- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
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September 30, 1997
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Value Line
Small-Cap
Growth
Fund, Inc.
[GRAPHIC]
----------
VALUE LINE
No Load
Mutual
Funds
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
To Our Value Line
- --------------------------------------------------------------------------------
To Our Shareholders:
We are pleased to bring you this semi-annual report for the Value Line Small-Cap
Growth Fund (the "Fund"). For the six months ended September 30, 1997, the Fund
appreciated 38.3% on a total return basis, compared to a gain of 33.5% for the
Russell 2000, a widely used benchmark for small-company stocks. Since its
inception on June 23, 1993, the Fund's total return has been 113.1%, versus
112.6% for the Russell 2000. Your Fund has achieved an annualized return growth
rate of 19.4%, compared to the 19.3% annual return for the Russell 2000 during
the same period.
The small-cap sector of the stock market has been a very difficult area in which
to invest over the past few years. However, this sector has performed very well
since the end of April. For the past three years ending in April, the larger
capitalization portion of the market had been a better place to invest due to
its aggregate earnings-growth expectations that rivaled the smaller stocks on a
risk-adjusted basis; that is, the expected earnings-growth rate of the
larger-cap stocks were similar to the smaller-cap companies. As of May this
trend appears to have shifted in favor of the small-cap sector due to factors
including a return of earnings expectations for the larger-cap stocks to the
more typical 6%-8% (from an expected mid-teens earnings growth rate for 1997),
relatively high valuations for the larger stocks, and relatively strong earnings
expectations for the small-cap stocks.
At this time, we continue to believe the smaller capitalization segment of the
market presents an excellent investment opportunity on both a relative and an
absolute basis, and that the case for investing in small-cap stocks remains
compelling. These companies typically are more focused in their specialized
areas and have greater growth potential than larger-capitalization firms.
Smaller companies usually are able to respond more quickly to changes in market
conditions and to exploit opportunities more successfully. These stocks often
manifest greater price volatility, however. Nevertheless, in a period of
economic expansion, like the present, smaller-cap stocks are likely to
outperform the larger companies.
Our investment strategy remains as it has been: to invest in small-cap stocks
that are generating exceptionally good earnings, whose price momentum outpaces
that of the market in general, and whose valuations are attractive. Although
your Fund remains well diversified, we continue to invest more heavily in the
technology, health-care, and consumer sectors.
We thank you for the confidence you have placed in the Value Line Small-Cap
Growth Fund. We will work hard to continue to justify your trust, and look
forward to serving your investment needs in the future.
Sincerely,
/s/ Jean Bernhard Buttner
----------------------------------
Jean Bernhard Buttner
Chairman and President
November 5, 1997
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2
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Small-Cap Growth Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
In contrast to many parts of the world, the basic underpinnings of the U.S.
economy appear to be quite sound as we wend our way through the latter stages of
this year and look ahead to 1998. Here's a rundown:
Economic Growth: After a strong opening half of the year, in which growth
exceeded 4%, the economy seems to be proceeding at a less frenetic pace.
Importantly, this more modest rate of business improvement should prove equally
sustainable. Overall, we see the domestic economy moving ahead at a 2.4%-2.6%
rate during the closing months of 1997, and then proceeding at a somewhat slower
2.0%-2.3% in 1998. We now believe that the evolving financial crises in
Southeast Asia and in other parts of the world will not have a material
dampening effect on this country's economic health.
Inflation: Here, too, moderation should be a prevailing theme, with prices
likely to continue rising at a subdued pace in the months ahead. The ongoing
lack of serious labor and raw materials shortages underscore much of our
optimism on the pricing front.
Interest Rates: As has been the case with the economy and inflation, interest
rates--specifically their ongoing stability--have been a pivotal source of
support for the financial markets in this country. But will rates continue to
provide support? The answer here will depend largely on the upcoming levels of
economic growth and inflation. Should both remain at moderate, non-threatening
levels, as we expect, the Federal Reserve will probably keep interest rates
where they are into at least the early part of 1998.
Performance Data:*
Average
Annual Total
Return
---------
1 year ended September 30, 1997....... ............................ +26.86%
3 years ended September 30, 1997...... ............................ +20.80%
From June 23, 1993+ to
September 30, 1997.................. ............................ +19.38%
+ Commencement of operations.
