-------------------
SEMI-ANNUAL REPORT
-------------------
September 30, 1997
-------------------
Value Line
Asset
Allocation
Fund, Inc.
[LOGO]
VALUE LINE
No Load
Mutual
Fund
<PAGE>
Value Line Asset Allocation Fund, Inc.
To Our Value Line Asset
================================================================================
Dear Shareholder:
We're pleased to report that the Value Line Asset Allocation Fund gained 21.70%
in the six-month period ending September 30, 1997. That compares well to a total
return of 26.27% for the unmanaged Standard & Poor's 500 Index and a total
return of 7.27% for the unmanaged Lehman Government/Corporate Bond Index, the
two relevant benchmarks for the Fund, given our mix of portfolio holdings (as
described below).
Since inception, your Fund has been the top-performing fund of its kind,
according to Lipper Analytical Services, ranking #1 among 81 "flexible" funds*.
From inception August 24, 1993 through September 30, 1997, the Fund earned a
total return of 128.35%, versus 127.61% for the S&P 500 and 26.57% for the
Lehman Government/Corporate Bond Index.
Not only has it outperformed the all equity S&P 500 since inception, but at the
same time your Fund has maintained a relatively low risk profile. In the past
year, for example, the Fund has been only about 45% invested in stocks, with the
remainder about evenly divided between Treasury bonds and cash equivalents,
which has clearly translated into low volatility compared to those funds that
are more fully invested in equities. Your Fund's performance during the recent
market turmoil presented a good demonstration of the results of this lower-risk
approach. From October 21, 1997, through October 30, while the S&P 500 fell
7.06%, the Fund lost only 2.70%. The portfolio's bondholdings gained in value
during the period, providing a welcome offset to losses in stocks and showing
the value of diversification among asset classes.
We also emphasize diversification within the stockholdings of the Fund.
Investment in over 200 different issues across a wide variety of industries
helps reduce the volatility of the portfolio. Our highly disciplined strategy is
to invest exclusively in stocks with strong earnings and strong price momentum,
quickly selling issues that fail to make the grade.
Value Line's proprietary stock market model is currently maintaining its
cautious view toward near-term market direction, largely due to the still
relatively high level of stock prices. The Fund, therefore, remains only about
45% invested in equities, which is below its neutral benchmark of 55%. U.S.
Treasuries and agencies with maturities of one to 25 years make up about 30% of
the portfolio, with the remainder invested in cash equivalents.
Your Fund's superior returns and relatively low risk are a rare combination
among investment vehicles. This achievement can be measured by translating it
into a number known in the academic world as the Sharpe ratio. The typical fund
achieves a Sharpe ratio of 1.0, which means that it delivers one unit of return
for each unit of risk taken. Your Fund has delivered a Sharpe ratio of 2.89, an
extraordinary accomplishment in the fund universe.
We will continue to aim for maximum returns subject to keeping risk at a
reasonable level. Thank you for investing with us.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
November 5, 1997
- ----------
* Lipper ranked the Value Line Asset Alocation Fund 1st out of 81 flexible
portfolio funds based on return from the Fund's inception on 8/24/93 to
9/30/97, 3rd out of 125 flexible portfolio funds based on its three-year
return as of 9/30/97, and 79th out of 201 flexible portfolio funds based on
its one-year return as of 9/30/97.
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line Asset Allocation Fund, Inc.
Allocation Fund Shareholders
================================================================================
Economic Observations
In contrast to many parts of the world, the basic underpinnings of the U.S.
economy appear to be quite sound as we wend our way through the latter stages of
this year and look ahead to 1998. Here's a rundown:
Economic Growth: After a strong opening half of the year, in which growth
exceeded 4%, the economy seems to be proceeding at a less frenetic pace.
Importantly, this more modest rate of business improvement should prove equally
sustainable. Overall, we see the domestic economy moving ahead at a 2.4%-2.6%
rate during the closing months of 1997, and then proceeding at a somewhat slower
2.0%-2.3% in 1998. We now believe that the evolving financial crises in
Southeast Asia and in other parts of the world will not have a material
dampening effect on this country's economic health.
Inflation: Here, too, moderation should be a prevailing theme, with prices
likely to continue rising at a subdued pace in the months ahead. The ongoing
lack of serious labor and raw materials shortages underscore much of our
optimism on the pricing front.
Interest Rates: As has been the case with the economy and inflation, interest
rates--specifically their ongoing stability--have been a pivotal source of
support for the financial markets in this country. But will rates continue to
provide support? The answer here will depend largely on the upcoming levels of
economic growth and inflation. Should both remain at moderate, non-threatening
levels, as we expect, the Federal Reserve will probably keep interest rates
where they are into at least the early part of 1998.
