--------------------
SEMI-ANNUAL REPORT
--------------------
June 30, 1999
--------------------
The Value Line
Special
Situations
Fund, Inc.
[LOGO]
----------
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
The Value Line Special Situations Fund, Inc.
To Our Value Line
- --------------------------------------------------------------------------------
To Our Fellow Shareholders:
We're pleased to report a very strong first half of 1999 for the Value Line
Special Situations Fund. Total return in the period was 16.33%. This compared
with a total return of 9.28% for the unmanaged Russell 2000 Index, the benchmark
for small-capitalization stocks, and a total return of 12.38% for the unmanaged
Standard & Poor's 500, the large-cap index. The Fund's peer group, as measured
by the Mid-Cap Fund Index of Lipper Analytical Services, gained 11.93% in the
period.
Returns For Six Months ending June 30, 1999
Value Line Special Situation Fund.... 16.33%
Russell 2000 Index .................. 9.28
S&P 500 ...................... .... 12.38
Mid Cap Fund Index................... 11.93
Our stock selection process emphasizes companies with strong earnings momentum
and strong stock price momentum. In brief, we invest in winners, and quickly
dump losers. Often, we buy stocks even as they are reaching new all-time high
prices, in anticipation of still better performance ahead. Stocks that have
languished for long periods are unattractive to us. Quarterly earnings reports
by companies, and their relationship to expected earnings, often trigger our buy
or sell actions. Any significant weakness in either earnings momentum or stock
price momentum will cause us to seriously consider a sale of the stock. Our
buying and selling activity is greater than that of the average fund, although
we try to hold onto our winners long enough to see them double or more in price.
For example, among our holdings as of June 30, 1999, shares of Best Buy Co. had
risen to more than 11 times our purchase price of 21 months before; stocks up
five or six times our cost (in just nine to 18 months) included American Eagle
Outfitters, Qlogic, Optical Coating, Metromedia Fiber, VISX, and TranSwitch.
Risk control is an important part of our investment process. One tool that we
use to limit risk is diversification, ensuring that no single stock or sector
can cause too much damage to performance. To this end, we generally hold more
than 300 different stocks. We also usually try to keep a cap of about 25% on our
allocation to the volatile technology sector, while spreading our investments
within this sector very widely. On the other end of the risk spectrum, your Fund
typically holds some stocks in conservative industries such as defense,
utilities, and supermarkets. The size of the companies in which we invest is
also well diversified, about evenly divided among large-, mid-, and
small-capitalization stocks.
This all adds up to a very disciplined investment process, which you can rely on
us to maintain. Thank you for investing with the Value Line Family of Mutual
Funds.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
August 6, 1999
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<PAGE>
The Value Line Special Situations Fund, Inc.
Special Situations Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The economy is now starting to turn in more of a mixed performance. Evidence of
this uneven pattern began to emerge in the second quarter, when GDP growth
slowed to a 2.3% rate. More recently, we've seen a moderation in the rate of
manufacturing activity and some selective weakening in retail sales. On the
other hand, housing is still quite strong and the level of employment continues
to increase at a healthy pace. Overall, this less even growth trend does not
imply that the long-running expansion is about to falter. But it does suggest
that growth is likely to hold nearer to the recent 2%-3% level over the next
several quarters than to the earlier, and more frenetic, 4%-5% pace.
Inflationary pressures, meanwhile, are starting to build. Here, as well, we
aren't forecasting a dramatic change in trend. Nevertheless, the sharp runup in
oil prices in recent months, the recent escalation in wage costs, and the runup
in mortgage rates all indicate that the cost of living is increasing. A gradual
uptrend in pricing now seems likely over the next several quarters. The Federal
Reserve, taking note of these rising cost pressures is likely to maintain a
somewhat more restrictive monetary stance in the months ahead.
*Performance Data:
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
------------ -------------
1 year ended 6/30/99..... 25.59% $12,559
5 years ended 6/30/99.... 26.73% $32,690
10 years ended 6/30/99.... 14.94% $40,261
* The performance data quoted represent past performance and are no guarantee
of future performance. The average annual total returns 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.
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3
<PAGE>
The Value Line Special Situations Fund, Inc.
