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VALUE LINE MID CAP FOCUSED FUND, INC.
​ Investor Class ​ ​
(Ticker Symbol: VLIFX)
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Institutional Class
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(Ticker Symbol: VLMIX)
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VALUE LINE CAPITAL APPRECIATION FUND, INC.
​ Investor Class ​ ​
(Ticker Symbol: VALIX)
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Institutional Class
​ ​
(Ticker Symbol: VLIIX)
​
VALUE LINE LARGER COMPANIES FOCUSED FUND, INC.
​ Investor Class ​ ​
(Ticker Symbol: VALLX)
​
​
Institutional Class
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(Ticker Symbol: VLLIX)
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VALUE LINE SELECT GROWTH FUND, INC.
​ Investor Class ​ ​
(Ticker Symbol: VALSX)
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Institutional Class
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(Ticker Symbol: VILSX)
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Value Line Core Bond Fund
​
Investor Class
​ ​
(Ticker Symbol: VAGIX)
​
7 Times Square, Suite 1606, New York, New York 10036-6524
800-243-2729
www.vlfunds.com  
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2022
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This Statement of Additional Information (“SAI”) is not a prospectus and should be read in conjunction with the Prospectus of Value Line Mid Cap Focused Fund, Inc. (“Value Line Mid Cap Focused Fund”), the Prospectus of Value Line Capital Appreciation Fund, Inc. (“Value Line Capital Appreciation Fund”), the Prospectus of Value Line Larger Companies Focused Fund, Inc. (“Value Line Larger Companies Focused Fund”), the Prospectus of Value Line Select Growth Fund, Inc. (“Value Line Select Growth Fund”) and the Prospectus of Value Line Core Bond Fund (“Value Line Core Bond Fund”) (individually, a “Fund” and collectively, the “Funds”), dated May 1, 2022, a copy of which may be obtained without charge by writing or telephoning the Funds. In each instance, “Prospectus” means the Prospectus as amended or supplemented from time to time. The financial statements, accompanying notes and the report of the independent registered public accounting firm appearing in each Fund’s 2021 Annual Report to Shareholders (“Annual Report”) incorporated by reference in this SAI. A copy of each Fund’s Annual Report and most recent Semi-Annual Report is available from the Fund upon request and without charge by calling 800-243-2729 or online at www.vlfunds.com.​
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DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
History and Classification.
Value Line Mid Cap Focused Fund was incorporated in Delaware in 1949 and reincorporated in Maryland in 1972. In March 2015 it changed its name from “The Value Line Fund, Inc.” to “Value Line Mid Cap Focused Fund, Inc.” Value Line Capital Appreciation Fund was incorporated in Delaware in 1952 and reincorporated in Maryland in 1972. In December 2017, it changed its name from “Value Line Income and Growth Fund, Inc.” to “Value Line Capital Appreciation Fund, Inc.” Value Line Larger Companies Focused Fund was incorporated in Maryland in 1972. On June 1, 2006, it changed its name from “Value Line Leveraged Growth Investors, Inc.” to “Value Line Larger Companies Fund, Inc.” and in March 2015 it changed its name to “Value Line Larger Companies Focused Fund, Inc.” Value Line Select Growth Fund was incorporated in Delaware in 1956 and reincorporated in Maryland in 1972. On October 5, 2005, it changed its name from “The Value Line Special Situations Fund, Inc.” to “Value Line Premier Growth Fund, Inc.” and effective May 1, 2020, it changed its name to “Value Line Select Growth Fund, Inc.” The Value Line Core Bond Fund was established as a Massachusetts business trust in 1995. In November 2012, it changed its name from “Value Line Aggressive Income Trust” to “Value Line Core Bond Fund.”
Each Fund is an open-end, diversified management investment company. Each Fund (other than Value Line Core Bond Fund) is currently divided into two classes of shares: Investor Class shares and Institutional Class shares. Value Line Core Bond Fund offers Investor Class shares. The investment adviser of each Fund is EULAV Asset Management (the “Adviser”), a Delaware statutory trust.
Non-Principal Investment Strategies and Associated Risks.
The investment objective(s), principal investment strategies and related principal risks for each Fund are discussed in its Prospectus. The following is a discussion of the non-principal investment strategies and related risks for the Funds. Unless otherwise noted, an investment strategy and the related risks described below are applicable to all Funds.
Restricted and Illiquid Securities. On occasion, the Funds may purchase illiquid securities or securities which would have to be registered under the Securities Act of 1933, as amended (the “Securities Act”), if they were to be publicly distributed. However, the Funds will not do so if the value of such securities (other than securities eligible to be sold in a Rule 144A transaction and determined by the Adviser to be liquid) and other securities which are not readily marketable (including repurchase agreements maturing in more than seven days) would exceed 15% of the market value of such Fund’s net assets. The acquisition in limited amounts of restricted securities is believed to be helpful toward the attainment of each Fund’s investment objective without unduly restricting its liquidity or freedom in the management of its portfolio. However, because restricted securities may only be sold privately or in an offering registered under the Securities Act, or pursuant to an exemption from such registration, substantial time may be required to sell such securities, and there is greater than usual risk of price decline prior to sale.
In addition, the Funds may purchase certain securities (“Rule 144A securities”) for which there is a secondary market of qualified institutional buyers, as contemplated by Rule 144A under the Securities Act. Rule 144A provides an exemption from the registration requirements of the Securities Act for the resale of certain restricted securities to qualified institutional buyers.
The Adviser, under the supervision of each Fund’s Board of Directors, will consider whether securities purchased under Rule 144A are liquid or illiquid for purposes of the Fund’s limitation on investment in securities which are not readily marketable or are illiquid. Among the factors to be considered are the frequency of trades and quotes, the number of dealers and potential purchasers, dealer undertakings to
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make a market and the nature of the security and the time needed to dispose of it.
To the extent that the liquid Rule 144A securities that a Fund holds become illiquid, due to lack of sufficient qualified institutional buyers or market or other conditions, the percentage of the Fund’s assets invested in illiquid assets would increase. The Adviser, under the supervision of each Fund’s Board of Directors, will monitor the Funds’ investments in Rule 144A securities and will consider appropriate measures to enable each Fund to maintain sufficient liquidity for operating purposes and to meet redemption requests.
Liquidity Risk Management Rules. Rule 22e-4 under the 1940 Act requires, among other things, that the Funds establish a liquidity risk management program (“LRMP”) that is reasonably designed to assess and manage liquidity risk. Rule 22e-4 defines “liquidity risk” as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors’ interests in the fund. The Funds have implemented a LRMP to meet the relevant requirements. The Value Line Funds have appointed a liquidity program administrator to implement the program under the Board’s oversight. The Board will review no less frequently than annually a written report prepared by the LRMP Administrator that addresses the operation of the LRMP and assesses its adequacy and effectiveness of implementation. Among other things, the LRMP provides for the classification of each Fund investment as a “highly liquid investment,” “moderately liquid investment,” “less liquid investment” or “illiquid investment”. The liquidity risk classifications of the Fund’s investments are determined after reasonable inquiry and taking into account relevant market, trading and investment-specific considerations. To the extent that a Fund investment is deemed to be an “illiquid investment” or a “less liquid investment,” a Fund can expect to be exposed to greater liquidity risk. There is no guarantee the LRMP will be effective in its operations, and complying with Rule 22e-4, including bearing related costs, could impact a Fund’s performance and its ability to achieve its investment objective.
Lower Rated Securities. Value Line Capital Appreciation Fund and Value Line Core Bond Fund may invest up to 5% and 20%, respectively, of the total assets of the Fund in below investment grade, high-yield bonds also known as junk bonds. The total return and yield of these lower rated bonds can be expected to fluctuate more than the total return and yield of higher quality bonds. Junk bonds have certain speculative characteristics and involve greater investment risk, including the possibility of default or bankruptcy and a risk of loss of income and principal, than is the case with lower yielding, higher rated securities. Junk bonds are often thinly traded and can be more difficult to sell and value accurately than high quality bonds.
Overview of Derivatives. Derivatives are financial instruments which derive their value from an underlying asset, reference rate or index. Derivatives may be used by each Fund for hedging purposes, including protecting unrealized gains by hedging against possible adverse fluctuations in the securities markets or changes in interest rates that would otherwise reduce the market value of the Fund’s investment portfolio. Derivatives also may be used by the Fund for non-hedging (sometimes referred to as “speculative”) purposes, such as enhancing returns, efficiently investing excess cash or quickly gaining market exposure.
Because derivative positions are typically established with a small amount of cash relative to the total amount of investment exposure they generate, the magnitude of losses from derivatives is generally much greater than the amount originally invested by the Fund. The Fund will be required to “set aside” (often referred to as “segregate”) liquid assets, or engage in other measures approved by the SEC or its staff, to “cover” open positions with respect to certain kinds of derivatives. In the case of futures contracts that are not contractually required to cash settle, for example, the Fund must set aside liquid assets equal to such contracts’ full notional value while the positions are open. With respect to futures contracts that are contractually required to cash settle, however, the Fund is permitted to set aside liquid assets in an amount
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equal to the Fund’s daily marked-to-market net obligations (i.e., the Fund’s daily net liability) under the contracts, if any, rather than such contracts’ full notional value. By setting aside assets equal to only its net obligations under cash-settled futures contracts, the Fund may employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional value of such contracts. The Fund may be required to liquidate its derivative positions or other attractive investments at inopportune times to fulfill these segregation requirements.
Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as over-the counter (“OTC”) derivatives. Exchange-traded derivatives generally are guaranteed by the clearing agency that is the issuer or counterparty to such derivatives. This guarantee usually is supported by a daily variation margin system operated by the clearing agency in order to reduce overall credit risk. As a result, counterparty credit risk associated with derivatives purchased on an exchange is lower than derivatives purchased through privately negotiated transactions.
Derivatives contracts entered into by the Fund will be subject to special tax rules. These rules may accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of Fund securities, convert capital gain into ordinary income, and convert short-term capital losses into long-term capital losses. As a result, these rules could affect the amount, timing and character of Fund distributions. However, the Fund anticipates that these investment activities will not prevent the Fund from qualifying as a regulated investment company.
Regulation by the Commodity Futures Trading Commission (“CFTC”). The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) resulted in historic and comprehensive statutory reform of certain derivatives, including futures contracts, options on futures contracts, certain forward contracts and swap agreements (generally, “commodity interests”). Historically, advisers of registered investment companies trading commodity interests have been excluded from regulation as commodity pool operators pursuant to CFTC Regulation 4.5. Following enactment of the Dodd-Frank Act, the CFTC amended Regulation 4.5 to dramatically narrow this exclusion. Under the amended Regulation 4.5 exclusion, the Funds’ commodity interests — other than those used for bona fide hedging purposes (as defined by the CFTC) — must be limited such that the aggregate initial margin and premiums required to establish the positions do not exceed 5% of the Fund’s net asset value (after taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options are “in-the-money” at the time of purchase), or alternatively, the aggregate net notional value of the positions, determined at the time the most recent position was established, does not exceed 100% of the Fund’s net asset value (after taking into account unrealized profits and unrealized losses on any such positions). Further, to qualify for the exclusion in amended Regulation 4.5, the Fund must satisfy a marketing test, which requires, among other things, that the Fund not hold itself out as a vehicle for trading commodity interests. An exclusion under Rule 4.5 has been claimed with respect to each of these Funds.
Any trading of commodity interests by the Funds will comply with one of the two alternative limitations described above. Complying with the limitations may restrict the Fund’s ability to use derivatives as part of its investment strategies and may subject the Fund to additional costs, expenses and administrative burdens. The Funds could become subject to regulation as commodity pools in the future which would further increase such costs, expenses and administrative burdens.
Futures Contracts Generally. Each of the Fund’s may invest in the types of futures contracts indicated below. A futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of the underlying asset, reference rate or index at the close of the last trading day of the contract and the price at which the contract is entered into. The contractual obligation is satisfied by either a cash settlement or by entering into an
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opposite and offsetting transaction on the same exchange prior to the delivery date. Entering into a futures contract to deliver the asset, rate or index underlying the contract is referred to as entering into a short futures contract. Entering into a futures contract to take delivery of the asset, rate or index is referred to as entering into a long futures contract. An offsetting transaction for a short futures contract is effected by the Fund entering into a long futures contract for the same date, time and place. If the price of the short contract exceeds the price in the offsetting long, the Fund is immediately paid the difference and thus realizes a gain. If the price of the long transaction exceeds the short price, the Fund pays the difference and realizes a loss. Similarly, the closing out of a long futures contract is effected by the Fund entering into a short futures contract. If the offsetting short price exceeds the long price, the Fund realizes a gain, and if the offsetting short price is less than the long price, the Fund realizes a loss.
No consideration is paid or received by the Fund upon entering into a futures contract. Initially, the Fund will be required to deposit with the broker an amount of cash or cash equivalents equal to approximately 1% to 10% of the contract amount. This amount is subject to change by the board of trade on which the contract is traded and members of such board of trade may charge a higher amount. This amount is known as “initial margin” and is in the nature of a performance bond or good-faith deposit on the contract which is returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Subsequent payments, known as “variation margin,” to and from the broker will be made daily as the price of the security, rate or index underlying the futures contract fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as “marking-to-market.”
Successful use of futures contracts by the Fund is subject to the Adviser’s ability to predict correctly movements in the direction of the market or reference rate. If the Adviser’s judgment about the several factors influencing the direction of the market or rate is wrong, the Fund’s overall performance may be worse than if no such contracts had been entered into. For example, if the Fund has entered into a futures contract to hedge against the possibility of a decline in the market or interest rates that would adversely affect the Fund’s portfolio and stock prices or interest rates increase instead, the Fund will lose part or all of the benefit of the increased value of the portfolio position being hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. Such sales of securities may be, but will not necessarily be, at increased prices which reflect the rising market. The Fund may have to sell securities at a time when it may be disadvantageous to do so. When the Fund uses futures contracts for hedging purposes, their successful use also is dependent on adequate correlation between movements in the price of the futures contract and movements in the price of the portfolio positions, which are the subject of the hedge.
