<PAGE>
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INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
Francis C. Oakley
Marion N. Ruth
Frances T. Newton
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Stephen Grant
VICE PRESIDENT
Michael Romanowski
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT AND
SECRETARY/TREASURER
Jack M. Houston
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THIS REPORT IS ISSUED FOR THE INFORMATION OF SHAREHOLDERS. IT IS NOT AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A
CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE DISTRIBUTOR).
# VLF 603001
----------------------
ANNUAL REPORT
----------------------
MARCH 31, 1996
----------------------
VALUE LINE
ASSET
ALLOCATION
FUND, INC.
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
TO OUR VALUE LINE ASSET
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to report a very strong year of investment returns for the Value
Line Asset Allocation Fund, Inc. (the "Fund"). For the fiscal year ended March
31, 1996, your Fund gained 35.13%, versus a total return of 32.07% for the
unmanaged Standard & Poor s 500 Index (including reinvested dividends) and a
total return of 10.93% for the Lehman Government/Corporate Bond Index. This
latest performance continues the consistently powerful results achieved since
the Fund's inception on August 24, 1993. Since that time, the Fund has gained
59.7%, versus total returns of 50.45% for the S&P 500 and 12.95% for the Lehman
Bond Index.
Remarkably, your Fund has achieved these market-beating results despite being
only about 70% invested in stocks, on average (ranging from 55% to 90%), with
the remainder in cash and bonds. In the latest fiscal year, the Fund averaged
nearly 30% of its assets in cash, which, of course, meant reduced risk for
shareholders. Yet, in one of the strongest bull markets ever, the Fund
outperformed the stock market indexes, while most fully invested stock funds
lagged the market. Taken alone, the portfolio's stockholdings gained 52.50% in
the 12-month period ended March 31, 1996.
The Fund takes a highly disciplined approach to portfolio management. Companies
must boast of both strong earnings momentum and strong stock-price momentum to
enter the portfolio. To remain in the portfolio, they must maintain this
momentum. As a result, turnover of holdings is high. Even so, about 10% of the
Fund s current holdings have been in the portfolio long enough to more than
double in value. Risk, meanwhile, is minimized through diversification into
approximately 200 different stocks in many different industries. At fiscal year
end, no single stock accounted for as much as 1% of total assets. About half of
the holdings at the moment are in small-capitalization stocks, with the
remainder in mid-cap and large-cap equities. This distribution is similar to
the actual size distribution of the nation's 3,000 largest public companies.
To determine the asset mix among stocks, bonds, and cash, the Fund uses
proprietary models that incorporate a number of financial and economic
variables. On average, over time, we expect about 55% of assets to be in
stocks, 35% in bonds, and 10% in cash. Currently, the Fund is 60% in stocks,
25% in bonds, and 15% in cash. Its latest allocation shift occurred in March and
April, when we moved assets out of stocks and into bonds, due to the rise in
bond yields. All bond assets are currently in U.S. Treasuries, with maturities
ranging from two years to 26 years.
Our goal will continue to be to maximize returns for shareholders, subject to
keeping risk at a moderate level. You will be pleased to know that Value Line
and its employees are the Fund's largest shareholders, expressing our own
confidence in the Fund and its management. We thank you for investing with us.
Sincerely,
/s/ Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
April 25, 1996
THE STANDARD & POOR'S 500 INDEX IS AN UNMANAGED INDEX THAT IS REPRESENTATIVE OF
THE LARGE-CAPITALIZATION STOCKS TRADED IN THE UNITED STATES
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2
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
ALLOCATION FUND SHAREHOLDERS
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ECONOMIC OBSERVATIONS
The U.S. economy is improving at a modest, yet apparently sustainable, pace as
we wend our way through the second quarter. On the whole, the figures coming
out in recent weeks--including those pertaining to auto sales, retailing,
manufacturing, and employment suggest that the expansion is neither grinding to
a halt, as some had feared at the start of the year, nor moving ahead
frenetically, as others had contended in March and April. Overall, we now think
that the economy, which grew at a stronger-than-expected 2.8% during the first
three months of the year, will move ahead at a similar gait in the April-
through-June period. Thereafter, we believe that the business uptrend will move
onto a somewhat slower, albeit likewise durable path.