Portfolio Highlights at June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Largest Holdings
Value Percentage
Issue Shares (in thousands) of Net Assets
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Scientific Corp. ...................................... 147,000 $6,459 2.6%
RF Micro Devices Inc. ........................................ 26,000 1,940 0.8
Microsoft Corp. .............................................. 19,000 1,714 0.7
Cisco Systems, Inc. .......................................... 22,607 1,458 0.6
VISX, Inc. ................................................... 18,000 1,425 0.6
Optical Coating Laboratory, Inc. ............................. 17,000 1,421 0.6
Biogen, Inc. ................................................. 22,000 1,415 0.6
Power Integrations, Inc. ..................................... 19,000 1,389 0.6
EchoStar Communications Corp., Class "A" ..................... 9,000 1,381 0.6
Best Buy Co., Inc. ........................................... 20,000 1,350 0.6
<CAPTION>
Five Largest Industry Categories
Value Percentage
Industry (in thousands) of Net Assets
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer Software & Services ................................. $18,669 7.6%
Medical Supplies ............................................. 18,183 7.4
Retail-Special Lines ......................................... 15,875 6.5
Telecommunication Services ................................... 11,757 4.8
Semiconductor ................................................ 11,389 4.6
<CAPTION>
Five Largest Net Security Purchases*
Cost
Issue (in thousands)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Boston Scientific Corp. ...................................... $5,783
Microsoft Corp. .............................................. 1,454
Johnson & Johnson ............................................ 985
Globix Corp. ................................................. 952
Global TeleSystems Group, Inc. ............................... 819
<CAPTION>
Five Largest Net Security Sales*
Proceeds
Issue (in thousands)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
DoubleClick Inc. ............................................. $1,560
General Electric Co. ......................................... 1,307
Medtronic, Inc. .............................................. 997
McGraw-Hill Companies, Inc. (The) ............................ 924
Chase Manhattan Corp. (The) .................................. 887
</TABLE>
* For the six month period ended 06/30/99
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4
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS (86.9%)
ADVERTISING (1.0%)
6,000 ADVO, Inc.*............................................ $ 125
9,000 Big Flower Holdings, Inc.*............................. 287
11,500 Lamar Advertising Co.
Class "A"*........................................... 471
12,000 Omnicom Group, Inc. ................................... 960
9,000 TMP Worldwide Inc.*.................................... 571
--------
2,414
AEROSPACE/
DEFENSE (1.4%)
3,000 Alliant Techsystems Inc.*.............................. 260
10,000 Aviation Sales Co.*.................................... 395
11,000 General Dynamics Corp. ................................ 754
13,000 Gulfstream Aerospace Corp.*............................ 878
7,000 Litton Industries, Inc.*............................... 502
8,000 Raytheon Co. Class "A"................................. 551
--------
3,340
AIR TRANSPORT (0.8%)
14,750 Comair Holdings, Inc. ................................. 307
29,000 Frontier Airlines, Inc.* .............................. 467
18,000 SkyWest, Inc. ......................................... 449
21,000 Southwest Airlines Co. ................................ 654
--------
1,877
ALTERNATE
ENERGY (0.2%)
6,800 AES Corp.*............................................. 395
APPAREL (0.6%)
24,000 Chico's FAS, Inc.* .................................... 564
14,000 Tarrant Apparel Group*................................. 318
9,000 Tommy Hilfiger Corp.*.................................. 662
--------
1,544
AUTO PARTS--ORIGINAL
EQUIPMENT (0.4%)
10,000 Arvin Industries, Inc.................................. 379
26,000 Gentex Corp.* ......................................... 728
--------
1,107
AUTO PARTS--
REPLACEMENT (0.3%)
4,000 Midas, Inc............................................. 114
12,000 O'Reilly Automotive, Inc.* ............................ 605
--------
719
BANK (0.3%)
9,750 AmSouth Bancorporation ................................ 226
5,000 State Street Corp...................................... 427
--------
653
BANK--MIDWEST (0.8%)
12,000 Fifth Third Bancorp.................................... 799
18,000 First Tennessee
National Corp. ..................................... 689
12,600 Old Kent Financial Corp................................ 528
--------
2,016
BEVERAGE--
ALCOHOLIC (0.6%)
13,000 Canandaigua Brands, Inc.
Class "A"* .......................................... 682
9,000 Coors (Adolph) Co.
Class "B"............................................ 445
8,000 Seagram Company Ltd. (The) ............................ 403
--------
1,530
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5
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
BUILDING MATERIALS
(1.0%)
14,000 Elcor Corp............................................. $ 612
21,000 Insituform Technologies, Inc.
Class "A"* .......................................... 454
15,000 Jacobs Engineering
Group Inc.* ......................................... 570
15,000 Johns Manville Corp.................................... 195
8,000 NCI Building Systems, Inc.*............................ 171
10,000 USG Corp. ............................................. 560
--------
2,562
CABLE TV (1.7%)
11,600 Cablevision Systems Corp.
