================================================================================
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SEMI-ANNUAL REPORT
------------------
September 30, 1998
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Value Line
Small-Cap
Growth
Fund, Inc.
[LOGO]
----------
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
To Our Value Line
- --------------------------------------------------------------------------------
To Our Shareholders:
The latest reporting period (the six months ended September 30, 1998) contained
good news and bad news. The good news was that the Value Line Small-Cap Growth
Fund once again began to keep pace with its index benchmark, even beating that
benchmark in the second half of the six-month period by more than two percentage
points. The bad news was that the benchmark, the unmanaged Russell 2000,
declined 23.87% (including dividends) for the six months, one of its worst drops
ever. The Fund fell 24.44%.
We do not know when this treacherous time for small-cap stocks will end. Better
performance of the group, both absolute and relative to large-caps, may require
an improved U.S. economic outlook and the resumption of a bull market for
stocks. (Please see the accompanying Economic Observations insert for our latest
thoughts on where the economy may be headed.) The rebound by small-caps in
October and November, subsequent to the latest reporting period, could herald
better times.
We remain confident, however, that the small-cap sector is likely to achieve
greater earnings growth in the years ahead than the more mature large-cap
sector. The underperformance by small-cap stocks means that this growth
potential can now be acquired at an even cheaper price.
In the meantime, we are keeping careful control of the Fund's risk exposure.
This means, for example, wide diversification of the portfolio's holdings. We
maintain a close eye on the percentage of technology stock holdings in the Fund;
although many tech stocks meet our requirement for strong earnings momentum,
they are also notoriously volatile securities. Risk control also means keeping
some extra cash on hand to cushion against market declines and to put to use
during sudden downdrafts. These measures paid off during the July-September
market drop, as the Fund performed better than both its benchmark index and its
peers.
We will stay the course during this rocky market period, and remain prepared for
better times ahead. Thank you for your patience.
Sincerely,
/s/ JEAN BERNHARD BUTTNER
Jean Bernhard Buttner
Chairman and President
November 16, 1998
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2
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Small-Cap Growth Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
Steady growth and low inflation continue to be two of the dominant themes in the
domestic economy as 1998 rapidly draws to a close. This is underscored by
reports that show relative stability in retailing, manufacturing, housing,
personal income, and employment. Such trends suggest that GDP growth, which has
generally moderated over the past six months, will average 2%, or perhaps a
shade more, during the next two to four quarters. At the same time, inflation
remains quiescent, with producer and consumer price increases still modest
overall and with key industrial sectors finding it difficult to implement price
increases.
At this point, though, we do not believe that this modest pace of economic
activity is the opening act in a serious domestic business downturn. Our sense
is that the global crisis still afflicting Asia, Russia, and parts of Latin
America will gradually recede over the next 12 to 18 months and that the
continuing subdued level of inflation in this country will encourage the Federal
Reserve Board to relax the credit reins again over the next several quarters.
Performance Data:*
Average
Annual Total
Return
---------
1 year ended September 30, 1998 ........................... -30.21%
5 years ended September 30, 1998 .......................... +5.83%
From June 23, 1993+ to
September 30, 1998 ...................................... +7.82%
+ 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.
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3
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (94.5%)
ADVERTISING (2.3%)
3,300 Big Flower Holdings, Inc.*..................... $ 77,138
2,000 Harte-Hanks, Inc............................... 44,750
600 Interpublic Group of
Companies, Inc............................. 32,362
1,400 Lamar Advertising Co.
Class "A"*................................. 39,200
1,700 Omnicom Group, Inc............................. 76,500
1,000 Snyder Communications, Inc.*................... 33,500
2,000 TMP Worldwide Inc.*............................ 65,625
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369,075
AEROSPACE/DEFENSE (0.2%)
1,000 Gulfstream Aerospace Corp.*.................... 40,250
AIR TRANSPORT (0.4%)
1,200 Comair Holdings, Inc........................... 34,500
1,800 Southwest Airlines Co.......................... 36,000
----------
70,500
APPAREL (1.7%)
1,500 Abercrombie & Fitch Co.
Class "A"*................................. 66,000
4,000 Chico's FAS, Inc.*............................. 64,500
2,500 Quiksilver, Inc.*.............................. 45,469
4,000 Tarrant Apparel Group*......................... 97,000
----------
272,969
AUTO PARTS--ORIGINAL
EQUIPMENT (0.5%)
2,000 Arvin Industries, Inc.......................... 74,500
AUTO PARTS--
REPLACEMENT (0.4%)
3,000 Midas, Inc..................................... 72,750
BANK (0.2%)
1,000 Sandy Spring Bancorp, Inc...................... 32,250
BEVERAGE--
ALCOHOLIC (0.6%)
2,000 Coors (Adolph) Co.
