<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1997
REGISTRATION NO. 33-56028
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 5 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(CHECK APPROPRIATE BOX OR BOXES)
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VALUE LINE SMALL-CAP GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone Number, Including Area Code: (212) 907-1500
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David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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Copy to:
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich CT 06830
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Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, as amended, the Registrant registered an indefinite number of shares of
common stock under the Securities Act of 1933. Registrant filed its Rule 24f-2
Notice for the year ended March 31, 1997 on or about May 14, 1997.
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It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on August 1, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of rule 485
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<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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<S> <C> <C>
PART A (PROSPECTUS)
Item 1. Cover Page..................................... Cover Page
Item 2. Synopsis....................................... Summary of Fund Expenses
Item 3. Condensed Financial Information................ Summary of Fund Expenses; Financial Highlights
Item 4. General Description of Registrant.............. Cover Page; Investment Objective and Policies;
Investment Restrictions; Additional
Information
Item 5. Management of the Fund......................... Summary of Fund Expenses; Management of the
Fund; Additional Information
Item 6. Capital Stock and Other Securities............. Dividends, Distributions and Taxes; Additional
Information
Item 7. Purchase of Securities Being Offered........... How to Buy Shares; Calculation of Net Asset
Value; Investor Services
Item 8. Redemption or Repurchase....................... How to Redeem Shares
Item 9. Pending Legal Proceedings...................... Not Applicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
Item 10. Cover Page..................................... Cover Page
Item 11. Table of Contents.............................. Table of Contents
Item 12. General Information and History................ Additional Information (Part A)
Item 13. Investment Objective and Policies.............. Investment Objective and Policies; Investment
Restrictions
Item 14. Management of the Fund......................... Directors and Officers
Item 15. Control Persons and Principal Holders of
Securities................................... Management of the Fund (Part A); Directors and
Officers
Item 16. Investment Advisory and Other Services......... Management of the Fund (Part A); The Adviser
Item 17. Brokerage Allocation........................... Management of the Fund (Part A); Brokerage
Arrangements
Item 18. Capital Stock and Other Securities............. Additional Information (Part A)
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................ How to Buy Shares; How to Redeem Shares;
Calculation of Net Asset Value (Part A)
Item 20. Tax Status..................................... Taxes
Item 21. Underwriters................................... Not Applicable
Item 22. Calculation of Performance Data................ Performance Information (Part A); Performance
Data
Item 23. Financial Statements........................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
<TABLE>
<S> <C>
VALUE LINE
SMALL-CAP GROWTH PROSPECTUS
FUND, INC. August 1, 1997
</TABLE>
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
Value Line Small-Cap Growth Fund, Inc. (the "Fund") is
a no-load investment company whose primary investment
objective is long-term growth of capital. The Fund
invests primarily in "small-cap" common stocks.
The Fund invests substantially all of its assets in
common stocks or securities convertible into common
stock. From time to time, a portion of the Fund's
assets may be invested in debt securities, short-term
indebtedness, bonds or preferred stocks or may be held
in cash.
The Fund's investment adviser is Value Line, Inc. (the
"Adviser").
Shares of the Fund are offered at net asset value.
There are no sales charges or redemption fees.
This Prospectus sets forth concise information about the Fund that a
prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information about
the Fund is contained in a Statement of Additional Information, dated
August 1, 1997, which has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. A copy
of the Statement of Additional Information may be obtained at no charge
by writing or telephoning the Fund at the address or telephone numbers
listed above.
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street,
New York, NY 10017-5891
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases..................................................... None
Sales Load on Reinvested Dividends.......................................... None
Deferred Sales Load......................................................... None
Redemption Fees............................................................. None
Exchange Fee................................................................ None
ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net assets)
Management Fees............................................................. .75%
12b-1 Fees(2)............................................................... .25%
Other Expenses.............................................................. .87%
Total Fund Operating Expenses............................................... 1.87%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:............ $ 19 $ 59 $ 101 $ 219
</TABLE>
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(1) The foregoing is based upon the expenses for the year ended March 31, 1997,
and is designed to assist investors in understanding the various costs and
expenses that an investor in the Fund will bear directly or indirectly.
ACTUAL EXPENSES IN THE FUTURE MAY BE GREATER OR LESS THAN THOSE SHOWN.
(2) Because 12b-1 fees continue for the life of the investment, over time a
long term investor may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc.
2
<PAGE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD)
The following information on selected per share data and ratios for the
three years in the period ended March 31, 1997 and the period ended March 31,
1994, and the related financial statements, have been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report thereon
appears in the Fund's Annual Report to Shareholders which is incorporated by
reference in the Statement of Additional Information. This information should be
read in conjunction with the financial statements and notes thereto which also
appear in the Fund's Annual Report to Shareholders available from the Fund
without charge.
<TABLE>
<CAPTION>
JUNE 23,
1993
(COMMENCEMENT
OF
OPERATIONS)
YEARS ENDED MARCH 31, TO
--------------------------------------- MARCH 31,
1997 1996 1995 1994
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<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 15.11 $ 12.33 $ 11.80 $ 10.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment (loss) income................ (.13) (.18) (.19)(2) .02(1)
Net gains or losses on securities
(both realized and unrealized)............ (.08) 3.08 1.05 1.81
----------- ----------- ----------- -----------
Total from investment operations.......... (.21) 2.90 .86 1.83
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LESS DISTRIBUTIONS:
Dividends from net investment income ....... -- -- -- (.02)
Distributions from capital gains............ (2.23) (.12) (.33) (.01)
----------- ----------- ----------- -----------
Total distributions....................... (2.23) (.12) (.33) (.03)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD.................... $ 12.67 $ 15.11 $ 12.33 $ 11.80
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN...................................... (2.07)% 23.58% 7.57% 18.36%+
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in thousands)........... $16,974 $ 19,106 $12,492 $ 9,823
Ratio of operating expenses to average net
assets........................................... 1.87%(3) 2.15%(3) 2.48%(2) 0.61%*(1)
Ratio of net investment (loss) income to average
net assets....................................... (1.07)% (1.27)% (1.63)%(2) 0.26%*(1)
Portfolio turnover rate........................... 100% % 57 30% 74%+
Average commission rate paid per share of common
stock investments purchased/ sold................ $ .0500(4) -- -- --
</TABLE>
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(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), the ratio of operating expenses to average net assets
would have been 2.45%*, and the ratio of net investment income (loss) to
average net assets would have been (1.57%)*.
(2) 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), the
ratio of operating 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%).
(3) Before Custody Credits.
(4) Disclosure effective for fiscal years beginning on or after September 1,
1995.
+ Not annualized
* Annualized
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term growth of capital. No
consideration is given to current income in the choice of investments. The Fund
will at all times keep not less than 65% of the market value of its total assets
invested in "small-cap" stocks. This is a fundamental policy of the Fund which
along with its investment objective cannot be changed without shareholder
approval. There can be no assurance that the Fund will achieve its investment
objective. There are risks in all investments, including any stock investment,
and in all mutual funds that invest in stocks.
BASIC INVESTMENT STRATEGY
The Fund seeks to achieve its investment objective by investing primarily in
"small cap" stocks (i.e. common stocks or securities convertible into common
stocks). As used in this Prospectus, "small cap" stocks refer to the common
stock of companies that have a market capitalization of less than $1 billion.
When the Adviser deems it appropriate in the light of economic or market
conditions, up to 35% of the Fund's total assets may be held from time to time
in cash, U.S. Government securities, investment-grade corporate debt obligations
or money-market instruments which are rated in the top two categories by a
nationally recognized rating organization. The Fund may also purchase restricted
securities, write covered call options, enter into repurchase agreements and
purchase and sell stock index futures contracts and options thereon.
