Value Line Capital Appreciation Fund N-CSRSCertified semi-annual shareholder report (management investment company)

Dear Fellow Shareholders:

On behalf of all of us here at Value Line Funds, I hope this semi-annual report finds you and your families safe and well.

As we continue through these challenging times, know that our long-term commitment to you, our Fund shareholders, remains unchanged. As such, we are pleased to present you with this semi-annual report for Value Line Mid Cap Focused Fund, Inc., Value Line Select Growth Fund, Inc., Value Line Larger Companies Focused Fund, Inc., Value Line Capital Appreciation Fund, Inc. and Value Line Core Bond Fund (individually, a “Fund” and collectively, the “Funds”) for the six months ended June 30, 2022. Additionally, to streamline our operations and reduce shareholder expense, the fiscal year-end for Value Line Small Cap Opportunities Fund, Inc. and Value Line Asset Allocation Fund, Inc. (individually, a “Fund” and collectively, the “Funds”) was changed from March 31st to December 31st, and so this newly-combined report also includes a review of these two Funds for the three months ended June 30, 2022.

During the semi-annual period, most broad U.S. equity and fixed income indices generated double-digit negative absolute returns, impacted by a variety of economic and market factors discussed below. Notably, while all seven equity, hybrid and fixed income Funds also posted negative absolute returns during their respective reporting periods, four of the seven outperformed their respective benchmark index on a relative basis. The semi-annual period was highlighted by several of the Value Line Funds being recognized for their long-term performance and/or attractive risk profiles.

On the following pages, the Funds’ portfolio managers discuss the management of their respective Funds during the reporting period. The discussions highlight key factors influencing recent performance of the Funds. You will also find a Schedule of Investments and financial statements for each of the Funds.

Before reviewing the performance of your individual mutual fund investment(s), we encourage you to take a brief look at the major factors affecting the financial markets during the six months ended June 30, 2022, especially given the newsworthy events of the semi-annual period. With meaningful trends and developments during the first half of 2022 in several drivers of the capital markets, we also invite you to take this time to consider a broader diversification strategy by including additional Value Line Funds in your investment portfolio. You can find out more about the entire family of Value Line Funds at our website, www.vlfunds.com.

During the six months ended June 30, 2022, U.S. economic data painted a mixed picture. On the one hand, the labor market remained strong, continuing to recover jobs lost in the COVID-19 pandemic at a rate of almost half a million jobs per month. The U.S. unemployment rate was near the pre-pandemic low at 3.6% at the end of the semi-annual period, and there were 1.9 job openings for every unemployed person. Retail sales also remained surprisingly robust, with spending by consumers increasing at an annualized rate of 1% in June 2022, exceeding economists’ expectations. Even new home sales in the U.S. were healthy, increasing 10.7% in May 2022 from the previous month to a seasonally-adjusted annual pace of 696,000, above market estimates of 588,000.

On the other hand, annualized U.S. Gross Domestic Product (GDP) growth posted a rate of -1.6% for the first quarter of 2022, and many policymakers see the second quarter of 2022 also running at a negative rate, which together would fit the technical definition of recession. Economic activity in the manufacturing and services sectors did continue to grow during the semi-annual period,

Inflation was clearly the dominant theme of the economic narrative during the semi-annual period. The Consumer Price Index, a measure of inflation, rose to a high of 9.1% year over year in June 2022, the largest 12-month increase since the period ending November 1981. The core Consumer Price Index, which excludes food and energy, rose 5.9% over the last 12 months. The food index increased 10.4% for the 12 months ending June 2022, the largest 12-month increase since the period ending February 1981. The energy index rose 41.6% over the last year, the largest 12-month increase since the period ending April 1980. Perhaps at the forefront of individuals’ minds was gasoline prices. According to AAA, the Daily National Average of Gasoline Prices reached $5.02/gallon during June 2022, an increase of $1.73/gallon since the beginning of the calendar year. The Daily National Average of Gasoline Prices came down slightly to end the semi-annual period at $4.85/gallon.

The surprisingly high and persistent inflation data prompted the U.S. Federal Reserve (the Fed) to take an accelerated approach to raising short-term interest rates. Indeed, following a sustained period of near-zero interest rates, Fed officials hiked the targeted federal funds rate 25 basis points in March 2022 in the first U.S. rate increase since the end of 2018. (A basis point is 1/100th of a percentage point.) In May 2022, the Fed lifted the targeted federal funds rate by another 50 basis points, bringing it to a range between 0.75% and 1.00%. Then, in June 2022, Fed policymakers raised the targeted federal funds rate by 75 basis points to a range between 1.50% and 1.75%— the largest single rate increase since 1994—and signaled they would continue tightening monetary policy at an aggressive pace. In June, the Fed also maintained it was “strongly committed” to returning inflation to its 2% objective. The median dot plot projection at the end of June called for a federal funds rate midpoint of 3.4% by the end of 2022, an increase of 150 basis points since March 2022 and of 250 basis points since December 2021. (The dot plot shows interest rate projections of the members of the Federal Open Market Committee (“FOMC”).)

