Value Line Asset Allocation Fund N-CSRSCertified semi-annual shareholder report (management investment company)

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 during these most 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 Small Cap Opportunities Fund, Inc. and Value Line Asset Allocation Fund, Inc. (individually, a “Fund” and collectively, the “Funds”) for the six months ended September 30, 2020.

The semi-annual period was highlighted by each Fund being recognized for both its long-term performance and attractive risk and return profiles.

On the following pages, the Funds’ portfolio managers discuss the management of their respective Fund(s) during the semi-annual 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 Fund.

Before reviewing the performance of your individual mutual fund investment, we encourage you to take a brief look at the major factors affecting the financial markets during the six months ended September 30, 2020, especially given the newsworthy events of the semi-annual period.

Through the semi-annual period, the COVID-19 pandemic wreaked havoc on the U.S. economy and on economies globally. Countries around the world were forced to shut down businesses and other workplaces to gain some control over the virus in an effort to save lives. The U.S. lockdown was lengthy and widespread, causing the U.S. economy — and the global economy — to enter a recession. Following a 5.0% decline in the U.S. Gross Domestic Product (GDP) growth rate, on an annualized basis, in the first quarter of 2020, U.S. GDP then precipitously dropped, recording an annualized rate of  -31.4% in the second calendar quarter, the lowest U.S. GDP reading on record. At the end of September 2020, many economists expected this historical decrease to be succeeded by double-digit annualized GDP growth in the third quarter of 2020, though attributable to only select segments of the economy.

As the semi-annual period began, U.S. unemployment had leapt from 4.4% in March 2020 to 14.7% in April. By the end of April, the economy had lost more than 20 million jobs, and jobless claims registered more than 6.6 million. Based largely on this severe rise in unemployment, retail sales plunged 16.4% from the prior month in April. Manufacturing also took a major hit, with the Institute for Supply Management (ISM) Manufacturing Survey declining from a peak reading of more than 50 early in 2020 to a low of 41.5 in April, well below the level widely considered to be a sign of contraction in the manufacturing sector (readings above 50 are positive). The service sector, the largest sector of the U.S. economy, was similarly impacted, shrinking for the first time in a decade. The ISM stated its service sector index fell to 41.8 in April 2020 from a reading of 52.5 just one month earlier.

With the situation dire, worry around potential corporate bankruptcies and mortgage defaults and fears of an economic depression taking hold drove monetary and fiscal authorities to spring into action. The U.S. Federal Reserve (the Fed) cut short-term interest rates from 1.5% to near zero, committed to buy an unlimited amount of U.S. Treasury and agency mortgage-backed securities, increased the scope of its asset purchase program to include investment grade and high yield corporate bonds, and started numerous credit facilities to help buoy the municipal bond market. Many other developed market central banks also added accommodation, while several emerging market central banks embarked on quantitative easing for the first time. On the fiscal front, the U.S. government enacted a more than $2 trillion relief bill, unleashing a massive stimulus plan to stem economic damage that included stimulus checks to many Americans, billions of dollars to the Small Business Administration to sustain businesses and increases to the amount Americans could obtain from unemployment insurance.

These monetary and fiscal measures successfully stemmed further significant declines in the capital markets and gave lifelines to the U.S. economy. Further buoying the U.S. economy were the number of workers able to work remotely from home. Infection, hospitalization and mortality rates began to subside as a result of protocols undertaken, particularly in the U.S.’ Northeast, which had seen, at the time, the worst of the pandemic. Additionally, in parts of the world, particularly in China and other countries in Asia, the virus had subsided to the point that their economies largely reopened. As a result, the U.S. economy also began to

By the end of September 2020, the economy had gained back more than half the jobs lost in February, March and April. Jobless claims had steadily declined to 837,000 in September, and the U.S. unemployment rate fell to 7.9%, still high, but better. Manufacturing significantly improved to a high point reading of 55.4 in the ISM Manufacturing Survey. Strength in the housing market was a major contributor to the gains in manufacturing. Due to the pandemic, many individuals and families bought houses in the suburbs, fleeing the density and constrained space of the cities. Historically low interest rates were an added incentive to purchase a home. Retail sales also rebounded, surging 17.7% in May 2020 and then slowing but remaining in positive territory, advancing 2.6% in August (latest data available). The ISM reported a service sector index reading of 57.8 in September 2020.