In selecting securities for purchase or sale, the Adviser may rely on the
Value Line Timeliness-TM- Ranking System, the Value Line Performance-TM- Ranking
System or the Value Line Small-Capitalization Stock Ranking System, if a ranking
is available for that particular stock. The Value Line Timeliness Ranking System
has evolved after many years of research and has been used in substantially its
present form since 1965. It is based upon historical prices and reported
earnings, recent earnings and price momentum and the degree to which the last
reported earnings deviated from estimated earnings. The Timeliness Rankings are
published weekly in the Standard Edition of The Value Line Investment Survey for
approximately 1,700 stocks. On a scale of 1 (highest) to 5 (lowest), the
rankings compare the Adviser's estimate of the probable market performance of
each stock during the coming twelve months relative to all 1,700 stocks under
review. The rankings are updated weekly to reflect the most recent information.
The Value Line Small-Capitalization Stock Ranking System has been employed
in managing pension client assets since 1981. This stock selection system relies
on factors similar to those found in the Value Line Timeliness Ranking System,
although it does not use published earnings estimates.
The Value Line Performance Ranking System for common stocks was introduced
in 1995. A variation of the Value Line Small-Capitalization Ranking System, the
Performance Ranking System evaluates the approximately 1,800 stocks in the
Expanded Edition of The Value Line Investment Survey. This stock selection
system relies on factors similar to those found in the Value Line Timeliness
Ranking System. The Performance Ranks use a scale of 1 (highest) to 5 (lowest)
to compare the Adviser's estimate of the probable market performance of each
Expanded Edition stock during the coming twelve months relative to all 1,800
stocks under review in the Expanded Edition.
None of the Value Line Ranking Systems eliminate market risk, but the
Adviser believes that they provide objective standards for determining whether
the market is undervaluing or overvaluing a particular security. The utilization
of these rankings is no assurance that the Fund will perform more favorably than
the market in general over any particular period.
4
<PAGE>
MISCELLANEOUS INVESTMENT PRACTICES
COVERED CALL OPTIONS. The Fund may write covered call options on stocks
held in its portfolio ("covered options"). When the Fund writes a covered call
option, it gives the purchaser of the option the right to buy the underlying
security at the price specified in the option (the "exercise price") at any time
during the option period. If the option expires unexercised, the Fund will
realize income to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder at the
exercise price. By writing a covered option, the Fund foregoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price. The Fund will not write call options in an
aggregate amount greater than 25% of its net assets.
The Fund will purchase call options only to close out a position. When an
option is written on securities in the Fund's portfolio and it appears that the
purchaser of that option is likely to exercise the option and purchase the
underlying security, it may be considered appropriate to avoid liquidating the
Fund's position, or the Fund may wish to extinguish a call option sold by it so
as to be free to sell the underlying security. In such instances the Fund may
purchase a call option on the same security with the same exercise price and
expiration date which had been previously written. Such a purchase would have
the effect of closing out the option which the Fund has written. The Fund
realizes a gain if the amount paid to purchase the call option is less than the
premium received for writing a similar option and a loss if the amount paid to
purchase a call option is greater than the premium received for writing a
similar option. Generally, the Fund realizes a short-term capital loss if the
amount paid to purchase the call option with respect to a stock is greater than
the premium received for writing the option. If the underlying security has
substantially risen in value, it may be expensive to purchase the call option
for the closing transaction.
STOCK INDEX FUTURES CONTRACTS AND OPTIONS THEREON. The Fund may trade in
stock index futures contracts and in options on such contracts. Such contracts
will be entered into on exchanges designated by the Commodity Futures Trading
Commission ("CFTC").
The Fund's futures and options on futures transactions must constitute bona
fide hedging or other risk management purposes pursuant to regulations
promulgated by the Commodity Futures Trading Commission. To the extent that the
Fund will engage in futures transactions for risk management purposes, the Fund
would sell futures short to offset a long position in its securities portfolio.
This technique is intended to reduce the Fund's exposure to losses which may
result due to general price declines in the securities markets. In addition, the
Fund may not engage in such activities generally if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity options would
exceed 5% of the fair market value of the Fund's net assets, after taking into
account unrealized profits and unrealized losses on such contracts it has
entered into; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. In instances involving entering into long futures or options
contracts by the Fund, an amount equal to the market value of the futures
contract will be deposited in a segregated account with the Fund's custodian of
cash, U.S. Government securities and other liquid high grade debt securities to
collateralize the position and thereby insure that the use of such futures
contract is unleveraged. No more than 25% of the Fund's net assets may be
deposited in such segregated account.
There can be no assurance of the Fund's successful use of stock index
futures as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the
5
<PAGE>
stock index futures and movements in the price of the securities which are the
subject of the hedge. The risk of imperfect correlation increases as the
composition of the Fund's securities portfolio diverges from the securities
included in the applicable stock index. In addition to the possibility that
there may be an imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the portfolio being
hedged, the price of stock index futures may not correlate perfectly with the
movement in the stock index due to certain market distortions. Increased
participation by speculators in the futures market also may cause temporary
price distortions. Due to the possibility of price distortions in the futures
market and because of the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by the Adviser still may not result in a successful
hedging transaction. Although the Fund may purchase or sell futures contracts,
it will enter into such transactions on an infrequent basis.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
broker-dealers or institutional investors if as a result thereof the aggregate
value of all securities loaned does not exceed 33 1/3% of the total assets of
the Fund. The loans will be made in conformity with applicable regulatory
policies and will be 100% collateralized by cash, cash equivalents or U.S.
Treasury bills on a daily basis in an amount equal to the market value of the
securities loaned and interest earned. The Fund will retain the right to call,
upon notice, the loaned securities and intends to call loaned voting securities
in anticipation of any important or material matter to be voted on by
shareholders. While there may be delays in recovery or even loss of rights in
the collateral should the borrower fail financially, the loans will be made only
to firms deemed by the Adviser to be of good standing and will not be made
unless, in the judgment of the Adviser, the consideration which can be earned
from such loan justifies the risk. The Fund may pay reasonable custodian and
administrative fees in connection with the loans.
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The Fund will make payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. The Board of Directors
monitors the creditworthiness of parties with which the Fund enters into
repurchase agreements.
RISK FACTORS
Investors should be aware of the following:
- There are risks in all investments, including any stock investment, and in
all mutual funds. The Fund's net asset value will fluctuate to reflect the
investment performance of the securities held by the Fund.
6
<PAGE>
- The value a shareholder receives upon redemption may be greater or lesser
than the value of such shares when acquired.
- The use of investment techniques such as investing in repurchase
agreements, lending portfolio securities, and trading in stock index futures
contracts and in options on such contracts involves greater risk than does an
investment in a fund that does not engage in these activities.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of investment restrictions which may not be
changed without shareholder approval. These are set forth in the Statement of
Additional Information and provide, among other things, that the Fund may not
(a) borrow in excess of 10% of the value of its total assets and then only
as a temporary measure;
(b) purchase securities (other than U.S. government securities) if the
purchase would cause the Fund, at the time, to have more than 5% of the value of
its total assets invested in the securities of any one company or to own more
than 10% of the outstanding voting securities of any one company; or
(c) invest 25% or more of the value of the Fund's total assets in securities
of issuers in one particular industry.
MANAGEMENT OF THE FUND
The management and affairs of the Fund are supervised by the Fund's Board of
Directors. The Fund's officers conduct and supervise the daily business
operations of the Fund. The Fund's investment decisions are made by an
investment committee of employees of the Adviser. The Fund's Annual Report
contains a discussion of the Fund's performance, which will be made available
upon request and without charge.
THE ADVISER. The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co., Inc. ("AB&Co.").
The Adviser was formed as part of a reorganization of AB&Co., a sole
proprietorship formed in 1931 which became a New York corporation in 1946.
