-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HTLWfWA4uIGdx2ybJulfh4jIKwQ8S0uxsr0tfEyjBctYqL1bNp0jrfuqdr2BDzY0 kOue7rA6n3V23WOopuAq0A== 0000897101-03-001096.txt : 20030905 0000897101-03-001096.hdr.sgml : 20030905 20030905161527 ACCESSION NUMBER: 0000897101-03-001096 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030905 EFFECTIVENESS DATE: 20030905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALUE LINE SPECIAL SITUATIONS FUND INC CENTRAL INDEX KEY: 0000102767 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02278 FILM NUMBER: 03883969 BUSINESS ADDRESS: STREET 1: 220 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126873965 N-CSRS 1 vl-ssf033834_ncsrs.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file Number 811-719 ------- The Value Line Special Situations Fund, Inc. - --------------------------------------------------------- (Exact name of registrant as specified in charter) 220 East 42nd Street, New York, N.Y. 10017 - -------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-907-1500 ------------ Date of fiscal year end: December 31, 2003 ----------------- Date of reporting period: June 30, 2003 ------------- Item I. Reports to Stockholders. - ------ ------------------------ A copy of the Semi-Annual Report to Stockholders for the period ended is included with this Form. Item 2. Code of Ethics - ------- -------------- Not applicable. Item 3. Audit Committee Financial Expert. - ------- --------------------------------- Not applicable. Item 9. Controls and Procedures. - ------- ------------------------ (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Act (17 CFR 270.30a-2(c) ) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report, are appropriately designed to ensure that material information relating to the registrant is made known to such officers and are operating effectively. (b) The registrant's principal executive officer and principal financial officer have determined that there have been no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including corrective actions with regard to significant deficiencies and material weaknesses. Item 10. Exhibits. - -------- --------- (a) Not applicable. (b) (1) Certification pursuant to Rule 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT. (2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By /s/ Jean B. Buttner ----------------------- Jean B. Buttner, President Date: August 29, 2003 ------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Jean B. Buttner ----------------------- Jean B. Buttner, President, Principal Executive Officer By: /s/ David T. Henigson ----------------------- David T. Henigson, Vice President, Treasurer, Principal Financial Officer Date: August 29, 2003 ------------------------ ================================================================================ INVESTMENT ADVISER Value Line, Inc. ------------------ 220 East 42nd Street SEMI-ANNUAL REPORT New York, NY 10017-5891 ------------------ June 30, 2003 DISTRIBUTOR Value Line Securities, Inc. ------------------ 220 East 42nd Street New York, NY 10017-5891 CUSTODIAN BANK State Street Bank and Trust Co. 225 Franklin Street Boston, MA 02110 SHAREHOLDER State Street Bank and Trust Co. SERVICING AGENT c/o NFDS P.O. Box 219729 Kansas City, MO 64121-9729 THE VALUE LINE SPECIAL INDEPENDENT PricewaterhouseCoopers LLP SITUATIONS ACCOUNTANTS 1177 Avenue of the Americas FUND, INC. New York, NY 10036 LEGAL COUNSEL Peter D. Lowenstein, Esq. Two Sound View Drive, Suite 100 Greenwich, CT 06830 DIRECTORS Jean Bernhard Buttner John W. Chandler Frances T. Newton Francis C. Oakley David H. Porter Paul Craig Roberts Marion N. Ruth Nancy-Beth Sheerr OFFICERS Jean Bernhard Buttner CHAIRMAN AND PRESIDENT Stephen E. Grant VICE PRESIDENT Nancy L. Bendig VICE PRESIDENT Brett Mitstifer VICE PRESIDENT [LOGO] David T. Henigson VALUE LINE VICE PRESIDENT AND NO-LOAD SECRETARY/TREASURER MUTUAL Joseph Van Dyke FUNDS ASSISTANT SECRETARY/TREASURER Stephen La Rosa ASSISTANT SECRETARY/TREASURER THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF THE FUND WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND, ACCORDINGLY, THEY DO NOT EXPRESS AN OPINION THEREON. THIS UNAUDITED REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE DISTRIBUTOR). #526700 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. TO OUR VALUE LINE SPECIAL - -------------------------------------------------------------------------------- TO OUR SHAREHOLDERS: The Value Line Special Situations Fund earned a total return of 10.14% for the six months ended June 30, 2003. For comparison purposes, the unmanaged Standard & Poor's 500 Index(1) had a total return of 11.76% in the same period. Looking at the longer term, your Fund has compiled an annualized total return of 12.04% for the ten years ending June 30th, versus 10.04% for the S&P 500; 4.60% for five years, versus an annualized loss of -1.61% for the S&P 500; and -2.69% for one year, versus 0.25% for the S&P 500(1). Our individual stock selections emphasize issues with records of strong earnings momentum and strong stock price momentum, relative to other stocks. This actually put us at a slight disadvantage in recent months, when the biggest winners were the losers of prior years, particularly highly speculative stocks of smaller companies (many in the technology sector), some of which had only recently been on the brink of bankruptcy. Over time, though, our disciplined strategy has helped us not only to find winners, but to avoid losers. Put another way, we play defense as well as offense in constructing a portfolio, and are sensitive to the trade-offs of risk versus performance. The portfolio currently holds about 350 stocks of companies of all sizes and diversified across many sectors. About 30% of stockholdings are small-capitalization companies; 50%, mid-cap; and 20%, large-cap. Top sectors represented are financial services, healthcare, and technology. We believe our disciplined investment approach will continue to serve your Fund well. Thank you for investing with us. Sincerely, /s/ Jean Bernhard Buttner Jean Bernhard Buttner CHAIRMAN AND PRESIDENT August 22, 2003 - -------------------------------------------------------------------------------- (1) THE STANDARD & POOR'S 500 INDEX CONSISTS OF 500 STOCKS WHICH ARE TRADED ON THE NEW YORK STOCK EXCHANGE, AMERICAN STOCK EXCHANGE AND THE NASDAQ NATIONAL MARKET SYSTEM AND IS REPRESENTATIVE OF THE BROAD STOCK MARKET. THIS IS AN UNMANAGED INDEX AND DOES NOT REFLECT CHARGES, EXPENSES OR TAXES. IT IS NOT POSSIBLE TO DIRECTLY INVEST IN THIS INDEX. - -------------------------------------------------------------------------------- 2 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. SITUATIONS FUND SHAREHOLDERS - -------------------------------------------------------------------------------- ECONOMIC OBSERVATIONS The U.S. economic recovery, which had been proceeding at an uninspiring pace for the better part of two years, showed