Class "A"* .......................................... 812
22,500 Century Communications
Corp. Class "A"* .................................... 1,035
24,000 Comcast Corp. Class "A" ............................... 922
9,000 EchoStar Communications
Corp. Class "A"* .................................... 1,381
--------
4,150
CEMENT &
AGGREGATES (0.3%)
13,000 Centex Construction
Products, Inc. ...................................... 444
7,000 Martin Marietta
Materials, Inc. ..................................... 413
--------
857
CHEMICAL--BASIC (0.2%)
4,000 Dow Chemical Co. ...................................... 507
CHEMICAL--
DIVERSIFIED (0.1%)
7,900 Spartech Corp. ........................................ 250
CHEMICAL--
SPECIALTY (0.7%)
13,000 Avery Dennison Corp. ................................. 785
7,500 Fuller (H.B.) Co. ..................................... 513
12,000 Rohm & Haas Co. ....................................... 514
--------
1,812
COMPUTER &
PERIPHERALS (3.5%)
19,000 Adaptec, Inc.* ........................................ 671
22,607 Cisco Systems, Inc.* .................................. 1,458
29,000 Computer Network
Technology Corp.* ................................... 627
18,000 Cybex Computer
Products Corp.* ..................................... 502
10,000 EMC Corp.*............................................. 550
6,000 Emulex Corp.*.......................................... 667
8,000 Hewlett-Packard Co. ................................... 804
8,000 International Business
Machines Corp. ..................................... 1,034
400 Juniper Networks, Inc.* ............................... 60
14,000 Mercury Computer
Systems, Inc.* ...................................... 452
24,000 Pinnacle Systems, Inc,* ............................... 807
16,000 Unisys Corp.* ......................................... 623
10,000 Visual Networks, Inc.* ................................ 320
--------
8,575
COMPUTER SOFTWARE
& SERVICES (7.6%)
59,000 Acclaim Entertainment, Inc.*........................... 376
16,000 Actuate Corp.*......................................... 424
9,000 Adobe Systems Inc...................................... 739
14,000 American Management
Systems, Inc.* ...................................... 449
11,000 Analytical Surveys, Inc.* ............................. 274
15,000 Ancor Communications,
Inc.*................................................ 486
25,000 Ardent Software Inc.*.................................. 531
1,800 Ariba, Inc.*........................................... 175
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6
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 1999
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
10,000 At Home Corp. Series "A"* ............................. $ 539
13,000 Citrix Systems, Inc.*.................................. 735
900 Clarent Corp.*......................................... 13
9,000 Comverse Technology, Inc.* ............................ 679
20,000 Concentric Network Corp.*.............................. 795
19,000 Dendrite International, Inc.* 686
17,000 Eidos PLC (ADR)* ...................................... 562
20,000 Electronics For Imaging Inc.* 1,028
10,000 FactSet Research
Systems Inc. ........................................ 566
11,000 Great Plains Software Inc.*............................ 519
10,000 Henry (Jack) &
Associates Inc. ..................................... 393
40,000 Mentor Graphics Corp.*................................. 512
14,000 Mercury Interactive Corp.*............................. 495
19,000 Microsoft Corp.* ...................................... 1,714
16,000 New Era of Networks, Inc.* ............................ 703
12,000 Open Text Corp.*....................................... 360
25,500 Paychex, Inc. ......................................... 813
18,000 Peregrine Systems, Inc.* .............................. 462
6,000 Perot Systems Corp.*................................... 177
900 Phone.com, Inc.* ...................................... 50
18,400 Progress Software Corp.*............................... 520
19,000 Rational Software Corp.*............................... 626
15,000 Siebel Systems, Inc.*.................................. 996
900 Software.com, Inc.*.................................... 21
9,000 TSI International
Software Ltd.* ...................................... 255
3,000 Unify Corp.*........................................... 41
16,000 Verity Inc.*........................................... 867
2,000 Zomax Inc.*............................................ 88
--------
18,669
DIVERSIFIED
COMPANIES (0.9%)
7,000 Textron, Inc. ......................................... 576
9,000 Tyco International, Ltd. .............................. 853
6,000 United Technologies Corp. ............................ 430
13,000 Viad Corp.............................................. 402
--------
2,261
DRUG (4.6%)
17,000 Amgen Inc.* ........................................... 1,035
15,000 Andrx Corp.* .......................................... 1,157
22,000 Biogen, Inc.* ......................................... 1,415
4,400 Biovail Corporation
International*....................................... 225
8,000 Bristol-Myers Squibb Co. .............................. 563
9,000 Enzon, Inc.*........................................... 186
11,000 Forest Laboratories, Inc.* ............................ 509
9,000 Gilead Sciences, Inc.* ................................ 470
14,000 ICOS Corp.*............................................ 571
9,000 IDEC Pharmaceuticals
Corp.*............................................... 694
5,000 Immunex Corp.* ........................................ 637
24,000 King Pharmaceuticals, Inc.*............................ 621
13,000 MedImmune, Inc.*....................................... 881
20,000 Millennium Pharmaceuticals,
Inc.* ............................................... 720
12,000 QLT PhotoTherapeutics,
Inc.*................................................ 660
16,000 Roberts Pharmaceutical
Corp.*............................................... 388
8,000 Sepracor, Inc.* ....................................... 650
--------
11,382
DRUGSTORE (0.2%)
9,000 CVS Corp. ................... 457
- --------------------------------------------------------------------------------
7
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
EDUCATIONAL
SERVICES (0.4%)
13,000 Career Education Corp.*................................ $ 440
26,400 Education Management
Corp.*............................................... 548
--------
988
ELECTRIC UTILITY--
WEST (0.2%)
11,000 Calpine Corp.*......................................... 594
ELECTRICAL
EQUIPMENT (1.6%)
13,000 Corning Inc............................................ 912
19,000 Power Integrations, Inc.* ............................. 1,389
11,000 Rockwell International Corp............................ 668
19,000 Semtech Corp.* ........................................ 990
--------
3,959
ELECTRONICS (2.6%)
12,000 CTS Corp. ............................................ 840
6,000 Cree Research, Inc.*................................... 462
15,000 DII Group, Inc.* ...................................... 560
14,000 Gemstar International
Group, Ltd.* ........................................ 913
4,000 JDS Uniphase Corp.*.................................... 664
10,000 Lexmark International
Group, Inc. Class "A"* .............................. 661
7,000 Plantronics Inc.* ..................................... 456
7,000 Safeguard Scientifics, Inc.*........................... 434
19,875 Symbol Technologies, Inc. ............................. 733
21,000 Universal Electronics Inc.*............................ 589
--------
6,312
ENTERTAINMENT (2.1%)
19,000 CBS Corp.*............................................. 825
13,000 Capstar Broadcasting Corp.
