<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 2000
FILE NO. 33-56028
FILE NO. 811-7388
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 8 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 8 /X/
</TABLE>
-------------
VALUE LINE EMERGING OPPORTUNITIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
220 East 42nd Street
New York, New York 10017-5891
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
Registrant's Telephone number, including Area Code: (212) 907-1500
David T. Henigson
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5891
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
Peter D. Lowenstein
Two Sound View Drive, Suite 100
Greenwich, CT 06830
<TABLE>
<S> <C>
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on August 1, 2000 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
</TABLE>
----------------------------------------------------------------------
----------------------------------------------------------------------
<PAGE>
VALUE LINE
EMERGING OPPORTUNITIES FUND, INC.
--------------------------------
PROSPECTUS
AUGUST 1, 2000
--------------------------------------------------------------------------------
[LOGO]
#513944
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, AND ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FUND SUMMARY
What is the Fund's goal? PAGE 2
What are the Fund's main investment strategies? PAGE 2
What are the main risks of investing in the Fund? PAGE 2
How has the Fund performed? PAGE 3
What are the Fund's fees and expenses? PAGE 4
HOW WE MANAGE THE FUND
Our principal investment strategies PAGE 5
The principal risks of investing in the Fund PAGE 7
WHO MANAGES THE FUND
Investment Adviser PAGE 8
Management fees PAGE 8
Portfolio management PAGE 8
ABOUT YOUR ACCOUNT
How to buy shares PAGE 9
How to sell shares PAGE 11
Special services PAGE 13
Dividends, distributions and taxes PAGE 14
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 15
<PAGE>
FUND SUMMARY
--------------------------------------------------------------------------------
WHAT IS THE FUND'S GOAL?
The Fund's investment objective is long-term growth of
capital. No consideration is given to current income in the
choice of investments. Although the Fund will strive to
achieve this goal, there is no assurance that it will
succeed.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
To achieve the Fund's goal, we keep not less than 65% of the
market value of the Fund's total assets invested in equity
securities of small-cap companies. Companies with a market
capitalization of $2 billion or less at the time of purchase
are considered by the Fund to be small-cap companies although
the median market capitalization of the companies purchased
by the Fund will not exceed $1.5 billion.
In selecting securities for purchase or sale, we may rely on
the Value Line Timeliness-TM- Ranking System, the Value Line
Performance-TM- Ranking System or the Value Line
Small-Capitalization Stock Ranking System. These Ranking
Systems compare the Adviser's estimate of the probable market
performance of each stock during the next six to twelve
months relative to all of the stocks under review and rank
stocks on a scale of 1 (highest) to 5 (lowest). The common
stocks in which the Fund will usually invest are those U.S.
Securities ranked 1 or 2 by one of the Ranking System but it
may also invest in common stocks ranked 3. The Fund's
portfolio will be actively traded.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
Investing in any mutual fund involves risk, including the
risk that you may receive little or no return on your
investment, and that you may lose part or all of the money
you invest. Therefore, before you invest in this Fund you
should carefully evaluate the risks.
Investments in smaller companies often involve greater risks
than investments in larger, more established companies.
Smaller companies may have less management experience, fewer
financial resources and limited product diversification.
Another risk that you assume when investing in the Fund is
market risk, the possibility that the securities in a certain
market will decline in value because of factors such as
economic conditions. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole.
The price of Fund shares will increase and decrease according
to changes in the value of the Fund's investments. The Fund
will be affected by changes in stock prices which tend to
fluctuate more than bond prices.
2
<PAGE>
The Fund has a high portfolio turnover rate which may
negatively affect the Fund's performance.
An investment in the Fund is not a complete investment
program and you should consider it just one part of your
total investment program. For a more complete discussion of
risk, please turn to page 7.
HOW HAS THE FUND PERFORMED?
This bar chart and table can help you evaluate the potential
risks of investing in the Fund. We show how returns for the
Fund's shares have varied over the life of the Fund, as well
as the average annual returns of these shares for one year,
five years, and since inception of the Fund, all compared to
the performance of the Russell 2000 Index, which is a broad
based market index. You should remember that unlike the Fund,
the index is unmanaged and does not include the costs of
buying, selling, and holding the securities. The Fund's past
performance is not necessarily an indication of how it will
perform in the future.
TOTAL RETURNS AS OF 12/31 EACH YEAR (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990
1991
1992
1993
1994 -0.64
1995 24.04
1996 10.35
1997 11.54
1998 4.61
1999 70.63
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q4 1999 +39.15%
WORST QUARTER: Q3 1998 (19.23%)
</TABLE>
As of June 30, 2000, the Fund had a year-to-date total return
of 14.50%.
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (6/23/93)
<S> <C> <C> <C>
----------------------------------------------------------------------
VALUE LINE EMERGING OPPORTUNITIES
FUND 70.63% 22.20% 19.97%
----------------------------------------------------------------------
RUSSELL 2000 INDEX 21.26% 16.69% 14.20%
----------------------------------------------------------------------
</TABLE>
3
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you pay in
connection with an investment in the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
MAXIMUM SALES CHARGES (LOAD) IMPOSED ON PURCHASES AS A PERCENTAGE NONE
OF OFFERING PRICE
------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGES (LOAD) AS A PERCENTAGE OF ORIGINAL NONE
PURCHASE PRICE OR REDEMPTION PRICE, WHICHEVER IS LOWER
------------------------------------------------------------------------------
MAXIMUM SALES CHARGES (LOAD) IMPOSED ON REINVESTED DIVIDENDS NONE
------------------------------------------------------------------------------
REDEMPTION FEE NONE
------------------------------------------------------------------------------
EXCHANGE FEE NONE
------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM THE FUND'S ASSETS)
<TABLE>
<S> <C>
MANAGEMENT FEES .75%
------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES* .25%
------------------------------------------------------
OTHER EXPENSES .69%
------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.69%
------------------------------------------------------
</TABLE>
*Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost
of your investment and may cost more than if you paid other
types of sales charges.
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other
mutual funds. We show the cumulative amount of Fund expenses
on a hypothetical investment of $10,000 with an annual 5%
return over the time shown, assuming that the Fund's
operating expenses remain the same. The expenses indicated
for each period would be the same whether you sold your
shares at the end of each period or continued to hold them.
This is an example only, and your actual costs may be greater
or less than those shown here. Based on these assumptions,
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
VALUE LINE EMERGING OPPORTUNITIES FUND $172 $533 $918 $1,998
----------------------------------------------------------------------------
</TABLE>
4
<PAGE>
HOW WE MANAGE THE FUND
--------------------------------------------------------------------------------
OUR PRINCIPAL INVESTMENT STRATEGIES
We analyze economic and market conditions, seeking to
identify the market sector or securities that we think make
the best investments. Because of the nature of the Fund, you
should consider an investment in it to be a long-term
investment that will best meet its objectives when held for a
number of years. The following is a description of how the
Adviser pursues the Fund's objectives.
The Fund attempts to achieve its objective by investing in
small-cap stocks, that is stocks of companies that have a
market capitalization of less than $2 billion at the time of
acquisition. The median market capitalization of the
companies purchased by the Fund will not exceed $1.5 billion.
The Fund will at all times keep not less than 65% of the
market value of its total assets invested in small-cap
stocks.
In selecting securities for purchase or sale, the Adviser may
rely on the Value Line Timeliness-TM- Ranking System, the
Value Line Performance-TM- Ranking System or the Value Line
Small-Capitalization Stock Ranking System.
The Value Line Timeliness Ranking System has evolved after
many years of research and has been used in substantially its
present form since 1965. It is based upon historical prices
and reported earnings, recent earnings and price momentum and
the degree to which the last reported earnings deviated from
estimated earnings, among other factors.
The Timeliness Rankings are published weekly in the Standard
Edition of The Value Line Investment Survey for approximately
1,700 of the most actively traded stocks in U.S. markets,
including stocks with large, mid and small market
capitalizations. There are only a few stocks of foreign
issuers that are included and stocks that have traded for
less than two years are not ranked. On a scale of 1 (highest)
to 5 (lowest), the rankings compare an estimate of the
probable market performance of each stock during the coming
six to twelve months relative to all 1,700 stocks under
review. The Rankings are updated weekly to reflect the most
recent information.
The Value Line Small-Capitalization Stock Ranking System has
been employed by the Adviser in managing private accounts
since 1981. This stock selection system relies on factors
similar to those found in the Value Line Timeliness Ranking
System, although it does not use published earnings
estimates.