a bit more spirit in the second quarter of this year, as the nation's gross domestic product increased at a modest 2.4% rate, pushed forward by a selective recovery in manufacturing, by strong housing demand, and by improving retail sales. True, there were still pockets of weakness around, most notably in the employment area, where non-farm payrolls declined further and the unemployment rate climbed above 6%. Overall, though, the economic picture at the end of the opening half was a lot brighter than it had been at the start of the year, when talk of a possible double-dip recession was still being heard. Now, as we make our way through the second half of 2003, we are starting to see evidence of a further improvement in business activity, with both the retail and manufacturing sectors strengthening even more, albeit still selectively, while housing remains resilient. The weak link in the recovery chain is still the employment situation, which, at best, is starting to show signs of stability following months of steady erosion. The ongoing support of the Federal Reserve, which continues to maintain its low-interest-rate policies, along with the earlier passage of a tax cut and fiscal stimulus package, should provide the additional help needed by the economy to push GDP growth up into the 3.5% to 4% range during the second half of the year. Inflation, meantime, remains muted, thanks, in part, to subdued labor costs. Adequate supplies of raw materials are also helping to keep the costs of production low. We caution, though, that as the U.S. economy moves further along the recovery trail over the next several years, some increase in pricing pressures may emerge. Absent a stronger long-term business recovery than we now envision, or a resumption of the earlier sharp rise in oil and gas prices stemming from a surprisingly long conflict in the Middle East, inflation should remain in check through the latter years of this decade. Long-term interest rates, which have moved higher recently, as the economy has perked up, should stabilize at modestly higher levels over the next several years. PERFORMANCE DATA:** AVERAGE ANNUAL GROWTH OF AN ASSUMED TOTAL RETURN INVESTMENT OF $10,000 ---------------- ---------------------- 1 year ended 6/30/03 .......... -2.69% $ 9,731 5 years ended 6/30/03 ......... +4.60% $12,522 10 years ended 6/30/03 ......... +12.04% $31,160 - -------------------------------------------------------------------------------- 3 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. PORTFOLIO HIGHLIGHTS AT JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- TEN LARGEST HOLDINGS
VALUE PERCENTAGE ISSUE SHARES (IN THOUSANDS) OF NET ASSETS - ------------------------------------------ -------- ---------------- -------------- Career Education Corp. ................... 46,000 $3,147 1.2% Varian Medical Systems, Inc. ............. 49,000 2,821 1.1 Apollo Group, Inc. Class "A" ............. 42,750 2,640 1.0 Corinthian Colleges, Inc. ................ 47,000 2,283 0.9 Family Dollar Stores, Inc. ............... 51,000 1,945 0.7 Chico's FAS, Inc. ........................ 74,000 1,558 0.6 Bed Bath & Beyond Inc. ................... 40,000 1,552 0.6 Old Republic International Corp. ......... 45,000 1,542 0.6 Ruby Tuesday, Inc. ....................... 60,800 1,504 0.6 Henry Schein, Inc. ....................... 28,000 1,466 0.6
FIVE LARGEST INDUSTRY CATEGORIES VALUE PERCENTAGE INDUSTRY (IN THOUSANDS) OF NET ASSETS - -------------------------------- ---------------- -------------- Medical Supplies ............... $21,064 8.1% Bank ........................... 12,876 5.0 Retail - Special Lines ......... 11,207 4.3 Educational Services ........... 10,777 4.1 Restaurant ..................... 9,948 3.8 FIVE LARGEST NET SECURITY PURCHASES* COST ISSUE (IN THOUSANDS) - ----------------------------------- --------------- Pfizer, Inc. ...................... $922 UTStarcom, Inc. ................... 587 Protein Design Labs, Inc. ......... 576 Liz Clairborne, Inc. .............. 573 Eon Labs, Inc. .................... 554 FIVE LARGEST NET SECURITY SALES* PROCEEDS ISSUE (IN THOUSANDS) - ----------------------------------- --------------- Alliant Techsystems, Inc. ......... $2,003 Forest Laboratories, Inc. ......... 1,451 TCF Financial Corp. ............... 1,322 ITT Industries, Inc. .............. 1,180 Darden Restaurants, Inc. .......... 1,180 * FOR THE SIX MONTH PERIOD ENDED 06/30/03 - -------------------------------------------------------------------------------- 4 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2003 - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- ADVERTISING (0.4%) 28,500 Harte-Hanks, Inc. ..................... $ 541 17,000 R.H. Donnelley Corp.* ................. 620 ------ 1,161 AEROSPACE/DEFENSE (0.2%) 14,000 Engineered Support Systems, Inc. 586 AIR TRANSPORT (0.2%) 10,000 FedEx Corp. ........................... 620 APPAREL (0.4%) 11,000 Columbia Sportswear Co.* .............. 565 16,000 Liz Claiborne, Inc. ................... 564 ------ 1,129 AUTO PARTS (0.9%) 7,500 Advance Auto Parts, Inc.* ............. 457 17,000 Gentex Corp.* ......................... 520 10,000 Johnson Controls, Inc. ................ 856 12,000 Lear Corp.* ........................... 552 ------ 2,385 BANK (5.0%) 26,000 BancorpSouth, Inc. .................... 542 8,000 Bank of America Corp. ................. 632 25,000 Bank of Hawaii Corp. .................. 829 25,000 BB&T Corp. ............................ 857 18,000 Community First Bankshares, Inc. ...... 491 32,000 Compass Bancshares, Inc. .............. 1,118 4,000 Deutsche Bank AG ...................... 258 15,000 First Virginia Banks, Inc. ............ 647 37,000 Hibernia Corp. Class "A" .............. 672 15,600 Hudson United Bancorp ................. 533 6,400 M & T Bank Corp. ...................... 539 1,800 National Australia Bank Ltd. (ADR) ....................... 202 16,000 National Commerce Financial Corp. ....................... 355 14,600 Popular, Inc. ......................... 563 23,000 South Financial Group, Inc. (The) ..................... 537 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- 40,000 SouthTrust Corp. ...................... $ 1,088 22,000 UCBH Holdings, Inc. ................... 631 17,000 United Bankshares, Inc. ............... 487 30,000 W Holding Company, Inc. ............... 508 13,000 Wells Fargo & Co. ..................... 655 17,000 Westamerica Bancorporation ............ 732 ------- 12,876 BANK - CANADIAN (0.3%) 17,000 Bank of Montreal ...................... 540 5,000 Canadian Imperial Bank of Commerce ...................... 200 ------- 740 BANK - MIDWEST (0.8%) 13,000 Associated Banc-Corp. ................. 483 13,650 Commerce Bancshares, Inc. ............. 532 12,000 First Tennessee National Corp. ........ 527 18,000 Marshall & Ilsley Corp. ............... 550 ------- 2,092 BEVERAGE - ALCOHOLIC (0.4%) 11,000 Anheuser-Busch Companies, Inc. ....................... 