Class "A"* .......................................... 356
11,544 Chancellor Media Corp.*................................ 636
8,629 Clear Channel
Communications, Inc.*................................ 595
11,000 Cox Radio, Inc. Class "A"* ............................ 597
16,000 Time Warner, Inc. ..................................... 1,176
16,000 USA Networks, Inc.* ................................... 642
5,000 Univision Communications
Inc. Class "A"* ..................................... 330
--------
5,157
ENVIRONMENTAL (0.2%)
26,000 IT Group, Inc. (The)* ................................. 418
FINANCIAL
SERVICES (0.7%)
400 E-LOAN, Inc.*.......................................... 15
15,000 Heller Financial, Inc. ................................ 417
14,000 Metris Companies, Inc. ................................ 571
7,500 Providian Financial Corp............................... 701
--------
1,704
FOOD PROCESSING (0.5%)
15,000 Keebler Foods Co.*..................................... 455
10,000 Quaker Oats Co. (The) ................................. 664
--------
1,119
FOREIGN
TELECOMMUNICATIONS
(1.1%)
10,000 AT & T Canada Inc.
Class "B" Dep. Receipt*.............................. 641
7,000 Nokia Corp.(ADR) Class "A" ............................ 641
9,000 Nortel Networks Corp................................... 781
3,500 Vodafone Airtouch
PLC (ADR) ........................................... 689
--------
2,752
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8
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 1999
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
FURNITURE/HOME
FURNISHINGS (0.6%)
19,500 Ethan Allen Interiors, Inc. ........................... $ 736
11,500 Mohawk Industries, Inc.* .............................. 349
27,000 Shaw Industries, Inc.* ................................ 446
--------
1,531
GROCERY (0.5%)
18,000 Kroger Co.*............................................ 503
13,000 Safeway Inc.* ......................................... 643
--------
1,146
HOME APPLIANCE (0.4%)
14,000 Maytag Corp............................................ 976
HOTEL/GAMING (0.4%)
23,000 Mandalay Resort Group*................................. 486
41,000 Park Place Entertainment
Corp.* .............................................. 397
--------
883
HOUSEHOLD
PRODUCTS (0.7%)
12,000 Church & Dwight Co., Inc. ............................. 522
9,000 Kimberly-Clark Corp. ................................. 513
4,000 Salton, Inc.* ......................................... 200
10,000 Scotts Company (The)
Class "A"* .......................................... 476
--------
1,711
INDUSTRIAL
SERVICES (2.9%)
16,000 Advantage Learning
Systems, Inc.* ...................................... 354
6,000 Catalina Marketing Corp.*.............................. 552
3,000 Celestica Inc.* ....................................... 130
10,000 Galileo International, Inc. ........................... 534
14,000 Labor Ready, Inc.*..................................... 455
26,000 Nielsen Media Research,
Inc.*................................................ 760
12,000 Profit Recovery Group
International, Inc. (The)* 568
10,000 QRS Corp.*............................................. 780
14,000 Quanta Services, Inc.* ................................ 616
9,100 SABRE Group Holdings,
Inc. Class "A"* ..................................... 626
20,000 Select Appointments
Holdings PLC (ADR)* ................................. 480
23,000 StarTek, Inc.*......................................... 569
21,000 URS Corp.*............................................. 616
900 Viant Corp.*........................................... 32
--------
7,072
INSURANCE--
DIVERSIFIED (0.6%)
5,985 American International
Group, Inc. ......................................... 700
10,000 Blanch (E.W.) Holdings Inc. ........................... 682
--------
1,382
INSURANCE--LIFE (0.2%)
6,700 Jefferson-Pilot Corp. ............................... 443
INTERNET (1.2%)
900 Ask Jeeves, Inc.* ..................................... 13
6,000 America Online, Inc.*.................................. 663
400 BackWeb Technologies Ltd.* ............................ 11
9,000 Exodus Communications,
Inc.* ............................................... 1,079
1,800 GoTo.com, Inc.*........................................ 50
17,000 Macromedia Inc.* ...................................... 599
7,400 MindSpring Enterprises, Inc.* ......................... 328
5,500 Ticketmaster Online--
Citysearch, Inc. Class "B"* ......................... 166
--------
2,909
- --------------------------------------------------------------------------------
9
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
MACHINERY (1.5%)
22,000 Astec Industries, Inc.* ............................... $ 896
10,000 Briggs & Stratton Corp. .............................. 577
12,000 Ingersoll-Rand Co. .................................... 776
15,750 Manitowoc Co., Inc. ................................... 656
7,000 Tecumseh Products Co.
