<PAGE>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
Francis C. Oakley
Marion N. Ruth
Frances T. Newton
OFFICERS Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
Steven M. Yeary
VICE PRESIDENT
Jerome Kaplan
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT
and SECRETARY/TREASURER
Jack M. Houston
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
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).
VLF603300
--------------------
ANNUAL REPORT
--------------------
March 31, 1996
--------------------
VALUE LINE
SMALL-CAP
GROWTH
FUND, INC.
[LOGO]
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
TO OUR VALUE LINE SMALL-CAP
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
We are pleased to bring you this annual report for the Value Line Small-Cap
Growth Fund (the "Fund"). For the year ended March 31, 1996, the Fund achieved
a total return of 23.58%, compared to 29.04% for the Russell 2000, a widely used
benchmark for small-company stocks. Since its inception on June 23, 1993, the
Fund's total return has been 57.33%, versus 47.91% for the Russell 2000. Your
Fund has achieved an annualized growth rate of 17.8%, handily outpacing the
15.3% annual return for the Russell 2000 during the same period.
Your Fund's performance benefited initially from its investments in technology
stocks, whose prices rose sharply during the first half of our fiscal year.
Investors' fears roiled that sector in the second half, however, and the strong
gains we achieved in the first half were diminished substantially. Recent,
renewed strength among selected technology sectors suggests that your Fund's
investments in these stocks may provide additional, significant returns in the
new fiscal year. We remain focused on companies with good earnings growth, and
we believe that carefully selected technology stocks will provide strong returns
to our shareholders.
The case for investing in small-cap stocks remains compelling. These companies
typically are more focused in their specialized areas and have greater growth
potential than larger-capitalization firms. They usually are able to respond
more quickly to changes in market conditions and to exploit opportunities more
successfully. These stocks often manifest greater price volatility, however.
Yet, in a period of economic expansion, like the present, smaller-cap stocks are
likely to outperform those of larger companies.
Our investment strategy remains as it has been: to invest in small-cap stocks
that are generating exceptionally good earnings, whose price momentum outpaces
that of the market in general, and whose valuations are attractive. Although
your Fund remains well diversified, we continue to weight the technology,
health-care, and capital-goods sectors more heavily than others.
We thank you for the confidence you have placed in the Value Line Small-Cap
Growth Fund, and we will work hard to continue to justify your trust. We look
forward to serving your investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
May 3, 1996
THE RUSSELL 2000 IS AN UNMANAGED INDEX THAT IS REPRESENTATIVE OF THE SMALLER-
CAPITALIZATION STOCKS TRADED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
2
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
GROWTH FUND SHAREHOLDERS
- --------------------------------------------------------------------------------
ECONOMIC OBSERVATIONS
The pace of economic growth is increasing modestly once again, in a reversal in
form from the very early part of the year. Back then, declining retail
activity, a faltering industrial sector, and an assortment of weather-related
dislocations had combined to put the long-lived business expansion in apparent
jeopardy. Now, by comparison, the construction markets are firming, employment
is up sharply, and the American public is fairly upbeat. To be sure, pockets of
weakness still exist, with chain-store sales, for example, still rather mixed.
On the whole, though, the positives now clearly outweigh the negatives,
suggesting that GDP growth in the opening half of this year will comfortably
exceed the tepid 0.5% rate of increase recorded during the final three months of
1995.
Moreover, we think the business uptrend will remain on track through the second
half and into 1997. The current improvement and the prospective growth over the
next several quarters, meanwhile, suggest that the fears expressed earlier this
year about a widespread reversal in corporate profits were exaggerated, although
some selective weakness is likely over the next couple of months.
Thus far, the modest increase in business activity has not generated havoc on
the pricing front. There had been some concern earlier that a pickup in the
economy--even a limited one--would lead to the labor and raw-materials
shortages that often precede a rise in inflation. To date, this has not
occurred. In fact, neither wholesale nor consumer inflation shows any major
signs of heating up. We caution, though, that commodity prices have worked
their way higher recently and that this uptrend will need to be watched closely
to determine whether a more worrisome pricing scenario will evolve over the next
several months. At this point, we do not believe such fears are yet warranted.
In sum, we think that economic growth will proceed at a moderate pace in 1996,
that inflation will generally remain under control, and that corporate
earnings--with some likely exceptions--will continue their climb. Offsetting
these positives to a certain degree is the decreasing likelihood that the
Federal Reserve Board will vote to lower interest rates anytime soon.
