Would you please comment on the stock market’s performance in the third quarter of 2024 and how the Fund performed in this period?

During the third quarter of 2024, the stock market, as represented by the S&P 500 Index, rose 5.89%, led primarily by cyclical and defensive sectors such as Utilities and Real Estate. Sectors that are generally more growth oriented, such as Information Technology and Communication Services, were weaker performers in the quarter. When comparing growth-oriented companies and value-oriented companies, the Russell 1000 Growth Index’s gain of 3.19% lagged the Russell 1000 Value Index’s 9.43% in 3Q.

With respect to the Fund’s relative performance, the Fund returned 1.52% for the three months ended September 30, 2024, lagging the Morningstar Large Growth Category average return of 3.70%.

Please visit the Fund’s performance page for complete performance information.

What drove the Fund’s Q3 performance compared to the S&P 500 Index?

The Fund’s underperformance relative to the S&P 500 Index was driven by a combination of stock selection and sector allocation. From a sector perspective, Financials and Consumer Discretionary were the primary detractors from Fund performance. The Fund’s Financials companies declined 1% while the SP 500’s Financials companies gained 11%. The Fund’s Consumer Discretionary companies gained 2% compared to the Index’s 8% gain in the sector.

On the other hand, the Fund’s largest sector contributors were Information Technology (IT) and Communication Services. The Fund’s two best performers in IT were MicroStrategy Inc. (MSTR, +22%), a software and analytics provider which uses Bitcoin as its treasury asset; and Shopify Inc. (SHOP, +21%), which provides an e-commerce platform to small and medium-size businesses. In Communication Services, the Fund’s two best performers were Match Group (MTCH), an online dating product provider; and Roku Inc. (ROKU), which provides television streaming devices. Both companies were up 25% in the quarter.

Would you please describe the portfolio’s three growth stages and provide examples?

The Fund is a concentrated growth portfolio generally comprised of 25-50 primarily large-cap companies that we believe are best positioned for long-term growth. We believe that owning companies in varying stages of their growth life cycle provides a well-rounded approach to managing the Fund. We typically segment the Fund’s holdings into three groups:

Established Growth Companies: This is the largest of the three portfolio segments. These are typically leading large-cap growth companies that have competitive operating advantages, dominant market share, exhibit sustainable growth, and benefit from secular drivers. For example, the Fund owns a position in NVIDIA Corp. (NVDA), a leading developer of graphics processing units that are used in artificial intelligence as well as a range of other software applications.

Next-Gen Growth Companies: This segment includes faster growing companies and those in earlier stages of growth. A portfolio example is DraftKings Inc. (DKNG), which operates online sports and casino gambling products. We believe the industry is positioned for growth following the Supreme Court ruling that allowed states to legalize online gambling.

Opportunistic Growth Companies: This segment is comprised of both cyclical companies and out-of-favor growth companies that may be poised for a turnaround. An example is Fund holding Diamondback Energy Inc. (FANG). Energy is generally a cyclical sector, and we believe the company has a strong management team and a competitive advantage due to its favorable positioning in the Permian Basin.

How do the Fund’s growth characteristics compare to the S&P 500 Index?

As of September 30, 2024, the Fund’s equity portfolio had a 3-year projected average annual sales growth rate that was nearly double that of the S&P 500, and a 3- to 5-year estimated forward earnings growth rate that was more than double the earnings growth rate of the S&P 500.


Value Line Larger Companies Focused Fund
Investor Class VALLX
Institutional Class VLLIX
AUM $380M

Cindy Starke Senior Portfolio Manager

*

* EULAV Asset Management (the “Adviser”) has contractually agreed to waive through June 30, 2020 certain Fund-wide fees and further assume certain Fund-wide expenses to the extent necessary to limit such expenses (excluding brokerage commissions, interest, taxes, and certain non-routine Fund-wide expenses) to 0.90% of the average daily net assets of each class (the “Fund-level Expense Limitation”). In addition, the Adviser and EULAV Securities LLC (the “Distributor”) have contractually agreed to permanently waive certain class-specific fees and assume certain class-specific expenses so that the Institutional Class bears its class-specific fees and expenses at the same percentage of its average daily net assets as the Investor Class’s class-specific fees and expenses (excluding 12b-1 fees and certain non-routine class-specific expenses) (the “Class Expense Limitation,” together with the Fund-level Expense Limitation, the “Expense Limitations”). Each Expense Limitation can be terminated with the agreement of the Fund’s Board. The Adviser and the Distributor may subsequently recover from a class any fees waived and expenses assumed within three years from the month in which the waiver or assumption occurred for such class, to the extent its expense ratio is less than the applicable Expense Limitation or, if lower, the expense limitation in effect when the waiver or assumption occurred. The Fund’s performance would be lower in the absence of such waivers.

As of 09/30/24, the Fund’s Top 10 Holdings were as follows: NVIDIA Corp (8.45%), Meta Platforms Inc Class A (7.97%), Uber Technologies Inc (6.35%), Advanced Micro Devices Inc (5.59%), Amazon.com Inc (5.35%), Exact Sciences Corp (3.83%), Microsoft Corp (3.82%), Alphabet Inc Class A (3.59%), Netflix Inc (3.36%), MicroStrategy Inc Class A (3.25%)

Morningstar™ Categories based on Investor class shares.

The performance data quoted herein represents past performance and does not guarantee future results. Market volatility can dramatically impact the fund's short term performance. Current performance may be lower or higher than figures shown. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than their original cost. Past performance data through the most recent month end is available at vlfunds.com or by calling 1-800-243-2729.

You should carefully consider investment objectives, risks, charges and expenses of Value Line Funds before investing. This and other information can be found in the fund's prospectus and summary prospectus, which can be obtained free of charge from your investment representative, by calling 800.243.2729, or by clicking on the applicable fund at www.vlfunds.com. Please read it carefully before you invest or send money. Value Line Funds are distributed by EULAV Securities LLC. Past performance is no guarantee of future results.

Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell securities. Current and future portfolio holdings are subject to risk.

The average annual returns shown above are historical and reflect changes in share price, reinvested dividends and are net of expenses. Investment results and the principal value of an investment will vary.

The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three- year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. VLEOX (3 Year / 5 stars / 536 funds; 5 Year / 5 stars / 517 funds; 10 Year / 4 stars / 395 funds; ) VLIFX (3 Year / 5 stars / 477 funds; 5 Year / 5 stars / 440 funds; 10 Year / 5 stars / 356 funds; ) VALLX (3 Year / 2 stars / 1020 funds; 5 Year / 2 stars / 955 funds; 10 Year / 2 stars / 751 funds; ) VALSX (3 Year / 4 stars / 1020 funds; 5 Year / 2 stars / 955 funds; 10 Year / 3 stars / 751 funds; ) VLAAX (3 Year / 4 stars / 677 funds; 5 Year / 4 stars / 636 funds; 10 Year / 5 stars / 484 funds; ) VALIX (3 Year / 2 stars / 677 funds; 5 Year / 4 stars / 636 funds; 10 Year / 4 stars / 484 funds; ) VAGIX (3 Year / 2 stars / 431 funds; 5 Year / 1 stars / 386 funds; 10 Year / 2 stars / 271 funds; )

Source: Morningstar Direct