================================================================================
------------------
SEMI-ANNUAL REPORT
------------------
September 30, 1999
------------------
Value Line
Asset
Allocation
Fund, Inc.
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Asset Allocation Fund, Inc.
To Our Value Line Asset
- --------------------------------------------------------------------------------
To Our Shareholders:
We're pleased to report continued excellent returns for the Value Line Asset
Allocation Fund. For the six months ended September 30, 1999, shareholders
earned a total return of 7.50%, which compared with a total return of 0.36% for
the unmanaged Standard & Poor's 500 Index and a total return of -0.56% for the
unmanaged Lehman Government/Corporate Bond Index.
Since inception in August, 1993, your Fund has displayed a remarkable
consistency of outstanding performance. The Fund has finished in the top
one-third of its "flexible funds" category in every year, according to Lipper
Analytical Services, and has usually achieved the top one-tenth of the category.
All in all, it ranks #1 among 69 flexible funds since inception. For the one
year ended September 30, 1999, the Fund ranks #1 of 217 funds; for three years,
#14 of 157 funds; for five years, #3 of 102 funds.
Strong stock selection has driven this success. Our selection method is simple:
We invest in winning companies, and stick with them as long as they continue to
win. We invest in companies of all sizes and in any industry. What they have in
common, however, is strong earnings momentum and strong stock price momentum. We
carefully examine quarterly earnings reports and closely monitor stock
performance. Companies that show significant blemishes on either count are sold.
Turnover of the Fund's holdings is relatively high, but consistent winners stay
in the portfolio for a long time. To reduce risk, we invest in many companies,
rarely putting more than 1% of assets in any one stock.
Our asset allocation process plays the key role in risk control. Since the
Fund's inception, an average of about 35% of assets has been invested in bonds
and cash. This has limited total returns in the very strong stock market of
recent years, but has kept the portfolio's volatility down. The real payoff, of
course, will come when the stock market someday enters a sustained period of
weakness. Currently, your Fund has 60% of assets in bonds and cash, a rather
conservative stance. A year ago, the Fund held nearly 90% of its assets in
stocks, but rising interest rates and rising stock prices have driven our model
to become increasingly cautious since then. Bonds, as a group, now offer more
competitive returns. The Fund's bondholdings are primarily in Treasuries and
U.S. agencies, with maturities averaging about six years.
Our goal remains to maximize return while minimizing risk. Thank you for
investing with us.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
November 10, 1999
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2
<PAGE>
Value Line Asset Allocation Fund, Inc.
Allocation Fund Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The American economy continues to perform well as we proceed through the final
weeks of the year. Evidence of this healthy level of business activity can be
found in the strong pace of manufacturing, the acceleration in job growth, and
the generally solid performance with respect to consumer spending. Overall, we
estimate that GDP growth, which rose at a vigorous 4.8% rate in the third
quarter, will average a solid 4% during the final three months of the year,
unless serious Year 2000 dislocations develop. We think growth will then
moderate into the 2.0%-2.5% range during the first half of next year. In all, we
believe that the 12 months upcoming will mark the tenth year in a row of
sustained economic growth.
Inflationary pressures, meanwhile, continue to be held largely at bay, in spite
of a tightening labor market, with strong increases in productivity being at
least partially responsible for this comparative pricing stability.
Nevertheless, a gradual uptrend in cost pressures does seem likely over the next
several quarters. The Federal Reserve, taking note of this somewhat higher
expense structure, is likely to maintain a neutral to at most modestly
restrictive monetary stance in the months ahead.