Still, just as COVID-19 cases were abating in the heavily hit Northeast states of the U.S., the virus began to spike in other areas, including Florida, Texas, Arizona, California and parts of the South and Midwest. These areas, which had been among the first in the U.S. to re-open, began to once again lock down certain establishments, such as restaurants and bars, and to increase the call for the usage of masks. By the end of the semi-annual period, in September 2020, the outcome of the pandemic-driven health and economic crises had become somewhat clouded. On the one hand, the initial shock of the lockdown had ebbed and select parts of the economy had begun to re-open and recover. Indeed, the U.S. economy had fared somewhat better than many had feared since the end of July, when several of the programs put in place by the U.S. government to cushion the financial impact of the pandemic, including supplemental unemployment payments, expired. On the other hand, job additions came in far below the number expected by most economists, and the share of Americans reporting their job loss as permanent grew. Unemployment, though improved, was still high. Layoffs especially hit industries most negatively affected by the pandemic, such as airlines, hospitality, retail, arts and leisure. The country, at the end of September, was still waiting for a new relief package and further stimulus measures from the Administration. Adding to the high level of uncertainty at the end of September was the escalating news flow around the upcoming U.S. elections. Once again, the course of COVID-19 and prospects for the economy took on a magnitude of uncertainty rarely seen.

U.S. equities, as measured by the S&P 500® Index3, returned 31.31% during the six months ended September 30, 2020, though this masks the heightened volatility. After registering its worst first quarter return on record, the S&P 500® Index soared in the second quarter of 2020 to record its best quarter since the fourth quarter of 1998 and then continued to rally through August before declining in September 2020.

While volatility was high, the U.S. equity market surged in the second calendar quarter on a strong rebound in investor sentiment. On the heels of unprecedented monetary and fiscal stimulus, the prospect of a gradual re-opening of U.S. businesses fueled optimism, despite a significant uptick in COVID-19 cases in regional pockets of the country causing local governments to pause re-opening plans and revisit previous lockdown measures. Positive market sentiment was buoyed by better than consensus expected economic data. Still, the majority of the rally occurred in April and May 2020, as renewed concerns about COVID-19 led to a relatively narrow gain in June. The S&P 500® Index posted a return of 20.54% for the second calendar quarter.

The rally in U.S. equities in July and August largely reflected ongoing support from the Fed, optimism surrounding the gradual re-opening of the U.S. and global economies and seeming progress toward a COVID-19 vaccine. Investors continued to display confidence the Fed was unlikely to raise its targeted federal funds rate in the near future. Supporting this belief was Fed Chair Powell’s speech at the annual Jackson Hole symposium that indicated a major policy adjustment. The Fed planned to shift both to average inflation targeting, i.e., to allow inflation to rise above the Fed’s existing 2% target to compensate for a period when inflation is below 2%, and to approach employment in a way that will focus on those at the lower end of the income spectrum. Stocks also benefited from a strong corporate earnings season that showed better demand trends and numerous beats against lower consensus earnings expectations. The proposal of a fifth COVID-19 relief bill had buoyed investor sentiment during these months, but a stalemate between Democrats and Republicans then served as a headwind in September. The U.S. equity market also grew increasingly cautious in September due to rising uncertainty about the U.S. elections, chaos around U.S. school openings, clashes around the U.S. Supreme Court justice replacement and a resurgence in COVID-19 cases in the U.S. and across the globe. The S&P 500® Index was down 3.80% in September but gained 8.93% for the third calendar quarter.