U.S. and Foreign Interest Rate Futures Contracts. Value Line Capital Appreciation Fund and Value Line Core Bond Fund may invest in derivatives linked to interest rates as incidental to the applicable Fund’s principal investment strategy. Value Line Capital Appreciation Fund and Value Line Core Bond Fund may also use derivatives as part of a non-principal investment strategy to the extent described in this SAI and consistent with the Fund’s investment objectives and policies.
Please see the Prospectus for disclosure regarding each Fund’s principal investment strategies, with respect to which investing in U.S. and foreign interest rate futures contracts is incidental (and not part of).
Each Fund invests in futures contracts that derive their value from 10-year government bonds issued by the U.S., the U.K., Japan, and Germany. Futures contracts on the 10-year U.S. Treasury bonds are listed for trading on a U.S. registered futures exchange and denominated in U.S. dollars. However, futures contracts on the 10-year government bonds issued by the U.K., Japan and Germany are listed on foreign
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boards of trade and denominated in the currency of the country issuing the bond. Accordingly, investments in these foreign interest rate futures contracts are subject to special risks in addition to the general risks of investing in derivatives and futures contracts. Futures which are listed on a foreign board of trade may not be entitled to the same regulatory protections as U.S. exchange-listed futures, and may be subject to higher transaction costs, reduced liquidity, delays in settlement, and different or greater counterparty risks. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. Also, foreign interest rate futures which are denominated in the currency of the country issuing the government bond are subject to foreign currency exchange risk. A change in the value of the foreign currency relative to the U.S. dollar will change the value of the futures contract to the Fund.
The Adviser does not intend to engage in foreign currency or other derivative transactions that seek to hedge the Fund’s exposure to foreign currencies. Accordingly, any gains accruing on the Fund’s investments in U.K., Japanese and German government bond futures may be reduced, and the Fund may experience losses, if the value of the U.S. dollar declines relative to the foreign currency in which the Fund must post margin and settle its obligation.
Also incidental to (and not part of) the applicable Fund’s principal investment strategies, the Fund may invest in futures contracts on other debt securities including U.S. Treasury bills, bonds and notes of different durations, as well as certificates of the Government National Mortgage Association, bank certificates of deposit and new types of such contracts that become available in the future. The Fund will only enter into these other financial futures contracts which are traded on a national futures exchange, principally the Chicago Board of Trade and the Chicago Mercantile Exchange.
Stock Index Futures Contracts and Options Thereon. Each of the Funds may trade in stock index futures contracts and in options on such contracts to realize profits and to hedge securities positions held by the Fund. Such contracts will be entered into on exchanges designated by the CFTC.
The Funds may enter into short futures contracts or long futures contracts. A stock index future obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the contract is entered into.
The Funds may also purchase put and call options on stock index futures contracts or write covered options on such contracts. A call option gives the purchaser the right to buy, and the writer the obligation to sell, while a put option gives the purchaser the right to sell and the writer the obligation to buy. Unlike a stock index futures contract, which requires the parties to buy and sell the stock index on a set date, an option on a stock index futures contract entitles its holder to decide on or before a future date whether to enter into such a futures contract. If the holder decides not to enter into the contract, the premium paid for the option is lost. Since the value of the option is fixed at the point of sale, the purchase of an option does not require daily payments of cash in the nature of “variation” or “maintenance” margin payments to reflect the change in the value of the underlying contract. The value of the option purchased by a Fund does change and is reflected in the net asset value of the Fund. The writer of an option, however, must make margin payments on the underlying futures contract. Exchanges provide trading mechanisms so that an option once purchased can later be sold and an option once written can later be liquidated by an offsetting purchase.
Use of options on stock index futures entails the risk that trading in the options may be interrupted if trading in certain securities included in the index is interrupted. The Funds will not purchase these options unless the Adviser is satisfied with the development, depth and liquidity of the market and the Adviser believes the options can be closed out.
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Covered Call Options. The Funds may write covered call options on stocks held in that Fund’s portfolio. The Funds may write covered call options to realize profits through the receipt of premiums and to hedge securities positions held by such Fund. When a Fund writes a covered call option, it gives the purchaser of the option the right to buy the underlying security at the price specified in the option (the “exercise price”) at any time during the option period. If the option expires unexercised, the Fund will realize income in the amount received for writing the option (the “premium”). If the option is exercised, a decision over which the Fund has no control, the Fund must sell the underlying security to the option holder at the exercise price. By writing a covered option, the Fund foregoes, in exchange for the premium less the commission (“net premium”), the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. Because the call option must be covered, the Fund also forgoes the opportunity to sell the underlying security during the option period.
The purchase of a call option has the effect of closing out a position when the purchased call option is for the same security at the same exercise price and expiration date as a call option which a Fund has written. Purchasing call options to close out call options written by a Fund may be done to avoid liquidating that Fund’s position upon exercise of the option by its purchaser or to extinguish the call option sold by the Fund so as to be free to sell the underlying security. In closing out a position, a Fund realizes a gain if the amount paid to purchase the call option is less than the net premium received for writing a similar option and a loss if the amount paid to purchase a call option is greater than the net premium received for writing a similar option. Generally, a Fund realizes a short-term capital loss if the amount paid to purchase the call option with respect to a stock is greater than the premium received for writing the option. If the underlying security has substantially risen in value, it may be difficult or expensive to purchase the call option for the closing transaction.
Repurchase Agreements. The Funds may invest temporary cash balances in money market funds and/or repurchase agreements to generate current income. A repurchase agreement involves a sale of securities to a Fund, with the concurrent agreement of the seller (a member bank of the Federal Reserve System or a securities dealer which the Adviser believes to be financially sound) to repurchase the securities at the same price plus an amount equal to an agreed-upon interest rate, within a specified time, usually less than one week, but, on occasion, at a later time. A Fund may permit the seller’s obligation to be novated to the Fixed Income Clearing Corporation (“FICC”) pursuant to an agreement between the Fund, FICC and the seller as a sponsoring member of FICC. A Fund will make payment for such securities only upon physical delivery or evidence of book-entry transfer to the account of the sponsoring member, the custodian or a bank acting as agent for the Fund. Repurchase agreements may also be viewed as loans made by a Fund which are collateralized by the securities subject to repurchase. The value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. In the event of a bankruptcy or other default of FICC or a seller of a repurchase agreement, to which a Fund is a party, the Fund could experience both delays in liquidating the underlying securities and losses, including: (a) a possible decline in the value of the underlying securities during the period while the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights. For more information regarding the risks associated with investing temporary cash balances in money market funds, please see “ETFs and Other Investment Companies” below.
Loans of Portfolio Securities. Each Fund may lend its portfolio securities to certain borrowers if, as a result thereof, the aggregate value of all securities loaned does not exceed 331∕3% of the total assets of the Fund (including the loan collateral), and each Fund may pay reasonable fees in connection with the loans. The loans will be made in conformity with the Fund’s policies and are collateralized by cash or liquid securities on a daily basis in an amount at least equal to 100% of the market value of the securities loaned
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and interest earned thereon. Each Fund retains the right to call the loaned securities upon notice and intends to call loaned voting securities in anticipation of any matter to be voted on by stockholders and deemed material by the Adviser acting in accordance with the Fund’s proxy voting policies. The Funds invest cash collateral in high quality, readily marketable short-term obligations and/or money market funds (to the extent consistent with each Fund’s investment restrictions). Each Fund bears the risk of any loss in connection with such investment of collateral. While securities lending involves risk of delays in recovery or even loss of rights in the collateral should the borrower fail financially, loans are made only to borrowers approved in accordance with a Fund’s securities lending guidelines.
ETFs and Other Investment Companies. The Funds may invest in exchange-traded funds (“ETFs”) to quickly gain exposure to a broad index of securities in lieu of investing directly in such securities. The Funds may also invest temporary cash balances and/or cash collateral received from securities lending arrangements in other investment companies to seek to generate income in excess of that available on other investments. When a Fund invests in another investment company, including an ETF, the Fund will indirectly bear its proportionate share of any fees and expenses payable directly by the investment company. These fees and expense are in addition to, and may be duplicative of, the Fund’s direct fees and expenses. The Fund has no control over the investment decisions made by other investment companies. If the investment company is buying (or selling) a security of the same issuer whose securities are being sold (or bought) by the Fund, the result of this would be an indirect expense to the Fund without accomplishing any investment purpose. ETFs are subject to additional risks such as the fact that their shares may trade at a market price above or below their net asset values or that an active market may not develop. With certain exceptions, the Investment Company Act of 1940 (the “1940 Act”) generally limits a fund’s ability to invest in other investment companies such that, following any purchase, the fund: (1) has invested no more than 5% of its total assets in any single investment company and no more than 10% of its total assets in investment companies overall, and (2) owns no more than 3% of the voting securities of any given investment company. These limitations do not apply to the Funds’ investments in money market funds, which are permitted to exceed 3%, 5% and 10% thresholds pursuant to SEC Rule 12d1-1 under the 1940 Act. A Fund may invest in ETFs in excess of the 3% limitation, provided that the Fund and the applicable ETF take appropriate steps to comply with the conditions of the ETF’s exemptive order granting such relief. The Fund may need to vote proxies relating to the ETF shares in accordance with instructions from the Fund’s shareholders or in the same proportion as the vote of all other owners of ETF shares.
Fundamental Policies.
The policies set forth below may not be changed with respect to a Fund without the affirmative vote of the majority of the outstanding voting securities of such Fund, which means the lesser of (1) the holders of more than 50% of the outstanding shares of capital stock of the Fund or (2) 67% of the shares present if more than 50% of the shares are present at a meeting in person or by proxy.
In addition to any fundamental policies set forth in the Prospectus, each Fund has the following fundamental policies:
Except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff, or other authority of competent jurisdiction, the Fund may not:
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Concentration.
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(1)
purchase the securities of any issuer if, as a result of such purchase, the Fund’s investments would be concentrated in any particular industry.
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Borrowing.
(2)
borrow money.
Senior Securities.
(3)
issue senior securities.
Lending.
(4)
make loans.
Real Estate & Commodities.
(5)
purchase or sell commodities or real estate.
Underwriting Securities.
(6)
underwrite the securities of other issuers.
Non-fundamental Policies.
The following policies are considered non-fundamental and can be changed by the Board of Directors without the approval of shareholders. Shareholders will be notified of any changes to their Fund’s non-fundamental policies.
(1)
Each Fund’s investment objective is non-fundamental. Value Line Mid Cap Focused Fund’s primary investment objective is long-term growth of capital. Value Line Capital Appreciation Fund’s investment objective is capital appreciation and income consistent with its asset allocation. Value Line Larger Companies Focused Fund’s sole investment objective is to realize capital growth. Value Line Select Growth Fund’s investment objective is long-term growth of capital. Value Line Core Bond Fund’s primary investment objective is to maximize current income and capital appreciation is a secondary investment objective.
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(2)
Value Line Select Growth Fund invests at least 80% of its net assets in a diversified portfolio of U.S. equity securities with favorable growth prospects.
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(3)
Value Line Mid Cap Focused Fund invests at least 80% of its assets in common stocks and other equity securities of mid-sized companies.
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(4)
Value Line Core Bond Fund invests at least 80% of its assets (including borrowings for investment purposes) in bonds and other debt instruments.
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Additional Information about the Funds’ Policies.
The information below is not part of any Fund’s fundamental or non-fundamental policies. This information is intended to provide a summary for each of the Fund’s fundamental policy of what is currently required or permitted by the 1940 Act, and the rules and regulations thereunder, or by the interpretive guidance thereof by the SEC or SEC staff. Where applicable, information is also provided regarding the Funds’ current intention with respect to certain investment practices permitted by the 1940 Act.
For purposes of fundamental policy (1), a Fund may not invest 25% or more of its total assets in the securities of issuers in a particular industry. This policy does not apply to investments in securities of other investment companies or securities of the U.S. government, its agencies or government sponsored enterprises or repurchase agreements with respect thereto.
For purposes of fundamental policy (2), a Fund may borrow money in amounts of up to 331∕3% of its total assets from banks for any purpose. Additionally, a Fund may borrow up to 5% of its total assets from banks or other lenders for temporary purposes (a loan is presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed).
For purposes of fundamental policy (3), a senior security does not include any promissory note or evidence of indebtedness if such loan is for temporary purposes only and in an amount not exceeding 5% of the value of the total assets of the Fund at the time the loan is made (a loan is presumed to be for
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temporary purposes if it is repaid within 60 days and is not extended or renewed). Further, to the extent a Fund covers its commitments under certain types of agreements and transactions — including reverse repurchase agreements, mortgage-dollar-roll transactions, sale-buybacks, when-issued, delayed-delivery, or forward commitment transactions, and other similar trading practices — by segregating or earmarking liquid assets equal in value to the amount of the Fund’s commitment, such agreement or transaction will not be considered a senior security by the Fund.
For purposes of fundamental policy (4), a Fund may not lend more than 331∕3% of its total assets, provided that this limitation shall not apply to the Fund’s purchase of debt obligations.
For purposes of fundamental policy (5), a Fund may invest in securities or other instruments backed by real estate or commodities or securities of issuers engaged in the real estate business, including real estate investment trusts, or issuers engaged in business related to commodities. Further, the Funds do not consider currency contracts or hybrid instruments to be commodities.
For purposes of fundamental policy (6), the policy will not apply to a Fund to the extent such Fund may be deemed an underwriter within the meaning of the Securities Act in connection with the purchase and sale of Fund portfolio securities in the ordinary course of pursuing its investment objectives and strategies.