Class "B".................................. 91,875
BUILDING MATERIALS (1.9%)
2,000 Elcor Corp..................................... 42,250
3,000 Granite Construction Inc....................... 88,313
5,000 Insituform Technologies, Inc.
Class "A"*................................. 66,250
2,300 Johns Manville Corporation..................... 26,162
2,200 NCI Building Systems, Inc.*.................... 43,588
1,400 Simpson Manufacturing
Co., Inc.*................................. 40,950
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307,513
CABLE TV (1.4%)
1,600 Cablevision Systems Corp.
Class "A"*................................. 69,100
2,000 Century Communications
Corp. Class "A"*........................... 47,750
1,500 Comcast Corp. Class "A"........................ 70,406
2,000 General Cable Corp............................. 37,000
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224,256
CEMENT &
AGGREGATES (0.2%)
1,200 Centex Construction
Products, Inc.............................. 40,950
CHEMICAL--
SPECIALTY (0.6%)
3,000 NL Industries, Inc............................. 58,125
4,000 Uniroyal Technology Corp.*..................... 37,000
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95,125
COMPUTER &
PERIPHERALS (4.0%)
1,400 American Power Conversion
Corp.*..................................... 52,762
1,000 Apple Computer, Inc.*.......................... 38,125
2,500 Brooktrout Technology, Inc.*................... 33,984
600 Cisco Systems, Inc.*........................... 37,088
2,000 Cybex Computer
Products Corp.*............................ 50,250
700 EMC Corp.*..................................... 40,031
2,000 FORE Systems, Inc.*............................ 33,250
1,000 Ingram Micro Inc. Class "A"*................... 53,563
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4
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
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400 International Business
Machines Corp.............................. $ 51,200
1,400 Pinnacle Systems, Inc.*........................ 36,400
4,000 Secure Computing Corp.*........................ 39,250
800 Sun Microsystems, Inc.*........................ 39,850
1,800 Unisys Corp.*.................................. 40,950
4,000 Xircom, Inc.*.................................. 98,000
----------
644,703
COMPUTER SOFTWARE
& SERVICES (16.3%)
1,000 Advent Software, Inc.*......................... 34,187
2,000 American Management
Systems, Inc.*............................. 54,750
4,000 Ardent Software, Inc.*......................... 50,000
1,600 Aspect Development, Inc.*...................... 63,000
800 At Home Corp. Series "A"*...................... 38,300
700 BMC Software, Inc.*............................ 42,044
3,000 Best Software, Inc.*........................... 72,000
1,300 CSG Systems
International, Inc.*....................... 57,525
2,000 CIBER, Inc.*................................... 40,375
2,000 Complete Business
Solutions, Inc.*........................... 57,500
700 Computer Sciences Corp.*....................... 38,150
1,800 Computer Task Group, Inc....................... 52,762
800 Compuware Corp.*............................... 47,100
1,300 Comverse Technology, Inc.*..................... 53,137
2,000 Concord Communications,
Inc.*...................................... 79,500
4,000 Dendrite International, Inc.*.................. 95,500
2,000 ECsoft Group PLC (ADR)*........................ 41,250
800 Edwards (J.D.) & Company *..................... 38,400
1,000 Engineering Animation, Inc.*................... 47,750
1,000 FactSet Research
Systems, Inc.*............................. 31,688
1,200 Fiserv, Inc.*.................................. 55,275
1,400 Great Plains Software, Inc.*................... 66,150
1,500 HNC Software Inc.*............................. 60,938
3,200 Henry (Jack) & Associates, Inc................. 152,800
2,000 Information Management
Resources, Inc.*........................... 49,500
1,800 INSpire Insurance
Solutions, Inc.*........................... 42,525
3,000 Intelligroup, Inc.*............................ 51,000
2,000 International Network
Services*.................................. 83,000
2,000 Legato Systems, Inc.*.......................... 102,750
3,000 MAPICS, Inc.*.................................. 66,188
2,000 Mastech Corp.*................................. 48,125
1,700 Mercury Interactive Corp.*..................... 67,469
2,000 META Group, Inc.*.............................. 65,375
1,000 Network Solutions, Inc.