Performance Data:*
Average
Annual Total
Return
---------
1 year ended 9/30/99........................................... 34.69%
5 years ended 9/30/99.......................................... 23.32%
From 8/24/93 (commencement
of operations) to 9/30/99.................................... 20.43%
* 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 (44.3%)
ADVERTISING (0.5%)
9,000 Big Flower Holdings, Inc.*.................. $ 254,812
11,400 Omnicom Group, Inc.......................... 902,738
------------
1,157,550
AEROSPACE/DEFENSE
(0.4%)
15,500 General Dynamics Corp. ..................... 967,781
AIR TRANSPORT (0.2%)
18,000 SkyWest, Inc................................ 394,875
APPAREL (0.5%)
31,000 Chico's FAS, Inc.*.......................... 844,750
14,000 Tommy Hilfiger Corp.*....................... 394,625
------------
1,239,375
AUTO PARTS--ORIGINAL
EQUIPMENT (0.2%)
11,000 Arvin Industries, Inc....................... 340,313
10,000 Gentex Corp.*............................... 206,562
------------
546,875
BANK--MIDWEST (0.5%)
11,000 Fifth Third Bancorp......................... 669,281
16,000 First Tennessee
National Corp........................... 450,000
------------
1,119,281
BEVERAGE--
ALCOHOLIC (0.4%)
12,000 Canandaigua Brands, Inc.
Class "A"*.............................. 717,000
2,000 Coors (Adolph) Co.
Class "B"............................... 108,250
------------
825,250
BUILDING
MATERIALS (0.6%)
21,000 Elcor Corp.................................. 525,000
25,000 Insituform Technologies, Inc.
Class "A"*.............................. 625,000
7,000 USG Corp.................................... 332,500
------------
1,482,500
CABLE TV (1.0%)
15,453 Adelphia Communications
Corp. Class "A"*........................ 908,830
10,000 Cablevision Systems Corp.
Class "A"*.............................. 727,500
6,800 EchoStar Communications
Corp. Class "A"*........................ 617,525
------------
2,253,855
CEMENT &
AGGREGATES (0.2%)
10,000 Centex Construction
Products, Inc........................... 371,250
COMPUTER &
PERIPHERALS (2.4%)
24,662 Cisco Systems, Inc.*........................ 1,690,888
16,000 Computer Network
Technology Corp.*....................... 149,000
18,000 Cybex Computer
Products Corp.*......................... 600,750
14,000 Dell Computer Corp.*........................ 585,375
8,000 EMC Corp.*.................................. 571,500
20,000 Pinnacle Systems, Inc.*..................... 847,500
20,000 Unisys Corp.*............................... 902,500
6,000 Zebra Technologies Corp.
Class "A"*.............................. 272,813
------------
5,620,326
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4
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1999
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE
& SERVICES (4.4%)
39,000 Acclaim Entertainment,
Inc.*................................... $ 296,156
14,000 Actuate Corp.*.............................. 474,250
7,000 Adobe Systems Inc........................... 794,500
10,000 Ancor Communications,
Inc.*................................... 242,500
27,000 Ardent Software, Inc.*...................... 727,313
9,600 Citrix Systems, Inc.*....................... 594,600
8,000 Comverse Technology,
Inc.*................................... 754,500
12,000 Electronics For
Imaging Inc.*........................... 616,875
5,000 FactSet Research
Systems Inc............................. 284,375
24,000 Mercury Interactive Corp.*.................. 1,549,500
10,000 Microsoft Corp.*............................ 905,625
22,500 Paychex, Inc................................ 767,812
23,000 Peregrine Systems, Inc.*.................... 937,250
8,000 Siebel Systems, Inc.*....................... 533,000
4,000 TSI International
Software Ltd.*.......................... 108,500
8,000 Verity Inc.*................................ 550,500
------------
10,137,256
DIVERSIFIED
COMPANIES (0.9%)
8,000 Textron, Inc................................ 619,000
10,000 Tyco International, Ltd..................... 1,032,500
6,000 United Technologies Corp.................... 355,875
------------
2,007,375
DRUG (2.7%)
10,000 Andrx Corp.*................................ 585,313
17,000 Biogen, Inc.*............................... 1,339,812
6,000 Bristol-Myers Squibb Co..................... 405,000