[GRAPH]
The Russell 2000 is an unmanaged index consisting of the smallest-capitalization
stocks in the Russel 3000 Index and generally represents the
small-capitalization market. The index used for this presentation includes
reinvested dividends.
PERFORMANCE DATA:*
AVERAGE
ANNUAL TOTAL
RETURN
- ------------------------------------------------
1 year ended March 31, 1996 23.58%
From June 23, 1993,+ to March 31, 1996 17.78%
+ COMMENCEMENT OF OPERATIONS.
* 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>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
SHARES VALUE
- ---------------------------------------------------------------
COMMON STOCKS(96.3%)
APPAREL (2.6%)
10,400 *Nautica Enterprises, Inc. . . . . . . . . $ 496,600
CEMENT (3.0%)
9,000 Texas Industries, Inc. . . . . . . . . . . 572,625
CHEMICAL-SPECIALTY (1.5%)
9,600 Park Electrochemical Corp. . . . . . . . . 285,600
COMPUTER SOFTWARE
& SERVICES (14.3%)
9,000 *America Online, Inc.. . . . . . . . . . . 504,000
8,000 Fair Issac & Co., Inc. . . . . . . . . . . 240,000
11,400 *FIserv, Inc.. . . . . . . . . . . . . . . 319,200
12,800 National Data Corp.. . . . . . . . . . . . 436,800
6,300 *Network General Corp. . . . . . . . . . . 252,000
7,700 *Sterling Software Inc.. . . . . . . . . . 542,850
12,800 *SunGard Data Systems, Inc.. . . . . . . . 438,400
----------
2,733,250
DIVERSIFIED
COMPANIES (4.0%)
12,500 Blount International, Inc. Class "A" . . . 384,375
12,600 Valmont Industries, Inc. . . . . . . . . . 378,000
----------
762,375
ELECTRICAL EQUIPMENT (4.1%)
25,300 LSI Industries, Inc. . . . . . . . . . . . 455,400
11,600 Measurex Corp. . . . . . . . . . . . . . . 336,400
----------
791,800
ELECTRONICS (7.7%)
6,400 *Arrow Electronics, Inc. . . . . . . . . . 300,800
8,200 *Electro Scientific Industries, Inc. . . . 152,725
11,400 *KEMET Corp. . . . . . . . . . . . . . . . 257,925
11,700 *Kent Electronics Corp.. . . . . . . . . . 413,888
12,500 *Vishay Intertechnology, Inc.. . . . . . . 337,500
----------
1,462,838
SHARES VALUE
- ---------------------------------------------------------------
FINANCIAL SERVICES (5.1%)
7,800 FINOVA Group Inc. . . . . . . . . . . . . $ 426,075
20,000 Money Store, Inc. (The). . . . . . . . . . 557,500
----------
983,575
FOOD WHOLESALERS (1.5%)
10,000 Richfood Holdings, Inc.. . . . . . . . . . 281,875
HEALTHCARE INFORMATION
SYSTEMS (0.8%)
2,000 *Medic Computer Systems, Inc.. . . . . . . 152,250
HOTEL/GAMING (0.6%)
4,000 La Quinta Inns, Inc. . . . . . . . . . . . 117,500
INSURANCE-PROPERTY/
CASUALTY (3.1%)
9,700 Frontier Insurance Group, Inc. . . . . . . 297,062
18,000 *20th Century Industries . . . . . . . . . 301,500
----------
598,562
MACHINERY (3.0%)
14,400 *FSI International, Inc. . . . . . . . . . 167,400
10,500 IDEX Corp. . . . . . . . . . . . . . . . . 408,187
----------
575,587
MANUFACTURED HOUSING/
RECREATIONAL
VEHICLES (5.3%)
11,900 *Champion Enterprises, Inc.. . . . . . . . 340,638
7,700 Oakwood Homes Corp.. . . . . . . . . . . . 382,112
14,000 *Redman Industries, Inc. . . . . . . . . . 283,500
----------
1,006,250
MEDICAL SERVICES (9.2%)
10,000 *CorVel Corp.. . . . . . . . . . . . . . . 350,000
9,600 *HealthCare COMPARE Corp.. . . . . . . . . 483,600
10,600 Omnicare, Inc. . . . . . . . . . . . . . . 571,075
12,600 *Vivra, Inc. . . . . . . . . . . . . . . . 362,250
----------
1,766,925
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4
<PAGE>
SHARES VALUE
- ---------------------------------------------------------------
VALUE LINE SMALL-CAP GROWTH FUND, INC.