562 13,000 Constellation Brands, Inc. Class "A"* ............................ 408 ------- 970 BIOTECHNOLOGY (0.2%) 29,000 Medicines Company (The)* .............. 578 BUILDING MATERIALS (0.5%) 28,000 Jacobs Engineering Group, Inc.* ....... 1,180 CANADIAN ENERGY (0.2%) 14,500 Encana Corp. .......................... 556 CHEMICAL - DIVERSIFIED (0.5%) 18,000 Albemarle Corp. ....................... 503 7,000 3M Company ............................ 903 ------- 1,406 - -------------------------------------------------------------------------------- 5 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- CHEMICAL - SPECIALTY (1.1%) 26,000 Airgas, Inc. ....................... $ 436 24,000 Ecolab Inc. ........................ 614 15,000 Praxair, Inc. ...................... 902 10,000 Sigma-Aldrich Corp. ................ 542 11,000 Valspar Corp. ...................... 464 ------ 2,958 COMPUTER & PERIPHERALS (1.4%) 5,000 Artisan Components, Inc.* .......... 113 18,000 Avocent Corp.* ..................... 539 46,000 Dot Hill Systems Corp.* ............ 602 22,000 Lexar Media, Inc.* ................. 210 29,000 NetScreen Technologies, Inc.* ...... 654 19,000 SanDisk Corp.* ..................... 767 9,000 Zebra Technologies Corp. Class "A"* ......................... 677 ------ 3,562 COMPUTER SOFTWARE & SERVICES (3.3%) 16,000 Affiliated Computer Services, Inc. Class "A"* .................... 732 15,000 ANSYS, Inc.* ....................... 466 12,000 CACI International, Inc.* Class "A" .......................... 412 36,000 Cognizant Technology Solutions Corp. Class "A"* ................... 877 21,000 Cognos Inc.* ....................... 567 13,000 Comverse Technology, Inc.* ......... 195 11,000 Digital River, Inc.* ............... 212 10,000 Fair, Issac & Co., Inc. ............ 515 24,000 Fiserv, Inc.* ...................... 855 29,000 Intergraph Corp.* .................. 623 18,000 Macromedia, Inc.* .................. 379 30,000 Magma Design Automation, Inc.* .................. 515 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- 15,000 Mercury Interactive Corp.* ......... $ 579 16,000 SAP AG (ADR) ....................... 467 14,000 Symantec Corp.* .................... 614 9,000 Synopsys, Inc.* .................... 557 ------- 8,565 DIVERSIFIED COMPANY (0.9%) 10,000 American Standard Companies, Inc.* ................... 739 11,000 Ametek, Inc. ....................... 403 7,900 Danaher Corp. ...................... 538 11,000 ESCO Technologies, Inc.* ........... 484 3,000 Pentair, Inc. ...................... 117 ------- 2,281 DRUG (3.7%) 29,300 Amylin Pharmaceuticals, Inc.* ...... 641 14,000 Angiotech Pharmaceuticals, Inc.* ... 570 16,000 Eon Labs, Inc.* .................... 562 17,000 Forest Laboratories, Inc.* ......... 931 24,000 Gilead Sciences, Inc.* ............. 1,334 19,500 Mylan Laboratories, Inc. ........... 678 34,000 NBTY, Inc.* ........................ 716 13,000 Neurocrine Biosciences, Inc.* ...... 649 26,000 Pfizer, Inc. ....................... 888 19,000 Pharmaceutical Resources, Inc.* .... 925 40,000 Protein Design Labs, Inc.* ......... 559 20,000 Teva Pharmaceutical Industries Ltd. (ADR) .............. 1,139 ------- 9,592 EDUCATIONAL SERVICES (4.1%) 42,750 Apollo Group, Inc. Class "A"* ...... 2,640 46,000 Career Education Corp.* ............ 3,147 47,000 Corinthian Colleges, Inc.* ......... 2,283 25,000 Education Management Corp.* ........ 1,330 24,000 ITT Educational Services, Inc.* .... 702 8,500 Strayer Education, Inc. ............ 675 ------- 10,777 - -------------------------------------------------------------------------------- 6 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. JUNE 30, 2003 - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- ELECTRIC UTILITY - CENTRAL (0.4%) 11,500 DTE Energy Co. ......................... $ 444 12,000 Entergy Corp. .......................... 634 ------- 1,078 ELECTRICAL EQUIPMENT (0.5%) 24,000 FLIR Systems, Inc.* .................... 724 22,000 Rockwell Automation, Inc. .............. 524 ------- 1,248 ELECTRONICS (0.9%) 18,000 Cubic Corp. ............................ 400 17,000 Harman International Industries, Inc. ....................... 1,346 15,000 Imation Corp. .......................... 567 ------- 2,313 ENTERTAINMENT (0.6%) 25,000 Cumulus Media, Inc. Class "A"* ......... 473 20,000 Fox Entertainment Group, Inc. Class "A"* ............................. 576 14,000 Westwood One, Inc.* .................... 475 ------- 1,524 ENTERTAINMENT TECHNOLOGY (0.1%) 8,000 Avid Technology, Inc.* ................. 280 ENVIRONMENTAL (0.7%) 22,000 Republic Services, Inc.* ............... 499 31,000 Stericycle, Inc.* ...................... 1,193 ------- 1,692 FINANCIAL SERVICES - DIVERSIFIED (2.4%) 37,000 BankAtlantic Bancorp, Inc. Class "A" .............................. 440 17,000 Brown & Brown, Inc. .................... 552 24,000 Doral Financial Corp. .................. 1,072 33,000 Fidelity National Financial, Inc. ...... 1,015 46,000 Fremont General Corp. .................. 630 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- 9,000 Leucadia National Corp. ................ $ 334 17,000 ProAssurance Corp.* .................... 459 15,000 SLM Corp. .............................. 588 20,000 Willis Group Holdings Ltd. ............. 615 15,000 Wintrust Financial Corp. ............... 444 ------- 6,149 FOOD PROCESSING (1.3%) 23,000 Bunge Limited .......................... 658 24,000 Dean Foods Co.* ........................ 756 11,000 Fresh Del Monte Produce, Inc. .......... 283 13,200 Smucker (J.M.) Co. ..................... 526 20,500 United Natural Foods, Inc.* ............ 577 10,000 Wrigley (Wm.) Jr. Co. .................. 562 ------- 3,362 FOOD WHOLESALERS (0.5%) 21,000 Performance Food Group Co.* ............ 777 17,000 SYSCO Corp. ............................ 511 ------- 1,288 FOREIGN TELECOMMUNI- CATIONS (0.1%) 40,000 Alcatel S.A. (ADR) ..................... 358 FURNITURE/HOME FURNISHINGS (0.4%) 4,000 Ethan Allen Interiors, Inc. ............ 141 4,000 Mohawk Industries, Inc.* ............... 222 21,900 Tuesday Morning Corp.* ................. 576 ------- 939 GROCERY (0.2%) 13,000 Whole Foods Market, Inc.* .............. 618 HOME APPLIANCE (0.3%) 20,000 Toro Company (The) ..................... 795 HOTEL/GAMING (1.2%) 31,000 Alliance Gaming Corp.* ................. 586 9,000 Choice Hotels, Inc.* ................... 246 20,000 GTECH Holdings Corp. ................... 753 7,000 Harrah's Entertainment, Inc.* .......... 282 - -------------------------------------------------------------------------------- 7 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- HOTEL/GAMING (continued) 32,000 Penn National Gaming, Inc.* ............. $ 657 23,000 Station Casinos, Inc.* .................. 581 ------ 3,105 HOUSEHOLD PRODUCTS (1.1%) 15,000 Church & Dwight Co., Inc. ............... 491 22,000 Energizer Holdings, Inc.* ............... 691 10,000 Procter & Gamble Co. (The) .............. 892 4,000 Rent-A-Center, Inc.