<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 Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company c/o NFDS
P.O. Box 419729, Kansas City, MO 64141-6729
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas, New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
BOARD OF DIRECTORS
Jean Bernhard Buttner Francis C. Oakley
Marion N. Ruth Frances T. Newton
OFFICERS
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
John E. Leslie III Jerome Kaplan
VICE PRESIDENT VICE PRESIDENT
David T. Henigson
VICE PRESIDENT, SECRETARY/TREASURER
Jack M. Houston Stephen La Rosa
ASSISTANT ASSISTANT
SECRETARY/TREASURER 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 no express an opinion thereon.
This report is issued for the information of shareholders. It is not
authorized for distribution to prospective investors unless preceded or
accompanied by a currently effective prospectus of the Fund (obtainable from
the Distributor).
---------------------
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1995
---------------------
VALUE LINE SMALL CAP GROWTH FUND, INC.
[Logo]
VALUE LINE MUTUAL FUNDS
<PAGE>
[Logo] TO OUR VALUE LINE SMALL-CAP GROWTH FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The first three quarters of this year were very kind to small-cap investors in
general and to investors in the Value Line Small-Cap Growth Fund in particular.
During this time period, your Fund achieved a total return of 29.87%, versus the
25.72% total return of the Russell 2000, a commonly referenced unmanaged index
of small-company stocks. Since its inception on June 23, 1993, the total return
of the Fund has been 56.22%. This compares very favorably to the Russell 2000's
total return over this same time period of 41.05%.
While this year has been very profitable for small-cap investors so far, it has
not been without some nervous moments. Technology stocks were, by far, the best
performers because of their tremendous earnings gains and investor expectations
of stronger future earnings. However, fears of negative earnings surprises
caused a sharp sell-off in the group late in the third quarter. Recent reports
of earnings gains by several companies have soothed investors' fears, supporting
additional rallies in the prices of these stocks. We believe that the companies
whose shares are owned by the Fund will be able to achieve strong earnings
gains. Nevertheless, we continue to monitor our holdings closely.
Examining the small-cap market in general, we find that small-company stocks are
trading at valuation multiples that are only slightly higher than those of
larger companies. This fact, coupled with analyst forecasts predicting that
smaller companies' earnings will grow 40% to 60% faster than
large-capitalization companies, provides a compelling argument for a strong
relative showing over time by the Value Line Small-Cap Growth Fund.
Our investment strategy remains as it has been: to invest in small-cap stocks
that are generating exceptionally good earnings, whose stock-price momentum
outpaces that of the market in general, and whose stocks are trading at
attractive valuations. Although your Fund is always well diversified across
economic sectors, we are currently weighted more heavily in the technology,
health-care, and capital-goods areas.
We appreciate the trust you have placed in Value Line and the Value Line
Small-Cap Growth Fund, and we will work hard to continue to justify your
confidence.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
November 10, 1995
- --------------------------------------------------------------------------------
THE RUSSELL 2000 IS AN UNMANAGED INDEX THAT IS REPRESENTATIVE OF THE SMALLER-
CAPITALIZATION STOCKS TRADED IN THE UNITED STATES.
2
<PAGE>
ECONOMIC OBSERVATIONS
Most signs now point to a slowdown in the rate of economic growth over the next
several months. Several key industrial indicators (e.g., the level of factory
usage) are now trending lower, and this is causing manufacturers to become more
cautious in their outlook. At the same time, consumers, burdened with a heavy
debt load, are becoming more selective in their purchasing plans. Not
surprisingly, retailers are not stocking their shelves the way they did earlier
in the business expansion. Taken together, these developments suggest that the
economy, which grew by better than 4% in the third quarter, will expand by
little more than half that rate in the final three months of 1995 and the
opening quarter of 1996.
Moreover, we think the economy will retain this calm, orderly growth character
throughout 1996. Perhaps the most distinguishing characteristic of the
five-year-old business expansion has been the notable lack of excess on the
growth side. Thus, while the automobile industry, the housing sector, and the
key industrial markets have all participated in the advance, none has veered out
of control. As a result, potentially inflationary labor and raw-materials
shortages have not developed. Hence, the Federal Reserve, which has had to
respond to higher prices in the past by clamping down hard on the monetary
brakes, has been able to be more gentle this time around.
On balance, we think little will change over the next several quarters.
