<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
SERVICING AGENT Co.
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
</TABLE>
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE
RECORDS OF THE FUND WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS
AND, ACCORDINGLY, THEY DO NOT EXPRESS AN OPINION THEREON.
THIS UNAUDITED REPORT IS ISSUED FOR 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).
VLF609170
------------------------------------
SEMI-ANNUAL REPORT
------------------------------------
SEPTEMBER 30, 1996
----------------------------------------
VALUE LINE
ASSET
ALLOCATION
FUND, INC.
[LOGO]
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
To Our Value Line Asset
- --------------------------------------------------------------------------------
Dear Shareholder:
We're pleased to report a continuation of the excellent returns earned by Value
Line Asset Allocation Fund. For the six months ended September 30, 1996, the
Fund gained 14.16%, versus a total return of 7.72% for the unmanaged Standard &
Poor's 500 Stock Index and a total return of 2.24% for the Lehman
Government/Corporate Bond Index.
Since inception, your Fund has been the top-performing fund of its kind,
according to Lipper Analytical Services, ranking #1 among 88 "flexible" funds.
From inception August 24, 1993 through September 30, 1996, the Fund earned a
total return of 82.31%, versus 62.06% for the S&P 500 and 15.48% for the Lehman
Government/Corporate Bond Index. By yet another measure, the Fund has
consistently dominated its category unlike any fund of any kind over the past
three years. Money Magazine (August 1996) scored the Fund's performance
percentile rankings in the "Total Return" category at 96% for 1994, 99% for
1995, and 100% for 1996 (through July 1st), a combination unmatched by any fund
in any category over this time period.
That's terrific, but doesn't great performance walk hand in hand with great
risk? In this case, the answer is no. As one indication, Mutual Funds magazine
(October 1996) lists your Fund as among only 25 in the country to beat the S&P
500 both on the way up-during the powerful market rally from April 1994 to May
1996-and on the way down-during the sharp market decline in May through July
1996. And among the only 178 funds (out of thousands of all kinds) that outpaced
the averages during that upswing, your Fund carried the third-highest Safety
Rating of 8.2 out of 10, according to the publishers of this article.
Key to the Fund's success is a highly selective, ever-vigilant investment
process. Strong earnings momentum and stock price momentum are necessary
elements for a stock
to enter the portfolio. But no stock carries a lifetime pass here: Each holding
must maintain these selection criteria every month and every quarter to remain
in the portfolio. A stumble means rapid elimination. We have found the greatest
opportunities among smaller and mid-size companies, the less-followed stocks
that have a greater chance of positively surprising Wall Street. And to ensure
that the odds work in our favor, the Fund holds a very diversified portfolio
that can easily shake off the occasional negative surprise.
This wide diversification is one way that we control risk. The Fund holds about
175 stocks and avoids concentration in any particular industry sector. The other
way the Fund reduces risk is through holdings of bonds and cash. Value Line's
proprietary stock and bond market models determine the desired allocation to
each asset category. The Fund began this fiscal year (April 1st) with 64% of
assets in stocks, 12% in bonds, and 24% in cash equivalents. Rising interest
rates, combined with rising stock prices, have since decreased the
attractiveness of stocks relative to bonds. The Fund's gradual shift out of
stocks and into bonds resulted in a September 30th allocation of 45% in stocks,
30% in bonds, and 25% in cash equivalents. This conservative posture should
allow the Fund to weather a stock market downturn in good shape.
We aim to continue to deliver high total returns to the Fund's shareholders,
while keeping risk down to a reasonable level. Thank you for investing with us.
Sincerely,
[SIGNATURE]
CHAIRMAN AND PRESIDENT
November 11, 1996
- --------------------------------------------------------------------------------
2
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Allocation Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The economy appears to be entering a period of somewhat slower growth, with this
deceleration in activity likely to persist for at least another several
quarters. Recent figures, for example, show that the employment, retail,
manufacturing, and housing sectors, albeit still showing some improvement, are
not nearly as strong as they had been earlier in the expansion. All of this
suggests that real, inflation-adjusted gross domestic product, which increased
at a modest 2.2% rate in the third quarter, will advance at a similarly
restrained pace over the final three months of this year and through much of
1997.