Class "A" ........................................... 424
14,000 Terex Corp.*........................................... 426
--------
3,755
MANUFACTURED HOUSING/
RECREATIONAL
VEHICLES (0.4%)
15,000 Monaco Coach Corp.*.................................... 635
16,500 National R.V. Holdings, Inc.* ......................... 400
--------
1,035
MEDICAL SERVICES (1.9%)
11,000 Advance Paradigm, Inc.* ............................... 671
26,000 Apria Healthcare Group Inc.*........................... 442
11,000 Express Scripts, Inc.
Class "A"* .......................................... 662
10,000 Hanger Orthopedic
Group, Inc.* ........................................ 142
42,000 Hooper Holmes, Inc. ................................... 856
19,500 Osteotech, Inc.* ...................................... 560
5,000 PacifiCare Health Systems,
Inc. Class "B"* ..................................... 360
15,000 Res-Care, Inc.*........................................ 341
8,000 Syncor International Corp.*............................ 288
13,000 Wesley Jessen VisionCare,
Inc.* ............................................... 421
--------
4,743
MEDICAL SUPPLIES (7.4%)
11,700 Allergan, Inc. ........................................ 1,299
20,000 Alpharma Inc. ......................................... 711
14,000 AmeriSource Health Corp.
Class "A"* .......................................... 357
32,444 Bindley Western Industries,
Inc. ................................................ 748
20,000 Biomatrix Inc.* ....................................... 433
147,000 Boston Scientific Corp.*............................... 6,459
18,000 D & K Healthcare
Resources, Inc.* .................................... 430
10,000 Johnson & Johnson...................................... 980
11,000 Laser Vision Centers, Inc.*............................ 693
8,262 Medtronic, Inc. ........................................ 643
16,000 Microvision, Inc.*..................................... 362
15,000 Patterson Dental Co.*.................................. 521
19,303 Priority Heathcare Corp.
Class "B"* ........................................... 666
15,300 ResMed Inc.*........................................... 508
27,000 SonoSite, Inc.*........................................ 459
11,000 Stryker Corp. ........................................ 661
18,000 VISX, Inc.*............................................ 1,425
17,000 Xomed Surgical Products
Inc.*................................................ 828
--------
18,183
NATURAL GAS--
DIVERSIFIED (0.6%)
11,000 Enron Corp............................................. 899
11,000 Williams Companies,
Inc. (The) .......................................... 468
--------
1,367
NEWSPAPER (0.5%)
19,000 News Corp., Ltd. (ADR) ................................ 671
7,000 Tribune Co............................................. 610
--------
1,281
OFFICE EQUIPMENT &
SUPPLIES (0.5%)
8,000 Pitney Bowes, Inc. .................................... 514
27,000 Staples, Inc.* ........................................ 835
--------
1,349
- --------------------------------------------------------------------------------
10
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 1999
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
PACKAGING &
CONTAINER (0.1%)
5,000 Ball Corp.............................................. $ 211
PRECISION
INSTRUMENT (1.2%)
17,000 Optical Coating Laboratory,
Inc. ................................................ 1,421
14,000 Orbotech Ltd.* ........................................ 730
14,000 Waters Corp.* ......................................... 744
--------
2,895
PUBLISHING (1.4%)
7,700 Consolidated Graphics, Inc.*. 385
15,000 Houghton Mifflin Co.................................... 706
26,000 PRIMEDIA Inc.*......................................... 440
20,000 Reader's Digest Association,
Inc. Class "A" ...................................... 795
19,500 Valassis Communications,
Inc.* ............................................... 714
24,000 Wiley (John) & Sons,
Class "A" ........................................... 423
--------
3,463
RAILROAD (0.1%)
22,000 Transportation Technologies
Industries, Inc.*.................................... 292
RECREATION (1.5%)
12,000 Harley-Davidson, Inc. ................................. 652
10,000 International Speedway Corp.
Class "A" ........................................... 475
20,000 JAKKS Pacific, Inc.* .................................. 596
14,000 Royal Caribbean Cruises,
Ltd. ................................................ 613
8,000 SFX Entertainment, Inc.* .............................. 512
15,000 Steiner Leisure Ltd.*.................................. 455
16,000 THQ, Inc.*............................................. 460
--------
3,763
RESTAURANT (1.3%)
22,000 Brinker International, Inc.*. 598
13,000 Cheesecake Factory,
Inc. (The)* ......................................... 396
23,000 Darden Restaurants, Inc. .............................. 502
30,000 Foodmaker Inc.* ....................................... 851
28,400 Ruby Tuesday, Inc. .................................... 540
19,000 Ryan's Family Steak
Houses Inc.* ........................................ 221
--------
3,108
RETAIL BUILDING
SUPPLY (0.5%)
10,000 Home Depot, Inc. (The) ................................ 645
9,600 Lowe's Companies, Inc. ................................ 544
--------
1,189
RETAIL--SPECIAL
LINES (6.5%)
18,000 Abercrombie & Fitch Co.