Meanwhile, the recent pickup in economic activity has both positive and
negative implications for the stock market. The economy's impressive
snapback early in the year understandably cheered investors, as they sensed
that stronger growth would sustain the uptrend in corporate profits. And
that is exactly what happened in the first quarter. In fact, in a number of
cases, results were somewhat better than expectations. Unfortunately, this
same economic strength is now lifting wage costs, which--together with the
recent drought in the Midwest and higher gasoline prices--are adding to the
perception that inflation may be on the increase before much longer. We
think such concerns are somewhat premature at this point. Nevertheless, even
the hint of materially higher wholesale and retail prices--and their
potential for ultimately lifting interest rates--are serving to make some
investors jumpy. Indeed, such fears have undoubtedly contributed to the
stock market's rockier performance in recent weeks.
[GRAPH]
FROM 8/24/93 TO 3/31/96
THE STANDARD & POOR'S 500 INDEX IS AN UNMANAGED INDEX THAT IS REPRESENTATIVE OF
THE LARGER CAPITALIZATION STOCKS TRADED IN THE UNITED STATES. THE PRESENTATION
INCLUDES REINVESTED DIVIDENDS. THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX IS AN UNMANAGED INDEX THAT GENERALLY REPRESENTS THE U.S. BOND MARKET, WITH
ISSUES HAVING AN AVERAGE MATURITY OF 9.8 YEARS. THE GRAPHIC REPRESENTATION
INCLUDES INTEREST REINVESTED.
Performance Data:*
Average Annual
Total Return
--------------
1 Year ended 3/31/96 35.13%
From 8/24/93 (commencement of
operations) to 3/31/96 19.73%
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN ASSUMED
INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF
AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN ITS ORIGINAL COST.
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3
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
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SHARES VALUE
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COMMON STOCKS (64.0%)
ADVERTISING (1.4%)
5,200 Ackerley Communications, Inc. $ 103,350
2,700 *Heritage Media Corp. Class "A" 96,862
10,200 Omnicom Group, Inc. 459,000
4,000 WPP Group PLC (ADR) 122,500
------------
781,712
AEROSPACE/DEFENSE (1.2%)
7,000 AAR Corp. 142,625
10,000 *ESCO Electronics Corp. 135,000
1,300 McDonnell Douglas Corp. 119,113
4,000 Sundstrand Corp. 163,000
3,000 *Whitehall Corp. 96,000
------------
655,738
AIR TRANSPORT (0.4%)
2,000 *Continental Airlines, Inc., Class "B" 112,750
3,400 Southwest Airlines Co. 100,725
------------
213,475
APPAREL (0.8%)
4,000 *Jones Apparel Group, Inc. 194,000
8,000 Liz Claiborne, Inc. 274,000
4,000 *Quiksilver Inc. 127,000
------------
595,000
AUTO PARTS-
REPLACEMENT (0.3%)
4,000 *Gentex Corp. 119,000
4,000 Masland Corp. 70,000
------------
189,000
BANK (0.8%)
8,000 Center Financial Corp. 145,000
8,000 *D & N Financial Corp. 102,000
3,000 *National City Bancorporation 65,625
4,000 River Forest Bancorp 116,000
------------
428,625
BEVERAGE-ALCOHOLIC (0.2%)
5,000 *Mondavi (Robert) Corp. (The)
Class "A" $ 128,750
BROADCASTING/
CABLE TV (0.7%)
3,600 *Clear Channel Communications, Inc. 203,400
5,000 *Infinity Broadcasting Corp. Class "A" 216,875
------------
420,275
BUILDING MATERIALS (1.0%)
3,000 Fluor Corp. 204,750
8,600 *Jacobs Engineering Group Inc. 242,950
4,000 *NCI Building Systems, Inc. 137,000
------------
584,700
CHEMICAL-SPECIALTY (1.8%)
2,000 Avery Dennison Corp. 108,000
2,000 OM Group, Inc. 74,250
13,150 Praxair, Inc. 524,356
3,000 Raychem Corp. 193,500
1,000 Sigma-Aldrich Corp. 57,250
3,000 Tredegar Industries, Inc. 69,375
------------
1,026,731
COMPUTER &
PERIPHERALS (1.7%)
5,000 *Auspex Systems, Inc. 89,375
2,200 *Cisco Systems, Inc. 102,025
10,000 *CompuCom Systems, Inc. 86,250