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MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed by the Fund’s officers under the direction of its Board of Directors. The following table sets forth information on the Directors and officers of the Funds, each of which serves in that capacity for every Fund. Each Director serves as a director or trustee of each of the registered investment companies advised by the Adviser (the “Value Line Funds”). Each Director serves until his or her successor is elected and qualified.
Name, Address, and Age
​ ​
Position
​ ​
Length of
Time Served
​ ​
Principal Occupations
During the Past 5 Years
​ ​
Number of
Portfolios in
Fund Complex
Overseen by
Director
​ ​
Other
Directorships Held
by Director During
the Past 5 Years
​
Interested Director* ​ ​ ​ ​ ​ ​
Mitchell E. Appel
Age: 51 		​ ​ Director ​ ​
Since 2010
​ ​
President of each of the Value Line Funds; Trustee, CEO and Treasurer of the Adviser; President and Chief Financial Officer of the Distributor.
​ ​
7
​ ​
Forethought Variable Insurance Trust
​
Non-Interested Directors
​ ​ ​ ​ ​ ​
Joyce E. Heinzerling
Age: 66 		​ ​ Director ​ ​
Since 2008
​ ​
Retired. Managing Member, Meridian Fund Advisers LLC (consultants) until 2020.
​ ​
7
​ ​
KOP Therapeutics Corp. (biotechnology)
​
James E. Hillman
Age: 65 		​ ​ Director
(Chair of the Board of the Value Line Funds since 2016) 		​ ​
Since 2015
​ ​
Chief Financial Officer, Notre Dame School of Manhattan since 2011; Director and Principal Financial Officer, Merrill Lynch Global Wealth Management, 2006 – 2011.
​ ​
7
​ ​
Miller/Howard High Income Equity Fund
​
Paul Craig Roberts
Age: 83 		​ ​ Director ​ ​
Since 1983
​ ​
Chairman, Institute for Political Economy.
​ ​
7
​ ​ None ​
Nancy-Beth Sheerr
Age: 73 		​ ​ Director ​ ​
Since 1996
​ ​
Independent Trustee and Managing Member, NBS Consulting LLC since 2014; Senior Financial Adviser, Veritable, L.P. (investment advisor) until 2013.
​ ​
7
​ ​ None ​
Officers ​ ​ ​ ​ ​ ​
Mitchell E. Appel
Age:51 		​ ​ President ​ ​
Since 2008
​ ​
President of each of the Value Line Funds; Trustee, CEO and Treasurer of the Adviser; President and Chief Financial Officer of the Distributor.
​ ​ ​
Christopher W. Roleke
Age: 50 		​ ​ Treasurer and Chief Financial Officer ​ ​
Since 2020
​ ​
Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) of each of the Value Line Funds since 2020; Managing Director and Fund Principal Financial Officer, Foreside Management Services, LLC, since 2011.
​ ​ ​
Michael J. Wagner
Age: 71 		​ ​ Chief Compliance Officer ​ ​
Since 2009
​ ​
Chief Compliance Officer of each of the Value Line Funds since 2009; President of Northern Lights Compliance Services, LLC 2006 – 2019.
​ ​ ​
Emily D. Washington
Age: 43 		​ ​ Vice President and Secretary ​ ​
Since 2008
​ ​
Vice President of each of the Value Line Funds since 2020 and Secretary since 2010; Treasurer and Chief Financial Officer of each of the Value Line Funds, 2008 – 2020.
​ ​ ​
Robert Scagnelli
Age: 61 		​ ​
Vice President
​ ​
Since 2020
​ ​
Vice President of each of the Value Line Funds since 2020; Vice President of the Distributor and the Adviser since 2011.
​ ​ ​
​
*
Mr. Appel is an “interested person” as defined in the 1940 Act by virtue of his position with EULAV Securities LLC (the “Distributor”) and the Adviser.
​
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The address for each of the above is 7 Times Square, Suite 1606, New York, NY 10036-6524.
Committees. The non-interested Directors of each Fund serve as members of the Audit Committee of the Board of Directors. The principal function of the Audit Committee consists of overseeing the accounting and financial reporting policies of the Fund and meeting with the Fund’s independent registered public accounting firm to review the range of their activities and to discuss the Fund’s system of internal accounting controls. The Audit Committee also meets with the Fund’s independent registered public accounting firm in executive session at most meetings of the Audit Committee. There were four meetings of each Fund’s Audit Committee during the last calendar year. Each Fund has a Valuation Committee consisting of Mitchell E. Appel and Joyce E. Heinzerling (or one other non-interested Director if she is not available). There were no meetings of the Valuation Committees during the last calendar year. The Valuation Committee reviews any actions taken by the Pricing Committee of each Fund which consists of certain officers and employees of the respective Fund and the Adviser, in accordance with the valuation procedures adopted by each Fund’s Board of Directors. Each Fund also has a combined Nominating/Governance Committee consisting of the non-interested Directors the purpose of which is to review and nominate candidates to serve as non-interested directors and supervise Fund governance matters. The Nominating/Governance Committee generally will not consider nominees recommended by shareholders. The Nominating/Governance Committee met one time during the last calendar year.
Board Structure. The Board is comprised of five Directors, four of whom (80%) are not “interested persons” ​(as that term is defined in the 1940 Act) of the Fund (the “Independent Directors”). The Board has appointed Mr. Hillman (an Independent Director) as its Chair and Mr. Appel (the CEO of the Adviser) as its Chief Executive Officer. The Board has established three standing committees: the Audit Committee, the Nominating/Governance Committee and the Valuation Committee. The Audit Committee and the Nominating/Governance Committee are chaired by, and composed entirely of, Independent Directors. The Valuation Committee is composed of an Independent Director and an interested Director. See “Committees” above for a further description of the composition, duties and responsibilities of these committees.
The Directors and the members of the Board’s committees annually evaluate the performance of the Board and the committees, which evaluation includes considering the effectiveness of the Board’s committee structure. The Board believes that their leadership structure, including an Independent Director as the Chair, is appropriate in light of the asset size of the respective Funds and the other Value Line Funds, the number of Value Line Funds, and the nature of the Funds’ business, and is consistent with industry best practices. In particular, the Board believes that having a supermajority of Independent Directors is appropriate and in the best interests of each Fund’s shareholders.
Risk Oversight. As part of their responsibilities for oversight of the Funds, the Board oversees risk management of each Fund’s investment program and business affairs. The Board performs its oversight responsibilities as part of its Board and Committee activities. The Independent Directors also regularly meet outside the presence of management and have engaged independent legal counsel to assist them in performing their oversight responsibilities. The Board has delegated to the Audit Committee oversight responsibility of the integrity of the Funds’ financial statements, the Funds’ compliance with legal and regulatory requirements as they relate to the financial statements, the independent auditor’s qualifications and independence, the Funds’ internal controls over financial reporting, the Funds’ disclosure controls and procedures and the Funds’ code of business conduct and ethics pursuant to the Sarbanes-Oxley Act of 2002. The Audit Committee reports areas of concern, if any, to the Fund’s Board for discussion and action.
The Board, including the Independent Directors, has approved the Funds’ compliance program and appointed the Funds’ Chief Compliance Officer, who is responsible for testing the compliance procedures of the Funds and certain of its service providers. Senior management and the Chief Compliance Officer
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report at least quarterly to the Board regarding compliance matters relating to the Funds, and the Chief Compliance Officer annually assesses (and reports to the Board regarding) the operation of the Funds’ compliance program. The Independent Directors generally meet at least quarterly with the Chief Compliance Officer outside the presence of management.
Qualifications and Experience of Directors. The Board believes that each Director’s experience, qualifications, attributes or skills on an individual basis and in combination with those of the other Directors lead to the conclusion that each Director should serve in such capacity. Among other attributes common to all Directors are their ability to review critically, evaluate, question and discuss information provided to them, to interact effectively with the Adviser, other service providers, counsel and the independent registered public accounting firm, to exercise effective business judgment in the performance of their duties, and to represent the interests of all the shareholders. A Director’s ability to perform his duties effectively may have been attained through his educational background or professional training; business, consulting or academic leadership positions; experience from service as a Director of a Fund, or in various roles at public companies, private entities or other organizations; and/or other life experiences. In addition to these shared characteristics, set forth below is a brief discussion of the specific qualifications, attributes or skills of each Director that support the conclusion that each person is qualified to serve as a Director.
Mr. Appel has served as an interested Director on the Board since 2010. His relevant experience includes serving as President of each Value Line Fund since 2008 and CEO of the Adviser since 2009.
Ms. Heinzerling has served as an Independent Director on the Board since 2008. Her relevant experience includes being the president of a regulatory consulting company, former general counsel to an investment adviser and a former director of an unaffiliated mutual fund family.
Mr. Hillman has served as an Independent Director on the Board since 2015 and Chairman of the Board since 2016. His relevant experience includes being a Certified Public Accountant, serving as an independent director to closed-end mutual funds and authoring the book Regulated Investment Companies, as well as having been a Principal Financial Officer of registered investment advisors and a tax partner of two public accounting firms.
Dr. Roberts has served as an Independent Director on the Board since 1983. His relevant experience includes being an economist and a former Assistant Secretary of the U.S. Treasury and a nationally syndicated columnist.
Ms. Sheerr has served as an Independent Director on the Board since 1996. Her relevant experience includes having been a senior financial adviser of an investment adviser and serving on other boards, including as chair, with endowment fund oversight responsibility.
The following table sets forth information regarding compensation of Directors by the Funds and the other Value Line Funds of which each of the Directors was a director or trustee for the fiscal year ended December 31, 2021. Directors who are officers or employees of the Adviser do not receive any
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compensation from the Funds or any of the Value Line Funds. The Funds have no retirement or pension plan for its Directors.
Name of Person
​ ​
Aggregate
Compensation
From Value
Line Mid Cap
Focused Fund
​ ​
Aggregate
Compensation
From Value
Line Capital
Appreciation Fund
​ ​
Aggregate
Compensation
From Value
Line Larger
Companies
Focused Fund
​ ​
Aggregate
Compensation
From Value
Line Select
Growth Fund
​ ​
Aggregate
Compensation
From Value
Line Core
Bond Fund
​ ​
Total
Compensation
From Value
Line Funds
​
Interested Director ​ ​ ​ ​ ​ ​ ​
Mitchell E. Appel ​ ​ ​ $ -0- ​ ​ ​ ​ $ -0- ​ ​ ​ ​ $ -0- ​ ​ ​ ​ $ -0- ​ ​ ​ ​ $ -0- ​ ​ ​ ​ $ -0- ​ ​
Non-Interested Directors
​ ​ ​ ​ ​ ​ ​
Joyce E. Heinzerling
​ ​ ​ $ 10,257 ​ ​ ​ ​ $ 16,110 ​ ​ ​ ​ $ 8,870 ​ ​ ​ ​ $ 10,334 ​ ​ ​ ​ $ 1,118 ​ ​ ​ ​ $ 108,000 ​ ​
James E. Hillman ​ ​ ​ $ 12,916 ​ ​ ​ ​ $ 20,287 ​ ​ ​ ​ $ 11,169 ​ ​ ​ ​ $ 13,013 ​ ​ ​ ​ $ 1,408 ​ ​ ​ ​ $ 136,000 ​ ​
Paul Craig Roberts ​ ​ ​ $ 10,257 ​ ​ ​ ​ $ 16,110 ​ ​ ​ ​ $ 8,870 ​ ​ ​ ​ $ 10,334 ​ ​ ​ ​ $ 1,118 ​ ​ ​ ​ $ 108,000 ​ ​
Nancy-Beth Sheerr ​ ​ ​ $ 10,637 ​ ​ ​ ​ $ 16,707 ​ ​ ​ ​ $ 9,198 ​ ​ ​ ​ $ 10,717 ​ ​ ​ ​ $ 1,159 ​ ​ ​ ​ $ 112,000 ​ ​
The following table illustrates the dollar range of any equity securities beneficially owned by each Director in the Funds and in all of the Value Line Funds as of December 31, 2021:
Name of Director
​ ​
Dollar Range of
Equity Securities
in Value Line
Mid Cap
Focused Fund
​ ​
Dollar Range of
Equity Securities
in Value Line
Capital
Appreciation Fund
​ ​
Dollar Range of
Equity Securities
in Value Line
Larger Companies
Focused Fund
​ ​
Dollar Range of
Equity Securities
in Value Line
Select
Growth Fund
​ ​
Dollar Range of
Equity Securities
in Value Line
Core
Bond Fund
​ ​
Aggregate Dollar
Range of Equity
Securities in
All of the
Value Line Funds
​
Interested Director ​ ​ ​ ​ ​ ​ ​
Mitchell E. Appel ​ ​
$50,001 – $100,000
​ ​
$10,001 – $50,000
​ ​
$10,001 – $50,000
​ ​
$10,001 – $50,000
​ ​
$10,001 – $50,000
​ ​
Over $100,000
​
Non-Interested Directors
​ ​ ​ ​ ​ ​ ​
Joyce E. Heinzerling ​ ​
$1 – $10,000
​ ​
$1 – $10,000
​ ​
$1 – $10,000
​ ​
$-0-
​ ​
$-0-
​ ​
$50,001 – $100,000
​
James E. Hillman ​ ​
$50,001 – $100,000
​ ​
Over $100,000
​ ​
$50,001 – $100,000
​ ​
$10,001 – $50,000
​ ​
$10,001 – $50,000
​ ​
Over $100,000
​
Paul Craig Roberts ​ ​
$-0-
​ ​
$-0-
​ ​
$-0-
​ ​
$-0-
​ ​
$-0-
​ ​
Over $100,000
​
Nancy-Beth Sheerr ​ ​
$1 – $10,000
​ ​
$10,001 – $50,000
​ ​
$1 – $10,000
​ ​
$10,001 – $50,000
​ ​
$1 – $10,000
​ ​
$50,001 – $100,000
​
As of March 31, 2022, with respect to each Fund, no person owned of record or, to the knowledge of the Fund, owned beneficially, 5% or more of the outstanding shares of any class of a Fund, other than:
​
Value Line Mid Cap Focused Fund
​
​ Charles Schwab & Co., Inc., 211 Main Street,
San Francisco, CA 94105 		​ ​ 1,401,590 Investor Class shares (approximately 14.1% of the shares outstanding) ​
​ ​ ​ ​ 527,840 Institutional Class shares (approximately 9.6% of the shares outstanding) ​
​ National Financial Services Corp. 499 Washington Blvd. Jersey City, NJ 07310 ​ ​ 2,031,729 Investor Class shares (approximately 20.4% of the shares outstanding) ​
​ ​ ​ ​ 1,316,073 Institutional Class shares (approximately 9.0% of the shares outstanding) ​
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​ TD Ameritrade Inc.
