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Q4 2022 : Portfolio Manager Q&A

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Would you please comment on the Fund’s performance relative to the Morningstar 50-70% Equity Allocation Funds category average for both the fourth quarter and the year ended December 31, 2022?

For the quarter ended December 31, 2022, the Fund’s return of 6.23% outperformed the Morningstar 50-70% Equity Allocation Funds category’s 5.69% average return. For the 1-year period ended the same date, the Fund’s -15.67% return underperformed the Morningstar category’s average of -13.64%. While we are never satisfied with relative underperformance, we believe that longer-term periods are important to investors. We are pleased to note that the Fund’s performance ranked in the top decile (10% or better) within the category for the 5 and 10-year periods as of December 31, 2022.

We believe the Fund’s relative performance over the longer time periods mentioned above is primarily due to our long-term oriented investment approach. Within the Fund’s equity portfolio, we own companies that possess 10+ years of consistent growth in both stock price and earnings, and the fixed income portfolio is comprised of primarily investment grade securities.

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


Source: Morningstar 12/31/22

Would you please comment on the Fund’s equity market cap composition?

From a market-cap perspective, the Fund’s equity investment approach is flexible and includes companies of various sizes. However, we believe mid-sized companies can be an attractive place to invest. Mid-sized companies have the potential to offer a longer growth runway relative to their larger counterparts.

As we seek companies with 10 or more years of consistent growth in both stock price and earnings, we often find more candidates within the market’s middle capitalization range. Compared to the Morningstar 50-70% Equity Allocation Funds category average, we have fewer of the giant-sized and more mid-sized companies. Notably, the Fund did not hold any of the 25 largest U.S. companies by market cap as of December 31, 2022.


Source: Morningstar 12/31/22

What was the Fund’s allocation between equities and fixed income?

The Fund’s allocation between equities and fixed income is flexible, allowing us to dynamically adapt to relative opportunities and risks. While both the equity and fixed income markets were subject to downward pressures due to inflation and rising interest rates during the year, we believe that the Fund benefited from a slightly higher allocation to equities. As of December 31, 2022, the Fund held approximately 65% in equities, up from 63% at the end of the prior quarter. The remaining fixed income allocation was approximately 29% in bonds and 6% in cash as of December 31, 2022.



* EULAV Asset Management (the “Adviser”) and EULAV Securities LLC, the Fund’s principal underwriter (the “Distributor”), have agreed to waive certain class-specific fees and/or pay certain class-specific expenses incurred by the Institutional Class 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 any extraordinary expenses incurred in different amounts by the classes) (the “Expense Limitation”). The Adviser and the Distributor may subsequently recover from assets attributable to the Institutional Class the 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 Institutional Class’s expense ratio is less than the Expense Limitation or, if lower, the expense limitation in effect when the waiver/reimbursement occurred. The Expense Limitation can be terminated or modified before June 30, 2019 only with the agreement of the Fund’s board. The Fund's performance would be lower in the absence of such waivers.

As of 12/31/22, the Fund’s Top 10 Holdings were as follows: Cintas Corp (3.49%), S&P Global Inc (3.16%), Thermo Fisher Scientific Inc (3.14%), Intercontinental Exchange Inc (3.02%), Intuit Inc (2.88%), Aon PLC Class A (2.55%), Republic Services Inc (2.53%), TransDigm Group Inc (2.46%), WR Berkley Corp (2.45%), Cadence Design Systems Inc (2.41%)

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. 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 / 523 funds; 5 Year / 5 stars / 492 funds; 10 Year / 5 stars / 382 funds; ) VALLX (3 Year / 1 stars / 1130 funds; 5 Year / 1 stars / 1049 funds; 10 Year / 2 stars / 801 funds; ) VLEOX (3 Year / 4 stars / 574 funds; 5 Year / 5 stars / 528 funds; 10 Year / 5 stars / 399 funds; ) VALSX (3 Year / 3 stars / 1130 funds; 5 Year / 5 stars / 1049 funds; 10 Year / 3 stars / 801 funds; ) VLAAX (3 Year / 2 stars / 683 funds; 5 Year / 5 stars / 655 funds; 10 Year / 5 stars / 485 funds; ) VALIX (3 Year / 2 stars / 192 funds; 5 Year / 2 stars / 185 funds; 10 Year / 3 stars / 127 funds; ) VAGIX (3 Year / 2 stars / 407 funds; 5 Year / 2 stars / 374 funds; 10 Year / 2 stars / 277 funds; )

Source: Morningstar Direct