.
The following table sets forth information regarding compensation of Directors
by the Fund and by the Fund and the eleven other Value Line Funds of which each
of the Directors is a director or trustee for the fiscal year ended December 31,
1995. Directors who are officers or employees of the Adviser do not receive any
compensation from the Fund or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSON FROM FUND OF FUND EXPENSES RETIREMENT (12 FUNDS)
- ------------------------------------------- --------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner $ -0- N/A N/A $ -0-
John W. Chandler 2,770 N/A N/A 35,350
Leo R. Futia 2,770 N/A N/A 35,350
Charles E. Reed 2,770 N/A N/A 35,350
Paul Craig Roberts 2,770 N/A N/A 35,350
</TABLE>
As of December 31, 1995, no person owned of record or, to the knowledge of
the Fund, owned beneficially, 5% or more of the outstanding stock of the Fund
other than the Adviser which owned 393,220 shares or 6.5% of the outstanding
shares of the Fund. In addition, the officers and directors of the Fund as a
group owned less than 1% of the outstanding shares of the Fund.
B-5
<PAGE>
THE ADVISER
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
The investment advisory agreement between the Fund and the Adviser dated
August 10, 1988 provides for an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets during the year. During 1993, 1994 and 1995, the
Fund paid or accrued to the Adviser advisory fees of $677,000, $646,000, and
$721,000, respectively. In the computation of the advisory fee, the net amount
of any tender fees received by Value Line Securities, Inc. from acting as
tendering broker with respect to any portfolio securities of the Fund will be
subtracted from the advisory fee. In addition, the Adviser shall reimburse the
Fund for expenses (exclusive of interest, taxes, brokerage expenses and
extraordinary expenses) which in any year exceed the limits prescribed by any
State in which shares of the Fund are qualified for sale. Presently, the most
restrictive limitation is 2.5% of the first $30 million of average daily net
assets, 2% of the next $70 million and 1.5% of any excess over $100 million.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal and
accounting fees, fees and expenses in connection with qualification under
federal and state securities laws and costs of shareholder reports and proxy
materials. The Fund has agreed that it will use the words "Value Line" in its
name only so long as Value Line, Inc. serves as investment adviser to the Fund.
The Adviser acts as investment adviser to 15 other investment companies
constituting the Value Line Family of Funds and furnishes investment advisory
services to private and institutional accounts.
Certain of the Adviser's clients may have investment objectives similiar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Fund does not purchase or sell a security based solely on information
contained in the Value Line Investment Survey. The Adviser and/or its
affiliates, officers, directors and employees may from time to time own
securities which are also held in the portfolio of the Fund. The Adviser has
imposed rules upon itself and such persons requiring monthly reports of security
transactions for their respective accounts and restricting trading in various
types of securities in order to avoid possible conflicts of interest. The
Adviser may from time to time, directly or through affiliates, enter into
agreements to furnish for compensation special research or financial services to
companies, including services in connection with acquisitions, mergers or
financings. In the event that such
B-6
<PAGE>
agreements are in effect with respect to issuers of securities held in the
portfolio of the Fund, specific reference to such agreements will be made in the
"Schedule of Investments" in shareholder reports of the Fund. As of the date of
this Statement of Additional Information, no such agreements exist.
BROKERAGE ARRANGEMENTS
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Purchases
and sales of securities which are not listed or traded on a securities exchange
will ordinarily be executed with primary market makers acting as principal,
except when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of the brokerage and research services provided. Such
allocation will be in such amounts and in such proportions as the Adviser may
determine. Orders may also be placed with brokers or dealers who sell shares of
the Fund or other funds for which the Adviser acts as investment adviser, but
this fact, or the volume of such sales, is not a consideration in their
selection. During 1993, 1994 and 1995, the Fund paid brokerage commissions of
$78,505, $40,291 and $32,469, respectively, of which, $46,266 (59%), $17,764
(44%), and $21,847 (67%), respectively, was paid to Value Line Securities, Inc.,
the Fund's distributor and a subsidiary of the Adviser. Value Line Securities
clears transactions for the Fund through unaffiliated broker-dealers.
The Board of Directors has adopted procedures incorporating the standards of
Rule 17e-1 under the 1940 Act which requires that the commissions paid to Value
Line Securities, or any other "affiliated person" be "reasonable and fair"
compared to the commissions paid to other brokers in connection with comparable
transactions. The procedures require that the Adviser furnish reports to the
Directors with respect to the payment of commissions to affiliated brokers and
maintain records with respect thereto. During 1995, $27,619 (85%) of the Fund's
brokerage commissions went to brokers or dealers solely for their services in
obtaining best prices and executions; the balance, or $4,850 (15%), went to
brokers or dealers who provided information or services to the Adviser and,
therefore, indirectly to the Fund and to shareholders of the Value Line funds.