A slower pace of growth is probably not an unwelcome development at this stage
of the business cycle, since such a deceleration would likely help keep labor,
energy, and raw materials shortages at bay, thus paving the way for continued
moderate levels of inflation. Limited pricing pressures, in turn, would tend to
dissuade the Federal Reserve Board from shifting onto a much tighter monetary
course. Our sense, for now, is that interest rates will remain relatively stable
over the next year.
The danger, though, is that the economy could slow too much, leading, perhaps,
to a recession. For now, we do not see such a reversal evolving over the next
year. We caution, however, that a business contraction would likely bring to an
end the long uptrend in corporate profits, and, most likely, to the bull market
as well.
Performance Data:*
<TABLE>
<CAPTION>
Average
Annual Total
Return
--------------------------
<S> <C>
1 Year ended 9/30/96...... 29.26%
3 Years ended 9/30/96..... 20.27%
From 8/24/93 (commencement
of operations) to
9/30/96.................. 21.38%
</TABLE>
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
3
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Schedule of Investments (unaudited)
- -------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (44.5%)
ADVERTISING (1.1%)
5,200 Ackerley Group, Inc........ $ 173,550
10,000 National Media Corp.*...... 148,750
6,200 Omnicom Group, Inc......... 289,850
4,000 WPP Group PLC (ADR)........ 146,500
-----------
758,650
AEROSPACE/DEFENSE (0.8%)
3,000 Northrop Grumman Corp...... 240,750
3,000 Whitehall Corp.*........... 120,000
8,000 Wyman-Gordon Co.*.......... 183,000
-----------
543,750
APPAREL (1.7%)
14,000 Chico's FAS, Inc.*......... 105,000
4,000 Jones Apparel Group,
Inc.*.................... 255,000
6,000 Liz Claiborne, Inc......... 223,500
4,000 Nautica Enterprises,
Inc.*.................... 129,000
3,000 Russell Corp............... 96,750
4,000 St. John Knits, Inc........ 200,500
2,000 Tommy Hilfiger Corp.*...... 118,500
-----------
1,128,250
AUTO PARTS-ORIGINAL EQUIPMENT (0.4%)
7,000 Excel Industries, Inc...... 119,000
6,000 Tower Automotive, Inc.*.... 153,750
-----------
272,750
AUTO PARTS-REPLACEMENT (0.1%)
5,000 Republic Automotive Parts,
Inc.*.................... 87,500
BUILDING MATERIALS (0.6%)
9,000 ABT Building Products
Corp.*................... 180,000
4,400 Apogee Enterprises, Inc.... 154,000
5,000 Triangle Pacific Corp.*.... 98,750
-----------
432,750
CHEMICAL-DIVERSIFIED (0.3%)
6,000 Cytec Industries, Inc.*.... 233,250
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
CHEMICAL-SPECIALTY (0.6%)
2,000 Avery Dennison Corp........ $ 111,000
4,000 Fuller (H.B.) Co........... 153,500
5,000 Tredegar Industries,
Inc...................... 167,500
-----------
432,000
COAL/ALTERNATE ENERGY (0.6%)
6,000 AES Corp.*................. 236,250
5,000 CalEnergy Inc.*............ 159,375
-----------
395,625
COMPUTER & PERIPHERALS (0.8%)
8,000 American Power Conversion
Corp.*................... 117,000
5,000 Auspex Systems, Inc.*...... 76,875
3,600 SCI Systems, Inc.*......... 202,500
6,000 Tech Data Corp.*........... 167,250
-----------
563,625
COMPUTER SOFTWARE & SERVICES (3.0%)
4,000 Acxiom Corp.*.............. 164,500
5,625 Cadence Design Systems,
Inc.*.................... 201,094
4,650 Computer Associates
International, Inc....... 277,837
3,300 Compuware Corp.*........... 150,975
7,000 Comverse Technology,
Inc.*.................... 272,125
10,000 MDL Information Systems,
Inc.*.................... 316,250
4,600 National Data Corp......... 200,675
4,500 Paychex, Inc............... 261,000
3,000 SunGuard Data Systems,
Inc.*.................... 135,000
4,000 Wall Data, Inc.*........... 91,000
-----------
2,070,456
DIVERSIFIED COMPANIES (1.8%)
2,200 AlliedSignal, Inc.......... 144,925
4,800 Danaher Corp............... 198,600
3,000 Raychem Corp............... 225,000
8,000 Service Corp.