Performance Data:*
Average
Annual Total
Return
---------
1 Year ended 9/30/97 ....................................... 25.26%
3 Years ended 9/30/97 ...................................... 27.97%
From 8/24/93 (commencement
of operations) to 9/30/97 ................................ 22.31%
* The performance data quoted represent past performance and are no guarantee
of future performance. The average annual total returns 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 (unaudited)
================================================================================
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (63.2%)
ADVERTISING (0.7%)
10,000 Big Flower Press
Holdings, Inc.* ............................ $ 231,875
6,200 Omnicom Group, Inc. ........................ 451,050
-----------
682,925
AEROSPACE/DEFENSE
(1.8%)
7,000 BE Aerospace, Inc.* ........................ 252,000
11,200 Ducommun Inc.* ............................. 422,100
4,000 Precision Castparts Corp. .................. 260,000
6,000 Sundstrand Corp. ........................... 345,750
5,000 Thiokol Corp. .............................. 430,000
3,000 Wyman-Gordon Co.* .......................... 78,750
-----------
1,788,600
AIR TRANSPORT (1.4%)
6,000 Airborne Freight Corp. ..................... 363,375
8,000 Expeditors International of
Washington, Inc. ........................... 335,000
2,800 Federal Express Corp.* ..................... 224,000
12,000 Mesaba Holdings, Inc.* ..................... 248,250
15,000 U.S. Xpress Enterprises, Inc.* ............. 300,000
-----------
1,470,625
APPAREL (1.1%)
5,500 Jones Apparel Group, Inc.* ................. 297,000
7,000 Nautica Enterprises, Inc.* ................. 196,875
9,000 Oxford Industries, Inc. .................... 304,875
14,000 Quaker Fabric Corp.* ....................... 316,750
-----------
1,115,500
AUTO & TRUCK (0.2%)
4,000 Navistar International Corp.* .............. 110,500
2,000 PACCAR Inc. ................................ 112,000
-----------
222,500
AUTO PARTS-ORIGINAL
EQUIPMENT (0.4%)
8,000 Arvin Industries, Inc. ..................... 314,000
3,000 Tower Automotive, Inc.* .................... 135,000
-----------
449,000
AUTO PARTS-
REPLACEMENT (0.4%)
6,000 Federal-Mogul Corp. ........................ 222,750
4,000 Wynn's International, Inc. ................. 133,000
-----------
355,750
BEVERAGE-
ALCOHOLIC (0.3%)
6,000 Canandaigua Brands, Inc.
Class "A"* ............................... 282,750
BUILDING MATERIALS
(1.6%)
9,000 Apogee Enterprises, Inc. ................... 220,500
8,000 Martin Marietta
Materials, Inc. .......................... 288,000
7,000 Masco Corp. .............................. 320,687
6,000 Simpson Manufacturing
Co., Inc.* .............................. 251,250
9,000 TJ International, Inc. ..................... 230,063
9,000 Thomas Industries, Inc. .................... 270,000
-----------
1,580,500
CEMENT (1.4%)
2,000 Florida Rock Industries, Inc. ............. 119,000
9,000 Lafarge Corp. ............................. 290,250
6,000 Lone Star Industries, Inc. ................ 324,000
6,000 Southdown, Inc. ........................... 327,750
4,000 Vulcan Materials Co. ...................... 348,000
-----------
1,409,000
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4
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1997
================================================================================
Shares Value
- --------------------------------------------------------------------------------
CHEMICAL-
DIVERSIFIED (0.6%)
10,000 Albermarle Corp. ........................... $ 250,000
8,000 Dexter Corp. ............................... 320,500
-----------
570,500
CHEMICAL-
SPECIALTY (1.2%)
7,200 Lubrizol Corp. (The) ....................... 302,400
5,000 MacDermid, Inc. ............................ 435,625
3,000 Penwest, Ltd. .............................. 107,250
5,800 Tredegar Industries, Inc. .................. 407,450
-----------
1,252,725
COAL/ALTERNATE
ENERGY (0.4%)
10,000 AES Corp.* ................................. 437,500
COMPUTER &
PERIPHERALS (3.2%)
4,000 Compaq Computer Corp.* ..................... 299,000
6,000 Data General Corp.* ........................ 159,750
7,000 Digital Equipment Corp.* ................... 303,187
3,900 EMC Corp.* ................................. 227,663
15,000 Genicom Corp.* ............................. 165,000
6,000 Hummingbird
Communications Ltd.* ..................... 234,000
4,000 Inter-Tel Inc.* ............................ 212,000
2,500 International Business
Machines Corp. ........................... 264,844
15,000 SBE, Inc.* ................................. 241,875
8,000 SanDisk Corp.* ............................. 288,000
9,000 Silicon Graphics, Inc.* .................... 236,250