AB&Co. currently owns approximately 81% of the outstanding shares of the
Adviser's common stock. Jean Bernhard Buttner, Chairman, President and Chief
Executive Officer of the Adviser, owns all of the voting stock of AB&Co. All of
the non-voting stock is owned by or for the benefit of members of the Bernhard
family and employees and former employees of AB&Co. or the Adviser. The Adviser
currently acts as investment adviser to the other Value Line mutual funds and
furnishes investment advisory services to private and institutional accounts
with combined assets in excess of $5 billion. Value Line Securities, Inc., the
Fund's distributor, is a subsidiary of the Adviser. The Adviser manages the
Fund's investments, provides various administrative services and supervises the
Fund's daily business affairs, subject to the authority of the Board of
Directors. The Adviser is paid an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets during the year. Although this fee is higher
than that paid by many other investment companies, it is not unusually high for
investment companies with a similar investment objective. From time to time, the
Adviser may voluntarily assume certain expenses of the Fund and waive its
advisory fee. This will have the effect of lowering the overall expense ratio of
the Fund. For more information about the Fund's management fees and expenses,
see the "Summary of Fund Expenses" on page 2.
BROKERAGE. The Fund pays a portion of its total brokerage commissions to
Value Line Securities, Inc., which clears transactions for the Fund through
unaffiliated broker-dealers.
7
<PAGE>
CALCULATION OF NET ASSET VALUE
The net asset value of the Fund's shares for purposes of both purchases and
redemptions is determined once daily as of the close of regular trading of the
first session of the New York Stock Exchange (currently 4:00 p.m., New York
time) on each day that the New York Stock Exchange is open for trading except on
days on which no orders to purchase, sell or redeem Fund shares have been
received. The New York Stock Exchange is currently closed on New Year's Day,
Martin Luther King Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share is determined by dividing the total value of the investments and
other assets of the Fund, less any liabilities, by the total outstanding shares.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities and for securities traded in the
over-the-counter market, the security is valued at the midpoint between the
latest available and representative asked and bid prices. Securities for which
market quotations are not readily available or which are not readily marketable
and all other assets of the Fund are valued at fair value as the Board of
Directors may determine in good faith. Short-term instruments with maturities of
60 days or less at the date of purchase are valued at amortized cost, which
approximates market.
HOW TO BUY SHARES
PURCHASE BY CHECK. To buy shares, send a check made payable to "NFDS-Agent"
and a completed and signed application form to Value Line Funds, c/o NFDS, P.O.
Box 419729, Kansas City, MO 64141-6729. Third party checks will not be accepted
for either initial or subsequent investments. For assistance in completing the
application and for information on pre-authorized telephone purchases, call
Value Line Securities at 1-800-223-0818 during New York business hours. Upon
receipt of the completed and signed purchase application and a check, National
Financial Data Services, Inc. ("NFDS"), the Fund's shareholder servicing agent,
will buy full and fractional shares (to three decimal places) at the net asset
value next computed after the funds are received and will confirm the investment
to the investor. Subsequent investments may be made by attaching a check to the
confirmation's "next payment" stub, by telephone or by federal funds wire.
Investors may also buy shares through broker-dealers other than Value Line
Securities. Such broker-dealers may charge investors a reasonable service fee.
Neither Value Line Securities nor the Fund receives any part of such fees when
charged (and which can be avoided by investing directly). If an order to
purchase shares is cancelled due to nonpayment or because the purchaser's check
does not clear, the purchaser will be responsible for any loss incurred by the
Fund or Value Line Securities by reason of such cancellation. If the purchaser
is a shareholder, Value Line Securities reserves the right to redeem sufficient
shares from the shareholder's account to protect the Fund against loss. The Fund
may refuse any order for the purchase of shares. Minimum orders are $1,000 for
an initial purchase and $100 for each subsequent purchase.
8
<PAGE>
WIRE PURCHASE -- $1,000 MINIMUM. An investor should call 1-800-243-2729 to
obtain an account number. After receiving an account number, instruct your
commercial bank to wire transfer "federal funds" via the Federal Reserve System
as follows:
State Street Bank and Trust Company, Boston, MA
ABA # 011000028
Attn: Mutual Fund Division
DDA # 99049868
Value Line Small-Cap Growth Fund
A/C # ________________________
Shareholder's name and account information
Tax ID # ________________________
NOTE: A COMPLETED AND SIGNED APPLICATION MUST BE MAILED IMMEDIATELY AND
RECEIVED BY NFDS BEFORE IT CAN HONOR ANY WITHDRAWAL OR EXCHANGE TRANSACTIONS.
After your account has been opened, you may wire additional investments in
the same manner.
For an initial investment made by federal funds wire purchase, the wire must
include a valid social security number or tax identification number. Investors
purchasing shares in this manner will then have 30 days after purchase to
provide the certification and signed account application. All payments should be
made in U.S. dollars and, to avoid fees and delays, should be drawn on only U.S.
banks. Until receipt of the above, any distributions from the account will be
subject to withholding at the rate of 31%.
SUBSEQUENT TELEPHONE PURCHASES--$250 MINIMUM. Upon completion of the
telephone purchase authorization section of the account application,
shareholders who own Fund shares with a current value of $500 or more may also
purchase additional shares in amounts of $250 or more up to twice the value of
their shares by calling 1-800-243-2729 between 9:00 a.m. and 4:00 p.m. New York
time. Such orders will be priced at the closing net asset value on the day
received and payment will be due within three business days. If payment is not
received within the required time or a purchaser's check does not clear, the
order is subject to cancellation and the purchaser will be responsible for any
loss incurred by the Fund or Value Line Securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund distributes net investment income and any net realized capital
gains to shareholders at least annually. Income dividends and capital gains
distributions are automatically reinvested in additional shares of the Fund
unless the shareholder has requested otherwise. Because the Fund intends to
distribute all of its net investment income and capital gains to shareholders,
it is not expected that the Fund will be required to pay any federal income
taxes. However, shareholders of the Fund normally will have to pay federal
income taxes, and any applicable state or local taxes, on the dividends and
capital gains distributions they receive from the Fund (whether or not
reinvested in additional Fund shares). Shareholders will be informed annually of
the amount and nature of the Fund's income and distributions.
Mutual funds are required to withhold 31% for federal income tax purposes of
dividends, distributions of capital gains and redemption proceeds from accounts
without a valid social security or tax identification number. You must provide
this information when you complete the Fund's
9
<PAGE>
application and certify that you are not currently subject to federal backup
withholding. The Fund reserves the right to close, by redemption, accounts for
which the holder fails to provide a valid social security or tax identification
number.
PERFORMANCE INFORMATION
The Fund may from time to time include information regarding its total
return performance in advertisements or in information furnished to existing or
prospective shareholders. When information regarding total return is furnished,
it will be based upon changes in the Fund's net asset value, and will assume the
reinvestment of all capital gains distributions and income dividends. It will
take into account nonrecurring charges, if any, which the Fund may incur but
will not take into account income taxes due on Fund distributions.
The table below illustrates the total return performance of the Fund for the
period indicated by showing the value of a hypothetical $1,000 investment made
at the beginning of the period. The information contained in the table has been
computed by applying the Fund's average annual total return to the hypothetical
$1,000 investment. The table assumes reinvestment of all capital gains
distributions and income dividends, but does not take into account income taxes
due on Fund distributions or dividends.
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
TOTAL RETURN
-------------
<S> <C> <C>
For the year ended March 31, 1997............................................. $979 -2.07%
For the period from June 23, 1993 (commencement of operations) through March
31, 1997..................................................................... $1,541 +12.15%
</TABLE>
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc. and other industry or financial publications. The Fund may compare its
performance to that of other mutual funds with similar investment objectives and
to stock or other relevant indices. From time to time, articles about the Fund
regarding its performance or ranking may appear in national publications such as
Kiplinger's Personal Finance, Money Magazine, Financial World, Morningstar,
Personal Investors, Forbes, Fortune, Business Week, Wall Street Journal,
Investor's Business Daily, Donoghue, The Financial Times, The Economist, Worth,
Smart Money, Mutual Fund Forecaster, U.S. News and World Report and Barron's.