Also during the semi-annual period, the Fed scaled back its large-scale asset purchase program in an effort to counteract increasing inflation, ending it entirely in March 2022. The Fed’s balance sheet had doubled during the COVID-19 pandemic from approximately $3.9 trillion to about $8.5 trillion to ensure financial market liquidity. In May 2022, the Fed announced it would start reducing the size of its balance sheet beginning June 1, 2022 but expected to maintain ample reserves to ensure it could continue to effectively control short-term interest rates. Since June 1, 2022, the Fed has progressively been phasing in a run-off cap of $95 billion. To ensure a gradual decline in the balance sheet, the monthly amounts of securities that were allowed to mature and not be replaced were capped and amounts above the cap would be reinvested and left on the balance sheet.

At its last meeting during the semi-annual period, the Fed stated, “The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.”

U.S. equities, as measured by the S&P 500^® Index³, returned -19.96% during the six months ended June 30, 2022, its worst showing in the first half of a calendar year since 1970 and erasing nearly all the gains achieved in 2021. Inflationary pressures, shifting U.S. Fed policy, COVID-19 pandemic overhangs and ongoing war between Russia and Ukraine were the primary concerns pressuring the U.S. equity markets during the Reporting Period.

During the first quarter of 2022, the S&P 500^® Index experienced its first quarterly decline since the first quarter of 2020. The dramatic repricing of the Fed interest rate hike path and accelerated expectations for a more aggressive balance sheet runoff phase due to concerns about elevated and persistent inflation pressures weighed on investor sentiment. Also, a resurgence in COVID-19 Omicron cases brought back supply-chain issues and worker shortages. Dampened corporate earnings momentum played into the bearish narrative for the U.S. equities markets. (Bearish refers to an expected downward movement in the prices of securities.) During the second quarter of 2022, the S&P 500^® Index retreated significantly. Inflation, the Fed’s policy response and recession worries were at the core of investors’ worries, resulting in a broad risk-off, or heightened risk aversion, atmosphere. Geopolitical overhang also remained a concern, as it affected energy prices, leading to low consumer sentiment and potentially changing consumer spending trends.

Value stocks meaningfully outperformed growth stocks across the capitalization spectrum of the U.S. equity market for the semi-annual period ended June 30, 2022. Within the U.S. equity market, all segments declined, but small-cap stocks were weakest, followed closely by mid-cap stocks and then large-cap stocks. (All as measured by the FTSE Russell indices.³)

In the S&P 500^® Index, 10 of the 11 sectors generated negative absolute total returns during the semi-annual period. Energy was the best relative performer, the only sector to produce a positive total return during the semi-annual period. Utilities, consumer staples and health care fell but still notably outpaced the broad S&P 500^® Index. Conversely, consumer discretionary, communication services and information technology were the weakest performing sectors in the S&P 500^® Index during the semi-annual period.

The U.S. equity markets performed in line with the international equity markets during the semi-annual period. Developed and emerging market equities, as measured by the MSCI EAFE Index³ and MSCI Emerging Markets Index³, respectively, posted semi-annual returns of -19.57% and -17.63%, respectively. As was the case for the U.S. equity markets, international equity markets, both developed and emerging, faced pressures from global concerns around rising inflation, planned interest rate hikes by the U.S. Fed, rising bond yields, valuation concerns, and Russia’s late February invasion of Ukraine. The geopolitical crisis also drove concerns around its impact on commodity prices—particularly in Europe. However, the corporate earnings season retained its overall strength. Other macroeconomic uncertainties included those around regulation in China,  the status of Chinese shares listed in the U.S., and slowing economic growth in China, all exacerbated by the imposition of lockdowns and manufacturing halts due to a rise in COVID-19 cases, leading, in turn, to further supply-chain issues. Japanese equities fell, as the yen significantly weakened against the U.S. dollar, driven by concerns surround a U.S. recession, currency markets and monetary policy. Inflation was also a headwind for Japan, with its inflation at the highest since 2008. Among developed international equity markets, all of the country constituents of the MSCI EAFE Index posted negative total returns during the semi-annual period. Notably, effective March 9, 2022, MSCI Inc. removed Russian securities from the MSCI Emerging Market Index after deeming the Russian equity market “uninvestable” amidst Russia’s invasion of Ukraine. MSCI Inc. announced the MSCI Russia Indexes would be reclassified to “standalone markets” instead of “emerging markets” across all of MSCI’s indexes “at a price that is effectively zero.”