International, Inc....... 242,000
4,000 Tyco International
Limited.................. 172,500
6,700 Valmont Industries, Inc.... 228,638
-----------
1,211,663
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
September 30, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
DRUG (0.6%)
10,000 Amylin Pharmaceuticals,
Inc.*.................... $ 113,750
3,000 Curative Technologies,
Inc.*.................... 57,750
3,000 Dura-Pharmaceuticals,
Inc.*.................... 110,625
6,000 NBTY, Inc.*................ 99,000
-----------
381,125
ELECTRONICS (0.7%)
9,000 Dynatech Corp.*............ 411,750
8,000 Herley Industries, Inc.*... 74,000
-----------
485,750
ENTERTAINMENT (0.2%)
4,000 Renaissance Communications
Corp.*................... 141,000
ENVIRONMENTAL (1.0%)
8,500 USA Waste Services,
Inc.*.................... 267,750
6,000 United States Filter
Corp.*................... 204,750
6,000 United Waste Systems,
Inc.*.................... 208,500
-----------
681,000
FINANCIAL SERVICES (0.5%)
10,000 Imperial Credit Industries,
Inc.*.................... 366,250
FOOD PROCESSING (0.7%)
2,200 Campbell Soup Co........... 171,600
4,000 Hershey Foods Corp......... 201,000
6,000 Northland Cranberries,
Inc...................... 102,000
-----------
474,600
FOOD WHOLESALERS (0.2%)
4,000 Riser Foods, Inc........... 104,000
FURNITURE/HOME FURNISHINGS (0.8%)
5,000 Ethan Allan Interiors,
Inc...................... 155,625
12,000 Furniture Brands
International, Inc.*..... 175,500
5,600 HON Industries Inc......... 222,600
-----------
553,725
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
GROCERY (1.4%)
3,400 American Stores Co......... $ 136,000
22,000 Food Lion, Inc. Class
"A"...................... 198,000
4,000 Quality Food Centers,
Inc.*.................... 139,000
6,400 Safeway, Inc.*............. 272,800
4,000 Vons Companies, Inc.*...... 171,500
-----------
917,300
HEALTHCARE INFORMATION SYSTEMS (0.2%)
4,000 Medic Computer Systems,
Inc.*.................... 145,500
HOMEBUILDING (0.2%)
6,000 Fairfield Communities,
Inc.*.................... 111,750
HOTEL/GAMING (1.2%)
10,000 Bally Entertainment
Corp.*................... 283,750
8,000 International Game
Technology............... 164,000
5,000 MGM Grand, Inc.*........... 211,250
10,500 Prime Hospitality Corp..... 173,250
-----------
832,250
INDUSTRIAL SERVICES (1.3%)
5,000 Electro Rent Corp.*........ 116,250
5,000 Equifax, Inc............... 131,875
6,000 G & K Services, Inc. Class
"A"...................... 175,500
5,000 Primark Corp.*............. 136,875
7,500 Right Management
Consultants, Inc.*....... 181,875
4,400 Robert Half International,
Inc.*.................... 162,250
-----------
904,625
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Schedule of Investments (unaudited)
- -------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
INSURANCE-DIVERSIFIED (0.9%)
5,800 American Bankers Insurance
Group, Inc............... $ 290,000
6,000 American Travellers
Corp.*................... 198,750
3,000 Security-Connecticut
Corp..................... 94,125
-----------
582,875