Some of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund. Reference to or reprints of such articles
may be used in the Fund's promotional literature.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after NFDS receives a request in proper form. ALL REQUESTS
FOR REDEMPTION SHOULD BE SENT TO NFDS, P.O. BOX 419729, KANSAS CITY, MO
64141-6729. The value of shares of the Fund on redemption may be more or less
than the shareholder's cost, depending upon the market value of the Fund's
assets at the time. A shareholder holding certificates for shares must surrender
the certificates properly endorsed with signature guaranteed. A signature
guarantee may be executed
10
<PAGE>
by any "eligible" guarantor. Eligible guarantors include domestic banks, savings
associations, credit unions, member firms of a national securities exchange, and
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. A guarantee from a Notary Public is not an acceptable source.
The signature on any request for redemption of shares not represented by
certificates, or on any stock power in lieu thereof, must be similarly
guaranteed. In each case the signature or signatures must correspond to the
names in which the account is registered. Additional documentation may be
required when shares are registered in the name of a corporation, agent or
fiduciary. For further information, you should contact NFDS.
The Fund does not make a redemption charge, but shares redeemed through
brokers or dealers may be subject to a service charge by such firms. A check for
the redemption proceeds will be mailed within seven days following receipt of
all required documents. However, payment may be postponed under unusual
circumstances such as when normal trading is not taking place on the New York
Stock Exchange. In addition, shares purchased by check may not be redeemed for
up to 15 calendar days following the purchase date.
If the Board of Directors determines that it is in the best interests of the
Fund, the Fund may redeem, upon prior written notice, at net asset value all
shareholder accounts which, due to redemptions, fall below $500 in net asset
value. In such event, an investor will have 30 days to increase the shares in
his account to the minimum level.
SERVICE AND DISTRIBUTION PLAN
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") 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. Under the Plan, the Distributor may make payments to securities dealers,
banks, financial institutions and other organizations which render distribution
and administrative services with respect to the distribution of the Fund's
shares. Such services may include, among other things, answering investor
inquiries regarding the Fund; processing new shareholder account applications
and redemption transactions; responding to shareholder inquiries; and such other
services as the Fund may request to the extent permitted by applicable statute,
rule or regulation. The Plan also provides that the Adviser may make such
payments out of its advisory fee, its past profits or any other source available
to it. The fees payable to the Distributor under the Plan are payable without
regard to actual expenses incurred.
The Glass-Steagall Act and other applicable laws prohibit banks from
engaging in the business of underwriting, selling or distributing securities.
Generally, banks will be engaged to provide administrative services. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either Federal or State statutes or regulations relating to the
permissible activities of banks and their affiliates, could prevent a bank from
continuing to perform all or a part of its administrative services. In that
case, its shareholder clients would be permitted to remain shareholders of the
Fund and alternative means for continuing the servicing of such shareholders
would be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these consequences.
11
<PAGE>
INVESTOR SERVICES
VALU-MATIC.-REGISTERED TRADEMARK- The Fund offers a free service to its
shareholders, Valu-Matic-Registered Trademark-, through which monthly
investments of $25 or more may be made automatically into the shareholder's Fund
account. The shareholder authorizes the Fund to debit the shareholder's bank
account monthly for the purchase of the Fund shares on or about the 3rd or 18th
of each month. Further information regarding this service can be obtained from
Value Line Securities by calling 1-800-223-0818.
EXCHANGE OF SHARES. Shares of the Fund may be exchanged for shares of the
other Value Line funds in any identically registered account on the basis of the
respective net asset values next computed after receipt of the exchange order.
No telephone exchanges can be made for less than $1,000. If shares of the Fund
are being exchanged for shares of The Value Line Cash Fund, Inc. or The Value
Line Tax Exempt Fund--Money Market Portfolio and the shares (including shares in
accounts under the control of one investment advisor) have a value in excess of
$500,000, then, at the discretion of the Adviser, the shares to be purchased
will be purchased at the closing price on the third business day following the
redemption of the shares being exchanged to allow the Fund to utilize normal
securities settlement procedures in transferring the proceeds of the redemption.
The exchange privilege may be exercised only if the shares to be acquired
may be sold in the investor's State. Prospectuses for the other funds may be
obtained from Value Line Securities by calling 1-800-223-0818. Each such
exchange involves a redemption and a purchase for tax purposes. Broker-dealers
are not prohibited from charging a commission for handling the exchange of Fund
shares. To avoid paying such a commission, send the request with signature
guaranteed to NFDS. The Fund reserves the right to terminate the exchange
privilege of any account making more than eight exchanges a year. (An exchange
out of The Value Line Cash Fund, Inc. or The Value Line Tax Exempt Fund--Money
Market Portfolio is not counted for this purpose.) The exchange privilege may be
modified or terminated upon sixty days' notice to shareholders, and any of the
Value Line funds may discontinue offering its shares generally or in any
particular state without prior notice. To make an exchange, call 1-800-243-2729.
Although it has not been a problem in the past, shareholders should be aware
that a telephone exchange may be difficult during periods of major economic or
market changes.
SYSTEMATIC CASH WITHDRAWAL PLAN. A shareholder who has invested a minimum
of $5,000 in the Fund, or whose shares have attained that value, may request a
transfer of his shares to a Value Line Systematic Cash Withdrawal Account which
NFDS will maintain in his name on the Fund's books. Under the Systematic Cash
Withdrawal Plan ("the Plan"), the shareholder will request that NFDS, acting as
his agent, redeem monthly or quarterly a sufficient number of shares to provide
for payment to him, or someone he designates, of any specified dollar amount
(minimum $25). All certificated shares must be placed on deposit under the Plan
and dividends and capital gains distributions, if any, are automatically
reinvested at net asset value. The Plan will automatically terminate when all
shares in the account have been redeemed. The shareholder may at any time
terminate the Plan, change the amount of the regular payment, or request
liquidation of the balance of his account on written notice to NFDS. The Fund
may terminate the Plan at any time on written notice to the shareholder.
TAX-SHELTERED RETIREMENT PLANS. Shares of the Fund may be purchased for
various types of retirement plans. For more complete information, contact Value
Line Securities, Inc. at 1-800-223-0818 during New York business hours.
12
<PAGE>
ADDITIONAL INFORMATION
The Fund is an open-end, diversified management investment company
incorporated in Maryland in 1992. The Fund has 300 million authorized shares of
common stock, $.001 par value. Each share has one vote with fractional shares
voting proportionately. Shares have no preemptive rights, are freely
transferable, are entitled to dividends as declared by the Directors, and, if
the Fund were liquidated, would receive the net assets of the Fund.
INQUIRIES. All inquiries regarding the Fund should be directed to the Fund
at the telephone numbers or address set forth on the cover page of this
Prospectus. Inquiries from shareholders regarding their accounts and account
balances should be directed to National Financial Data Services, Inc., servicing
agent for State Street Bank and Trust Company, the Fund's transfer agent,
1-800-243-2729. Shareholders should note they may be required to pay a fee for
special requests such as historical transcripts of an account. Our Info-Line
provides the latest account information 24 hours a day, every day, and is
available to shareholders with pushbutton phones. The Info-Line toll-free number
is 1-800-243-2739.
WITHHOLDING. Mutual funds are required to withhold 31% of dividends,
distributions of capital gains and redemption proceeds from accounts without a
valid social security or tax identification number. You must provide this
information when you complete the Fund's application and certify that you are
not currently subject to backup withholding.
SHAREHOLDER MEETINGS. The Fund does not intend to hold routine annual
meetings of shareholders. However, special meetings of shareholders will be held
as required by law, for purposes such as changing fundamental policies or
approving an advisory agreement. Shareholders of record of not less than a
majority of the outstanding shares of the Fund may remove a Director by votes
cast in person or by proxy at a meeting called for that purpose. The Directors
are required to call a meeting of shareholders for the purpose of voting upon
the question of the removal of any Director when so requested by the
shareholders of record of not less than 10% of the Fund's outstanding shares.
13
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
-------------------------------------------
1950--THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952--THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956--THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth of
capital by investing not less than 80% of its assets in "special situations". No
consideration is given to achieving current income.