The broad U.S. investment grade fixed income market, as measured by the Bloomberg US Aggregate Bond Index⁴, posted a return of -10.35% during the semi-annual period. The U.S. fixed income market suffered one of its worst-ever drawdowns during the first quarter of 2022, challenged by rising interest rates, as persistently high inflation shifted investor expectations about the scope and timing of Fed monetary policy action. Still, for the semi-annual period overall, the U.S. fixed income market significantly outperformed the broad U.S. equity market. Bond prices fell and yields rose across the yield curve, or spectrum of maturities, during the semi-annual period. (Remember, there is usually an inverse relationship between bond prices and yield movements, so that bond prices rise when yields decrease and vice versa.)

For the semi-annual period overall, the yield on the three-month U.S. Treasury bill rose approximately 166 basis points, while the yield on the two-year U.S. Treasury note increased approximately 219 basis points, and the yield on the five-year U.S. Treasury note rose approximately 175 basis points. (A basis point is 1/100th of a percentage point.) The yield on the bellwether 10-year U.S. Treasury note increased approximately 146 basis points, and the yield on the 30-year U.S. Treasury bond rose approximately 124 basis points during the semi-annual period.  Yields rose primarily in response to rising inflation and the Fed’s interest rate hike path, which sought to contain that inflation. As investors feared an economic slowdown in reaction to the interest rate hikes, the yield curve flattened⁵, meaning the spread, or yield differential, between two-year and 30-year maturities narrowed during the semi-annual period.

Virtually all fixed income sectors recorded negative absolute returns during the semi-annual period. However, on a relative basis, U.S. corporate bonds, both high yield and investment grade, underperformed U.S. Treasury securities the most, as investors favored higher quality assets. For similar reasons, sovereign emerging markets debt also significantly underperformed U.S. Treasuries for the semi-annual period. Securitized bonds overall, including U.S. mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities, modestly outperformed U.S. Treasury securities during the semi-annual period. Treasury inflation-protected securities, leveraged loans and municipal bonds, with the exception of high yield municipal bonds, also outpaced U.S. Treasury securities during the semi-annual period.

Just as we remain focused on long-term, strategic investing through all market conditions, we encourage you to do so as well.

We thank you for trusting us to be a part of your long-term, comprehensive investment strategy.  We appreciate your confidence in the Value Line Funds and look forward to serving your investment needs in the years ahead just as we have been helping to secure generations’ financial futures since 1950—based on solid fundamentals, sound investment principles and the power of disciplined and rigorous analytics.

To stay current with timely commentary and investment insights and/or if you would like additional information on these or other Value Line Funds, we invite you to contact your investment representative or visit us at www.vlfunds.com.

Sincerely,

Mitchell Appel
President of the Value Line Funds

The opinions expressed herein are those of EULAV Asset Management and its investment team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. There is no guarantee of the future performance of any Value Line Fund's investment portfolio. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. For educational use only. This information is not intended to serve as investment advice. This material is not intended to be relied upon as a forecast or research.

The Fund’s investment objective is long-term growth of capital.

Shareholders of Value Line Small Cap Opportunities Fund, Inc. (the “Fund”) received an annual report covering the 12 months ended March 31, 2022. The fiscal year-end of the Fund was subsequently changed from March 31^st to December 31^st. As such, below, Fund portfolio manager Stephen E. Grant discusses the Fund’s performance and positioning for the three months ended June 30, 2022 (the “reporting period”).

The Fund’s Investor Class generated a total return of -12.57% during the three months ended June 30, 2022. This compares to the -17.20% return of the Fund’s benchmark, the Russell 2000^® Index¹, during the same reporting period.

While absolute returns disappointed, the Fund significantly outperformed the Russell 2000^® Index on a relative basis during the three-month reporting period due primarily to stock selection. Sector allocation detracted modestly from relative results during the reporting period.

Further, during the reporting period, higher-quality stocks outpaced lower-quality, more speculative stocks within the broad U.S. equity market, as economic uncertainty and market volatility persisted. The Fund held more higher-quality stocks on average than did the Russell 2000^® Index, supporting its outperformance during a down market.

Relative to the Russell 2000^® Index, effective stock selection in and having an overweighted exposure to the comparatively strongly performing industrials sector contributed most positively to the Fund’s results. The Fund also benefited from strong individual stock selection in the information technology, health care and consumer discretionary sectors. Only partially offsetting these positive contributors was the dampening effect of having no holdings in two relatively strong sectors—utilities and energy.

Among the individual stocks that contributed most positively to the Fund’s relative results were insurance company RLI, data analytics and digital operations company ExlService Holdings and physical and occupational therapy clinics operator U.S. Physical Therapy. Each of these companies’ share price gained during the reporting period, in each case because of stronger than expected operating results.

During the reporting period, among the stocks that detracted most from the Fund’s relative performance were positions in software-as-a-service company Workiva, energy control systems manufacturer for the aerospace and industrial segments Woodward and security data and analytics solutions provider Rapid7. Each of these stocks posted a substantial double-digit negative return, in each case because of weaker than expected operating results.

The Fund did not use derivatives as part of its strategy during the reporting period.