MARCH 31, 1996
MEDICAL SUPPLIES (7.4%)
7,300 Arrow International, Inc.. . . . . . . . . $303,862
4,750 Cardinal Health, Inc.. . . . . . . . . . . 305,188
17,400 Invacare Corp. . . . . . . . . . . . . . . 491,550
4,800 *Nellcor-Puritan Bennett, Inc. . . . . . . 308,400
----------
1,409,000
METAL FABRICATING (2.2%)
18,700 Allied Products Corp.. . . . . . . . . . . 423,088
OFFICE EQUIPMENT
& SUPPLIES (4.0%)
12,000 Reynolds & Reynolds Co. Class "A" 492,000
13,463 *Staples, Inc. . . . . . . . . . . . . . . 274,298
----------
766,298
PRECISION
INSTRUMENTS (4.1%)
16,000 *Input/Output, Inc.. . . . . . . . . . . . 496,000
12,100 *Summit Technology, Inc. . . . . . . . . . 285,863
----------
781,863
PUBLISHING (0.6%)
10,300 Graphic Industries, Inc. . . . . . . . . . 115,875
RECREATION (1.4%)
11,200 *Custom Chrome, Inc. . . . . . . . . . . . 273,000
RETAIL STORE (1.9%)
12,500 Dollar General Corp. . . . . . . . . . . . 362,500
SEMICONDUCTOR (1.7%)
16,600 *Integrated Device Technology, Inc.. . . . 188,825
8,000 *Kulicke & Soffa Industries, Inc.. . . . . 126,000
----------
314,825
SHOE (1.4%)
15,000 *Barry (R.G.) Corp.. . . . . . . . . . . . 258,750
TELECOMMUNICATIONS
EQUIPMENT (1.9%)
9,450 *Andrew Corp.. . . . . . . . . . . . . . . 361,462
SHARES OR
PRINCIPAL
AMOUNTS VALUE
- ---------------------------------------------------------------
THRIFT (3.9%)
20,000 *Cal Fed Bancorp Inc.. . . . . . . . . . .$ 357,500
2,000 *California Federal Bank,
F.S.B. (CLR)+. . . . . . . . . . . . . . 14,750
22,800 Oriental Bank & Trust
San Juan, P.R. . . . . . . . . . . . . . . 376,200
----------
748,450
----------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (96.3%)
(Cost $14,232,543) . . . . . . . . . . . . 18,402,723
REPURCHASE AGREEMENT (4.2%)
(INCLUDING ACCRUED INTEREST)
$800,000 Collateralized by $815,000 U.S.
Treasury Notes 5 5/8%, due
1/31/98, with a value of $818,994
(with State Street Bank & Trust
Co., Inc. 5.05%, dated 3/29/96,
due 4/1/96, delivery value
$800,337) . . . . . . . . . . . . . . . . 800,337
EXCESS OF LIABILITIES OVER CASH
AND OTHER ASSETS (-0.5%) . . . . . . . . . . . . . . (97,403)
-----------
NET ASSETS (100%). . . . . . . . . . . . . . . . . .$19,105,657
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER OUTSTANDING
SHARE ($19,105,657 DIVIDED BY 1,264,808 shares
outstanding) . . . . . . . . . . . . . . . . . . . . $ 15.11
-----------
-----------
* Non-income producing
+ Contigent Litigation Recovery Certificate
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
STATEMENT OF ASSETS
AND LIABILITIES AT MARCH 31, 1996
- --------------------------------------------------------------------------
ASSETS:
Investment securities, at value
(Cost-$14,232,543). . . . . . . . . . . . . . . . $18,402,723
Repurchase agreements
(Cost-$800,337) . . . . . . . . . . . . . . . . . 800,337
Cash . . . . . . . . . . . . . . . . . . . . . . . . . 64,642
Deferred organization costs (note 2) . . . . . . . . . 29,528
Receivable for capital shares sold . . . . . . . . . . 9,708
Dividends receivable . . . . . . . . . . . . . . . . . 9,041
-----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . 19,315,979
-----------
LIABILITIES:
Payable for securities purchased . . . . . . . . . . . 152,250
Payable for capital shares redeemed. . . . . . . . . . 8,599
Accrued expenses:
Advisory fee payable. . . . . . . . . . . . . . . 11,003
Distribution plan fee payable . . . . . . . . . . 3,668
Other . . . . . . . . . . . . . . . . . . . . . . 34,802
-----------
Total Liabilities . . . . . . . . . . . . . . . . 210,322
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . $19,105,657
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock, at $.001 par value (authorized
300,000,000, outstanding 1,264,808
shares) . . . . . . . . . . . . . . . . . . . . . $1,265
Additional paid-in capital . . . . . . . . . . . . . . 13,919,166
Accumulated net realized gain
on investments. . . . . . . . . . . . . . . . . . 1,015,046
