================================================================================
SEMI-ANNUAL REPORT
------------------
June 30, 2000
------------------
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 are pleased to report continued strong performance by the Value Line Special
Situations Fund. For the six months ending June 30th, your Fund gained 8.08%,
versus a gain of 3.04% for the unmanaged Russell 2000 Index, the benchmark for
small-capitalization stocks, and a loss of -.42% for the unmanaged Standard &
Poor's 500, the large-cap index.
This was a particularly volatile period for the market, especially for the
NASDAQ and technology stocks that comprise a large part of the Fund's portfolio.
After wide swings, the NASDAQ Composite Index ended down for the six months.
Your Fund weathered the period by sticking with companies showing strong
earnings momentum and strong stock price momentum, reflecting powerful positions
in their business niche. We find many such companies in the various technology
subsectors, including semiconductors, specialty software, the internet,
telecommunications, and electronics. After Keithley Instruments, a small-cap
electronics company, reported strong first-quarter earnings in April, we
purchased the stock at $27 a share in early May and saw it close June 30th at
$87. We began purchasing equipment maker Tollgrade Communications in January at
$30 a share (a near record-high at the time) and added more in March at $50 and
in April at $64, and it closed June 30th at $132. Your Fund's top performer in
the first half was Newport Corp., a fiber-optics firm purchased near the end of
last year at under $12 a share (a near record-high at the time) that grew into
our largest holding by June 30th at $107 a share, representing 1.2% of the
Fund's assets. A number of the portfolio's other holdings, primarily in the
technology or biotechnology sectors, doubled or tripled in the six-month period.
Our investment style is to cast our net widely, collect many promising small
fish, and give them the room to grow. Those that suffer problems shrink into a
tiny part of the portfolio and are usually sold. Those that succeed can grow
into very large fish indeed. We hold over 400 stocks of all shapes and sizes in
the portfolio.
This disciplined investment process, we believe, will continue to serve our
shareholders well in these volatile markets. Thank you for investing with us.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
August 4, 2000
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2
<PAGE>
The Value Line Special Situations Fund, Inc.
Special Situations Fund Shareholders
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Economic Observations
The American economy appears to be on a somewhat slower growth track as we move
through the early stages of the second half of calendar 2000. Evidence of this
deceleration in business activity can be found in recent surveys on
manufacturing, housing, auto sales, and employment. Overall, we now estimate
that GDP growth will average 3.0%-3.5% during the third and fourth quarters.
Thereafter, we would expect the pace of economic activity to hold at these
comparatively restrained levels through at least the first half of 2001, as the
succession of interest-rate hikes voted for by the Federal Reserve Board over
the past year, or so, continues to have the hoped-for effect of stabilizing the
economy at comfortable growth levels.
Inflationary pressures, meanwhile, continue to be held in check for the most
part, with sustained increases in productivity and ongoing technological
innovations being at least partially responsible for this comparative pricing
stability. Nevertheless, a moderate increase in cost pressures could still
evolve over the next few quarters, particularly if energy prices increase
further and the aforementioned moderation in second-half GDP growth fails to
evolve as we expect it will. The Federal Reserve, taking note of this potential
for higher prices, meanwhile, is likely to keep a vigilant eye on the monetary
situation, standing ready to raise interest rates further should it deem
inflation to be a problem. Absent an unexpected price flareup, we believe the
recent credit tightening cycle will shortly run its course.
*Performance Data:
Average Growth of
Annual an Assumed
Total Investment
Return of $10,000
------ ----------
1 year ended 6/30/2000 ..................... 50.20% $15,020
5 years ended 6/30/2000 .................... 28.87% $35,541
10 years ended 6/30/2000 .................... 18.72% $55,608
* 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, 2000 (unaudited)
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Ten Largest Holdings
<TABLE>
<CAPTION>
Value Percentage
Issue Shares (in thousands) of Net Assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Newport Corp. ................................................ 51,000 $5,476 1.1%
SDL, Inc. .................................................... 18,000 5,133 1.1
Calpine Corp. ................................................ 72,000 4,734 1.0
Power-One, Inc. .............................................. 37,500 4,273 0.9
Check Point Software Technologies Ltd. ....................... 19,000 4,023 0.8
TriQuint Semiconductor, Inc. ................................. 39,800 3,808 0.8
TelCom Semiconductor, Inc. ................................... 89,000 3,566 0.7
Network Appliance, Inc. ...................................... 42,000 3,381 0.7
BroadVision, Inc. ............................................ 65,553 3,331 0.7
Millennium Pharmaceuticals, Inc. ............................. 28,000 3,132 0.7
<CAPTION>
Five Largest Industry Categories
Value Percentage
Industry (in thousands) of Net Assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer Software & Services ................................. $ 56,584 11.8%
Semiconductor ................................................ 51,345 10.7
Telecommunications Equipment ................................. 34,963 7.3
Electronics .................................................. 33,015 6.9
Computer & Peripherals ....................................... 29,963 6.3
<CAPTION>
Five Largest Net Security Purchases*
Cost
Issue (in thousands)
-----------------------------------------------------------------------------------------------------------
<S> <C>
Apple Computer, Inc. ......................................... $ 2,161
TelCom Semiconductor, Inc. ................................... 2,120
Aradigm Corp. ................................................ 1,949
Aether Systems, Inc. ......................................... 1,386
Corning Inc. ................................................. 1,337
<CAPTION>
Five Largest Net Security Sales*
Proceeds
Issue (in thousands)
-----------------------------------------------------------------------------------------------------------
<S> <C>
General Electric Co. ......................................... $ 4,827
Microsoft Corp. .............................................. 3,885
Broadcom Corp. Class "A" ..................................... 2,189
MedImmune, Inc. .............................................. 2,069
PMC-Sierra, Inc. ............................................. 1,790
</TABLE>
* For the six month period ended 06/30/00
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4
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited) June 30, 2000
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Value
Shares (in thousands)
--------------------------------------------------------------------------------
COMMON STOCKS (96.3%)
ADVERTISING (0.9%)
21,000 Getty Images, Inc.*..................................... $ 778
12,000 Omnicom Group, Inc...................................... 1,069
21,000 TMP Worldwide Inc.*..................................... 1,550
21,000 True North
Communications, Inc................................. 924
--------
4,321
AEROSPACE/
DEFENSE (0.5%)
8,500 Alliant Techsystems, Inc.*.............................. 573
20,000 Boeing Co............................................... 836
20,000 General Dynamics Corp................................... 1,045
--------
2,454
AIR TRANSPORT (0.2%)
32,000 Atlantic Coast Airlines
Holdings, Inc.*..................................... 1,016
BANK--MIDWEST (0.5%)
12,000 Fifth Third Bancorp..................................... 759
21,000 Northern Trust Corp..................................... 1,366
13,230 Old Kent Financial Corp................................. 354
--------
2,479
BEVERAGE--
ALCOHOLIC (0.4%)
13,000 Canandaigua Brands, Inc.