9,000 Forest Laboratories, Inc.*.................. $ 379,125
3,000 Gilead Sciences, Inc.*...................... 192,562
10,000 MedImmune, Inc.*............................ 996,563
12,000 Millennium Pharmaceuticals,
Inc.*................................... 780,000
10,000 QLT PhotoTherapeautics
Inc.*................................... 764,375
23,000 Roberts Pharmaceutical
Corp.*.................................. 695,750
------------
6,138,500
ELECTRIC UTILITY--
CENTRAL (0.3%)
10,000 AES Corp.*.................................. 590,000
ELECTRIC UTILITY--
WEST (0.3%)
8,000 Calpine Corp.*.............................. 680,500
ELECTRICAL
EQUIPMENT (1.0%)
17,000 Power Integrations, Inc.*................... 1,177,250
32,000 Semtech Corp.*.............................. 1,172,000
------------
2,349,250
ELECTRONICS (1.5%)
16,000 CTS Corp.................................... 920,000
10,000 Gemstar International
Group Ltd.*............................. 781,250
7,000 JDS Uniphase Corp.*......................... 796,688
6,000 Lexmark International
Group, Inc. Class "A"*.................. 483,000
16,200 Symbol Technologies, Inc.................... 544,725
------------
3,525,663
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5
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ENTERTAINMENT (1.5%)
7,544 AMFM Inc.*.................................. $ 459,241
10,000 CBS Corp.*.................................. 462,500
11,143 Clear Channel
Communications, Inc.*................... 890,047
8,200 Cox Radio, Inc. Class "A"*.................. 487,900
10,400 Time Warner Inc............................. 631,800
12,000 USA Networks Inc.*.......................... 465,000
------------
3,396,488
FINANCIAL SERVICES
(0.2%)
13,000 Metris Companies, Inc....................... 382,688
FOREIGN
TELECOMMUNICATIONS
(0.6%)
14,000 Nortel Networks Corp........................ 714,000
2,650 Vodafone Airtouch PLC
(ADR)................................... 630,037
------------
1,344,037
FURNITURE/HOME
FURNISHINGS (0.3%)
15,000 Ethan Allen Interiors, Inc.................. 477,188
17,500 Shaw Industries, Inc........................ 277,812
------------
755,000
GROCERY (0.1%)
15,000 Kroger Co.*................................. 330,937
HOUSEHOLD
PRODUCTS (0.5%)
37,500 Salton, Inc.*............................... 1,132,031
INDUSTRIAL SERVICES
(1.2%)
10,500 Labor Ready, Inc.*.......................... 105,656
22,500 Profit Recovery Group
International, Inc. (The)* ............. 1,004,063
12,000 QRS Corp.*.................................. 769,500
10,000 SABRE Group Holdings,
Inc. Class "A"*......................... 430,000
15,000 URS Corp.*.................................. 367,500
------------
2,676,719
INSURANCE--
DIVERSIFIED (0.2%)
7,000 Blanch (E.W.) Holdings
Inc..................................... 455,875
INTERNET (0.9%)
3,800 America Online, Inc.*....................... 395,200
12,000 Exodus Communications,
Inc.*................................... 864,750
19,000 Macromedia Inc.*............................ 776,625
------------
2,036,575
MACHINERY (0.4%)
22,000 Astec Industries, Inc.*..................... 530,750
13,000 Terex Corp.*................................ 409,500
------------
940,250
MANUFACTURED
HOUSING/
RECREATIONAL
VEHICLES (0.5%)
33,750 Monaco Coach Corp.*......................... 822,656
12,000 National R.V.
Holdings, Inc.*......................... 237,000
------------
1,059,656
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6
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1999
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDICAL SERVICES
(0.7%)
9,000 Advance Paradigm, Inc.*..................... $ 492,750
9,000 Express Scripts, Inc.
Class "A"*.............................. 704,250
18,000 Hooper Holmes, Inc.......................... 461,250
------------
1,658,250
MEDICAL SUPPLIES
(2.7%)
11,500 Allergan, Inc............................... 1,265,000
14,000 Alpharma Inc. Class "A"..................... 494,375
28,000 Bindley Western
Industries, Inc......................... 400,750
7,000 Johnson & Johnson........................... 643,125
16,000 Laser Vision Centers, Inc.*................. 224,500
9,536 Medtronic, Inc.............................. 338,528
12,000 Patterson Dental Co.*....................... 594,750
12,768 Priority Healthcare Corp.
