---------------
ANNUAL REPORT
---------------
March 31, 1999
---------------
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:
As you know, the small-capitalization segment of the U.S. stock market has
continued to be a poor place to fish for winning stocks. Nonetheless, the Value
Line Small-Cap Growth Fund was able to eke out a small gain of 1.01% in its
fiscal year ended March 31, 1999. This was much better than the loss of 15.51%
for the average small-cap fund in the same period, as reported by Lipper
Analytical Services, and the loss of 16.26% for the benchmark Russell 2000
Index, an unmanaged index of small-cap stocks.
Simply staying out of trouble was key to the Fund's success in the 12-month
period. Actually, it wasn't so simple, because almost daily another small-cap
company reported a shortfall in revenue or earnings, often causing an immediate
drop of 50% or more in its stock price. Our strict investment discipline has
allowed us to avoid most of these negative surprises. We stick with winners:
those companies that have established a record of strong earnings momentum and
strong stock price momentum. We typically hold about 300 different names, well
diversified across sector and industry, which has also helped our performance.
In particular, we keep a close watch on the Fund's investment in technology
stocks, ensuring that this volatile sector doesn't have too large an influence
on performance.
Small-cap stocks should again have their day in the sun, but we cannot say when.
Over the long term, this will be an important segment of the stock market in
which to stay involved, we believe, allowing participation in some of the
fastest-growing companies in the country. In the meantime, we will continue to
employ the risk-control measures that have proved effective for your Fund.
Thank you for investing with us.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
May 18, 1999
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2
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Value Line Small-Cap Growth Fund, Inc.
Small-Cap Growth Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
For now, at least, our economy continues to move ahead at a brisk pace. Evidence
of this ongoing strength can be found in the first quarter's 4.5% increase in
gross domestic product, as well as in reports showing further modest gains in
manufacturing, retailing, and employment. In fact, the only area of major
concern currently is our widening international trade deficit, as faltering
business overseas continues to limit demand for American exports. Even with this
bleak trade situation, though, it appears unlikely that economic growth will
fall short of 3% in the second quarter or 2%-3% in the second half.
Inflation reports take on increasing significance in this setting. That's
because the persistence of solid levels of economic growth, along with the
continuing increases in oil and gas prices, has the potential to introduce
pricing pressures for the first time in years. For now, such fears have not been
realized to any sustainable degree. Indeed, many corporations continue to have
limited pricing power. Even so, with the economy still moving ahead solidly,
with energy prices retaining most of their recent increases, with labor markets
still tightening, and with the tab for the war in Kosovo mounting, it is
realistic to expect at least a moderately higher rate of inflation in the coming
months.
At this juncture, though, we do not see a compelling reason for the Federal
Reserve to push interest rates materially higher. We note, however, that as the
economic situation starts to improve globally, the temptation for the Fed--which
has already signaled that it is now more likely to raise interest rates than to
lower them in the weeks ahead--to push up interest rates would increase.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000
INVESTMENT IN THE VALUE LINE SMALL-CAP GROWTH FUND, INC.
AND THE RUSSELL 2000 STOCK INDEX*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Value Line Small Cap Russell 2000
Growth Fund, Inc. Stock Index
----------------- -----------
6/23/93 10,000 10,000
9/30/93 11,200 11,142
12/31/93 12,106 11,431
3/31/94 11,835 11,127
6/30/94 11,504 10,691
9/30/94 12,086 11,434
12/31/94 12,029 11,233
3/31/95 12,731 11,741
6/30/95 13,639 12,841
9/30/95 15,622 14,110
12/31/95 14,921 14,415
3/31/96 15,733 15,151
6/30/96 16,149 15,909
9/30/96 16,735 15,963
12/31/96 16,465 16,793
3/31/97 15,408 15,969
6/30/97 18,095 18,558
9/30/97 21,305 21,319
12/31/97 18,365 20,606
3/31/98 19,644 22,678
6/30/98 18,410 21,621
9/30/98 14,869 17,264
12/31/98 19,213 20,080
3/31/99 19,842 18,991
From 6/23/93+ to 3/31/99.
Performance Data:*
Average
Annual Total
Return
---------
1 year ended March 31, 1999......................... 1.01%
5 years ended March 31, 1999........................ 10.89%
From June 23, 1993+ to
March 31, 1999.................................... 12.61%
+ Commencement of operations.
* The performance data quoted represent past performance and are no guarantee
of future performance. The average annual total return and growth of an
assumed investment of $10,000 include dividends reinvested and capital
gains distributions accepted in shares. The investment return and principal
value of an investment will fluctuate so that an investment, when redeemed,
may be worth more or less than its original cost.