Specifically, we would look for growth and inflation to hold within a comforting
2%-3% band. We also see interest rates remaining near current levels, with a
further slight decline being perhaps more likely than an increase. Finally, we
expect corporate profits to edge higher, on balance, over the next 12 to 15
months. Altogether, this scenario should not presage troubling times for
equity-market participants in the months ahead, nor should it lull investors
into thinking future gains will come easily.
* PERFORMANCE DATA:
GROWTH OF AN
AVERAGE ASSUMED
ANNUAL INVESTMENT
TOTAL RETURN OF $10,000
------------ ------------
1 year ended 9/30/95 29.26% $12,926
From 6/23/93
(commencement
of operations) to
9/30/95. . . . . . . . . . . . 21.72% $15,622
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL
GAINS DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST.
3
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (92.6%)
COMPUTER SOFTWARE & SERVICES (19.2%)
4,500 * America Online, Inc.. . . . . . . . . . . . . . $ 309,375
5,800 * Broderbund Software, Inc. . . . . . . . . . . . 441,525
8,000 Fair Isaac & Co., Inc.. . . . . . . . . . . . . 232,000
11,400 * FIserv, Inc.. . . . . . . . . . . . . . . . . . 329,175
12,800 National Data Corp. . . . . . . . . . . . . . . 344,000
6,300 * Network General Corp. . . . . . . . . . . . . . 259,875
9,200 Sterling Software Inc.. . . . . . . . . . . . . 418,600
12,800 * SunGard Data Systems Inc. . . . . . . . . . . . 374,400
9,000 System Software Associates, Inc.. . . . . . . . 361,125
-----------
3,070,075
DIVERSIFIED COMPANIES (2.1%)
9,000 Standex International Corp. . . . . . . . . 327,375
ELECTRONICS (11.4%)
6,400 * Arrow Electronics, Inc. . . . . . . . . . . . 348,000
8,200 * Electro Scientific Industries, Inc. . . . 285,975
5,850 * Kent Electronics Corp.. . . . . . . . . . . . 256,669
22,950 Pioneer-Standard Electronics, Inc.. . . . . . . 401,625
12,500 * Vishay Intertechnology, Inc.. . . . . . . . . . 525,000
-----------
1,817,269
FINANCIAL SERVICES (2.2%)
7,800 FINOVA Group (The). . . . . . . . . . . . . 347,100
FOOD WHOLESALERS (1.6%)
10,000 Richfood Holdings, Inc. . . . . . . . . . . 251,875
HOTEL/GAMING (0.7%)
4,000 La Quinta Inns, Inc.. . . . . . . . . . . . . . 112,000
HOUSEHOLD PRODUCTS (1.7%)
7,866 Lancaster Colony Corp.. . . . . . . . . . . . . 267,444
MACHINERY (5.3%)
14,400 * FSI International, Inc. . . . . . . . . . . . . 478,800
10,500 IDEX Corp.. . . . . . . . . . . . . . . . . . . 375,375
-----------
854,175
MANUFACTURED HOUSING/RECREATIONAL
VEHICLES (1.3%)
10,500 * Champion Enterprises, Inc.. . . . . . . . . . . 208,687
MEDICAL SERVICES (5.3%)
9,600 * HealthCare COMPARE Corp.. . . . . . . . . . . . 372,000
10,000 * Horizon/CMS Healthcare Corp.. . . . . . . . . . 227,500
10,800 Surgical Care Affiliates, Inc.. . . . . . . . . 251,100
-----------
850,600
MEDICAL SUPPLIES (12.2%)
7,300 Arrow International, Inc. . . . . . . . . . . 315,725
8,750 Cardinal Health, Inc. . . . . . . . . . . . . . 484,531
3,500 * Cordis Corp.. . . . . . . . . . . . . . . . . . 296,625
9,700 Invacare Corp.. . . . . . . . . . . . . . . . . 465,600
4,800 * Nellcor Puritan-Bennett, Inc. . . . . . . . . . 238,800
5,700 * Sunrise Medical, Inc. . . . . . . . . . . . . . 156,750
-----------
1,958,031
METAL FABRICATING (2.5%)
18,700 Allied Products Corp. . . . . . . . . . . . . . 399,713
NEWSPAPER (1.9%)
6,000 Pulitzer Publishing Co. . . . . . . . . . . . . 310,500
OFFICE EQUIPMENT & SUPPLIES (5.9%)
12,000 Reynolds & Reynolds Co. Class "A" . . . . . . . 412,500
18,975 * Staples, Inc. . . . . . . . . . . . . . . . . . 536,044
-----------
948,544
PRECISION INSTRUMENTS (0.9%)
3,800 * Input/Output, Inc.. . . . . . . . . . . . . . 145,825
4
<PAGE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<C> <S> <C>
PUBLISHING (4.8%)
24,000 * American City Business Journals, Inc.. . . . . . $ 666,000
10,300 Graphic Industries, Inc. . . . . . . . . . . . . 105,575
-----------
771,575
RETAIL STORE (2.3%)
12,500 Dollar General Corp. . . . . . . . . . . . . . . 367,187
SEMICONDUCTOR (4.4%)
16,600 * Integrated Device Technology, Inc. . . . . . . . 415,000
8,000 * Kulicke & Soffa Industries, Inc. . . . . . . . . 292,000
-----------
707,000
TELECOMMUNICATIONS EQUIPMENT (2.4%)
6,300 * Andrew Corp. . . . . . . . . . . . . . . . . . . 385,088