The information and services furnished to the Adviser include the furnishing of
research reports and statistical compilations and computations and the providing
of current quotations for securities. These services and information were
furnished to the Adviser at no cost to it; no such services or information were
furnished directly to the Fund, but certain of these services might have
relieved the Fund of expenses which it would otherwise have had to pay. Such
information and services are considered by the Adviser, and brokerage
commissions are allocated in accordance with its assessment of such information
and services, but only in a manner consistent with the placing of purchase and
sale orders with brokers and/or dealers, which, in the judgment of the Adviser,
are able to execute such orders as expeditiously as possible and at the best
obtainable price. The Fund is advised that the receipt of such information and
services has not reduced in any determinable amount the overall expenses of the
Adviser.
PORTFOLIO TURNOVER. The Fund's annual portfolio turnover rate may exceed
100%. A rate of portfolio turnover of 100% would occur if all of the Fund's
portfolio were replaced in a period of one year. To the extent that the Fund
engages in short-term trading in attempting to achieve its objective,
B-7
<PAGE>
it may increase portfolio turnover and incur higher brokerage commissions and
other expenses than might otherwise be the case. The Fund's portfolio turnover
rate for recent fiscal years is shown under "Financial Highlights" in the Fund's
Prospectus.
HOW TO BUY SHARES
(SEE ALSO "CALCULATION OF NET ASSET VALUE", "HOW TO BUY SHARES"
AND "INVESTOR SERVICES" IN THE FUND'S PROSPECTUS)
Minimum orders are $1,000 for an initial purchase and $100 for each
subsequent purchase. The Fund reserves the right to reduce or waive the minimum
purchase requirements in certain cases, such as under The Value Line Monthly
Investment Plan and pursuant to payroll deduction plans, etc., where subsequent
and continuing purchases are contemplated.
The Fund has entered into a distribution agreement with Value Line
Securities pursuant to which Value Line Securities acts as principal underwriter
and distributor of the Fund for the sale and distribution of its shares. For its
services under the agreement, Value Line Securities receives no compensation.
Value Line Securities also serves as distributor to the other Value Line funds.
AUTOMATIC PURCHASES. The Fund offers a free service to its shareholders,
Valu-Matic, through which monthly investments of $25 or more are automatically
made into the shareholder's account. The required form to enroll in this program
is available upon request from the Distributor.
RETIREMENT PLANS. Shares of the Fund may be purchased as the investment
medium for various tax-sheltered retirement plans. Upon request, the Distributor
will provide information regarding eligibility and permissible contributions.
Because a retirement plan is designed to provide benefits in future years, it is
important that the investment objectives of the Fund be consistent with the
participant's retirement objectives. Premature withdrawals from a retirement
plan may result in adverse tax consequences. For more complete information,
contact the Distributor at 1-800-223-0818 during New York business hours.
SUSPENSION OF REDEMPTIONS
The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period by the Fund under the following conditions
authorized by the 1940 Act: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday closing, or
(b) during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal by
the Fund of securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for the Fund to determine the fair value of its net assets;
(3) for such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
B-8
<PAGE>
TAXES
(SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE FUND'S PROSPECTUS)
The Fund intends to continue to qualify as a regulated investment company
under the United States Internal Revenue Code (the "Code"). The Fund so
qualified during the Fund's last fiscal year. By so qualifying, the Fund is not
subject to federal income tax on its net investment income or net realized
capital gains which are distributed to shareholders (whether or not reinvested
in additional Fund shares).
Distributions of investment income and of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income (whether or not reinvested in additional Fund shares).
Distributions of the excess of net long-term capital gain over net short-term
capital loss (net capital gains) are taxable to shareholders as long-term
capital gain, regardless of the length of time the shares of the Fund have been
held by such shareholders and regardless of whether the distribution is received
in cash or in additional shares of the Fund. It is expected that dividends from
domestic corporations will constitute most of the Fund's gross income and that a
substantial portion of the dividends paid by the Fund will qualify for the
dividends-received deduction for corporate investors. Upon request, the Fund
will advise shareholders of the amount of dividends which so qualify.