1972--VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979--THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981--VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value of
its net assets will be invested in issues of the U.S. Government and its
agencies and instrumentalities.
1983--VALUE LINE CENTURION FUND* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984--THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985--VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by The Value Line Convertible Ranking System.
1986--VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, low-rated, fixed-income corporate securities.
1987--VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal
individual income taxes while avoiding undue risk to principal.
1987--VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times.
1992--VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing in a diversified portfolio of
investment-grade debt securities with a dollar-weighted average portfolio
maturity of between three and ten years.
1993--VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993--VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
1995--VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
- ----------------
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTORS, 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 E. 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.
14
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
INVESTMENT ADVISER
Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR
Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Fund Expenses................................................... 2
Financial Highlights....................................................... 3
Investment Objective and Policies.......................................... 4
Risk Factors............................................................... 6
Investment Restrictions.................................................... 7
Management of the Fund..................................................... 7
Calculation of Net Asset Value............................................. 8
How to Buy Shares.......................................................... 8
Dividends, Distributions and Taxes......................................... 9
Performance Information.................................................... 10
How to Redeem Shares....................................................... 10
Service and Distribution Plan.............................................. 11
Investor Services.......................................................... 12
Additional Information..................................................... 13
</TABLE>
-------------------------------------------
PROSPECTUS
-------------------
AUGUST 1, 1997
VALUE LINE
SMALL-CAP
GROWTH
FUND, INC.
(800) 223-0818
[LOGO]
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and must be
read in conjunction with the Prospectus of Value Line Small-Cap Growth Fund,
Inc. (the "Fund") dated August 1, 1997, a copy of which may be obtained without
charge by writing or telephoning the Fund.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Investment Objective and Policies................................................... B-1
Other Investment Strategies......................................................... B-2
Investment Restrictions............................................................. B-4
Directors and Officers.............................................................. B-6
The Adviser......................................................................... B-7
Brokerage Arrangements.............................................................. B-8
How to Buy Shares................................................................... B-9
How to Redeem Shares................................................................ B-10
Service and Distribution Plan....................................................... B-10
Taxes............................................................................... B-11
Performance Data.................................................................... B-12
Additional Information.............................................................. B-13
Financial Statements................................................................ B-13
</TABLE>
The Fund's investment adviser is Value Line, Inc. (the "Adviser").
INVESTMENT OBJECTIVE AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVE AND POLICIES" IN THE FUND'S PROSPECTUS)
The Fund will not concentrate its investments in any particular industry but
reserves the right to invest up to 25% of its total assets (taken at market
value) in any one industry. The Fund does not
B-1
<PAGE>
invest for the purposes of management or control of companies whose securities
the Fund owns. It is the policy of the Fund to purchase and hold securities
which are believed to have potential for long-term capital appreciation. The
Fund generally does not attempt to realize short-term trading profits.
The policies set forth in the Fund's Prospectus and in this Statement of
Additional Information and the policies set forth below under "Investment
Restrictions" are, unless otherwise indicated, fundamental policies of the Fund
and may not be changed without the affirmative vote of a majority of the
outstanding voting securities of the Fund. As used in this Statement of
Additional Information and in the Prospectus, a "majority of the outstanding
voting securities of the Fund" means the lesser of (1) the holders of more than
50% of the outstanding shares of capital stock of the Fund or (2) 67% of the
shares present if more than 50% of the shares are present at a meeting in person
or by proxy.
OTHER INVESTMENT STRATEGIES
(SEE ALSO "INVESTMENT OBJECTIVES AND POLICIES" IN THE FUND'S PROSPECTUS)
The Fund may trade in stock index futures contracts and in options on such
contracts. Such contracts will be entered into on exchanges designated by the
Commodity Futures Trading Commission ("CFTC"). These transactions may be entered
into for bona fide hedging and other permissible risk management purposes
including protecting against anticipated changes in the value of portfolio
securities the Fund intends to purchase.
For example, should the Fund anticipate a decrease in the value of its
portfolio securities, it could enter into futures contracts to sell stock
indexes thereby partially hedging its portfolio against the anticipated losses.
Losses in the portfolio, if realized, should be partially offset by gains on the
futures contracts. Conversely, if the Fund anticipated purchasing additional
portfolio securities in a rising market, it could enter into futures contracts
to purchase stock indexes thereby locking in a price. The implementation of
these strategies by the Fund should be less expensive and more efficient than
buying and selling the individual securities at inopportune times.
A stock index future obligates the seller to deliver (and the purchaser to
take) an amount of cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of the last trading day
of the contract and the price at which the contract is entered into. There can
be no assurance of the Fund's successful use of stock index futures as a hedging
device.
The contractual obligation is satisfied by either a cash settlement or by
entering into an opposite and offsetting transaction on the same exchange prior
to the delivery date. Entering into a futures contract to deliver the index
underlying the contract is referred to as entering into a short futures
contract. Entering into a futures contract to take delivery of the index is
referred to as entering into a long futures contract. An offsetting transaction
for a short futures contract is effected by the Fund entering into a long
futures contract for the same date, time and place. If the price of the short
contract exceeds the price in the offsetting long, the Fund is immediately paid
the difference and thus realizes a gain. If the price of the long transaction
exceeds the short price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a long futures contract is effected by the Fund
entering into a short futures contract. If the offsetting short price exceeds
the long price, the Fund realizes a gain, and if the offsetting short price is
less than the long price, the Fund realizes a loss.
B-2
<PAGE>
No consideration will be paid or received by the Fund upon entering into a
futures contract. Initially, the Fund will be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1% to 10% of
the contract amount. This amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may charge a
higher amount. This amount is known as "initial margin" and is in the nature of
a performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price of the index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market."
The Fund may also purchase put and call options on stock index futures
contracts on commodity exchanges or write covered options on such contracts. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, while a put option gives the purchaser the right to sell and the writer
the obligation to buy. Unlike a stock index futures contract, which requires the
parties to buy and sell the stock index on a set date, an option on a stock
index futures contract entitles its holder to decide on or before a future date
whether to enter into such a futures contract. If the holder decides not to
enter into the contract, the premium paid for the option is lost. Since the
value of the option is fixed at the point of sale, the purchase of an option
does not require daily payments of cash in the nature of "variation" or
"maintenance" margin payments to reflect the change in the value of the
underlying contract. The value of the option purchased by the Fund does change
and is reflected in the net asset value of the Fund. The writer of an option,
however, must make margin payments on the underlying futures contract. Exchanges
provide trading mechanisms so that an option once purchased can later be sold
and an option once written can later be liquidated by an offsetting purchase.
Successful use of stock index futures by the Fund also is subject to the
Adviser's ability to predict correctly movements in the direction of the market.
If the Adviser's judgment about the several directions of the market is wrong,
the Fund's overall performance may be worse than if no such contracts had been
entered into. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting stocks held in its portfolio and stock
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of its stock which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Fund may have to
sell securities at a time when it may be disadvantageous to do so. When stock
index futures are purchased to hedge against a possible increase in the price of
stocks before the Fund is able to invest its cash (or cash equivalents) in
stocks in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest in stocks at that time because
of concern as to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not offset by a reduction in
the price of securities purchased.
Use of options on stock index futures entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. The Fund will not purchase these options unless its
investment adviser is satisfied with the development, depth and liquidity of the
market and the investment adviser believes the options can be closed out.
B-3
<PAGE>
Options and futures contracts entered into by the Fund will be subject to
special tax rules. These rules may accelerate income to the Fund, defer Fund
losses, cause adjustments in the holding periods of Fund securities, convert
capital gain into ordinary income and convert short-term capital losses into
long-term capital losses. As a result, these rules could affect the amount,
timing and character of Fund distributions. However, the Fund anticipates that
these investment activities will not prevent the Fund from qualifying as a
regulated investment company.