THRIFT (3.6%)
20,000 * California Federal Bank, F.S.B. . . . . . . . . 315,000
2,000 * California Federal Bank, F.S.B. (CLR) (1). . . . 11,500
11,600 Oriental Bank & Trust San Juan, P.R. . . . . . . 252,300
-----------
578,800
TRUCKING/TRANSPORTATION LEASING (0.9%)
8,000 * Swift Transportation Co., Inc. . . . . . . . . . 138,000
-----------
TOTAL COMMON STOCKS AND TOTAL INVESTMENT
SECURITIES (92.6%)
(COST $9,639,591). . . . . . . . . . . . . . . . 14,816,863
-----------
<CAPTION>
Principal Amount Value
- --------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (6.9%)
(INCLUDING ACCRUED INTEREST)
$1,100,000 Collateralized by $835,000
U.S. Treasury Notes 11 5/8%,
due 11/15/02, with a value of
$1,128,946. (With Morgan
Stanley & Co., Inc. 6 1/4%,
dated 9/29/95, due 10/2/95,
delivery value $1,100,573.). . . . . . . . . . . . $ 1,100,382
CASH AND OTHER ASSETS LESS LIABILITIES (0.5%). . . . . . . . . 75,609
-----------
NET ASSETS (100%). . . . . . . . . . . . . . . . . . . . . . . $15,992,854
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($15,992,854 DIVIDED BY 1,056,765
SHARES OUTSTANDING). . . . . . . . . . . . . . . . . . . . . . $ 15.13
-----------
-----------
</TABLE>
* Non-income producing
(1) Contingent Litigation Recovery Security
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
AT SEPTEMBER 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment securities, at value
(Cost--$9,639,591) . . . . . . . . . . . . . . . . . . . . . $14,816,863
Repurchase agreements
(Cost--$1,100,382) . . . . . . . . . . . . . . . . . . . . . 1,100,382
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,904
Deferred organization costs (note 2) . . . . . . . . . . . . . 36,174
Receivable for investments sold. . . . . . . . . . . . . . . . 35,684
Dividends receivable . . . . . . . . . . . . . . . . . . . . . 4,996
-----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . 16,033,003
-----------
LIABILITIES:
Accrued expenses:
Advisory fee payable . . . . . . . . . . . . . . . . . . . . 9,829
Plan fee payable . . . . . . . . . . . . . . . . . . . . . . 3,276
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,044
-----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . 40,149
-----------
NET ASSETS:
Capital stock, at $.001 par value (authorized
300,000,000, outstanding 1,056,765 shares) . . . . . . . . . 1,057
Additional paid-in capital . . . . . . . . . . . . . . . . . . 10,819,367
Accumulated investment loss--net . . . . . . . . . . . . . . . (101,741)
Accumulated net realized gain on investments . . . . . . . . . 96,899
Unrealized net appreciation of investments . . . . . . . . . . 5,177,272
-----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . $15,992,854
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($15,992,854 DIVIDED BY
1,056,765 SHARES OUTSTANDING) . . . . . . . . . . . . . . $ 15.13
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income. . . . . . . . . . . . . . . . . . . . . . . . $ 31,726
Dividend income (net of foreign withholding tax of $242) . . . 27,578
-----------
TOTAL INCOME. . . . . . . . . . . . . . . . . . . . . . . 59,304
-----------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . 53,435
Auditing and legal fees. . . . . . . . . . . . . . . . . . . . 21,299
Service and distribution plan fee . . . . . . . . . . . . . . 17,812
Accounting and bookkeeping expense . . . . . . . . . . . . . . 16,200
Directors' fees and expenses . . . . . . . . . . . . . . . . . 15,380
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 11,029
Registration and filing fees . . . . . . . . . . . . . . . . . 8,978
Amortization of deferred organization costs (note 2) . . . . . 6,611
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,623
Insurance, dues, and other . . . . . . . . . . . . . . . . . . 4,678
-----------
TOTAL EXPENSES. . . . . . . . . . . . . . . . . . . . . . 161,045
-----------
INVESTMENT LOSS--NET . . . . . . . . . . . . . . . . . . . . . (101,741)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NET:
Realized Gain--Net. . . . . . . . . . . . . . . . . . . . 424,461
Change in Unrealized Appreciation . . . . . . . . . . . . 2,614,681
-----------
NET REALIZED GAIN AND NET UNREALIZED
APPRECIATION OF INVESTMENTS . . . . . . . . . . . . . . . 3,039,142
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . $ 2,937,401