* .................... 303 11,000 Scotts Company (The) Class "A"* .............................. 544 ------ 2,921 INDUSTRIAL SERVICES (1.8%) 22,000 ARAMARK Corp. Class "B"* ................ 493 15,000 C.H. Robinson Worldwide, Inc. ........... 534 14,000 EMCOR Group, Inc.* ...................... 691 14,000 Expeditors International of Washington, Inc. ........................ 485 22,500 FTI Consulting, Inc.* ................... 562 15,000 Iron Mountain, Inc.* .................... 556 22,000 Kroll Inc.* ............................. 595 44,000 Navigant Consulting, Inc.* .............. 522 18,000 Rollins, Inc. ........................... 339 ------ 4,777 INFORMATION SERVICES (0.9%) 23,500 Alliance Data Systems Corp.* ............ 550 16,000 Arbitron, Inc.* ......................... 571 23,000 Equifax, Inc. ........................... 598 9,000 FactSet Research Systems, Inc. .......... 396 5,000 Moody's Corp. ........................... 264 ------ 2,379 INSURANCE - LIFE (0.5%) 17,000 AFLAC, Inc. ............................. 523 8,000 Prudential Financial, Inc. .............. 269 13,500 Torchmark, Inc. ......................... 503 ------ 1,295 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- INSURANCE - PROPERTY/ CASUALTY (3.4%) 16,500 Berkley (W.R.) Corp. .................... $ 870 9,000 Chubb Corporation (The) ................. 540 7,000 Everest Re Group, Ltd. .................. 536 12,000 HCC Insurance Holdings, Inc. ............ 355 16,500 IPC Holdings, Ltd. ...................... 553 2,300 Markel Corp.* ........................... 589 45,000 Old Republic International Corp. ..................... 1,542 18,000 Progressive Corp. ....................... 1,316 17,400 RenaissanceRe Holdings Ltd. ............. 792 17,000 RLI Corp. ............................... 560 15,000 Safeco Corp. ............................ 529 9,000 XL Capital Ltd. Class "A" ............... 747 ------ 8,929 INTERNET (0.8%) 20,000 CheckFree Corp.* ........................ 557 7,000 eBay, Inc.* ............................. 729 27,000 United Online, Inc.* .................... 684 ------ 1,970 MACHINERY (0.9%) 2,000 Actuant Corp. Class "A"* ................ 95 11,000 Donaldson Co., Inc. ..................... 489 18,750 Graco Inc. .............................. 600 14,000 Smith (A.O.) Corp. ...................... 394 14,000 Tractor Supply Co.* ..................... 668 ------ 2,246 MANUFACTURED HOUSING/RECREATIONAL VEHICLE (0.5%) 9,500 Oshkosh Truck Corp. ..................... $ 564 5,000 Thor Industries, Inc. ................... 204 13,600 Winnebago Industries, Inc. .............. 515 ------ 1,283 MEDICAL SERVICES (3.5%) 32,250 aaiPharma, Inc.* ........................ 641 10,000 Anthem, Inc.* ........................... 772 - -------------------------------------------------------------------------------- 8 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. JUNE 30, 2003 - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- MEDICAL SERVICES (continued) 22,000 Apria Healthcare Group, Inc.* ......... $ 547 6,000 Centene Corp.* ........................ 234 38,000 eResearch Technology, Inc.* ........... 842 19,500 First Health Group Corp.* ............. 538 22,000 Gentiva Health Services Inc.* ......... 198 17,000 Health Net, Inc.* ..................... 560 30,000 Lincare Holdings, Inc.* ............... 945 17,000 Mid Atlantic Medical Services, Inc.* ....................... 889 20,000 Odyssey Healthcare, Inc.* ............. 740 16,000 Renal Care Group, Inc.* ............... 563 25,000 Select Medical Corp.* ................. 621 12,000 Wellpoint Health Networks, Inc.* ....................... 1,012 ------ 9,102 MEDICAL SUPPLIES (8.1%) 13,000 Alcon, Inc. ........................... 594 11,000 Bio-Rad Laboratories, Inc. Class "A"* ............................ 609 7,000 Biolase Technology, Inc.* ............. 75 27,750 Biomet, Inc. .......................... 795 17,000 Biosite, Inc.* ........................ 818 14,000 Boston Scientific Corp.* .............. 855 12,000 Charles River Laboratories International, Inc.* .................. 386 36,000 Cooper Companies, Inc. ................ 1,252 23,000 Dade Behring Holdings, Inc.* .......... 533 34,500 DENTSPLY International, Inc. .......... 1,411 21,000 Edwards Lifesciences Corp.* ........... 675 19,000 Fisher Scientific International, Inc.* .................. 663 28,000 Henry Schein, Inc.* ................... 1,466 17,000 IDEXX Laboratories, Inc.* ............. 573 21,000 Inamed Corp.* ......................... 1,128 11,000 Integra LifeSciences Holdings Corp.* ....................... 290 11,000 Johnson & Johnson ..................... 569 22,702 Medtronic, Inc. ....................... 1,089 11,000 Mentor Corp. .......................... 213 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- 25,250 Merit Medical Systems, Inc.* .......... $ 504 22,000 Patterson Dental Co.* ................. 998 17,000 Respironics, Inc.* .................... 638 14,000 St. Jude Medical, Inc.* ............... 805 9,000 Stryker Corp. ......................... 624 4,000 Sybron Dental Specialties, Inc.* ...... 94 49,000 Varian Medical Systems, Inc.* ......... 2,821 13,000 Zimmer Holdings, Inc.* ................ 586 ------- 21,064 NATURAL GAS - DISTRIBUTION (0.7%) 21,000 AGL Resources Inc. .................... 534 15,000 Energen Corp. ......................... 499 21,000 UGI Corp. ............................. 666 ------- 1,699 NATURAL GAS - DIVERSIFIED (0.7%) 13,000 Equitable Resources, Inc. ............. 529 20,000 Patina Oil & Gas Corp. ................ 643 30,666 XTO Energy, Inc. ...................... 617 ------- 1,789 NEWSPAPER (1.7%) 7,000 Gannett Co., Inc. ..................... 538 7,500 Knight-Ridder, Inc. ................... 517 16,500 Lee Enterprises, Inc. ................. 619 9,000 McClatchy Co. (The) Class "A" ......... 519 11,000 New York Times Co, (The) Class "A" ............................. 501 7,000 Scripps (E.W.) Co. Class "A" .......... 621 11,000 Tribune Co. ........................... 531 800 Washington Post Co. (The) Class "B" ............................. 586 ------- 4,432 OFFICE EQUIPMENT & SUPPLIES (0.7%) 30,000 Global Imaging Systems, Inc.* ......... 695 40,000 Moore Wallace Incorporated* ........... 587 30,000 Staples, Inc.* ........................ 550 ------- 1,832 - -------------------------------------------------------------------------------- 9 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- PACKAGING & CONTAINER (1.4%) 12,000 Ball Corp. ............................ $ 546 10,000 Bemis Co., Inc. ....................... 468 17,000 CLARCOR Inc. .......................... 655 19,200 Jarden Corp.* ......................... 531 40,000 Packaging Corp. of America* ........... 737 29,000 Pactiv Corp.* ......................... 572 ------ 3,509 PETROLEUM - INTEGRATED (0.2%) 11,000 Murphy Oil Corp. ...................... 579 PETROLEUM - PRODUCING (1.5%) 8,400 Apache Corp. .......................... 547 50,000 Chesapeake Energy Corp. ............... 