Class "B"*.............................. 394,212
3,500 ResMed Inc.*................................ 115,719
10,000 VISX, Inc.*................................. 790,937
14,500 Xomed Surgical
Products, Inc.*......................... 826,500
------------
6,088,396
NEWSPAPER (0.2%)
10,000 Tribune Co.................................. 497,500
OFFICE EQUIPMENT
& SUPPLIES (0.6%)
11,000 Pitney Bowes, Inc........................... 670,313
28,500 Staples, Inc.*.............................. 621,656
------------
1,291,969
PRECISION
INSTRUMENT (1.3%)
17,250 Kronos Inc.*................................ 632,859
11,000 Optical Coating
Laboratory, Inc......................... 1,012,688
10,000 Orbotech Ltd.*.............................. 618,750
12,000 Waters Corp.*............................... 726,750
------------
2,991,047
PUBLISHING (0.4%)
13,000 Reader's Digest Association,
Inc. Class "A" ......................... 380,250
12,000 Valassis Communications,
Inc.*................................... 527,250
------------
907,500
RAILROAD (0.2%)
27,000 Transportation Technologies
Industries, Inc.* ...................... 467,438
RECREATION (0.7%)
10,000 Carnival Corp............................... 435,000
9,000 Harley-Davidson, Inc........................ 450,562
18,000 Royal Caribbean
Cruises Ltd............................. 810,000
------------
1,695,562
RESTAURANT (0.9%)
24,000 Brinker International, Inc.*................ 651,000
19,000 Darden Restaurants, Inc..................... 371,688
24,000 Jack in the Box Inc.*....................... 598,500
20,000 Ruby Tuesday, Inc........................... 390,000
------------
2,011,188
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7
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RETAIL--
SPECIAL LINES (4.2%)
18,640 Abercrombie & Fitch Co.
Class "A"*.............................. $ 634,925
17,500 American Eagle
Outfitters, Inc. *...................... 847,656
11,000 AnnTaylor Stores Corp.*..................... 449,625
19,000 Bed Bath & Beyond Inc.*..................... 663,812
10,000 Best Buy Co., Inc.*......................... 620,625
14,000 Circuit City Stores--
Circuit City Group...................... 590,625
10,500 Dollar Tree Stores, Inc.*................... 419,344
28,500 Fossil Inc.*................................ 771,281
12,250 Gap, Inc. (The)............................. 392,000
15,750 Intimate Brands, Inc........................ 613,266
16,000 Linens `N' Things, Inc.*.................... 540,000
25,500 Quiksilver, Inc.*........................... 465,375
20,000 Ross Stores Inc............................. 402,500
18,000 TJX Companies, Inc.......................... 505,125
10,000 Tandy Corp.................................. 516,875
12,000 Tiffany & Co................................ 719,250
11,500 Zale Corp.*................................. 440,594
------------
9,592,878
RETAIL BUILDING
SUPPLY (0.8%)
18,000 Home Depot, Inc. (The)...................... 1,235,250
14,560 Lowe's Companies, Inc....................... 709,800
------------
1,945,050
RETAIL STORE (2.1%)
15,000 Ames Department
Stores, Inc.*........................... 478,125
11,000 Cost Plus, Inc.*............................ 533,500
9,200 Dayton Hudson Corp.......................... 552,575
8,500 Kohl's Corp.*............................... 562,062
9,750 99 Cents Only Stores*....................... 352,219
8,000 ShopKo Stores, Inc.*........................ 232,000
42,000 Wal-Mart Stores, Inc........................ 1,997,625
------------
4,708,106
SEMICONDUCTOR
(2.1%)
10,000 Linear Technology Corp...................... 587,813
10,000 PMC-Sierra, Inc.*........................... 925,000
12,000 QLogic Corp*................................ 838,500
21,500 TranSwitch Corp.*........................... 1,225,500
12,000 TriQuint Semiconductor,
Inc.*................................... 686,250
9,000 Xilinx, Inc.*............................... 589,781
------------
4,852,844
SHOE (0.1%)
6,000 Timberland Co. (The)
Class "A"*.............................. 234,375
TELECOMMUNICATIONS
EQUIPMENT (1.9%)
22,500 AVT Corp.*.................................. 689,062