INSURANCE-LIFE (0.6%)
5,600 Conseco, Inc............... 275,800
4,000 SunAmerica, Inc............ 138,000
-----------
413,800
INSURANCE-PROPERTY/ CASUALTY (0.4%)
3,000 Fremont General Corp....... 88,500
3,000 Progressive Corp........... 171,750
-----------
260,250
MACHINERY (3.6%)
10,000 Chart Industries, Inc...... 176,250
10,000 DT Industries, Inc......... 337,500
5,200 Dover Corp................. 248,300
16,000 Powell Industries, Inc.*... 148,000
40,000 Zoltek Companies, Inc.*.... 1,520,000
-----------
2,430,050
MACHINERY-CONSTRUCTION & MINING (0.6%)
3,000 Deere & Co................. 126,000
6,000 JLG Industries, Inc........ 112,500
6,000 Manitowoc Co., Inc......... 192,750
-----------
431,250
MANUFACTURED HOUSING/ RECREATIONAL
VEHICLES (1.2%)
10,800 Champion Enterprises,
Inc.*.................... 244,350
7,000 Coachmen Industries,
Inc...................... 180,250
6,000 Oakwood Homes Corp......... 165,000
4,000 Redman Industries, Inc.*... 112,000
5,000 Skyline Corp............... 137,500
-----------
839,100
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
MEDICAL SERVICES (0.9%)
5,000 Fresenius USA, Inc.*....... $ 133,125
13,000 Health Images, Inc......... 173,875
8,000 Rexall Sundown, Inc.*...... 292,000
-----------
599,000
MEDICAL SUPPLIES (1.4%)
11,000 ADAC Laboratories.......... 221,375
3,000 Cardinal Health, Inc....... 247,875
4,000 Hologic, Inc.*............. 112,000
12,000 Protocol Systems, Inc.*.... 199,500
4,000 United States Surgical
Corp..................... 170,000
-----------
950,750
METAL FABRICATING (0.6%)
5,000 Lone Star Technologies,
Inc.*.................... 73,125
10,000 Shaw Group, Inc. (The)*.... 347,500
-----------
420,625
NATURAL GAS-DIVERSIFIED (0.2%)
4,000 PanEnergy Corp............. 138,500
OILFIELD SERVICES/ EQUIPMENT (1.6%)
5,200 Camco International,
Inc...................... 194,350
11,000 Global Marine, Inc.*....... 173,250
12,000 Noble Drilling Corp.*...... 181,500
9,000 Reading & Bates Corp.*..... 244,125
4,000 Smith International,
Inc.*.................... 140,500
10,000 Tuboscope Vetco
International Corp.*..... 156,250
-----------
1,089,975
PETROLEUM-PRODUCING (0.4%)
2,000 Chesapeake Energy Corp.*... 125,250
3,000 Noble Affiliates, Inc...... 126,750
-----------
252,000
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
September 30, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
PRECISION INSTRUMENT (1.1%)
3,300 Coherent, Inc.*............ $ 116,325
6,400 Dionex Corp.*.............. 243,200
6,000 Input/Output, Inc.*........ 178,500
9,000 Kollmorgen Corp............ 113,625
4,500 Perceptron, Inc.*.......... 113,625
-----------
765,275
PUBLISHING (0.4%)
5,000 Deluxe Corp................ 188,750
4,000 National Education
Corp.*................... 76,500
-----------
265,250
RECREATION (0.1%)
2,200 Harley-Davidson, Inc....... 94,600
RESTAURANT (0.8%)
6,000 CKE Restaurants, Inc....... 184,500
20,000 Foodmaker, Inc.*........... 200,000
10,500 ShowBiz Pizza Time,
Inc.*.................... 190,312
-----------
574,812
RETAIL-SPECIAL LINES (2.6%)
15,000 DAMARK International, Inc.