5
<PAGE>
The Value Line Performance Ranking System for common stocks
was introduced in 1995. A variation of the Value Line
Small-Capitalization Ranking System, the Performance Ranking
System evaluates the approximately 1,800 stocks in the
Expanded Edition of The Value Line Investment Survey which
consists of stocks with mostly smaller market capitalizations
(under $1 billion) and only a few stocks of foreign issuers.
This stock ranking system relies on factors similar to those
found in the Value Line Timeliness Ranking System except that
it does not utilize earnings estimates. The Performance Ranks
use a scale of 1 (highest) to 5 (lowest) to compare the
Adviser's estimate of the probable market performance of each
Expanded Edition stock during the coming six to twelve months
relative to all 1,800 stocks under review in the Expanded
Edition.
None of the Value Line Ranking Systems eliminate market risk,
but the Adviser believes that they provide objective
standards for determining expected relative performance for
the next six to twelve months. The Fund will usually invest
in U.S. common stocks ranked 1 or 2 but it may also invest in
common stocks ranked 3. The utilization of these Rankings is
no assurance that the Fund will perform more favorably than
the market in general over any particular period.
TEMPORARY DEFENSIVE POSITION
From time to time in response to adverse market, economic,
political or other conditions, up to 35% of the Fund's total
assets may be held in cash, U.S. Government securities or
money market instruments rated in the top two categories by a
nationally recognized rating organization for temporary
defensive purposes. This could help the Fund avoid losses,
but it may result in lost opportunities. If this becomes
necessary, the Fund may not achieve its investment
objectives.
PORTFOLIO TURNOVER
The Fund engages in active and frequent trading of portfolio
securities in order to take advantage of better investment
opportunities to achieve its investment objectives. This
strategy results in higher brokerage commissions and other
expenses and may negatively affect the Fund's performance.
Portfolio turnover may also result in capital gain
distributions that could increase your income tax liability.
6
<PAGE>
THE PRINCIPAL RISKS OF INVESTING IN THE FUND
- Because the Fund may invest substantially all of its assets
in common stocks, the value of the stocks in its portfolio
and the Fund's share price might decrease in response to the
activities of an individual company or in response to general
market or economic conditions.
- Investments in smaller companies tend to be more volatile and
somewhat more speculative than investments in larger
companies.
- Certain securities may be difficult or impossible to sell at
the time and price that the Fund would like. The Fund may
have to lower the price, sell other securities instead or
forego an investment opportunity. This could have a negative
effect on the Fund's performance.
- The Fund's use of the Value Line Ranking Systems involves the
risk that over certain periods of time the price of
securities not covered by the Ranking Systems, or lower
ranked securities, may appreciate to a greater extent than
those securities in the Fund's portfolio.
- Please see the Statement of Additional Information for a
further discussion of risks. Information on the Fund's recent
holdings can be found in the Fund's current annual or
semi-annual report.
7
<PAGE>
WHO MANAGES THE FUND
--------------------------------------------------------------------------------
The business and affairs of the Fund are managed by the
Fund's officers under the direction of the Fund's Board of
Directors.
INVESTMENT ADVISER
Value Line, Inc., 220 East 42nd Street, New York, NY 10017,
serves as the Fund's investment adviser and manages the
Fund's business affairs. Value Line also acts as investment
adviser to the other Value Line mutual funds and furnishes
investment counseling services to private and institutional
clients resulting in combined assets under management of over
$5 billion.
The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co.,
Inc. which with its predecessor has been in business since
1931. Value Line Securities, Inc., the Fund's distributor, is
a subsidiary of the Adviser. Another subsidiary of the
Adviser publishes The Value Line Investment Survey and other
publications.
MANAGEMENT FEES
For managing the Fund and its investments, the Adviser is
paid a yearly fee of 0.75% of the Fund's average daily net
assets.
PORTFOLIO MANAGEMENT
A committee of employees of the Investment Adviser is jointly
and primarily responsible for the day-to-day management of
the Fund's portfolio.
8
<PAGE>
ABOUT YOUR ACCOUNT
--------------------------------------------------------------------------------
HOW TO BUY SHARES
/ / BY TELEPHONE
Once you have opened an account, you can buy additional
shares by calling 800-243-2729 between 9:00 a.m. and
4:00 p.m. New York time. You must pay for these shares within
three business days of placing your order.
/ / BY WIRE
If you are making an initial purchase by wire, you must call
us at 800-243-2729 so we can assign you an account number.
Request your bank to wire the amount you want to invest to
State Street Bank and Trust Company, ABA #011000028,
attention DDA # 99049868. Include your name, account number,
tax identification number and the name of the fund in which
you want to invest.
/ / THROUGH A BROKER-DEALER
You can open an account and buy shares through a
broker-dealer, who may charge a fee for this service.
/ / BY MAIL
Complete the Account Application and mail it with your check
payable to NFDS, Agent, to Value Line Funds, c/o National
Financial Data Services, Inc., P.O. Box 219729, Kansas City,
MO 64121-9729. If you are making an initial purchase by mail,
you must include a completed Account Application or an
appropriate retirement plan application if you are opening a
retirement account, with your check. Third party checks will
not be accepted for either the initial or any subsequent
purchase. All purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
/ / MINIMUM/ADDITIONAL INVESTMENTS
Once you have completed an application, you can open an
account with an initial investment of $1,000, and make
additional investments at any time for as little as $100. The
price you pay for shares will depend on when we receive your
purchase order.
/ / TIME OF PURCHASE
Your price for Fund shares is the Fund's net asset value per
share (NAV), which is generally calculated as of the close of
regular trading on the New York Stock Exchange (currently
4:00 p.m., Eastern time) every day the Exchange is open for
business. The Exchange is currently closed on New Year's Day,
Martin Luther King, Jr. Day, President's Day, Good Friday,
9
<PAGE>
Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day and on the preceding Friday or subsequent
Monday if any of those days falls on a Saturday or Sunday,
respectively. Your order will be priced at the next NAV
calculated after your order is received by the Fund. We
reserve the right to reject any purchase order and to waive
the initial and subsequent investment minimums at any time.
Fund shares may be purchased through various third-party
intermediaries including banks, brokers, financial advisers
and financial supermarkets. When the intermediary is
authorized by the Fund, orders will be priced at the NAV next
computed after receipt by the intermediary.
/ / DISTRIBUTION CHARGES
The Fund has adopted a plan under rule 12b-1 of the
Investment Company Act of 1940. Under the plan, the Fund is
charged a fee at the annual rate of 0.25% of the Fund's
average daily net assets with the proceeds used to finance
the activities of Value Line Securities, Inc., the Fund's
distributor. The plan provides that the distributor may make
payments to securities dealers, banks, financial institutions
and other organizations which provide distribution and
administrative services with respect to the distribution of
the Fund's shares. Such services may include, among other
things, answering investor inquiries regarding the Fund;
processing new shareholder account applications and
redemption transactions; responding to shareholder inquiries;
and such other services as the Fund may request to the extent
permitted by applicable statute, rule or regulation. The plan
also provides that the Adviser may make such payments out of
its advisory fee, its past profits or any other source
available to it. The fees payable to the distributor under
the plan are payable without regard to actual expenses
incurred.
/ / NET ASSET VALUE
We calculate NAV by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all
liabilities, and dividing the resulting number by the number
of shares outstanding. The result is the net asset value per
share. We price securities for which market prices or
quotations are available at their market value. We price
securities for which market valuations are not available at
their fair market value as determined under the direction of
the Board of Directors. Any investments which have a maturity
of less than 60 days we price at amortized cost. The
amortized cost method of valuation involves valuing a
security at its cost and accruing any discount or premium
over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the
security.
10
<PAGE>
HOW TO SELL SHARES
/ / BY MAIL
You can redeem your shares (sell them back to the Fund) by
mail by writing to: Value Line Funds, c/o National Financial
Data Services, Inc., P.O. Box 219729, Kansas City, MO
64121-9729. The request must be signed by all owners of the
account, and you must include a signature guarantee for each
owner. Signature guarantees are also required when redemption
proceeds are going to anyone other than the account holder(s)
of record. If you hold your shares in certificates, you must
submit the certificates properly endorsed with signature
guaranteed with your request to sell the shares. A signature
guarantee can be obtained from most banks or securities
dealers, but not from a notary public. A signature guarantee
helps protect against fraud.
/ / THROUGH A BROKER-DEALER
You may sell your shares through a broker-dealer, who may
charge a fee for this service.
The Fund has authorized certain brokers to accept purchase
and redemption orders on behalf of the Fund. The Fund has
also authorized these brokers to designate others to accept
purchase and redemption orders on behalf of the Fund.