21,000 *Data General Corp. 307,125
1,700 International Business Machines Corp. 188,913
8,000 *Mylex Corp. 190,000
------------
963,688
COMPUTER SOFTWARE
& SERVICES (6.4%)
3,000 *BMC Software, Inc. 164,250
3,750 *Cadence Design Systems, Inc. 165,469
2,000 *Cognos Inc. 113,500
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4
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
MARCH 31, 1996
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SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE
& SERVICES (CONTINUED)
3,100 Computer Associates International, Inc. $ 222,037
14,000 Computer Data Systems, Inc. 217,875
3,000 *Computer Horizons Corp. 113,250
2,520 *Continuum Co., Inc. 104,895
3,000 *Gartner Group Inc. Class "A" 183,000
10,000 Henry (Jack) & Associates, Inc. 243,750
2,500 *INSO Corp. 115,313
3,000 *Integrated Systems Inc. 144,750
5,000 LCS Industries, Inc. 116,250
10,000 *MDL Information Systems, Inc. 210,625
9,000 *Micrografx, Inc. 117,000
5,000 *Oracle Corp. 235,625
3,500 *PeopleSoft Inc. 201,250
23,000 *Physician Computer Network, Inc. 313,375
2,000 *Sterling Software Inc. 141,000
10,000 *Structural Dynamics Research Corp. 337,500
4,000 *Wind River Systems, Inc. 123,000
------------
3,583,714
DIVERSIFIED
COMPANIES (1.9%)
3,000 AlliedSignal, Inc. 177,375
2,400 Blount, Inc. Class "A" 73,800
3,000 Crane Co. 121,125
3,800 Danaher Corp. 140,600
7,000 *Rexel Inc. 85,750
5,000 Service Corp. International 243,750
6,700 Valmont Industries, Inc. 201,000
------------
1,043,400
DRUG (1.1%)
7,000 *Curative Technologies, Inc. 129,500
8,000 *K-V Pharmaceutical Co. Class "A" 113,000
3,000 *Quintiles Transnational Corp. 195,000
5,500 *Vivus Inc. 170,500
------------
608,000
DRUGSTORE (0.6%)
7,000 *Eckerd "Jack" Corp. 336,875
ELECTRICAL EQUIPMENT (0.6%)
8,000 Charter Power Systems, Inc. $ 216,000
12,000 *Jabil Circuit, Inc. 105,750
------------
321,750
ELECTRONICS (1.7%)
4,000 *Bel Fuse Inc. 73,500
21,000 *Computer Products, Inc. 283,500
9,000 *Dynatech Corp. 211,500
4,000 *Herley Industries, Inc. 34,000
3,100 *Symbol Technologies, Inc. 108,887
21,000 *Universal Electronics, Inc. 244,125
------------
955,512
ENVIRONMENTAL (1.1%)
12,000 *Sanifill, Inc. 460,500
3,000 *United Waste Systems, Inc. 150,000
------------
610,500
FINANCIAL SERVICES (1.7%)
2,000 FINOVA Group Inc. 109,250
2,600 Loews Corp. 196,625
11,000 Money Store, Inc. (The) 306,625
3,000 Paychex, Inc. 175,500
2,000 Student Loan Marketing Association 153,000
------------
941,000
FOOD PROCESSING (0.4%)
4,000 Interstate Bakeries Corp. 98,000
8,000 Worthington Foods, Inc. 122,000
------------
220,000
FURNITURE/
HOME FURNISHINGS (0.8%)
7,500 Bush Industries, Inc. 189,375
8,000 Miller (Herman), Inc. 248,000
------------
437,375
GROCERY (1.2%)
4,000 *Kroger Co. 162,000
10,400 *Safeway, Inc. 296,400
12,000 *Whole Foods Market, Inc. 219,000
------------
677,400
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5
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
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SHARES VALUE
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HEALTHCARE INFORMATION
SYSTEMS (0.7%)
2,500 HBO & Co. $ 235,625
2,000 *Medic Computer Systems, Inc. 151,500
------------
387,125
HOTEL/GAMING (1.6%)
13,000 *Bally Entertainment Corp. 224,250
6,000 *HFS Inc. 291,750
1,400 Hilton Hotels Corp. 131,600
5,800 *Mirage Resorts, Inc. 254,475
------------
902,075
INDUSTRIAL SERVICES (1.4%)
12,000 AMRESCO, Inc. 175,500
5,000 *Primark Corp. 185,000
5,000 *Right Management
Consultants, Inc. 147,500
4,200 *Robert Half International, Inc. 204,225
4,200 World Fuel Services Corp. 71,400
------------
783,625
INSURANCE-
DIVERSIFIED (2.0%)
7,800 American Bankers Insurance
Group, Inc. 274,950
4,000 *American Travellers Corp. 118,500