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3
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (95.7%)
ADVERTISING (1.5%)
3,500 Harte-Hanks Inc....................................... $ 96,031
1,400 Lamar Advertising Co.
Class "A"*........................................ 47,513
1,700 Omnicom Group, Inc.................................... 135,894
1,200 Young & Rubicam Inc.*................................. 48,900
-----------
328,338
AEROSPACE/
DEFENSE (0.9%)
500 Alliant Techsystems Inc.*............................. 38,844
1,700 Aviation Sales Co.*................................... 75,650
600 General Dynamics Corp................................. 38,550
1,000 Gulfstream Aerospace Corp.*........................... 43,375
-----------
196,419
AIR TRANSPORT (0.7%)
1,800 Comair Holdings, Inc.................................. 42,525
2,000 SkyWest, Inc.......................................... 57,750
2,000 Southwest Airlines Co................................. 60,500
-----------
160,775
APPAREL (1.5%)
3,500 Chico's FAS, Inc.*.................................... 75,250
2,500 Quiksilver, Inc.*..................................... 105,625
2,000 Tarrant Apparel Group*................................ 84,000
900 Tommy Hilfiger Corp.*................................. 61,988
-----------
326,863
AUTO PARTS--ORIGINAL
EQUIPMENT (0.9%)
2,000 Arvin Industries, Inc................................. 67,375
3,800 Gentex Corp.*......................................... 81,938
1,300 Strattec Security Corp.*.............................. 36,562
-----------
185,875
AUTO PARTS--
REPLACEMENT (0.8%)
3,000 Midas, Inc............................................ 100,125
1,600 O'Reilly Automotive, Inc.*............................ 71,600
-----------
171,725
BANK (0.4%)
600 Chase Manhattan Corp. (The)........................... 48,788
1,000 Sandy Spring Bancorp, Inc............................. 27,250
-----------
76,038
BANK--MIDWEST (0.6%)
800 Fifth Third Bancorp................................... 52,750
2,000 First Tennessee National
Corp.............................................. 73,250
-----------
126,000
BEVERAGE--
ALCOHOLIC (0.7%)
1,800 Canandaigua Brands, Inc.
Class "A"* ....................................... 90,675
1,000 Coors (Adolph) Co.
Class "B"......................................... 54,000
-----------
144,675
BUILDING
MATERIALS (2.1%)
5,000 Craftmade International, Inc.......................... 75,000
2,000 Dayton Superior Corp.
Class "A"*........................................ 34,750
3,000 Elcor Corp............................................ 105,563
5,000 Insituform Technologies, Inc.
Class "A"* ....................................... 87,500
2,200 Jacobs Engineering
Group Inc. *...................................... 86,762
3,000 NCI Building Systems, Inc.*........................... 70,500
-----------
460,075
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4
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Value Line Small-Cap Growth Fund, Inc.
March 31, 1999
- --------------------------------------------------------------------------------
Shares Value
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CABLE TV (2.5%)
1,600 Cablevision Systems Corp.
Class "A"*........................................ $ 118,600
3,500 Century Communications
Corp. Class "A"*.................................. 162,531
1,500 Comcast Corp. Class "A"............................... 94,406
2,000 EchoStar Communications
Corp. Class "A"* ................................ 163,250
-----------
538,787
CEMENT &
AGGREGATES (0.3%)
1,700 Centex Construction
Products, Inc..................................... 59,181
CHEMICAL--
SPECIALTY (0.7%)
1,300 Avery Dennison Corp................................... 74,750
2,000 Park Electrochemical Corp............................. 47,000
4,000 Uniroyal Technology Corp.*............................ 31,750
-----------
153,500
COMPUTER &
PERIPHERALS (1.1%)
2,400 Cybex Computer Products
Corp.*............................................ 43,050
5,000 Kofax Image Products, Inc.*........................... 45,000
2,000 Mercury Computer
Systems, Inc.*.................................... 36,000
1,400 Pinnacle Systems, Inc.*............................... 63,700
1,300 Visual Networks, Inc.*................................ 48,588
-----------
236,338
COMPUTER SOFTWARE
& SERVICES (11.5%)
7,000 Acclaim Entertainment, Inc.*.......................... 62,562
2,000 Actuate Software Corp.*............................... 66,000
1,600 Affiliated Computer
Services Inc. Class "A"* ......................... 73,200
2,000 American Management
Systems, Inc.*.................................... 68,250
3,500 Ardent Software, Inc.*................................ 56,219
800 At Home Corp. Series "A"*............................. 126,000
3,000 Best Software, Inc.*.................................. 40,500
1,000 Citrix Systems, Inc.*................................. 38,125
900 Comverse Technology, Inc.*............................ 76,500
2,000 Concentric Network Corp.*............................. 149,500
1,500 Concord Communications,
Inc.*............................................. 85,500