Unrealized net appreciation of
investments . . . . . . . . . . . . . . . . . . . 4,170,180
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . $19,105,657
-----------
-----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE, PER
OUTSTANDING SHARE ($19,105,657
DIVIDED BY 1,264,808 shares outstanding). . . . . $15.11
-----------
-----------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
- -------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income (net of foreign withholding
tax of $746). . . . . . . . . . . . . . . . . . . $ 72,171
Interest income. . . . . . . . . . . . . . . . . . . . 52,566
-----------
Total Income. . . . . . . . . . . . . . . . . . . . 124,737
-----------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . 112,855
Auditing and legal fees. . . . . . . . . . . . . . . . 41,766
Service and distribution plan fee . . . . . . . . . . 37,618
Accounting and bookkeeping expense . . . . . . . . . . 32,400
Custodian fees . . . . . . . . . . . . . . . . . . . . 26,673
Directors' fees and expenses . . . . . . . . . . . . . 25,552
Registration and filing fees . . . . . . . . . . . . . 17,523
Amortization of deferred organization
costs (note 2). . . . . . . . . . . . . . . . . . 13,257
Printing . . . . . . . . . . . . . . . . . . . . . . . 10,382
Transfer agent fees. . . . . . . . . . . . . . . . . . 4,610
Other. . . . . . . . . . . . . . . . . . . . . . . . . 4,623
-----------
Total Expenses Before Expense Offset. . . . . . . . 327,259
-----------
Less: Expense Offset. . . . . . . . . . . . . . . . (8,461)
-----------
Net Expenses. . . . . . . . . . . . . . . . . . . . 318,798
INVESTMENT LOSS-NET. . . . . . . . . . . . . . . . . . (194,061)
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS-NET:
Realized Gain-Net. . . . . . . . . . . . . . . . 1,669,533
Change in Unrealized Appreciation. . . . . . . . 1,607,589
-----------
NET REALIZED GAIN AND NET UNREALIZED
APPRECIATION OF INVESTMENTS. . . . . . . . . . . . . 3,277,122
-----------
NET INCREASE IN NET ASSETS
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . $3,083,061
-----------
-----------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1996, AND 1995
- --------------------------------------------------------------------------------
1996 1995
---------------------------
OPERATIONS:
Investment loss-net $ (194,061) $ (177,197)
Realized gain (loss) on investments-net 1,669,533 (325,832)
Net unrealized appreciation 1,607,589 1,309,330
---------------------------
Net increase in net assets from operations 3,083,061 806,301
---------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Realized gains-net (132,864) (291,703)
---------------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 5,517,098 4,959,735
Net proceeds from reinvestment of
distributions to shareholders 130,221 286,982
Cost of shares repurchased (1,984,247) (3,091,872)
---------------------------
Increase from capital share transactions 3,663,072 2,154,845
---------------------------
TOTAL INCREASE 6,613,269 2,669,443
NET ASSETS:
Beginning of year 12,492,388 9,822,945
---------------------------
End of year $19,105,657 $12,492,388
---------------------------
---------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Value Line Small-Cap Growth 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 "small-cap" common stocks.
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(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 that 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. 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.
Permanent book-tax differences relating to shareholder distributions have been
reclassified. Net investment loss, net realized gain (loss), and net assets are
not affected. In the current year the net investment loss of $194,061 was
reclassified within the composition of net assets to accumulated net realized
gain on investments.