Class "A"*................................. 41,625
2,000 New Dimension
Software, Ltd.*............................ 49,750
1,500 New Era of Networks, Inc.*..................... 61,125
800 Paychex, Inc................................... 41,250
2,000 Peregrine Systems, Inc.*....................... 80,500
3,000 Progress Software Corp.*....................... 77,625
3,000 SPR Inc.*...................................... 69,000
2,000 Siebel Systems, Inc.*.......................... 57,375
2,200 TSI International
Software Ltd.*............................. 76,175
3,000 Timberline Software Corp....................... 57,000
1,000 USCS International, Inc.*...................... 32,125
1,300 Veritas Software Corp.*........................ 71,825
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2,661,388
DIVERSIFIED
COMPANIES (1.1%)
1,500 Myers Industries, Inc.......................... 34,500
2,500 Ogden Corp..................................... 71,094
3,000 Quixote Corp.*................................. 37,500
700 Tyco International, Ltd........................ 38,675
----------
181,769
DRUG (2.5%)
700 Amgen Inc.*.................................... 52,894
800 Biogen, Inc.*.................................. 52,650
2,000 Forest Laboratories, Inc.*..................... 68,750
2,000 Medco Research, Inc.*.......................... 43,375
600 Pfizer Inc..................................... 63,562
400 Schering-Plough Corp........................... 41,425
800 Sepracor, Inc.*................................ 52,600
2,000 USANA, Inc.*................................... 25,500
----------
400,756
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5
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
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Shares Value
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DRUGSTORE (0.4%)
2,000 D & K Healthcare
Resources, Inc.*........................... $ 36,000
3,000 Natural Alternatives
International, Inc.*....................... 36,750
----------
72,750
EDUCATIONAL
SERVICES (0.6%)
1,300 Apollo Group, Inc.
Class "A"*................................. 36,238
2,000 Education Management
Corp.*..................................... 71,000
----------
107,238
ELECTRICAL
EQUIPMENT (0.2%)
2,000 LSI Industries, Inc............................ 36,000
ELECTRONICS (1.5%)
2,000 Gilat Satellite
Networks, Ltd.*............................ 90,000
800 Lexmark International
Group, Inc. Class "A"*..................... 55,450
1,400 Symbol Technologies, Inc....................... 71,838
1,400 Telxon Corp.................................... 28,525
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245,813
ENTERTAINMENT (1.0%)
1,000 Chancellor Media Corp.*........................ 33,375
800 Clear Channel
Communications, Inc.*...................... 38,000
600 Time Warner Inc................................ 52,537
2,000 USA Networks, Inc.*............................ 38,875
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162,787
ENVIRONMENTAL (0.8%)
2,000 KTI, Inc.*..................................... 36,500
2,000 Waste Connections, Inc.*....................... 39,500
1,000 Waste Management, Inc.......................... 48,062
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124,062
FINANCIAL
SERVICES (3.8%)
2,000 AmeriCredit Corp.*............................. 48,750
2,500 Century Business
Services, Inc.*............................ 50,938
1,300 Concord EFS, Inc.*............................. 33,556
5,000 Doral Financial Corp........................... 80,000
3,000 First Cash Inc.*............................... 34,875
1,500 HealthCare Financial
Partners, Inc.*............................ 63,000
1,000 Metris Companies, Inc.......................... 46,625
1,800 Mutual Risk Management Ltd..................... 63,675
600 Providian Financial Corp....................... 50,887
3,500 Resource America, Inc.......................... 35,219
1,000 SEI Investments Company........................ 69,500
2,000 United Payors & United
Providers, Inc.*........................... 39,000
----------
616,025
FOOD PROCESSING (0.8%)
1,600 Earthgrains Co. (The).......................... 49,500
600 Quaker Oats Company (The)...................... 35,400
2,500 Worthington Foods, Inc......................... 48,438
----------
133,338
FOREIGN
TELECOMMUNICATIONS
(0.2%)
500 Nokia Corp. (ADR) Class "A".................... 39,219
FURNITURE/HOME
FURNISHINGS (2.9%)
1,800 American Woodmark Corp......................... 45,675
2,000 Department 56, Inc.*........................... 54,000
3,200 Furniture Brands
International, Inc.*....................... 62,400
2,200 Juno Lighting, Inc............................. 49,225
3,600 La-Z-Boy, Inc.................................. 70,650
1,700 Mohawk Industries, Inc.*....................... 46,537
3,500 Shaw Industries, Inc.*......................... 56,875
2,000 Stanley Furniture Co., Inc.*................... 34,750
2,500 Winsloew Furniture, Inc.*...................... 47,500
----------
467,612