FBO Our Customers
P.O. Box 2226
Omaha, NE 68103 		​ ​
768,920 Investor Class shares (approximately 7.7% of the shares outstanding)
358,974 Institutional Class shares (approximately 6.5% of the shares outstanding)
​
​ American Enterprise
Investment Services
707 2nd Ave S.
Minneapolis, MN 55402 		​ ​ 1,430,665 Institutional Class shares (approximately 26.1% of the shares outstanding) ​
​ LPL Financial Corp.
4707 Executive Dr.
San Diego, CA 92121 		​ ​ 799,440 Institutional Class shares (approximately 14.6% of the shares outstanding) ​
​ Reliance Trust Co
FBO Seaside Natl Bank
P.O. Box 78446
Atlanta, GA 30357 		​ ​ 610,295 Institutional Class shares (approximately 11.1% of the shares outstanding) ​
​
Value Line Capital Appreciation Fund
​
​ Charles Schwab & Co., Inc., 211 Main Street,
San Francisco, CA 94105 		​ ​
6,517,251 Investor Class shares (approximately 17.2% of the shares outstanding)
1,712,182 Institutional Class shares (approximately 7.6% of the shares outstanding)
​
​ National Financial Services Co.,
499 Washington Blvd
Jersey City, NJ 07310 		​ ​
9,180,114 Investor Class shares (approximately 24.3% of the shares outstanding)
1,316,073 Institutional Class shares (approximately 9.0% of the shares outstanding)
​
​ American Enterprise
Investment Services
707 2nd Ave S.
Minneapolis, MN 55402 		​ ​ 5,395,522 Institutional Class shares (approximately 37.0% of the shares outstanding) ​
​ Wells Fargo Clearing Services
2801 Market Street
St. Louis, MO 63103 		​ ​ 1,027,171 Institutional Class shares (approximately 7.1% of the shares outstanding) ​
​ LPL Financial Corp.
4707 Executive Dr.
San Diego, CA 92121 		​ ​ 2,044,938 Institutional Class shares (approximately 14.0% of the shares outstanding) ​
​ Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303 		​ ​ 928,410 Institutional Class shares (approximately 6.4% of the shares outstanding) ​
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​
Value Line Larger Companies Focused Fund
​
​ Charles Schwab & Co., Inc., 211 Main Street,
San Francisco, CA 94105 		​ ​ 731,758 Investor Class shares (approximately 7.0% of the shares outstanding) ​
​ ​ ​ ​ 12,634 Institutional Class shares (approximately 5.5% of the shares outstanding) ​
​ National Financial Services Co.,
499 Washington Blvd.
Jersey City, NJ 07310 		​ ​
720,629 Investor Class shares (approximately 6.9% of the shares outstanding)
29,445 Institutional Class shares (approximately 12.8% of the shares outstanding)
​
​ American Enterprise
Investment Services
707 2nd Ave S
Minneapolis, MN 55402 		​ ​ 104,802 Institutional Class shares (approximately 45.5% of the shares outstanding) ​
​ LPL Financial Corp.
4707 Executive Dr.
San Diego, CA 92121 		​ ​ 25,423 Institutional Class shares (approximately 11.1% of the shares outstanding) ​
​ CAO VAN Pham Inc.
Money Purchase Pension Plan
18356 Santa Joanana
Fountain Valley, CA 92708 		​ ​ 20,083 Institutional Class shares (approximately 8.7% of the shares outstanding) ​
​
Value Line Select Growth Fund
​
​ Charles Schwab & Co. Inc., 211 Main Street,
San Francisco, CA 94105 		​ ​
2,227,732 Investor Class shares (approximately 19.4% of the shares outstanding)
31,062 Institutional Class shares (approximately 8.1% of the shares outstanding)
​
​ National Financial Services Co., 499 Washington Blvd. Jersey City, NJ 07310 ​ ​ 1,795,917 Investor Class shares (approximately 15.6% of the shares outstanding) ​
​ American Enterprise Investment Services
707 2nd Ave S. Minneapolis, MN 55402 		​ ​ 300,999 Institutional Class shares (approximately 78.1% of the shares outstanding) ​
​ Sam Rae
40 Michelle Way
Pine Brook, NJ 07058 		​ ​ 19,558 Institutional Class shares (approximately 5.1% of the shares outstanding) ​
​ Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303 		​ ​ 21,410 Institutional Class shares (approximately 5.6% of the shares outstanding) ​
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​
Value Line Core Bond Fund
​
​ Charles Schwab & Co. Inc., 211 Main Street,
San Francisco, CA 94105 		​ ​ 257,153 Investor Class shares
(approximately 7.8% of the shares outstanding) 		​
Officers and Directors of each Fund owned less than 1% of the outstanding shares of each Fund. None of the non-interested Directors, nor his or her immediate family members, own any shares in the Adviser or a subsidiary of the Adviser or a person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with the Adviser or the Distributor.
Proxy Voting Policies
As a shareholder of the companies in which it invests, each Fund receives proxies to vote at those companies’ annual or special meetings. Each Fund’s Board of Directors has adopted Proxy Voting Policies and Procedures (“Proxy Voting Policies”) pursuant to which the Adviser votes shares owned by a Fund. As described in the “ETFs and Other Investment Companies” risk above, the Adviser may be required to vote proxies relating to shares of certain ETFs in accordance with instructions from the Fund’s shareholders or in the same proportion as the vote of all other owners of the ETFs. The Adviser endeavors to vote proxies relating to portfolio securities (other than shares of certain ETFs and other investment companies) in accordance with its best judgment as to the advancement of the Fund’s investment objective. The general principles of the Proxy Voting Policies reflect the Adviser’s basic investment criterion that good company management is shareholder focused and should generally be supported. The Funds generally support management on routine matters and support management proposals that are in the interests of shareholders. The Board of each Fund reviews the Proxy Voting Policies periodically.
Subject to each Board’s oversight, the Adviser has final authority and fiduciary responsibility for voting proxies received by a Fund; however, the Adviser has delegated the implementation of each Fund’s Proxy Voting Policies to Broadridge Investor Communications Solutions, Inc. (“Broadridge”), a proxy voting service that is not affiliated with the Adviser or the Funds. Broadridge provides vote execution, reporting and record keeping services and votes proxies as directed by the Adviser in accordance with the Proxy Voting Policies. In addition, the Adviser employs an independent proxy advisory firm, Glass, Lewis & Co., LLC to provide voting research and recommendations. The Adviser generally anticipates that it will follow those recommendations.
The following is a summary of the manner in which the Adviser would normally expect to vote on certain matters that typically are included in the proxies that the Funds receive each year; however, each proxy needs to be considered separately and a Fund’s vote may vary depending upon the actual circumstances presented. Proxies for extraordinary matters, such as mergers, reorganizations and other corporate transactions, may be considered on a case-by-case basis in light of the merits of the individual transactions.
Election of Directors, Corporate Governance and Routine Matters    
The Funds generally support management on routine corporate matters and matters relating to corporate governance such as:
•
Increases in the number of authorized shares of or issuances of common stock or other equity securities pursuant to an appropriate detailed plan;
​
•
Shareholder rights and recapitalization measures; and
​
•
The selection of independent accountants.
​
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The types of matters of corporate governance that the Adviser would expect to vote against include:
•
The adoption of a classified board;
​
•
The adoption of proposals that tend to limit or reduce the market value of the company’s securities; and
​
•
The adoption of poison pill plans or similar anti-takeover measures.
​
Compensation Arrangements and Stock Option Plans    
The Adviser believes, if its view of management is favorable enough that a Fund has invested in the company, that arrangements that align the interests of management and shareholders are beneficial to long-term performance. However, some arrangements or plans have features that a Fund would oppose. For example, the Funds would normally vote against a “say-on-pay” proposal if deficiencies are identified in the design of the company’s compensation program.
Social Policy Based Proposals    
Generally, the Adviser will vote against proposals that address social or political issues but will consider supporting such proposals when they seek to protect shareholder rights or minimize risks to shareholder value.
If the Adviser believes that a conflict of interest exists with respect to its exercise of any proxy received by a Fund, the Adviser will report the potential conflict to a Proxy Voting Committee consisting of members of the Adviser’s staff. A conflict of interest may arise, for example, if the company to which the proxy relates is a client of the Adviser or one of its affiliates or if the Adviser or one of its affiliates has a material business relationship with that company. The Adviser’s Proxy Voting Committee is responsible for ensuring that the Adviser complies with its fiduciary obligations in voting proxies. If a proxy is referred to the Proxy Voting Committee, the Proxy Voting Committee evaluates whether a potential conflict exists and, if there is such a conflict, determines how the proxy should be voted in accordance with the best interests of the Fund and its shareholders.
Every August, each Fund will file with the SEC information regarding the voting of proxies by the Fund for the 12-month period ending the preceding June 30th. Shareholders will be able to view such filings without charge on the SEC’s website at http://www.sec.gov or at the Funds’ website at http://www.vlfunds.com.
Shareholders may also obtain a copy without charge of the Proxy Voting Policies by contacting the Funds at the address or phone number on the cover page of this SAI.
Disclosure of Portfolio Holdings
Each Fund’s policy is to provide portfolio holdings information to all investors on an equal basis and in a manner that is not expected to interfere with the Fund’s investment strategies. To that end, each Fund provides general portfolio holdings information to shareholders in their annual and semi-annual reports, which reports are also filed with the SEC. In addition, with respect to fiscal quarter ends for which there is no shareholder report, each Fund files with the SEC a Form N-Q. Each of these shareholder reports or filings provides full period end portfolio holdings and are filed or mailed to shareholders within 60 days of the period end.
In addition, the Funds’ Distributor may produce for marketing purposes Fund fact sheets, which would include each Fund’s top ten holdings and other information regarding a Fund’s portfolio. These fact sheets would be prepared as soon as possible after the end of each month and available at www.vlfunds.com.
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Ongoing Relationships. Officers of the Funds who are also officers of the Adviser currently authorize the distribution of portfolio holdings information other than that stated above to (i) each Fund’s service providers and (ii) investment company rating agencies which are Morningstar, S&P, Lipper, Thomson Financial, Value Line Publishing and Bloomberg pursuant to policies and procedures adopted by each Fund’s Board of Directors. The Funds’ service providers are their accountants, administrator, custodian, counsel, pricing services and proxy voting service, who may need to know a Fund’s portfolio holdings in order to provide their services to the Fund. Information is provided to such firms without a time lag. Investment company rating agencies require the portfolio holdings information more frequently than the Funds otherwise disclose portfolio holdings in order to obtain their ratings. This information is normally provided as soon as possible after the period end, which may be month end or quarter end. The Adviser believes that obtaining a rating from such rating agencies, and providing the portfolio holdings information to them, is in the best interest of shareholders. While the Funds do not have written confidentiality agreements from any rating agency or service provider and may be subject to potential risks, the information is provided with the understanding, based on duties of confidentiality arising under law or contract, that it only may be used for the purpose provided and should not be used to trade on such information or communicated to others.
Non-Ongoing Relationships. Except for rating agencies and service providers, non-public portfolio holdings disclosure may only be made if a Fund’s Chief Compliance Officer determines that there are legitimate business purposes for the Fund in making the selective disclosure and adequate safeguards to protect the interest of the Fund and its shareholders have been implemented. These safeguards may include requiring written undertakings regarding confidentiality, use of the information for specific purposes and prohibition against trading on that information. To the extent that an officer of a Fund determines that there is a potential conflict of interest with respect to the disclosure of information that is not publicly available between the interests of Fund shareholders, on the one hand, and those of the Adviser, the Distributor or any affiliated person of the Fund, the Adviser or the Distributor on the other, the officer must inform the Fund’s Chief Compliance Officer of such potential conflict who shall determine whether disclosure is reasonable under the circumstances and shall report such potential conflict of interest to the Fund’s Board of Directors. The Chief Compliance Officer will also report to the Board of Directors regarding any disclosure (other than to rating agencies and service providers) at the Board meeting next following the selective disclosure. The Funds do not release portfolio holdings information to any person for compensation.
Each Fund’s Board of Directors has approved its portfolio holdings disclosure policy and may require the Adviser to provide reports on its implementation from time to time including a review of any potential conflicts of interest in the disclosure made by the Adviser in accordance with the policy or the exceptions permitted under the policy. It may also require that each Fund’s Chief Compliance Officer monitor compliance with this policy.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser. For providing advisory services and managing a Fund’s investments during the year ended December 31, 2021, the Adviser was paid by each Fund a fee at the annual rate indicated in the following table. The table also sets forth the dollar amount of advisory fees accrued by each Fund during the fiscal years ended December 31, 2019, 2020 and 2021. As described in the subsection “Expense
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Limitation Agreements” below, the Adviser is a party to a contractual expense limitation agreement with Value Line Larger Companies Focused Fund and Value Line Core Bond Fund that may result in that Fund paying advisory fees at a lower rate than the accrued amount.