(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
- -------------------------------------------------------------------------------
8
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
MARCH 31, 1996
- -------------------------------------------------------------------------------
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:
YEARS ENDED MARCH 31,
1996 1995
---------------------
Shares sold.......................... 382,670 415,645
Shares issued to shareholders in
reinvestment of dividends and
distributions 9,151 25,218
-----------------------
391,821 440,863
Shares repurchased ................. 140,214 260,146
-----------------------
Net increase ........................ 251,607 180,717
-----------------------
-----------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, were as
follows:
Year Ended
March 31, 1996
---------------
PURCHASES:
Investment securities ............................ $ 11,912,773
---------------
---------------
Sales:
Investment securities ............................ $ 8,074,970
---------------
---------------
At March 31, 1996, the aggregate cost of investment securities and repurchase
agreement for federal income-tax purposes was $15,032,880. The aggregate
appreciation and depreciation of investments at March 31, 1996, based on a
comparison of investment values and their costs for federal income-tax purposes,
is $4,788,133 and $617,953, respectively, resulting in a net appreciation of
$4,170,180.
For federal income-tax purposes, the Fund fully utilized its capital loss
carryover of approximately $166,168 to offset gains realized during the year
ended March 31, 1996.
5. ADVISORY FEES, SERVICE AND DISTRIBUTION PLAN FEES, AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $112,855 was paid or payable to Value Line, Inc., the Fund's
investment adviser ( the "Adviser"), for the year ended March 31, 1996. 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 $5,760 for printing services was paid or payable to the Adviser for the
year ended March 31, 1996.
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 year ended March 31, 1996,
fees amounting to $37,618 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 March 31, 1996, the Adviser and/or affiliated companies owned 1,014,240
shares of the Fund's capital stock, representing 80% of the outstanding shares.
In addition, certain officers and directors of the Fund owned 55,569 shares of
capital stock, representing 4% of the outstanding shares.
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9
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
JUNE 23, 1993
YEARS ENDED MARCH 31, (COMMENCEMENT OF
--------------------- OPERATIONS), TO
1996 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 ( .18) (.19)(3) .02(1)
Net gains or losses on securities
(both realized and unrealized) 3.08 1.05 1.81
---------------------------------------------
Total from investment operations 2.90 .86 1.83
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (.02)
Distributions from capital gains ( .12) (.33) (.01)
Total distributions ( .12) (.33) (.03)
---------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.11 $12.33 $11.80
---------------------------------------------
---------------------------------------------
TOTAL RETURN 23.58% 7.57% 18.36%+
---------------------------------------------
---------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in thousands) $19,106 $12,492 $9,823
Ratio of operating expenses to
average net assets 2.09%(4) 2.48%(3) 0.61%*(1)(2)
Ratio of net investment (loss) income
to average net assets (1.27)% (1.63)%(3) 0.26%*(1)(2)
Portfolio turnover rate 57% 30% 74%+
</TABLE>
(1) NET OF EXPENSE REIMBURSEMENT AND FEES WAIVED BY THE ADVISER. HAD THESE
EXPENSES BEEN FULLY PAID BY THE FUND, THE INVESTMENT LOSS--NET PER SHARE
WOULD HAVE BEEN $(0.12), THE RATIO OF OPERATING EXPENSES TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.45%,* AND THE RATIO OF NET INVESTMENT 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
THE SHORT PERIOD COVERED BY THIS REPORT, DATA MAY NOT BE INDICATIVE OF
FUTURE PERIODS.
(3) NET OF EXPENSE REIMBURSEMENT BY THE ADVISER. HAD THESE EXPENSES BEEN FULLY
PAID BY THE FUND, THE INVESTMENT LOSS--NET PER SHARE WOULD HAVE BEEN
$(0.20), THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 2.52%,
AND THE RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS WOULD HAVE BEEN
(1.67%).
(4) NET OF CUSTODY-CASH CREDITS. HAD THE FUND NOT RECEIVED THESE CUSTODY
CREDITS, THE RATIO OF OPERATING EXPENSES TO AVERAGE DAILY NET ASSETS WOULD
HAVE BEEN 2.15%.
+ NOT ANNUALIZED
* ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS
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10
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF VALUE LINE SMALL-CAP GROWTH FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Small-Cap Growth Fund,
Inc. (the "Fund") at March 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the two years in
the period then ended and for the period June 23, 1993 (commencement of
operations) through March 31, 1994, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 20, 1996
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11
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
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 INVESTOR'S sole investment objective is
to realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current
income consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income
without undue risk to principal. Under normal conditions, at least 80% of the
value of its assets will be invested in issues of the U.S. Government and its
agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital as its
sole objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
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 investment-grade 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.
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12