2,500 Dendrite International, Inc.*......................... 55,781
3,000 ECsoft Group PLC (ADR)*............................... 95,625
2,000 Eidos PLC (ADR)*...................................... 64,875
2,500 Electronics For Imaging Inc.*......................... 97,500
1,500 FactSet Research
Systems,Inc.*..................................... 64,875
1,200 Fiserv, Inc.*......................................... 64,350
1,400 Great Plains Software, Inc.*.......................... 54,163
1,400 Henry (Jack) &
Associates, Inc................................... 51,450
1,000 International Network
Services*......................................... 69,937
4,000 Mentor Graphics Corp.*................................ 54,000
2,600 Mercury Interactive Corp.*............................ 92,625
200 NEON Systems, Inc.*................................... 11,000
2,000 New Dimension
Software, Ltd.*................................... 103,750
1,600 New Era of Networks, Inc.*............................ 108,400
500 ONYX Software Corp.*.................................. 19,563
800 Paychex, Inc.......................................... 37,950
1,800 Peregrine Systems, Inc.*.............................. 60,525
3,000 Progress Software Corp.*.............................. 102,375
2,000 Rational Software Corp.*.............................. 53,625
2,000 Siebel Systems, Inc.*................................. 95,000
1,500 SunGard Data Systems Inc.*............................ 60,000
3,000 Unify Corp.*.......................................... 45,000
1,300 Verio Inc.*........................................... 59,962
2,000 Verity Inc.*.......................................... 67,000
3,000 Wiztec Solutions Ltd.*................................ 53,813
-----------
2,485,500
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5
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED
COMPANIES (0.2%)
700 Tyco International, Ltd............................... $ 50,225
DRUG (5.3%)
1,400 Amgen Inc.*........................................... 104,825
900 Andrx Corp.*.......................................... 82,013
1,000 Biogen, Inc.*......................................... 114,312
1,400 Forest Laboratories, Inc.*............................ 78,925
1,000 Genzyme Corp.--
General Division*................................. 50,438
1,200 Gilead Sciences, Inc.*................................ 54,600
2,000 ICOS Corp.*........................................... 67,500
3,500 King Pharmaceuticals, Inc.*........................... 97,125
3,300 Medco Research, Inc.*................................. 85,800
2,400 MedImmune, Inc.*...................................... 142,050
2,100 Millennium Pharmaceuticals,
Inc. *............................................ 65,625
1,300 QLT PhotoTherapeutics,
Inc.*............................................. 52,975
3,100 Roberts Pharmaceutical
Corp.*............................................ 64,325
800 Sepracor, Inc.*....................................... 89,800
-----------
1,150,313
EDUCATIONAL
SERVICES (1.2%)
2,400 Advantage Learning
Systems, Inc.*.................................... 74,550
2,100 Career Education Corp.*............................... 72,712
4,000 Education Management
Corp.*............................................ 123,000
-----------
270,262
ELECTRICAL
EQUIMENT (1.2%)
1,000 Corning Inc........................................... 60,000
2,600 LSI Industries, Inc................................... 43,875
3,000 Power Integrations, Inc.*............................. 95,250
1,800 Semtech Corp.*........................................ 57,375
-----------
256,500
ELECTRONICS (2.1%)
2,000 CTS Corp.............................................. 98,875
2,000 DII Group, Inc.*...................................... 58,500
500 Gemstar International
Group Ltd. *...................................... 37,625
2,000 Herley Industries, Inc.*.............................. 24,000
900 Plantronics Inc.*..................................... 56,306
1,100 Safeguard Scientifics, Inc.*.......................... 74,594
600 Uniphase Corp.*....................................... 69,075
3,500 Universal Electronics Inc.*........................... 43,750
-----------
462,725
ENTERTAINMENT (2.0%)
1,200 CBS Corp.*............................................ 49,125
3,600 CapRock Communications
Corp.*............................................ 70,200
1,000 Chancellor Media Corp.*............................... 47,125
800 Clear Channel
Communications, Inc.*............................. 53,650
1,200 Cox Radio, Inc. Class "A"*............................ 61,500
1,200 Time Warner Inc....................................... 85,275
2,000 USA Networks, Inc.*................................... 71,625
-----------
438,500
FINANCIAL
SERVICES (0.7%)
900 Providian Financial Corp.............................. 99,000
2,000 United Payors & United
Providers, Inc.*.................................. 46,125
-----------
145,125
FOOD PROCESSING (0.5%)
1,900 Earthgrains Co. (The)................................. 42,156
1,500 Keebler Foods Co.*.................................... 54,750
-----------