5,000 SMART Modular
Technologies, Inc.* ........................ 415,000
4,500 Tech Data Corp.* ........................... 207,000
-----------
3,253,569
COMPUTER SOFTWARE
& SERVICES (3.3%)
4,000 Arbor Software Corp.* ...................... 185,250
10,500 CHS Electronics, Inc.* ..................... 287,438
5,300 Computer Task Group, Inc. .................. 222,268
5,000 Compuware Corp.* ........................... 302,500
5,000 Comverse Technology, Inc.* ................. 263,750
5,000 Fiserv, Inc.* .............................. 219,375
12,000 Intersolv, Inc.* ........................... 186,000
2,000 Manugistics Group, Inc.* ................... 71,500
10,000 Mercury Interactive Corp.* ................. 191,250
12,000 New Dimension
Software Ltd.* ........................... 247,500
5,000 PeopleSoft, Inc. ........................... 298,750
5,000 Security Dynamics
Technologies, Inc.* ........................ 185,625
11,000 Symantec Corp.* ............................ 250,250
12,000 System Software
Associates, Inc.* ........................ 177,000
5,000 Systems & Computer
Technology Corp.* ........................ 225,313
-----------
3,313,769
DIVERSIFIED
COMPANIES (1.8%)
6,000 Crane Co. .................................. 246,750
6,000 Danaher Corp. .............................. 348,000
4,000 GenCorp, Inc. .............................. 113,750
5,000 Nortek, Inc.* .............................. 129,688
5,500 Sequa Corp.* ............................... 316,937
5,000 Tyco International, Ltd. ................... 410,313
14,000 Walter Industries, Inc.* ................... 279,125
-----------
1,844,563
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line Asset Allocation Fund, Inc.
Scheule of Investments (unaudited)
================================================================================
Shares Value
- --------------------------------------------------------------------------------
DRUG (0.5%)
13,000 Faulding Inc.* ............................. $ 169,812
5,000 ICN Pharmaceuticals, Inc. .................. 245,938
10,000 ICOS Corp.* ................................ 126,250
-----------
542,000
ELECTRIC UTILITY-
EAST (0.2%)
4,177 Duke Energy Corp. .......................... 206,500
ELECTRICAL
EQUIPMENT (1.3%)
7,000 AVX Corp. .................................. 226,625
4,800 Jabil Circuit, Inc.* ....................... 314,400
13,000 MagneTek, Inc.* ............................ 290,875
3,000 Semtech Corp.* ............................. 207,375
8,000 Technitrol, Inc. ........................... 318,500
-----------
1,357,775
ELECTRONICS (2.3%)
7,000 Avid Technology, Inc.* ..................... 227,500
6,000 Cohu, Inc. ................................. 322,500
8,000 DII Group, Inc.* ........................... 262,250
7,000 Electro Scientific
Industries, Inc.* ........................ 427,000
10,000 IEC Electronics Corp.* ..................... 196,250
8,000 Plexus Corp.* .............................. 281,000
6,000 Spectrian Corp.* ........................... 384,750
11,000 Three Five Systems, Inc.* .................. 242,000
-----------
2,343,250
ENTERTAINMENT (0.9%)
7,273 Chancellor Media Corp.* .................... 382,731
5,000 Clear Channel
Communications, Inc. ..................... 324,375
4,000 Emmis Broadcasting Corp.* .................. 191,000
-----------
898,106
ENVIRONMENTAL (0.4%)
11,000 Allied Waste Industries, Inc.* ............. 210,375
4,300 USA Waste Services, Inc.* .................. 171,462
-----------
381,837
FINANCIAL
SERVICES (0.5%)
17,000 Cash American
International, Inc. ...................... 191,250
6,000 Investment Technology
Group, Inc.* ............................. 163,500
2,500 Mutual Risk
Management Ltd. ............................ 127,031
-----------
481,781
FOOD PROCESSING
(1.4%)
7,000 Dean Foods Co. ............................. 323,750
5,000 Interstate Bakeries Corp. .................. 342,812
12,000 Michael Foods, Inc. ........................ 307,500
8,000 Morningstar Group,
Inc. (The)* .............................. 344,000
4,000 Smithfield Foods, Inc.* .................... 120,000
-----------
1,438,062
FOOD WHOLESALERS
(0.2%)
7,000 Rykoff-Sexton, Inc. ........................ 181,125
FOREIGN
TELECOMMUNICATIONS
(0.3%)
3,000 Northern Telecom Ltd. ...................... 311,813
FURNITURE/HOME
FURNISHINGS (1.1%)
3,000 CORT Business Services
Corp.* ................................... 119,813
12,000 Ethan Allen Interiors, Inc. ................ 372,000
6,000 Miller (Herman), Inc. ...................... 321,000
10,000 Stanley Furniture Co., Inc.* ............... 267,500
-----------
1,080,313
- --------------------------------------------------------------------------------
6
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1997