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6
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
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GROCERY (0.7%)
1,200 Kroger Co.*.................................... $ 60,000
1,000 Safeway Inc.*.................................. 46,375
----------
106,375
HEALTHCARE
INFORMATION
SYSTEMS (0.4%)
500 Eclipsys Corp.*................................ 11,437
1,000 IDX Systems Corp.*............................. 53,000
----------
64,437
HOME APPLIANCE (0.5%)
1,000 Maytag Corp.................................... 47,750
1,600 Rent-Way, Inc.*................................ 39,400
----------
87,150
HOMEBUILDING (0.8%)
3,900 Kaufman & Broad
Home Corp.................................. 91,406
2,000 National R.V. Holdings, Inc.*.................. 42,000
----------
133,406
HOUSEHOLD
PRODUCTS (0.6%)
2,000 Renters Choice, Inc.*.......................... 53,000
4,000 Salton/Maxim
Housewares, Inc.*.......................... 45,500
----------
98,500
INDUSTRIAL
SERVICES (5.0%)
2,000 Diamond Technology
Partners Inc. Class "A"*................... 33,000
1,400 F.Y.I., Inc.*.................................. 34,300
3,300 Labor Ready, Inc.*............................. 48,263
1,100 Lason, Inc.*................................... 56,375
2,000 Market Facts, Inc.*............................ 55,500
2,200 Metamor Worldwide, Inc.*....................... 60,500
2,000 Metzler Group Inc. (The)*...................... 68,500
3,000 National Computer
Systems, Inc............................... 88,500
1,200 On Assignment, Inc.*........................... 44,400
2,000 Profit Recovery Group
International, Inc. (The)*................. 62,500
1,200 Robert Half International, Inc.*............... 51,825
2,200 Romac International, Inc.*..................... 39,600
1,500 SM & A Corp.*.................................. 25,875
1,000 SABRE Group Holdings, Inc.
Class "A"*................................. 30,000
2,500 Syntel, Inc.*.................................. 55,625
3,000 URS Corp.*..................................... 53,812
----------
808,575
INSURANCE--
DIVERSIFIED (1.1%)
1,000 American General Corp.......................... 63,875
1,300 LandAmerica Financial
Group, Inc................................. 66,625
2,000 Triad Guaranty Inc.*........................... 51,000
----------
181,500
INSURANCE--LIFE (1.2%)
600 Jefferson-Pilot Corp........................... 36,300
800 Lincoln National Corp.......................... 65,800
700 Reinsurance Group of
America, Inc............................... 41,256
800 SunAmerica Inc................................. 48,800
----------
192,156
INSURANCE--PROPERTY/
CASUALTY (0.2%)
7,000 Headway Corporate
Resources Inc.*............................ 35,000
INTERNET (0.3%)
100 eBay Inc.*..................................... 4,506
100 GeoCities*..................................... 2,325
500 Inktomi Corp.*................................. 37,625
----------
44,456
MACHINERY (1.1%)
2,000 Astec Industries, Inc.*........................ 85,250
3,000 Commercial Intertech Corp...................... 55,313
1,200 Ingersoll-Rand Co.............................. 45,525
----------
186,088
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7
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
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Shares Value
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MANUFACTURED HOUSING/
RECREATIONAL
VEHICLES (0.5%)
2,000 Champion Enterprises, Inc.*.................... $ 46,500
1,500 Monaco Coach Corp.*............................ 37,875
----------
84,375
MEDICAL SERVICES (2.3%)
2,300 Hanger Orthopedic
Group, Inc.*............................... 42,837
2,000 Omnicare, Inc.................................. 70,500
2,500 Osteotech, Inc.*............................... 66,250
1,000 Province Heathcare Company*.................... 34,063
2,550 Renal Care Group, Inc.*........................ 65,344
2,000 Res-Care, Inc.*................................ 37,500
3,000 Veterinary Centers of
America, Inc.*............................. 54,750
----------
371,244
MEDICAL SUPPLIES (5.8%)
2,000 ADAC Laboratories*............................. 48,000
3,000 Allegiance Corp................................ 89,250
1,000 Allergan, Inc.................................. 58,375
1,000 Arterial Vascular
Engineering, Inc.*......................... 37,000
1,200 Becton, Dickinson & Co......................... 49,350
2,500 Bindley Western
Industries, Inc............................ 82,500
600 Cardinal Health, Inc........................... 61,950
1,600 Cooper Companies,
Inc. (The)*................................ 28,200
1,000 McKesson Corp.................................. 91,625
1,300 ResMed, Inc.*.................................. 67,600
3,800 Safeskin Corp.*................................ 119,937
1,600 Schein (Henry), Inc.*.......................... 55,600
1,000 VISX, Inc...................................... 67,000
2,000 Xomed Surgical
Products, Inc.*............................ 82,250
----------