505 10,000 Evergreen Resources, Inc.* ............ 543 14,000 Pogo Producing Co. .................... 598 28,000 Suncor Energy, Inc. ................... 525 31,000 Unit Corp.* ........................... 648 25,000 Westport Resources Corp.* ............. 569 ------ 3,935 PHARMACY SERVICES (1.3%) 15,000 AdvancePCS* Services .................. 574 46,000 Caremark Rx, Inc.* .................... 1,181 18,000 Express Scripts, Inc. Class "A"* ...... 1,228 13,000 Omnicare, Inc. ........................ 439 ------ 3,422 POWER INDUSTRY (0.2%) 37,000 Headwaters, Inc.* ..................... 544 PRECISION INSTRUMENT (0.8%) 12,500 Dionex Corp.* ......................... 497 24,000 Garmin Ltd.* .......................... 957 15,000 Varian, Inc.* ......................... 520 ------ 1,974 PUBLISHING (0.4%) 14,000 Deluxe Corp. .......................... 627 11,500 Meredith Corp. ........................ 506 ------ 1,133 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- R.E.I.T. (3.4%) 24,000 Capital Automotive REIT ............... $ 672 13,000 Catellus Development Corp.* ........... 286 12,000 CBL & Associates Properties, Inc. ...................... 516 32,000 Chelsea Property Group, Inc. .......... 1,290 23,700 Corrections Corp. of America* ......... 600 19,000 Developers Diversified Realty Corp. .......................... 540 6,000 Heritage Property Investment Trust, Inc. ........................... 162 30,000 Impac Mortgage Holdings, Inc. ......... 501 15,000 iStar Financial, Inc. ................. 548 17,000 Macerich Company (The) ................ 597 14,500 Pan Pacific Retail Properties, Inc. ...................... 571 15,000 Pennsylvania Real Estate Investment Trust ...................... 449 14,000 ProLogis Trust ........................ 382 9,000 Redwood Trust, Inc. ................... 359 13,000 Simon Property Group, Inc. ............ 507 15,000 Thornburg Mortgage, Inc. .............. 371 13,000 Weingarten Realty Investors ........... 545 ------ 8,896 RAILROAD (0.3%) 15,000 CP Holders, Inc. ...................... 757 RECREATION (1.7%) 14,000 Expedia, Inc. Class "A"* .............. 1,074 43,000 Marvel Enterprises, Inc.* ............. 821 56,000 Mattel, Inc. .......................... 1,059 20,000 SCP Pool Corp.* ....................... 688 25,000 Shuffle Master, Inc.* ................. 735 ------ 4,377 RESTAURANT (3.8%) 22,500 Applebee's International, Inc. ........ 707 20,000 Bob Evans Farms, Inc. ................. 553 39,000 Brinker International, Inc.* .......... 1,405 22,000 CBRL Group, Inc. ...................... 855 - -------------------------------------------------------------------------------- 10 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. JUNE 30, 2003 - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- RESTAURANT (continued) 16,000 Cheesecake Factory Incorporated (The)* ................... $ 574 8,000 IHOP Corp. ............................ 253 14,500 P.F. Chang's China Bistro, Inc.* ...... 713 18,000 Panera Bread Co. - Class "A"* ......... 720 19,000 RARE Hospitality International, Inc.* .................. 621 60,800 Ruby Tuesday, Inc. .................... 1,504 56,250 Sonic Corp.* .......................... 1,430 25,000 Starbucks Corp.* ...................... 613 ------ 9,948 RETAIL BUILDING SUPPLY (0.5%) 14,000 Fastenal Co. .......................... 475 19,000 Lowe's Companies, Inc. ................ 816 ------ 1,291 RETAIL STORE (1.5%) 51,000 Family Dollar Stores, Inc. ............ 1,945 20,000 Target Corp. .......................... 757 22,000 Wal-Mart Stores, Inc. ................. 1,181 ------ 3,883 RETAIL - SPECIAL LINES (4.3%) 21,000 Aeropostale, Inc.* .................... 451 5,000 AutoZone, Inc.* ....................... 380 40,000 Bed Bath & Beyond Inc.* ............... 1,552 10,000 CDW Computer Centers, Inc.* ........... 458 74,000 Chico' s FAS, Inc.* ................... 1,558 14,000 Claire's Stores, Inc. ................. 355 24,000 Coach, Inc.* .......................... 1,194 8,000 Dick's Sporting Goods, Inc.* .......... 293 24,000 Fossil, Inc.* ......................... 566 30,000 Gap, Inc. (The) ....................... 563 25,000 Guitar Center, Inc.* .................. 725 30,000 Hollywood Entertainment Corp.* ........ 516 27,500 Movie Gallery, Inc.* .................. 507 31,000 Pier 1 Imports, Inc. .................. 632 VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- 19,000 Ross Stores, Inc. ..................... $ 812 28,000 TJX Companies, Inc. (The) ............. 528 4,000 Williams-Sonoma, Inc.* ................ 117 ------- 11,207 SECURITIES BROKERAGE (0.2%) 8,000 Bear Stearns Companies, Inc. (The) ............................ 579 SEMICONDUCTOR (0.9%) 28,000 ATI Technologies, Inc.* ............... 286 17,000 Marvell Technology Group Ltd.* 584 18,500 Microchip Technology Inc. ............. 453 33,000 OmniVision Technologies, Inc.* ........ 1,030 -------- 2,353 SHOE (1.0%) 18,000 Brown Shoe Company, Inc. .............. 536 10,000 Nike, Inc. Class "B" .................. 535 38,000 Reebok International Ltd.* ............ 1,278 6,000 Timberland Co. Class "A"* ............. 317 -------- 2,666 TELECOMMUNICATION SERVICES (0.8%) 10,500 Mobile TeleSystem OJSC (ADR) 620 11,000 NTL Inc.* ............................. 375 12,500 Vimpel-Communications, Open Joint Stock Co. (ADR)* ................ 580 19,000 West Corp.* ........................... 506 -------- 2,081 TELECOMMUNICATIONS EQUIPMENT (0.2%) 18,000 UTStarcom, Inc.* ...................... 640 - -------------------------------------------------------------------------------- 11 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2003 - -------------------------------------------------------------------------------- VALUE SHARES (IN THOUSANDS) - ----------------------------------------------------------------- THRIFT (3.5%) 43,000 Brookline Bancorp, Inc. .............. $ 602 31,972 Charter One Financial, Inc. .......... 997 18,500 First BanCorp ........................ 508 44,000 Flagstar Bancorp, Inc. ............... 1,076 11,000 Golden West Financial Corp. .......... 880 13,000 GreenPoint Financial Corp. ........... 662 28,000 Hudson City Bancorp, Inc. ............ 716 42,666 New York Community Bancorp, Inc. ........................ 1,241 63,000 Sovereign Bancorp, Inc. .............. 986 32,912 Washington Federal, Inc. ............. 761 17,000 Webster Financial Corp. .............. 643 ------ 9,072 TOILETRIES/ COSMETICS (0.3%) 11,000 Avon Products, Inc. .................. 684 7,000 Chattem, Inc.* ....................... 132 ------ 816 TRUCKING/TRANSPORTATION LEASING (1.2%) 19,000 Arkansas Best Corp. .................. 452 19,000 Landstar System, Inc.* ............... 1,194 13,400 Roadway Corp. ........................ 382 25,000 Werner Enterprises, Inc. ............. 530 19,500 Yellow Corporation* .................. 452 ------ 3,010 WIRELESS NETWORKING (0.1%) 7,000 InterDigital Communications Corporation* ......................... 