We added no new holdings to the Fund’s portfolio during the reporting period. Conversely, we eliminated 10 holdings we believed were no longer achieving the consistent earnings growth we seek. Among the positions sold were automotive seating supplier Adient, human interface hardware and software developer Synaptics and  technology and analytics company focused on providing online financial services Enova International.

There were no notable changes in the Fund’s sector weightings relative to the Russell 2000^® Index during the reporting period.

As of June 30, 2022, the Fund was overweighted relative to the Russell 2000^® Index in the industrials, information technology, materials and consumer discretionary sectors. The Fund was underweighted relative to the Russell 2000^® Index in the health care, financials and communication services sectors and had a rather neutral exposure relative to the Russell 2000^® Index in consumer staples on the same date. The Fund had no exposure to the energy. real estate or utilities sectors on June 30, 2022.

As always, we intend to stay true to our time-tested investment discipline going forward, seeking to invest in companies that have demonstrated a solid history of consistent growth in both their earnings and stock price. We believe these companies possess enviable portfolios of proprietary products and services that give them strong market positions and make them less vulnerable to swings in national and international economic conditions. In our experience, the stocks of these companies tend to be less volatile than the average small-cap stock, and therefore the Fund has historically provided a smoother ride to investors than its peer group average. At the same time, however, past performance is no guarantee of future results, and small-cap stocks in general are often more volatile than larger-cap stocks. Accepting the short-term ebbs and flows inevitable in the stock market, we believe investments in these companies may well provide superior returns to our shareholders maintaining a long-term perspective.

The following table summarizes the inputs used to value the Fund's investments in securities as of June 30, 2022 (See Note 1(B)):

The Fund’s sole investment objective is long-term growth of capital.

Below, Value Line Mid Cap Focused Fund, Inc. portfolio manager Stephen E. Grant discusses the Fund’s performance and positioning for the six months ended June 30, 2022.

The Fund’s Investor Class generated a total return of -16.81% during the six months ended June 30, 2022. This compares to the -19.96% return of the Fund’s benchmark, the S&P 500^® Index, during the same semi-annual period.

While absolute returns disappointed, the Fund outperformed the S&P 500^® Index on a relative basis during the six-month reporting period, driven by a combination of stock selection and sector allocation decisions overall. Such decisions more than offset the relative disadvantage the Fund faced, as the semi-annual period was one wherein value stocks beat growth stocks across the capitalization spectrum of the U.S. equity market, and the Fund emphasizes growth over value.

The Fund was helped most by effective stock selection in the financials sector. The Fund held three stocks in the financials sector, each in the insurance industry and each of which registered gains, while the S&P 500^® Index was hit hard by double-digit percentage losses in nearly all the bank industry stocks. Further boosting the Fund’s relative results was effective stock selection in the information technology sector. Having no exposure at all to communication services, which was the second-weakest performing sector in the S&P 500^® Index during the semi-annual period, also helped.

These positive contributors were only partially offset by weak stock selection in the health care sector, which detracted. Further dampening the Fund’s relative results was its lack of exposure to energy and utilities and its underweighted exposure to consumer staples—the three strongest sectors in the S&P 500^® Index during the semi-annual period.

Among the individual stocks that contributed most to the Fund’s relative results were its three insurance company holdings—W.R. Berkley, American Financial Group and Arch Capital Group, which each enjoyed share price gains during the semi-annual period because of stronger than expected operating performance.

During the semi-annual period, the Fund was hurt most by positions in swimming pool supplies and equipment distributor Pool, integrated information management solutions and services provider for the public sector Tyler Technologies and engineering simulation software and services company ANSYS. Each of these companies experienced a substantial double-digit share price decline during the semi-annual period because of a less favorable financial and operating environment.

The Fund did not use derivatives during the reporting period.

New positions added to the Fund’s portfolio during the semi-annual period were medical equipment company STERIS, corporate identity uniforms and related business services provider Cintas and software engineering and information technology consulting services provider EPAM Systems. In our view, each demonstrated attractive and consistent growth in earnings and stock price during the past decade.

Conversely, we eliminated from the Fund’s portfolio positions in household products manufacturer Church & Dwight and packaging products manufacturer Ball Corp. We sold the positions because we believed these companies were no longer generating the type of long-term growth we seek. This focused Fund ended the semi-annual period with 30 holdings in its portfolio as compared to 29 at the start of the calendar year.

We shifted during the semi-annual period from having an overweight to a rather neutral position in materials, from a relatively neutral to overweight position in financials, and from a rather neutral to underweight position in consumer staples relative to the S&P 500^® Index.

As of June 30, 2022, the Fund was overweighted relative to the S&P 500^® Index in the industrials, information technology and financials sectors. The Fund was underweighted relative to the S&P 500^® Index in the consumer discretionary, health care and consumer staples sectors and was rather neutrally weighted relative to the Index in the materials and real estate sectors on the same date. On June 30, 2022, the Fund held no positions at all in the energy, communication services or utilities sectors.