RESTRICTED SECURITIES. On occasion, the Fund may purchase securities which
would have to be registered under the Securities Act of 1933 if they were to be
publicly distributed. However, it will not do so if the value of such securities
(other than in a Rule 144A transaction) would exceed 5% of the market value of
its net assets or if the value of such securities and other securities which are
not readily marketable (including repurchase agreements maturing in more than
seven days) would exceed 15% of the market value of its net assets. It is
management's policy to permit the occasional acquisition of restricted
securities only if (except in the case of short-term, non-convertible debt
securities) there is an agreement by the issuer to register such securities,
ordinarily at the issuer's expense, when requested to do so by the Fund. The
acquisition in limited amounts of restricted securities is believed to be
helpful toward the attainment of the Fund's investment objective of capital
appreciation without unduly restricting its liquidity or freedom in the
management of its portfolio. However, because restricted securities may only be
sold privately or in an offering registered under the Securities Act of 1933, or
pursuant to an exemption from such registration, substantial time may be
required to sell such securities, and there is greater than usual risk of price
decline prior to sale. The Fund has no present intention to purchase such
securities during the coming year.
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Engage in arbitrage transactions, short sales, purchases on margin
or participate on a joint or joint and several basis in any trading account
in securities, except in connection with the purchase or sale of futures
transactions and to deposit or pay initial or variation margin in connection
with financial futures contracts or related options transactions.
(2) Issue senior securities or borrow money in excess of 10% of the
value of its net assets and then only as a temporary measure to meet
unusually heavy redemption requests or for other extraordinary or emergency
purposes. Securities will not be purchased while borrowings are outstanding.
No assets of the Fund may be pledged, mortgaged or otherwise encumbered,
transferred or assigned to secure a debt.
(3) Engage in the underwriting of securities, except to the extent that
the Fund may be deemed an underwriter as to restricted securities under the
Securities Act of 1933 in selling portfolio securities.
(4) Invest in real estate, mortgages, illiquid securities of real
estate investment trusts, real estate limited partnerships or interests in
oil, gas or mineral leases although the Fund may purchase securities of
issuers which engage in real estate operations.
(5) Invest in commodities or commodity contracts, except that the Fund
may invest in futures contracts and financial futures contracts and options
on futures contracts and financial futures contracts.
B-4
<PAGE>
(6) Lend money except in connection with the purchase of debt
obligations or by investment in repurchase agreements, provided that
repurchase agreements maturing in more than seven days, over-the-counter
options held by the Fund and the portion of the assets used to cover such
options when taken together with other securities that are illiquid or
restricted by virtue of the absence of a readily available market do not
exceed 15% of the Fund's net assets. The Fund may lend its portfolio
securities to broker-dealers and institutional investors if as a result
thereof the aggregate value of all securities loaned does not exceed 33 1/3%
of the total assets of the Fund.
(7) Invest more than 5% of the value of its total assets in the
securities of any one issuer or purchase more than 10% of the outstanding
voting securities, or any other class of securities, of any one issuer. For
purposes of this restriction, all outstanding debt securities of an issuer
are considered as one class, and all preferred stock of an issuer is
considered as one class. This restriction does not apply to obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(8) Purchase securities of other registered investment companies,
except in mergers or other business combinations.
(9) Invest 25% or more of its total assets in securities of issuers in
any one industry.
(10) Invest more than 5% of its total assets in securities of issuers
having a record, together with predecessors, of less than three years of
continuous operation. The restriction does not apply to any obligation
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
(11) Purchase or retain the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and of Value
Line, Inc. (the "Adviser"), who each owns more than 0.5% of the outstanding
securities of such issuer, together own more than 5% of such securities.
(12) Invest more than 2% of the value of its total assets in warrants
(valued at the lower of cost or market), except that warrants attached to
other securities are not subject to these limitations.
(13) Purchase securities for the purpose of exercising control over
another company.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
B-5
<PAGE>
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 62 of Directors and Officer of the Adviser and Value Line
President Publishing, Inc. Chairman and President of
the Value Line Funds and Value Line
Securities, Inc.
Francis C. Oakley Director Professor of History, Williams College, 1961
936 Main Street to present and President Emeritus since 1994;
Williamstown, MA 01267 President of Williams College, 1985-1993;
Age 65 Director, Berkshire Life Insurance Company
Marion N. Ruth Director Real Estate Executive; President, Ruth Realty
5 Outrider Road (real estate broker).
Rolling Hills, CA 90274
Age 62
Frances T. Newton Director Computer Programming Professional, Duke Power
4921 Buckingham Drive Company.
Charlotte, NC 28209
Age 56
Steven M. Yeary Vice President Portfolio Manager with the Adviser since
Age 42 1995; Securities Analyst with the Adviser
since 1993; prior thereto Analyst with the
Adviser.
Jerome H. Kaplan Vice President Securities Analyst with the Adviser.
Age 59
David T. Henigson Vice President, Director, Vice President and Compliance
Age 39 Secretary and Officer of the Adviser. Director and Vice
Treasurer President of the Distributor.
</TABLE>
- ------------------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors and certain officers of the Fund are also directors and officers
of other investment companies for which the Adviser acts as investment adviser.
The following table sets forth information regarding compensation of Directors
by the Fund and by the Fund and the three other Value
B-6
<PAGE>
Line Funds of which each of the Directors is a director for the fiscal year
ended March 31, 1997. Directors who are officers or employees of the Adviser do
not receive any compensation from the Fund or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL
RETIREMENT ANNUAL COMPENSATION
AGGREGATE BENEFITS ACCRUED BENEFITS FROM FUND AND
COMPENSATION AS PART OF FUND UPON FUND COMPLEX
NAME OF PERSON FROM FUND EXPENSES RETIREMENT (4) FUNDS
- ------------------------------------------- --------------- ------------------ ----------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner............................ $ -0- N/A N/A $ -0-
Francis C. Oakley.......................... 5,000 N/A N/A 20,000
Marion N. Ruth............................. 5,000 N/A N/A 20,000
Frances T. Newton.......................... 5,000 N/A N/A 20,000
</TABLE>
As of March 31, 1997, no person owned of record or, to the knowledge of the
Fund, owned beneficially, 5% or more of the outstanding stock of the Fund other
than the Adviser and affiliated companies which owned 1,098,579 shares of the
Fund's capital stock or 82% of the outstanding shares. In addition, certain
officers and directors of the Fund owned 2,490 shares of capital stock,
representing less than 1% of the outstanding shares.
THE ADVISER
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
The investment advisory agreement between the Fund and the Adviser dated
June 1, 1993 provides for an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets during the year. During the fiscal years ended
March 31, 1995, 1996 and 1997, the Fund paid or accrued to the Adviser advisory
fees of $80,681, $112,855 and $141,377, respectively. During the fiscal year
ended March 31, 1997, the Fund paid or accrued to the Adviser $2,880 for
printing services.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agent, legal, audit
and Fund accounting expenses, fees and expenses in connection with qualification
under federal and state securities laws and costs of shareholder reports and
proxy materials. The Fund has agreed that it will use the words "Value Line" in
its name only so long as Value Line, Inc. serves as investment adviser to the
Fund.
The Adviser acts as investment adviser to 15 other investment companies
constituting The Value Line Family of Funds and furnishes investment advisory
services to private and institutional accounts with combined assets in excess of
$5 billion.
Certain of the Adviser's clients may have investment objectives similiar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at
B-7
<PAGE>
different times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Fund does not purchase or sell a security based solely on information
contained in any of the Value Line publications. The Adviser and/or its
affiliates, officers, directors and employees may from time to time own
securities which are also held in the portfolio of the Fund. The Adviser has
imposed rules upon itself and such persons requiring monthly reports of security
transactions for their respective accounts and restricting trading in various
types of securities in order to avoid possible conflicts of interest. The
Adviser may from time to time, directly or through affiliates, enter into
agreements to furnish for compensation special research or financial services to
companies, including services in connection with acquisitions, mergers or
financings. In the event that such agreements are in effect with respect to
issuers of securities held in the portfolio of the Fund, specific reference to
such agreements will be made in the "Schedule of Investments" in shareholder
reports of the Fund. As of the date of this Statement of Additional Information,
no such agreements exist.
