Investment Objective and Strategy

The investment objective of the Fund is to maximize current income. Capital appreciation is a secondary objective but only when consistent with the Fund’s primary objective.

The Fund invests primarily in a diversified portfolio of primarily investment grade, fixed income obligations, including securities issued or guaranteed by the U.S. government, its agencies or instrumentalities (U.S. government securities), mortgage-backed securities, asset-backed securities, corporate bonds, and other fixed income securities. Under normal circumstances, the Fund invests at least 80% of its assets in fixed income securities. The Fund invests in debt securities of any maturity, and there is no limit on the Fund’s maximum average portfolio maturity.

Average Annual Returns as of 08/31/16

YTD 1 Yr 3 Yr 5 Yr 10 Yr
transparent Core Bond Fund 5.25% 5.30% 3.45% 4.23% 5.18%
transparent Barclays US Aggregate Bond Index 5.86% 5.97% 4.37% 3.24% 4.89%
transparent Morningstar Interm.-Term Bond Funds 5.89% 5.47% 4.04% 3.43% 4.60%
Morningstar Interm.-Term Bond Funds Ranking - 663/1070 763/956 140/846 167/603
Percentile as of 08/31/16 - 62nd 80th 17th 28th
VAGIX Gross / Net Expense Ratio*: 1.17% / 0.89%
Morningstar rates funds based on enhanced Morningstar risk-adjusted returns.
Effective Dec. 10, 2012 the Core Bond Fund changed its primary strategy of investing in high-yield bonds to investing in investment-grade bonds. All data above prior to 12/10/2012 reflects the old strategy.
VAGIX BCAGG MITBF
YTD 5.25% 5.86% 5.89%
1 Yr 5.30% 5.97% 5.47%
3 Yr 3.45% 4.37% 4.04%
5 Yr 4.23% 3.24% 3.43%
10 Yr 5.18% 4.89% 4.60%
VAGIX Gross / Net Expense Ratio*: 1.17% / 0.89%
Morningstar rates funds based on enhanced Morningstar risk-adjusted returns.
Effective Dec. 10, 2012 the Core Bond Fund changed its primary strategy of investing in high-yield bonds to investing in investment-grade bonds. All data above prior to 12/10/2012 reflects the old strategy.

Quarterly Economic Highlights as of 08/31/16

The S&P 500 lost some ground in 2015, modestly dropping from 2058 to 2043 at yearend. The equity market saw increased volatility stemming from weak global growth and a drop of almost 40% in oil prices. The strength of the dollar also created a bit of a headwind for companies doing business outside of the U.S.

The capital markets were focused for much of the year on possible tightening by the Fed. While improving job numbers were supportive of a rise in rates, the Fed’s inflation target of 2% remained elusive. The long-awaited first 25-basis point increase finally was announced at the Fed’s December meeting. Overall, interest rates ranged in a fairly tight band with rates across ending the year slightly higher than where they began.

Despite the unemployment rate drop from 5.6% to 5.0% in 2015 and a marked improvement in job creation, consumer spending was somewhat lackluster. Despite the increase in jobs, wage inflation remained extremely muted. While consumers did benefit at the gas pump from the huge drop in oil prices, some of this windfall went to savings and to pay down debt. Particularly hard hit were the bricks and mortar retailers without a significant online presence.

Several of the key events of 2015 are likely to continue to be highly impactful in 2016. While the Fed has indicated the likelihood of four interest rate hikes this year, it is not yet clear if economic growth will be robust enough to support this plan. Similarly, the fortunes of the energy sector will be a key determinant of market action in 2016.

Morningstar as of 08/31/16

Category Intermediate-Term Bond
3 Year of 956 Funds
5 Year of 846 Funds
10 Year of 603 Funds
Overall of 956 Funds

* EULAV Asset Management (the “Adviser”) and EULAV Securities LLC, the Fund’s principal underwriter (the “Distributor”) have agreed to waive a portion of their advisory and Rule 12b-1 fees and the Adviser has further agreed to reimburse certain expenses of the Fund to the extent necessary to limit the Fund’s total annual operating expenses (other than those attributable to interest, taxes, brokerage and futures commissions, and extraordinary expenses not incurred in the ordinary course of the Fund’s business) to 0.99% of the Fund’s average daily net assets (the “Expense Limitation”). The Adviser and the Distributor may subsequently recover from the Fund reimbursed expenses and/or waived fees (within 3 years after the fiscal year end in which the waiver/reimbursement occurred) to the extent that the Fund’s expense ratio is less than the Expense Limitation. The Expense Limitation can be terminated or modified before June 30, 2017 only with the agreement of the Fund’s Board. The Fund's performance would be lower in the absence of such waivers.

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. The inception dates of Value Line Mutual Funds range from 1950 to 2016. 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 methodology rates funds based on an enhanced Morningstar Risk-Adjusted Return measure, which also accounts for the effects of all sales charges, loads, or redemption fees. Funds are ranked by their Morningstar Risk-Adjusted Return scores and stars are assigned using the following scale: 5 stars for top 10%; 4 stars next 22.5%; 3 stars next 35%; 2 stars next 22.5%; 1 star for bottom 10%. Funds are rated for up to three periods: the trailing three-, five-, and 10-years. For a fund that does not change categories during the evaluation period, the overall rating is calculated using the following weights: At least 3 years, but less than 5 years uses 100% three-year rating. At least 5 years but less than 10 years uses 60% five-year rating / 40% three-year rating. At least 10 years uses 50% ten-year rating / 30% five-year rating / 20% three-year rating. VLIFX (3 Year / 5 stars / 652 funds; 5 Year / 4 stars / 582 funds; 10 Year / 3 stars / 433 funds; ) VALLX (3 Year / 5 stars / 1470 funds; 5 Year / 4 stars / 1278 funds; 10 Year / 3 stars / 920 funds; ) VLEOX (3 Year / 5 stars / 656 funds; 5 Year / 5 stars / 592 funds; 10 Year / 4 stars / 432 funds; ) VALSX (3 Year / 4 stars / 662 funds; 5 Year / 3 stars / 582 funds; 10 Year / 4 stars / 433 funds; ) VLAAX (3 Year / 4 stars / 829 funds; 5 Year / 5 stars / 718 funds; 10 Year / 4 stars / 491 funds; ) VALIX (3 Year / 4 stars / 383 funds; 5 Year / 4 stars / 310 funds; 10 Year / 5 stars / 230 funds; ) VLDSX (3 Year / 2 stars / 252 funds; 5 Year / 1 stars / 156 funds; 10 Year / N/A stars / N/A funds; ) VAGIX (3 Year / 2 stars / 956 funds; 5 Year / 4 stars / 846 funds; 10 Year / 3 stars / 603 funds; ) VLHYX (3 Year / 1 stars / 181 funds; 5 Year / 1 stars / 169 funds; 10 Year / 1 stars / 140 funds; )