* The performance data quoted represent past performance and are no guarantee
of future performance. The average annual total returns include dividends
reinvested and capital gains distributions accepted in shares. The investment
return and principal value of an investment will fluctuate so that an
investment, when redeemed, may be worth more or less than its original cost.
- --------------------------------------------------------------------------------
3
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments (unaudited)
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Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (92.0%)
AEROSPACE/DEFENSE
(2.5%)
9,100 AAR Corp................................................. $ 303,713
2,600 Precision Castparts Corp................................. 169,000
7,300 Wyman-Gordon Co.*........................................ 191,625
----------
664,338
AIR TRANSPORT (2.3%)
8,150 Air Express International Corp........................... 297,475
16,200 U.S. Xpress Enterprises, Inc.
Class "A"*............................................. 324,000
----------
621,475
APPAREL (3.5%)
10,700 Nautica Enterprises, Inc.*............................... 300,937
7,700 Oxford Industries, Inc................................... 260,838
4,400 St. John Knits, Inc...................................... 197,725
3,500 Tommy Hilfiger Corp.*.................................... 174,781
----------
934,281
BANK (1.7%)
4,800 City National Corp....................................... 153,600
2,200 Silicon Valley Bancshares*............................... 128,700
4,400 Zions Bancorporation..................................... 165,000
----------
447,300
BUILDING MATERIALS
(0.4%)
4,700 Apogee Enterprises, Inc.................................. 115,150
COMPUTER &
PERIPHERALS (4.0%)
6,400 Data General Corp.*...................................... 170,400
2,900 Inter-Tel Inc.*.......................................... 153,700
1,800 SCI Systems, Inc.*....................................... 89,212
11,400 Sequent Computer
Systems, Inc.*......................................... 282,863
3,900 Stratus Computer, Inc.*.................................. 188,663
4,000 Tech Data Corp.*......................................... 184,000
----------
1,068,838
COMPUTER SOFTWARE
& SERVICES (4.0%)
7,100 Barra, Inc.*............................................. 298,200
3,000 Fair, Isaac & Co., Inc................................... 132,750
2,100 Fiserv, Inc.*............................................ 92,137
5,100 Manugistics Group, Inc.*................................. 182,325
7,300 National Data Corp....................................... 299,300
2,000 Rational Software Corp.*................................. 32,000
1,300 Sterling Commerce, Inc.*................................. 46,719
----------
1,083,431
DIVERSIFIED COMPANIES
(0.9%)
10,300 American Precision
Industries, Inc.*...................................... 235,612
ELECTRICAL EQUIPMENT
(1.2%)
9,100 Kuhlman Corp............................................. 327,600
ELECTRONICS (6.8%)
5,400 ANADIGICS, Inc.*......................................... 266,287
4,000 Benchmark Electronics, Inc.*............................. 112,750
7,400 Dynatech Corp.*.......................................... 303,863
4,900 Electro Scientific
Industries, Inc.*...................................... 298,900
3,500 Pittway Corp. Class "A" ................................. 227,281
7,800 Spectrian Corp.*......................................... 500,175
4,900 Telxon Corp.............................................. 120,050
----------
1,829,306
ENVIRONMENTAL (0.8%)
5,000 Ionics, Inc.*............................................ 221,562
FINANCIAL SERVICES
(2.0%)
2,200 FINOVA Group, Inc........................................ 208,175
6,200 Investment Technology
Group, Inc. *.......................................... 168,950
5,400 Money Store, Inc. (The).................................. 153,900
----------
531,025
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4
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
September 30, 1997
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Shares Value
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FOOD PROCESSING (2.9%)
4,300 DEKALB Genetics Corp.
Class "B".............................................. $ 190,812
5,100 International Multifoods
Corp................................................... 151,406
10,900 Michael Foods, Inc....................................... 279,313
2,800 Suiza Foods Corp.*....................................... 144,200
----------
765,731
FOOD WHOLESALERS
(0.5%)
5,500 Richfood Holdings, Inc................................... 142,656
FURNITURE/HOME
FURNISHINGS (2.6%)
5,000 Bush Industries, Inc.