Regardless of market conditions, we intend to stay true to our time-tested investment discipline going forward, seeking to invest in companies that have demonstrated a solid history of consistent growth in both their earnings and stock price. In our view, these companies possess attractive portfolios of proprietary products and services that give them strong market positions and make them less vulnerable to swings in national and international economic conditions. At the same time, we believe the underlying stocks of these companies tend to be less volatile than the average stock in the S&P 500^® Index. By maintaining our investment discipline, the Fund has historically provided a smoother ride to investors than its peer group averages. Putting aside short-term ebbs and flows in the equity market, we believe the Fund’s investments are likely to provide superior returns to our shareholders over the long term.

The Fund’s sole investment objective is long-term growth of capital.

Below, Value Line Select Growth Fund, Inc. portfolio manager Stephen E. Grant discusses the Fund’s performance and positioning for the six months ended June 30, 2022.

The Fund’s Investor Class generated a total return of -23.01% during the six months ended June 30, 2022. This compares to the -19.96% return of the Fund’s benchmark, the S&P 500^® Index, during the same semi-annual period.

The Fund underperformed the S& P 500^® Index during the six-month reporting period, driven by a combination of stock selection and sector allocation decisions overall. Further, the semi-annual period was one wherein value stocks beat growth stocks across the capitalization spectrum of the U.S. equity market. This put the Fund at a relative disadvantage, as the Fund emphasizes growth over value.

The Fund was hurt most by stock selection in the health care sector. Whereas the S&P 500^® Index benefited from gains in the leading pharmaceutical companies, such as Johnson & Johnson and Merck, the Fund instead held health care laggards, such as IDEXX Laboratories and Danaher. Further detracting from the Fund’s relative results was its lack of exposure to energy, the strongest sector by far in the S&P 500^® Index during the semi-annual period. To a lesser extent, weak stock selection in the financials and consumer staples sector also dampened the Fund’s relative results.

Only partially offsetting these detractors was the positive contribution made by having only a small exposure to consumer discretionary and having no exposure at all to communication services, the two weakest sectors in the S&P 500^® Index during the semi-annual period. Further boosting the Fund’s relative results was effective stock selection in and having an overweighting to the industrials sector, which posted negative absolute returns but outpaced the S&P 500^® Index on a relative basis during the semi-annual period.

The most significant detractors from the Fund’s performance were positions in information technology services and consulting firm Accenture, diagnostics provider for veterinary, food and water testing applications IDEXX Laboratories and software and technology services firm Intuit. Each significantly lagged the S&P 500^® Index during the semi-annual period because investors reduced their expectations to account for a less favorable financial and operating environment.

Among the individual stocks that contributed most to the Fund’s relative results were those in which it held no position—namely, Facebook parent company Meta Platforms, e-commerce behemoth Amazon.com and three-dimensional graphics processors developer NVIDIA. Not holding these stocks helped because they were the top three detractors from the S&P 500^® Index during the semi-annual period.

The Fund did not use derivatives during the reporting period.

During the semi-annual period, we established a new Fund position in insurance and professional services firm Marsh & McLennan, which, in our view, continues to deliver consistent, attractive long-term growth in both earnings and stock price. We also added substantially to the Fund’s position in Intercontinental Exchange, which operates regulated exchanges, clearing houses and listings venues for commodity, financial, fixed income and equity markets around the world, based on our view of its similarly strong long-term track record.

Conversely, we eliminated the Fund’s positions in American Tower, a wireless and broadcast communications infrastructure real estate investment trust, and HEICO, an aerospace and electronics company. We believed each was no longer generating the consistent long-term growth we seek. Also, within the financial information services industry, Fund holding IHS Markit was acquired by another Fund holding, S&P Global, during the semi-annual period. The Fund had 30 holdings in its portfolio as of June 30, 2022, as compared to 32 at the start of the semi-annual period.

The only notable change in the Fund’s sector weightings relative to the S&P 500^® Index during the six-month period ended June 30, 2022 was a shift from an underweight to a rather neutral position in financials.

As of June 30, 2022, the Fund was overweighted relative to the S&P 500^® Index in the industrials, information technology and health care sectors. The Fund was underweighted relative to the S&P 500^® Index in the consumer staples, consumer discretionary, materials and real estate sectors and held a rather neutral position in financials. The Fund had no allocations to the energy, communication services or utilities sectors on the same date.

Regardless of market conditions, we intend to stay true to our time-tested investment discipline going forward, seeking to invest in companies that have demonstrated a solid history of consistent growth in both their earnings and stock price. In our view, these companies possess attractive portfolios of proprietary products and services that give them strong market positions and make them less vulnerable to swings in national and international economic conditions. At the same time, we believe the underlying stocks of these companies tend to be less volatile than the average stock in the S&P 500^® Index. By maintaining our investment discipline, the Fund has historically provided a smoother ride to investors than its peer group averages. Putting aside short-term ebbs and flows in the equity market, we believe the Fund’s investments are likely to provide superior returns to our shareholders over the long term.