Class "A"*.......................................... 656
19,000 Coors (Adolph) Co.
Class "B"........................................... 1,149
--------
1,805
BUILDING
MATERIALS (0.1%)
26,000 Insituform Technologies, Inc.
Class "A"*.......................................... 705
CABLE TV (0.4%)
18,000 Antec Corp.*............................................ 748
42,000 EchoStar Communications
Corp. Class "A"*.................................... 1,391
--------
2,139
CHEMICAL--
DIVERSIFIED (0.6%)
8,000 Brady Corp. Class "A"................................... 260
20,000 Eastman Chemical Company................................ 955
14,000 Millipore Corp.......................................... 1,055
20,900 Spartech Corp........................................... 565
--------
2,835
CHEMICAL--
SPECIALTY (0.2%)
17,000 Avery Dennison Corp..................................... 1,141
COMPUTER &
PERIPHERALS (6.3%)
8,000 Actel Corp.*............................................ 365
36,000 Apple Computer, Inc.*................................... 1,885
18,000 Blue Wave Systems, Inc.*................................ 186
4,000 Breakaway Solutions, Inc.*.............................. 108
22,000 Cabletron Systems, Inc.*................................ 555
45,214 Cisco Systems, Inc.*.................................... 2,874
37,500 Cybex Computer
Products Corporation*............................... 1,589
20,000 Dell Computer Corp.*.................................... 986
14,000 EMC Corp.*.............................................. 1,077
23,000 Emulex Corp.*........................................... 1,511
12,000 Gateway, Inc.*.......................................... 681
10,000 Hewlett-Packard Co...................................... 1,249
40,000 InFocus Corporation*.................................... 1,287
15,000 M-Systems Flash Disk
Pioneers Ltd.*...................................... 1,168
30,000 MRV Communications, Inc.*............................... 2,017
9,000 Mercury Computer
Systems, Inc.*...................................... 291
42,000 Network Appliance, Inc.*................................ 3,381
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5
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
COMPUTER &
PERIPHERALS (6.3%)
(Continued)
20,000 Palm, Inc.*............................................. $ 668
48,000 Pinnacle Systems, Inc.*................................. 1,079
14,000 SanDisk Corp.*.......................................... 857
20,000 Silicon Storage
Technology, Inc.*................................... 1,766
28,400 Sun Microsystems, Inc.*................................. 2,583
23,000 Tech Data Corp.*........................................ 1,002
18,000 Zebra Technologies Corp.
Class "A"*.......................................... 798
--------
29,963
COMPUTER SOFTWARE &
SERVICES (11.8%)
50,000 Actuate Corp.*.......................................... 2,669
18,000 Adobe Systems, Inc...................................... 2,340
20,000 Advanced Digital
Information Corp.*.................................. 319
13,000 Advent Software, Inc.*.................................. 839
9,000 Apex, Inc.*............................................. 394
24,000 AremisSoft Corp.*....................................... 747
24,000 Aspen Technology, Inc.*................................. 924
26,000 BEA Systems, Inc.*...................................... 1,285
16,000 Brio Technology, Inc.*.................................. 339
65,553 BroadVision, Inc.*...................................... 3,331
26,000 Business Objects S.A. (ADR)*............................ 2,291
19,000 Check Point Software
Technologies Ltd. *................................. 4,023
17,000 Citrix Systems, Inc.*................................... 322
13,000 Clarus Corporation*..................................... 505
30,000 Cognizant Technology
Solutions Corp. Class "A"*.......................... 996
34,000 Cognos Inc.*............................................ 1,407
24,000 Comverse Technology, Inc.*.............................. 2,232
4,000 DST Systems, Inc.*...................................... 305
12,000 Datastream Systems, Inc.*............................... 150
31,500 Dendrite International, Inc.*........................... 1,049
16,000 Documentum, Inc.*....................................... 1,430
9,000 E.piphany, Inc.*........................................ 965
21,000 Fiserv, Inc.*........................................... 908
32,000 Henry (Jack) & Associates, Inc.......................... 1,604
9,800 i2 Technologies, Inc.*.................................. 1,022
5,500 Inktomi Corp.*.......................................... 650
18,000 IONA Technologies
PLC (ADR)*.......................................... 1,134
26,000 Macrovision Corp.*...................................... 1,662
27,000 Mercury Interactive Corp.*.............................. 2,612
10,000 Micromuse, Inc.*........................................ 1,655
18,000 MicroStrategy Inc. Class "A"*........................... 540
38,250 Paychex, Inc............................................ 1,606
44,250 Peregrine Systems, Inc.*................................ 1,535
3,000 RSA Security Inc.*...................................... 208
13,000 Rational Software Corp.*................................ 1,208
30,000 Red Hat, Inc.*.......................................... 812
19,000 Remedy Corp.*........................................... 1,059
24,000 ScanSource, Inc.*....................................... 933
18,000 Siebel Systems, Inc.*................................... 2,944
1,000 SilverStream Software, Inc.*............................ 58
5,000 Software.com, Inc.*..................................... 649
36,000 Sybase, Inc.*........................................... 828
14,000 TIBCO Software, Inc.*................................... 1,501
15,750 Veritas Software Corp.*................................. 1,780
62,000 Zomax, Inc.*............................................ 814
--------
56,584
DIVERSIFIED
COMPANIES (0.6%)
11,000 American Standard
Companies, Inc.*.................................... 451