================================================================================
Shares Value
- --------------------------------------------------------------------------------
HEALTHCARE
INFORMATION
SYSTEM (0.3%)
4,000 Cerner Corp.* .............................. $ 95,750
6,400 HBO & Co. .................................. 241,600
-----------
337,350
HOMEBUILDING (0.8%)
9,000 Fairfield Communities, Inc.* ............... 338,062
11,000 Host Marriott Corp.* ....................... 250,250
10,000 Modtech, Inc.* ............................. 227,500
-----------
815,812
HOTEL/GAMING (0.4%)
8,000 Promus Hotel Corp.* ........................ 358,500
HOUSEHOLD
PRODUCTS (0.1%)
5,000 Home Products
International, Inc.* ..................... 73,125
2,000 Libbey, Inc. ............................... 71,375
-----------
144,500
INDUSTRIAL SERVICES
(1.0%)
8,000 Actrade International, Ltd.* ............... 162,500
13,000 Information Resources, Inc.* ............... 229,125
12,000 Interim Services, Inc.* .................... 337,500
6,600 Robert Half
International, Inc.* ..................... 273,075
-----------
1,002,200
INSURANCE-
DIVERSIFIED (1.2%)
8,000 American Bankers Insurance
Group, Inc. .............................. 292,000
11,000 Fidelity National
Financial, Inc. .......................... 260,562
5,300 Horace Mann
Educators Corp. .......................... 297,463
6,000 Triad Guaranty, Inc.* ...................... 335,250
-----------
1,185,275
INSURANCE-LIFE (0.2%)
7,000 John Alden Financial Corp. ................. 217,000
INSURANCE-PROPERTY/
CASUALTY (0.7%)
3,500 ACE, Ltd. .................................. 329,000
4,000 Executive Risk Inc. ........................ 273,500
3,000 Philadelphia Consolidated
Holding Co.* ............................... 129,938
-----------
732,438
MACHINERY (4.5%)
5,000 Aeroquip-Vickers Inc. ...................... 245,000
6,200 Applied Power, Inc.
Class "A" ................................ 390,213
9,500 Chart Industries, Inc. ..................... 193,562
4,000 Cummins Engine Co., Inc. ................... 312,250
4,000 Dover Corp.* ............................... 271,500
7,327 Dreco Energy Services, Ltd.
Exchangeable Shares* ..................... 548,166
4,000 Farr Company* .............................. 72,000
8,000 Gardner Denver
Machinery Inc.* .......................... 269,500
12,000 Gehl Co.* .................................. 268,500
19,000 ITEQ, Inc.* ................................ 264,812
30,000 International Comfort
Products Inc. ............................ 211,875
8,500 Manitowoc Co., Inc. ........................ 303,344
12,000 MotivePower Industries, Inc.* .............. 312,000
5,250 Parker-Hannifin Corp. ...................... 236,250
2,000 Regal-Beloit Corp. ......................... 61,500
5,000 Robbins & Myers, Inc. ...................... 192,500
16,000 Terex Corp.* ............................... 332,000
2,000 Zoltek Companies, Inc.* .................... 127,250
-----------
4,612,222
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7
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments (unaudited)
================================================================================
Shares Value
- --------------------------------------------------------------------------------
MANUFACTURED
HOUSING/RECREATIONAL
VEHICLES (0.2%)
10,000 Monaco Coach Corp.* ........................ $ 236,250
MEDICAL SERVICES
(1.4%)
20,000 Hanger Orthopedic
Group, Inc.* ............................. 298,750
16,000 Hooper Holmes, Inc. ........................ 195,000
3,000 Integrated Health
Services, Inc. ........................... 100,313
6,000 Lincare Holdings, Inc.* .................... 302,625
6,000 Osteotech, Inc.* ........................... 120,750
5,000 Renal Care Group, Inc.* .................... 180,000
2,000 Universal Health
Services, Inc. Class "B"* ................ 86,500
3,000 Wellpoint Health Networks
Inc. Class "A"* .......................... 173,812
-----------
1,457,750
MEDICAL SUPPLIES
(1.7%)
4,000 AmeriSource Health Corp.
Class "A"* ............................... 233,750
12,000 Cooper Companies, Inc.* .................... 441,000
6,000 Guidant Corp. .............................. 336,000
18,000 International Murex
Technologies Corp.* ...................... 171,000
11,000 Kinetic Concepts, Inc. ..................... 204,875
8,000 Safeskin Corp.* ............................ 355,000
-----------
1,741,625
METAL FABRICATING
(1.2%)
9,000 Allied Products Corp. ...................... 222,750
8,000 Lone Star Technologies, Inc.* .............. 417,500
8,000 Maverick Tube Corp.* ....................... 330,000
6,000 SPS Technologies, Inc.* .................... 282,000
-----------
1,252,250
NEWSPAPER (0.3%) 4,000
Central Newspapers, Inc.