18,000 CommScope, Inc.*............................ 585,000
2,000 Harmonic Inc.*.............................. 261,625
30,000 Polycom, Inc.*.............................. 1,429,688
4,500 QUALCOMM Inc.*.............................. 851,344
10,000 Tellabs, Inc. *............................. 569,375
------------
4,386,094
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8
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1999
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATION
SERVICES (0.9%)
6,000 ALLTEL Corp................................. $ 422,250
23,400 DyCom Industries, Inc.*..................... 987,188
19,000 Metromedia Fiber Network
Inc. Class "A"*......................... 465,500
8,000 Viatel, Inc.*............................... 236,500
------------
2,111,438
TOILETRIES/
COSMETICS (0.1%)
9,000 Lauder (Estee) Companies
Inc. (The) Class "A" ................... 351,562
------------
TOTAL
COMMON STOCKS
(Cost $61,437,775) ......................... 101,708,915
============
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (17.0%)
$5,000,000 United States Treasury
Notes 4%, 10/31/00.................. $ 4,923,123
4,000,000 United States Treasury
Notes 5.250%,
5/31/01............................. 3,975,853
4,000,000 United States Treasury
Notes 5.750%,
6/30/01............................. 4,005,509
2,000,000 United States Treasury
Notes 6.25%,
8/31/02............................. 2,026,364
6,500,000 United States Treasury
Notes 4.750%,
2/15/04............................. 6,232,790
1,750,000 United States Treasury
Notes 5.875%,
11/15/05............................ 1,739,451
2,000,000 United States Treasury
Notes 5.625%,
2/15/06............................. 1,959,346
5,081,800 United States Treasury
Inflation Indexed
Notes 3.875%,
1/15/09 ............................ 5,000,783
8,500,000 United States Treasury
Bonds 7.250%,
8/15/22**........................... 9,333,651
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $39,830,093) .................... 39,196,870
============
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9
<PAGE>
Value Line Asset Allocation Fund, Inc.
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (21.7%)
$2,000,000 Federal Home Loan Bank
Bonds 5.375%, 3/2/01................ $ 1,984,459
4,500,000 Federal Home Loan
Mortgage Corp.
Debentures 5.750%,
6/15/01 ............................ 4,482,271
1,500,000 Federal Home Loan Bank
Bonds 5.125%,
2/26/02............................. 1,467,025
4,000,000 Federal National Mortgage
Association Notes
5.375%, 3/15/02 .................... 3,931,982
4,000,000 Federal Home Loan
Mortgage Corp.
Debentures 5.500%,
5/15/02 ............................ 3,938,549
2,000,000 Federal Home Loan
Mortgage Corp.
Debentures 5.750%,
7/15/03 ............................ 1,963,871
1,500,000 Federal National Mortgage
Association Notes
4.75%, 11/14/03 .................... 1,415,127
6,000,000 Federal Home Loan
Mortgage Corp.
Debentures 5%, 1/15/04 ............. 5,692,975
1,500,000 Federal National Mortgage
Association Notes
5.125%, 2/13/04..................... 1,429,111
8,000,000 Federal National Mortgage
Association Notes
5.625%, 5/14/04 .................... 7,760,951
3,000,000 Federal Home Loan
Mortgage Corp.
Debentures 6.25%,
7/15/04 ............................ 2,982,546
1,000,000 Federal National Mortgage
Association Notes
5.75%, 6/15/05 ..................... 968,300
$1,000,000 Federal Home Loan
Mortgage Corp.
Debentures 5.75%,
4/15/08 ............................ 940,803
2,000,000 Federal National Mortgage
Association Notes
5.250%, 1/15/09 .................... 1,804,194
1,605,000 Federal National Mortgage
Association Notes
6.375%, 6/15/09 .................... 1,571,361
7,500,000 Federal National Mortgage
Association Notes
6.625%, 9/15/09 .................... 7,470,023
------------
TOTAL
U.S. GOVERNMENT
AGENCY
OBLIGATIONS
(Cost $50,740,392) .................... $ 49,803,548
============
CORPORATE BONDS & NOTES (0.8%)
TELECOMMUNICATION
SERVICES (0.8%)
$1,000,000 AirTouch Communications,
Inc. Notes 6.650%,
5/1/08 ............................. $ 960,844
1,000,000 MCI WorldCom Inc.