The Fund’s sole investment objective is long-term growth of capital.

Below, Value Line Larger Companies Focused Fund, Inc. portfolio manager Cindy Starke discusses the Fund’s performance and positioning for the six months ended June 30, 2022.

The Fund’s Investor Class generated a total return of -36.41% during the six months ended June 30, 2022. This compares to the -19.96% return of the Fund’s benchmark, the S&P 500^® Index, during the same semi-annual period.

The Fund underperformed the S& P 500^® Index on a relative basis during the six-month reporting period, attributable primarily to stock selection. Sector allocation overall also detracted, though to a far lesser extent. Further, the Fund was hurt by its focus on growth companies, as value-oriented stocks significantly outperformed growth-oriented stocks during the semi-annual period. That said, having a position in cash, albeit a modest one, during a period when the S&P 500^® Index declined dramatically, proved beneficial.

Stock selection in information technology, communication services and industrials detracted most from the Fund’s relative results. Having overweighted allocations to information technology and communication services, two of the weakest sectors in the S&P 500^® Index during the semi-annual period, also hurt.

Only partially offsetting these detractors was having an overweighted allocation to health care, which contributed positively. Health care, which outpaced the S&P 500^® Index during the semi-annual period, was the only sector to boost the Fund’s relative results.

During the semi-annual period, the stocks that detracted most from the Fund’s performance were digital payments technology platform PayPal Holdings, ride share transportation company Lyft and cloud-based, multichannel e-commerce platform Shopify.

Shares of PayPal Holdings declined significantly during the semi-annual period. Its performance largely reflected what turned out to be an overly optimistic market outlook for the company and for the macro environment. Less consumer spending, reduced cross-border trade, cryptocurrency volatility and increased competition proved headwinds for the company. Lyft experienced a significant double-digit share price decline during the semi-annual period, largely due to disappointing first quarter 2022 earnings results and guidance. The company was facing driver supply shortages and higher than anticipated investments made in seeking to support its business. Shares of Shopify saw a sharp double-digit decline during the annual period, primarily reflecting less e-commerce activity following economic re-openings after the worst of the COVID-19 pandemic.

The individual stocks that contributed most to the Fund’s relative results were oncology-focused biotechnology company Exelixis, independent oil and natural gas company Diamondback Energy and cystic fibrosis-focused biotechnology company Vertex Pharmaceuticals.

Exelixis’ shares enjoyed a double-digit gain during the semi-annual period. Its shares rose on reports of favorable financial results and updates on progress toward achieving key corporate objectives as well as commercial, clinical and pipeline development milestones. Diamondback Energy, which operates in the Permian Basin in Texas, was the Fund’s second-largest holding and its shares saw a double-digit gain during the semi-annual period, largely supported by oil and gas price appreciation. The company also delivered positive sales and earnings per share surprises for both the fourth quarter of 2021 and the first quarter of 2022, despite some market challenges such as supply and labor shortages. Shares of Vertex Pharmaceuticals experienced a double-digit increase, benefiting from one of its competitor’s weak trial data, which supported its own dominance in the cystic fibrosis drug market. Other catalysts included Vertex Pharmaceuticals’ progress in areas beyond cystic fibrosis, including type 1 diabetes, sickle cell disease and acute pain.

The Fund did not use derivatives during the reporting period.

We established a Fund position during the semi-annual period in The Goldman Sachs Group. In our view, this financials institution is likely to benefit amid an environment of rising interest rates and positive capital markets trends. The company delivered strong first quarter 2022 earnings results, and consensus estimates reflect potential for revenue growth and earnings per share growth going forward. We also initiated a Fund position in Rivian Automotive, an American manufacturer of electric SUVs, trucks and delivery vans. The company’s Initial Public Offering highlighted Amazon.com as one of its first customers, with a large preorder for electric delivery vans. Amazon.com also owns more than 15% of Rivian Automotive’s equity. We established a Fund position in Intuit, the largest provider of small business accounting software and consumer U.S. tax preparation software. We believe Intuit is an attractive growth company, estimated to grow its sales and earnings at a healthy pace going forward.

Several of the Fund’s sales were prompted by merger and acquisition activity during the semi-annual period, each of which benefited the Fund’s relative results. In January 2022, we sold the Fund’s position in interactive gaming and entertainment software developer Activision Blizzard following Microsoft’s announcement of its intent to acquire the company in an all-cash transaction. In April 2022, we opportunistically eliminated the Fund’s position in social media platform Twitter following Elon Musk’s announcement of his intent to acquire the company. In May 2022, we exited the Fund’s position in Biohaven Pharmaceutical following Pfizer’s announcement of its intent to acquire the company.

During the semi-annual period, the Fund’s weightings in the energy and financials sectors increased, and its weightings in the communication services and health care sectors decreased, in each case relative to the S&P 500^® Index.