Class "A" ................................ 297,000
OFFICE EQUIPMENT &
SUPPLIES (0.3%)
7,200 Day Runner, Inc.* .......................... 277,200
OILFIELD SERVICES/
EQUIPMENT (0.8%)
2,000 SEACOR SMIT Inc.* .......................... 124,000
4,000 Smith International, Inc.* ................. 310,750
12,000 Tuboscope Inc.* ............................ 376,500
-----------
811,250
PACKAGING &
CONTAINER (0.9%)
8,000 ACX Technologies, Inc.* .................... 213,000
4,000 AptarGroup, Inc. ........................... 223,750
6,000 Gibson Greetings, Inc.* .................... 155,250
5,000 Sealed Air Corp.* .......................... 274,687
-----------
866,687
PAPER & FOREST
PRODUCTS (0.3%)
11,000 Mail-Well, Inc.* ........................... 298,375
PRECISION
INSTRUMENT (0.9%)
8,000 Cognex Corp.* .............................. 263,000
3,500 CyberOptics Corp.* ......................... 118,125
5,000 Orbotech, Ltd.* ............................ 288,750
6,000 Waters Corp.* .............................. 265,125
-----------
935,000
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1997
================================================================================
Shares Value
- --------------------------------------------------------------------------------
PUBLISHING (1.0%)
9,000 Consolidated Graphics, Inc.* ............... $ 447,750
9,000 Meredith Corp. ............................. 298,125
7,000 Valassis Communications, Inc.* ............. 223,125
-----------
969,000
R.E.I.T. (0.0%)
2,400 Griffin Land & Nurseries, Inc.
Class "A"* ............................... 41,100
RECREATION (0.1%)
9,000 Fountain Powerboat
Industries, Inc.* .......................... 133,312
RESTAURANT (0.9%)
6,000 CKE Restaurants, Inc. ...................... 252,000
13,000 Foodmaker, Inc.* ........................... 244,563
3,500 ShowBiz Pizza Time, Inc.* . ................ 80,500
17,000 WSMP, Inc.* ................................ 348,500
-----------
925,563
RETAIL-SPECIAL
LINES (4.3%)
8,000 Barnes & Noble, Inc.* ...................... 226,000
9,000 Best Buy Co., Inc.* ........................ 222,188
10,000 Braun's Fashions Corp.* .................... 142,500
6,000 Brightpoint, Inc.* ......................... 278,250
10,000 CompUSA, Inc.* ............................. 350,000
12,000 Dress Barn, Inc. (The)* .................... 288,000
14,000 Fingerhut Companies, Inc. .................. 315,000
14,000 Funco, Inc.* ............................... 280,000
5,000 Gap, Inc. .................................. 250,312
9,000 Goody's Family
Clothing, Inc.* .......................... 290,250
3,500 Payless ShoeSource, Inc.* . ................ 208,906
16,500 Pier 1 Imports, Inc. ....................... 295,969
6,000 Ross Stores, Inc. .......................... 204,750
4,000 Russ Berrie & Co., Inc. .................... 117,000
10,000 TJX Companies, Inc. ........................ 305,625
6,000 Tiffany & Co. .............................. 255,000
13,500 Tuesday Morning Corp.* ..................... 318,094
-----------
4,347,844
RETAIL STORE (2.6%)
8,000 Costco Companies, Inc.* .................... 301,000
5,000 Dayton Hudson Corp. ........................ 299,687
15,000 Family Dollar Stores, Inc. ................. 342,188
10,000 Fred's, Inc. ............................... 207,500
5,000 Kohl's Corp.* .............................. 355,000
3,000 Neiman-Marcus Group, Inc.* ................. 96,000
7,000 99 Cents Only Stores* ...................... 229,687
4,000 Nordstrom, Inc. ............................ 255,000
7,000 Pacific Sunwear of
California, Inc.* ........................ 287,000
7,000 Stein Mart, Inc.* .......................... 229,250
-----------
2,602,312
SEMICONDUCTOR
(1.6%)
6,000 Advanced Technology
Materials, Inc.* ......................... 220,500
8,000 Asyst Technologies, Inc.* . ................ 355,250
8,000 Burr-Brown Corp.* .......................... 267,000
5,500 National Semiconductor
Corp.* ................................... 225,500
6,000 Siliconix, Inc.* ........................... 273,750
3,500 Unitrode Corp.* ............................ 259,438
-----------
1,601,438
SEMICONDUCTOR-
CAPITAL
EQUIPMENT (0.2%)
2,000 Applied Materials, Inc.* ................... 190,500
SHOE (0.8%)
24,000 Genesco, Inc.* ............................. 351,000
10,000 Rocky Shoes & Boots, Inc.* ................. 180,625
11,000 Wolverine World Wide, Inc. ................. 277,750
-----------
809,375
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments (unaudited)
================================================================================