BROKERAGE ARRANGEMENTS
(SEE ALSO "MANAGEMENT OF THE FUND" IN THE FUND'S PROSPECTUS)
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Purchases
and sales of securities which are not listed or traded on a securities exchange
will ordinarily be executed with primary market makers acting as principal,
except when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of the brokerage and research services provided. Such
services may include but are not limited to information as to the availability
of securities for purchase or sale; statistical or factual information or
opinions pertaining to investments; and appraisals or evaluations of portfolio
securities. Such allocation will be in such amounts and in such proportions as
the Adviser may determine. Orders may also be placed with brokers or dealers who
sell shares of the Fund or other funds for which the Adviser acts as investment
adviser, but this fact, or the volume of such sales, is not a consideration in
their selection. During the fiscal years ended March 31, 1995, 1996 and 1997,
the Fund paid brokerage commissions of $6,071, $18,009 and $34,336,
respectively, of which none was paid to Value Line Securities, Inc., the Fund's
distributor and a subsidiary of the Adviser. Value Line Securities, Inc. clears
transactions for the Fund through unaffiliated broker-
dealers.
The Board of Directors has adopted procedures incorporating the standards of
Rule 17e-1 under the 1940 Act which requires that the commissions paid to Value
Line Securities, Inc. or any other "affiliated person" be "reasonable and fair"
compared to the commissions paid to other brokers in connection with comparable
transactions. The procedures require that the Adviser furnish
B-8
<PAGE>
reports to the Directors with respect to the payment of commissions to
affiliated brokers and maintain records with respect thereto. During the fiscal
year ended March 31, 1997, $24,207 (71%) of the Fund's brokerage commissions
were paid to brokers or dealers solely for their services in obtaining best
prices and executions; the balance, or $10,129 (29%), went to brokers or dealers
who provided information or services to the Adviser and, therefore, indirectly
to the Fund and to shareholders of the Value Line funds. The information and
services furnished to the Adviser include the furnishing of research reports and
statistical compilations and computations and the providing of current
quotations for securities. These services and information were furnished to the
Adviser at no cost to it; no such services or information were furnished
directly to the Fund, but certain of these services might have relieved the Fund
of expenses which it would otherwise have had to pay. Such information and
services are considered by the Adviser, and brokerage commissions are allocated
in accordance with its assessment of such information and services, but only in
a manner consistent with the placing of purchase and sale orders with brokers
and/or dealers, which, in the judgment of the Adviser, are able to execute such
orders as expeditiously as possible and at the best obtainable price. The Fund
is advised that the receipt of such information and services has not reduced in
any determinable amount the overall expenses of the Adviser.
PORTFOLIO TURNOVER. It is not expected that the Fund's annual portfolio
turnover rate will exceed 100%. A rate of portfolio turnover of 100% would occur
if all of the Fund's portfolio were replaced in a period of one year. To the
extent that the Fund engages in short-term trading in attempting to achieve its
objective, it may increase portfolio turnover and incur higher brokerage
commissions and other expenses than might otherwise be the case.
HOW TO BUY SHARES
(SEE ALSO "CALCULATION OF NET ASSET VALUE", "HOW TO BUY SHARES",
"SERVICE AND DISTRIBUTION PLAN" AND "INVESTOR SERVICES" IN THE FUND'S
PROSPECTUS)
Shares of the Fund are purchased at net asset value next calculated after
receipt of a purchase order. Minimum orders are $1,000 for an initial purchase
and $100 for each subsequent purchase. The Fund reserves the right to reduce or
waive the minimum purchase requirements in certain cases, such as pursuant to
payroll deduction plans, etc., where subsequent and continuing purchases are
contemplated.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor") pursuant to which the Distributor acts as
principal underwriter and distributor of the Fund for the sale and distribution
of its shares. The Distributor, a wholly-owned subsidiary of the Adviser,
receives no compensation for its services under the agreement. However, see
"Service and Distribution Plan" for certain payments to the Distributor. The
Distributor also serves as distributor to the other Value Line Funds.
AUTOMATIC PURCHASES. The Fund offers a free service to its shareholders,
Valu-Matic, through which monthly investments of $25 or more may be made
automatically into the shareholder's Fund account. The required form to enroll
in this program is available upon request from the Distributor.
RETIREMENT PLANS. Shares of the Fund may be purchased as the investment
medium for various tax-sheltered retirement plans. Upon request, the Distributor
will provide information regarding eligibility and permissible contributions.
Because a retirement plan is designed to provide benefits in future years, it is
important that the investment objectives of the Fund be consistent with
B-9
<PAGE>
the participant's retirement objectives. Premature withdrawals from a retirement
plan may result in adverse tax consequences. For more complete information,
contact Value Line Securities at 1-800-223-0818 during New York business hours.
HOW TO REDEEM SHARES
(SEE ALSO "HOW TO REDEEM SHARES" AND "INVESTOR SERVICES" IN THE FUND'S
PROSPECTUS)
The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period by the Fund under the following conditions
authorized by the 1940 Act: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday closing, or
(b) during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal by
the Fund of securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for the Fund to determine the fair value of its net assets;
(3) for such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time. Shareholders should note that if a loss has been realized on the sale of
shares of the Fund, the loss may be disallowed for tax purposes if shares of the
same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities or other property of the Fund. However, the Fund has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Fund's net assets
if that is less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing the net
asset value per share. Shareholders receiving such securities may incur
brokerage costs on their sales.
SERVICE AND DISTRIBUTION PLAN
(SEE ALSO "SERVICE AND DISTRIBUTION PLAN" IN THE FUND'S PROSPECTUS)
The Service and Distribution Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, provides for the payment of certain expenses
incurred by Value Line Securities, Inc. 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. During the fiscal
years ended March 31, 1995, 1996 and 1997, fees of $26,894, $37,618 and $47,125,
respectively, were paid or payable to the Distributor under the Plan.
TAXES
(SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE FUND'S PROSPECTUS)
The Fund intends to qualify as a regulated investment company under the
United States Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, the Fund is not subject to federal income tax on its net investment
income or net realized capital gains which are distributed to shareholders
(whether or not reinvested in additional Fund shares).
B-10
<PAGE>
Distributions of investment income and of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income (whether or not reinvested in additional Fund shares).
Distributions of the excess of net long-term capital gain over net short-term
capital loss (net capital gains) are taxable to shareholders as long-term
capital gain, regardless of the length of time the shares of the Fund have been
held by such shareholders and regardless of whether the distribution is received
in cash or in additional shares of the Fund. It is expected that dividends from
domestic corporations will constitute most of the Fund's gross income and that a
substantial portion of the dividends paid by the Fund will qualify for the
dividends-received deduction for corporate investors. Upon request, the Fund
will advise investors of the amount of dividends which so qualify.
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains determined, in general, on an October 31 year end,
plus certain undistributed amounts from previous years. The Fund anticipates
that it will make sufficient timely distributions to avoid imposition of the
excise tax.
Options and futures contracts entered into by the Fund will be subject to
special tax rules. These rules, among other things, may accelerate income to the
Fund, defer Fund losses, cause adjustments in the holding periods of Fund
securities, convert capital gain into ordinary income and convert short-term
capital losses into long-term capital losses. As a result, these rules could
affect the amount, timing and character of Fund distributions.
