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Q4 2023 : Portfolio Manager Q&A

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Would you please comment on the Fund’s performance relative to the Morningstar Moderate Allocation Category average for the fourth quarter as well as longer periods?

The Fund’s return of 11.89% for the quarter ended December 31, 2023 outperformed the Morningstar Moderate Allocation Category’s average return of 8.60%. Also, for the one-year period, the Fund’s 21.39% return outperformed the category’s average 13.78% return, surpassing the category’s average by over 700 basis points.

In addition, we are pleased that the Fund has outperformed the category average over longer-term periods. In fact, the Fund’s performance ranked in the top decile (10% or better) for the 1, 5 and 10-year periods ended December 31, 2023.

We believe this relative outperformance is primarily due to our consistent investment approach and flexible allocation. In the Fund’s equity portfolio, we own companies that have a track record of 10+ years of consistent growth in both stock price and earnings, and the Fund’s fixed income portfolio is comprised of primarily investment grade bonds.

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


Source: Morningstar as of 12/31/23

Would you please describe the Fund’s equity portfolio composition?

The Fund’s equity sleeve is comprised of companies that have demonstrated consistent growth in both stock price and earnings over a long-term period, generally 10 years or more. We believe companies that have grown steadily through various economic conditions are more likely to have consistent results going forward.

From a market cap perspective, the Fund’s allocation approach is dynamic as we tend to own companies of various sizes. Generally, the Fund’s portfolio includes more companies that are mid- or large-cap but we own fewer mega-cap companies compared to our peers in the Morningstar Moderate Allocation Category. We believe that mid-sized companies offer a longer growth runway compared to their larger counterparts. In fact, out of the 20 largest companies in the U.S., the Fund owned only one of these, Costco Wholesale Corp. (COST), as of December 31, 2023.


Source: Morningstar as of 12/31/23

How much did the Fund’s allocation between equities and fixed income change compared to the prior year?

The Fund’s allocation between equities and fixed income is flexible, enabling us to dynamically adapt based on relative opportunities and risks. In our view, the equity market was a favorable place to invest in 2023. As of December 31, 2023, the Fund was allocated 63% to equities, compared to 67% as of December 31, 2022.

Also as of December 31, 2023, the Fund was allocated 37% to bonds and cash. Within the fixed income portfolio, approximately 98% of the Fund’s debt securities were rated investment grade (AAA through BBB) as of December 31, 2023.



* 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 12/31/23, the Fund’s Top 10 Holdings were as follows: Cintas Corp (4.59%), TransDigm Group Inc (4.12%), Roper Technologies Inc (3.41%), Republic Services Inc (3.37%), Fair Isaac Corp (3.07%), Adobe Inc (2.71%), WR Berkley Corp (2.49%), Intercontinental Exchange Inc (2.46%), Union Pacific Corp (2.38%), S&P Global Inc (2.34%)

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 / 493 funds; 10 Year / 5 stars / 395 funds; ) VALLX (3 Year / 1 stars / 1115 funds; 5 Year / 1 stars / 1040 funds; 10 Year / 2 stars / 811 funds; ) VLEOX (3 Year / 5 stars / 559 funds; 5 Year / 5 stars / 527 funds; 10 Year / 5 stars / 405 funds; ) VALSX (3 Year / 5 stars / 1115 funds; 5 Year / 3 stars / 1040 funds; 10 Year / 3 stars / 811 funds; ) VLAAX (3 Year / 5 stars / 695 funds; 5 Year / 4 stars / 655 funds; 10 Year / 5 stars / 487 funds; ) VALIX (3 Year / 1 stars / 695 funds; 5 Year / 3 stars / 655 funds; 10 Year / 4 stars / 487 funds; ) VAGIX (3 Year / 2 stars / 426 funds; 5 Year / 2 stars / 386 funds; 10 Year / 2 stars / 275 funds; )

Source: Morningstar Direct