Class "A"*............... 193,125
14,000 Filene's Basement Corp.*... 61,250
18,000 Herbalife International,
Inc...................... 279,000
7,000 InaCom Corp.*.............. 239,750
5,000 Lands' End, Inc.*.......... 107,500
10,000 MicroAge, Inc.*............ 188,750
5,000 Ross Stores, Inc........... 180,000
7,000 TJX Companies, Inc......... 251,125
4,000 Tiffany & Co............... 160,000
6,000 Zale Corp.*................ 131,250
-----------
1,791,750
RETAIL BUILDING SUPPLY (1.6%)
33,700 Eagle Hardware & Garden,
Inc.*.................... 909,900
5,000 Hughes Supply, Inc......... 185,000
-----------
1,094,900
<CAPTION>
Shares Value
- ----------------------------------------------------
<C> <S> <C>
RETAIL STORE (0.9%)
4,000 Meyer (Fred), Inc.*........ $ 132,500
13,000 Stein Mart, Inc.*.......... 287,625
6,000 Wal-Mart Stores, Inc....... 158,250
-----------
578,375
SEMICONDUCTOR (0.4%)
16,000 GenRad, Inc.*.............. 266,000
SHOE (0.4%)
10,000 Genesco, Inc.*............. 93,750
1,300 NIKE, Inc. Class "B"....... 157,950
-----------
251,700
STEEL-INTEGRATED (0.3%)
9,000 Gibraltor Steel Corp.*..... 202,500
TELECOMMUNICATIONS EQUIPMENT (0.6%)
4,000 Aspect Telecommunications
Corp.*................... 249,000
4,000 Black Box Corp.*........... 132,000
-----------
381,000
TELECOMMUNICATION SERVICES (1.2%)
15,000 ACC Corp. Class "A"*....... 708,750
5,000 Atlantic Tele-Network,
Inc.*.................... 101,250
-----------
810,000
THRIFT (0.3%)
4,200 Charter One Financial,
Inc...................... 168,000
TOBACCO (0.3%)
3,400 Culbro Corp.*.............. 188,700
TRUCKING/TRANSPORTATION LEASING (0.2%)
7,200 Swift Transportation Co.,
Inc.*.................... 157,950
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Schedule of Investments (unaudited)
- -------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
- ----------------------------------------------------
<C> <S> <C>
OTHER (0.1%)
6,000 Actrade International
Ltd.*................... $ 37,500
4,000 Engineered Support
Systems, Inc............ 45,500
-----------
83,000
-----------
TOTAL COMMON STOCKS (COST
$23,378,252)............ 30,311,131
-----------
U.S. TREASURY OBLIGATIONS (29.5%)
$ 4,000,000 United States Treasury
Notes 6 1/8%, 3/31/98... 4,008,744
4,000,000 United States Treasury
Notes 6 1/4%, 6/30/98... 4,013,744
2,000,000 United States Treasury
Notes 6 1/8%, 8/31/98... 2,001,872
4,000,000 United States Treasury
Notes 6 3/4%, 5/31/99... 4,050,000
1,000,000 United States Treasury
Notes 7 3/4%, 2/15/01... 1,049,061
2,000,000 United States Treasury
Notes 5 7/8%,
11/15/05................ 1,889,372
3,000,000 United States Treasury
Bonds 7 1/4%, 8/15/22... 3,060,933
-----------
TOTAL U.S. TREASURY
OBLIGATIONS (COST
$20,143,953)............ 20,073,726
-----------
TOTAL INVESTMENT
SECURITIES (74.0%) (COST
$43,522,205)............ 50,384,857
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (25.7%)
U.S. GOVERNMENT AGENCY OBLIGATIONS
(14.7%)
$10,000,000 Federal National Mortgage
Association Discount
Notes 5.21%, due
10/15/96................ $ 9,979,739
REPURCHASE AGREEMENT (11.0%) (INCLUDING
ACCRUED INTEREST)
7,500,000 Collateralized by
$7,610,000 U.S. Treasury
Notes 5.25%, due
12/31/97, with a value
of $7,655,184 (with
State Street Bank &
Trust Co., N.A. 5.40%,
dated 9/30/96, due
10/1/96, delivery value
$7,501,125.............. 7,501,125
-----------
TOTAL SHORT-TERM
INVESTMENTS (COST
$17,480,864)............ 17,480,864
-----------
EXCESS OF CASH AND OTHER ASSETS OVER
LIABILITIES (0.3%)..................... 241,298
-----------
NET ASSETS (100%)...................... $68,107,019
-----------
-----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER OUTSTANDING SHARE
($68,107,019 DIVIDED BY 4,222,654
SHARES
OUTSTANDING)......................... $ 16.13
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Statement of Assets and Liabilities
at September 30, 1996
(unaudited)
- ------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment securities, at value
(Cost--$43,522,205)................... $ 50,384,857
Short-term investments
(Cost--$17,480,864)................... 17,480,864
Cash.................................... 23,236
Receivable for securities sold.......... 1,182,188
Dividends and interest receivable....... 253,387
Receivable for capital shares sold...... 102,731
Deferred organization costs (note 2).... 24,858
-------------
Total Assets........................ $ 69,452,121
-------------
Liabilities:
Payable for securities purchased........ 1,249,625
Accrued expenses:
Advisory fee payable.................. 35,115
Plan fees payable..................... 13,212
Other................................. 47,150
-------------
Total Liabilities................... $ 1,345,102
-------------
Net Assets.............................. $ 68,107,019