As of June 30, 2022, the Fund was overweighted relative to the S&P 500^® Index in the communication services, consumer discretionary, energy and information technology sectors. The Fund was underweighted relative to the S&P 500^® Index in the financials and industrials sectors on the same date. The Fund was rather neutrally weighted to the S&P 500^® Index in the health care sector and had no exposure to the consumer staples, materials, real estate and utilities sectors at the end of June 2022.

Following the S&P 500^® Index’s worst first-half calendar year performance in more than half a century, we were cautiously optimistic at the end of the semi-annual period that the second half of 2022 would be a stronger time for U.S. equities. However, there remained some noteworthy headwinds for the market to digest. These include the U.S. Federal Reserve’s intentions to continue to raise interest rates as it seeks to tame inflation as well as economic growth likely to slow and potentially slip into a recession. We were hopeful the significant market sell-off in the first half of 2022 means most of these risks are already priced in going forward.

Given this backdrop, we continue to believe innovative market leaders with scale, pricing power and strong management are likely to outperform the S&P 500^® Index over longer periods of time and especially during spans of slower economic growth. At the end of the semi-annual period, we continued to favor and look for quality large growth companies with strong balance sheets that are poised to grow both sales and earnings above the market and their peers. Regardless of market condition, we remain committed to our focus on longer-term growth investing as a compelling way to create long-term growth of capital for investors.

The Fund’s investment objective is to achieve a high total investment return (current income and capital appreciation) consistent with reasonable risk. For this purpose, risk takes into account volatility and other factors as determined by EULAV Asset Management (the “Adviser”).

Effective February 8, 2022, Liane Rosenberg assumed primary responsibility for the day-to-day management of the fixed income portion of the Value Line Asset Allocation Fund, Inc. (the “Fund”), following the retirement of her co-portfolio manager, Jeffrey Geffen. Stephen E. Grant continues to have primary responsibility for the day-to-day management of the Fund’s equity portfolio and its asset allocation. Ms. Rosenberg has been a portfolio manager with the Adviser since 2009 and has been one of the Fund’s portfolio managers since 2012.

Shareholders of the Fund received an annual report covering the 12 months ended March 31, 2022. The fiscal year-end of the Fund was subsequently changed from March 31^st to December 31^st. As such, below, Fund portfolio managers Stephen E. Grant and Liane Rosenberg discuss the Fund’s performance and positioning for the three months ended June 30, 2022 (the “reporting period”).

The Fund’s Investor Class generated a total return of -11.05% during the three months ended June 30, 2022. While absolute returns disappointed, the Fund outperformed the -11.63% return of the Fund’s blended benchmark, comprised 60% of the S&P 500^® Index and 40% of the Bloomberg US Aggregate Bond Index (the “Bloomberg Index”), during the same reporting period.

The Fund’s relative results are attributable to both the equity portfolio outperforming the S&P 500^® Index and the fixed income portfolio outperforming the Bloomberg Index during the reporting period. That said, asset allocation had mixed results during the reporting period. An overweighting in equities detracted, as the -16.10% return of the S&P 500^® Index significantly lagged the -4.69% return of the Bloomberg Index during the reporting period. However, the Fund’s 4% to 5% allocation of assets to cash proved beneficial, as both the equity and fixed income markets declined during the reporting period.

The equity portion of the Fund outperformed its benchmark, the S&P 500^® Index, on a relative basis due primarily to stock selection overall. Sector allocation contributed positively, albeit modestly.

The equity portion of the Fund was helped most by effective stock selection in and having an underweight to the weakly performing consumer discretionary sector. Individual stock selection in the information technology, financials and industrials sectors also added value. Only partially offsetting these positive contributors was the equity portion of the Fund’s weak stock selection in the health care and consumer staples sectors coupled with an underweighting each of these relatively strongly performing sectors, which detracted. Having no holdings at all in energy, which outpaced the S&P 500^® Index during the reporting period, also hurt.

Among the individual stocks that contributed most positively to the equity portion of the Fund’s relative results were those it did not own—namely e-commerce behemoth Amazon.com, electric vehicle maker Tesla and three-dimensional graphics processors developer NVIDIA, as these were the three largest detractors from the S&P 500^® Index’s performance, each experiencing a significant double-digit share price decline during the reporting period.

Among the stocks that detracted most from the equity portion of the Fund’s relative results were Intercontinental Exchange, which operates regulated exchanges, clearing houses and listings venues for commodity, financial, fixed income and equity markets around the world, and IDEXX Laboratories, which is a diagnostics provider for veterinary, food and water testing applications. Each of these companies saw a substantial double-digit share price decline during the reporting period, in each case because of weaker than expected operating performance. The equity portion of the Fund’s relative results was also hurt by not owning a position in managed healthcare and insurance company UnitedHealth Group, whose shares gained during the reporting period.