Senior Notes 6.400%,
8/15/05............................. 973,778
------------
TOTAL CORPORATE
BONDS & NOTES
(Cost $1,998,284) ..................... 1,934,622
============
TOTAL INVESTMENT
SECURITIES (83.8%)
(Cost $154,006,544) ................... 192,643,955
============
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10
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (14.1%)
(including accrued interest)
$11,100,000 Collateralized by $7,995,000
U.S. Treasury Bonds
10.625%, due 8/15/15,
with a value of
$11,386,631, (with
Warburg Dillon Read
LLC 5%, dated 9/30/99,
due 10/1/99, delivery
value $11,101,542).................. $ 11,101,542
11,100,000 Collateralized by $9,325,000
U.S. Treasury Bonds
8.125%, due 5/15/21,
with a value of
$11,395,444, (with
Goldman, Sachs & Co.
5%, dated 9/30/99,
due 10/1/99, delivery
value $11,101,542).................. 11,101,542
10,100,000 Collateralized by $8,145,000
U.S. Treasury Bonds
8.75%, due 8/15/20,
with a value of
$10,339,064, (with
Morgan Stanley & Co.,
Incorporated 5.25%,
dated 9/30/99, due
10/1/99, delivery
value $10,101,472).................. 10,101,472
------------
TOTAL REPURCHASE
AGREEMENTS
(Cost $32,304,556) .................... 32,304,556
============
CASH AND RECEIVABLES
LESS LIABILITIES (2.1%) .................................... $ 4,851,955
------------
NET ASSETS (100%) .......................................... $229,800,466
============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER OUTSTANDING SHARE
($229,800,466 / 11,880,125
shares outstanding) ........................................ $ 19.34
============
* Non-income producing
** A portion of this security is segregated to cover initial margin
requirements on the following open short financial futures contracts:
Number of Unrealized Contract
Contracts Gain Value
--------------------------------------
Russell 2000 Index
Dec./99 ...................... 26 $ 250,250 $5,583,500
S&P 500 Index
Dec./99 ...................... 12 231,750 3,894,600
S&P MidCap 400
Index Dec./99 ................ 12 175,800 2,312,400
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Asset Allocation Fund, Inc.
Statement of Assets and Liabilities
at September 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investment securities, at value
(Cost--$154,006,544) ................................... $192,643,955
Repurchase agreements
(Cost--$32,304,556) ...................................... 32,304,556
Cash ..................................................... 94,347
Receivable for capital shares sold ....................... 2,869,235
Receivable for securities sold ........................... 1,250,096
Dividends and interest receivable ........................ 1,162,931
------------
Total Assets ....................................... 230,325,120
------------
Liabilities:
Payable for capital shares
repurchased ............................................ 182,307
Variation margin on futures
contracts .............................................. 123,650
Accrued expenses:
Advisory fee payable ................................... 121,396
Service and distribution plan
fees payable ......................................... 46,400
Other .................................................. 50,901
------------
Total Liabilities .................................. 524,654
------------
Net Assets ............................................... $229,800,466
============
Net Assets consist of:
Capital stock, at $.001 par value
(authorized 300,000,000,
outstanding 11,880,125 shares) ......................... $ 11,880
Additional paid-in capital ............................... 173,301,033
Undistributed net investment income ...................... 1,980,585
Undistributed net realized gain
on investments ......................................... 15,211,757
Net unrealized appreciation
of investments ......................................... 39,295,211
------------
Net Assets ............................................... $229,800,466
============
Net Asset Value, Offering and
Redemption Price, per
Outstanding Share
($229,800,466 / 11,880,125
shares outstanding) .................................... $ 19.34
============
Statement of Operations
for the six months ended September 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest income ......................................... $ 2,449,241
Dividend income (net of foreign
withholding tax of $331) .............................. 142,162
------------
Total Income ...................................... 2,591,403
------------
Expenses:
Advisory fee ............................................ 673,732
Service and distribution plan fee ....................... 259,128
Custodian fees .......................................... 28,203
Registration and filing fees ............................ 22,387
Transfer agent fees ..................................... 18,952
Auditing and legal fees ................................. 18,326
Accounting & bookkeeping expense ........................ 16,200
Insurance, dues and other ............................... 13,902