-------------
-------------
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000, outstanding
4,222,654 shares)..................... $ 4,223
Additional paid-in capital.............. 50,045,542
Undistributed investment income--net.... 649,947
Accumulated net realized gain on
investments........................... 10,544,655
Unrealized net appreciation of
investments........................... 6,862,652
-------------
Net Assets.............................. $ 68,107,019
-------------
-------------
Net Asset Value, Offering and Redemption
Price, per Outstanding Share
($68,107,019 DIVIDED BY 4,222,654
shares outstanding)................... $ 16.13
-------------
-------------
</TABLE>
Statement of Operations
for the six months ended September 30, 1996
(unaudited)
<TABLE>
<S> <C>
Investment Income:
Interest income......................... $ 872,041
Dividend income (net of foreign
withholding tax of $101)............. 67,152
-------------
Total Income........................ 939,193
-------------
Expenses:
Advisory fee............................ 202,037
Service and distribution plan fee....... 77,707
Custodian fees.......................... 27,679
Auditing and legal fees................. 19,947
Accounting & bookkeeping expense........ 16,196
Registration and filing fees............ 13,312
Directors' fees and expenses............ 9,150
Printing................................ 7,320
Amortization of deferred organization
costs (note 2)....................... 6,564
Transfer agent fees..................... 4,575
Insurance, dues and other............... 3,386
-------------
Total Expenses Before Offset........ 387,873
Less: Expense Offset................ (1,693)
-------------
Net Expenses........................ 386,180
-------------
Investment Income--Net.................. 553,013
-------------
Realized and Unrealized Gain on
Investments--Net:
Realized Gain--Net.................... 6,753,367
Change in Unrealized Appreciation..... 813,397
-------------
Net Realized Gain and Net Unrealized
Appreciation of Investments........... 7,566,764
-------------
Net Increase in Net Assets from
Operations........................... $ 8,119,777
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Statement of Changes in Net Assets
for the six months ended September 30, 1996 and for the year ended March 31,
1996
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1996 Year Ended
(unaudited) March 31, 1996
---------------------------------------
<S> <C> <C>
Operations:
Investment income--net................ $ 553,013 $ 412,793
Realized gain on investments--net..... 6,753,367 7,850,774
Net unrealized appreciation........... 813,397 3,999,625
---------------------------------------
Net increase in net assets from
operations............................ 8,119,777 12,263,192
---------------------------------------
Distributions to Shareholders:
Investment income--net................ -- (408,505)
Realized gains--net................... -- (4,391,445)
---------------------------------------
Total distributions................... -- (4,799,950)
---------------------------------------
Capital Share Transactions:
Net proceeds from sale of shares...... 7,134,769 18,879,669
Net proceeds from reinvestment of
distributions to shareholders......... -- 4,775,221
Cost of shares repurchased............ (2,950,257) (1,487,694)
---------------------------------------
Increase from capital share
transactions.......................... 4,184,512 22,167,196
---------------------------------------
Total Increase.......................... 12,304,289 29,630,438
Net Assets:
Beginning of period................... 55,802,730 26,172,292
---------------------------------------
End of period......................... $ 68,107,019 $ 55,802,730
---------------------------------------
---------------------------------------
Undistributed investment income--net,
at end of period...................... $ 649,947 $ 96,934
---------------------------------------
---------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Notes to Financial Statements (unaudited)
- -------------------------------------------
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 which 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 which 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 at the date of purchase 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 which 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 sixty months
beginning at the commencement of operations of the Fund. In the
- --------------------------------------------------------------------------------
11
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Notes to Financial Statements (unaudited)
- -------------------------------------------
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.