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
AND FOR THE YEAR ENDED MARCH 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995
------------------ ---------------
<S> <C> <C>
OPERATIONS:
Investment (loss) income--net. . . . . . . . . . . . . . . . . . . . . . $ (101,741) $ (177,197)
Realized gain (loss) on investments--net . . . . . . . . . . . . . . . . 424,461 (325,832)
Net unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . 2,614,681 1,309,330
----------- -----------
Net increase in net assets from operations . . . . . . . . . . . . . . . 2,937,401 806,301
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Realized gains--net. . . . . . . . . . . . . . . . . . . . . . . . . . . -- (291,703)
----------- -----------
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . -- (291,703)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares . . . . . . . . . . . . . . . . . . . . 1,486,168 4,959,735
Net proceeds from reinvestment of distributions to shareholders. . . . . -- 286,982
Cost of shares repurchased . . . . . . . . . . . . . . . . . . . . . . . (923,103) (3,091,872)
----------- -----------
Increase from capital-share transactions . . . . . . . . . . . . . . . . 563,065 2,154,845
----------- -----------
TOTAL INCREASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,466 2,669,443
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . 12,492,388 9,822,945
----------- -----------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,992,854 $12,492,388
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
(A) SECURITY VALUATION. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales prices on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or which are
not readily marketable and all other assets of the Fund are valued at fair value
as the Board of Directors may determine in good faith. Short-term instruments
with maturities of 60 days or less at the date of purchase are valued at
amortized cost, which approximates market value.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income-tax or excise-tax provision is required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted
for on the date the securities are purchased or sold. Realized gains and losses
on sales of securities are calculated for financial accounting purposes 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.
2. ORGANIZATION COST
Costs of $66,890 incurred in connection with the Fund's organization and initial
registration have been deferred and are being amortized over 60 months,
beginning at the commencement of operations of the Fund. In the event any of
the initial shares of the Fund are redeemed by the holder thereof during the
five-year amortization period, the redemption proceeds will be reduced by a
pro-rata portion of any unamortized, deferred organizational expenses in the
same proportion as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of redemption.
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock were as follows:
SIX MONTHS ENDED
SEPT. 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995
---------------- --------------
Shares sold. . . . . . . . . . . . . . . 112,502 415,645
Shares issued in reinvestment of
dividends and distributions. . . . . . -- 25,218
------- -------
112,502 440,863
Shares repurchased . . . . . . . . . . . 68,938 260,146
------- -------
Net increase . . . . . . . . . . . . . . 43,564 180,717
------- -------
------- -------
8
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, were as
follows:
SIX MONTHS ENDED
SEPTEMBER 30, 1995
(UNAUDITED)
------------------
PURCHASES:
Investment Securities. . . . . . . . . . . . . . . $4,238,380
----------
----------
SALES:
Investment Securities. . . . . . . . . . . . . . . $3,748,458
----------
----------
At September 30, 1995, the aggregate cost of investment securities and
repurchase agreement for Federal income tax purposes is $10,739,973. The
aggregate appreciation and depreciation of investments, based on a comparison of
investment values and their costs for federal income-tax purposes, is $5,225,469
and $48,197, respectively, resulting in a net appreciation of $5,177,272.
For Federal income-tax purposes, the Fund had a net capital-loss carryover at
March 31, 1995, of approximately $166,169 which will expire in the year 2003.