Fund
​ ​
Advisory Fee Rate as a % of
Average Daily Net Assets
​ ​
Advisory Fees Paid and/or
Accrued to the Adviser for the
fiscal years ended December 31:
​
​
2019
​ ​
2020
​ ​
2021
​
Value Line Mid Cap Focused Fund ​ ​ 0.68% in the first $100 million of the Fund’s
average daily net assets and 0.63% on any
additional assets. 		​ ​ ​ $ 2,115,261 ​ ​ ​ ​ $ 2,715,793 ​ ​ ​ ​ $ 3,049,831 ​ ​
Value Line Capital Appreciation Fund ​ ​ 0.68% in the first $100 million of the Fund’s
average daily net assets and 0.63% on any
additional assets. 		​ ​ ​ $ 3,034,962 ​ ​ ​ ​ $ 3,278,741 ​ ​ ​ ​ $ 4,745,560 ​ ​
Value Line Larger Companies Focused Fund ​ ​ 0.73% ​ ​ ​ $ 2,127,293 ​ ​ ​ ​ $ 2,396,341 ​ ​ ​ ​ $ 2,963,591 ​ ​
Value Line Select Growth Fund ​ ​ 0.73% ​ ​ ​ $ 3,187,790 ​ ​ ​ ​ $ 3,252,197 ​ ​ ​ ​ $ 3,487,387 ​ ​
Value Line Core Bond Fund ​ ​ 0.35% ​ ​ ​ $ 206,322 ​ ​ ​ ​ $ 200,398 ​ ​ ​ ​ $ 180,148 ​ ​
The investment advisory agreement between each Fund and the Adviser provides for a combined fee for both advisory services and Administrative Services (as defined in the investment advisory agreement) at a specified annual rate. For each of Value Line Mid Cap Focused Fund and Value Line Capital Appreciation Fund, the investment advisory agreement provides for a combined fee equal to 0.70% of the first $100 million of the Fund’s average daily net assets and 0.65% on any additional assets. For each of Value Line Larger Companies Focused Fund and Value Line Select Growth Fund, the investment advisory agreement provides for a combined fee equal to 0.75% of the Fund’s average daily net assets. For Value Line Core Bond Fund, the investment advisory agreement provides for a combined fee equal to 0.50% of the Fund’s average daily net assets. The advisory fee component paid by the Fund to the Adviser for each period is calculated by subtracting the amount paid by the Fund for Administrative Services from the applicable combined fee with respect to the same period. The Adviser provides (or arranges for the provision of) such Administrative Services pursuant to a separate administration agreement with the Fund.
Each Fund’s investment advisory agreement provides that the Adviser shall render investment advisory and other services to the Fund and is responsible for furnishing, at its expense, all necessary facilities, equipment and personnel for performing the Adviser’s services under the investment advisory agreement. The Adviser is not required to pay any expenses other than those expressly assumed by the Adviser in the investment advisory agreement or administration agreement between the Adviser and the Fund. In particular, and without limiting the generality of the foregoing, the Adviser is not required to pay a Fund’s taxes, interest, brokerage commissions, insurance premiums, fees and expenses of the custodian and shareholder servicing agents, legal, audit and fund accounting expenses and fees, fees and expenses in connection with qualification under federal and state securities laws and costs of shareholder reports and proxy materials. Each Fund has agreed that it will use the words “Value Line” in its name only so long as the Adviser serves as investment adviser to the Fund and the Fund does not alter its investment objectives or fundamental policies to use leverage for investment purposes or other strategies similar to that of hedge funds. The agreement will terminate upon its “assignment,” as such term is defined in the 1940 Act. As described below, the Adviser is a party to an Expense Limitation Agreement for the benefit of the Institutional Class shares of each Fund. See “Expense Limitation Agreement” below.
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The Adviser currently acts as investment adviser or manager to 2 other investment companies which, together with the Funds, constitute the Value Line Funds with combined assets under management of approximately $4.2 billion as of March 31, 2022. Certain of the Adviser’s clients may have investment objectives similar to a Fund and certain investments may be appropriate for a Fund and for other clients advised by the Adviser. From time to time, a particular security may be bought or sold for only one client or in different amounts and at different times for more than one but less than all such clients. In addition, a particular security may be bought for one or more clients when one or more other clients are selling such security, or purchases or sales of the same security may be made for two or more clients at the same time. In such event, such transactions, to the extent practicable, will be averaged as to price and allocated as to amount in proportion to the amount of each order. In some cases, this procedure could have a detrimental effect on the price or amount of the securities purchased or sold by a Fund. In other cases, however, it is believed that the ability of a Fund to participate, to the extent permitted by law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may from time to time own securities which are also held in the portfolio of a Fund. The Funds, the Adviser and the Distributor have adopted a Code of Ethics under Rule 17j-1 of the 1940 Act which permits personnel subject to the Code of Ethics to invest in securities, including securities that may be purchased or held by a Fund. The Code of Ethics requires that such personnel submit reports of security transactions for their respective accounts and restricts trading in various situations in order to avoid possible conflicts of interest.
Principal Underwriter. Each Fund has entered into a distribution agreement with the Distributor, a wholly-owned subsidiary of the Adviser, whose address is 7 Times Square, Suite 1606, New York, NY 10036-6524, pursuant to which the Distributor acts as principal underwriter and distributor of the Fund for the sale and distribution of its shares. For its services under the agreement, the Distributor is not entitled to receive any compensation, although it is entitled to receive fees under each Fund’s Service and Distribution Plan (12b-1 Plan) (each a “Plan” and together the “Plans”). The Distributor also serves as distributor to the other Value Line Funds.
Expense Limitation Agreements. Value Line Larger Companies Focused Fund has entered into a contractual expense limitation agreement with the Adviser pursuant to which the Adviser has agreed to waive up to the whole amount of its management fee, and further reimburse or pay certain Fund-wide expenses, to the extent necessary to limit the total annual operating expenses attributable to such Fund-wide fees and expenses (other than acquired fund fees and expenses, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) to 0.90% of the average daily net assets of each class through June 30, 2023 (the “Larger Companies Expense Limitation”). The Adviser and the Distributor are parties with Value Line Core Bond Fund to an Expense Limitation Agreement pursuant to which the Adviser and the Distributor have agreed to waive a proportionate amount of their advisory fees and Rule 12b-1 fees, respectively, and the Adviser has further agreed to reimburse certain expenses of Value Line Core Bond Fund, to the extent necessary to limit Value Line Core Bond Fund’s total annual operating expenses (other than those attributable to interest, taxes, brokerage and futures commissions, and extraordinary expenses not incurred in the ordinary course of the Fund’s business) to 0.90% of the Fund’s average daily net assets (the “Core Bond Expense Limitation”) and together with the Larger Companies Expense Limitation, the “Fund-level Expense Limitations” through June 30, 2023. The Adviser and the Distributor, as applicable, may subsequently recover from the assets of the Value Line Larger Companies Focused Fund or the Value Line Core Bond Fund, as applicable, reimbursed expenses and/or waived fees (within three years from the month in which the waiver/reimbursement occurred) to the extent that the expense ratio of the applicable Fund is less than its Fund-level Expense
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Limitation or, if lower, the expense limitation in effect when the waiver/reimbursement occurred. Each Fund-level Expense Limitation can be terminated before June 30, 2023 only with the agreement of the applicable Fund’s Board.
In addition, each of the Funds (other than Value Line Core Bond Fund) has entered into a contractual expense limitation agreement pursuant to which the Distributor will permanently waive Institutional Class-specific fees payable under the Fund’s Sub-Transfer Agency and Servicing Plan, and the Adviser will pay or reimburse other Institutional Class-specific expenses, to the extent necessary so that the Fund’s total annual operating expenses (other than extraordinary expenses incurred in different amounts by the share classes outside of the ordinary course of business) which are allocated to its Institutional Class shares is less than that allocated to its Investor Class shares by the percentage of average daily net assets that the Investor Class shares pay as 12b-1 fees during the same period (the “Class Expense Limitation” and, together with the Fund-level Expense Limitations, the “Expense Limitations”). The Class Expense Limitation can be terminated with respect to a Fund only with the agreement of the Fund’s Board. The Adviser may subsequently recover from assets attributable to the applicable class of a Fund any waived fees and/or reimbursed expenses (within 3 years from the month in which the waiver/reimbursement occurred) to the extent that such class’s expense ratio is less than the applicable Class Expense Limitation or, if lower, the expense limitation in effect when the waiver/reimbursement occurred.
For the year ended December 31, 2021, the Adviser waived/reimbursed $66,334, $92,294, $34,925, and $22,388 of the class-specific fees and expenses fees allocated to Institutional Class shares of the Value Line Mid Cap Focused Fund, Value Line Capital Appreciation Fund, Value Line Larger Companies Focused Fund, and Value Line Select Growth Fund, respectively. During the year ended December 31, 2021, Value Line Mid Cap Focused Fund, Value Line Capital Appreciation Fund and Value Line Larger Companies Focused Fund made repayments to the Adviser for previously waived and reimbursed fees in the amounts of $6,086, $3,346 and $124,389, respectively. For the year ended December 31, 2021, the Adviser waived/reimbursed $170,756 of Value Line Core Bond Fund’s fees and expenses.
Other Service Providers. State Street Bank and Trust Company (“State Street”) has been retained to provide certain bookkeeping, accounting and administrative services (including Form N-PORT, Form N-CEN and liquidity risk management support services) for an annual fee of $89,600 paid by each of Value Line Mid Cap Focused Fund, Value Line Larger Companies Focused Fund and Value Line Select Growth Fund and $91,600 paid by each of Value Line Capital Appreciation Fund and Value Line Core Bond Fund. Each Fund’s advisory fee is offset in each period by the portion of that fee and related expenses paid to State Street for Administrative Services which the Adviser is responsible for providing (or arranging for provision) to the Fund as described under “Investment Adviser” above. State Street, whose address is 1 Iron Street, Boston, MA 02210, also acts as each Fund’s custodian and dividend-paying agent. As custodian, State Street is responsible for safeguarding each Fund’s cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on each Fund’s investments. As dividend-paying agent, State Street transmits payments for dividends and distributions declared by each Fund. DST Asset Manager Solutions, Inc., whose address is 330 W. 9th Street, Kansas City, MO 64105, provides certain transfer agency functions to each Fund.
PricewaterhouseCoopers LLP, whose address is 300 Madison Avenue, New York, NY 10017, acts as each Fund’s independent registered public accounting firm.
Securities Lending. State Street serves as the securities lending agent for each Fund authorized to lead securities. As the securities lending agent, State Street is responsible for the administration and management of the Fund’s securities lending program, including the preparation and execution of an agreement with each borrower governing the terms and conditions of any securities loan, ensuring that
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securities loans are properly coordinated and documented with the Fund’s custodian, ensuring that loaned securities are valued daily and that the corresponding required cash collateral is delivered by the borrower(s) and arranging for the investment of cash collateral received from borrowers in accordance with the Fund’s investment guidelines.
State Street receives as compensation for its services a portion of the amount earned by the Funds for lending securities. The table below sets forth, for each Fund’s fiscal year ended December 31, 2021, the Fund’s gross income received from securities lending activities, the fees and/or other compensation paid by the Fund for securities lending activities and the net income earned by the Fund for securities lending activities. The table below also discloses any other fees or payments incurred by each Fund resulting from lending securities.
​ ​ ​
Value Line
Mid Cap
Focused Fund
​ ​
Value Line
Capital
Appreciation
Fund
​ ​
Value Line
Larger
Companies
Focused Fund
​ ​
Value Line
Select Growth
Fund
​ ​
Value Line
Core Bond
Fund
​
Gross income from securities lending activities
​ ​ ​ $ 868 ​ ​ ​ ​ $ 83,953 ​ ​ ​ ​ $ 61,644 ​ ​ ​ ​ $ 0 ​ ​ ​ ​ $ 4,482 ​ ​
Fees and/or compensation for
securities lending activities and
related services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fees paid to securities lending
agent from revenue split
​ ​ ​ $ 245 ​ ​ ​ ​ $ 24,382 ​ ​ ​ ​ $ 18,136 ​ ​ ​ ​ $ 0 ​ ​ ​ ​ $ 1,173 ​ ​
Fees paid for any cash
collateral management
services (including fees
deducted from a pooled cash
collateral reinvestment
vehicle) that are not included
in the revenue split.
​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 2,626 ​ ​ ​ ​ ​ 1,163 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 539 ​ ​
Administrative fees not included in revenue split
​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​
Indemnification fees not included in revenue split
​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​
Rebate (paid to borrower)
​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 10 ​ ​
Other fees not included in revenue split (specify)
​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​
Aggregate fees/compensation for securities lending activities
​ ​ ​ $ 291 ​ ​ ​ ​ $ 27,020 ​ ​ ​ ​ $ 19,299 ​ ​ ​ ​ $ 0 ​ ​ ​ ​ $ 1,722 ​ ​
Net Income from securities lending activities
​ ​ ​ $ 577 ​ ​ ​ ​ $ 56,933 ​ ​ ​ ​ $ 42,345 ​ ​ ​ ​ $ 0 ​ ​ ​ ​ $ 2,760 ​ ​
Ownership and Control of the Adviser. The Adviser’s voting securities are held in equal percentages by five shareholders, each of which also serves as a trustee of the Adviser. Together, they manage the combined company consisting of the Adviser and the Distributor much like a board of directors. Day-to-day management of the Adviser and the Distributor is delegated to its senior executive, Mitchell E. Appel. The current trustees and holders of the Adviser’s voting profits interests are: Mr. Appel, Avi T. Aronovitz, John P. Ellis, Robert E. Rice and R. Alastair Short.
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A non-voting profits interest and a non-voting revenues interest in the Adviser is retained by its predecessor, Value Line, Inc. (“Value Line”). Value Line has with respect to the Adviser the benefit of certain consent rights, such as selling all or a significant part of the Adviser, making material acquisitions, entering into businesses other than asset management and fund distribution, declaring bankruptcy, making material changes in tax or accounting policies or making material borrowing, and entering into related party transactions. However, Value Line has no power to vote for the election, removal or replacement of trustees of the Adviser.