For the semi-annual period overall, virtually all segments of the U.S. equity market posted strong double-digit returns, but on a relative basis, mid-cap stocks and large-cap stocks within the U.S. equity market performed best and similarly to each other, followed closely by small-cap stocks. As was the case since 2017, growth stocks significantly outperformed value stocks across the capitalization spectrum. (All as measured by the FTSE Russell indices.3)

Among the sectors of the S&P 500® Index, all 11 posted positive returns. Consumer discretionary was the strongest performing sector during the semi-annual period. Information technology and materials also significantly outperformed the S&P 500® Index during the semi-annual period. Energy and utilities posted positive absolute returns but were by far the weakest sectors of the S&P 500® Index during the semi-annual period, followed at some distance by real estate.

The broad U.S. fixed income market, as measured by the Bloomberg Barclays US Aggregate Bond Index4, posted a return of 3.53% during the semi-annual period, significantly underperforming the broad U.S. equity market.

Sovereign yield curves in most developed and emerging market countries steepened modestly, led by the U.S. Short-term yields declined modestly, while long-term yields increased slightly. In the U.S., yields across the maturity spectrum fluctuated, but strong demand for U.S. Treasuries as a “safe haven” kept short- to intermediate-term yields rather range-bound near historical lows, while the Fed’s policy shift was interpreted as being more tolerant of higher inflation, causing a sell-off in longer-dated securities. (Remember, there is an inverse relationship between bond prices and yield movements, so that bond prices rise when yields decrease and vice versa.) Global central banks remained extremely accommodative throughout.

More specifically, the yield on the three-month U.S. Treasury fell approximately one basis point to end the semi-annual period at 0.10%, and the yield on the two-year U.S. Treasury declined approximately 10 basis points to end the semi-annual period at 0.13%. (A basis point is 1/100th of a percentage point.) The yield on the bellwether 10-year U.S. Treasury fell approximately one basis point to end the annual period at 0.69%. Yields on the 30-year U.S. Treasury increased approximately 11 basis points to end the semi-annual period at 1.46%.

Most spread, or non-government bond, sectors posted positive returns that outperformed U.S. Treasuries and other sovereign bonds during the semi-annual period. Corporate bonds, led by lower-rated credits, performed especially well, as countries began to gradually emerge from lockdowns, vaccine developments progressed and asset purchases by the Fed began through its credit facilities. Emerging markets debt, in U.S. dollar terms, rallied, supported by the global wave of monetary and fiscal stimulus that boosted commodities and helped the lifting of lockdown restrictions and re-opening of economies in many countries. Treasury inflation protected securities (TIPS) were also strong, buoyed by Fed purchases. The securitized sector, including mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities, outperformed U.S. Treasuries during the semi-annual period but far more modestly so.

Of course, moving forward, we continue to monitor the latest updates related to COVID-19. Please be assured that we have well-established, comprehensive business continuity plans in place to manage your mutual funds through this situation. 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 for nearly 70 years — 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 have any questions or 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,

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

Below, Value Line Small Cap Opportunities Fund, Inc. portfolio manager Stephen E. Grant discusses the Fund’s performance and positioning for the six months ended September 30, 2020.

The Fund (Investor Class) generated a total return of 27.70% during the six months ended September 30, 2020. This compares to the 31.60% return of the Fund’s benchmark, the Russell 2000® Index1, during the same semi-annual period.

While posting robust double-digit absolute positive returns, the Fund underperformed the Russell 2000® Index on a relative basis during the six-month reporting period due primarily to stock selection. Sector allocation contributed positively, albeit modestly, to relative results.

Further, during the semi-annual period, there were outsized gains by the most speculative, volatile stocks, while the Fund’s historically steadier, more conservative holdings did not keep pace. This focus on more conservative stocks more than offset the benefit of emphasizing growth over value within the Fund during a six-month period when growth-oriented stocks outpaced value-oriented stocks by a wide margin.