Class "A"* .......................................... 864
16,800 American Eagle Outfitters,
Inc.* ............................................... 764
16,000 AnnTaylor Stores Corp.* ............................... 720
9,200 bebe stores, inc.* ................................... 313
21,000 Bed Bath & Beyond Inc.* ............................... 808
20,000 Best Buy Co., Inc.*.................................... 1,350
8,200 Circuit City Stores--
Ciricut City Group .................................. 763
14,000 Claire's Stores Inc.................................... 359
20,000 Copart, Inc.* ......................................... 425
7,750 Dollar Tree Stores, Inc.* ............................. 341
14,000 Fossil Inc.*........................................... 677
12,000 Gap, Inc............................................... 605
19,000 Group 1 Automotive Inc.*............................... 401
6,000 Haverty Furniture Companies,
Inc. ................................................ 212
- --------------------------------------------------------------------------------
11
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
19,000 Hollywood Entertainment
Corp.*............................................... $ 372
26,000 InterTAN, Inc.*........................................ 533
18,900 Intimate Brands, Inc. ................................. 895
17,000 Linens `N' Things, Inc.* .............................. 744
27,000 Luxottica Group S.P.A.
(ADR) ............................................... 420
10,500 Men's Wearhouse, Inc.
(The)* .............................................. 268
27,000 Quiksilver, Inc.* ..................................... 704
11,000 Ross Stores, Inc. ..................................... 554
12,000 Sonic Automotive, Inc.* ............................... 165
19,000 TJX Companies, Inc. ................................... 633
15,000 Tandy Corp............................................. 733
8,000 Tiffany & Co. ......................................... 772
12,000 Zale Corp.*............................................ 480
--------
15,875
RETAIL STORE (2.9%)
27,000 Ames Department Stores,
Inc.* ............................................... 1,232
22,000 BJ's Wholesale Club, Inc.*............................. 661
13,000 Cost Plus, Inc.* ...................................... 591
8,000 Dayton Hudson Corp..................................... 520
23,000 Family Dollar Stores, Inc. ............................ 552
11,500 Federated Department
Stores, Inc.* ....................................... 609
9,600 Kohl's Corp.* ......................................... 741
9,687 99 Cents Only Stores *................................. 484
16,000 ShopKo Stores, Inc.* .................................. 580
24,000 Wal-Mart Stores, Inc. ................................. 1,158
--------
7,128
SECURITIES
BROKERAGE (0.2%)
12,800 Donaldson, Lufkin & Jenrette,
Inc.--DLJdirect* .................................... 378
SEMICONDUCTOR (4.6%)
10,000 Applied Micro Circuits
Corp.*............................................... 822
12,000 Conexant Systems, Inc.* ............................... 697
5,000 Ibis Technology Corp.*................................. 168
10,000 Linear Technology Corp. .............................. 672
17,100 MIPS Technologies, Inc.* .............................. 820
8,000 Motorola, Inc. ........................................ 758
13,000 PMC-Sierra, Inc.*...................................... 766
10,000 QLogic Corp.*.......................................... 1,320
26,000 RF Micro Devices Inc.* ................................ 1,940
13,000 SDL, Inc.*............................................. 664
27,000 TranSwitch Corp.* ..................................... 1,279
13,000 TriQuint Semiconductor,
Inc.* ............................................... 739
13,000 Xilinx, Inc.* ......................................... 744
--------
11,389
SHOE (0.2%)
8,000 Timberland Co. (The)
Class "A"*........................................... 545
TELECOMMUNICATIONS EQUIPMENT (3.9%)
17,200 AVT Corp.*............................................. 651
22,000 CommScope, Inc.*....................................... 677
14,000 General Instrument Corp.*.............................. 595
9,000 Harmonic Inc.* ........................................ 517
44,000 InterVoice, Inc.*...................................... 635
10,000 L-3 Communications
Holdings, Inc.* ..................................... 483
33,000 Polycom, Inc.* ........................................ 1,287
19,000 Powerwave Technologies,
Inc.*................................................ 613
8,000 Proxim, Inc.* ......................................... 464
7,000 QUALCOMM Incorporated* ................................ 1,004
16,000 Scientific-Atlanta, Inc. .............................. 576
12,000 Tellabs, Inc.* ........................................ 811
21,000 Viatel, Inc.* ......................................... 1,179
--------
9,492
- --------------------------------------------------------------------------------
12
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 1999
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
TELECOMMUNICATION
SERVICES (4.8%)
13,500 AT & T Corp............................................ $ 753
10,000 Allegiance Telecom, Inc.* ............................. 549
9,000 ALLTEL Corp. ......................................... 643
22,125 CenturyTel, Inc. ...................................... 879
18,000 Dycom Industries, Inc.* ............................... 1,008
16,000 Global Crossing Ltd.*.................................. 682
12,000 Global TeleSystems
Group, Inc.* ........................................ 972
29,000 Globix Corp.* ......................................... 1,281
9,000 Level 3 Communications,
Inc.*................................................ 541
8,000 MCI WorldCom, Inc.*.................................... 689
12,000 MediaOne Group Inc.* .................................. 893
27,000 Metromedia Fiber Network,
Inc. Class "A"* ..................................... 970
1,100 Network Plus Corp.*.................................... 23
16,000 Qwest Communications
International Inc.* ................................. 529
12,800 RCN Corp.*............................................. 533
14,000 SBC Communications Inc. ............................... 812
--------
11,757
THRIFT (0.2%)
14,500 Queens County Bancorp Inc. ............................ 469
TOILETRIES/
COSMETICS (0.3%)
13,200 Lauder (Estee) Companies Inc.