13,000 Textron, Inc............................................ 706
24,000 Tyco International Ltd.................................. 1,137
7,000 United Technologies Corp................................ 412
--------
2,706
DRUG (5.9%)
4,000 Abgenix, Inc.*.......................................... 479
30,000 Andrx Corp.*............................................ 1,918
27,000 Celgene Corp.*.......................................... 1,590
8,000 Cephalon, Inc.*......................................... 479
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6
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 2000
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
DRUG (5.9%) (Coninued)
16,000 CuraGen Corp.*.......................................... $ 609
29,000 DUSA Pharmaceuticals, Inc.*............................. 855
11,000 Forest Laboratories, Inc.*.............................. 1,111
14,000 Gene Logic, Inc.*....................................... 500
9,000 Genentech, Inc.*........................................ 1,548
10,000 Hyseq, Inc.*............................................ 454
2,000 ImClone Systems, Inc.*.................................. 153
18,000 Immunex Corp.*.......................................... 890
2,000 Invitrogen Corp.*....................................... 150
64,500 Ivax Corp.*............................................. 2,677
36,750 Jones Pharma Incorporated............................... 1,468
58,500 King Pharmaceuticals, Inc.*............................. 2,567
4,000 Medicis Pharmaceutical Corp.
Class "A"*.......................................... 228
28,000 Millennium Pharmaceuticals,
Inc.*............................................... 3,132
44,000 NBTY, Inc.*............................................. 281
6,000 PE Corporation-Celera
Genomic Group*...................................... 561
4,000 Pharmacopeia, Inc.*..................................... 186
12,000 Sepracor, Inc.*......................................... 1,447
16,682 Shire Pharmaceuticals
Group PLC (ADR)*.................................... 865
24,000 Teva Pharmaceutical
Industries, Ltd. (ADR).............................. 1,331
34,000 Titan Pharmaceuticals, Inc.*............................ 1,462
20,000 Watson Pharmaceuticals, Inc.*........................... 1,075
--------
28,016
EDUCATIONAL
SERVICES (0.5%)
10,000 Career Education Corp.*................................. 485
11,000 Learning Tree
International, Inc.*................................ 674
22,000 National Computer
Systems, Inc........................................ 1,083
--------
2,242
ELECTRIC UTILITY--
CENTRAL (0.4%)
39,600 AES Corp. (The)*........................................ 1,807
ELECTRIC UTILITY--
WEST (1.0%)
72,000 Calpine Corp.*.......................................... 4,734
ELECTRICAL
EQUIPMENT (3.4%)
20,000 AVX Corp................................................ 459
32,000 Belden, Inc............................................. 820
8,000 Brooks Automation, Inc.*................................ 511
30,000 C&D Technologies, Inc................................... 1,695
17,000 Cable Design
Technologies Corp................................... 570
6,500 Corning Inc............................................. 1,754
14,000 General Electric Co..................................... 742
14,000 Kopin Corp.*............................................ 969
15,000 Merix Corp.*............................................ 705
28,000 Power Integrations, Inc.*............................... 660
37,500 Power-One, Inc.*........................................ 4,273
25,000 Semtech Corp.*.......................................... 1,912
12,500 Technitrol, Inc......................................... 1,211
--------
16,281
ELECTRONICS (6.9%)
29,000 Adaptive Broadband Corp.*............................... 1,066
24,000 Alpha Industries, Inc.*................................. 1,058
12,000 Amphenol Corp. Class "A"*............................... 794
22,500 ANADIGICS, Inc.*........................................ 766
3,000 Anaren Microwave, Inc.*................................. 394
3,000 Artesyn Technologies, Inc.*............................. 83
13,000 Avnet, Inc.............................................. 770
12,000 CTS Corp................................................ 540
13,000 Creative Technology, Ltd................................ 310
21,000 Cree, Inc.*............................................. 2,804
4,000 Diodes, Inc.*........................................... 172
12,000 Exar Corp.*............................................. 1,046
37,320 Flextronics International Ltd.*......................... 2,563
26,000 Gemstar International
Group Ltd.*......................................... 1,598
25,984 JDS Uniphase Corp.*..................................... 3,115
14,000 KEMET Corp.*............................................ 351
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7
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
ELECTRONICS (6.9%)
(Continued)
26,000 Micrel, Inc.*........................................... $ 1,129
4,000 Parkervision, Inc.*..................................... 202
17,000 Plexus Corp.*........................................... 1,921
41,812 Symbol Technologies, Inc................................ 2,258
40,000 Three-Five Systems, Inc.*............................... 2,360
48,000 Titan Corp.*............................................ 2,148
46,000 Universal Electronics Inc.*............................. 1,130
31,000 Varian Medical Systems, Inc............................. 1,213
45,000 Viasystems Group, Inc.*................................. 728
18,000 Virata Corporation*..................................... 1,073
37,500 Vishay Intertechnology, Inc.*........................... 1,423
--------
33,015
ENTERTAINMENT (2.1%)
17,985 AMFM Inc.*.............................................. 1,241
9,629 Clear Channel
Communications, Inc.*............................... 722
39,000 Cox Radio, Inc. Class "A"*.............................. 1,092
20,000 Emmis Communications Corp.