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
A distribution by the Fund will result in a reduction in the Fund's net
asset value per share. Such a distribution is taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a return of capital. In particular,
investors should be careful to consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will then receive a return of capital upon the distribution
which nevertheless is taxable to them. All distributions, whether received in
cash or reinvested in shares, must be reported by each shareholder on his or her
federal income tax return. Under the Code, dividends declared by the Fund in
October, November and December of any calendar year, and payable to shareholders
of record in such a month, shall be deemed to have been received by the
shareholders on December 31 of such calendar year if such dividend is actually
paid in January of the following calendar year.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date), or under special rules, an average cost. Under
certain circumstances, a loss on the sale or redemption of shares held for six
months or less may be treated as a long-term capital loss to the extent that the
Fund has distributed long-term capital gain dividends on
B-9
<PAGE>
such shares. Moreover, a loss on sale or redemption of Fund shares will be
disallowed to the extent the shareholder purchases other shares of the Fund
within 30 days before or after the date the shares are sold or redeemed.
For shareholders who fail to furnish to the Fund their social security or
taxpayer identification numbers and certain related information, or who fail to
certify that they are not subject to backup withholding, dividends,
distributions of capital gains and redemption proceeds paid by the Fund will be
subject to a 31% federal income tax withholding requirement. If the withholding
provisions are applicable, any dividends or capital gains distributions to these
shareholders, whether taken in cash or reinvested in additional shares, and any
redemption proceeds will be reduced by the amounts required to be withheld.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents, domestic
corporations and partnerships, and certain trusts and estates) and is not
intended to be a complete discussion of all federal tax consequences.
Shareholders are advised to consult with their tax advisers concerning the
application of federal, state and local tax laws to an investment in the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual total return over the most recent four calendar quarters
and the period from the Fund's inception of operations. The Fund may also
advertise aggregate annual total return information over different periods of
time.
The Fund's average annual total return is determined by reference to a
hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
T =#ERV/P - 1
n
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the end of
the period.
</TABLE>
ADDITIONAL INFORMATION
EXPERTS
The financial statements of the Fund and the financial highlights included
in the Fund's Annual Report to Shareholders and incorporated by reference in
this Statement of Additional Information have been so incorporated by reference
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
B-10
<PAGE>
CUSTODIAN
The Fund employs State Street Bank and Trust Company, Boston, MA as
custodian for the Fund. The custodian's responsibilities include safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Fund's
investments. The custodian does not determine the investment policies of the
Fund or decide which securities the Fund will buy or sell.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended December 31, 1995,
including the financial highlights for each of the five fiscal years in the
period ended December 31, 1995, appearing in the 1995 Annual Report to
Shareholders and the report thereon of Price Waterhouse LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information.
The Fund's 1995 Annual Report to Shareholders is enclosed with this
Statement of Additional Information.
B-11
<PAGE>
THE VALUE LINE SPECIAL SITUATIONS FUND, INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements
Included in Part A of this Registration Statement
Financial Highlights for each of the 10 years in the period ended
December 31, 1995
Incorporated by reference in Part B of this Registration Statement:*
Schedule of Investments at December 31, 1995
Statement of Assets and Liabilities at December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the years ended December 31,
1995 and 1994
Notes to Financial Statements
Financial Highlights for each of the five years in the period ended
December 31, 1995
Report of Independent Accountants
Statements, schedules and historical information other than those listed
above have been omitted since they are either not applicable or are not
required.
-------------
* Incorporated by reference from the Annual Report to Shareholders for the
year ended December 31, 1995.
b. Exhibits
16. Calculation of Performance Data--Exhibit 1
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of December 31, 1995, there were 13,494 record holders of the
Registrant's Capital Stock ($1.00 par value).
ITEM 27. INDEMNIFICATION.
Incorporated by reference from Post-Effective Amendment No. 77 (filed with
the Commission March 3, 1988).
C-1
<PAGE>
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individual trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 29.
<TABLE>
<CAPTION>
NAME POSITION WITH THE ADVISER OTHER EMPLOYMENT
- ---------------------------- ---------------------------------- ------------------------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, President, Chairman of the Board and Chief Executive
and Chief Executive Officer Officer of Arnold Bernhard & Co., Inc.; Chairman
of the Value Line Funds and the Distributor
Samuel Eisenstadt Senior Vice President and Director ------------------------------------------------
David T. Henigson Vice President, Treasurer Vice President and a Director of Arnold Bernhard
and Director & Co., Inc. and the Distributor
Howard A. Brecher Secretary and Director Secretary and Treasurer of Arnold Bernhard &
Co., Inc.
Harold Bernard, Jr. Director Administrative Law Judge
William S. Kanaga Director Retired Chairman of the Advisory Board of Ernst
& Young
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison, attor-
neys.