938,637
METAL FABRICATING (0.4%)
1,600 SPS Technologies, Inc.*........................ 74,500
NEWSPAPER (0.2%)
1,500 News Corp., Ltd. (ADR)......................... 38,437
OFFICE EQUIPMENT &
SUPPLIES (1.4%)
2,000 Knoll, Inc.*................................... 43,750
1,000 Pitney Bowes, Inc.............................. 52,563
1,500 Staples, Inc.*................................. 44,062
4,000 United Stationers, Inc.*....................... 95,500
----------
235,875
PACKAGING &
CONTAINER (0.2%)
4,000 Zapata Corp.................................... 38,750
PAPER & FOREST
PRODUCTS (0.2%)
3,000 Mail-Well, Inc.*............................... 25,688
PRECISION
INSTRUMENTS (1.9%)
1,200 Eastman Kodak Co............................... 92,775
2,800 Instron Corp................................... 39,550
2,400 Kronos Inc.*................................... 88,800
1,300 Optical Coating Laboratory,
Inc........................................ 23,319
1,000 Waters Corp.*.................................. 67,000
----------
311,444
PUBLISHING (1.2%)
1,300 Consolidated Graphics, Inc.*................... 49,400
3,000 Hollinger International, Inc.
Class "A".................................. 43,125
600 McGraw-Hill Companies,
Inc. (The)................................. 47,550
800 Wiley (John) & Sons, Inc.
Class "A".................................. 49,150
----------
189,225
RAILROAD (0.3%)
3,000 Johnstown America
Industries, Inc.*.......................... 42,750
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8
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RECREATION (1.4%)
1,000 Carnival Corp.................................. $ 31,813
3,000 First Years, Inc. (The)........................ 42,750
1,200 Harley-Davidson, Inc........................... 35,250
2,000 International Speedway Corp.
Class "A".................................. 59,875
1,200 Royal Caribbean Cruises Ltd.................... 31,875
2,200 Steiner Leisure Ltd.*.......................... 34,375
----------
235,938
RESTAURANT (1.2%)
3,000 Brinker International, Inc.*................... 56,250
4,000 Ruby Tuesday, Inc.............................. 60,500
4,000 Ryan's Family Steak
Houses, Inc.*.............................. 47,750
900 Tricon Global Restaurants, Inc.*............... 35,100
----------
199,600
RETAIL-SPECIAL LINES (7.0%)
1,400 American Eagle Outfitters, Inc.*............... 48,475
2,000 AnnTaylor Stores Corp.*........................ 40,625
2,800 bebe stores, inc.*............................. 44,975
1,500 Bed Bath & Beyond Inc.*........................ 35,063
1,200 Best Buy Co., Inc.*............................ 49,800
2,000 Blair Corp..................................... 59,750
4,000 Catherines Stores Corp.*....................... 31,000
3,500 CATO Corp. Class "A"........................... 40,687
800 Circuit City Stores--Circuit
City Group................................. 26,650
3,000 DM Management Company*......................... 24,188
1,200 Dollar Tree Stores, Inc.*...................... 37,575
2,500 Fossil, Inc.*.................................. 34,062
800 Gap, Inc. (The)................................ 42,200
4,600 Goody's Family Clothing, Inc.*................. 55,200
1,950 Insight Enterprises, Inc.*..................... 55,088
2,000 Linens `N' Things, Inc.*....................... 55,000
3,500 Maxim Group, Inc. (The)*....................... 66,062
2,000 Men's Wearhouse, Inc. (The) *.................. 34,500
2,000 Michaels Stores, Inc.*......................... 51,000
2,200 Micro Warehouse, Inc.*......................... 33,137
5,000 Musicland Stores Corp.*........................ 61,875
4,000 Rush Enterprises, Inc.*........................ 41,000
1,500 TJX Companies, Inc............................. 26,719
1,000 Tandy Corp..................................... 53,500
2,000 Williams-Sonoma, Inc.*......................... 42,625
2,000 Zale Corp.*.................................... 51,250
----------
1,142,006
RETAIL BUILDING
SUPPLY (0.3%)
2,000 Eagle Hardware &
Garden, Inc.*.............................. 43,375
RETAIL STORE (3.3%)
3,000 Ames Department Stores, Inc.*.................. 38,063
3,100 Buckle, Inc. (The) *........................... 55,800
700 Costco Companies, Inc.*........................ 33,162
800 Dayton Hudson Corp............................. 28,600
3,000 Family Dollar Stores, Inc...................... 47,250
2,300 Kmart Corp.*................................... 27,456
1,000 Kohl's Corp.*.................................. 39,000
2,000 99 Cents Only Stores*.......................... 79,125
2,600 Pacific Sunwear of
California, Inc.*.......................... 57,850
2,000 Sonic Automotive, Inc.*........................ 39,625
3,000 Trans World Entertainment
Corp.*..................................... 54,750
600 Wal-Mart Stores, Inc........................... 32,775
----------
533,456
SEMICONDUCTOR (2.0%)
2,000 Applied Micro Circuits Corp.*.................. 29,750
1,300 Micron Technology, Inc.*....................... 39,569
1,200 QLogic Corp.*.................................. 78,300