3,000 Horace Mann Educators Corp. 91,500
2,000 MGIC Investment Corp. 109,000
1,000 *Markel Corp. 88,000
8,000 Penncorp Financial Group, Inc. 252,000
5,000 Pioneer Financial Services, Inc. 81,250
3,000 *Triad Guaranty, Inc. 90,750
------------
1,105,950
INSURANCE-LIFE (0.8%)
4,800 Conseco, Inc. 347,400
2,000 SunAmerica Inc. 100,750
------------
448,150
INSURANCE-
PROPERTY/CASUALTY (0.7%)
5,000 Allied Group, Inc. $ 198,750
7,000 PartnerRe Holdings Ltd. 208,250
------------
407,000
MACHINE TOOL (0.4%)
5,500 Gleason Corp. 223,438
MACHINERY (0.9%)
2,000 Bearings, Inc. 56,750
4,000 DT Industries, Inc. 76,500
5,200 Dover Corp. 237,900
4,500 Lindsay Manufacturing Co. 155,250
------------
526,400
MACHINERY-CONSTRUCTION
& MINING (1.5%)
6,600 Foster Wheeler Corp. 292,875
10,000 *Global Industrial Technologies, Inc. 240,000
6,000 JLG Industries, Inc. 274,500
------------
807,375
MANUFACTURED HOUSING/
RECREATIONAL VEHICLES (0.9%)
5,400 *Champion Enterprises, Inc. 154,575
3,000 Oakwood Homes Corp. 148,875
4,000 *Redman Industries, Inc. 81,000
5,000 Skyline Corp. 123,125
------------
507,575
MEDICAL SERVICES (2.2%)
4,000 *ABR Information Services, Inc. 186,000
5,000 *Multicare Companies, Inc. 141,875
4,000 Omnicare, Inc. 215,500
6,000 *OrNda HealthCorp. 172,500
3,000 *Oxford Health Plans, Inc. 263,250
4,400 *Universal Health Services, Inc.
Class "B" 233,750
------------
1,212,875
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6
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
MARCH 31, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
MEDICAL SUPPLIES (4.7%)
7,000 ADAC Laboratories $ 123,375
3,700 Becton, Dickinson & Co. 302,938
5,200 *Boston Scientific Corp. 239,200
3,000 Cardinal Health, Inc. 192,750
8,000 *Chronimed, Inc. 161,000
3,000 *Daig Corp. 72,375
8,300 Invacare Corp. 234,475
2,797 Johnson & Johnson 258,023
7,000 Life Technologies, Inc. 196,000
4,280 *Nellcor-Puritan Bennett, Inc. 274,990
10,000 *Protocol Systems, Inc. 168,750
11,000 *Respironics, Inc. 231,000
5,000 *Safeskin Corp. 136,250
3,000 *STAAR Surgical Co. 42,000
------------
2,633,126
METAL FABRICATING (0.7%)
8,000 Allied Products Corp. 181,000
13,000 *Shaw Group, Inc. (The) 225,875
------------
406,875
NATURAL GAS-
DIVERSIFIED (0.3%)
3,000 Williams Companies, Inc. 151,125
OFFICE EQUIPMENT
& SUPPLIES (0.2%)
4,000 American Business Products, Inc. 90,500
OILFIELD SERVICES/
EQUIPMENT (2.7%)
5,000 Baker Hughes Inc. 146,250
5,200 Camco International, Inc. 163,800
15,000 *Global Marine Inc. 150,000
4,700 Halliburton Co. 267,312
12,000 *Noble Drilling Corp. 148,500
9,000 *Reading & Bates Corp. 177,750
4,000 *Seacor Holdings, Inc. 147,500
4,000 *Smith International, Inc. 101,000
6,000 Tidewater, Inc. 228,000
------------
1,530,112
PETROLEUM-
PRODUCING (0.9%)
13,000 *Benton Oil & Gas Co. $ 204,750
6,000 *Chesapeake Energy Corp. 277,500
------------
482,250
PRECISION INSTRUMENT (2.1%)
3,300 *Coherent, Inc. 140,250
6,400 *Dionex Corp. 226,400
6,000 *Input/Output, Inc. 186,000
6,000 Kollmorgen Corp. 70,500
5,000 MTS Systems Corp. 187,500
10,000 *OEC-Medical Systems, Inc. 117,500
4,500 *Perceptron, Inc. 116,437
4,000 *Thermedics, Inc. 113,000
------------
1,157,587
PUBLISHING (0.4%)
20,000 *National Education Corp. 235,000
RECREATION (0.4%)
4,000 Carnival Corp. Class "A" 110,000
RESTAURANT (0.9%)
3,000 CKE Restaurants, Inc. 50,250
19,000 *Longhorn Steaks, Inc. 437,000
------------
487,250
RETAIL-SPECIAL LINES (2.3%)
3,600 *Bed, Bath & Beyond, Inc. 189,900
4,000 Gap, Inc. 221,500
8,000 *General Nutrition Companies, Inc. 200,000
7,000 *InaCom Corp. 119,875
9,000 Nature's Sunshine Products, Inc. 231,750
8,000 *Orchard Supply Hardware
Stores Corp. 189,000
3,000 *PetsMart, Inc. 108,750
------------
1,260,775
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7