On an absolute basis, the Russell 2000® Index had gains in 10 of its 11 sectors during the semi-annual period, while the Fund was invested in eight sectors, with absolute gains in all eight.

Relative to the Russell 2000® Index, weak stock selection in the industrials sector detracted most from the Fund’s results. Stock selection in the health care, materials and consumer staples sectors also dampened the Fund’s results. Only partially offsetting these detractors was the positive contribution of effective stock selection in and having an underweighted allocation to the utilities sector, the only sector in the Russell 2000® Index to post a negative absolute return during the semi-annual period. Having an underweighted allocation to the financials sector and no exposure to the real estate and communication services sectors, each of which significantly underperformed the Russell 2000® Index during the semi-annual period, also proved beneficial.

During the semi-annual period, among the stocks that detracted most from the Fund’s relative performance were RLI, a specialty insurance company; ICU Medical, which develops, manufactures and sells disposable medical connection systems for use in intravenous therapy applications; and Healthcare Services Group, which provides housekeeping, laundry, linen, facility maintenance and food services to the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals. Each of these companies experienced a single-digit percentage decline during the semi-annual period, in each case because their operations were hurt in various ways by the effects of the COVID-19 pandemic.

Among the individual stocks that contributed most to the Fund’s relative results were swimming pool supplies and equipment wholesaler Pool, cloud contact center software provider Five9 and solar power company SolarEdge Technologies. Pool and Five9 each saw a double-digit percentage gain during the semi-annual period, and SolarEdge Technologies enjoyed a triple-digit percentage gain during the same time period, with each benefiting from better than expected operating performance.

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

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”).

Below, Value Line Asset Allocation Fund, Inc. portfolio managers Stephen E. Grant and Liane Rosenberg discuss the Fund’s performance and positioning for the six months ended September 30, 2020.

The Fund (Investor Class) generated a total return of 20.07% during the six months ended September 30, 2020. The Fund closely matched the 20.20% return of the Fund’s blended benchmark, comprised 60% of the S&P 500® Index and 40% of the Bloomberg Barclays US Aggregate Bond Index (the “Bloomberg Barclays Index”), during the same annual period.

The Fund’s equity portfolio outperformed the S&P 500® Index, while the Fund’s fixed income portfolio underperformed the Bloomberg Barclays Index during the reporting period. Overall, asset allocation detracted modestly from Fund results during the semi-annual period.

Supporting the equity portion of the Fund’s outperformance of the S&P 500® Index was its leaning more to growth-oriented stocks than to value-oriented stocks during a semi-annual period when growth substantially outperformed value across the capitalization spectrum.

On a relative basis, the equity portion of the Fund outperformed its benchmark, the S&P 500® Index, due both to effective stock selection and favorable sector allocation overall. The Fund was helped most by strong stock selection in the health care sector. The Fund also benefited from effective stock selection in the consumer staples sector. Having no exposure to energy and an underweighted allocation to utilities, the two weakest sectors in the S&P 500® Index during the semi-annual period, further boosted the equity portion of the Fund’s relative results. Only partially offsetting these positive contributors was the equity portion of the Fund’s weak stock selection in the information technology, consumer discretionary and materials sectors, which detracted. Having an underweighted allocation to consumer discretionary, the strongest performing sector in the S&P 500® Index during the semi-annual period, also hurt.

Among the individual stocks that contributed most to the equity portion of the Fund’s relative results were Cintas, an industrial services provider; Danaher, which designs, manufactures and markets professional, medical, industrial and commercial products and services in the test and measurement, environmental, life sciences, dental and industrial technologies industries; and Thermo Fisher Scientific, a scientific instruments, consumables and chemicals manufacturer. Each of these companies saw a robust double-digit percentage increase during the semi-annual period, benefiting from their reports of stronger than expected operating performance.

