Q2 2017 : Portfolio Manager Q&A

Download PDF Version

How does the Fund distinguishes itself from other mid-cap growth funds?

The Fund is differentiated from many Morningstar Mid-Cap Growth Funds in the following ways:

1. Actively Managed, Focused Strategy. The Fund holds approximately 30 to 50 stocks and as of June 30, 2017, the Fund was comprised of 40 positions. Rather than holding small positions in many different mid-cap companies, we concentrate on our “best ideas” and allocate a meaningful percentage to each holding.

2. Portfolio of Companies Exhibiting Consistent Growth. We seek high-quality companies that have demonstrated over 10 years of consistent growth in both earnings and stock price and avoid high-flying, volatile stocks and companies with shorter track records of success.

3. Lower Risk Profile. In addition to the Fund receiving Morningstar’s overall “Low” risk rating, the portfolio’s standard deviation, a measure of volatility, was considerably lower than the Morningstar Mid-Cap Growth Fund Category average over the 3-, 5- and 10-year periods as of June 30, 2017.

Given these attributes, what should investors expect in terms of short- and long-term performance?

We believe our “focused” mid-cap strategy is designed to provide long-term oriented investors with outperformance and lower volatility. However, in fast-rising markets, this approach can result in short-term periods of underperformance compared to other mid- cap growth funds.

How do the sector weightings of the Fund differ from those of its peers?

As of the second quarter of 2017, the weightings in the Industrials and Consumer Staples sectors in the Morningstar Mid Growth Funds Category averaged 18% and 5%, respectively. However, due to our emphasis on longer term operating results, the portfolio’s Industrials and Consumer Staples sector weightings comprised 35% and 10% of the Fund’s assets, respectively, as of June 30, 2017.

Conversely, the Fund held fewer companies in the more volatile Consumer Discretionary and Financial Services sectors and had no companies in the Real Estate, Communication Services and Energy sectors as compared to the Morningstar Mid Growth Funds Category average at the end of the quarter.

How does the market and economic enviroment influence your investment decisions?

As long-term investors, we don’t attempt to time the market nor do we make long-term investment decisions based on short-term data. Rather, we maintain a portfolio of high-quality, mid-cap companies that continue to exhibit consistent growth regardless of the economy or market conditions.

We expect to hold positions over a longer term period and continually monitor their quarterly and annual earnings and stock price for consistency in growth. If one of our holdings exhibits weaker growth over consecutive quarters, we may trim or sell the position and redeploy the proceeds to an existing or new positon with greater appreciation opportunity.


Average Annual Returns as of 06/30/17

1 Yr 3 Yr 5 Yr 10 Yr
Value Line Mid Cap Focused Fund 15.66% 9.88% 13.81% 5.17%
S&P 500 Index 17.90 9.61 14.63 7.18
Morningstar Mid-Cap Growth Category Average 18.58 6.86 12.72 6.81
Morningstar Cat. Rank (%) 76 11 27 82
# of Funds in Category 626 576 502 370
Morningstar Risk Low Low Low
VLIFX Gross / Net Expense Ratio: 1.21% , VLMIX Gross / Net Expense Ratio*: 23.99% / 0.96%.
Morningstar rates funds based on enhanced Morningstar risk-adjusted returns.

* EULAV Securities LLC (the "Distributor") contractually agreed to waive a portion of the Fund's 12b-1 fee in an amount equal to 0.10% of the Fund's average daily net assets for the period August 1, 2014 through July 31, 2015. The waiver cannot be modified or terminated before July 31, 2015 without the approval of the Fund's Board of Directors. The Fund's performance would be lower in the absence of such waivers.

There are risks associated with investing in small and mid cap stocks, which tend to be more volatile and less liquid than stocks of large companies, including the risk of price fluctuations.

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 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. The inception dates of Value Line Mutual Funds range from 1950 to 2017. 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. VLIFX (3 Year / 5 stars / 576 funds; 5 Year / 4 stars / 498 funds; 10 Year / 2 stars / 369 funds; ) VALLX (3 Year / 5 stars / 1258 funds; 5 Year / 5 stars / 1124 funds; 10 Year / 3 stars / 790 funds; ) VLEOX (3 Year / 4 stars / 600 funds; 5 Year / 4 stars / 531 funds; 10 Year / 4 stars / 394 funds; ) VALSX (3 Year / 4 stars / 576 funds; 5 Year / 3 stars / 498 funds; 10 Year / 4 stars / 369 funds; ) VLAAX (3 Year / 5 stars / 723 funds; 5 Year / 4 stars / 652 funds; 10 Year / 4 stars / 452 funds; ) VALIX (3 Year / 5 stars / 328 funds; 5 Year / 5 stars / 285 funds; 10 Year / 5 stars / 206 funds; ) VAGIX (3 Year / 2 stars / 849 funds; 5 Year / 3 stars / 762 funds; 10 Year / 2 stars / 531 funds; ) VLHYX (3 Year / 1 stars / 140 funds; 5 Year / 1 stars / 131 funds; 10 Year / 1 stars / 104 funds; )

Source: Morningstar Direct