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL BUILDING
SUPPLY (0.4%)
6,000 *Eagle Hardware & Garden, Inc. $ 61,500
7,000 *Genlyte Group, Inc. (The) 56,000
3,500 Hughes Supply, Inc. 100,187
------------
217,687
RETAIL STORE (0.3%)
9,000 *Price/Costco, Inc. 168,750
SEMICONDUCTOR (0.5%)
20,000 *GenRad, Inc. 255,000
SHOE (0.6%)
3,000 NIKE, Inc. Class "B". 243,750
3,000 Wolverine World Wide, Inc. 84,000
------------
327,750
STEEL-GENERAL (0.2%)
3,000 Carpenter Technology Corp. 115,500
TELECOMMUNICATIONS
EQUIPMENT (3.1%)
4,000 *Aspect Telecommunications Corp. 183,000
21,000 *Digital Systems International, Inc. 321,563
4,000 *InterVoice, Inc. 114,500
3,000 *Level One Communications, Inc. 83,250
3,000 *Octel Communications Corp. 144,750
3,000 *PairGain Technologies, Inc. 194,250
17,000 *TCSI Corp. 518,500
10,000 *Zoom Telephonics, Inc. 162,500
------------
1,722,313
TELECOMMUNICATIONS
SERVICE (0.4%)
5,500 *WorldCom Inc. 253,000
THRIFT (0.6%)
4,000 Charter One Financial, Inc. 135,000
3,000 Leader Financial Corp. 132,000
3,000 *St. Francis Capital Corp. 81,750
------------
348,750
TOBACCO (0.7%)
3,400 *Culbro Corp. $ 208,675
2,000 Philip Morris Companies, Inc. 175,500
------------
384,175
TOILETRIES/COSMETICS (0.5%)
2,000 *Paragon Trade Brands, Inc. 41,500
7,000 Regis Corp. 215,250
------------
256,750
TRUCKING/TRANSPORTATION
LEASING (0.2%)
4,000 *Oxford Resources Corp. Class "A" 112,000
------------
TOTAL COMMON STOCKS
(Cost $29,701,763) 35,741,083
------------
U.S. TREASURY OBLIGATIONS (11.6%)
$ 500,000 United States Treasury Notes
6 3/4%, 5/31/99 510,938
4,000,000 Unites States Treasury Notes
5 7/8%, 11/15/05 3,851,244
2,000,000 United States Treasury Bonds
7 1/4%, 8/15/22 2,087,500
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $6,439,747) 6,449,682
------------
TOTAL INVESTMENT
SECURITIES (75.6%)
(Cost $36,141,510) 42,190,765
------------
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8
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
MARCH 31, 1996
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (21.0%)
(including accrued interest)
$11,700,000 Collateralized by $11,870,000
U.S. Treasury Notes 5 5/8%,
due 1/31/98, with a value of
$11,928,168 (with State Street
Bank & Trust Co., 5.05%, dated
3/29/96, due 4/1/96, delivery
value $11,704,924 $ 11,704,924
-------------
EXCESS OF CASH AND
OTHER ASSETS OVER
LIABILITIES (3.4%) $ 1,907,041
-------------
NET ASSETS (100%) $ 55,802,730
-------------
-------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER OUTSTANDING
SHARE ($55,802,730 DIVIDED BY 3,948,919 shares
outstanding) $ 14.13
-------------
-------------
* Non-income producing
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
STATEMENT OF ASSETS
AND LIABILITIES AT MARCH 31, 1996
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
ASSETS:
Investment securities, at value
(Cost--$36,141,510) $ 42,190,765
Repurchase agreements
(Cost--$11,704,924) 11,704,924
Cash 191,580
Receivable for securities sold 3,769,653
Dividends and interest receivabl 131,688
Deferred organization costs (note 2) 31,422
Receivable for capital shares sold 22,882
---------------
Total Assets 58,042,914
---------------
---------------
LIABILITIES:
Payable for securities purchased 2,143,611
Payable for capital shares redeemed 11,820
Accrued expenses:
Advisory fee payable 30,217
Distribution plan fees payable 11,328
Other 43,208
---------------
Total Liabilities 2,240,184
---------------
NET ASSETS $ 55,802,730
---------------
---------------
NET ASSETS CONSIST OF:
Capital stock, at $.001 par value (authorized
300,000,000, outstanding 3,948,919
shares) $ 3,949
Additional paid-in capital 45,861,304
Undistributed investment income-net 96,934
Accumulated net realized gain
on investments 3,791,288
Unrealized net appreciation of
investments 6,049,255