Among the stocks that detracted most from the equity portion of the Fund’s relative results were those it did not hold — namely, technology hardware giant Apple and e-commerce retailing behemoth Amazon.com, each of which were among the strongest contributors to the S&P 500® Index during the semi-annual period. Also, a position in Teledyne Technologies, which provides electronic subsystems and instrumentation to the aerospace and defense industry, dampened the equity portion of the Fund’s relative results, as its shares rose only modestly during the semi-annual period due to weaker than expected operating performance.

During the semi-annual period, we initiated positions in power management solutions manufacturer Monolithic Power Systems and drug discovery and development research tools and support services provider Charles River Laboratories International, each reporting strong recent operating results that, in our view, added to their solid long-term history of consistent gains in earnings and stock price.

Among those names eliminated from the equity portion of the Fund during the semi-annual period were Amphenol, which manufactures electrical, electronic and fiber optic industrial products, and Broadridge Financial Solutions, which provides technology-based outsourcing solutions to the financial services industries. We believed each had become less consistent in delivering long-term gains in earnings and stock price.

During the six-month period ended September 30, 2020, the equity portion of the Fund’s allocation relative to the S&P 500® Index in financials increased, though there were still no holdings in banks. The equity portion of the Fund’s allocation relative to the S&P 500® Index in real estate decreased during the semi-annual period.

As of September 30, 2020, the equity portion of the Fund was overweighted relative to the S&P 500® Index in industrials, information technology and materials and was underweighted relative to the S&P 500® Index in the health care, consumer staples, consumer discretionary, utilities and real estate sectors. The Fund was rather neutrally weighted relative to the S&P 500® Index in financials and had no exposure to the energy and communication services sectors on September 30, 2020.

We kept the fixed income portion of the Fund’s duration modestly shorter than that of the Bloomberg Barclays Index, which detracted from performance given that interest rates declined overall during the semi-annual period. The fixed income portion of the Fund’s duration stance was based in large part on our view that given the already extremely low level of interest rates and the massive Federal Reserve (Fed) stimulus, there would be a gradual return to upward pressure on interest rates. However, this scenario was not fully realized by the end of September. Duration is a measure of the Fund’s sensitivity to changes in interest rates.

Yield curve positioning generated mixed results. Exposure to longer-duration U.S. Treasuries hurt, as yields rose at the long-term end of the yield curve. However, an increased allocation to U.S. Treasuries in the two-year to five-year segment of the yield curve, boosted relative results, as this was the best performing part of the yield curve during the semi-annual period.

From a sector perspective, the fixed income portion of the Fund underperformed its benchmark, the Bloomberg Barclays Index, primarily due to its high overall credit quality, especially within the investment grade corporate bond sector. While the fixed income portion of the Fund was essentially neutral to the Bloomberg Barclays Index in corporate bonds, we generally favored more highly-rated issues. However, during the semi-annual period, the strongest performers tended to be BBB-rated investment grade corporate bonds and lower-rated high yield securities. These lower quality corporate bonds benefited from the Fed’s addition of corporate bonds to its bond-buying quantitative easing program. That said, the fixed income portion of the Fund did have some out-of-benchmark exposure to high yield corporate bonds that performed quite well, including those issued by Murphy Oil, Sabra Health and Nova Chemicals.

Exposure to U.S. Treasuries, other than long-term maturities, also contributed positively, as they benefited from the downward pressure on interest rates. Holdings in long-term U.S. Treasuries hurt performance due to steepening at the back, or long-term, end of the yield curve. An allocation to mortgage-backed securities also detracted, as this sector suffered from particularly high levels of mortgage prepayments amidst the low interest rate environment.

Overall, we sought to mitigate risk within the fixed income portion of the Fund given significant concerns about the U.S. and global economies due to the COVID-19 pandemic. We reduced the fixed income portion of the Fund’s exposure to corporate bonds, both investment grade and high yield, as well as to commercial mortgage-backed securities and mortgage-backed securities. Proceeds were generally allocated to an increased allocation to U.S. Treasuries. While this allocation shift proved