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS
EQUIPMENT (2.1%)
6,000 AFC Cable Systems, Inc.* ................. $ 213,000
7,000 CellStar Corp.* .......................... 325,500
12,000 Cognitronics Corp.* ...................... 219,000
5,000 DSC Communications Corp.* ................ 134,688
9,000 DSP Group, Inc.* ......................... 353,250
3,000 Datum Inc.* .............................. 136,875
7,000 Digital Microwave Corp.* ................. 313,250
7,500 PairGain Technologies, Inc.* ............. 213,750
6,000 Tekelec * ................................ 204,375
-----------
2,113,688
TELECOMMUNICATIONS
SERVICE (1.1%)
8,000 P-Com, Inc.* ............................. 191,500
7,000 Teledata Communications,
Ltd.* .................................. 315,875
5,000 Tel-Save Holdings, Inc.* ................. 120,312
7,000 United Video Satellite
Group, Inc. Class "A"* ................. 194,250
9,000 World Access, Inc.* ...................... 292,500
-----------
1,114,437
TEXTILE (0.6%)
10,000 Fieldcrest Cannon, Inc.* ................. 345,000
6,000 Interface Inc. Class "A" ................. 174,750
3,000 Westpoint Stevens, Inc.* ................. 123,750
-----------
643,500
THRIFT (0.2%)
4,200 Charter One Financial, Inc. .............. 248,325
TIRE & RUBBER (0.4%)
9,000 Carlisle Companies, Inc. ................. 399,938
TOILETRIES/COSMETICS
(0.3%)
14,000 Helen of Troy Ltd.* ...................... 276,500
TRUCKING/
TRANSPORTATION &
LEASING (0.9%)
11,000 American Freightways Corp.* .............. 209,000
21,000 Arkansas Best Corp.* ..................... 237,562
8,000 USFreightways Corp. ...................... 269,000
6,000 Yellow Corp.* ............................ 195,375
-----------
910,937
TOTAL COMMON STOCKS
(Cost $48,234,840) ....................... 64,158,791
-----------
- --------------------------------------------------------------------------------
10
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1997
================================================================================
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (25.1%)
$4,000,000 United States Treasury
Notes 6 3/4%, 5/31/99 ......................... $ 4,058,480
5,000,000 United States Treasury
Notes 6 3/8%, 5/15/00 ......................... 5,058,900
1,000,000 United States Treasury
Notes 7 3/4%, 2/15/01 ......................... 1,054,160
5,000,000 United States Treasury
Notes 6 1/2%, 5/31/02 ......................... 5,092,700
2,000,000 Unites States Treasury
Notes 5 7/8%, 11/15/05 ........................ 1,962,560
5,000,000 United States Treasury
Notes 6 1/4%, 2/15/07 ......................... 5,024,500
3,000,000 United States Treasury
Bonds 7 1/4%, 8/15/22 ......................... 3,277,320
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $25,125,765) .............................. 25,528,620
------------
TOTAL INVESTMENT
SECURITIES (88.3%)
(Cost $73,360,605) .............................. 89,687,411
------------
SHORT-TERM INVESTMENTS (11.9%)
U.S. TREASURY
OBLIGATIONS (9.9%)
4,000,000 United States Treasury
Notes 6 1/8%, 3/31/98** ....................... 4,014,280
4,000,000 United States Treasury
Notes 6 1/4%, 6/30/98 ....................... 4,019,760
2,000,000 United States Treasury
Notes 6 1/8%, 8/31/98 ....................... 2,008,600
------------
10,042,640
REPURCHASE
AGREEMENT (2.0%)
(including accrued interest)
$2,000,000 Collateralized by $1,405,000
U.S. Treasury Bonds 12%,
8/15/13, with a value of
$2,049,544. (with
Goldman, Sachs & Co.,
Inc. 6.05%, dated 9/30/97,
due 10/1/97, delivery
value $2,000,336) ............................. $ 2,000,336
------------
TOTAL SHORT-TERM
INVESTMENTS
(Cost $12,003,710) .............................. 12,042,976
------------
EXCESS OF LIABILITIES
OVER CASH AND
OTHER ASSETS (-0.2%) ......................................... (175,969)
------------
NET ASSETS (100%) ............................................ $101,554,418
============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE,
PER OUTSTANDING SHARE
($101,554,418 / 6,118,671
shares outstanding) .......................................... $ 16.60
============
* Non-income producing
** Part of this security is segregated to cover initial margin requirements on
the following open short financial futures contracts:
% of
No. of Unrealized Contract Net
Contracts Loss Value Assets
--------- ---------- --------- ------
Russell 2,000 Index
December, 1997 ........... 63 $ 140,175 $14,397,075 14.2%
S & P Mid-Cap 400
December, 1997 ........... 11 37,300 1,837,550 1.8
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Asset Allocation Fund, Inc.