During the reporting period, we did not establish any new positions in the equity portion of the Fund. Among those names sold from the equity portion of the Fund during the reporting period were payment transactions processor Mastercard, pest control services provider Rollins and digital infrastructure company Equinix. We believed each had become less consistent in delivering long-term gains in earnings and stock price.

There were no notable changes in the equity portion of the Fund’s sector weightings relative to the S&P 500^® Index during the three-month period ended June 30, 2022.

As of June 30, 2022, the equity portion of the Fund was overweighted relative to the S&P 500^® Index in information technology, industrials, health care and financials and was underweighted relative to the S&P 500^® Index in the consumer staples, consumer discretionary, materials and utilities sectors. The equity portion of the Fund was rather neutrally weighted relative to the S&P 500^® Index in real estate and had no exposure to the energy or communication services sectors on June 30, 2022.

We kept the fixed income portion of the Fund’s duration shorter than that of the Bloomberg Index throughout the reporting period based on our expectations for higher interest rates. As rates did rise across the yield curve in response to greater inflationary pressures and the U.S. Federal Reserve’s (the “Fed”) efforts to rein in inflation by hiking interest rates, the fixed income portion of the Fund’s short duration positioning added value. Duration is a measure of the Fund’s sensitivity to changes in interest rates. Overall, yield curve positioning also contributed positively to relative performance. The fixed income portion of the Fund was positioned with an underweight to long-dated bonds, i.e. those with maturities of 30 years, which significantly underperformed bonds with short-term and intermediate-term maturities during the reporting  period.

During the reporting period, having an overweight to agency commercial mortgage-backed securities proved beneficial, as these issues outperformed the Bloomberg Index amid the “risk off”^* investor bias that dominated during the reporting period. Issue selection within the corporate credit and securitized sectors also added value.

Conversely, having an overweighted allocation to investment grade corporate bonds relative to the Bloomberg Index and exposure to high yield corporate bonds, which are not a component of the Bloomberg Index, detracted, as these sectors were among the weakest within the fixed income asset class amid the strong investor bias to more “risk off” securities during the reporting period. Having an underweighted allocation to and selection among U.S. Treasuries also detracted.

We reduced the fixed income portion of the Fund’s exposure to corporate bonds, both investment grade and high yield, which added value given these sectors’ weak performance during the reporting period. We established positions in several floating rate corporate bonds that performed well as interest rates were rising. We increased the fixed income portion of the Fund’s allocation to mortgage-backed securities. Also, within the mortgage-backed securities sector, we sold lower-coupon bonds and replaced them with higher-coupon bonds. We also increased the fixed income portion of the Fund’s allocation to U.S. Treasuries during the reporting period.

As of June 30, 2022, the fixed income portion of the Fund remained overweight relative to the Bloomberg Index in investment grade corporate bonds and remained underweight relative to the Bloomberg Index in U.S. Treasuries. The fixed income portion of the Fund had a more modestly overweight exposure to the securitized sector overall but, within that allocation, had an overweight to commercial mortgage-backed securities and an underweight to mortgage-backed securities. The fixed income portion of the Fund’s duration was modestly lengthened during the reporting period but remained shorter than that of the Bloomberg Index.

At the end of June 2022, the Fund had a weighting of approximately 68% in stocks, 28% in fixed income securities and 4% in cash equivalents. This compares to Fund weightings of approximately 67% in stocks, 28% in fixed income securities and 5% in cash equivalents at the end of March 2022.

Neither the equity portion nor the fixed income portion of the Fund used derivatives as part of its strategy during the reporting period.

Regardless of market conditions, within the equity portion of the Fund, we intend to stay true to our time-tested investment discipline going forward, seeking to invest in companies that have demonstrated a solid history of consistent growth in both their earnings and stock price. We believe these companies possess enviable portfolios of proprietary products and services that give them strong market positions and make them less vulnerable to swings in national and international economic conditions. The equity portion of the Fund favors mid-cap companies and the lower range of the large-cap company spectrum. In our view, this is the “sweet spot,” where we seek to find firms that have already established long-term winning records and yet still have plenty of room to grow. Unlike the typical fund in its peer group, the equity portion of the Fund held none of the 25 largest U.S. companies by market capitalization as of June 30, 2022. Of course, past performance is no guarantee of future results. Accepting the short-term ebbs and flows inevitable in the stock market, we believe investments in these companies may well provide superior returns to our shareholders maintaining a long-term perspective.

As we manage both the equity and fixed income portions of the Fund and determine asset allocation, we will continue to carefully monitor any significant changes in the pace of U.S. and global economic growth, any shifts in the Fed’s outlook, the path of the Russia/Ukraine war, and any notable movements in either inflation or labor market conditions, as these factors are likely, in our view, to affect the Fund’s equity and fixed income holdings.

The following table summarizes the inputs used to value the Fund's investments in securities as of June 30, 2022 (See Note 1(B)):