Class "A"*.......................................... 828
16,800 Entercom Com-
munications Corp.*.................................. 819
16,000 Hispanic Broadcasting Corp.*............................ 530
12,000 TCI Satellite Entertainment,
Inc. Class "A"*..................................... 104
14,000 Time Warner, Inc........................................ 1,064
32,000 USA Networks, Inc.*..................................... 692
16,000 Univision Communications,
Inc. Class "A"*..................................... 1,656
20,615 Viacom, Inc. Class "B"*................................. 1,406
--------
10,154
FINANCIAL SERVICES--
DIVERSIFIED (0.6%)
4,000 American General Corp................................... 244
16,000 Capital One Financial Corp.............................. 714
21,000 Citigroup, Inc.......................................... 1,265
7,500 Providian Financial Corp................................ 675
--------
2,898
FOOD PROCESSING (0.4%)
15,000 Keebler Foods Co........................................ 557
22,000 McCormick & Co., Inc.................................... 715
6,000 Quaker Oats Company (The)............................... 451
--------
1,723
FOOD
WHOLESALERS (0.3%)
30,000 SYSCO Corp.............................................. 1,264
FOREIGN ELECTRONICS/
ENTERTAINMENT (0.6%)
50,000 ARM Holdings plc (ADR)*................................. 1,644
3,000 Epcos AG (ADR)*......................................... 295
15,000 Koninklijke Philips
Electronics N.V. (ADR).............................. 713
--------
2,652
FOREIGN
TELECOMMUNICATIONS
(2.1%)
18,000 Alcatel (ADR)........................................... 1,197
20,000 AT & T Canada, Inc.
Class "B" (ADR)*.................................... 664
64,000 Ericsson (L.M.) Telephone Co.
(ADR) Class "B"..................................... 1,280
17,000 Euro99.Com A/S (ADR)*................................... 112
36,000 Nokia Corp. (ADR)....................................... 1,798
41,480 Nortel Networks Corp.................................... 2,831
23,000 SK Telecom Ltd. (ADR)*.................................. 835
24,000 Telefonos de Mexico
S.A. de CV (ADR).................................... 1,371
--------
10,088
FURNITURE/HOME
FURNISHINGS (0.1%)
19,500 Ethan Allen Interiors, Inc.............................. 468
GROCERY (0.2%)
47,000 Kroger Co.*............................................. 1,037
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8
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 2000
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
HEALTHCARE
INFORMATION
SYSTEMS (0.1%)
84,000 Hooper Holmes, Inc...................................... $ 672
HOME APPLIANCE (0.1%)
10,000 Whirlpool Corp.......................................... 466
HOTEL/GAMING (0.5%)
55,000 Argosy Gaming Company*.................................. 791
17,000 MGM Grand, Inc.*........................................ 546
36,000 Station Casinos, Inc.*.................................. 900
--------
2,237
HOUSEHOLD
PRODUCTS (0.3%)
18,000 Church & Dwight Co., Inc................................ 324
21,000 Salton, Inc.*........................................... 774
10,000 Scotts Company (The)
Class "A"*.......................................... 365
--------
1,463
INDUSTRIAL
SERVICES (2.3%)
12,000 Administaff, Inc.*...................................... 762
12,000 Amdocs Ltd.*............................................ 921
6,000 Catalina Marketing Corp.*............................... 612
28,000 Celestica, Inc.*........................................ 1,390
22,000 Convergys Corp.*........................................ 1,141
22,500 Quanta Services, Inc.*.................................. 1,237
62,000 Robert Half International, Inc.*........................ 1,767
23,000 SmartForce PLC (ADR)*................................... 1,104
23,000 StarTek, Inc.*.......................................... 1,159
26,000 TeleTech Holdings, Inc.*................................ 808
--------
10,901
INTERNET (3.0%)
9,000 Akamai Technologies, Inc.*.............................. 1,069
9,000 America Online, Inc.*................................... 475
1,800 Be Free, Inc.*.......................................... 16
20,000 chinadotcom corporation
Class "A"*.......................................... 409
22,000 Digital Island, Inc.*................................... 1,070
56,000 Exodus Communications, Inc.*............................ 2,579
6,000 F5 Networks, Inc.*...................................... 327
9,000 iBasis, Inc.*........................................... 388
8,000 Internet Capital Group, Inc.*........................... 296
8,000 JNI Corporation*........................................ 253
19,000 Kana Communications, Inc.*.............................. 1,176
6,000 Keynote Systems, Inc.*.................................. 423
6,000 Liberate Technologies*.................................. 176
17,000 Macromedia, Inc.*....................................... 1,644
14,000 Netopia, Inc.*.......................................... 564
2,000 ONI Systems Corp*....................................... 234
16,000 Portal Software, Inc.*.................................. 1,022
15,000 S1 Corp.*............................................... 350
34,000 Sequoia Software Corp.*................................. 557
5,000 Turnstone Systems, Inc.*................................ 828
5,000 Ventro Corporation*..................................... 94
4,000 Vitria Technology, Inc.*................................ 244
--------
14,194
MACHINERY (0.7%)
26,000 Donaldson Co., Inc...................................... 513
28,000 Dover Corp.............................................. 1,136
18,000 Helix Technology Corp................................... 702
16,000 PRI Automation, Inc.*................................... 1,046
--------
3,397
MANUFACTURED HOUSING/
RECREATIONAL
VEHICLE (0.1%)
15,000 Oshkosh Truck Corp...................................... 536
MEDICAL SERVICES (1.8%)
22,000 Advance Paradigm, Inc.*................................. 451
7,000 Affymetrix, Inc.*....................................... 1,156
27,000 Excel Technology, Inc.*................................. 1,358
4,000 Myriad Genetics, Inc.*.................................. 592
39,000 Oxford Health Plans, Inc.*.............................. 929
21,000 Quest Diagnostics, Inc.*................................ 1,503
8,000 Syncor International Corp.*............................. 576
34,000 Tenet Healthcare Corp.*................................. 918
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9
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
MEDICAL SERVICES (1.8%)
(Continued)
14,000 Triad Hospitals, Inc.*.................................. $ 339
11,000 Wellpoint Health
Networks, Inc.*..................................... 797
--------
8,619
MEDICAL SUPPLIES (3.6%)
23,400 Allergan, Inc........................................... 1,743
25,000 Alpharma Inc. Class "A"................................. 1,556
7,000 AmeriSource Health Corp.