Class "A" ........................................... 138,438
9,600 Ethan Allen Interiors, Inc............................... 297,600
3,200 Furniture Brands
International, Inc.*................................... 60,400
3,500 HON Industries, Inc...................................... 203,000
----------
699,438
HOUSEHOLD PRODUCTS
(0.6%)
5,200 Watsco, Inc.............................................. 162,500
INDUSTRIAL SERVICES
(3.9%)
3,700 CDI Corp.*............................................... 139,675
6,000 Caribnier International, Inc.* .......................... 244,500
5,600 G & K Services, Inc...................................... 194,600
5,000 Interim Services, Inc.*.................................. 140,625
9,900 Norrell Corp............................................. 340,312
----------
1,059,712
INSURANCE-PROPERTY/
CASUALTY (5.0%)
6,000 Executive Risk, Inc...................................... 410,250
14,740 Frontier Insurance Group, Inc............................ 560,120
7,100 NAC Re Corp.............................................. 364,763
----------
1,335,133
MACHINERY (3.3%)
6,000 Applied Power Inc.
Class "A" ............................................. 377,625
4,800 Lancer Corp.*............................................ 76,800
7,600 PRI Automation, Inc.*.................................... 444,600
----------
899,025
MANUFACTURED
HOUSING/
RECREATIONAL
VEHICLES (0.2%)
1,800 Oakwood Homes Corp....................................... 51,075
MEDICAL SERVICES
(1.4%)
8,100 American Oncology
Resources, Inc.*....................................... 130,613
4,000 Omnicare, Inc............................................ 130,000
3,400 Renal Care Group, Inc.*.................................. 122,400
----------
383,013
MEDICAL SUPPLIES
(4.2%)
5,400 Cooper Companies, Inc.*.................................. 198,450
11,600 Invacare Corp............................................ 272,600
13,400 Kinetic Concepts, Inc.................................... 249,575
8,000 Safeskin Corp.*.......................................... 355,000
1,000 Sofamor Danek Group, Inc.*............................... 57,125
----------
1,132,750
METAL FABRICATING
(1.8%)
6,500 Maverick Tube Corp.*..................................... 268,125
9,000 Oregon Metallurgical Corp.*.............................. 225,562
----------
493,687
OFFICE EQUIPMENT &
SUPPLIES (0.5%)
4,000 New England Business
Service, Inc........................................... 128,000
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5
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments (unaudited)
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Shares Value
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OILFIELD SERVICES/
EQUIPMENT (6.1%)
3,200 Atwood Oceanics, Inc.*................................... $ 360,400
3,000 Cliffs Drilling Co.*..................................... 208,875
2,600 Helmerich & Payne, Inc................................... 208,000
16,900 Parker Drilling Co.*..................................... 256,669
5,000 Pride International, Inc.*............................... 170,000
2,100 Seacor Holdings, Inc.*................................... 130,200
2,000 UTI Energy Corp.*........................................ 79,000
4,400 Varco International, Inc.*............................... 213,400
----------
1,626,544
PACKAGING & CONTAINER
(1.4%)
4,400 AptarGroup, Inc.......................................... 246,125
2,300 Sealed Air Corp.*........................................ 126,356
----------
372,481
PETROLEUM-PRODUCING
(0.7%)
4,600 Global Industries, Ltd.*................................. 183,425
PRECISION INSTRUMENTS
(4.5%)
3,800 Coherent, Inc.*.......................................... 210,425
7,500 Dionex Corp.*............................................ 404,531
7,500 Instron Corp............................................. 141,562
8,200 Newport Corp............................................. 127,100
4,400 Sybron International Corp.*.............................. 188,925
3,300 Waters Corp.*............................................ 145,819
----------
1,218,362
RECREATION (1.4%)
13,000 Action Performance
Companies, Inc.*....................................... 378,625
RESTAURANT (0.7%)
5,500 Applebee's International, Inc............................ 137,500
1,100 CKE Restaurants, Inc..................................... 46,200
----------
183,700
RETAIL-SPECIAL LINES
(1.0%)
4,900 Fabri-Centers of America, Inc.