96,906
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6
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
March 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FURNITURE/HOME
FURNISHINGS (2.3%)
1,800 American Woodmark Corp................................ $ 56,925
2,500 Boyd's Collection,
Ltd. (The)*....................................... 45,000
2,600 Department 56, Inc.*.................................. 79,137
1,500 Ethan Allen Interiors, Inc............................ 62,344
1,700 Mohawk Industries, Inc.*.............................. 51,000
3,200 Rowe Companies (The).................................. 32,000
1,600 Select Comfort Corp.*................................. 44,600
3,500 Shaw Industries, Inc.*................................ 64,750
3,000 Stanley Furniture Co., Inc.*.......................... 58,500
-----------
494,256
GROCERY (0.6%)
1,200 Kroger Co.*........................................... 71,850
1,000 Safeway Inc.*......................................... 51,312
-----------
123,162
HOME APPLIANCE (0.3%)
1,200 Maytag Corp........................................... 72,450
HOUSEHOLD
PRODUCTS (0.7%)
1,500 Church & Dwight Co., Inc.............................. 61,125
4,000 Salton, Inc.*......................................... 97,750
-----------
158,875
INDUSTRIAL
SERVICES (3.3%)
1,000 Catalina Marketing Corp.*............................. 85,875
1,000 Galileo International, Inc............................ 48,375
1,900 Metzler Group Inc. *.................................. 59,613
4,000 Nielsen Media Research, Inc........................... 98,750
2,000 Profit Recovery Group
International, Inc. (The)* ....................... 79,000
1,600 QRS Corp.*............................................ 100,100
2,200 Quanta Services, Inc.*................................ 55,962
1,000 SABRE Group Holdings, Inc.
Class "A"* ....................................... 45,375
2,600 Select Appointments Holdings
PLC (ADR)......................................... 69,388
3,700 URS Corp.*............................................ 66,831
-----------
709,269
INSURANCE--
DIVERSIFIED (0.9%)
684 American International
Group, Inc........................................ 82,508
2,200 Blanch (E.W.) Holdings Inc............................ 115,500
-----------
198,008
INSURANCE--LIFE (0.8%)
1,000 AFLAC, Inc............................................ 54,437
600 Jefferson-Pilot Corp.................................. 40,650
1,950 Reinsurance Group of
America, Inc..................................... 82,997
-----------
178,084
INTERNET (2.8%)
800 America Online, Inc.*................................. 116,800
200 Autoweb.com, Inc.*.................................... 7,125
100 Cheap Tickets, Inc.*.................................. 3,363
700 Exodus Communications,
Inc.*............................................. 94,150
3,000 Globix Corp.*......................................... 111,937
300 Intraware, Inc.*...................................... 12,019
100 iVillage Inc.*........................................ 10,050
2,000 Macromedia Inc.*...................................... 90,625
500 Priceline.com Inc.*................................... 41,437
1,200 Security First Technologies
Corp.*............................................ 88,200
500 Ticketmaster Online--
Citysearch, Inc. Class "B"* ...................... 16,813
100 VerticalNet, Inc.*.................................... 10,387
200 Ziff-Davis Inc.--ZDNet*................................ 7,200
-----------
610,106
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7
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
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Shares Value
- --------------------------------------------------------------------------------
MACHINERY (1.0%)
2,800 Astec Industries, Inc.*............................... $ 86,450
1,200 Ingersoll-Rand Co..................................... 59,550
1,500 Manitowoc Co., Inc.................................... 62,812
-----------
208,812
MANUFACTURED
HOUSING/
RECREATIONAL
VEHICLES (0.7%)
2,250 Monaco Coach Corp.*................................... 51,891
2,000 National R.V. Holdings, Inc.*......................... 44,250
4,000 Winnebago Industries, Inc............................. 56,000
-----------
152,141
MEDICAL SERVICES (2.6%)
1,400 Advance Paradigm, Inc.*............................... 88,463
1,400 Express Scripts, Inc.
Class "A"*........................................ 120,312
7,000 Hooper Holmes, Inc.................................... 109,375
3,500 Res-Care, Inc.*....................................... 78,969
1,700 Sunrise Assisted Living Inc.*......................... 77,456
3,000 Veterinary Centers of
America, Inc.*.................................... 42,375
500 WellPoint Health Networks
Inc. *............................................ 37,906
-----------
554,856
MEDICAL SUPPLIES (6.4%)
1,000 Allergan, Inc......................................... 87,875
2,800 Alpharma Inc. Class "A"............................... 109,900
1,200 AmeriSource Health Corp.
Class "A"* ....................................... 41,025
2,000 Bergen Brunswig Corp.