Class "A"*.......................................... 217
123,000 Aradigm Corp.*.......................................... 2,153
13,000 ArthroCare Corp.*....................................... 692
32,444 Bindley Western Industries, Inc......................... 858
32,000 Cytyc Corp.*............................................ 1,708
8,000 Digene Corp.*........................................... 323
21,800 Inamed Corp.*........................................... 798
22,702 Medtronic, Inc.......................................... 1,131
17,000 Patterson Dental Co.*................................... 867
29,000 PolyMedica Corp.*....................................... 1,254
30,600 ResMed Inc.*............................................ 819
28,000 SonoSite, Inc.*......................................... 807
16,000 Techne Corp.*........................................... 2,080
--------
17,006
NATURAL GAS--
DIVERSIFIED (0.6%)
17,000 Dynegy, Inc............................................. 1,161
24,000 Enron Corp.............................................. 1,548
--------
2,709
NEWSPAPER (0.4%)
18,000 Dow Jones & Co., Inc.................................... 1,318
17,000 Tribune Co.............................................. 595
--------
1,913
OFFICE EQUIPMENT &
SUPPLIES (0.1%)
9,000 Lexmark International, Inc.
Class "A"*.......................................... 605
OILFIELD SERVICES/
EQUIPMENT (0.4%)
2,000 Cooper Cameron Corp.*................................... 132
42,000 Hanover Compressor Co.*................................. 1,596
--------
1,728
PRECISION
INSTRUMENT (4.2%)
3,814 Agilent Technologies, Inc.*............................. 281
14,000 Cognex Corp.*........................................... 725
24,000 Keithley Instruments, Inc............................... 2,091
8,000 LTX Corp.*.............................................. 280
27,000 Mettler Toledo
International, Inc.*................................ 1,080
51,000 Newport Corp............................................ 5,476
21,000 Orbotech Ltd.*.......................................... 1,950
27,000 PerkinElmer, Inc........................................ 1,785
31,000 Sybron International Corp.*............................. 614
17,000 Tektronix, Inc.......................................... 1,258
34,000 Varian, Inc.*........................................... 1,568
23,000 Waters Corp.*........................................... 2,871
--------
19,979
PUBLISHING (0.5%)
18,000 McGraw-Hill Companies, Inc.............................. 972
27,000 Reader's Digest
Association, Inc. Class "A" ........................ 1,073
5,000 Reuters Group PLC (ADR)................................. 500
--------
2,545
R.E.I.T. (0.2%)
14,000 Pinnacle Holdings, Inc.*................................ 756
RECREATION (0.3%)
8,000 Electronic Arts Inc.*................................... 583
24,000 Harley-Davidson, Inc.................................... 924
--------
1,507
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10
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 2000
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
RESTAURANT (1.2%)
28,000 Applebee's International, Inc........................... $ 849
26,000 Brinker International, Inc.*............................ 761
5,000 CEC Entertainment, Inc.*................................ 128
45,000 Cheesecake Factory,
Inc. (The)*.......................................... 1,237
32,000 Darden Restaurants, Inc................................. 520
30,000 Jack In The Box, Inc.*.................................. 739
60,800 Ruby Tuesday, Inc....................................... 764
25,000 Sonic Corp.*............................................ 734
--------
5,732
RETAIL BUILDING
SUPPLY (0.5%)
16,000 Fastenal Co............................................. 810
22,500 Home Depot, Inc. (The).................................. 1,123
15,600 Lowe's Companies, Inc................................... 641
--------
2,574
RETAIL--SPECIAL
LINES (3.3%)
37,000 Audiovox Corp. Class "A"................................ 816
28,000 Bed Bath & Beyond Inc.*................................. 1,015
16,000 CDW Computer Centers, Inc.*............................. 1,000
48,000 Chico's FAS, Inc.*...................................... 960
16,400 Circuit City Stores, Inc.-
Circuit City Group ................................. 544
25,500 Cost Plus, Inc.*........................................ 732
17,625 Dollar Tree Stores, Inc.*............................... 697
19,000 Gap, Inc. (The)......................................... 594
4,000 Gucci Group N.V......................................... 379
23,000 Insight Enterprises, Inc.*.............................. 1,364
57,000 Intertan, Inc.*......................................... 670
43,800 Intimate Brands, Inc.