(The) Class "A" ..................................... 662
TRUCKING/
TRANSPORTATION
LEASING (0.3%)
15,000 Avis Rent A Car Inc.* ................................. 437
9,000 Landstar System, Inc.* ................................ 325
--------
762
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT SECURITIES (86.9%)
(Cost $148,616,000) ................................. 213,224
--------
Value
Principal (in thousands
Amounts except per share
(in thousands) amount)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (11.2%)
(including accrued interest)
$27,400 Collateralized by $23,755,000
U.S. Treasury Bonds 10.750%,
due 5/15/03, with a value
of $27,027,000 (with State
Street Bank & Trust
Company, 4.70%, dated
6/30/99, due 7/1/99, delivery
value of $27,404,000)................................ $ 27,404
CASH AND RECEIVABLES LESS
LIABILITIES (1.9%) .............................................. 4,786
--------
NET ASSETS (100.0%) ............................................. $245,414
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE
($245,413,622 / 11,919,709 shares
outstanding) .................................................... $ 20.59
========
* Non-income producing
(ADR) American Depositary Receipts.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
13
<PAGE>
The Value Line Special Situations Fund, Inc.
Statement of Assets and Liabilities Statement of Operations
at June 30, 1999 (unaudited) for the six months ended June 30, 1999
(unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands
except per share
amount)
-----------------
Assets:
Investment securities, at value
(Cost--$148,616)............................................... $213,224
Repurchase agreements (Cost--$27,404) 27,404
Cash ............................................................ 116
Receivable for capital shares sold .............................. 3,431
Receivable for securities sold .................................. 2,966
Dividends receivable ............................................ 46
Prepaid insurance expense ....................................... 5
--------
Total Assets .............................................. 247,192
--------
Liabilities:
Payable for securities purchased ................................ 1,324
Payable for capital shares repurchased 270
Accrued expenses:
Advisory fee .................................................. 136
Other ......................................................... 48
--------
Total Liabilities ......................................... 1,778
--------
Net Assets ...................................................... $245,414
========
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 100,000,000,
outstanding 11,919,709 shares)................................. $ 11,920
Additional paid-in capital ...................................... 150,346
Accumulated net investment loss ................................. (316)
Undistributed net realized gain
on investments................................................. 18,856
Net unrealized appreciation
of investments................................................. 64,608
--------
Net Assets ...................................................... $245,414
========
Net Asset Value, Offering and
Redemption Price per Outstanding
Share ($245,413,622 / 11,919,709
shares outstanding) ........................................... $ 20.59
========
Statement of Operations
for the six months ended June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands)
--------------
Investment Income:
Interest ........................................................ $ 335
Dividends (Net of foreign
withholding taxes of $1)....................................... 282
--------
Total Income .............................................. 617
--------
Expenses:
Advisory fee .................................................... 746
Transfer agent .................................................. 59
Custodian fees .................................................. 33
Printing and stationery ......................................... 24
Auditing and legal fees ......................................... 19
Registration fees ............................................... 18
Postage ......................................................... 15
Telephone and wire charges ...................................... 14
Directors' fees and expenses .................................... 8
Insurance, dues and other ....................................... 1
--------
Total Expenses Before
Custody Credits ......................................... 937
Less: Custody Credits ..................................... (4)
--------
Net Expenses .............................................. 933
--------
Net Investment Loss ............................................. (316)
--------
Net Realized and Unrealized Gain
on Investments:
Net Realized Gain ........................................... 13,772
Change in Net Unrealized
Appreciation .............................................. 18,540
--------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ................................................ 32,312
--------
Net Increase in Net Assets
from Operations ............................................... $31,996
========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14
<PAGE>
The Value Line Special Situations Fund, Inc.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
for the six months ended June 30, 1999 (unaudited)and for the year ended
December 31, 1998
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1999 December 31,
(unaudited) 1998
----------------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Net investment loss ................................................. $ (316) $ (478)
Net realized gain on investments .................................... 13,772 13,927
Change in net unrealized appreciation ............................... 18,540 28,446
----------------------------
Net increase in net assets from operations........................... 31,996 41,895
----------------------------
Distributions to Shareholders:
Net investment income................................................ -- --
Net realized gain from investment transactions....................... -- (10,402)
----------------------------
Total distributions ................................................. -- (10,402)
----------------------------
Capital Share Transactions:
Proceeds from sale of shares ........................................ 144,985 151,465
Proceeds from reinvestment of distributions to shareholders.......... -- 8,828
Cost of shares repurchased .......................................... (122,201) (117,192)
---------------------------
Net increase from capital share transactions......................... 22,784 43,101
----------------------------
Total Increase ........................................................ 54,780 74,594
Net Assets:
Beginning of period ................................................. 190,634 116,040
----------------------------
End of period ....................................................... $ 245,414 $ 190,634
============================
Accumulated Net Investment (Loss) Income, at End of Period ............ $ (316) $ --
============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
15
<PAGE>
The Value Line Special Situations Fund, Inc.
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Value Line Special Situations Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management 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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
(A) Security Valuation. Securities listed on a securities exchange 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 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.