We treat any order to buy or sell shares that you place with
one of these brokers, or anyone they have designated, as if
you had placed it directly with the Fund. The shares that you
buy or sell through brokers or anyone they have designated
are priced at the next net asset value that is computed after
they receive your order.
Among the brokers that have been authorized are Charles
Schwab & Co., Inc., National Investor Services Corp.,
Pershing and Fidelity Brokerage Services Corp. You should
consult with your broker to determine if it has been
authorized.
/ / BY EXCHANGE
You can exchange all or part of your investment in the Fund
for shares in other Value Line funds. When you exchange
shares, you are purchasing shares in another fund so you
should be sure to get a copy of that fund's prospectus and
read it carefully before buying shares through an exchange.
To execute an exchange, call 800-243-2729.
11
<PAGE>
When you send us a request to sell or exchange shares, you
will receive the net asset value that is next determined
after we receive your request. For each account involved, you
should provide the account name, number, name of fund and
exchange or redemption amount. Call 1-800-243-2729 for
additional documentation that may be required. You may have
to pay taxes on the gain from your sale of shares.
We will pay you promptly, normally the next business day, but
no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we
will wait until your check has cleared, which can take up to
15 days from the day of purchase, before we send the proceeds
to you.
Exchanges among Value Line funds are a shareholder privilege
and not a right. We may reject any exchange order,
particularly when there appears to be frequent purchases and
sales by a shareholder.
ACCOUNT MINIMUM
If as a result of redemptions your account balance falls
below $500, the Fund may ask you to increase your balance
within 30 days. If your account is not at the minimum by the
required time, the Fund may redeem your account, after first
notifying you in writing.
REDEMPTION IN KIND
The Fund reserves the right to make a redemption in
kind--payment in portfolio securities rather than cash--if
the amount being redeemed is large enough to affect Fund
operations.
12
<PAGE>
SPECIAL SERVICES
To help make investing with us as easy as possible, and to
help you build your investments, we offer the following
special services. You can get further information about these
programs by calling Shareholder Services at 800-223-0818.
/ / Valu-Matic-Registered Trademark- allows you to make regular
monthly investments of $25 or more automatically from your
checking account.
/ / Through our Systematic Cash Withdrawal Plan you can arrange a
regular monthly or quarterly payment from your account
payable to you or someone you designate. If your account is
$5,000 or more, you can have monthly or quarterly withdrawals
of $25 or more.
/ / You may buy shares in the Fund for your individual or group
retirement plan, including your Regular or Roth IRA. You may
establish your IRA account even if you already are a member
of an employer-sponsored retirement plan. Not all
contributions to an IRA account are tax deductible: consult
your tax advisor about the tax consequences of your
contribution.
13
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to pay dividends from its net investment
income, if any, and to distribute any capital gains that it
has realized annually. We automatically reinvest all
dividends and any capital gains, unless you instruct us
otherwise in your application to purchase shares.
You will generally be taxed on distributions you receive,
regardless of whether you reinvest them or receive them in
cash. Dividends from short-term capital gains and net
investment income will be taxable as ordinary income.
Dividends designated by the Fund as capital gains
distributions will be taxable at your long-term capital gains
tax rate, no matter how long you have owned your Fund shares.
In addition, you may be subject to state and local taxes on
distributions.
We will send you a statement by January 31 each year
detailing the amount and nature of all dividends and capital
gains that you received during the prior year.
If you hold your Fund shares in a tax-deferred retirement
account, such as an IRA, you generally will not have to pay
tax on distributions until they are distributed from the
account. These accounts are subject to complex tax rules, and
you should consult your tax adviser about investment through
a tax-deferred account.
You will generally have a capital gain or loss if you dispose
of your Fund shares by redemption, exchange or sale. Your
gain or loss will be long-term or short-term, generally
depending upon how long you owned your shares.
As with all mutual funds, the Fund may be required to
withhold U.S. federal income tax at the rate of 31% of all
taxable distributions payable to you if you fail to provide
the Fund with your correct taxpayer identification number or
to make required certifications, or if you have been notified
by the IRS that you are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in
which the IRS ensures it will collect taxes otherwise due.
Any amounts withheld may be credited against your U.S.
federal income tax liability.
The above discussion is meant only as a summary, and we urge
you to consult your tax adviser about your particular tax
situation and how it might be affected by current tax law.
14
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you
understand the Fund's financial performance for the past five
years. Certain information reflects financial results for a
single Fund share. The total returns in the table represent
the rate that an investor would have earned or lost on an
investment in the Fund assuming reinvestment of all dividends
and distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual
report, which is available upon request by calling
800-223-0818.
FINANCIAL HIGHLIGHTS
<TABLE>
---------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31,
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $13.24 $13.37 $12.67 $15.11 $12.33
---------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (.15)(3) (.11)(3) (.15) (.13) (.18)
Net gains or (losses) on
securities (both realized
and unrealized) 12.39 .21 3.34 (.08) 3.08
---------------------------------------------------------------------------------------------------
Total from investment
operations 12.24 .10 3.19 (.21) 2.90
---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from capital
gains (.51) (.23) (2.49) (2.23) (.12)
---------------------------------------------------------------------------------------------------
Total distributions (.51) (.23) (2.49) (2.23) (.12)
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $24.97 $13.24 $13.37 $12.67 $15.11
---------------------------------------------------------------------------------------------------
TOTAL RETURN 93.59% 1.01% 27.50% (2.07)% 23.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands) $50,784 $21,561 $21,490 $16,974 $19,106
Ratio of operating expenses to
average
net assets 1.34%(2)(3) 1.34%(2)(3) 1.81%(1) 1.87%(1) 2.15%(1)
Ratio of net investment loss
to average
net assets (0.96)%(3) (0.90)%(3) (1.10)% (1.07)% (1.27)%
Portfolio turnover rate 104% 203% 149% 100% 57%
---------------------------------------------------------------------------------------------------
</TABLE>
(1) Before offset of custody credits.
(2) Ratio reflects expenses grossed up for custody credit arrangement. The
ratio of expenses to average net assets net of custody credits would have
been 1.32% in the year ended 3/31/2000 and 1.29% in the year ended
3/31/1999.
(3) Net of waived advisory fee and service and distribution plan fees. Had
these expenses been fully paid by the Fund for the years ended March 31,
2000 and March 31, 1999, net investment loss per share would have been
$(.21) and $(.18), the ratio of expenses to average net assets would have
been 1.69% and 1.91%, and the ratio of net investment loss to average net
assets would have been 1.31% and (1.47)%, respectively.
------------------------------------------------------------
15
<PAGE>
FOR MORE INFORMATION
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional
Information dated August 1, 2000, which we have filed
electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you
want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any
questions about investing in this Fund, you can write to us
at 220 East 42nd Street, New York, NY 10017-5891 or call
toll-free 800-223-0818. You may also obtain the prospectus
from our Internet site at
http:// www.valueline.com.
Reports and other information about the Fund are available on
the Edgar Database on the SEC Internet site
(http:// www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by
electronic request at the following E-mail address:
[email protected], or by writing to the Public Reference
Section of the SEC, Washington, D.C. 20549-0102. Information
about the Fund, including its Statement of Additional
Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington,
D.C. You can get information on operation of the public
reference room by calling the SEC at 1-202-942-8090.
<TABLE>
<S> <C>
INVESTMENT ADVISER SERVICE AGENT
Value Line, Inc. State Street Bank and Trust Company
220 East 42nd Street c/o NFDS
New York, NY 10017-5891 P.O. Box 219729
Kansas City, MO 64121-9729
CUSTODIAN DISTRIBUTOR
State Street Bank and Trust Company Value Line Securities, Inc.
225 Franklin Street 220 East 42nd Street
Boston, MA 02110 New York, NY 10017-5891
</TABLE>
<TABLE>
<S> <C>
Value Line Securities, Inc.