800 Rambus Inc.*................................... 51,200
3,000 TranSwitch Corp.*.............................. 44,812
3,400 Vitesse Semiconductor Corp.*................... 80,325
----------
323,956
TELECOMMUNICATIONS
EQUIPMENT (1.7%)
3,000 AVT Corporation*............................... 67,875
2,500 InterVoice, Inc.*.............................. 57,344
1,500 Superior TeleCom Inc........................... 72,563
2,600 Tekelec*....................................... 39,650
3,300 Viatel, Inc.*.................................. 35,062
----------
272,494
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9
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATION
SERVICES (2.1%)
1,200 Century Telephone
Enterprises, Inc........................... $ 56,700
2,000 DyCom Industries, Inc.*........................ 62,250
4,000 GeoTel Communications
Corp.*..................................... 107,500
700 MCI WorldCom, Inc.*............................ 34,212
800 MediaOne Group Inc.*........................... 35,550
1,400 Metromedia Fiber Network,
Inc. Class "A"*............................ 45,850
----------
342,062
TEXTILE (0.4%)
2,000 WestPoint Stevens, Inc.*....................... 61,000
THRIFT (0.7%)
1,500 Anchor BanCorp
Wisconsin, Inc............................. 33,188
2,200 Dime Bancorp, Inc.............................. 55,687
2,300 Westernbank Puerto Rico........................ 32,919
----------
121,794
TOILETRIES/
COSMETICS (0.4%)
3,300 Helen of Troy Ltd.*............................ 63,937
TRUCKING/
TRANSPORTATION
LEASING (1.2%)
1,500 Hertz Corp. Class "A" (The).................... 62,063
1,800 M.S. Carriers, Inc.*........................... 35,775
4,300 MotivePower Industries, Inc.*.................. 100,512
----------
198,350
----------
TOTAL COMMON
STOCKS AND TOTAL
INVESTMENT
SECURITIES (94.5%)
(Cost $16,574,507) ............................ $15,412,009
----------
Principal
Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.4%)
(Including accrued interest)
$1,200,000 Collateralized by $945,000
U.S. Treasury Bonds
11 1/8%, due 8/15/03,
with a value of
$1,231,010 (with
State Street Bank &
Trust Company 5.30%,
dated 9/30/98,
due 10/1/98, delivery
value $1,200,177).................... $ 1,200,177
EXCESS OF LIABILITIES
OVER CASH AND OTHER
ASSETS (-1.9%) .............................................. (306,203)
------------
NET ASSETS (100%) ........................................... $16,305,983
============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE,
PER OUTSTANDING SHARE
($16,305,983 / 1,610,497
shares outstanding) ......................................... $ 10.12
============
* Non-income producing
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
Statement of Assets and Liabilities
at September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(Cost--$16,574,507) ................................. $ 15,412,009
Repurchase agreement
(Cost--$1,200,177) .................................. 1,200,177
Cash .................................................. 7,968
Receivable for securities sold ........................ 164,557
Dividends receivable .................................. 3,545
Receivable for capital shares sold .................... 79
------------
Total Assets ...................................... 16,788,335
------------
Liabilities:
Payable for securities purchased ...................... 460,867
Payable for capital shares
repurchased ......................................... 6,209
Accrued expenses ...................................... 15,276
------------
Total Liabilities ................................. 482,352
------------
Net Assets ............................................ $ 16,305,983
============
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 1,610,497 shares) ....................... $ 1,611
Additional paid-in capital ............................ 17,980,142
Accumulated net investment loss ....................... (134,106)
Accumulted net realized loss
on investments ...................................... (379,166)
Net unrealized depreciation
of investments ...................................... (1,162,498)
------------
Net Assets ............................................ $ 16,305,983
============
Net Asset Value, Offering and
Redemption Price, per
Outstanding Share
($16,305,983 / 1,610,497
shares outstanding) ................................. $ 10.12
============
Statement of Operations
for the six months ended September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividend income (net of foreign
withholding tax of $38) ............................. $ 31,279
Interst income ........................................ 9,153
------------
Total Income ...................................... 40,432
------------
Expenses:
Advisory fee (note 5) ................................. 57,239
Custodian fees ........................................ 27,657
Service and distribution plan fee
(note 5) ............................................ 19,080