---------------
NET ASSETS $ 55,802,730
---------------
---------------
Net Asset Value, Offering and
Redemption Price per
Outstanding Share ($55,802,730) DIVIDED BY
3,948,919 shares outstanding) $ 14.13
---------------
---------------
INVESTMENT INCOME:
Interest income $ 810,424
Dividend income (net of foreign withholding
tax of $1,352) 176,931
---------------
Total Income 987,355
---------------
---------------
EXPENSES:
Advisory fee 268,707
Service and distribution plan fee 103,055
Custodian fees 48,306
Auditing and legal fees 38,200
Accounting & bookkeeping expense 32,400
Registration and filing fees 28,656
Directors fees and expenses 25,552
Printing 14,529
Amortization of deferred organization
costs (note 2) 13,093
Insurance, dues and other 6,442
---------------
Total Expenses Before Expense Offset 578,940
Less: Expense Offset (4,378)
---------------
Net Expenses 574,562
---------------
INVESTMENT INCOME-NET 412,793
---------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS-NET:
Realized Gain-Net 7,850,774
Change in Unrealized Appreciation 3,999,625
---------------
NET REALIZED GAIN AND NET UNREALIZED
Appreciation of Investments 11,850,399
---------------
NET INCREASE IN NET ASSETS
from Operations $ 12,263,192
---------------
---------------
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
--------------------------------
<S> <C> <C>
Operations:
Investment income-net....................................... $ 412,793 $ 177,306
Realized gain on investments-net............................ 7,850,774 654,998
Net unrealized appreciation ................................ 3,999,625 1,970,422
--------------------------------
Net increase in net assets from operations ................. 12,263,192 2,802,726
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income-net ...................................... (408,505) (116,050)
Realized gains-net ......................................... (4,391,445) (206,890)
--------------------------------
Total distributions ........................................ (4,799,950) (322,940)
--------------------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares ........................... 18,879,669 4,879,999
Net proceeds from reinvestment of distributions
to shareholders ....................................... 4,775,221 321,433
Cost of shares repurchased.................................. (1,487,694) (497,439)
--------------------------------
Increase from capital share transactions ................... 22,167,196 4,703,993
--------------------------------
TOTAL INCREASE................................................... 29,630,438 7,183,779
NET ASSETS:
Beginning of year........................................... 26,172,292 18,988,513
--------------------------------
End of Year ................................................ $ 55,802,730 $ 26,172,292
--------------------------------
--------------------------------
Undistributed investment income-net at end of year............... $ 96,934 $ 92,646
--------------------------------
--------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
11
<PAGE>
VALUE LINE ASSETS ALLOCATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Value Line Asset Allocation Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company that seeks to achieve a high total investment
return consistent with reasonable risk by investing primarily in a broad range
of common stocks, bonds, and money market instruments. The Fund will attempt to
achieve its objective by following an asset allocation strategy, based on data
derived from computer models for the stock and bond markets, that shifts the
assets of the Fund among equity, debt and money market securities as the models
indicate and its investment adviser, Value Line, Inc. (the "Adviser"), deems
appropriate.