220 East 42nd Street, New York, NY 10017-5891 File no. 811-7388
</TABLE>
<PAGE>
VALUE LINE EMERGING OPPORTUNITIES FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818 or 1-800-243-2729
www.valueline.com
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 2000
-------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line Emerging Opportunities
Fund, Inc. dated August 1, 2000, a copy of which may be obtained without charge
by writing or telephoning the Fund. The financial statements, accompanying notes
and report of independent accountants appearing in the Fund's 2000 Annual Report
to Shareholders are incorporated by reference in this Statement. A copy of the
Annual Report is available from the Fund upon request and without charge by
calling 800-223-0818.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Fund and Its Investments and Risks....... B-2
Management of the Fund...................................... B-8
Investment Advisory and Other Services...................... B-10
Service and Distribution Plan............................... B-11
Brokerage Allocation and Other Practices.................... B-11
Capital Stock............................................... B-12
Purchase, Redemption and Pricing of Shares.................. B-13
Taxes....................................................... B-14
Performance Data............................................ B-17
Financial Statements........................................ B-18
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
HISTORY AND CLASSIFICATION. The Fund is an open-end, diversified management
investment company incorporated in Maryland in 1993 under the name "Value Line
Small-Cap Growth Fund, Inc." On February 1, 2000, the Fund's name changed to
"Value Line Emerging Opportunities Fund, Inc." The Fund's investment adviser is
Value Line, Inc. (the "Adviser").
NON-PRINCIPAL INVESTMENT STRATEGIES AND ASSOCIATED RISKS.
- RESTRICTED SECURITIES. On occasion, the Fund may purchase securities
which would have to be registered under the Securities Act of 1933 if they were
to be publicly distributed. However, it will not do so if the value of such
securities (other than in a Rule 144A transaction) would exceed 5% of the market
value of its net assets or if the value of such securities and other securities
which are not readily marketable (including repurchase agreements maturing in
more than seven days) would exceed 15% of the market value of its net assets. It
is management's policy to permit the occasional acquisition of such restricted
securities only if (except in the case of short-term non-convertible debt
securities) there is an agreement by the issuer to register such securities,
ordinarily at the issuer's expense, when requested to do so by the Fund. The
acquisition in limited amounts of restricted securities is believed to be
helpful toward the attainment of the Fund's investment objective without unduly
restricting its liquidity or freedom in the management of its portfolio.
However, because restricted securities may only be sold privately or in an
offering registered under the Securities Act of 1933, or pursuant to an
exemption from such registration, substantial time may be required to sell such
securities, and there is greater than usual risk of price decline prior to sale.
In addition, the Fund may purchase certain securities ("Rule 144A
securities") for which there is a secondary market of qualified institutional
buyers, as contemplated by Rule 144A under the Securities Act of 1933.
Rule 144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified
institutional buyers.
The Adviser, under the supervision of the Board of Directors, will consider
whether securities purchased under Rule 144A are liquid or illiquid for purposes
of the Fund's limitation on investment in securities which are not readily
marketable or are illiquid. Among the factors to be considered are the frequency
of trades and quotes, the number of dealers and potential purchasers, dealer
undertakings to make a market and the nature of the security and the time needed
to dispose of it.
To the extent that the liquid Rule 144A securities that the Fund holds
become illiquid, due to lack of sufficient qualified institutional buyers or
market or other conditions, the percentage of the Fund's assets invested in
illiquid assets would increase. The Adviser, under the supervision of the Board
of Directors, will monitor the Fund's investments in Rule 144A securities and
will consider appropriate measures to enable the Fund to maintain sufficient
liquidity for operating purposes and to meet redemption requests.
- STOCK INDEX FUTURES CONTRACTS AND OPTIONS THEREON. The Fund may trade in
stock index futures contracts and in options on such contracts. Such contracts
will be entered into on exchanges designated by the Commodity Futures Trading
Commission ("CFTC").
The Fund's futures and options on futures transactions must constitute bona
fide hedging or other risk management purposes pursuant to regulations
promulgated by the CFTC. In addition, the Fund may not engage in such activities
generally if the sum of the amount of initial margin deposits
B-2
<PAGE>
and premiums paid for unexpired commodity options would exceed 5% of the fair
market value of the Fund's net assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%. In
instances involving entering into long futures or options contracts by the Fund,
an amount equal to the market value of the futures contract will be deposited in
a segregated account with the Fund's custodian of cash and liquid securities to
collateralize the position and thereby insure that the use of such futures
contract is unleveraged. No more than 25% of the Fund's net assets may be
deposited in such segregated account.
There can be no assurance of the Fund's successful use of stock index
futures as a hedging device. Hedging transactions involve certain risks. One
risk arises because of the imperfect correlation between movements in the price
of the stock index future and movements in the price of the securities which are
the subject of the hedge. The risk of imperfect correlation increases as the
composition of the Fund's securities portfolio diverges from the securities
included in the applicable stock index. In addition to the possibility that
there may be an imperfect correlation, or no correlation at all, between
movements in the stock index future and the portion of the portfolio being
hedged, the price of stock index futures may not correlate perfectly with the
movement in the stock index due to certain market distortions. Increased
participation by speculators in the futures market also may cause temporary
price distortions. Due to the possibility of price distortions in the futures
market and because of the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by the Adviser still may not result in a successful
hedging transaction.
For example, should the Fund anticipate a decrease in the value of its
portfolio securities, it could enter into futures contracts to sell stock
indexes thereby partially hedging its portfolio against the anticipated losses.
Losses in the portfolio, if realized, should be partially offset by gains on the
futures contracts. Conversely, if the Fund anticipated purchasing additional
portfolio securities in a rising market, it could enter into futures contracts
to purchase stock indexes thereby locking in a price. The implementation of
these strategies by the Fund should be less expensive and more efficient than
buying and selling the individual securities at inopportune times.
A stock index future obligates the seller to deliver (and the purchaser to
take) an amount of cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of the last trading day
of the contract and the price at which the contract is entered into. There can
be no assurance of the Fund's successful use of stock index futures as a hedging
device.
The contractual obligation is satisfied by either a cash settlement or by
entering into an opposite and offsetting transaction on the same exchange prior
to the delivery date. Entering into a futures contract to deliver the index
underlying the contract is referred to as entering into a short futures
contract. Entering into a futures contract to take delivery of the index is
referred to as entering into a long futures contract. An offsetting transaction
for a short futures contract is effected by the Fund entering into a long
futures contract for the same date, time and place. If the price of the short
contract exceeds the price in the offsetting long, the Fund is immediately paid
the difference and thus realizes a gain. If the price of the long transaction
exceeds the short price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a long futures contract is effected by the Fund
entering into a short futures contract. If the offsetting short price exceeds
the long price, the
B-3
<PAGE>
Fund realizes a gain, and if the offsetting short price is less than the long
price, the Fund realizes a loss.
No consideration will be paid or received by the Fund upon entering into a
futures contract. Initially, the Fund will be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1% to 10% of
the contract amount. This amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may charge a
higher amount. This amount is known as "initial margin" and is in the nature of
a performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price of the index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market."
The Fund may also purchase put and call options on stock index futures
contracts on commodity exchanges or write covered options on such contracts. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, while a put option gives the purchaser the right to sell and the writer
the obligation to buy. Unlike a stock index futures contract, which requires the
parties to buy and sell the stock index on a set date, an option on a stock
index futures contract entitles its holder to decide on or before a future date
whether to enter into such a futures contract. If the holder decides not to
enter into the contract, the premium paid for the option is lost. Since the
value of the option is fixed at the point of sale, the purchase of an option
does not require daily payments of cash in the nature of "variation" or
"maintenance" margin payments to reflect the change in the value of the
underlying contract. The value of the option purchased by the Fund does change
and is reflected in the net asset value of the Fund. The writer of an option,
however, must make margin payments on the underlying futures contract. Exchanges
provide trading mechanisms so that an option once purchased can later be sold
and an option once written can later be liquidated by an offsetting purchase.
Successful use of stock index futures by the Fund also is subject to the
Adviser's ability to predict correctly movements in the direction of the market.
If the Adviser's judgment about the several directions of the market is wrong,
the Fund's overall performance may be worse than if no such contracts had been
entered into. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting stocks held in its portfolio and stock
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of its stock which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Fund may have to
sell securities at a time when it may be disadvantageous to do so. When stock
index futures are purchased to hedge against a possible increase in the price of
stocks before the Fund is able to invest its cash (or cash equivalents) in
stocks in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest in stocks at that time because
of concern as to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not offset by a reduction in
the price of securities purchased.
Use of options on stock index futures entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. The Fund will not
B-4
<PAGE>
purchase these options unless its investment adviser is satisfied with the
development, depth and liquidity of the market and the investment adviser
believes the options can be closed out.
Options and futures contracts entered into by the Fund will be subject to
special tax rules. These rules may accelerate income to the Fund, defer Fund
losses, cause adjustments in the holding periods of Fund securities, convert
capital gain into ordinary income and convert short-term capital losses into
long-term capital losses. As a result, these rules could affect the amount,
timing and character of Fund distributions. However, the Fund anticipates that
these investment activities will not prevent the Fund from qualifying as a
regulated investment company.
- REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The Fund will make payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto;
(b) possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights.
- LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to broker-dealers or institutional investors if as a result thereof the
aggregate value of all securities loaned does not exceed 33 1/3% of the total
assets of the Fund (including the loan collateral). The loans will be made in
conformity with applicable regulatory policies and will be 100% collateralized
by cash or liquid securities on a daily basis in an amount equal to the market
value of the securities loaned and interest earned. The Fund will retain the
right to call, upon notice, the loaned securities and intends to call loaned
voting securities in anticipation of any important or material matter to be
voted on by shareholders. While there may be delays in recovery or even loss of
rights in the collateral should the borrower fail financially, the loans will be
made only to firms deemed by the Adviser to be of good standing and will not be
made unless, in the judgment of the Adviser, the consideration which can be
earned from such loan justifies the risk. The Fund may pay reasonable custodian
and administrative fees in connection with the loans.
- COVERED CALL OPTIONS. The Fund may write covered call options on stocks
held in its portfolio ("covered options"). When the Fund writes a covered call
option, it gives the purchaser of the option the right to buy the underlying
security at the price specified in the option (the "exercise price") at any time
during the option period. If the option expires unexercised, the Fund will
realize income to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder at the
exercise price. By writing a covered option, the Fund foregoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the
B-5
<PAGE>
option period from an increase in the market value of the underlying security
above the exercise price. The Fund will not write call options in an aggregate
amount greater than 25% of its net assets.
The Fund will purchase call options only to close out a position. When an
option is written on securities in the Fund's portfolio and it appears that the
purchaser of that option is likely to exercise the option and purchase the
underlying security, it may be considered appropriate to avoid liquidating the
Fund's position, or the Fund may wish to extinguish a call option sold by it so
as to be free to sell the underlying security. In such instances the Fund may
purchase a call option on the same security with the same exercise price and
expiration date which had been previously written. Such a purchase would have
the effect of closing out the option which the Fund has written. The Fund
realizes a gain if the amount paid to purchase the call option is less than the
premium received for writing a similar option and a loss if the amount paid to
purchase a call option is greater than the premium received for writing a
similar option. Generally, the Fund realizes a short-term capital loss if the
amount paid to purchase the call option with respect to a stock is greater than
the premium received for writing the option. If the underlying security has
substantially risen in value, it may be difficult or expensive to purchase the
call option for the closing transaction.
FUND POLICIES.
(i) The Fund may not issue senior securities or borrow money in excess
of 10% of the value of its net assets and then only as a temporary measure
to meet unusually heavy redemption requests or for other extraordinary or
emergency purposes. Securities will not be purchased while borrowings are
outstanding. No assets of the Fund may be pledged, mortgaged or otherwise
encumbered, transferred or assigned to secure a debt.
(ii) The Fund may not engage in the underwriting of securities except to
the extent that the Fund may be deemed an underwriter as to restricted
securities under the Securities Act of 1933 in selling portfolio securities.
(iii) The Fund may not invest 25% or more of its assets in securities of
issuers in any one industry.
(iv) The Fund may not purchase securities of other investment companies
except in mergers or other business combinations or invest in real estate,
mortgages, illiquid securities of real estate investment trusts, real estate
limited partnerships or interests in oil, gas or mineral leases, although
the Fund may purchase securities of issuers which engage in real estate
operations.
(v) The Fund may not lend money except in connection with the purchase
of debt obligations or by investment in repurchase agreements, provided that
repurchase agreements maturing in more than seven days, over-the-counter
options held by the Fund and the portion of the assets used to cover such
options when taken together with other securities that are illiquid or
restricted do not exceed 15% of the Fund's net assets. The Fund may lend its
portfolio securities to broker-dealers and institutional investors if as a
result thereof the aggregate value of all securities loaned does not exceed
33 1/3% of the total assets of the Fund.
(vi) The Fund may not engage in arbitrage transactions, short sales,
purchases on margin or participate on a joint or joint and several basis in
any trading account in securities except in
B-6
<PAGE>
connection with the purchase or sale of futures transactions and to deposit
or pay initial or variation margin in connection with financial futures
contracts or related options transactions.
(vii) The Fund may not invest more than 5% of its total assets in the
securities of any one issuer or purchase more than 10% of the outstanding
voting securities, or any other class of securities, of any one issuer. For
purposes of this restriction, all outstanding debt securities of an issuer
are considered as one class, and all preferred stock of an issuer is
considered as one class. This restriction does not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
(viii) The Fund may not invest more than 5% of its total assets in
securities of issuers having a record, together with its predecessors, of
less than three years of continuous operation. This restriction does not
apply to any obligation issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
(ix) The Fund may not purchase securities for the purpose of exercising
control over another company.
(x) The Fund may not invest in commodities or commodity contracts except
that the Fund may invest in futures contracts and financial futures
contracts and options on futures contracts and financial futures contracts.
(xi) The Fund may not purchase the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and of the
Adviser, who each owns more than 0.5% of the outstanding securities of such
issuer, together own more than 5% of such securities.
(xii) The Fund may not invest more than 2% of the value of its total
assets in warrants (valued at the lower of cost or market), except that
warrants attached to other securities are not subject to these limitations.
(xiii) The primary investment objective of the Fund is long-term growth
of capital.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction except for restriction (i). For
purposes of industry classifications, the Fund follows the industry
classifications in The Value Line Investment Survey.
The policies set forth above may not be changed without the affirmative vote
of the majority of the outstanding voting securities of the Fund which means the
lesser of (1) the holders of more than 50% of the outstanding shares of capital
stock of the Fund or (2) 67% of the shares present if more than 50% of the
shares are present at a meeting in person or by proxy.
B-7
<PAGE>
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed by the Fund's officers
under the direction of the Board of Directors. Set forth below is certain
information regarding the Directors and Officers of the Fund.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
--------------------- ------------------ -----------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Chairman, President and Chief Executive
Age 65 Board of Directors Officer of the Adviser and Value Line
and President Publishing, Inc.; Chairman and Presi-
dent of the Value Line Funds and Value
Line Securities, Inc. (the
"Distributor"); Chairman and President of
each of the 15 Value Line Funds.
John W. Chandler Director Consultant, Academic Search Consul-
2801 New Mexico Ave., N.W. tation Service, Inc.; Trustee Emeritus
Washington, DC 20007 and Chairman (1993-1994) of the Board of
Age 76 Trustees of Duke University; President
Emeritus, Williams College.
Frances T. Newton Director Computer Programming Professional, Duke
4921 Buckingham Drive Power Company.
Charlotte, NC 28209
Age 59
Francis C. Oakley Director Professor of History, Williams College,
54 Scott Hill Road 1961 to present, President Emeritus since
Williamstown, MA 01267 1994 and President, 1985-1993; Director,
Age 68 Berkshire Life Insurance Company.
David H. Porter Director Visiting Professor of Classics, Williams
5 Birch Run Drive College, since 1999; President Emeri-
Saratoga Springs, NY 12866 tus, Skidmore College since 1999 and
Age 64 President, 1987-1998; Director of
Adirondack Trust Company.
Paul Craig Roberts Director Chairman, Institute for Political Econ-
169 Pompano St. omy; Director, A. Schulman Inc. (plas-
Panama City Beach, FL 32413 tics).
Age 61
Marion N. Ruth Director Real Estate Executive; President, Ruth
5 Outrider Road Realty (real estate broker).
Rolling Hills, CA 90274
Age 65
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
--------------------- ------------------ -----------------------------------------
<S> <C> <C>
Nancy-Beth Sheerr Director Former Chairman, Radcliffe College Board
1409 Beaumont Drive of Trustees.
Gladwyne, PA 19035
Age 51
Stephen Grant Vice President Portfolio Manager with the Adviser.
Age 46
David T. Henigson Vice President, Director, Vice President and Compliance
Age 42 Secretary and Officer of the Adviser; Director and Vice
Treasurer President of the Distributor; Vice
President, Secretary and Treasurer of
each of the 15 Value Line Funds.
</TABLE>
--------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors of the Fund are also directors/trustees of 14 other Value Line
Funds.
The following table sets forth information regarding compensation of
Directors by the Fund and by the Fund and the other Value Line Funds of which
each of the Directors was a director for the fiscal year ended March 31, 2000.
Directors who are officers or employees of the Adviser do not receive any
compensation from the Fund or any of the Value Line Funds.