Class "A"........................................... 865
19,000 Linens `N' Things, Inc.*................................ 516
21,000 Michaels Stores, Inc.*.................................. 962
27,000 Quiksilver, Inc.*....................................... 420
16,000 RadioShack Corp......................................... 758
12,000 Sonic Automotive, Inc.
Class "A"*.......................................... 128
17,000 Talbots, Inc. (The)..................................... 934
16,000 Tiffany & Co............................................ 1,080
23,000 ValueVision International, Inc.
Class "A"*.......................................... 552
18,000 Zale Corp.*............................................. 657
--------
15,643
RETAIL STORE (1.2%)
25,000 BJ's Wholesale Club Inc.*............................... 825
51,000 Family Dollar Stores, Inc............................... 998
19,200 Kohl's Corp.*........................................... 1,068
12,000 Target Corp............................................. 696
34,000 Wal-Mart Stores, Inc.................................... 1,959
--------
5,546
SECURITIES
BROKERAGE (0.2%)
13,000 Morgan Stanley
Dean Witter & Co.................................... 1,082
SEMICONDUCTOR (10.7%)
29,000 ASM International N.V.*................................. 769
17,000 Advanced Micro Devices, Inc.*........................... 1,313
21,000 Amkor Technology, Inc.*................................. 742
22,000 Analog Devices, Inc.*................................... 1,672
30,000 Applied Micro Circuits Corp.*........................... 2,963
17,000 Asyst Technologies, Inc.*............................... 582
25,000 Atmel Corp.*............................................ 922
8,000 C-Cube Microsystems Inc.*............................... 157
24,000 Conexant Systems, Inc.*................................. 1,167
29,000 Cypress Semiconductor Corp.*............................ 1,225
24,000 Dallas Semiconductor Corp............................... 978
9,000 Electroglas, Inc.*...................................... 194
21,000 Fairchild Semiconductor
International, Inc. Class "A"*...................... 850
19,000 IBIS Technology Corp.*.................................. 1,147
20,000 Integrated Device
Technology, Inc.*................................... 1,198
24,000 International Rectifier Corp.*.......................... 1,344
25,500 Lam Research Corp.*..................................... 956
17,000 Lattice Semiconductor Corp.*............................ 1,175
--------------------------------------------------------------------------------
11
<PAGE>
The Value Line Special Situations Fund, Inc.
Schedule of Investments (unaudited)
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
SEMICONDUCTOR (10.7%)
(Continued)
20,000 Linear Technology Corp.................................. $ 1,279
24,000 Mattson Technology, Inc.*............................... 780
17,000 Maxim Integrated
Products, Inc.*..................................... 1,155
40,000 NVIDIA Corp.*........................................... 2,542
17,000 Nanometrics, Inc.*...................................... 700
3,000 National Semiconductor
Corp.*.............................................. 170
17,000 PMC-Sierra, Inc.*....................................... 3,021
24,000 Pericom Semiconductor
Corp.*.............................................. 1,632
22,000 QLogic Corp.*........................................... 1,453
18,000 SDL, Inc.*.............................................. 5,133
17,000 Silicon Image, Inc.*.................................... 848
15,000 STMicroelectronics N.V.................................. 963
900 Stratos Lightwave, Inc.*................................ 25
89,000 TelCom Semiconductor, Inc.*............................. 3,566
33,000 TranSwitch Corp.*....................................... 2,547
39,800 TriQuint Semiconductor, Inc.*........................... 3,808
26,000 Varian Semiconductor
Equipment Associates, Inc.*......................... 1,633
10,000 Vitesse Semiconductor Corp.*............................ 736
--------
51,345
SEMICONDUCTOR
CAPITAL
EQUIPMENT (0.7%)
13,000 Altera Corp.*........................................... 1,325
22,000 Electro Scientific
Industries, Inc.*................................... 969
19,000 Kulicke & Soffa
Industries Inc.*.................................... 1,128
--------
3,422
SHOE (0.4%)
18,000 Kenneth Cole Productions, Inc.
Class "A"*.......................................... 720
16,000 Timberland Co. Class "A"*............................... 1,133
--------
1,853
TELECOMMUNICATIONS
EQUIPMENT (7.3%)
24,000 ADC Telecommunications,
Inc.*............................................... 2,013
16,000 Andrew Corp.*........................................... 537
27,000 Anixter International, Inc.*............................ 716
17,000 Aspect Communications
Corp.*.............................................. 668
21,000 C-Cor.net Corp.*........................................ 567
32,000 California Amplifier, Inc.*............................. 1,464
25,000 CommScope, Inc.*........................................ 1,025
28,000 DSP Group, Inc.*........................................ 1,568
10,000 Ditech Communications
Corp.*.............................................. 946
11,000 E-TEK Dynamics, Inc.*................................... 2,902
3,000 Efficient Networks, Inc.*............................... 221
12,000 General Motors Corp.
Class "H"*.......................................... 1,053
11,000 Gilat Satellite Networks Ltd.*.......................... 763
15,000 GlobeSpan, Inc.*........................................ 1,831
22,341 Harmonic, Inc.*......................................... 553
38,000 International Fibercom, Inc.*........................... 969
7,500 MasTec, Inc.*........................................... 286
2,000 Natural MicroSystems Corp.*............................. 225
5,000 NICE Systems Ltd. (ADR)*................................ 386
62,000 Oak Technology, Inc.*................................... 1,337
33,000 Polycom, Inc.*.......................................... 3,105
48,000 Powerwave Technologies,
Inc.*............................................... 2,112
9,000 QUALCOMM Inc.*.......................................... 540
21,000 REMEC, Inc.*............................................ 879
34,000 Scientific-Atlanta, Inc................................. 2,533
26,000 SpectraSite Holdings, Inc.*............................. 738
27,000 Tekelec*................................................ 1,301
16,000 Tellabs, Inc.*.......................................... 1,095
16,000 Tollgrade
Communications, Inc.*............................... 2,120
34,000 Westell Technologies, Inc.