Class "B"*............................................. 106,269
4,100 Tiffany & Co............................................. 174,250
---------
280,519
RETAIL BUILDING
SUPPLY (0.1%)
2,000 Eagle Hardware &
Garden, Inc.*.......................................... 39,375
RETAIL STORE (0.9%)
9,700 ShopKo Stores, Inc.*..................................... 252,200
SEMICONDUCTOR (5.1%)
11,300 Integrated Process
Equipment Corp.*....................................... 416,688
6,800 Photronics Inc.*......................................... 411,825
5,200 Unitrode Corp.*.......................................... 385,450
4,400 VLSI Technology, Inc.*................................... 152,625
---------
1,366,588
SEMICONDUCTOR-
CAPITAL EQUIPMENT
(1.8%)
6,300 Kulicke & Soffa
Industries, Inc.*...................................... 291,769
3,700 Vitesse Semiconductor Corp.*............................. 183,381
----------
475,150
STEEL-GENERAL (0.9%)
7,700 NS Group, Inc.*.......................................... 249,287
TELECOMMUNICATIONS
EQUIPMENT (2.3%)
9,300 Allen Telecom, Inc.*..................................... 265,050
5,000 Black Box Corp.*......................................... 218,750
6,800 Communications Systems, Inc.............................. 141,100
----------
624,900
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6
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
September 30, 1997
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Shares Value
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TELECOMMUNICATION
SERVICES (1.2%)
2,300 ACC Corp. Class "A"*..................................... $ 75,612
7,100 Billing Information
Concepts Corp.*........................................ 248,500
----------
324,112
TEXTILE (4.0%)
5,300 Culp, Inc................................................ 109,975
10,900 Galey & Lord, Inc.*...................................... 205,738
7,600 Interface Inc. Class "A"................................. 221,350
20,875 Paxar Corp.*............................................. 410,977
4,500 Pillowtex Corp........................................... 128,250
----------
1,076,290
THRIFT (1.5%)
4,300 Astoria Financial Corp................................... 216,344
1,000 CitFed Bancorp, Inc...................................... 50,625
4,600 Golden State Bancorp, Inc.*.............................. 137,425
----------
404,394
TIRE & RUBBER (0.4%)
2,400 Carlisle Companies, Inc.................................. 106,650
TOILETRIES/COSMETICS
(0.6%)
7,800 Helen of Troy Ltd.*...................................... 154,050
TRUCKING/
TRANSPORTATION
LEASING (0.4%)
4,000 Heartland Express, Inc.*................................. 110,500
----------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (92.0%)
(Cost $19,613,562) ...................................... 24,759,790
----------
Principal
Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.6%)
(including accrued interest)
$2,300,000 Collateralized by $1,685,000
U.S. Treasury Notes 12%,
due 5/15/05, with a value of
$2,354,787 (with Morgan
Stanley & Co., Inc. 5.95%,
dated 9/30/97, due 10/1/97,
delivery value $2,300,380.) ........................... $ 2,300,380
EXCESS OF LIABILITIES OVER
CASH AND OTHER ASSETS (-0.6%) (164,119)
----------
NET ASSETS (100%) ................................................. $26,896,051
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE, PER
OUTSTANDING SHARE
($26,896,051 / 1,535,121
shares outstanding) ............................................... $ 17.52
==========
* Non-income producing
See Notes to Financial Statements.