COMPENSATION TABLE
FISCAL YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSONS FROM FUND OF FUND EXPENSES RETIREMENT (15 FUNDS)
--------------- ------------ ---------------- ---------- ------------
<S> <C> <C> <C> <C>
Jean B. Buttner................... $ -0- N/A N/A $ -0-
John W. Chandler*................. -0- N/A N/A 35,620
Frances T. Newton................. 5,834 N/A N/A 20,000
Francis C. Oakley................. 5,834 N/A N/A 20,000
David H. Porter*.................. -0- N/A N/A 35,620
Paul Craig Roberts*............... -0- N/A N/A 35,620
Marion N. Ruth.................... 5,834 N/A N/A 20,000
Nancy-Beth Sheerr*................ -0- N/A N/A 35,620
</TABLE>
--------------
* Became a Director of the Fund on June 15, 2000.
As of May 31, 2000, no person owned of record or, to the knowledge of the
Fund, owned beneficially, 5% or more of the outstanding stock of the Fund other
than the Adviser and affiliated companies which owned 1,317,628 shares of the
Fund's capital stock or 66.7% of the outstanding shares. In addition, First
Union National Bank, as Trustee of the Value Line, Inc. Profit Sharing and
B-9
<PAGE>
Savings Plan, owned 80,068 shares (4.1%) and Jean B. Buttner, Chairman of the
Board of Directors and President, owned 44,894 shares (2.3%). Other officers and
directors of the Fund owned 763 shares of capital stock, representing less than
1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund's investment adviser is Value Line, Inc. (the "Adviser").
Arnold Bernhard & Co., Inc., 220 East 42nd Street, New York, NY 10017, a holding
company, owns approximately 84% of the outstanding shares of the Adviser's
common stock. Jean Bernhard Buttner, Chairman, President and Chief Executive
Officer of the Adviser and Chairman and President of the Fund, owns all of the
voting stock of Arnold Bernhard & Co., Inc.
The investment advisory agreement between the Fund and the Adviser, dated
June 1, 1993, provides for an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets during the year. During the fiscal years ended
March 31, 1998, 1999 and 2000, the Fund paid or accrued to the Adviser advisory
fees of $163,905, $57,239 and $143,291 respectively. From August 18, 1998 to
March 31, 1999, advisory fees amounting to $87,176 were voluntarily waived by
the Adviser, and advisory fees amounting to $95,298 from April 1, 1999 to
October 6, 1999 were also voluntarily waived by the Adviser.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agents, legal,
audit and Fund accounting expenses and fees, fees and expenses in connection
with qualification under federal and state securities laws and costs of
shareholder reports and proxy materials. The Fund has agreed that it will use
the words "Value Line" in its name only so long as Value Line, Inc. serves as
investment adviser to the Fund. The agreement will terminate upon its
assignment.
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment counseling
services to private and institutional accounts resulting in combined assets
under management in excess of $5 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may
from time to time own securities which are also held in the portfolio of the
Fund. The Fund, the Adviser and the Distributor have adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act which permits
B-10
<PAGE>
personnel subject to the Code to invest in securities, including securities that
may be purchased or held by the Fund. The Code requires that such personnel
submit reports of security transactions for their respective accounts and
restricts trading in various situations in order to avoid possible conflicts of
interest.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor") whose address is 220 East 42nd Street, New
York, NY 10017, pursuant to which the Distributor acts as principal underwriter
and distributor of the Fund for the sale and distribution of its shares. The
Distributor is a wholly-owned subsidiary of the Adviser. For its services under
the agreement, the Distributor is not entitled to receive any compensation,
although it is entitled to receive fees under the Service and Distribution Plan.
The Distributor also serves as distributor to the other Value Line funds.
Jean Bernhard Buttner is Chairman and President of the Distributor.
The Adviser has retained State Street Bank and Trust Company ("State
Street") to provide certain bookkeeping and accounting services for the Fund.
The Adviser pays State Street $32,400 per annum for each Value Line fund for
which State Street provides these services. State Street, whose address is
225 Franklin Street, Boston, MA 02110, also acts as the Fund's custodian,
transfer agent and dividend-paying agent. As custodian, State Street is
responsible for safeguarding the Fund's cash and securities, handling the
receipt and delivery of securities and collecting interest and dividends on the
Fund's investments. As transfer agent and dividend-paying agent, State Street
effects transfers of Fund shares by the registered owners and transmits payments
for dividends and distributions declared by the Fund. National Financial Data
Services, Inc., a State Street affiliate, whose address is 330 W. 9th Street,
Kansas City, MO 64105, provides certain transfer agency functions to the Fund as
an agent for State Street. PricewaterhouseCoopers LLP, whose address is
1177 Avenue of the Americas, New York, NY 10036, acts as the Fund's independent
accountants and also performs certain tax preparation services.
SERVICE AND DISTRIBUTION PLAN
The Service and Distribution Plan (12b-1 Plan) is designed to finance the
activities of Value Line Securities, Inc. (the "Distributor") in advertising,
marketing and distributing Fund shares and for servicing Fund shareholders at an
annual rate of .25% of the Fund's average daily net assets. During the fiscal
year ended March 31, 2000, the Fund paid fees of $65,583 to the Distributor
under the Plan; the Distributor voluntarily waived additional fees of $13,946.
The Distributor paid $17,688 to other broker-dealers and incurred $2,516 in
advertising and other marketing expenses. The fees payable to the Distributor
under the Plan are payable without regard to actual expenses incurred.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Debt
securities are traded principally in the over-the-counter market on a net basis
through dealers acting for their own account and not as brokers. Purchases and
sales of securities which are not listed or traded on a securities exchange will
ordinarily be executed with primary market makers acting as principal, except
when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of
B-11
<PAGE>
the brokerage and research services provided. Such allocation will be in such
amounts and in such proportions as the Adviser may determine. Orders may also be
placed with brokers or dealers who sell shares of the Fund or other funds for
which the Adviser acts as investment adviser, but this fact, or the volume of
such sales, is not a consideration in their selection. During the fiscal years
ended March 31, 1998, 1999 and 2000, the Fund paid brokerage commissions of
$50,452, $54,623 and $24,096 respectively, of which $0, $19,652 (36%) and
$14,865 (62%), respectively, was paid to Value Line Securities, Inc., the Fund's
distributor and a subsidiary of the Adviser. Value Line Securities, Inc. clears
transactions for the Fund through unaffiliated broker-dealers.
The Board of Directors has adopted procedures incorporating the standards of
Rule 17e-1 under the 1940 Act which requires that the commissions paid to Value
Line Securities or any other "affiliated person" be "reasonable and fair"
compared to the commissions paid to other brokers in connection with comparable
transactions. The procedures require that the Adviser furnish reports to the
Directors with respect to the payment of commissions to affiliated brokers and
maintain records with respect thereto. During the fiscal year ended March 31,
2000, $22,140 (92%) of the Fund's brokerage commissions were paid to brokers or
dealers solely for their services in obtaining the best prices and executions;
the balance, or $1,956 (8%), went to brokers or dealers who provided information
or services to the Adviser and, therefore, indirectly to the Fund and the other
entities that it advises. The information and services furnished to the Adviser
include the furnishing of research reports and statistical compilations and
computations and the providing of current quotations for securities. The
services and information were furnished to the Adviser at no cost to it; no such
services or information were furnished directly to the Fund, but certain of
these services might have relieved the Fund of expenses which it would otherwise
have had to pay. Such information and services are considered by the Adviser,
and brokerage commissions are allocated in accordance with its assessment of
such information and services, but only in a manner consistent with the placing
of purchase and sale orders with brokers and/or dealers, which, in the judgment
of the Adviser, are able to execute such orders as expeditiously as possible and
at the best obtainable price. The Fund is advised that the receipt of such
information and services has not reduced in any determinable amount the overall
expenses of the Adviser.
PORTFOLIO TURNOVER. The Fund's annual portfolio turnover rate has equaled
or exceeded 100% in each of the last five years. A rate of portfolio turnover of
100% occurs when all of the Fund's portfolio is replaced in a period of one
year. To the extent that the Fund engages in short-term trading in attempting to
achieve its objective, it may increase portfolio turnover and incur higher
brokerage commissions and other expenses than might otherwise be the case.
Portfolio turnover may also result in capital gain distributions that could
increase your income tax liability. The Fund's portfolio turnover rate for
recent fiscal years is shown under "Financial Highlights" in the Fund's
Prospectus.