Class "A"......................................... 40,000
3,400 Bindley Western Industries,
Inc............................................... 97,113
1,500 Biomatrix, Inc.*...................................... 117,000
4,000 Colorado MEDtech, Inc.*............................... 44,500
2,700 D & K Healthcare
Resources, Inc.*.................................. 66,825
2,000 Ocular Sciences Inc.*................................. 57,375
2,000 Patterson Dental Co.*................................. 86,500
2,820 Priority Heathcare Corp.
Class "B"*........................................ 127,605
1,600 ResMed Inc.*.......................................... 45,200
4,000 Techne Corp.*......................................... 115,500
2,000 VISX, Inc.*........................................... 215,125
3,000 Xomed Surgical Products,
Inc.*............................................. 117,750
-----------
1,369,293
OFFICE EQUIPMENT &
SUPPLIES (0.6%)
1,000 Pitney Bowes, Inc..................................... 63,750
2,250 Staples, Inc.*........................................ 73,969
-----------
137,719
PRECISION
INSTRUMENTS (2.5%)
1,500 Badger Meter, Inc..................................... 46,031
1,500 Hutchinson Technology Inc.*........................... 37,312
3,600 Kronos Inc.*.......................................... 88,200
3,300 Optical Coating Laboratory,
Inc............................................... 158,400
1,500 Orbotech Ltd.*........................................ 73,688
1,200 Waters Corp.*......................................... 126,075
-----------
529,706
PUBLISHING (2.2%)
4,500 Advanced Marketing
Services, Inc..................................... 58,500
1,300 Consolidated Graphics, Inc.*.......................... 75,075
2,400 Houghton Mifflin Co................................... 112,500
2,100 Valassis Communications,
Inc.*............................................. 108,675
2,600 Wiley (John) & Sons, Inc.
Class "A" ........................................ 109,200
-----------
463,950
RAILROAD (0.2%)
3,000 Johnstown America
Industries, Inc.*................................. 44,625
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8
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
March 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RECREATION (1.8%)
2,000 Action Performance
Companies, Inc.*.................................. $ 60,250
1,200 Harley-Davidson, Inc.................................. 69,000
2,000 International Speedway Corp.
Class "A"......................................... 105,500
1,200 Royal Caribbean Cruises Ltd........................... 46,800
2,200 Steiner Leisure Ltd.*................................. 67,650
2,200 THQ, Inc.*............................................ 44,825
-----------
394,025
RESTAURANT (2.8%)
3,200 Bob Evans Farms, Inc.................................. 64,000
3,300 Brinker International, Inc.*.......................... 85,181
2,500 Darden Restaurants, Inc............................... 51,563
4,200 Foodmaker Inc.*....................................... 107,100
1,900 Papa John's International,
Inc.*............................................. 83,837
4,800 Ruby Tuesday, Inc..................................... 83,400
6,000 Ryan's Family Steak
Houses, Inc.*..................................... 72,375
900 Tricon Global Restaurants,
Inc.*............................................. 63,225
-----------
610,681
RETAIL--SPECIAL
LINES (9.2%)
1,500 Abercrombie & Fitch Co.
Class "A"* ....................................... 138,000
1,400 American Eagle
Outfitters, Inc.*................................. 100,362
2,500 AnnTaylor Stores Corp.*............................... 110,469
2,800 bebe stores, inc.*.................................... 114,800
2,000 Best Buy Co., Inc.*................................... 104,000
3,400 Children's Place Retail
Stores, Inc. (The)* .............................. 91,587
800 Circuit City Stores--
Circuit City Group ............................... 61,300
3,000 Copart, Inc.*......................................... 62,250
2,500 Deb Shops, Inc........................................ 28,125
1,200 Dollar Tree Stores, Inc.*............................. 37,125
2,500 Fossil Inc.*.......................................... 74,531
1,200 Gap Inc. (The)........................................ 80,775
2,800 Group 1 Automotive Inc.*.............................. 68,775
2,500 Hollywood Entertainment
Corp.*............................................ 46,563
2,700 Intimate Brands, Inc.................................. 129,937
2,000 Linens `N' Things, Inc.*.............................. 90,750
4,000 Media Arts Group, Inc.*............................... 36,000
2,000 Men's Wearhouse,
Inc. (The) *...................................... 57,750
5,000 Musicland Stores Corp.*............................... 44,063
4,000 Programmer's Paradise, Inc.*.......................... 48,500
1,500 Ross Stores Inc....................................... 65,719