A distribution by the Fund will result in a reduction in the Fund's net
asset value per share. Such a distribution is taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a return of capital. In particular,
investors should be careful to consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will then receive a return of capital upon the distribution
which nevertheless is taxable to them. All distributions, whether received in
cash or reinvested in shares, must be reported by each shareholder on his or her
federal income tax return. Under the Code, dividends declared by the Fund in
October, November and December of any calendar year, and payable to shareholders
of record in such a month, shall be deemed to have been received by the
shareholder on December 31 of such calendar year if such dividend is actually
paid in January of the following calendar year.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the Fund. The tax consequences of a sale or redemption
depend upon several factors, including the shareholder's tax basis in the shares
sold or redeemed and the length of time the shares have been held. Basis in the
shares may be the actual cost of those shares (net asset value of Fund shares on
purchase or reinvestment date), or under special rules, an average cost. Under
certain circumstances, a loss on the sale or redemption of shares held for six
months or less may be treated as a long-term capital loss to the extent that the
Fund has distributed long-term capital gain dividends on such shares. Moreover,
a loss on sale or redemption of Fund shares will be disallowed to the extent the
shareholder purchases other shares of the Fund within 30 days before or after
the date the shares are sold or redeemed.
B-11
<PAGE>
For shareholders who fail to furnish to the Fund their social security or
taxpayer identification numbers and certain related information, or who fail to
certify that they are not subject to backup withholding, dividends,
distributions of capital gains and redemption proceeds paid by the Fund will be
subject to a 31% Federal income tax withholding requirement. If the withholding
provisions are applicable, any dividends or capital gains distributions to these
shareholders, whether taken in cash or reinvested in additional shares, and any
redemption proceeds will be reduced by the amounts required to be withheld.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents, domestic
corporations and partnerships, and certain trusts and estates) and is not
intended to be a complete discussion of all federal tax consequences.
Shareholders are advised to consult with their tax advisers concerning the
application of federal, state and local tax laws to an investment in the Fund.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual total return over the most recent four calendar quarters
and the period from the Fund's inception of operations. The Fund may also
advertise aggregate annual total return information over different periods of
time.
The Fund's average annual total return is determined by reference to a
hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
T = (to the nth power of (ERV/P)) - 1
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the end of
the period.
</TABLE>
ADDITIONAL INFORMATION
EXPERTS
The financial statements of the Fund and the financial highlights included
in the Fund's Annual Report to Shareholders and incorporated by reference in
this Statement of Additional Information have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
CUSTODIAN
The Fund employs State Street Bank and Trust Company, Boston, MA as
custodian for the Fund. The custodian's responsibilities include safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Fund's
investments. The custodian does not determine the investment policies of the
Fund or decide which securities the Fund will buy or sell.
B-12
<PAGE>
FINANCIAL STATEMENTS
The Fund's financial statements and financial highlights appearing in the
1997 Annual Report to Shareholders and the report thereon of Price Waterhouse
LLP, independent accountants, appearing therein, are incorporated by reference
in this Statement of Additional Information.
The Fund's 1997 Annual Report to Shareholders is enclosed with this
Statement of Additional Information.
B-13
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
PART C
OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements
Included in Part A of this Registration Statement
Financial Highlights for the period from June 23, 1993 (commencement of
operations) through March 31, 1994, and for the three years in the period
ended March 31, 1997.
Included in Part B of this Registration Statement:*
Schedule of Investments at March 31, 1997
Statement of Assets and Liabilities at March 31, 1997
Statement of Operations for the year ended March 31, 1997
Statements of Changes in Net Assets for the years ended March 31, 1996 and 1997
Notes to Financial Statements
Report of Independent Accountants
Statements, schedules and historical information other than those listed above
have been omitted since they are either not applicable or are not required.
</TABLE>
- ------------------------
*Incorporated by reference from the Annual Report to Shareholders for the period
ended March 31, 1997.
<TABLE>
<S> <C>
b. Exhibits
16. Calculation of Performance Data -- Exhibit 1
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1997, there were 397 record holders of the Registrant's Capital Stock
($.001 par value).
ITEM 27. INDEMNIFICATION.
Incorporation by Reference from initial Registration Statement (filed on December 2,
1992).
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
</TABLE>
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individuals, trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 29.
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- ---------------------------- ------------------------------ ----------------------------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, Chairman of the Board and Chief Executive Officer of
President, and Chief Executive Arnold Bernhard & Co., Inc.; Chairman of the Value
Officer Line Funds and the Distributor
Samuel Eisenstadt Senior Vice President and
Director
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
- ---------------------------- ------------------------------ ----------------------------------------------------
<S> <C> <C>
David T. Henigson Vice President, Treasurer and Vice President and a Director of Arnold Bernhard &
Director Co., Inc. and the Distributor
Howard A. Brecher Vice President, Secretary and Secretary and Treasurer of Arnold Bernhard & Co.,
Director Inc.
Harold Bernard, Jr. Director Administrative Law Judge
William S. Kanaga Director Retired Chairman of Arthur Young (now Ernst & Young)
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison, attorneys
</TABLE>
<TABLE>
<CAPTION>
ITEM 29. PRINCIPAL UNDERWRITERS.
<S> <C>
(a) Value Line Securities, Inc., acts as principal underwriter for the following Value
Line funds: The Value Line Fund, Inc.; The Value Line Income Fund, Inc.; The Value
Line Special Situations Fund, Inc.; Value Line Leverage Growth Investors, Inc.;
The Value Line Cash Fund, Inc.; Value Line U.S. Government Securities Fund, Inc.;
Value Line Centurion Fund, Inc.; The Value Line Tax Exempt Fund, Inc.; Value Line
Convertible Fund, Inc.; Value Line Aggressive Income Trust; Value Line New York
Tax Exempt Trust; Value Line Strategic Asset Management Trust; Value Line
Intermediate Bond Fund, Inc.; Value Line Small-Cap Growth Fund, Inc.; Value Line
Asset Allocation Fund, Inc.; Value Line U.S. Multinational Company Fund, Inc.
(b)
</TABLE>
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
- -------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board Chairman of the Board and
President
David T. Henigson Vice President, Secretary, Vice President, Secretary and
Treasurer and Director Treasurer
Stephen LaRosa Asst. Vice President Asst. Treasurer
</TABLE>
The business address of each of the officers and directors is 220 East 42nd
Street, New York NY 10017-5891.
(c) Not applicable.
C-2
<PAGE>
<TABLE>
<S> <C>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc.
220 East 42nd Street
New York, NY 10017
For records pursuant to:
Rule 31a-1(b)(4),(5),(6),(7),(10),(11)
Rule 31a-1(f)
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141
For records pursuant to Rule 31a-1(b)(2)(iv)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
For all other records
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
</TABLE>
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information, constituting parts of this Post-Effective
Amendment No. 5 to the registration statement on Form N-1A, (the "Registration
Statement"), of our report dated May 14, 1997, relating to the financial
statements and financial highlights appearing in the March 31, 1997 Annual
Report to Shareholders of Value Line Small-Cap Growth Fund, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the headings "Additional Information" and "Financial Statements" in
the Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
July 22, 1997
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, the 22nd day of
July, 1997.
VALUE LINE SMALL-CAP GROWTH FUND, INC.
By /s/ DAVID T. HENIGSON
------------------------------------
David T. Henigson
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------------------ ----------------------------- -----------------------
<C> <S> <C>
* JEAN B. BUTTNER Chairman of the Board, July 22, 1997
------------------------------------------- President; Principal
Jean B. Buttner Executive Officer
* FRANCIS C. OAKLEY Director July 22, 1997
-------------------------------------------
Francis C. Oakley
* MARION N. RUTH Director July 22, 1997
-------------------------------------------
Marion N. Ruth
* FRANCES T. NEWTON Director July 22, 1997
-------------------------------------------
Frances T. Newton
/s/ DAVID T. HENIGSON Treasurer; Principal July 22, 1997
------------------------------------------- Financial and Accounting
David T. Henigson Officer
*By
-------------------------------------
David T. Henigson,
Attorney-in-fact
</TABLE>
C-4
<PAGE>
VALUE LINE SMALL-CAP GROWTH FUND, INC.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
EXHIBIT 16
Year(s) Ended 03/31/97:
1 year 3.77 years*
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Initial Investment: 1,000 1,000
Balance at End of Period: 979 1,541
Change: (21) 541
Percentage Change: -2.07% 54.10%
Average Annual Total Return: -2.07% 12.15%
*from 06/23/93 (commencement of operations)