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. Such policies are
consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
(A) SECURITY VALUATION. Securities listed on a securities exchange and over-the-
counter securities traded on the NASDAQ national market are valued at the
closing sales price on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or that are not
readily marketable and all other assets of the Fund are valued at fair value as
the Board of Directors may determine in good faith. Short-term instruments with
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying
collateral securities, the value of which exceeds the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to ensure the adequacy of the
collateral. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund s policy to comply with the
requirements of the Internal Revenue Code of 1986, as amended, applicable to
regulated investment companies, and to distribute all of its taxable income to
its shareholders. Therefore, no federal income-tax or excise-tax provision is
required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted
for on the date the securities are purchased or sold. Realized gains and losses
on sales of securities are calculated for financial accounting and federal
income-tax purposes on the identified-cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Distributions are determined in accordance with income-tax regulations
that may differ from generally accepted accounting
principles.
(E) AMORTIZATION. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
2. ORGANIZATION COSTS
Costs of $66,040 incurred in connection with the Fund's organization and initial
registration have been deferred and are being amortized over 60 months beginning
at the commencement of operations of the Fund. In the event any of the initial
shares of the Fund are redeemed by the holder thereof during the five-year
amortization period, the redemption proceeds will be reduced by a pro-rata
portion of any unamortized, deferred organizational expenses in
the same proportion as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of redemption.
- --------------------------------------------------------------------------------
12
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
MARCH 31, 1996
- --------------------------------------------------------------------------------
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock were as follows:
Year Year
Ended Ended
March 31, March 31,
1996 1995
------------------------
Shares sold 1,435,241 443,662
Shares issued in reinvestment
of dividends and distributions 363,965 30,238
------------------------
1,799,206 473,900
Shares repurchased 109,696 45,595
------------------------
Net increase 1,689,510 428,305
------------------------
------------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, were as
follows:
Year Ended
March 31, 1996
---------------
PURCHASES:
U.S. Treasury obligations $ 3,850,000
Other investment securities 78,778,065
-------------
$82,628,065
-------------
SALES:
Investment securities $74,720,928
-------------
At March 31, 1996, the aggregate cost of investment securities and repurchase
agreement for Federal income-tax purposes was $47,851,434. The aggregate
appreciation and depreciation of investments at March 31, 1996, based on a
comparison of investment values and their costs for federal income-tax purposes,
was $6,305,148 and $260,893, respectively, resulting in a net appreciation of
$6,044,255.
5. ADVISORY FEES, SERVICE AND DISTRIBUTION PLAN
FEES, AND TRANSACTIONS WITH AFFILIATES
An advisory fee of $268,707 was paid or payable to the Adviser for the year
ended March 31, 1996. The fee was computed at the rate of .65 of 1% of the daily
net assets during the period and paid monthly. The Adviser provides research,
investment programs, and supervision of the investment portfolio and pays costs
of certain administrative services and office space. The Adviser also provides
persons, satisfactory to the Fund's Board of Directors, to act as officers of
the Fund and pays their salaries and wages. The Fund bears all other costs and
expenses in its organization and operation. If the aggregate expenses of the
Fund, other than taxes, interest, brokerage commissions, and extraordinary
expenses, exceed the expense limitation imposed by any state in which the Fund
sells its shares, the advisory fee will be reduced by the amount of such excess,
or the amount of such excess will be refunded.
A fee of $5,760 for printing services was paid or payable to the Adviser for the
year ended March 31, 1996.
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a wholly-
owned subsidiary of the Adviser, in advertising, marketing, and distributing the
Fund's shares and for servicing the Fund's shareholders at an annual rate of
0.25% of the Fund's average daily net assets. In the year ended March 31, 1996,
fees amounting to $103,055 were paid or payable under this Plan.