- --------------------------------------------------------------------------------
16
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 1999
- --------------------------------------------------------------------------------
2. Capital Share Transactions, Dividends and Distributions to Shareholders
Transactions in capital stock were as follows (in thousands except per share
amounts):
Six Months
Ended
June 30, Year Ended
1999 December 31,
(unaudited) 1998
--------------------------
Shares sold ...................................... 7,816 9,467
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. -- 530
---------------------
7,816 9,997
Shares repurchased ............................... 6,663 7,242
---------------------
Net increase ..................................... 1,153 2,755
=====================
Dividends per share from
net investment income .......................... $ -- $ --
=====================
Distributions per share from
net realized gains ............................. $ -- $ 1.0435
=====================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months
Ended
June 30, 1999
(unaudited)
-------------
(in thousands)
Purchases:
Investment Securities ............................ $111,965
========
Sales:
Investment Securities............................. $103,966
========
At June 30, 1999, the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes was $176,135,000. The aggregate
appreciation and depreciation of investments at June 30, 1999, based on a
comparison of investment values and their costs for federal income tax purposes,
was $67,107,000 and $2,614,000 respectively, resulting in a net appreciation of
$64,493,000.
4. Investment Advisory Contract, Management Fees, and Transactions With
Affiliates
An advisory fee of $746,000 was paid or payable to Value Line, Inc., the Fund's
investment adviser (the "Adviser"), for the six months ended June 30, 1999. This
was computed at the rate of 3/4 of 1% of the average daily net assets during the
period and paid monthly. The Adviser provides research, investment programs,
supervision of the investment portfolio and pays costs of administrative
services, office space, equipment and compensation of administrative,
bookkeeping and clerical personnel necessary for managing the affairs of the
Fund. The Adviser also provides persons, satisfactory to the Fund's Board of
Directors, to act as officers and employees of the Fund and pays their salaries
and wages. The Fund bears all other costs and expenses.
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, 1999, the Fund paid brokerage commissions totalling
$75,394 to the distributor, which clears its transactions through unaffiliated
brokers.
The Adviser and/or affiliated companies owned 961,908 shares of the Fund's
capital stock, representing 8.1% of the outstanding shares at June 30, 1999. In
addition, certain officers and directors of the Fund owned 143,765 shares of the
Fund, representing 1.2% of the shares outstanding.
- --------------------------------------------------------------------------------
17
<PAGE>
The Value Line Special Situations Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Years Ended December 31,
June 30, 1999 -------------------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ................ $ 17.70 $ 14.48 $ 13.34 $ 16.24 $ 16.15 $ 16.95
--------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment (loss) income ..... (.03) (.04) (.02) .26 .06 (.07)
Net gains or losses on securities
(both realized and unrealized) 2.92 4.30 4.15 .85 4.58 .23
--------------------------------------------------------------------------------------------
Total from investment operations .. 2.89 4.26 4.13 1.11 4.64 .16
--------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income .............. -- -- # (.26) (.06) --
Distributions from capital gains -- (1.04) (2.99) (3.75) (4.49) (.96)
--------------------------------------------------------------------------------------------
Total distributions .............. -- (1.04) (2.99) (4.01) (4.55) (.96)
--------------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 20.59 $ 17.70 $ 14.48 $ 13.34 $ 16.24 $ 16.15
============================================================================================
Total return ......................... 16.33%+ 29.88% 32.10% 7.24% 28.96% 1.03%
============================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ..................... $ 245,414 $ 190,634 $ 116,040 $ 89,594 $ 98,408 $ 90,180
Ratio of expenses to
average net assets ................. .92%*(1) 1.02%(1) 1.08%(1) 1.08%(1) 1.06% 1.10%
Ratio of net investment (loss) income
to average net assets .............. (.31)%* (.34)% (.14)% 1.44% 0.32% (0.46)%
Portfolio turnover rate .............. 55%+ 183% 240% 146% 10% 37%
</TABLE>
# Dividend paid was less than one cent per share
(1) Before offset of custody credits.
+ Not annualized
* Annualized.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
18
<PAGE>
The Value Line Special Situations Fund, Inc.
Other Information (unaudited)
- --------------------------------------------------------------------------------
Year 2000. Like other mutual funds, the Fund could be adversely affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.
- --------------------------------------------------------------------------------
19
<PAGE>
The Value Line Special Situations Fund, Inc.
The Value Line Family of Funds
- --------------------------------------------------------------------------------
1950--The Value Line Fund seeks long-term growth of capital. Current income is a
secondary objective.
1952--Value Line Income and Growth Fund's primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks long-term growth of capital.
No consideration is given to current income in the choice of investments.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth.
1979--The Value Line Cash Fund, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be invested in securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital.
1984--The Value Line Tax Exempt Fund seeks to provide investors with the maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: The Money Market Portfolio
and the National Bond 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.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with the 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* seeks to achive a high total
investment return consistent with reasonable risk.
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 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, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
20
<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
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT PricewaterhouseCoopers LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
Directors Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Stephen E. Grant
Vice President
Philip Orlando
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and, accordingly, they
do not express an opinion thereon. This unaudited report is issued for
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).
#507986