Directors' fees and expenses ............................ 11,182
Printing ................................................ 10,068
------------
Total expenses before
custody credits ................................. 1,072,080
Less: custody credits ............................. (1,896)
------------
Net Expenses ...................................... 1,070,184
------------
Net Investment Income ................................... 1,521,219
------------
Net Realized and Unrealized Gain
on Investments:
Net Realized Gain
(includes $485,494 loss on
futures contracts) ................................ 12,841,926
Change in Net Unrealized
Appreciation ...................................... 477,509
------------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ........................................ 13,319,435
------------
Net Increase in Net Assets
from Operations ....................................... $ 14,840,654
=============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
<PAGE>
Statement of Changes in Net Assets
for the six months ended September 30, 1999 (unaudited) and for the year ended
March 31, 1999
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1999 Year Ended
(unaudited) March 31, 1999
-------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 1,521,219 $ 460,193
Net realized gain on investments .......................... 12,841,926 2,393,060
Change in net unrealized appreciation ..................... 477,509 15,396,207
------------------------------------
Net increase in net assets from operations ................ 14,840,654 18,249,460
------------------------------------
Distributions to Shareholders:
Net investment income ..................................... -- (230,574)
Net realized gain from investment transactions ............ -- (2,460,642)
------------------------------------
Total distributions ....................................... -- (2,691,216)
------------------------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 91,741,278 106,486,745
Proceeds from reinvestment of distributions to shareholders -- 2,407,222
Cost of shares repurchased ................................ (59,313,215) (65,408,668)
------------------------------------
Net increase from capital share transactions .............. 32,428,063 43,485,299
------------------------------------
Total Increase in Net Assets ................................ 47,268,717 59,043,543
Net Assets:
Beginning of period ....................................... 182,531,749 123,488,206
------------------------------------
End of period ............................................. $ 229,800,466 $ 182,531,749
====================================
Net undistributed investment income, at end of period ....... $ 1,980,585 $ 459,366
====================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<PAGE>
Value Line Asset Allocation Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Value Line Asset Allocation Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company 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 applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, 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. Interest income is accrued
as earned. 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 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
- --------------------------------------------------------------------------------
14
<PAGE>
Value Line Asset Allocation Fund, Inc.
September 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
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. Capital Share Transactions Transactions in capital stock were as follows:
Six Months
Ended Year
September 30, Ended
1999 March 31,
(unaudited) 1999
----------------------------
Shares sold ................................ 4,876,994 6,501,091
Shares issued in
reinvestment of dividends
and distributions......................... -- 149,517
----------------------------
4,876,994 6,650,608
Shares repurchased ......................... 3,143,003 4,073,462
----------------------------
Net increase ............................... 1,733,991 2,577,146
============================
3. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, were as
follows:
Six Months Ended
September 30, 1999
(unaudited)
------------
PURCHASES:
U.S. Treasury Obligations ............................... $ 65,185,409
Other Investment Securities ............................. 24,463,856
------------
$ 89,649,265
============
SALES:
U.S. Treasury Obligations ............................... $ 8,126,194
Other Investment Securities ............................. 66,497,106
------------
$ 74,623,300
============
At September 30, 1999, the aggregate cost of investment securities and
repurchase agreements for federal income tax purposes was $186,407,939. The
aggregate appreciation and depreciation of investments at September 30, 1999,
based on a comparison of investment values and their costs for federal income
tax purposes was $42,201,641 and $3,661,069 respectively, resulting in a net
appreciation of $38,540,572.