Value Line has (1) granted the Adviser, the Distributor and each Fund a permanent right to use of the name “Value Line” so long as the Adviser remains the Fund’s adviser and the Fund does not alter its investment objectives or fundamental policies as they exist on the date of the investment advisory agreement to create a risk profile similar to that of so-called hedge funds and (2) agreed to provide the Adviser its ranking information without charge on as favorable a basis as to its best institutional customers.
Portfolio Managers
Fund
​ ​
Portfolio Manager
​
Value Line Mid Cap Focused Fund ​ ​ Stephen E. Grant has primary responsibility for the day-to-day management of the Fund’s portfolio. ​
Value Line Capital Appreciation Fund ​ ​ Cindy Starke has primary responsibility for the day-to-day management of the Fund’s equity portfolio and allocation of the Fund’s assets; Liane Rosenberg has primary responsibility for the day-to-day management of the fixed income portion of the Fund’s portfolio. ​
Value Line Larger Companies Focused Fund ​ ​ Cindy Starke has primary responsibility for the day-to-day management of the Fund’s portfolio. ​
Value Line Select Growth Fund ​ ​ Stephen E. Grant has primary responsibility for the day-to-day management of the Fund’s portfolio. ​
Value Line Core Bond Fund ​ ​ Liane Rosenberg has primary responsibility for the day-to-day management of the Fund’s portfolio. ​
Compensation. Each portfolio manager employed by the Adviser receives a fixed base salary. In addition, a manager may receive an annual bonus in the Adviser’s discretion. Salary and bonus are paid in cash. Base salary is normally reevaluated on an annual basis. Any bonus is completely discretionary and may be in excess of a manager’s base salary. The profitability of the Adviser and the investment performance of the accounts that the portfolio manager is responsible for are factors in determining the manager’s overall compensation. The level of any bonus compensation may be influenced by the relative performance of the accounts managed by the portfolio manager or the financial performance of the Adviser. However, as noted, all bonus compensation is discretionary and the Adviser does not employ formulas with respect to either of these factors to compute a portfolio manager’s bonus. There are no differences in a portfolio manager’s compensation structure for managing mutual funds or private accounts.
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Other Accounts Managed. The table below shows the number of Value Line Funds for which each portfolio manager has primary or joint responsibility of day-to-day management and the combined total assets of those Value Line Funds at December 31, 2021. None of the portfolio managers currently manage any private accounts.
​ ​ ​
Number of Funds
​ ​
Total Assets
​
Stephen E. Grant ​ ​ ​ ​ 6 ​ ​ ​
$3.8 billion
​
Liane Rosenberg ​ ​ ​ ​ 4 ​ ​ ​
$2.9 billion
​
Cindy Starke ​ ​ ​ ​ 2 ​ ​ ​
$1.1 billion
​
Material Conflicts of Interest. The Adviser’s portfolio managers typically manage more than one account. Portfolio managers make investment decisions for each account based on the investment objectives and policies of each such account. If the portfolio manager identifies an investment opportunity that may be suitable for multiple accounts, the Fund may not take full advantage of that opportunity because the opportunity may need to be allocated among more than one account. In addition, a portfolio manager may purchase or sell securities of one account and not another account. None of the accounts pay performance-related fees. Investments are allocated pro rata among all of the Adviser’s accounts in a manner which the Adviser deems to be fair and equitable. The Adviser currently does not have any private accounts.
Ownership of Securities. None of the Funds’ portfolio managers own shares of the Fund(s) they manage, except as noted below:
Name
​ ​
Dollar Range of
Equity Securities
in Value Line
Capital
Appreciation
Fund
​ ​
Dollar Range of
Equity Securities
in Value Line
Larger Companies
Focused Fund
​
Cindy Starke ​ ​ ​ $ 1 – $10,000 ​ ​ ​
$1 – $10,000
​
CAPITAL STOCK AND SHARE CLASSES
Each Fund is an open-end diversified management investment company incorporated in Maryland, except Value Line Core Bond Fund which is a Massachusetts business trust, and governed by Articles of Association and By-Laws, as amended from time to time, that authorize the Fund’s Directors to issue and classify shares of common stock in one or more classes. Each share of each Fund’s common stock represents a proportionate interest in the assets belonging to the Fund and has one vote with fractional shares voting proportionately. Shares have no preemptive rights, are freely transferable, are entitled to dividends as declared by the Directors and, if a Fund were liquidated, would receive the net assets of the respective Fund. The Directors of each Fund (except Value Line Core Bond Fund) have authorized two classes of shares: the Investor Class, $.001 par value, and the Institutional Class, $.001 par value. Value Line Core Bond Fund has only one share class, the Investor Class, $.01 par value.
Each share class of a Fund represents an interest in the same assets of such Fund, has the same rights and is identical in all material respects except that: (i) each class of shares may bear different (or no) distribution fees and/or sales loads; (ii) certain other class specific expenses will be borne solely by the class to which such expenses are attributable, including transfer agent fees attributable to a specific class of shares, printing and postage expenses related to preparing and distributing materials to current shareholders of a specific class, registration fees incurred by a specific class of shares, the expenses of administrative personnel and services required to support the shareholders of a specific class, litigation or other legal expenses relating to a class of shares, Board of Directors’ fees or expenses incurred as a result of issues relating to a specific class of shares and accounting fees and expenses relating to a specific class
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of shares; (iii) each class has exclusive voting rights with respect to matters relating to its own distribution arrangements; and (iv) when the interests of one class of shares differ from the interests of any other class, the shareholders of each differing class will vote separately on the matter at issue. In choosing which class of shares to purchase, you should consider which will be most beneficial to you given the amount of your purchase and the length of time you expect to hold the shares.
The primary differences between the Investor Class and the Institutional Class are the ongoing fees, minimum purchase amounts and the distribution channels through which shares of the classes may be purchased. As described in “Service and Distribution Plan” below, a Rule 12b-1 fee is paid from Investor Class assets at the annual rate of 0.25% of the Fund’s average daily net assets attributable to Investor Class shares as compensation to the Distributor for providing distribution, marketing and administrative services primarily intended to result in the sale of Investor Class shares for such Fund. Institutional Class shares do not pay Rule 12b-1 distribution and service fees, and are not subject to the Plan.
The minimum initial investment in each Fund is $1,000 to purchase Investor Class shares and $100,000 in the aggregate to purchase Institutional Class shares subject to the exceptions noted below. In the case of the last exception, your brokerage platform may charge additional fees or commissions other than those disclosed in this SAI, such as a transaction fee or other fee for its services. The minimum investment to purchase Institutional Class shares in a Fund does not apply to:
•
Investors in fee-based investment advisory programs sponsored by a broker-dealer or other financial institution, that have entered into a special arrangement with the Fund and/or the Distributor specifically for such purchases, provided that the program invests in the Fund through an omnibus account.
​
•
Employer-sponsored retirement or benefit plans that invest in the Fund through an omnibus account, directly or through an intermediary, provided that, in the case of investment through an intermediary, the intermediary has entered into a special arrangement with the Fund and/or the Distributor specifically for that purpose.
​
•
Retirement and non-retirement accounts on brokerage platforms which charge their own customized commissions for services provided in connection with the sale of Institutional Class shares, provided the broker-dealer has entered into a special arrangement with the Fund and/or the Distributor specifically for that purpose.
​
You can exchange all or part of your shares of a particular class of a Fund for shares of the same class of another Value Line mutual fund or other funds offered through the Distributor, provided that such fund offers the same class of shares and your investment in such fund satisfies any applicable minimum investment or other criteria for purchasing shares of such class of the fund. Consult with your intermediary or Shareholder Services at 800-243-2729 to determine if your shares of a Fund are eligible for exchange into shares of another fund of the same class or a different class with a lower minimum initial investment or other criteria that you satisfy. If the other fund does not offer multiple classes, you may still obtain shares of such fund in exchange for your Fund shares, provided you satisfy any applicable criteria for purchasing shares of such fund. There may be limitations on exchanging Fund shares for shares of another fund or a different class of shares, or moving shares held in certain types of accounts to a different type of account or a new account maintained by a financial intermediary.
You may be eligible to convert your Investor Class shares of a Fund into Institutional Class shares of that Fund if your investment in the Fund appreciates in value, or increases through additional purchases or exchanges, to exceed any applicable minimum investment for purchasing Institutional Class shares of such Fund. Consult with your intermediary or Shareholder Services at 800-243-2729 to determine if your Investor Class shares are eligible for conversion into Institutional Class shares of a Fund. If you hold Institutional Class shares of a Fund, and exchanges or redemptions from the Fund cause the balance of your investment to fall below any applicable minimum investment for purchasing Institutional Class shares,
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the Fund may ask you to increase your balance within 30 days. If your account is not brought up to the minimum, the Fund may convert your Institutional Class shares into Investor Class shares or redeem all of your shares and close your account.
SERVICE AND DISTRIBUTION PLAN AND SUB-TRANSFER AGENCY FEES
Service and Distribution Plan
Each Fund has adopted, on behalf of the Investor Class, a Plan which is designed to finance the activities of the Distributor in advertising, marketing and distributing Fund shares and for servicing Fund shareholders. Under each Plan, the Distributor is paid Rule 12b-1 fees from Investor Class assets of each Fund at the annual rate of 0.25% of the Fund’s average daily net assets attributable to Investor Class shares. Institutional Class shares do not pay Rule 12b-1 fees and are not subject to the Plan.
The table below sets forth for each Fund’s fiscal year ended December 31, 2021 the net fees paid from Investor Class assets to the Distributor pursuant to the Plan, the amounts paid by the Distributor to other broker-dealers, and the amounts incurred by the Distributor in advertising and other marketing expenses. The fees payable to the Distributor under each Plan are payable without regard to actual expenses incurred.
​ ​ ​
Net Fees Paid to
the Distributor
​ ​
Fees Paid by the
Distributor to other
Broker-Dealers
​ ​
Advertising and
Marketing Expenses
Paid by the Distributor
​
Value Line Mid Cap Focused Fund ​ ​ ​ $ 809,311 ​ ​ ​ ​ $ 437,033 ​ ​ ​ ​ $ 210,902 ​ ​
Value Line Capital Appreciation Fund ​ ​ ​ $ 1,422,683 ​ ​ ​ ​ $ 1,039,154 ​ ​ ​ ​ $ 298,090 ​ ​
Value Line Larger Companies Focused Fund
​ ​ ​ $ 993,713 ​ ​ ​ ​ $ 236,769 ​ ​ ​ ​ $ 196,870 ​ ​
Value Line Select Growth Fund ​ ​ ​ $ 1,151,989 ​ ​ ​ ​ $ 676,253 ​ ​ ​ ​ $ 202,356 ​ ​
Value Line Core Bond Fund ​ ​ ​ $ 128,225 ​ ​ ​ ​ $ 29,709 ​ ​ ​ ​ $ 9,212 ​ ​
The principal services and expenses for which such compensation may be used under each Plan are primarily intended to result in the sale of Investor Class shares and include: compensation to employees or account executives and reimbursement of their expenses; overhead and telephone costs of such employees or account executives; printing of prospectuses or reports for prospective shareholders advertising; preparation, printing and distribution of sales literature; and allowances to other broker-dealers. A report of the amounts expended under each Plan is submitted to the Directors each quarter. Because of the Plan, long-term shareholders of Investor Class shares may pay more than the economic equivalent of the maximum sales charge permitted by the Financial Industry Regulatory Authority regarding investment companies.
As noted above, each Plan is a compensation plan, which means that the Distributor’s fees under the Plan are payable without regard to actual expenses incurred by the Distributor. To the extent the revenue received by the Distributor pursuant to a Plan exceeds the Distributor’s marketing expenses, the Distributor may earn a profit under the Plan.
Each Plan is subject to annual approval by the respective Fund’s Directors, including the non-interested Directors. Each Plan is terminable at any time by vote of the respective Fund’s Directors or by vote of a majority of the Investor Class shares of the Fund. Pursuant to each Plan, a new Director who is not an “interested person” ​(as defined in the 1940 Act) must be nominated by existing Directors who are not “interested persons.”
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Because amounts paid pursuant to each Plan are paid to the Distributor, the Distributor and its officers, directors and employees may be deemed to have a financial interest in the operation of the Plan. None of the non-interested Directors has a financial interest in the operation of each Plan.
Each Plan was adopted because of its anticipated benefits to the Fund’s Investor Class and its shareholders. These anticipated benefits include: the ability to realize economies of scale as a result of increased promotion and distribution of the Fund’s shares, and enhancement in the Fund’s ability to maintain accounts and improve asset retention, increased stability of net assets for the Fund, increased stability in the Fund’s investment positions, and greater flexibility in achieving investment objectives. Although each Plan is adopted and evaluated in light of its benefits to the Investor Class of a Fund, all share classes of that Fund (including the Institutional Class when offered) are likely to participate in certain of these benefits. The costs of any joint distribution activities between a Fund and other Value Line Funds will be allocated among the Funds and, as applicable, the classes of the Funds based on their relative net asset value or another reasonable method of allocation.