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7
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Statement of Assets and Liabilities
at September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(Cost-$19,613,562) ...................................... $24,759,790
Repurchase agreement
(Cost-$2,300,380) ....................................... 2,300,380
Cash ...................................................... 86,481
Receivable for capital shares sold ........................ 20,000
Deferred organization costs (note 2) ...................... 9,625
Dividends receivable ...................................... 6,403
-----------
Total Assets .......................................... 27,182,679
-----------
Liabilities:
Payable for securities purchased .......................... 254,478
Payable for capital shares repurchased .................... 275
Accrued expenses:
Advisory fee payable .................................... 15,991
Service and Distribution Plan fee ..................... 5,283
Other ................................................. 10,601
------------
Total Liabilities ................................... 286,628
------------
Net Assets .............................................. $ 26,896,051
============
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 1,535,121 shares) ......................... $ 1,535
Additional paid-in capital .............................. 17,684,903
Accumulated investment loss--net ........................ (103,345)
Accumulated net realized gain
on investments ........................................ 4,166,730
Unrealized net appreciation of
investments ........................................... 5,146,228
------------
Net Assets .............................................. $ 26,896,051
------------
Net Asset Value, Offering and
Redemption Price, per
Outstanding Share
($26,896,051 / 1,535,121
shares outstanding) ............................... $ 17.52
============
Statement of Operations
for the six months ended September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest income .......................................... $ 47,322
Dividend income .......................................... 32,055
-----------
Total Income ......................................... 79,377
-----------
Expenses:
Advisory fee ............................................. 77,884
Service and distribution plan fee ........................ 25,961
Auditing and legal fees .................................. 19,947
Accounting and bookkeeping
expense ................................................ 16,196
Directors' fees and expenses ............................. 9,150
Registration and filing fees ............................. 8,967
Custodian fees ........................................... 7,132
Amortization of deferred organization
costs (note 2) ......................................... 6,646
Printing ................................................. 5,856
Transfer agent fees ...................................... 3,660
Other .................................................... 3,331
-----------
Total Expenses Before Custody
Credits ............................................ 184,730
Less: Custody Credits ................................ (2,008)
-----------
Net Expenses ......................................... 182,722
-----------
Investment Loss--Net ..................................... (103,345)
-----------
Realized and Unrealized Gain on
Investments--Net:
Realized Gain-Net .................................... 2,483,159
Change in Unrealized
Appreciation ....................................... 4,372,243
-----------
Net Realized Gain and Net
Unrealized Appreciation of
Investments ............................................ 6,855,402
-----------
Net Increase in Net Assets
from Operations ........................................ $ 6,752,057
============
See Notes to Financial Statements.
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8
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Statement of Changes in Net Assets
for the six months ended September 30, 1997 (unaudited) and
for the year ended March 31, 1997
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<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1997 March 31,
(unaudited) 1997
--------------------------------
<S> <C> <C>
Operations:
Investment loss--net .......................................... $ (103,345) $ (200,471)
Realized gain on investments--net ............................. 2,483,159 3,214,307
Net change in unrealized appreciation (depreciation) ......... 4,372,243 (3,396,195)
--------------------------------
Net increase (decrease) in net assets from operations 6,752,057 (382,359)
--------------------------------
Distributions to Shareholders:
Realized gains--net ........................................... -- (2,545,782)
--------------------------------
Capital Share Transactions:
Net proceeds from sale of shares .............................. 3,923,116 1,638,024
Net proceeds from reinvestment of distributions to shareholders -- 2,535,169
Cost of shares repurchased .................................... (753,564) (3,376,267)
--------------------------------
Increase from capital share transactions ...................... 3,169,552 796,926
--------------------------------
Total Increase (Decrease) ....................................... 9,921,609 (2,131,215)
Net Assets:
Beginning of period ........................................... 16,974,442 19,105,657
--------------------------------
End of period ................................................. $ 26,896,051 $ 16,974,442
================================
Accumulated investment loss-net, at end of period ............... $ (103,345) $ --
================================
</TABLE>
See Notes to Financial Statements.
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9
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Notes to Financial Statements (unaudited)
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1. Significant Accounting Policies
Value Line Small-Cap Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company whose primary investment objective is long-term
growth of capital. The Fund invests primarily in "small-cap" common stocks.
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(A) Security Valuation. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales 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 value.
(B) Repurchase Agreements. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) Federal Income Taxes. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) Security Transactions and Distributions. Security transactions are accounted
for on the date the securities are purchased or sold. Realized gains and losses
on sales of securities are calculated for financial accounting purposes and
federal income tax purposes on the identified cost basis. Dividend income and
distributions to shareholders are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
(E) Amortization. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
2. Organization Cost
Costs of $66,890 incurred in connection with the Funds's organization and
initial registration have been deferred and are being amortized over sixty
months beginning at the commencement of operations of the Fund. In the event any
of the initial shares of the Fund are redeemed by the holder thereof during the
five-year amortization period, the redemption proceeds will be reduced by a pro
rata portion of any unamortized deferred organizational
- --------------------------------------------------------------------------------
10
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
September 30, 1997
- --------------------------------------------------------------------------------
expenses in the same proportion as the number of initial shares being redeemed
bears to the number of initial shares outstanding at the time of redemption.