4. Advisory Fees, Service and Distribution Plan Fees and Transactions With
Affiliates:
An advisory fee of $673,732 was paid or payable to the Adviser for the six
months ended September 30, 1999. 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.
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets. For the six months
ended September 30, 1999, fees amounting to $259,128 were paid or payable to the
Distributor 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,
1999, the Fund paid brokerage commissions totalling $30,629 to the Distributor,
a registered broker/dealer, which clears its transactions through unaffiliated
brokers.
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Asset Allocation Fund, Inc.
Notes to Financial Statements September 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
At September 30, 1999, the Adviser, and/or affiliated companies, and the Value
Line, Inc. Profit Sharing and Savings Plan, owned 3,777,011 shares of the Fund's
capital stock, representing 31.8% of the outstanding shares. In addition,
certain officers and directors of the Fund owned 351,358 shares of capital
stock, representing 3.0% of the outstanding shares.
5. Financial Instrument with Off-Balance Sheet Risk
During the six months ended September 30, 1999, 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, 1999 the Fund held an open short
position of 26 Russell 2000 Index contracts, 12 S&P 500 Index contracts, and 12
S&P Mid-Cap 400 Index contracts, all expiring in December 1999, with a total
notional value of $11,790,500.
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>
Value Line Asset Allocation Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Years Ended March 31,
Sept. 30, 1999 ---------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........ $ 17.99 $ 16.32 $ 13.64 $ 14.13 $ 11.58 $ 10.37
---------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ...... .12 .03 .22 .30 .10 .08
Net gains on securities
(both realized
and unrealized) .......... 1.23 1.92 4.54 2.15 3.86 1.30
---------------------------------------------------------------------------------------------
Total from investment
operations ............. 1.35 1.95 4.76 2.45 3.96 1.38
---------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ........ -- (.02) (.26) (.25) (.12) (.06)
Distributions from
capital gains ............ -- (.26) (1.82) (2.69) (1.29) (.11)
---------------------------------------------------------------------------------------------
Total distributions ........ -- (.28) (2.08) (2.94) (1.41) (.17)
---------------------------------------------------------------------------------------------
Net asset value,
end of period .............. $ 19.34 $ 17.99 $ 16.32 $ 13.64 $ 14.13 $ 11.58
=============================================================================================
Total return ................. 7.50%+ 12.16% 37.36% 17.49% 35.13% 13.47%
=============================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ............. $ 229,800 $ 182,532 $ 123,488 $ 74,981 $ 55,803 $ 26,172
Ratio of operating expenses
to average net assets ...... 1.04%*(1) 1.08%(1) 1.15%(1) 1.23%(1) 1.38%(1) 1.76%
Ratio of net investment
income to average net assets 1.48%* 0.30% 1.46% 1.95% .99% .85%
Portfolio turnover rate ...... 41%+ 129% 139% 192% 244% 211%
</TABLE>
(1) Before offset of custody credits.
* Annualized
+ Not annualized
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
17
<PAGE>
Value Line Asset Allocation Fund, Inc.
Other Information (unaudited)
- --------------------------------------------------------------------------------
Year 2000. Like other mutual funds, the Fund could be adversely affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.n This page intentionally left blank
- --------------------------------------------------------------------------------
18
<PAGE>
Value Line Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
This page intentionally left blank
- --------------------------------------------------------------------------------
19
<PAGE>
Value Line Asset Allocation Fund, Inc.
The Value Line Family of Funds
- --------------------------------------------------------------------------------
1950--The Value Line Fund seeks long-term growth of capital. Current income is a
secondary objective.
1952--Value Line Income and Growth Fund's primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks long-term growth of capital.
No consideration is given to current income in the choice of investments.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth.
1979--The Value Line Cash Fund, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value of its
net assets will be invested in securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital.
1984--The Value Line Tax Exempt Fund seeks to provide investors with the maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: The Money Market Portfolio
and The National Bond 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.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with the 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* seeks to achieve a high total
investment return consistent with reasonable risk.
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 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, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
20
<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 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers 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 E. Grant
Vice President
Bruce H. Alston
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).
509917