164 ------ TOTAL COMMON STOCKS AND AND TOTAL INVESTMENT SECURITIES (88.9%) $231,317 (COST $178,333,000)............................. ======== VALUE (IN THOUSANDS EXCEPT PER SHARE SHARES AMOUNT - -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (10.8%) (including accrued interest) $14,000,000 Collateralized by $9,860,000 U.S. Treasury Bonds 7.625%, due 2/15/25, with a value of $ 14,275,000 (with Morgan Stanley, 0.94%, dated 6/30/03, due 7/1/03, delivery value $14,000,365) ................ $ 14,000 14,000,000 Collateralized by $11,459,000 U.S. Treasury Bonds 6.25%, due 8/15/23, with a value of $14,306,000 (with UBS Warburg LLC, 1.10%, dated 6/30/03, due 7/1/03, delivery value $14,000,428) .......... 14,001 -------- 28,001 -------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (0.3%)................................... 871 -------- NET ASSETS (100.0%) ............................................ $260,189 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER OUTSTANDING SHARE ($260,189,040 - 14,691,599 SHARES OUTSTANDING) .................................................. $ 17.71 ========= - -------------------------------------------------------------------------------- 12 THE VALUE LINE SPECIAL SITUATIONS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS AT JUNE 30, 2003 FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) (UNAUDITED) - --------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS EXCEPT PER SHARE AMOUNT) (IN THOUSANDS) ------------- ------------- ASSETS: INVESTMENT INCOME: Investment securities, at value Dividends (Net of foreign withholding (Cost - $178,333) ........................... $231,317 taxes of $8) ............................ $ 935 Repurchase agreements Interest ................................... 152 (Cost - $28,001) ............................ 28,001 ------- Cash ........................................... 114 Total Income .............................. 1,087 Receivable for securities sold ................. 2,091 ------- Receivable for capital shares sold ............. 699 EXPENSES: Dividends receivable ........................... 153 Advisory fee ............................... 901 Prepaid insurance expense ...................... 18 Service and distribution plan fees ......... 300 Prepaid registration and filing fees ........... 5 Transfer agent ............................. 66 --------- Custodian fees ............................. 38 TOTAL ASSETS ................................. 262,398 Auditing and legal fees .................... 28 --------- Printing ................................... 23 LIABILITIES: Postage .................................... 16 Payable for securities purchased ............... 1,369 Registration fees .......................... 12 Payable for capital shares repurchased ......... 560 Directors' fees and expenses ............... 10 Accrued expenses: Telephone .................................. 10 Advisory fee ................................ 162 Insurance, dues and other .................. 9 Service and distribution plan fees ------- payable .................................. 54 Total Expenses Before Custody Other ....................................... 64 Credits .............................. 1,413 --------- Less: Custody Credits ................... (1) TOTAL LIABILITIES ............................ 2,209 ------- --------- Net Expenses ............................ 1,412 NET ASSETS ..................................... $260,189 ------- ======== NET INVESTMENT LOSS ........................ (325) NET ASSETS CONSIST OF: ------- Capital stock, at $1.00 par value NET REALIZED AND UNREALIZED GAIN ON (authorized 100,000,000, outstanding INVESTMENTS: 14,691,599 shares) .......................... $ 14,692 Net Realized Gain ....................... 2,167 Additional paid-in capital ..................... 215,335 Change in Net Unrealized Accumulated net investment loss ................ (325) Appreciation ......................... 21,525 Accumulated net realized loss on ------- investments ................................. (22,497) NET REALIZED GAIN AND CHANGE IN NET Net unrealized appreciation of UNREALIZED APPRECIATION ON investments ................................. 52,984 INVESTMENTS ............................. 23,692 -------- ------- NET ASSETS ..................................... $260,189 NET INCREASE IN NET ASSETS FROM ======== OPERATIONS .............................. $23,367 NET ASSET VALUE, OFFERING AND ======= REDEMPTION PRICE PER OUTSTANDING SHARE ($260,189,040 - 14,691,599 SHARES OUTSTANDING) ......... $ 17.71 ========
SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- 13 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 2002 - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, (UNAUDITED) 2002 ----------- ------------ (IN THOUSANDS) OPERATIONS: Net investment loss ............................................. $ (325) $ (790) Net realized gain (loss) on investments ......................... 2,167 (14,704) Change in net unrealized appreciation ........................... 21,525 (26,726) --------------------------- Net increase (decrease) in net assets from operations ........... 23,367 (42,220) --------------------------- DISTRIBUTIONS TO SHAREHOLDERS: Net realized gain from investment transactions .................. -- -- --------------------------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares .................................... 200,974 546,946 Proceeds from reinvestment of distributions to shareholders ..... -- -- Cost of shares repurchased ...................................... (206,546) (524,161) --------------------------- Net (decrease) increase from capital share transactions ......... (5,572) 22,785 --------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 17,795 (19,435) NET ASSETS: Beginning of period ............................................. 242,394 261,829 --------------------------- End of period ................................................... $ 260,189 $ 242,394 =========================== ACCUMULATED NET INVESTMENT LOSS, END OF PERIOD ................... $ (325) $ -- ===========================
SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- 14 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2003 - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Value Line Special Situations Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company whose primary investment objective is long-term growth of capital. The Fund invests primarily in a broadly diversified list of "special situations." The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. (A) SECURITY VALUATION. Securities listed on a securities exchange and over-the-counter securities traded on the NASDAQ national market are valued at the closing sales prices on the date as of which the net asset value is being determined. In the absence of closing sales prices for such securities and for securities traded in the over-the-counter market, the security is valued at the midpoint between the latest available and representative asked and bid prices. Securities for which market quotations are not readily available or which are not readily marketable and all other assets of the Fund are valued at fair value as the Board of Directors may determine in good faith. Short-term instruments with maturities of 60 days or less are valued at amortized cost, which approximates market value. (B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase agreements, the Fund's custodian takes possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. In the event of default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. (C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies, including the distribution requirements of the Tax Reform Act of 1986, and to distribute all of its taxable income to its shareholders. Therefore, no federal income tax or excise tax provision is required. (D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted for on the date the securities are purchased or sold. Interest income is accrued as earned. Realized gains and losses on sales of securities are calculated for financial accounting and federal income tax purposes on the identified cost basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. - -------------------------------------------------------------------------------- 15 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 2. CAPITAL SHARE TRANSACTIONS Transactions in capital stock were as follows (in thousands except per share amounts): SIX MONTHS YEAR ENDED ENDED JUNE 30, 2003 DECEMBER 31, (UNAUDITED) 2002 --------------- ------------- Shares sold ..................... 12,302 31,210 Shares issued to shareholders in reinvestment of dividends and distributions ................ -- -- ------ ------ 12,302 31,210 Shares repurchased .............. 12,681 29,954 ------ ------ Net (decrease) increase ......... (379) 1,256 ====== ====== 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of investment securities, excluding short-term securities, were as follows: SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) ----------------- (IN THOUSANDS) Purchases: Investment Securities ......... $57,707 ======= Sales: Investment Securities ......... $68,896 ======= 4. INCOME TAXES At June 30, 2003, information on the tax components of capital is as follows: (unaudited) (IN THOUSANDS) Cost of investments for tax purposes ......... $206,351 ======== Gross tax unrealized appreciation ............ $ 55,246 Gross tax unrealized depreciation ............ (2,279) ------- Net tax unrealized appreciation on investments ............................... $ 52,967 ======== Capital loss carryforward, expires December 31, 2009 ........................... $ 9,758 December 31, 2010 ........................... 11,671 -------- Total capital loss carryforward .............. $ 21,429 ======== During the year ended December 31, 2002, as permitted under Federal income tax regulations, the Fund elected to defer $3,203,000 of post-October net capital losses to the current taxable year. To the extent future capital gains are offset by capital losses, the Fund does not anticipate distributing any such gains to the shareholders. Net realized gains/losses differ for financial statement and tax purposes primarily due to differing treatments of wash sales. - -------------------------------------------------------------------------------- 16 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. JUNE 30, 2003 - -------------------------------------------------------------------------------- 5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES, AND TRANSACTIONS WITH AFFILIATES An advisory fee of $901,000 was paid or payable to Value Line, Inc., the Fund's investment adviser (the "Adviser"), for the six months ended June 30, 2003. This was computed at the rate of 3/4 of 1% of the average daily net assets during the period and paid monthly. The Adviser provides research, investment programs, supervision of the investment portfolio and pays costs of administrative services, office space, equipment and compensation of administrative, bookkeeping and clerical personnel necessary for managing the affairs of the Fund. The Adviser also provides persons, satisfactory to the Fund's Board of Directors, to act as officers and employees of the Fund and pays their salaries and wages. The Fund bears all other costs and expenses. The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain expenses incurred by Value Line Securities, Inc. (the "Distributor"), a wholly-owned subsidiary of the Adviser, in advertising, marketing and distributing the Fund's shares and for servicing the Fund's shareholders at an annual rate of 0.25% of the Fund's average daily net assets. For the six months ended June 30, 2003, fees amounting to $300,000 were paid or payable to the Distributor under this Plan. During the six months ended June 30, 2003, the Fund paid brokerage commissions totaling $78,032 to the distributor which clears its transactions through unaffiliated brokers. Certain officers and directors of the Adviser and its wholly owned subsidiary, Value Line Securities, Inc. (the Fund's distributor and a registered broker/dealer), are also officers and directors of the Fund. For the six months ended June 30, 2003, the Fund's expenses were reduced by $722 under a custody credit agreement with the Custodian. The Value Line, Inc. Profit Sharing and Savings Plan at June 30, 2003, owned 64,069 shares of the Fund's capital stock, representing 0.4% of the outstanding shares. In addition, certain officers and directors of the Fund owned 132,829 shares of the Fund, representing 0.9% of the shares outstanding. - -------------------------------------------------------------------------------- 17 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, 2003 --------------------------------------------------------------------- (UNAUDITED) 2002 2001 2000 1999 1998 ==================================================================================== NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 16.08 $ 18.95 $ 23.55 $ 27.09 $ 17.70 $ 14.48 ------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss ....................... (.02) (.05) (.09) (.19) (.04) (.04) Net gains or losses on securities (both realized and unrealized) ............................. 1.65 (2.82) (4.07) (1.64) 10.83 4.30 ------------------------------------------------------------------------------------ Total from investment operations .............................. 1.63 (2.87) (4.16) (1.83) 10.79 4.26 ------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income ....................... -- -- -- -- -- -- Distributions from capital gains ................................... -- -- (.44) (1.71) (1.40) (1.04) ------------------------------------------------------------------------------------ Total distributions ....................... -- -- (.44) (1.71) (1.40) (1.04) ------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ............. $ 17.71 $ 16.08 $ 18.95 $ 23.55 $ 27.09 $ 17.70 ==================================================================================== TOTAL RETURN ............................... 10.14%+ 15.15% 17.65% 6.78% 61.66% 29.88% ==================================================================================== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ................................ $ 260,189 $ 242,394 $ 261,829 $ 388,264 $ 421,031 $ 190,634 Ratio of expenses to average net assets .................................... 1.18%*(1) 1.20%(1) 1.14%(1) 1.01%(1) .89%(1) 1.02% Ratio of net investment loss to average net assets ........................ (0.27)%* (.31)% (.39)% (.68)% (.22)% (.34)% Portfolio turnover rate .................... 27%+ 66% 88% 78% 85% 183%