4,000 Rush Enterprises, Inc.*............................... 45,000
4,000 Sonic Automotive, Inc.*............................... 62,000
1,500 TJX Companies, Inc.................................... 51,000
2,100 Tiffany & Co.......................................... 156,975
2,000 Zale Corp.*........................................... 68,375
-----------
1,974,731
RETAIL BUILDING
SUPPLY (0.4%)
2,000 Eagle Hardware &
Garden, Inc.*..................................... 76,375
RETAIL STORE (2.4%)
3,000 Ames Department
Stores, Inc.*..................................... 111,375
2,500 BJ's Wholesale Club, Inc.*............................ 66,094
800 Dayton Hudson Corp.................................... 53,300
3,000 Family Dollar Stores, Inc............................. 69,000
1,000 Kohl's Corp.*......................................... 70,875
1,500 99 Cents Only Stores*................................. 63,656
2,600 Pacific Sunwear of
California, Inc.*................................. 90,350
-----------
524,650
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9
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Schedule of Investments
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SEMICONDUCTOR (3.6%)
1,600 Applied Micro Circuits
Corp.*............................................ $ 68,400
1,900 MIPS Technologies, Inc.*.............................. 115,900
1,000 PMC-Sierra, Inc.*..................................... 71,187
1,400 QLogic Corp.*......................................... 93,975
1,200 RF Micro Devices Inc.*................................ 114,825
800 Rambus Inc.*.......................................... 51,500
1,000 SDL, Inc.*............................................ 90,750
2,000 TranSwitch Corp.*..................................... 90,500
1,400 Vitesse Semiconductor
Corp.*............................................ 70,875
-----------
767,912
SEMICONDUCTOR
CAPITAL
EQUIPMENT (0.3%)
1,600 Electro Scientific
Industries, Inc.*................................. 74,400
SHOE (0.8%)
4,000 K-Swiss Inc. Class "A"................................ 101,000
1,200 Timberland Co. (The)
Class "A"*........................................ 75,675
-----------
176,675
TELECOMMUNICATIONS
EQUIPMENT (2.7%)
3,000 AVT Corp.*............................................ 71,625
1,000 Associated Group, Inc. (The)
Class "A"* ....................................... 49,563
3,000 CommScope, Inc.*...................................... 62,812
6,200 InterVoice, Inc.*..................................... 68,200
1,500 L-3 Communications
Holdings, Inc..................................... 69,375
4,000 Polycom, Inc.*........................................ 75,000
2,000 Powerwave Technologies,
Inc.*............................................. 56,750
1,400 Scientific-Atlanta, Inc............................... 38,150
3,300 Viatel, Inc.*......................................... 94,050
-----------
585,525
TELECOMMUNICATION
SERVICES (3.7%)
1,200 Century Telephone
Enterprises, Inc.................................. 84,300
3,000 DyCom Industries, Inc.*............................... 130,500
2,400 GeoTel Communications
Corp.*............................................ 110,100
2,000 Global Crossing Ltd.*................................. 92,500
1,000 Level 3 Communications,
Inc.*............................................. 72,813
700 MCI WorldCom, Inc.*................................... 61,994
800 MediaOne Group Inc.*.................................. 50,800
2,400 Metromedia Fiber Network,
Inc. Class "A"* .................................. 124,350
900 Qwest Communications
International Inc.*............................... 64,884
-----------
792,241
THRIFT (0.5%)
2,000 Flagstar Bancorp, Inc................................. 53,000
3,100 Westernbank of Puerto Rico............................ 49,406
-----------
102,406
TRUCKING/
TRANSPORTATION
LEASING (0.2%)
1,000 Landstar System, Inc.*................................ 33,125
-----------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT SECURITIES (95.7%)
(Cost $15,901,180) ................................... $20,638,703
-----------
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10
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
March 31, 1999
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.7%)
(Including accrued interest)
$800,000 Collateralized by $810,000
U.S. Treasury Bonds 5.50%,
due 3/31/03, with a value
of $818,100 (with State
Street Bank & Trust
Company 4.87%, dated
3/31/99, due 4/1/99,
delivery value $800,108).......................... $ 800,108
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES (0.6%) .................................. 122,032
-----------
NET ASSETS (100%) ............................................... $21,560,843
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE, PER
OUTSTANDING SHARE
($21,560,843 / 1,628,819
shares outstanding) ........................................... $ 13.24
===========
*Non-income producing.