Class "A"*.......................................... 510
--------
34,963
--------------------------------------------------------------------------------
12
<PAGE>
The Value Line Special Situations Fund, Inc.
June 30, 2000
--------------------------------------------------------------------------------
Value
Shares (in thousands)
--------------------------------------------------------------------------------
TELECOMMUNICATION
SERVICES (3.2%)
12,000 ACTV, Inc.*............................................. $ 179
11,000 ADTRAN, Inc.*........................................... 659
15,000 Allegiance Telecom, Inc.*............................... 960
32,000 BroadWing Inc.*......................................... 830
17,500 Celeritek, Inc.*........................................ 714
14,000 Copper Mountain
Networks, Inc.*..................................... 1,234
6,000 Digital Lightwave, Inc.*................................ 603
27,000 DyCom Industries, Inc.*................................. 1,242
16,000 Global Crossing Ltd.*................................... 421
3,000 LCC International, Inc.
Class "A"*.......................................... 82
5,000 MGC Communications, Inc.*............................... 300
12,000 MediaOne Group, Inc.*................................... 796
54,000 Metromedia Fiber Network,
Inc. Class "A"*..................................... 2,143
18,000 Nextel Communications, Inc.
Class "A"*.......................................... 1,101
22,000 NEXTLINK
Communications, Inc.
Class "A"*.......................................... 835
400 Pac-West Telecomm, Inc.*................................ 8
16,000 Qwest Communications
International, Inc.*................................ 795
16,000 Sprint Corporation
(PCS Group)*........................................ 952
9,000 Sycamore Networks, Inc.*................................ 993
8,000 TV Guide, Inc. Class "A"*............................... 274
--------
15,121
TRUCKING/
TRANSPORTATION
LEASING (0.1%)
11,000 Landstar System, Inc.*.................................. 655
WIRELESS
NETWORKING (1.3%)
7,500 Aether Systems, Inc.*................................... 1,538
35,000 Puma Technology, Inc.*.................................. 938
28,000 RF Micro Devices Inc.*.................................. 2,454
20,000 Sawtek Inc.*............................................ 1,151
--------
6,081
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT SECURITIES (96.3%)
(Cost $286,207,000) ................................ 459,777
--------
Value
Principal (in thousands
Amount except per share
(in thousands) amount)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.0%)
(including accrued interest)
$5,000 Collateralized by $4,690,000
U.S. Treasury Bonds
6.625%, due 2/15/27,
with a value of $5,098,000
(with Warburg Dillon
Read LLC, 6.20%,
dated 6/30/00, due 7/3/00,
delivery value $5,002,583) ................... $ 5,001
CASH AND OTHER ASSETS LESS
LIABILITIES (2.7%) ................................................. 12,879
--------
NET ASSETS (100.0%) ............................................. $477,657
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE
($477,657,198 / 16,313,067 shares
outstanding) $ 29.28
========
* 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
at June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
(In thousands
except per share
amount)
----------------
Assets:
Investment securities, at value
(Cost - $286,207) .................................... $ 459,777
Repurchase agreement (Cost - $5,001) ................... 5,001
Cash ................................................... 26
Receivable for capital shares sold ..................... 11,194
Receivable for securities sold ......................... 5,354
Dividends receivable ................................... 49
Prepaid expenses ....................................... 7
------------
Total Assets ..................................... 481,408
------------
Liabilities:
Payable for securities purchased ....................... 2,771
Payable for capital shares repurchased ................. 623
Accrued expenses:
Advisory fee ......................................... 285
Other ................................................ 72
------------
Total Liabilities ................................ 3,751
------------
Net Assets ............................................. $ 477,657
============
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 100,000,000,
outstanding 16,313,067 shares) ....................... $ 16,313
Additional paid-in capital ............................. 250,120
Accumulated net investment loss ........................ (1,380)
Undistributed net realized gain
on investments ....................................... 39,034
Net unrealized appreciation of
investments .......................................... 173,570
------------
Net Assets ............................................. $ 477,657
============
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($477,657,198 / 16,313,067
shares outstanding) .................................. $ 29.28
============
Statement of Operations
for the six months ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
(In thousands)
------------
Investment Income:
Dividends (Net of foreign
withholding taxes of $5) ............................... $ 385
Interest ................................................. 245
--------
Total Income ....................................... 630
--------
Expenses:
Advisory fee ............................................. 1,725
Transfer agent ........................................... 80
Custodian fees ........................................... 53
Registration fees ........................................ 38
Insurance, dues and other ................................ 28
Printing ................................................. 26
Postage .................................................. 22
Auditing and legal fees .................................. 19
Telephone ................................................ 16
Directors' fees and expenses ............................. 7
--------
Total Expenses Before
Custody Credits .................................. 2,014
Less: Custody Credits .............................. (4)
--------
Net Expenses ....................................... 2,010
--------
Net Investment Loss ...................................... (1,380)
--------
Net Realized and Unrealized
Gain on Investments:
Net Realized Gain .................................... 27,994
Change in Net Unrealized
Appreciation ....................................... 6,768
--------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ......................................... 34,762
--------
Net Increase in Net Assets
from Operations ........................................ $ 33,382
========
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14
<PAGE>
The Value Line Special Situations Fund, Inc.