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE RATIOS OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD NOT HAVE CHANGED. + NOT ANNUALIZED * ANNUALIZED SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- 18 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. - -------------------------------------------------------------------------------- (This page has been left blank intentionally.) - -------------------------------------------------------------------------------- 19 THE VALUE LINE SPECIAL SITUATIONS FUND, INC. THE VALUE LINE FAMILY OF FUNDS - -------------------------------------------------------------------------------- 1950 - THE VALUE LINE FUND seeks long-term growth of capital. Current income is a secondary objective. 1952 - VALUE LINE INCOME AND GROWTH FUND'S primary investment objective is income, as high and dependable as is consistent with reasonable risk. Capital growth to increase total return is a secondary objective. 1956 - THE VALUE LINE SPECIAL SITUATIONS FUND seeks long-term growth of capital. No consideration is given to current income in the choice of investments. 1972 - VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to realize capital growth. 1979 - THE VALUE LINE CASH FUND, a money market fund, seeks to secure as high a level of current income as is consistent with maintaining liquidity and preserving capital. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 1981 - VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without undue risk to capital. Under normal conditions, at least 80% of the value of its net assets will be invested in securities issued or guaranteed by the U.S. Government and its agencies and instrumentalities. 1983 - VALUE LINE CENTURION FUND* seeks long-term growth of capital. 1984 - THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with the maximum income exempt from federal income taxes while avoiding undue risk to principal. The Fund offers investors a choice of two portfolios: The Money Market Portfolio and The National Bond Portfolio. The fund may be subject to state and local taxes and the Alternative Minimum Tax (if applicable). 1985 - VALUE LINE CONVERTIBLE FUND seeks high current income together with capital appreciation primarily from convertible securities ranked 1 or 2 for year-ahead performance by the Value Line Convertible Ranking System. 1986 - VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income. 1987 - VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers with the maximum income exempt from New York State, New York City and federal income taxes while avoiding undue risk to principal. The fund may be subject to state and local taxes and the Alternative Minimum Tax (if applicable). 1987 - VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* seeks to achieve a high total investment return consistent with reasonable risk. 1993 - VALUE LINE EMERGING OPPORTUNITIES FUND invests primarily in common stocks or securities convertible into common stock, with its primary objective being long-term growth of capital. 1993 - VALUE LINE ASSET ALLOCATION FUND seeks high total investment return, consistent with reasonable risk. The Fund invests in stocks, bonds and money market instruments utilizing quantitative modeling to determine the asset mix. * ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY. FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC., 220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223- 0818, 24 HOURS A DAY, 7 DAYS A WEEK, OR VISIT US AT WWW.VALUELINE.COM. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. - -------------------------------------------------------------------------------- 20 EX-99.CERT 3 vl-ssf033834_ex99cert.txt Exhibit 99.CERT CERTIFICATION PURSUANT TO RULE 30a-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 (17 CFR 270.30a-2) I, Jean Bernhard Buttner, Chairman and President of TheValue Line Special Situations Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of The Value Line Special Situations Fund, Inc.: 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures abased on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal control; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 29, 2003 ------------------------ By: /s/ Jean Bernhard Buttner ------------------------- Jean Bernhard Buttner Chairman and President The Value Line Special Situations Fund, Inc. CERTIFICATION PURSUANT TO RULE 30a-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 (17 CFR 270.30a-2) I, David T. Henigson, Vice President and Secretary/Treasurer of TheValue Line Special Situations Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of The Value Line Special Situations Fund, Inc.: 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures abased on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal control; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 29, 2003 ------------------------ By: /s/ David T. Henigson --------------------- David T. Henigson Vice President and Secretary/Treasurer The Value Line Special Situations Fund, Inc. EX-99.906.CERT 4 vlssf033834_ex99-906.txt Exhibit 99.906.CERT CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jean Bernhard Buttner, Chairman and President of The Value Line Special Situations Fund, Inc.(the "Registrant"), certify that: 1. The periodic report on Form N-CSR of the Registrant for the period ended 6/30/03 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: August 29, 2003 ------------------------ By: /s/ Jean Bernhard Buttner ------------------------- Jean Bernhard Buttner Chairman and President Value Line Special Situations Fund, Inc. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, David T. Henigson, Vice President and Secretary/Treasurer of The Value Line Special Situations Fund, Inc.(the "Registrant"), certify that: 1. The periodic report on Form N-CSR of the Registrant for the period ended 6/30/03 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: August 29, 2003 ------------------------ By: /s/ David T. Henigson --------------------- David T. Henigson Vice President and Secretary/Treasurer Value Line Special Situations Fund, Inc. -----END PRIVACY-ENHANCED MESSAGE-----