Statement of Assets and Liabilities
at September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(Cost-$73,360,605) ...................................... $ 89,687,411
Short-term investments
(Cost-$12,003,710) ...................................... 12,042,976
Cash ...................................................... 16,431
Receivable for securities sold ............................ 615,578
Dividends and interest receivable ......................... 533,244
Receivable for capital shares sold ........................ 78,180
Deferred organization costs (note 2) ...................... 11,766
------------
Total Assets ........................................ 102,985,586
------------
Liabilities:
Payable for securities purchased .......................... 1,296,319
Variation margin on futures contracts ..................... 22,175
Payable for capital shares repurchased .................... 17,438
Accrued expenses:
Advisory fee payable .................................... 53,277
Distribution plan fees payable .......................... 20,198
Other ................................................... 21,761
------------
Total Liabilities ................................... 1,431,168
------------
Net Assets ................................................ $101,554,418
============
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 6,118,671 shares) ........................... $ 6,119
Additional paid-in capital ................................ 76,144,949
Undistributed investment
income--net ............................................. 1,163,865
Accumulated net realized gain
on investments .......................................... 8,050,888
Unrealized net appreciation of
investments (includes $177,475
unrealized loss on open
futures contracts) ...................................... 16,188,597
------------
Net Assets ................................................ $101,554,418
============
Net Asset Value, Offering and
Redemption Price, per
Outstanding Share
($101,554,418 / 6,118,671
shares outstanding) ..................................... $ 16.60
============
Statement of Operations
for the six months ended September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest income .......................................... $ 1,171,428
Dividend income (net of foreign
withholding tax of $158) ............................... 121,153
------------
Total Income ....................................... 1,292,581
------------
Expenses:
Advisory fee ............................................. 287,226
Service and distribution plan fee ........................ 110,472
Custodian fees ........................................... 28,412
Auditing and legal fees .................................. 19,947
Accounting & bookkeeping expense ......................... 18,895
Registration and filing fees ............................. 15,406
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 ................................ 3,385
------------
Total Expenses Before
Custody Credits .................................. 511,352
Less: Custody Credits .............................. (2,426)
------------
Net Expenses ....................................... 508,926
------------
Investment Income-Net .................................... 783,655
------------
Realized and Unrealized Gain on
Investments--Net:
Realized Gain--Net (includes
$1,907,044 loss on futures
contracts) ......................................... 5,154,060
Change in Unrealized Appreciation
(includes $177,475 unrealized
loss on open short futures
contracts) ......................................... 11,482,049
------------
Net Realized Gain and Net
Unrealized Appreciation of
Investments ............................................ 16,636,109
------------
Net Increase in Net Assets
from Operations ........................................ $ 17,419,764
============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Asset Allocation Fund, Inc.
Statement of Changes in Net Assets
for the six months ended Septmeber 30, 1997 (unaudited)
and for the year ended March 31, 1997
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1997 March 31,
(unaudited) 1997
------------------------------
<S> <C> <C>
Operations:
Investment income--net ........................................ $ 783,655 $ 1,306,323
Realized gain on investments--net ............................. 5,154,060 10,113,531
Net change in unrealized appreciation (depreciation) .......... 11,482,049 (1,342,707)
------------------------------
Net increase in net assets from operations .................... 17,419,764 10,077,147
------------------------------
Distributions to Shareholders:
Investment income--net ........................................ -- (1,023,047)
Realized gains-net ............................................ -- (11,007,991)
------------------------------
Total distributions ........................................... -- (12,031,038)
------------------------------
Capital Share Transactions:
Net proceeds from sale of shares .............................. 17,164,398 30,217,220
Net proceeds from reinvestment of distributions to shareholders -- 11,783,049
Cost of shares repurchased .................................... (8,010,574) (20,868,278)
------------------------------
Increase from capital share transactions ...................... 9,153,824 21,131,991
------------------------------
Total Increase .................................................. 26,573,588 19,178,100
Net Assets:
Beginning of period ........................................... 74,980,830 55,802,730
------------------------------
End of period ................................................. $ 101,554,418 $ 74,980,830
------------------------------
Undistributed investment income-net, at end of period ........... $ 1,163,865 $ 380,210
==============================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<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.
(F) Financial Futures Contracts. A financial futures contract is an agreement
between two parties to buy or sell financial instruments at a set price on a
future date. Upon
- --------------------------------------------------------------------------------
14
<PAGE>
Value line Asset Allocation Fund, Inc.