Auditing and legal fees ............................... 16,890
Accounting and bookkeeping
expense ............................................. 16,200
Printing .............................................. 13,126
Directors' fees and expenses .......................... 11,098
Registration and filing fees .......................... 10,300
Amortization of deferred organization
costs (note 2) ...................................... 3,015
Insurance, dues and other ............................. 2,850
Transfer agent fees ................................... 2,544
------------
Total Expenses Before
Custody Credits ................................. 179,999
Less: Custody Credits ............................. (5,461)
------------
Net Expenses ...................................... 174,538
------------
Net Investment Loss ................................... (134,106)
------------
Net Realized and Unrealized
Loss on Investments:
Net Realized Loss ................................. (737,890)
Change in Net Unrealized
Appreciation (Depreciation) ..................... (4,360,622)
------------
Net Realized Loss and Change in
Net Unrealized Appreciation
(Depreciation) on Investments ....................... (5,098,512)
------------
Net Decrease in Net Assets
from Operations ..................................... $ (5,232,618)
============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Statement of Changes in Net Assets
for the six months ended September 30, 1998 (unaudited) and for the year ended
March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1998 March 31,
(unaudited) 1998
-----------------------------
<S> <C> <C>
Operations:
Net investment loss ....................................... $ (134,106) $ (238,939)
Net realized (loss) gain on investments ................... (737,890) 2,251,939
Change in net unrealized (depreciation) appreciation ...... (4,360,622) 2,424,139
-----------------------------
Net (decrease) increase in net assets from operations ..... (5,232,618) 4,437,139
-----------------------------
Distributions to Shareholders:
Net realized gain from investment transactions ............ -- (3,576,786)
-----------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 1,567,662 5,385,378
Proceeds from reinvestment of distributions to
shareholders -- 3,548,688
Cost of shares repurchased ................................ (1,518,718) (5,279,204)
-----------------------------
Increase from capital share transactions .................. 48,944 3,654,862
-----------------------------
Total (Decrease) Increase ................................... (5,183,674) 4,515,215
Net Assets:
Beginning of period ....................................... 21,489,657 16,974,442
-----------------------------
End of period ............................................. $ 16,305,983 $ 21,489,657
===============================
Accumulated Net Investment Loss, at end of period ........... $ (134,106) $ --
===============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Notes to Financial Statements September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
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 recorded on the ex-dividend date.
Distributions are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles.
(E) Amortization. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
2. Organization Cost
Costs of $66,890 incurred in connection with the Funds's organization and
initial registration have been deferred and amortized over sixty months
beginning at the commencement of operations of the Fund. At September 30, 1998
the organization costs were fully amortized.
- --------------------------------------------------------------------------------
13
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Notes to Financial Statements September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
3. Capital Share Transactions
Transactions in capital stock, were as follows:
Six Months
Ended
Sept. 30, Year Ended
1998 March 31,
(unaudited) 1998
--------------------------
Shares sold ................................ 138,052 344,231
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ -- 296,713
--------------------------
138,052 640,944
Shares repurchased ......................... 134,778 373,731
--------------------------
Net increase ............................... 3,274 267,213
==========================
4. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
Six Months Ended
Sept. 30, 1998
(unaudited)
--------------
PURCHASES:
Investment Securities ............................. $25,558,336
===============
SALES:
Investment Securities ............................. $26,011,578
===============
At September 30, 1998, the aggregate cost of investment securities and
repurchase agreement for federal income tax purposes was $17,774,684. The
aggregate appreciation and depreciation of investments at September 30, 1998,
based on a comparison of investment values and their costs for federal income
tax purposes was $943,047 and $2,105,545, respectively, resulting in a net
depreciation of $1,162,498.