Sub-Transfer Agency Services and Fees
Each Fund (other than Value Line Core Bond Fund) has adopted, on behalf of each class, a Sub-Transfer Agency and Servicing Plan, pursuant to which financial intermediaries are compensated out of assets attributable to such class for providing sub-transfer agency and related services to investors that hold their Fund shares of such class in omnibus accounts maintained by the financial intermediaries with the Fund or in "networked" accounts maintained by a centralized clearing authority but supported by the financial intermediaries. The sub-transfer agency fee, which may be paid directly to the financial intermediary or indirectly via the Distributor, is measured with respect to each financial intermediary at the lower of (i) the aggregate amount of additional transfer agency fees and expenses that a Fund would otherwise pay to its transfer agent if each subaccount in the omnibus account and each networked account for such class of shares were maintained and supported only by the Fund’s transfer agent, not by such financial intermediary and (ii) the amount by which the fees charged by such financial intermediary for including the Fund on its platform and providing shareholder, sub-transfer agency and related services, with respect to shares of the applicable class in the omnibus account or networked account, exceed (x) $0 in the case of Institutional Class shares, or (y) the amount paid to such financial intermediary under the Fund’s Plan in the case of Investor Class shares. The Board retains the authority to determine the maximum sub-transfer agency fee that the Distributor may agree to pay to the financial intermediaries under the Sub-Transfer Agency and Servicing Plan. If the sub-transfer agency fee is paid to financial intermediaries indirectly via the Distributor, the Distributor does not retain any amount thereof and such fee otherwise reduces the amount that the Distributor is contractually obligated to pay to the financial intermediary. The Sub-Transfer Agency and Servicing Plan is subject to annual approval by the Board of each Fund and is terminable at any time by the Board. In addition to payments by Institutional Class and Investor Class shares under a Fund’s Sub-Transfer Agency and Servicing Plan and payments by Investor Class shares under a Fund’s Plan, the Distributor or its affiliates may make additional payments to the financial intermediary out of their own assets as described below.
Additional Financial Intermediary Compensation
If you purchase shares of a Fund through a broker, fund trading platform or other financial intermediary (collectively, “intermediaries”), your intermediary may receive various forms of compensation which may come directly or indirectly from the Fund and other Value Line Funds or from the Distributor, the Adviser and/or their affiliates (collectively, the “Service Providers”). The amount of such payments may be based on a variety of factors, including sales of Fund shares through that intermediary or the value of shares held by investors through that intermediary and in certain instances are subject to minimum payment levels.
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Compensation from the Service Providers may vary among intermediaries. The types of payments an intermediary may receive include:
•
Payments under the Plan which are asset-based charges paid from the assets of the Fund attributable to Investor Class shares;
​
•
Payments for sub-transfer agency and related services to omnibus account and networked account investors, which are paid from the assets of the Fund attributable to Investor Class shares and Institutional Class shares; and
​
•
Payments by the Service Providers out of its own assets. These payments are in addition to payments made from assets of the Fund, such as payments under the Plan and payments for sub-transfer agency and related services. These payments may take the form of, among other things: “due diligence” payments for an intermediary’s examination of the Fund and payments for providing extra employee training, education and information relating to the Fund; “listing” fees for the placement of the Fund on an intermediary’s list of mutual funds available for purchase by its customers; “finders” fees for directing investors to the Fund; “distribution and marketing support” fees for providing assistance in promoting the sale of the Funds’ shares; payments for the sale of shares and/or the maintenance of share balances; maintenance fees; and set-up fees regarding the establishment of new accounts. You should consult with your intermediary and review carefully any disclosure by the intermediary as to compensation received by it for more information about the payments described above. Although a portion of the Service Providers’ revenue comes directly or indirectly in part from fees paid by the Fund and other funds, these payments do not increase the price paid by investors for the purchase of shares of the Fund or other funds. The Service Providers generally agree amongst themselves what payment to make to intermediaries and which Service Provider will bear or make such payments. Payments of this type are sometimes referred to as revenue-sharing payments.
​
In addition, the Service Providers may contribute to various non-cash and cash incentive arrangements to promote the sale of Fund shares, and may sponsor various contests and promotions subject to applicable Financial Industry Regulatory Authority (“FINRA”) and securities regulations in which participants may receive prizes such as travel awards, merchandise and cash. Subject to applicable FINRA and securities regulations, the Service Providers may also: (i) pay for the travel expenses, meals, lodging and entertainment of intermediaries and their salespersons in connection with educational and sales promotional programs, (ii) sponsor speakers, educational seminars and charitable events and (iii) provide other sales and marketing conferences and other resources to intermediaries and their salespersons.
Payments to an intermediary may be significant to the intermediary, and amounts that intermediaries pay to your financial advisor or investment professional may also be significant for your financial advisor or investment professional. Because an intermediary may make decisions about which investment options it will recommend or make available to its clients or what services to provide for various products based on payments it receives or is eligible to receive, revenue sharing payments create conflicts of interest between the intermediary and its clients and these financial incentives may cause the intermediary to recommend the Fund and other funds over other investments. The same conflict of interest exists with respect to your financial advisor or investment professional if he or she receives similar payments from his or her intermediary firm.
The maximum amount of compensation that may be paid to any intermediary under each Plan is 0.25% of the Fund’s average daily net assets attributable to Investor Class shares. The maximum amount of compensation for sub-transfer agency and related services that may be paid out of the assets attributable to either class of a Fund is determined by the Board, but generally measured with respect to each
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intermediary at the lower of (i) the aggregate amount of additional transfer agency fees and expenses that a Fund would otherwise pay to its transfer agent if each subaccount in the omnibus account, and each networked account, for such class of shares were maintained and supported only by the Fund’s transfer agent, not by such financial intermediary and (ii) the amount by which the fees charged by such financial intermediary for including the Fund on its platform and providing shareholder, sub-transfer agency and related services with respect to shares of the applicable class in the omnibus account or networked account exceed (a) $0 in the case of Institutional Class shares, or (b) the amount paid to such financial intermediary under the Fund’s Plan in the case of Investor Class shares. Generally, the maximum amount of additional compensation that the Distributor pays to any intermediary from its own assets is 0.10% of the respective Fund’s average daily net assets attributable to Investor Class or Institutional Class shares. However, to the extent the Distributor waives any fees it would have otherwise received under a Plan, the Distributor (and not the Fund) would pay the intermediaries out of its own assets any such amounts waived.
As of December 31, 2021, the Distributor may make payments out of its own assets to the following financial intermediaries whose fees exceed payments by the applicable class of each Fund under the Sub-Transfer Agency and Servicing Plan and, in the case of the Investor Class, the Plan.
Ameriprise Financial, Inc.
Charles Schwab
Edward Jones
Hand Securities, Inc.
JP Morgan Secs
Lincoln Financial Advisors Corp.
Lincoln Financial Securities Corp.
LPL Financial LLC
MSCS Financial Services
Morgan Stanley
National Financial Services
Pershing LLC
Principal Life
Raymond James & Associates, Inc.
TD Ameritrade Inc.
UBS Financial
Vanguard Brokerage Services
Financial intermediaries may have been added or removed from the list above since December 31, 2021.
Intermediaries may charge their clients additional fees for account-related services. For example, intermediaries may charge their customers a service fee in connection with the purchase or redemption of Fund shares. The amount and applicability of any such fee is determined by, and should be disclosed to its customers by, each individual intermediary. Service fees typically are fixed, nominal dollar amounts and are in addition to the charges described in the Prospectuses and this SAI. Your intermediary should provide you with specific information about any service fees you will be charged.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Orders for the purchase and sale of portfolio securities are placed with brokers and dealers who, in the judgment of the Adviser, will obtain the best results for a Fund’s portfolio taking into consideration such relevant factors as price, the ability of the broker to effect the transaction and the broker’s facilities, reliability and financial responsibility.
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Commission rates and spreads, being a component of price, are considered together with such factors. Debt securities are traded principally in the over-the-counter market on a net basis through dealers acting for their own account as principals and not as brokers, without stated commissions, though the price of a security usually includes a profit to the dealer. In underwritten offerings, securities are bought at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the underwriter’s “concession” or “discount.” On occasion, certain money market instruments may be bought directly from an issuer, in which case no commissions or discounts are paid.
Pursuant to the provisions of Section 28(e) of the Securities Exchange Act of 1934, the Adviser is also authorized to place purchase or sale orders with brokers or dealers who may charge a commission in excess of that charged by other brokers or dealers if the amount of the commission charged is reasonable in relation to the value of the brokerage and research services provided viewed either in terms of that particular transaction or in relation to the Adviser’s overall responsibilities with respect to the account as to which the Adviser exercises investment discretion. Research services provided to the Adviser by broker-dealers are available for the benefit of all Funds and accounts managed by the Adviser, and the allocation of such benefits relative to commissions paid by a Fund or account will be in such amounts and in such proportion as the Adviser may determine. The information and services that may be furnished to the Adviser include the furnishing of research reports and statistical compilations and computations and the providing of current quotations for securities. When services and information are furnished to the Adviser at no cost, certain of these services might relieve the Funds or the Adviser of expenses which they would otherwise have to pay. The advisory fee paid by the Funds to the Adviser will not be reduced as a result of the Adviser’s receipt of information and research services. Such information and services are considered by the Adviser, and brokerage commissions are allocated in accordance with its assessment of such information and services, but only in a manner consistent with the placing of purchase and sale orders with brokers and/or dealers, which, in the judgment of the Adviser, are able to execute such orders as expeditiously as possible. Orders may also be placed with brokers or dealers who sell shares of the Funds or other Value Line Funds, but this fact, or the volume of such sales, is not a consideration in their selection.
The table below sets forth the brokerage commissions paid by each Fund during the fiscal years ended December 31, 2019, 2020 and 2021. During the fiscal year ended December 31, 2021, all of the Funds’ brokerage commissions were paid to brokers or dealers solely for their services in obtaining the best prices and executions.
​ ​ ​
Brokerage Commissions Paid
During the Fiscal Years Ended December 31:
​
​ ​ ​
2019
​ ​
2020
​ ​
2021
​
Value Line Mid Cap Focused Fund ​ ​ ​ $ 14,918 ​ ​ ​ ​ $ 3,651 ​ ​ ​ ​ $ 2,970 ​ ​
Value Line Capital Appreciation Fund ​ ​ ​ $ 33,047 ​ ​ ​ ​ $ 72,447 ​ ​ ​ ​ $ 44,147 ​ ​
Value Line Larger Companies Focused Fund ​ ​ ​ $ 20,226 ​ ​ ​ ​ $ 54,628 ​ ​ ​ ​ $ 23,260 ​ ​
Value Line Select Growth Fund ​ ​ ​ $ 6,834 ​ ​ ​ ​ $ 9,973 ​ ​ ​ ​ $ 3,474 ​ ​
Value Line Core Bond Fund ​ ​ ​ $ 46 ​ ​ ​ ​ $ 109 ​ ​ ​ ​ $ -0- ​ ​
The primary reasons for the increase in 2020 of aggregate brokerage commissions paid by Value Line Capital Appreciation Fund and Value Line Larger Companies Focused Fund are (i) the total assets of each Fund increased substantially in 2020 and (ii) the portfolio turnover rate increased.
Portfolio Turnover. Each Fund’s portfolio turnover rate for recent fiscal years is shown under “Financial Highlights” in the Funds’ Prospectus.
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PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchases. Shares of a Fund are purchased at the net asset value next calculated after receipt of a purchase order. The minimum amount of an initial investment in a Fund varies depending on the class of shares you buy and the type of account, as described above in “CAPITAL STOCK AND SHARE CLASSES.” The minimum amount of any additional investment is $100, provided that no minimum applies to the automatic reinvestment of dividends and distributions received from the Fund. Each Fund reserves the right to reduce or waive the minimum purchase requirements.
Automatic Purchases. Each Fund offers a free service to its Investor Class shareholders, Valu-Matic®, through which monthly investments of $25 or more may be made automatically into the shareholder’s Fund account. The required form to enroll in this program is available upon request from the Distributor.
Retirement Plans. Shares of a Fund may be purchased as the investment medium for various tax-sheltered retirement plans. Upon request, the Distributor will provide information regarding eligibility and permissible contributions. Because a retirement plan is designed to provide benefits in future years, it is important that the Fund’s investment objective be consistent with the participant’s retirement objectives. Premature withdrawals from a retirement plan may result in adverse tax consequences. For more complete information, contact Shareholder Services at 1-800-243-2729.
Redemptions. Redemptions are taxable transactions for shareholders that are subject to tax. The value of shares of a Fund on redemption may be more or less than the shareholder’s cost, depending upon the market value of a Fund’s assets at the time. Shareholders should note that if a loss has been realized on the sale of shares of the Fund, the loss may be disallowed for tax purposes to the extent that shares of the same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in the opinion of a Fund’s Board of Directors, make it undesirable for the Fund to pay for redemptions in cash. In such cases, the Board may authorize payment to be made in portfolio securities or other property of the Fund. However, the Funds have obligated themselves under the 1940 Act to redeem for cash all shares presented for redemption by any one shareholder up to $250,000 (or 1% of the respective Fund’s net assets if that is less) in any 90-day period. Securities delivered in payment of redemptions are valued at the same value assigned to them in computing the net asset value per share. Shareholders receiving such securities may incur brokerage costs on their sales.
Calculation of Net Asset Value. The net asset value per share of each class of each Fund is determined once daily, for purposes of both purchases and redemptions, as of the close of regular trading on the New York Stock Exchange (generally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange is open for business. The net asset value per share is determined, on a per class basis, by dividing the total value of all the securities and other assets of the Fund, less any liabilities, by the total number of outstanding shares. Securities for which market prices or quotations are readily available are priced at their market value, which in the case of securities traded on an exchange or the NASDAQ Stock Market is typically the last quoted sale or the NASDAQ Official Closing Price. In the absence of closing sales prices for such securities, market value is typically deemed to be the midpoint between the latest available and representative asked and bid prices. Securities for which market quotations are not readily available, or are determined not to reflect accurately fair value, are valued at fair value as determined by the Adviser pursuant to policies and procedures adopted by each Fund’s Board of Directors. Debt securities with remaining maturities of 60 days or more at the time of acquisition are valued using prices provided by a pricing service or by prices furnished by recognized dealers in such securities. Short-term instruments with maturities of 60 days or less at the date of purchase are valued at amortized cost, unless
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an instrument’s amortized cost is not approximately the same as its fair value, in which case the instrument is priced at fair value.