Realized losses incurred after October 31, if so elected by the Fund, are deemed
to arise on the first day of the following fiscal year. The fund incurred and
elected to defer losses of approximately $161,387. To the extent future capital
gains are offset by such capital losses, the Fund does not anticipate
distributing such gains to the shareholders.
5. ADVISORY FEES, SERVICE AND DISTRIBUTION PLAN FEES, AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $53,435 was paid or payable to Value Line, Inc., the Fund's
investment adviser (the "Adviser"), for the six months ended September 30, 1995.
The fee was computed at the rate of .75 of 1% of the daily net assets during the
year and paid monthly. The Adviser provides research, investment programs, and
supervision of the investment portfolio and pays costs of certain
administrative services and office space. The Adviser also provides persons,
satisfactory to the Fund's Board of Directors, to act as officers of the Fund
and pays their salaries and wages. The Fund bears all other costs and expenses
in its organization and operation. If the aggregate expenses of the Fund, other
than taxes, interest, brokerage commissions, and extraordinary expenses, exceed
the expense limitation imposed by any state in which the Fund sells its shares,
the advisory fee will be reduced by the amount of such excess, or the amount of
such excess will be refunded.
A fee of $2,880 for printing services was paid or payable to the Adviser for the
six months ended September 30, 1995.
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing, and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets. In the six months
ended September 30, 1995, fees amounting to $17,812 were paid or payable under
this Plan.
Certain officers and directors of the Adviser and the Distributor, are also
officers and a director of the Fund.
At September 30, 1995, the Adviser and/or affiliated companies owned 804,682
shares of the Fund's capital stock, representing 76% of the outstanding shares.
In addition, certain officers and directors of the Fund owned 54,901 shares of
capital stock, representing 5% of the outstanding shares.
9
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
JUNE 23, 1993
SIX MONTHS ENDED (COMMENCEMENT
SEPTEMBER 30, 1995 YEAR ENDED OF OPERATIONS), TO
(UNAUDITED) MARCH 31, 1995 MARCH 31, 1994
------------------ -------------- ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $12.33 $11.80 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment (loss) income. . . . . . . . . . . . . . . . (.10) (.19) (3) .02 (1)
Net gains or losses on securities
(both realized and unrealized) . . . . . . . . . . . . 2.90 1.05 1.81
------ ------ ------
Total from investment operations. . . . . . . . . . . . . . 2.80 .86 1.83
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income. . . . . . . . . . . . -- -- (.02)
Distributions from capital gains. . . . . . . . . . . . . . -- (.33) (.01)
------ ------ ------
Total distributions . . . . . . . . . . . . . . . . . . . . -- (.33) (.03)
------ ------ ------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $15.13 $12.33 $11.80
------ ------ ------
------ ------ ------
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . 22.71%+ 7.57% 18.36%+
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in thousands). . . . . . . . . . . . . $15,993 $12,492 $ 9,823
Ratio of operating expenses to average net assets. . . . . . . . 2.26%* 2.48% (3) 0.61%* (1)(2)
Ratio of net investment (loss) income to average net assets. . . (1.43)%* (1.63%) (3) 0.26%* (1)(2)
Portfolio turnover rate. . . . . . . . . . . . . . . . . . . . . 29%+ 30% 74%
</TABLE>
(1) Net of expense reimbursement and fees waived by the Adviser. Had these
expenses been fully paid by the Fund, investment loss--net per share would
have been $(.12), ratio of operating expenses to average net assets would
have been 2.45%*, and ratio of net investment income (loss) to average net
assets would have been (1.57%)*.
(2) Due to the reimbursement of expenses and waiver of fees by the Adviser and
short period covered by this report, data are not indicative of future
periods.
(3) Net of expense reimbursement by the Adviser. Had these expenses been fully
paid by the Fund, investment loss--net per share would have been $(.20),
ratio of operating expenses to average net assets would have been 2.52%,
and ratio of net investment income (loss) to average net assets would have
been (1.67%).
+ Not annualized
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
(This page intentionally left blank)
11
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth
of capital by investing not less than 80% of its assets in "special situations."
No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS'S sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high yielding, lower-rated, fixed-income securities.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City, and federal
income taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* invests in stocks, bonds,
and cash equivalents according to computer trend models developed by Value Line.
The objective is to professionally manage the optimal allocation of these
investments at all times.
1992 -- VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing primarily in a diversified
portfolio of debt securities.
1993 -- VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds, and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
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 THE GUARDIAN INVESTOR, A TAX-DEFERRED,
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891, OR CALL 1-800-223-0818,
24 HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
12