Abbreviations used in this statement:
(ADR)- American Depository Receipt.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Statement of Assets and Liabilities
at March 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(Cost--$15,901,180) .................................... $ 20,638,703
Repurchase agreement
(Cost--$800,108) ....................................... 800,108
Cash ..................................................... 92,964
Receivable for securities sold ........................... 192,687
Dividends receivable ..................................... 1,890
------------
Total Assets ......................................... 21,726,352
------------
Liabilities:
Payable for securities purchased ......................... 111,359
Payable for capital shares repurchased ................... 29,291
Accrued expenses ......................................... 24,859
------------
Total Liabilities .................................... 165,509
------------
Net Assets ............................................... $ 21,560,843
============
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 1,628,819 shares) .......................... $ 1,629
Additional paid-in capital ............................... 17,897,713
Accumulated net realized loss
on investments ......................................... (1,076,022)
Net unrealized appreciation
of investments ......................................... 4,737,523
------------
Net Assets ............................................... $ 21,560,843
============
Net Asset Value, Offering and
Redemption Price, per
Outstanding Share
($21,560,843 / 1,628,819
shares outstanding) .................................... $ 13.24
============
Statement of Operations
for the year ended March 31, 1999
- --------------------------------------------------------------------------------
Investment Income:
Dividend income (net of foreign
withholding tax of $110) ............................... $ 52,228
Interest income .......................................... 27,804
-----------
Total Income ......................................... 80,032
-----------
Expenses:
Advisory fee ............................................. 144,415
Custodian fees ........................................... 52,718
Service and distribution plan fee ........................ 48,139
Auditing and legal fees .................................. 36,781
Accounting and bookkeeping expense ....................... 32,400
Directors' fees and expenses ............................. 23,152
Registration and filing fees ............................. 19,722
Printing ................................................. 17,617
Insurance, dues and other ................................ 5,813
Transfer agent fees ...................................... 5,101
Amortization of deferred organization
costs (note 2) ......................................... 3,015
-----------
Total Expenses before fee waivers
and custody credits ................................ 388,873
Less: advisory and service and
distribution plan fees waived ...................... (116,235)
Less: custody credits ................................ (9,571)
-----------
Net Expenses ......................................... 263,067
-----------
Net Investment Loss ...................................... (183,035)
-----------
Net Realized and Unrealized Gain
(Loss) on Investments:
Net Realized Loss .................................... (1,060,364)
Change in Net Unrealized
Appreciation ....................................... 1,539,399
-----------
Net Realized Loss and Change in
Net Unrealized Appreciation
on Investments ......................................... 479,035
-----------
Net Increase in Net Assets
from Operations ........................................ $ 296,000
===========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Statement of Changes in Net Assets
for the years ended March 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1999 March 31, 1998
-------------------------------
<S> <C> <C>
Operations:
Net investment loss ....................................... $ (183,035) $ (238,939)
Net realized (loss) gain on investments ................... (1,060,364) 2,251,939
Change in net unrealized appreciation ..................... 1,539,399 2,424,139
-----------------------------
Net increase in net assets from operations ................ 296,000 4,437,139
-----------------------------
Distributions to Shareholders:
Net realized gain from investment transactions ............ (374,217) (3,576,786)
-----------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 3,510,733 5,385,378
Proceeds from reinvestment of distributions to shareholders 365,602 3,548,688
Cost of shares repurchased ................................ (3,726,932) (5,279,204)
-----------------------------
Net increase from capital share transactions .............. 149,403 3,654,862
-----------------------------
Total Increase in Net Assets ................................ 71,186 4,515,215
Net Assets:
Beginning of year ......................................... 21,489,657 16,974,442
-----------------------------
End of year ............................................... $ 21,560,843 $ 21,489,657
=============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Value Line Small-Cap Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company whose primary investment objective is long-term
growth of capital. The Fund invests primarily in "small-cap" common stocks.
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(A) Security Valuation. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales 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.
Permanent book-tax differences relating to shareholder distributions have been
reclassified. Net investment loss, net realized gain (loss), and net assets were
not affected. In the current year the net investment loss of $183,035 was
reclassified within the composition of net assets to additional paid-in capital.
(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 Costs
Costs of $66,890 incurred in connection with the Funds's organization and
initial registration were deferred and amortized over sixty months beginning at
the commencement of operations of the Fund. At March 31, 1999 the organization
costs were fully amortized.
- --------------------------------------------------------------------------------
14
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
March 31, 1999
- --------------------------------------------------------------------------------
3. Capital Share Transactions Transactions in capital stock were as follows:
Year Ended Year Ended
March 31, March 31,
1999 1998
----------------------------
Shares sold ............................ 304,372 344,231
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 32,070 296,713
----------------------------
336,442 640,944
Shares repurchased ..................... 314,846 373,731
----------------------------
Net increase ........................... 21,596 267,213
============================
4. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
Year Ended
March 31, 1999
--------------
PURCHASES:
Investment Securities .......................... $39,805,349
===========
SALES:
Investment Securities .......................... $40,609,444
===========
At March 31, 1999, the aggregate cost of investment securities and repurchase
agreement for federal income tax purposes was $16,702,914. The aggregate
appreciation and depreciation of investments at March 31, 1999, based on a
comparison of investment values and their costs for federal income tax purposes
was $5,234,022 and $498,125, respectively, resulting in a net appreciation of
$4,735,897. For federal income tax purposes the Fund had a net capital loss
carryover at March 31, 1999 of $1,074,389, which will expire in the year 2007.