<TABLE>
Statement of Changes in Net Assets
for the six months ended June 30, 2000 (unaudited) and for the year ended December 31, 1999
-------------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended Year Ended
June 30, 2000 December 31,
(unaudited) 1999
-----------------------------
(In thousands)
<S> <C> <C>
Operations:
Net investment loss ....................................... $ (1,380) $ (546)
Net realized gain on investments .......................... 27,994 26,531
Change in net unrealized appreciation ..................... 6,768 120,734
---------------------------
Net increase in net assets from operations ................ 33,382 146,719
---------------------------
Distributions to Shareholders:
Net realized gain from investment transactions ............ -- (20,029)
---------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 475,789 382,615
Proceeds from reinvestment of distributions to shareholders -- 19,484
Cost of shares repurchased ................................ (452,545) (298,392)
---------------------------
Net increase from capital share transactions .............. 23,244 103,707
---------------------------
Total Increase in Net Assets ................................ 56,626 230,397
Net Assets:
Beginning of period ....................................... 421,031 190,634
---------------------------
End of period ............................................. $ 477,657 $ 421,031
===========================
Accumulated Net Investment Loss, at End of Period ........... $ (1,380) $ --
===========================
</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 prices on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or which are
not readily marketable and all other assets of the Fund are valued at fair value
as the Board of Directors may determine in good faith. Short-term instruments
with maturities of 60 days or less 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, 2000
--------------------------------------------------------------------------------
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
2000 December 31,
(unaudited) 1999
------------------------------
Shares sold ................................ 16,607 18,731
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ -- 801
-------------------------
16,607 19,532
Shares repurchased ......................... 15,837 14,757
-------------------------
Net increase ............................... 770 4,775
=========================
Distributions per share from
net realized gains ....................... $ -- $1.395
=========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months
Ended
June 30, 2000
(unaudited)
-------------
(in thousands)
Purchases:
Investment Securities ................................ $179,324
========
Sales:
Investment Securities ................................ $166,688
========
At June 30, 2000, the aggregate cost of investment securities and repurchase
agreement for federal income tax purposes was $291,311,000. The aggregate
appreciation and depreciation of investments at June 30, 2000, based on a
comparison of investment values and their costs for federal income tax purposes,
was $194,515,000 and $21,048,000 respectively, resulting in a net appreciation
of $173,467,000.
4. Investment Advisory Contract, Management Fees,
and Transactions With Affiliates
An advisory fee of $1,725,000 was paid or payable to Value Line, Inc., the
Fund's investment adviser (the "Adviser"), for the six months ended June 30,
2000. 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, 2000, the Fund paid brokerage commissions totalling
$54,000 to the distributor, which clears its transactions through unaffiliated
brokers.
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan at June 30, 2000, owned 959,983 shares of the Fund's capital
stock, representing 5.9% of the outstanding shares. In addition, certain
officers and directors of the Fund owned 129,502 shares of the Fund,
representing 0.8% of the shares outstanding.
--------------------------------------------------------------------------------
17
<PAGE>
The Value Line Special Situations Fund, Inc.
Notes to Financial Statements (unaudited) June 30, 2000
--------------------------------------------------------------------------------
5. Subsequent Event
At a special meeting of shareholders held on June 15, 2000, the shareholders
approved the adoption of a Service and Distribution Plan (the "Plan") effective
July 1, 2000. The Plan, adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, provides for the payment of certain expenses incurred by
the distributor in advertising, marketing and distributing the Fund's shares and
for servicing the Fund's shareholders at an annual rate of 0.25% of the Fund's
average daily net assets.
--------------------------------------------------------------------------------
18
<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, 2000 ------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ................. $ 27.09 $ 17.70 $ 14.48 $ 13.34 $ 16.24 $ 16.15
-----------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment (loss) income ...... (.08) (.04) (.04) (.02) .26 .06
Net gains or losses on securities
(both realized and unrealized)... 2.27 10.83 4.30 4.15 .85 4.58
-----------------------------------------------------------------------------------------
Total from investment operations... 2.19 10.79 4.26 4.13 1.11 4.64
-----------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ............... -- -- -- # (.26) (.06)
Distributions from capital gains... -- (1.40) (1.04) (2.99) (3.75) (4.49)
-----------------------------------------------------------------------------------------
Total distributions ............... -- (1.40) (1.04) (2.99) (4.01) (4.55)
-----------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 29.28 $ 27.09 $ 17.70 $ 14.48 $ 13.34 $ 16.24
=========================================================================================
Total return .......................... 8.08%+ 61.66% 29.88% 32.10% 7.24% 28.96%
=========================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ...................... $477,657 $421,031 $190,634 $116,040 $ 89,594 $ 98,408
Ratio of expenses to
average net assets .................. .88%*(2) .89%(2) 1.02%(1) 1.08%(1) 1.08%(1) 1.06%
Ratio of net investment (loss) income
to average net assets ............... (.61)%* (.22)% (.34)% (.14)% 1.44% 0.32%
Portfolio turnover rate ............... 37%+ 85% 183% 240% 146% 10%
</TABLE>
# Dividend paid was less than one cent per share
(1) Before offset of custody credits.
(2) Ratios reflect expenses grossed up for custody credit arrangement. The
ratios of expenses to average net assets net of custody credits would not
have changed.
+ Not annualized
* Annualized.
See Notes to Financial Statements
--------------------------------------------------------------------------------
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. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its 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 achieve a high total
investment return consistent with reasonable risk.
1993--Value Line Emerging Opportunities 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 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Sound View Drive, Suite 100
Greenwich, CT 06830
Directors Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Marion N. Ruth
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Stephen E. Grant
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).
#513942