CAPITAL STOCK
Each share of the Fund's common stock, $.001 par value, has one vote with
fractional shares voting proportionately. Shares have no preemptive rights, are
freely transferable, are entitled to dividends as declared by the Directors and,
if the Fund were liquidated, would receive the net assets of the Fund.
B-12
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES: Shares of the Fund are purchased at the net asset value next
calculated after receipt of a purchase order. Minimum orders are $1,000 for an
initial purchase and $100 for each subsequent purchase. The Fund reserves the
right to reduce or waive the minimum purchase requirements in certain cases such
as pursuant to payroll deduction plans, etc., where subsequent and continuing
purchases are contemplated.
AUTOMATIC PURCHASES: The Fund offers a free service to its shareholders,
Valu-Matic, through which monthly investments of $25 or more may be made
automatically into the shareholder's Fund account. The required form to enroll
in this program is available upon request from the Distributor.
RETIREMENT PLANS: Shares of the Fund may be purchased as the investment medium
for various tax-sheltered retirement plans. Upon request, the Distributor will
provide information regarding eligibility and permissible contributions. Because
a retirement plan is designed to provide benefits in future years, it is
important that the investment objectives of the Fund be consistent with the
participant's retirement objectives. Premature withdrawals from a retirement
plan may result in adverse tax consequences. For more complete information,
contact Shareholder Services at 1-800-223-0818.
REDEMPTION: The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period, by the Fund under the following
conditions authorized by the 1940 Act: (1) For any period (a) during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) For any period during which an emergency exists as a result of
which (a) disposal by the Fund of securities owned by it is not reasonably
practical, or (b) it is not reasonably practical for the Fund to determine the
fair value of its net assets; (3) For such other periods as the Securities and
Exchange Commission may by order permit for the protection of the Fund's
shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time. Shareholders should note that if a loss has been realized on the sale of
shares of the Fund, the loss may be disallowed for tax purposes if shares of the
same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities or other property of the Fund. However, the Fund has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Fund's net assets
if that is less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing the net
asset value per share. Shareholders receiving such securities may incur
brokerage costs on their sales.
The net asset value of the Fund's shares for purposes of both purchases and
redemptions is determined once daily as of the close of regular trading on the
New York Stock Exchange (generally 4:00 p.m., New York time) on each day that
the New York Stock Exchange is open for trading except on days on which no
orders to purchase, sell or redeem Fund shares have been received. The New York
Stock Exchange is currently closed on New Year's Day, Martin Luther King, Jr.
Day, Presidents'
B-13
<PAGE>
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day and on the preceding Friday or subsequent Monday if one of
those days falls on a Saturday or Sunday, respectively. The net asset value per
share is determined by dividing the total value of the investments and other
assets of the Fund, less any liabilities, by the total outstanding shares.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities and for securities traded in the
over-the-counter market, the security is valued at the midpoint between the
latest available and representative asked and bid prices. Securities for which
market quotations are not readily available or which are not readily marketable
and all other assets of the Fund are valued at fair value as the Board of
Directors or persons acting at their direction 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.
TAXES
(SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE FUND'S PROSPECTUS)
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances, nor to certain types of shareholders subject to
special treatment under the federal income tax laws. This discussion is based
upon present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder and judicial and administrative
ruling authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares, as well as the tax consequences arising under the
laws of any state, foreign country, or other taxing jurisdiction.
FUND STATUS. The Fund intends to qualify and elect to be treated each year
as a regulated investment company under Subchapter M of the Code. Accordingly,
the Fund generally must, among other things, (i) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments from certain
securities loans, and gains from the sale of stock, securities or foreign
currencies or other income (such as gains from options, futures or forward
contracts) from investing in stock, securities or currencies; and (ii) hold as
of the close of each quarter, at least 50% of its assets in certain investment
assets, such as cash, U.S. Government securities, securities of other regulated
investment companies and other securities, with such other securities limited as
to any issuer to not more than 5% of the value of the Fund's total assets and
10% of the outstanding voting securities of such issuer, and hold not more than
25% of the value of the Fund's assets in the securities of any issuer (other
than U.S. Government securities or securities of other regulated investment
companies).
FUND DISTRIBUTIONS. As a regulated investment company, the Fund generally
will not be subject to U.S. federal income tax on income and gains that it
distributes to shareholders, if at least 90% of the Fund's investment company
income -- dividends, interest and net short-term capital gains in excess of net
long-term capital losses -- for the taxable year is distributed. The Fund
intends to distribute substantially all of its investment company income and net
capital gains to shareholders
B-14
<PAGE>
for federal income tax purposes although such distributions will be
automatically reinvested in additional shares of the Fund unless the shareholder
has requested otherwise.
Amounts not timely distributed by the Fund are subject to a nondeductible 4%
excise tax at the Fund level. To avoid the tax, the Fund must distribute during
a calendar year at least 98% of its ordinary income, 98% of its capital gains in
excess of capital losses for the one year period ended October 31 of such year,
and all ordinary income and capital gains for previous years that were not
distributed in earlier years. The Fund will satisfy the annual distribution
requirement if it distributes the required amount on or before December 31 of
such year or if the distribution is declared in October, November or December of
such year with a record date within such period and paid by the Fund during
January of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. The Fund
anticipates that it will make sufficient timely distributions to avoid
imposition of the excise tax.
Options, futures contracts and short sales entered into by the Fund will be
subject to special tax rules. These rules may accelerate income to the Fund,
defer Fund losses, cause adjustments in the holding periods of Fund securities,
convert capital gain into ordinary income and convert short-term capital losses
into long-term capital losses. As a result, these rules could affect the amount,
timing and character of Fund distributions.
Distributions of investment company taxable income are taxable to a U.S.
shareholder as ordinary income, whether paid in cash or reinvested. Dividends
paid to a corporate shareholder may qualify for the dividends-received
deduction, to the extent such dividends are attributable to dividends received
from a U.S. corporation. It is expected that dividends from U.S. corporations
will constitute most of the Fund's gross income and that a substantial portion
of the dividends paid by the Fund will qualify for the dividends-received
deduction for corporate shareholders of the Fund. Upon request, the Fund will
advise Fund shareholders of the amount of dividends which qualify for the
dividends-received deduction.
Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses), if any, designated as capital gain
dividends will be taxable to shareholders as long-term capital gains, regardless
of how long the shareholder has held the Fund's shares. Distributions of capital
gain from the sale of assets held for one year or less will generally be taxed
as ordinary income.
Investors purchasing Fund shares prior to a distribution should be aware of
the tax consequences of purchasing such Fund shares. The purchase price paid for
such shares may reflect the amount of the forthcoming distribution. Although
distributions from the Fund shortly after the purchase of Fund shares may be
viewed in substance as a return of capital, nevertheless, such a distribution
will be attributed to the dividend or capital gain income of the Fund and,
therefore, be taxable to the shareholder.
REDEMPTION, SALE OR EXCHANGE OF FUND SHARES. Upon a redemption or sale of
shares of the Fund, a shareholder may realize a gain or loss for federal income
tax purposes depending upon his or her basis in the shares. A gain or loss will
be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands, and will be long-term or short-term, depending upon the
shareholder's holding period for the shares. Any loss realized on a redemption
or sale of Fund shares will
B-15
<PAGE>
be disallowed to the extent the Fund shares disposed of are replaced (including
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after the Fund shares are disposed of. In such a case,
the basis of the Fund shares acquired will be adjusted to reflect the disallowed
loss. If a shareholder held Fund shares for six months or less and during that
period received a distribution taxable to the shareholder as long-term capital
gain, any loss realized on the sale of such Fund shares during such six-month
period would be a long-term loss to the extent of such distribution.
An exchange of shares in the Fund for shares of another Value Line fund will
be treated as a taxable sale of the exchanged Fund shares. Accordingly, a
shareholder may recognize a gain or loss for federal income tax purposes
depending upon his or her basis in the Fund shares exchanged. A gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term depending upon the
shareholder's holding period for the shares. The shareholder will have a tax
basis in the newly-acquired Fund shares equal to the amount invested and will
begin a new holding period for federal income tax purposes.
If a shareholder exchanges shares in the Fund for shares in another Value
Line fund pursuant to a reinvestment right, the sales charge incurred in the
purchase of the Fund shares exchanged may not be added to tax basis in
determining gain or loss for federal income tax purposes. Instead, the sales
charge for the exchanged Fund shares shall be added to basis for purposes of
determining gain or loss on the disposition of the newly-acquired Fund shares,
if such newly-acquired Fund shares are not disposed of in a similar exchange
transaction.