September 30, 1997
================================================================================
entering into such a contract the Fund is required to pledge to the broker cash,
or U.S. Government securities, equal to the minimum "initial margin"
requirements of the applicable futures exchange. Pursuant to the contract, the
Fund agrees to receive from or to pay the broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
2. Organization Costs
Costs of $66,040 incurred in connection with the Funds'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 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:
Six Months
Ended Year
September 30, Ended
1997 March 31,
(unaudited) 1997
----------------------------
Shares sold ................................ 1,152,634 2,033,628
Shares issued in
reinvestment of dividends
and distributions ........................ -- 870,240
----------------------------
1,152,634 2,903,868
Shares repurchased ......................... 532,096 1,354,654
----------------------------
Net increase ............................... 620,538 1,549,214
============================
4. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
Six Months
Ended
Sept. 30, 1997
(unaudited)
--------------
PURCHASES:
U.S. Treasury Obligations ............................. $14,971,875
Other Investment Securities ........................... 54,062,545
-----------
$69,034,420
===========
SALES:
Investment Securities ................................. $45,120,766
===========
At September 30, 1997, the aggregate cost of investment securities and
short-term investments for federal income tax purposes was $85,398,055. The
aggregate appreciation and depreciation of investments at September 30, 1997,
based on a comparison of investment values and their costs for federal income
tax purposes, was $16,533,141 and $378,284, respectively, resulting in a net
appreciation of $16,154,857.
5. Advisory Fees, Service and Distribution Plan Fees and Transactions With
Affiliates
An advisory fee of $287,226 was paid or payable to the Adviser for the six
months ended September 30, 1997. 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.
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
- --------------------------------------------------------------------------------
15
<PAGE>
Value line Asset Allocation Fund, Inc.
Notes to Financial Statements (unaudited) September 30, 1997
- --------------------------------------------------------------------------------
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 six months ended September 30, 1997,
fees amounting to $110,472 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,
1997, the Fund paid brokerage commissions totalling $47,473 to the Distributor,
a registered broker/dealer, which clears its transactions through unaffiliated
brokers.
At September 30, 1997, the Adviser, and/or affiliated companies, and the Value
Line, Inc. Profit Sharing Plan, owned 3,581,442 shares of the Fund's capital
stock, representing 58.5% of the outstanding shares. In addition, certain
officers and directors of the Fund owned 359,746 shares of capital stock,
representing 5.9% of the outstanding shares.
6. Financial Instruments with Off-Balance Sheet Risk
During the period ended September 30, 1997, the Fund sold stock index futures
contracts to hedge its portfolio positions against price fluctuations. Futures
contracts involve elements of credit and market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The contract amounts of
these futures contracts reflect the extent of the Fund's exposure to off-balance
sheet risk. At September 30, 1997 the Fund held an open short position of 63
Russell 2000 Index contracts expiring December, 1997 and 11 S&P Mid Cap 400
index contracts expiring December, 1997 with a notional value of $16,234,625.
The Fund purchases or sells futures contracts only on exchanges or a board of
trade. The exchange or board of trade acts as the counterparty to the Fund's
futures transactions; therefore, the Fund's credit risk is limited to the
failure of the exchange or board of trade. The Fund bears the market risk which
arises from any changes in security values.
- --------------------------------------------------------------------------------
16
<PAGE>
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
August 24, 1993
Six Months (commencement
Ended Years Ended March 31, of operations) to
Sept. 30, 1997 March 31,
(unaudited) 1997 1996 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 13.64 $ 14.13 $ 11.58 $ 10.37 $ 10.00
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income ................. .12 .30 .10 .08 .06(1)
Net gains or losses on securities
(both realized and unrealized) ...... 2.84 2.15 3.86 1.30 .35
----------------------------------------------------------------------------------
Total from investment opeations ....... 2.96 2.45 3.96 1.38 .41
----------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .. -- (.25) (.12) (.06) (.04)
Distributions from capital gains ...... -- (2.69) (1.29) (.11) --
----------------------------------------------------------------------------------
Total distributions ................... -- (2.94) (1.41) (.17) (.04)
----------------------------------------------------------------------------------
Net asset value, end of period .......... $ 16.60 $ 13.64 $ 14.13 $ 11.58 $ 10.37
==================================================================================
Total return ............................ 21.70%+ 17.49% 35.13% 13.47% 4.15%+
==================================================================================
Ratios/Supplemental Data:
Net assets end of period (in thousands) . $ 101,554 $ 74,981 $ 55,803 $ 26,172 $ 18,989
Ratio of operating expenses to average
net assets ............................ 1.16%(2)* 1.23%(2) 1.38%(2) 1.76% 0.47%*(1)
Ratio of net investment income to
average net assets .................... 1.77%* 1.95% .99% .85% 1.10%*(1)
Portfolio turnover rate ................. 58%+ 192% 244% 211% 108%+
Average commissions paid per share of
common stock investments purchased/sold $ .0493 $ .0492(3) -- -- --
</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) Before Custody Credits.
(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.
+ Not annualized.
* Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
17
<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 to
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 Convetible Ranking System.
1986--Value Line Aggressive Income Trust seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income corporate 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
individual 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.
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 detemine 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 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.
- --------------------------------------------------------------------------------
18
<PAGE>
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
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
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).
VLF709214