To the extent future capital gains are offset by such capital losses, the Fund
does not anticipate distributing any such gains to its shareholders.
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 March 31, 1999 advisory fees of $87,176 were
voluntarily waived by the Adviser. The fee was computed at the annual rate of
.75 of 1% of the daily net assets during the year 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, as amended, 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 $29,059 for the period August 19, 1998 to
March 31, 1999, 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 year ended March 31, 1999, the
Fund paid brokerage commissions totaling $19,653 to the Distributor, a
registered broker/dealer, which clears its transactions through unaffiliated
brokers.
At March 31, 1999, the Adviser and/or affiliated companies and the Value Line
Inc. Profit Sharing and Savings Plan owned 1,304,778 shares of the Fund's
capital stock, representing 80.1% of the outstanding shares. In addition,
certain officers and directors of the Fund owned 45,337 shares of capital stock,
representing 2.8% of the outstanding shares.
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Years Ended March 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .... $ 13.37 $ 12.67 $ 15.11 $ 12.33 $ 11.80
-------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment (loss) income ........ (.11)(4) (.15) (.13) (.18) (.19)(1)
Net gains or (losses) on securities
(both realized and unrealized) .... .21 3.34 (.08) 3.08 1.05
-------------------------------------------------------------------------------------
Total from investment operations .... .10 3.19 (.21) 2.90 .86
-------------------------------------------------------------------------------------
Less distributions:
Distributions from capital gains .... (.23) (2.49) (2.23) (.12) (.33)
-------------------------------------------------------------------------------------
Total distributions ................. (.23) (2.49) (2.23) (.12) (.33)
-------------------------------------------------------------------------------------
Net asset value, end of year .......... $ 13.24 $ 13.37 $ 12.67 $ 15.11 $ 12.33
=====================================================================================
Total return .......................... 1.01% 27.50% (2.07)% 23.58% 7.57%
=====================================================================================
Ratios/Supplemental Data:
Net assets, end of year (in thousands) $ 21,561 $ 21,490 $ 16,974 $ 19,106 $ 12,492
Ratio of expenses to
average net assets .................. 1.34%(3)(4) 1.81%(2) 1.87%(2) 2.15%(2) 2.48%(1)
Ratio of net investment (loss) income
to average net assets ............... (0.90)%(4) (1.10)% (1.07)% (1.27)% (1.63)%(1)
Portfolio turnover rate ............... 203% 149% 100% 57% 30%
</TABLE>
(1) 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 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%).
(2) Before offset of custody credits.
(3) Ratio reflects expenses grossed up for custody credit arrangement. The
ratio of expenses to average net assets net of custody credits would have
been 1.29%.
(4) Net of waived advisory fee and service and distribution plan fees. Had
these expenses been fully paid by the Fund, net investment loss per share
would have been $(.18), the ratio of expenses to average net assets would
have been 1.91% and the ratio of net investment loss to average net assets
would have been (1.47%).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Value Line Small-Cap Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Small-Cap Growth Fund,
Inc. (the "Fund") at March 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
May 17, 1999
- --------------------------------------------------------------------------------
Other Information (unaudited)
Year 2000. Like other mutual funds, the Fund could be adversely affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.
- --------------------------------------------------------------------------------
17
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
18
<PAGE>
Value Line Small-Cap Growth Fund, Inc.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
19
<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. Current income is a
secondary objective.
1952--The Value Line Income Fund's primary investment objective is income, as
high and dependable as is consistent with reasonable risk. Capital growth to
increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks long-term growth of capital.
No consideration is given to current income in the choice of investments.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth.
1979--The Value Line Cash Fund, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be invested in securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital.
1984--The Value Line Tax Exempt Fund seeks to provide investors with the maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: The Money Market Portfolio
and The 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.
Capital appreciation is a secondary objective.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with the maximum income exempt from New York State, New York City and federal
income taxes while avoiding undue risk to principal.
1987--Value Line Strategic Asset Management Trust* seeks to achive a high total
investment return consistent with reasonable risk.
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 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 ValuePlus, a variable life insurance policy.
For more complete information about any of the Value Line Funds, including
charges and expenses, send for a prospectus from Value Line Securities, Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call 1-800-223-0818, 24
hours a day, 7 days a week, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
20
<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
Stephen E. Grant
Vice President
Steven M. Yeary
Vice President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
This report is issued for 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).
506624
