Investment Objective and Strategy

The primary investment objective of the Fund is to provide investors with the maximum income exempt from federal income taxes while avoiding undue risk to principal. Capital appreciation is a secondary objective.

To achieve the Fund’s investment objectives, under normal conditions, the Adviser invests at least 80% of the Fund’s assets in securities the income of which is exempt from regular federal income taxation and will not subject non-corporate shareholders to the alternative minimum tax. The Fund invests primarily in investment grade municipal bonds and expects to maintain an average maturity of between 7 and 20 years.

Average Annual Returns as of 07/31/16

YTD 1 Yr 3 Yr 5 Yr 10 Yr
transparent Tax Exempt Fund 3.36% 5.38% 4.90% 3.93% 3.31%
transparent Barclays Capital Municipal Bond Index 4.40% 6.94% 5.91% 5.12% 5.01%
transparent Morningstar Muni. National Long Funds 4.45% 7.16% 6.26% 5.46% 4.45%
Morningstar Muni. National Long Funds Ranking - 190/205 175/186 165/173 136/145
Percentile as of 07/31/16 - 92nd 94th 95th 93rd
VLHYX Gross / Net Expense Ratio*: 1.11% / 0.86%
Morningstar rates funds based on enhanced Morningstar risk-adjusted returns.
VLHYX BC Muni Bond Index MMNLF
YTD 3.36% 4.40% 4.45%
1 Yr 5.38% 6.94% 7.16%
3 Yr 4.90% 5.91% 6.26%
5 Yr 3.93% 5.12% 5.46%
10 Yr 3.31% 5.01% 4.45%
VLHYX Gross / Net Expense Ratio*: 1.11% / 0.86%
Morningstar rates funds based on enhanced Morningstar risk-adjusted returns.

Quarterly Economic Highlights as of 07/31/16

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 07/31/16

Category Muni National Long
3 Year of 186 Funds
5 Year of 173 Funds
10 Year of 145 Funds
Overall of 186 Funds

* For the period July 1, 2014 through June 30, 2017, EULAV Securities LLC (the “Distributor”) contractually agreed to waive the Fund’s 12b-1 fee in an amount equal to 0.25% of the Fund’s average daily net assets. The waiver cannot be modified or terminated before June 30, 2017 without the approval of the Fund’s Board of Directors. There is no assurance that the Distributor will extend the fee waiver beyond June 30, 2017. . 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 / 654 funds; 5 Year / 4 stars / 575 funds; 10 Year / 2 stars / 429 funds; ) VALLX (3 Year / 4 stars / 1482 funds; 5 Year / 4 stars / 1287 funds; 10 Year / 3 stars / 924 funds; ) VLEOX (3 Year / 5 stars / 657 funds; 5 Year / 5 stars / 589 funds; 10 Year / 4 stars / 430 funds; ) VALSX (3 Year / 4 stars / 654 funds; 5 Year / 4 stars / 575 funds; 10 Year / 4 stars / 429 funds; ) VLAAX (3 Year / 4 stars / 823 funds; 5 Year / 5 stars / 708 funds; 10 Year / 4 stars / 484 funds; ) VALIX (3 Year / 4 stars / 384 funds; 5 Year / 4 stars / 310 funds; 10 Year / 5 stars / 234 funds; ) VLDSX (3 Year / 2 stars / 249 funds; 5 Year / 2 stars / 155 funds; 10 Year / N/A stars / N/A funds; ) VAGIX (3 Year / 2 stars / 955 funds; 5 Year / 3 stars / 838 funds; 10 Year / 3 stars / 602 funds; ) VLHYX (3 Year / 1 stars / 186 funds; 5 Year / 1 stars / 173 funds; 10 Year / 1 stars / 145 funds; )