5. Advisory Fees, Service and Distribution Plan Fees and Transactions With
Affiliates
An advisory fee of $57,239 was paid to Value Line, Inc., the Fund's investment
adviser (the "Adviser"), for the period April 1, 1998 to August 18, 1998. For
the period August 19, 1998 to September 30, 1998 advisory fees of $14,707 were
voluntarily waived by the Adviser. The fee was computed at the rate of .75 of 1%
of the daily net assets and was 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.
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. Fees amounting to
$19,080 for the period April 1, 1998 to August 18, 1998 were paid to the
Distributor, and fees amounting to $4,902 for the period August 19, 1998 to
September 30, 1998, were voluntarily waived by the Distributor.
Certain officers and directors of the Adviser and the Distributor are also
officers and a director of the Fund. During the six months ended September 30,
1998, the Fund paid brokerage commissions totalling $8,401 to the Distributor, a
registered broker/dealer, which clears its transactions through unaffiliated
brokers.
At September 30, 1998, the Adviser and/or affiliated companies owned 1,294,686
shares of the Fund's capital stock, representing 80.4% of the outstanding
shares. In addition, certain officers and directors of the Fund owned 44,448
shares of capital stock, representing 2.8% of the outstanding shares.
- --------------------------------------------------------------------------------
14
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months June 23, 1993
Ended Years Ended March 31, (commencement of
Sept. 30, 1998 ---------------------------------------------------- operations) to
(Unaudited) 1998 1997 1996 1995 March 31, 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........ $13.37 $12.67 $15.11 $12.33 $11.80 $10.00
--------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment (loss) income (.08)(4) (.15) (.13) (.18) (.19)(2) .02(1)
Net (losses) or gains on
securities (both realized
and unrealized) .......... (3.17) 3.34 (.08) 3.08 1.05 1.81
--------------------------------------------------------------------------------------------
Total from investment
operations ............. (3.25) 3.19 (.21) 2.90 .86 1.83
--------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ........ -- -- -- -- -- (.02)
Distributions from capital
gains .................... -- (2.49) (2.23) (.12) (.33) (.01)
--------------------------------------------------------------------------------------------
Total distributions ...... -- (2.49) (2.23) (.12) (.33) (.03)
--------------------------------------------------------------------------------------------
Net asset value, end of period $10.12 $13.37 $12.67 $15.11 $12.33 $11.80
--------------------------------------------------------------------------------------------
Total return ................. -24.31%+ 27.50% (2.07)% 23.58% 7.57% 18.36%+
--------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets end of period
(in thousands) ............. $16,306 $21,490 $16,974 $19,106 $12,492 $9,823
Ratio of operating expenses to
average net assets ......... 1.90%*(3)(4) 1.81%(3) 1.87%(3) 2.15%(3) 2.48%(2) 0.61%*(1)
Ratio of net investment (loss)
income to average net assets (1.42)%*(4) (1.10)% (1.07)% (1.27)% (1.63)%(2) 0.26%*(1)
Portfolio turnover rate ...... 140%+ 149% 100% 57% 30% 74%
</TABLE>
(1) Net of expense reimbursement and fees waived by the Adviser. Had these
expenses been fully paid by the Fund, net investment loss per share would
have been $(.12), 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, net investment loss per share would have been $(.20), the
ratio of operating 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 offset of custody credits.
(4) Net of waived advisory and service and distribution plan fees. Had these
expenses been fully paid by the Fund, net investment loss per share would
have been $(.095), the ratio of operating expenses to average net assets
would have been 2.11%* and the ratio of net investment loss to average net
assets would have been (1.63%)*.
+ Not annualized.
* Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
The Value Line Family of Funds
- --------------------------------------------------------------------------------
1950 -- The Value Line Fund seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- The Value Line Income Fund's primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956 -- The Value Line Special Situations Fund seeks to obtain long-term growth
of capital by investing not less than 80% of its assets in "special situations".
No consideration is given to achieving current income.
1972 -- Value Line Leveraged Growth 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 assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983 -- Value Line Centurion Fund* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984 -- The Value Line Tax Exempt Fund seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- Value Line Convertible Fund seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- Value Line Aggressive Income Trust seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income 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.
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 Investor, a tax deferred,
variable annuity, or Value Plus, a variable life insurance policy.
For more complete information about any of the Value Line Funds, including
charges and expenses, send for a prospectus from Value Line Securities, Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call 1-800-223-0818, 24
hours a day, 7 days a week or visit us at www.valueline.com. Read the prospectus
carefully before you invest or send money.
- --------------------------------------------------------------------------------
16
<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 PricewaterhouseCoopers 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).
#502645