FUND INVESTMENTS. Any regulated futures contracts and certain options
(namely, nonequity options and dealer equity options) in which the Fund may
invest may be "section 1256 contracts." Gains (or losses) on these contracts
generally are considered to be 60% long-term and 40% short-term capital gains or
losses. Also, section 1256 contracts held by the Fund at the end of each taxable
year (and on certain other dates prescribed in the Code) are "marked to market"
with the result that unrealized gains or losses are treated as though they were
realized.
Transactions in options, futures and forward contracts undertaken by the
Fund may result in "straddles" for federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Fund, and
losses realized by the Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. In addition, certain carrying charges (including interest expense)
associated with positions in a straddle may be required to be capitalized rather
than deducted currently. Certain elections that the Fund may make with respect
to its straddle positions may also affect the amount, character and timing of
the recognition of gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
B-16
<PAGE>
CONSTRUCTIVE SALES. Under certain circumstances, the Fund may recognize
gain from a constructive sale of an "appreciated financial position" it holds if
it enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position.
In that event, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code. Constructive sale treatment does
not apply to transactions closed in the 90-day period ending with the 30th day
after the close of the taxable year, if certain conditions are met.
REPORTING AND BACKUP WITHHOLDING. The Fund will be required to report to
the Internal Revenue Service ("IRS") all distributions and gross proceeds from
the redemption of the Fund's shares, except in the case of certain exempt
shareholders. The Fund may be required to withhold U.S. federal income tax at
the rate of 31% of all taxable distributions and redemption proceeds payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make certain certifications or who have been
notified by the IRS that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code generally are
exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the shareholder's U.S. federal
income tax. If the backup withholding provisions are applicable to a
shareholder, distributions and gross proceeds payable to such shareholder will
be reduced by the amounts required to be withheld, regardless of whether such
distributions are paid or reinvested.
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual compounded rate of return for the periods of one year,
five years and ten years, all ended on the last day of a recent calendar
quarter. The Fund may also advertise aggregate total return information for
different periods of time.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T) to the power of n = ERV
<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase
at the end of the period.
</TABLE>
The Fund's average annual total returns as of March 31, 2000, for the one
year, five years and the period since inception were 93.59%, 24.72% and 21.99%,
respectively.
B-17
<PAGE>
The Fund's total return may be compared to relevant indices and data from
Lipper Analytical Services, Inc., Morningstar or Standard & Poor's Indices.
From time to time, evaluations of the Fund's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield, total return or
distribution rate for any period should not be considered as a representation of
what an investment may earn or what an investor's total return, yield or
distribution rate may be in any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended March 31, 2000, including
the financial highlights for each of the five fiscal years in the period ended
March 31, 2000, appearing in the 2000 Annual Report to Shareholders and the
report thereon of PricewaterhouseCoopers LLP, independent accountants, appearing
therein, are incorporated by reference in this Statement of Additional
Information.
B-18
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation.*
(b) By-laws.*
(c) Instruments Defining Rights of Security Holders. Reference is made to
Article Fifth of the Articles of Incorporation filed as Exhibit (a) to
Post-Effective Amendment No. 7 and incorporated herein by reference.
(d) Investment Advisory Agreement.*
(e) Distribution Agreement.*
(f) Not applicable.
(g) Custodian Agreement and Amendment thereto.*
(h) Not applicable.
(i) Legal Opinion.*
(j) Not applicable.
(k) Not applicable.
(l) Not applicable.
(m) Service and Distribution (12b-1) Plan.*
(p) Code of Ethics.
------------------------
* Filed as an exhibit to Post-Effective Amendment No. 7 and incorporated herein
by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Incorporated by reference to Article VIII of the Articles of Incorporation
filed as Exhibit (a) to Post-Effective Amendment No. 7.
ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Value Line, Inc., Registrant's investment adviser, acts as investment
adviser for a number of individuals, trusts, corporations and institutions, in
addition to the registered investment companies in the Value Line Family of
Funds listed in Item 27.
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
---- ----------- ----------------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board, Chairman of the Board and Chief Executive
President and Chief Executive Officer of Arnold Bernhard & Co., Inc. and
Officer Chairman of the Value Line Funds and the
Distributor
Samuel Eisenstadt Senior Vice President and -------------------------------------------
Director
David T. Henigson Vice President, Treasurer and Vice President and a Director of Arnold
Director Bernhard & Co., Inc. and the Distributor
Howard A. Brecher Vice President, Secretary and Vice President, Secretary, Treasurer and a
Director Director of Arnold Bernhard & Co., Inc.
Harold Bernard, Jr. Director Attorney-at-law; Retired Administrative Law
Judge
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME THE ADVISER OTHER EMPLOYMENT
---- ----------- ----------------
<S> <C> <C>
W. Scott Thomas Director Partner, Brobeck, Phleger & Harrison,
attorneys, One Market Plaza, San Francisco,
CA 94105
Linda S. Wilson Director President Emerita, Radcliffe College;
Senior Lecturer, Harvard Graduate School of
Education, Cambridge, MA 02138
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Value Line Securities, Inc., acts as principal underwriter for the
following Value Line funds, including the Registrant: The Value Line
Fund, Inc.; Value Line Income and Growth Fund, Inc.; The Value Line
Special Situations Fund, Inc.; Value Line Leveraged Growth Investors,
Inc.; The Value Line Cash Fund, Inc.; Value Line U.S. Government
Securities Fund, Inc.; Value Line Centurion Fund, Inc.; The Value Line
Tax Exempt Fund, Inc.; Value Line Convertible Fund, Inc.; Value Line
Aggressive Income Trust; Value Line New York Tax Exempt Trust; Value Line
Strategic Asset Management Trust; Value Line Emerging Opportunities Fund,
Inc.; Value Line Asset Allocation Fund, Inc.; Value Line U.S.
Multinational Company Fund, Inc.
(b)
<TABLE>
<CAPTION>
(2)
POSITION AND (3)
(1) OFFICES POSITION AND
NAME AND PRINCIPAL WITH VALUE LINE OFFICES WITH
BUSINESS ADDRESS SECURITIES, INC. REGISTRANT
---------------- ---------------- ----------
<S> <C> <C>
Jean Bernhard Buttner Chairman of the Board Chairman of the Board and
President
David T. Henigson Vice President, Secretary, Vice President, Secretary and
Treasurer and Director Treasurer
Stephen LaRosa Asst. Vice President Asst. Treasurer
</TABLE>
The business address of each of the officers and directors is 220 East
42nd Street, NY 10017-5891.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Value Line, Inc.
220 East 42nd Street
New York, NY 10017
For records pursuant to:
Rule 31a-1(b)(4),(5),(6),(7),(10),(11)
Rule 31a-1(f)
State Street Bank and Trust Company
c/o NFDS
P.O. Box 419729
Kansas City, MO 64141
For records pursuant to Rule 31a-1(b)(2)(iv)
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
For all other records
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
None.
--------------
C-2
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 8 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated May 1, 2000, relating to the financial
statements and financial highlights which appear in the March 31, 2000 Annual
Report to Shareholders of Value Line Emerging Opportunities Fund, Inc., which
are also incorporated by reference into the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights",
"Investment Advisory and Other Services" and "Financial Statements" in such
Registration Statement.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 27, 2000
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 27th day of July, 2000.
VALUE LINE EMERGING OPPORTUNITIES FUND,
INC.
By: /s/ DAVID T. HENIGSON
.......................................
DAVID T. HENIGSON, VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C> <C>
*JEAN B. BUTTNER Chairman and Director; July 27, 2000
(JEAN B. BUTTNER) President; Principal
Executive Officer
*JOHN W. CHANDLER Director July 27, 2000
(JOHN W. CHANDLER)
*FRANCES T. NEWTON Director July 27, 2000
(FRANCES T. NEWTON)
*FRANCIS C. OAKLEY Director July 27, 2000
(FRANCIS C. OAKLEY)
*DAVID H. PORTER Director July 27, 2000
(DAVID H. PORTER)
*PAUL CRAIG ROBERTS Director July 27, 2000
(PAUL CRAIG ROBERTS)
*MARION N. RUTH Director July 27, 2000
(MARION N. RUTH)
*NANCY-BETH SHEERR Director July 27, 2000
(NANCY-BETH SHEERR)
/s/ DAVID T. HENIGSON Treasurer; Principal Financial July 27, 2000
........................................... and Accounting Officer
(DAVID T. HENIGSON)
</TABLE>
*By /s/ DAVID T. HENIGSON
....................................
(DAVID T. HENIGSON,
ATTORNEY-IN-FACT)
C-4