3.Capital Share Transactions
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1996 March 31,
(unaudited) 1996
----------------------------
<S> <C> <C>
Shares sold............. 467,615 1,435,241
Shares issued in
reinvestment of
dividends and
distributions......... -- 363,965
----------------------------
467,615 1,799,206
Shares repurchased...... 193,880 109,696
----------------------------
Net increase............ 273,735 1,689,510
----------------------------
</TABLE>
4.Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1996
(unaudited)
-------------------
<S> <C>
PURCHASES:
U.S. Treasury Obligations...... $ 15,625,156
Other Investment Securities.... 43,713,867
-------------------
$ 59,339,023
-------------------
-------------------
SALES:
U.S. Treasury Obligations...... $ 1,889,688
Investment Securities.......... 56,826,757
-------------------
$ 58,716,445
-------------------
-------------------
</TABLE>
At September 30, 1996, the aggregate cost of investment securities and
short-term investments for Federal income tax purposes was $60,996,051. The
aggregate appreciation and depreciation of investments at September 30, 1996,
based on a comparison of investment values and their costs for federal income
tax purposes was $7,150,297 and $294,663, respectively, resulting in a net
appreciation of $6,855,634.
5.Advisory Fees, Service and Distribution Plan Fees and
Transactions With Affiliates
An advisory fee of $202,037 was paid or payable to the Adviser for the six
months ended September 30, 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 $2,880 for printing services was paid or payable to the Adviser for the
six months ended September 30, 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, Inc., 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
- --------------------------------------------------------------------------------
12
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
- -------------------------------------------
assets. In the six months ended September 30, 1996, fees amounting to $77,707
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 six months ended September 30,
1996, the Fund paid brokerage commissions totalling $38,437 to the Distributor,
a registered broker/dealer, which clears its transactions through unaffiliated
brokers.
At September 30, 1996, the Adviser and/or affiliated companies, and the Value
Line, Inc. Profit Sharing Plan, owned 3,203,333 shares of the Fund's capital
stock, representing 76% of the outstanding shares. In addition, certain officers
and directors of the Fund owned 260,250 shares of capital stock, representing 6%
of the outstanding shares.
- --------------------------------------------------------------------------------
13
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
Financial Highlights
- -------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
August 24,
1993
(commencement
Six Months of
Ended operations)
Sept. 30, Years Ended March 31, to
1996 ----------------------- March 31,
(unaudited) 1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $14.13 $11.58 $10.37 $10.00
-------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............. .13 .10 .08 .06(1)
Net gains or losses on securities
(both realized and
unrealized)..................... 1.87 3.86 1.30 .35
-------------------------------------------------
Total from investment
operations........................ 2.00 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.......... $16.13 $14.13 $11.58 $10.37
-------------------------------------------------
-------------------------------------------------
TOTAL RETURN............................ 14.15%+ 35.13% 13.47% 4.15%+
-------------------------------------------------
-------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in
thousands)............................ $68,107 $55,803 $26,172 $18,989
Ratio of operating expenses
to average net assets................. 1.25%* 1.39% 1.76% 0.47%*(1)
Ratio of net investment income
to average net assets................. 1.78%* .99% .85% 1.10%*(1)
Portfolio turnover rate................. 121%+ 244% 211% 108%+
Average commissions paid per share of
common stock investments
purchased/sold........................ $ .049(2) -- -- --
</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 $(.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)DISCLOSURE EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1,
1995.
+ NOT ANNUALIZED.
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
- --------------------------------------------------------------------------------
THIS PAGE LEFT INTENTIONALLY BLANK.
- --------------------------------------------------------------------------------
15
<PAGE>
VALUE LINE ASSET ALLOCATION FUND, INC.
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 INVESTORS' 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