</TABLE>
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a)Value Line Securities, Inc., acts as principal underwriter for the
following Value Line funds, including the Registrant: The Value Line
Fund, Inc.; The Value Line Income Fund, Inc.; The Value Line Special
Situations Fund, Inc.; Value Line Leveraged Growth Investors, Inc.; The
Value Line Cash Fund, Inc.; Value Line U.S. Government Securities Fund,
Inc.; Value Line Centurion Fund, Inc.; The Value Line Tax Exempt Fund,
Inc.; Value Line Convertible Fund, Inc.; Value Line Aggressive Income
Trust; Value Line New York Tax Exempt Trust; Value Line Strategic Asset
Management Trust; Value Line Intermediate Bond Fund, Inc.; Value Line
Small Cap Growth Fund, Inc.; Value Line Asset Allocation Fund; Value Line
U.S. Multinational Company Fund, Inc.
(b)
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
- -------------------------- ------------------- -------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Chairman of the
Board Board
David T. Henigson Vice President, Vice President,
Secretary, Secretary and
Treasurer and Treasurer
Director
Stephen LaRosa Asst. Vice Asst. Treasurer
President
</TABLE>
The business address of each of the officers and directors is 220 East 42nd
Street, New York, NY 10017-5891.
(c) Not applicable.
C-3
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc., 220 East 42nd Street, New York, NY 10017 for records
pursuant to Rule 31a-1(b)(4),(5),(6),(7),(10),(11), Rule 31a-(i). State Street
Bank and Trust Company, c/o NFDS, P.O. Box 419729, Kansas City, MO 64141 for
records pursuant to Rule 31a-1(b)(2)(iv). State Street Bank and Trust Company,
225 Franklin Street, Boston, MA 02110 for all other records.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
-------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information, constituting parts of this Post-Effective
Amendment No. 85 to the registration statement on Form N-1A (the "Registration
Statement"), of our report dated February 16, 1996, relating to the financial
statements and financial highlights appearing in the December 31, 1995 Annual
Report to Shareholders of The Value Line Special Situations Fund, Inc., which
are also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectus and under the headings "Additional Information" and "Financial
Statements" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 15, 1996
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 16th day of April, 1996.
THE VALUE LINE SPECIAL SITUATIONS FUND,
INC.
By: DAVID T. HENIGSON
......................................
DAVID T. HENIGSON, VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------------------ ---------------------------------- ---------------------
<C> <S> <C>
*JEAN B. BUTTNER Chairman and Director April 16, 1996
(JEAN B. BUTTNER)
*JOHN W. CHANDLER Director April 16, 1996
(JOHN W. CHANDLER)
*LEO R. FUTIA Director April 16, 1996
(LEO R. FUTIA)
*CHARLES E. REED Director April 16, 1996
(CHARLES E. REED)
*PAUL CRAIG ROBERTS Director April 16, 1996
(PAUL CRAIG ROBERTS)
*PETER SHRAGA President; Principal Executive April 16, 1996
(PETER SHRAGA) Officer
DAVID T. HENIGSON Treasurer; Principal Financial and April 16, 1996
..................................................... Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
* By DAVID T. HENIGSON
..................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-5
<PAGE>
EXHIBIT 16
THE VALUE LINE SPECIAL
SITUATIONS FUND, INC.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
<TABLE>
<CAPTION>
Year(s) Ended 12/31/95: 1 year 5 years 10 years
----------- ----------- -----------
<S> <C> <C> <C>
Initial Investment: 1,000 1,000 1,000
Balance at End of Period: 1,290 1,942 2,230
Change: 290 942 1,230
Percentage Change: 28.96% 94.17% 123.00%
Average Annual Total Return: 28.96% 14.19% 8.35%
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 75,614
<INVESTMENTS-AT-VALUE> 98,463
<RECEIVABLES> 22
<ASSETS-OTHER> 87
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98,572
<PAYABLE-FOR-SECURITIES> 8
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 156
<TOTAL-LIABILITIES> 164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,977
<SHARES-COMMON-STOCK> 6,060
<SHARES-COMMON-PRIOR> 5,582
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,581
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,849
<NET-ASSETS> 98,408
<DIVIDEND-INCOME> 25
<INTEREST-INCOME> 1,310
<OTHER-INCOME> 0
<EXPENSES-NET> 1,026
<NET-INVESTMENT-INCOME> 309
<REALIZED-GAINS-CURRENT> 25,437
<APPREC-INCREASE-CURRENT> (1,797)
<NET-CHANGE-FROM-OPS> 23,949
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 308
<DISTRIBUTIONS-OF-GAINS> 21,803
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,081
<NUMBER-OF-SHARES-REDEEMED> 1,805
<SHARES-REINVESTED> 1,202
<NET-CHANGE-IN-ASSETS> 8,228
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (53)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,026
<AVERAGE-NET-ASSETS> 96,114
<PER-SHARE-NAV-BEGIN> 16.15
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 4.58
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 4.49
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.24
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