Certain officers and directors of the Adviser and the Distributor are also
officers and a director of the Fund. During the year ended March 31, 1996, the
Fund paid brokerage commissions totalling $65,781 to the Distributor, a
registered broker/dealer, which clears its transactions through unaffiliated
brokers.
At March 31, 1996, the Adviser and/or affiliated companies and the Value Line,
Inc. Profit Sharing Plan, owned 3,172,783 shares of the Fund's capital stock,
representing 80% of the outstanding shares. In addition, certain officers and
directors of the Fund owned 249,771 shares of capital stock, representing 6% of
the outstanding shares.
- -------------------------------------------------------------------------------
13
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
August 24, 1993
(commencement of
Years Ended March 31, operations), to
1996 1995 March 31, 1994
----------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $11.58 $10.37 $10.00
----------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ .10 .08 .06(1)
Net gains or losses on securities
(both realized and unrealized).................... 3.86 1.30 .35
----------------------------------------
Total from investment operations ................. 3.96 1.38 .41
----------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............. (.12) (.06) (.04)
Distributions from capital gains ................. (1.29) (.11) --
----------------------------------------
Total distributions.......................... (1.41) (.17) (.04)
----------------------------------------
NET ASSET VALUE, END OF PERIOD ........................ $14.13 $11.58 $10.37
----------------------------------------
----------------------------------------
TOTAL RETURN........................................... 35.13% 13.47% 4.15%+
----------------------------------------
----------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in thousands) ............... $55,803 $26,172 $18,989
Ratio of operating expenses to average net assets...... 1.38% 1.76% 0.47%*(1)(2)
Ratio of net investment income to average net assets... .99% .85% 1.10%*(1)(2)
Portfolio turnover rate ............................... 244% 211% 108%+
</TABLE>
(1) NET OF EXPENSE REIMBURSEMENT AND FEES WAIVED BY THE ADVISER. HAD THESE
EXPENSES BEEN FULLY PAID BY THE FUND, NET INVESTMENT LOSS PER SHARE WOULD
HAVE BEEN ($0.02), THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE
BEEN 2.24%*, AND THE RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS WOULD
HAVE BEEN (0.67%). *
(2) DUE TO THE REIMBURSEMENT OF EXPENSES AND WAIVER OF
FEES BY THE ADVISER AND THE SHORT PERIOD COVERED BY THIS REPORT, DATA MAY NOT
BE INDICATIVE OF FUTURE PERIODS.
(3) NET OF CUSTODY CASH CREDITS. HAD THE FUND NOT RECEIVED THESE CUSTODY
CREDITS, THE RATIO OF OPERATING EXPENSES TO AVERAGE DAILY NET ASSETS WOULD
HAVE BEEN 1.39%.
+ NOT ANNUALIZED
* ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
14
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF VALUE LINE ASSET ALLOCATION FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Asset Allocation Fund,
Inc. (the "Fund") at March 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the two years in the
period then ended and for the period August 24, 1993 (commencement of
operations) through March 31, 1994, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund s management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1996 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 20, 1996
--------------------------------------------------------------
Federal Tax Status of Distributions (unaudited)
For corporate taxpayers, 4% of the ordinary income distributions
paid during the year 1995 qualify for the corporate-dividends-
received deduction.
--------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE>
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952 -- THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term
growth of capital by investing not less than 80% of its assets in "special
situations." No consideration is given to achieving current income.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTOR'S sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks high current
income consistent with preservation of capital and liquidity.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income
without undue risk to principal. Under normal conditions, at least 80% of the
value of its assets will be invested in issues of the U.S. Government and its
agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital as its
sole objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking
System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income securities.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York
taxpayers with maximum income exempt from New York State, New York City, and
federal income taxes while avoiding undue risk to principal.
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* invests in stocks, bonds,
and cash equivalents according to computer-trend models developed by Value Line.
The objective is to professionally manage the optimal allocation of these
investments at all times.
1992 -- VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing primarily in a diversified
portfolio of investment-grade debt securities.
1993 -- VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being long-
term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds, and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
1995 -- VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* ONLY AVAILABLE THROUGH THE PURCHASE OF THE GUARDIAN INVESTOR, A
TAX-DEFERRED, VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891, OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
- --------------------------------------------------------------------------------
16