3. Capital Share
Transactions Transactions in capital stock, were as follows:
Six Months
Ended Year
September 30, Ended
1997 March 31,
(unaudited) 1997
------------------------
Shares sold .................................... 245,487 111,384
Shares issued to shareholders
in reinvestment of dividends
and distributions ............................ -- 190,901
-----------------------
245,487 302,285
Shares repurchased ............................. 50,376 227,083
-----------------------
Net increase ................................... 195,111 75,202
=======================
4. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
Six Months
Ended
Sept. 30, 1997
(unaudited)
--------------
PURCHASES:
Investment Securities ................................ $14,799,308
===========
SALES:
Investment Securities ................................ $12,188,139
===========
At September 30, 1997, the aggregate cost of investment securities and
repurchase agreement for federal income tax purposes was $21,913,942. The
aggregate appreciation and depreciation of investments at September 30, 1997,
based on a comparison of investment values and their costs for federal income
tax purposes was $5,476,174 and $329,946, respectively, resulting in a net
appreciation of $5,146,228.
5. Advisory Fees, Service and Distribution Plan Fees and Transactions With
Affiliates
An advisory fee of $77,884 was paid or payable to Value Line, Inc., the Fund's
investment adviser (the Adviser), for the six months ended September 30, 1997.
The fee was computed at the rate of .75 of 1% of the daily net assets during the
period and paid monthly. The Adviser provides research, investment programs and
supervision of the investment portfolio and pays costs of certain administrative
services and office space. The Adviser also provides persons, satisfactory to
the Fund's Board of Directors to act as officers of the Fund and pays their
salaries and wages. The Fund bears all other costs and expenses in its
organization and operation.
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets. In the six months
ended September 30, 1997, fees amounting to $25,961 were paid or payable under
this Plan.
Certain officers and directors of the Adviser and the Distributor are also
officers and a director of the Fund.
At September 30, 1997, the Adviser and/or affiliated companies owned 1,175,225
shares of the Fund's capital stock, representing 77% of the outstanding shares.
In addition, officers and directors owned 111,830 representing 7% of the
outstanding shares.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
June 23, 1993
Six Months (commencement
Ended Years Ended March 31, of operations) to
Sept. 30, 1997 ---------------------------- March 31,
(unaudited) 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $12.67 $15.11 $12.33 $11.80 $10.00
--------------------------------------------------------------------
Income from investment operations:
Net investment (loss) income........... (.07) (.13) (.18) (.19)(2) .02(1)
Net gains or losses on securities
(both realized and unrealized)....... 4.92 (.08) 3.08 1.05 1.81
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Total from investment operations....... 4.85 (.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)
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Total distributions.................... -- (2.23) (.12) (.33) (.03)
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Net asset value, end of period .......... $17.52 $12.67 $15.11 $12.33 $11.80
====================================================================
Total return ............................ 38.28%+ (2.07)% 23.58% 7.57% 18.36%+
====================================================================
Ratios/Supplemental Data:
Net assets end of period (in thousands).. $26,896 $16,974 $19,106 $12,492 $9,823
Ratio of operating expenses to
average net assets..................... 1.76%*(3) 1.87%(3) 2.15%(3) 2.48%(2) 0.61%*(1)
Ratio of net investment (loss) income
to average net assets.................. (0.99)%* (1.07)% (1.27)% (1.63)%(2) 0.26%*(1)
Portfolio turnover rate.................. 64%+ 100% 57% 30% 74%+
Average commission rate paid per share of
common stock investments purchased/sold $.0500 $.0500(4) -- -- --
</TABLE>
(1) Net of expense reimbursement and fees waived by the Adviser. Had these
expenses been fully paid by the Fund, investment loss-net per share would
have been $(.12), the ratio of operating expenses to average net assets
would have been 2.45%* and the ratio of net investment loss to average net
assets would have been (1.57%)*.
(2) 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 expense 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
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
Francis C. Oakley
Marion N. Ruth
Francis T. Newton
OFFICERS Jean Bernhard Buttner
Chairman and President
Steven M. Yeary
Vice President
Jerome Kaplan
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and, accordingly, they
do not express an opinion thereon.
This unaudited report is issued for information of shareholders. It is not
authorized for distribution to prospective investors unless preceded or
accompanied by a currently effective prospectus of the Fund (obtainable from the
Distributor).
VLF709213