TAXES
(See “Dividends, Distributions and Taxes” in the Funds’ Prospectus)
Each Fund has elected to be treated, has qualified and intends to continue to qualify for tax treatment as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”). By so qualifying, and assuming each Fund meets the distribution requirements stated below, each Fund will not be subject to federal income tax on net investment income or net realized capital gains which are distributed to shareholders (whether or not reinvested in additional Fund shares). In order to qualify as a regulated investment company under Subchapter M of the Code, each Fund must, among other things, (i) derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and net income derived from an interest in a qualified publicly traded partnership (as defined in Section 851(h) of the Code) (the “90% income test”) and (ii) diversify its holdings so that at the end of each quarter of each taxable year: (a) at least 50% of the value of the Fund’s total assets is represented by (1) cash and cash items, U.S. government securities, securities of other regulated investment companies, and (2) other securities, with such other securities limited, in respect to any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets and to not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Fund’s total assets is invested in (1) the securities (other than U.S. government securities and securities of other regulated investment companies) of any one issuer, (2) the securities (other than securities of other regulated investment companies) of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades or businesses, or (3) the securities of one or more qualified publicly traded partnerships.
If a Fund qualifies as a regulated investment company and distributes to its shareholders each taxable year an amount equal to or exceeding the sum of (i) 90% of its investment company taxable income without regard to the deduction for dividends paid and (ii) 90% of the excess of its gross tax-exempt interest income, if any, over certain disallowed deductions, the Fund generally will be relieved of U.S. federal income tax on any income of the Fund, including “net capital gain” ​(the excess of net long-term capital gain over net short-term capital loss), distributed to shareholders. However, if a Fund meets such distribution requirements, but chooses to retain some portion of its investment company taxable income or net capital gain, it generally will be subject to U.S. federal income tax at regular corporate rates on the amount retained. Each Fund intends to distribute at least annually all or substantially all of its investment company taxable income, net tax-exempt interest, and net capital gain. If for any taxable year a Fund did not qualify as a regulated investment company or did not satisfy the distribution requirement described above but was eligible for statutory relief, the Fund might be required to pay penalty taxes (or interest charges in the nature of a penalty) and/or to dispose of certain assets in order to continue to qualify for such tax treatment. If a Fund were not eligible for such relief or did not choose to avail itself of such relief, the Fund generally would be treated as a corporation subject to U.S. federal income tax and when the Fund’s income was thereafter distributed, it would be subject to a further tax at the shareholder level.
The Code requires each regulated investment company to pay a nondeductible 4% excise tax to the extent the company does not distribute, during each calendar year, 98% of its ordinary income, determined on a calendar year basis, and 98.2% of its capital gains in excess of capital losses, determined, in general, for a one-year period ending on October 31 of such year, plus certain undistributed amounts from previous
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years. Each Fund anticipates that it will make sufficient timely distributions to avoid imposition of the excise tax.
For U.S. federal income tax purposes, a Fund is permitted to carry forward its net capital losses attributable to any taxable year of the Fund commencing on or after December 23, 2010, indefinitely to offset future capital gains of the Fund in such years (if any). If a Fund so elects, all or a portion of certain losses realized by the Fund in the portion of its taxable year after October 31 will be treated as arising on the first day of its following taxable year.
At December 31, 2021, none of the Funds had an unused capital loss carryforward.
Unless a shareholder elects otherwise, distributions from a Fund will be invested in additional common shares of the Fund. All Fund distributions other than exempt-interest dividends will be subject to U.S. federal income tax, and applicable state and local income taxes, whether they are paid in cash or reinvested in additional shares.
In general, assuming that a Fund has sufficient earnings and profits, dividends from investment company taxable income are taxable either as ordinary income or if certain conditions are met, as “qualified dividend income” taxable to individual shareholders at a reduced maximum U.S. federal income tax rate. Dividend income distributed to individual shareholders will qualify for such reduced maximum U.S. federal income tax rate to the extent that such dividends are attributable to “qualified dividend income” as that term is defined in Section 1(h)(11)(B) of the Code from a Fund’s investment in common and preferred stock of U.S. companies and stock of certain foreign corporations, and are reported by the Fund as attributable to such qualified dividend income, provided that certain holding period and other requirements are met by both the Fund and the shareholders.
A dividend that is attributable to qualified dividend income of a Fund that is paid by such Fund to an individual shareholder will not be eligible to be treated as qualified dividend income if (1) the dividend is received with respect to any share of the Fund held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share became ex-dividend with respect to such dividend, (2) to the extent that the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, or (3) the shareholder elects to have the dividend treated as investment income for purposes of the limitation on deductibility of investment interest.
Dividends received by a Fund from U.S. corporations in respect of any share of stock with a tax holding period of at least 46 days (91 days in the case of certain preferred stock) extending before and after each dividend held in an unleveraged position and distributed and reported by the Fund (except for capital gain dividends received from a regulated investment company) may be eligible for the 50% dividends-received deduction generally available to corporations under the Code. In order to qualify for the deduction, corporate shareholders must meet the minimum holding period requirement stated above with respect to their Fund shares, taking into account any holding period reductions from certain hedging or other transactions or positions that diminish their risk of loss with respect to their Fund shares, and, if they borrow to acquire or otherwise incur debt attributable to Fund shares, they may be denied a portion of the dividends-received deduction.
Distributions from net capital gain that a Fund reports as capital gain dividends, if any, are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the Fund. Capital gain dividends distributed by a Fund to individual shareholders generally will qualify for the reduced maximum federal income tax rate on long-term capital gains.
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A 3.8% Medicare tax is imposed on the net investment income of U.S. individuals, estates and trusts whose income exceeds certain threshold amounts. For this purpose, net investment income generally includes distributions from each Fund and capital gains attributable to the sale, redemption or exchange of Fund shares. For U.S. individuals, this threshold generally is exceeded if an individual filer has modified adjusted gross income in excess of $200,000, if a married joint filer has modified adjusted gross income in excess of $250,000, or if a married separate filer has modified adjusted gross income in excess of $125,000.
Because the ultimate tax characterization of a Fund’s distributions cannot be determined until after the end of a tax year, there is a possibility that a Fund may make distributions to shareholders that exceed the Fund’s current earnings and profits for a tax year. Any such distributions will not be treated as taxable dividends, but instead will be treated as a return of capital to the extent of (and in reduction of) the shareholder’s basis in its shares. To the extent that any such distributions are in excess of that basis, the excess amounts will be treated as gain from the sale of the shares, as discussed below.
Dividends declared by a Fund in October, November or December of any calendar year, and payable to shareholders of record in such a month, shall be deemed to have been received by such shareholder on December 31 of such calendar year even when such dividend is actually paid in January of the following calendar year. In addition, certain other distributions made after the close of a taxable year of a Fund may be “spilled back” and treated as paid by the Fund (except for purposes of the 4% excise tax) during such taxable year. In such case, shareholders generally will be treated as having received such dividends in the taxable year in which the distributions were actually made.
If a Fund invests in certain pay-in-kind securities, zero coupon securities or, in general, any other securities with original issue discount (or with market discount if the Fund elects to include market discount in income currently), the Fund must accrue income on such investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, the Fund must distribute, at least annually, all or substantially all of its net investment income, including such accrued income, to shareholders to qualify as a regulated investment company under the Code and avoid U.S. federal income and excise taxes. Therefore, the Fund may have to dispose of portfolio securities that it would otherwise have retained, or may have to borrow, in order to satisfy distribution requirements.
Options written or purchased by a Fund and futures contracts purchased on certain securities and indices may cause the Fund to recognize gains or losses from marking-to-market even though such options may not have lapsed, been closed out, or exercised or such futures contracts may not have been performed or closed out. The tax rules applicable to these contracts may affect the characterization of some capital gains and losses recognized by a Fund as long-term or short-term. Additionally, a Fund may be required to recognize gain if an option, futures contract, short sale, or other transaction that is not subject to the mark-to-market rules is treated as a “constructive sale” of an “appreciated financial position” held by the Fund under Section 1259 of the Code. Any net mark-to-market gains and/or gains from constructive sales may also have to be distributed to satisfy the distribution requirements referred to above even though a Fund may receive no corresponding cash amounts, possibly requiring the Fund to dispose of portfolio securities or to borrow to obtain the necessary cash. Losses on certain options, futures and/or offsetting positions (portfolio securities or other positions with respect to which a Fund’s risk of loss is substantially diminished by one or more options or futures contracts) may also be deferred under the tax straddle rules of the Code, which may also affect the characterization of capital gains or losses from straddle positions and certain successor positions as long-term or short-term. Certain tax elections may be available that would enable the Fund to ameliorate some adverse effects of the tax rules described in this paragraph. The tax rules applicable to options, futures contracts, short sales, and straddles may affect the amount, timing and character of each Fund’s income and gains or losses and hence of its distributions to shareholders.
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Value Line Capital Appreciation Fund and Value Line Core Bond Fund may invest in debt obligations that are in the lowest rating categories or are unrated, including debt obligations of issuers not currently paying interest or who are in default. Investment in debt obligations that are at risk of or in default present special tax issues for the Fund. Tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by the Fund, in the event it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.
To the extent that any Fund invests in stock of foreign issuers, such Fund may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect to such investments. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes in some cases. Each Fund does not expect to satisfy the requirements for passing through to its shareholders their pro rata shares of qualified foreign taxes paid by the Fund, with the result that shareholders will not be entitled to a tax deduction or credit for such taxes on their own tax returns.
If any Fund acquires any equity interest (under proposed Treasury regulations, generally including not only stock but also an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or that hold at least 50% of their assets in investments producing such passive income (“passive foreign investment companies”), the Fund could be subject to U.S. federal income tax and additional interest charges on “excess distributions” received from such companies or on gain from the sale of stock in such companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction for such a tax. Elections may generally be available that would ameliorate these adverse tax consequences, but such elections could require the Fund to recognize taxable income or gain (subject to tax distribution requirements) without the concurrent receipt of cash. These investments could also result in the treatment of capital gains from the sale of stock of passive foreign investment companies as ordinary income. The Fund may limit and/or manage its holdings in passive foreign investment companies to limit its tax liability or maximize its return from these investments.
A shareholder may realize a capital gain or capital loss on the sale, exchange or redemption of shares of a Fund. The tax consequences of a sale, exchange or redemption depend upon several factors, including the shareholder’s adjusted tax basis in the shares sold, exchanged or redeemed and the length of time the shares have been held. Initial basis in the shares will be the actual cost of those shares (net asset value of Fund shares on purchase or reinvestment date). In general, if Fund shares are sold, redeemed or exchanged, the shareholder will recognize gain or loss equal to the difference between the amount realized on the sale and the shareholder’s adjusted tax basis in the shares. Such gain or loss generally will be treated as long-term capital gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term capital gain or loss. In addition, capital gains recognized from redemptions and exchanges of Fund shares generally will be included in the calculation of “net investment income” for purposes of the 3.8% Medicare tax applicable to certain U.S. individuals, estates and trusts as discussed above.
Any loss realized by shareholders upon the sale, redemption or exchange of shares within six months of the date of their purchase will generally be treated as a long-term capital loss to the extent of any distributions of net long-term capital gains with respect to such shares. Moreover, a loss on a sale, exchange or redemption of Fund shares will be disallowed to the extent that shares of the Fund are
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purchased (including through the reinvestment of dividends) within 30 days before or after the shares are sold, exchanged or redeemed.
In addition to reporting gross proceeds from redemptions, exchanges or other sales of mutual fund shares, federal law requires mutual funds, such as the Funds, to report to the IRS and shareholders the “cost basis” of shares acquired by shareholders on or after January 1, 2012 that are redeemed, exchanged or otherwise sold on or after such date. These requirements generally do not apply to investments through a tax-deferred arrangement or to certain types of entities (such as C corporations). S corporations, however, are not exempt from these rules. Also, if the shareholder holds Fund shares through a broker (or another nominee), the shareholder should contact that broker (nominee) with respect to the reporting of cost basis and available elections for the shareholder’s account.
If a shareholder holds Fund shares directly, the shareholder may request that the shareholder’s cost basis be calculated and reported using any one of a number of IRS-approved alternative methods. A shareholder should contact the applicable Fund to make, revoke or change such an election. If a shareholder does not affirmatively elect a cost basis method, the Fund will use the average cost basis method as its default method for determining the cost basis for such shareholder.
Please note that shareholders will continue to be responsible for calculating and reporting the cost basis, as well as any corresponding gains or losses, of Fund shares that were purchased prior to January 1, 2012 that are subsequently redeemed, exchanged or sold. Shareholders are encouraged to consult their tax advisors regarding the application of the cost basis reporting rules to them and, in particular, which cost basis calculation method a shareholder should elect. In addition, because each Fund is not required to, and in many cases does not possess the information to, take into account all possible basis, holding period or other adjustments into account in reporting cost basis information to shareholders, shareholders also should carefully review the cost basis information provided to them by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on a federal income tax return.
Under Treasury regulations, if a shareholder recognizes a loss with respect to Fund shares of $2 million or more for an individual shareholder, or $10 million or more for a corporate shareholder, in any single taxable year (or greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. Shareholders who own portfolio securities directly are in many cases excepted from this reporting requirement but, under current guidance, shareholders of regulated investment companies are not excepted. A shareholder who fails to make the required disclosure to the IRS may be subject to substantial penalties. The fact that a loss is reportable under these regulations does not affect the legal determination of whether or not the taxpayer’s treatment of the loss is proper. Shareholders should consult with their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
Shareholders that are exempt from U.S. federal income tax, such as retirement plans that are qualified under Section 401 of the Code, generally are not subject to U.S. federal income tax on Fund dividends or distributions or on sales or exchanges of Fund shares. However, a tax-exempt shareholder may recognize unrelated business taxable income if (1) the acquisition of Fund shares was debt financed or (2) the Fund recognizes certain “excess inclusion income” derived from direct or indirect investments (including from an investment in a REIT) in (a) residual interests in a real estate mortgage investment conduit or (b) equity interests in a taxable mortgage pool if the amount of such income that is recognized by the Fund exceeds the Fund’s investment company taxable income (after taking into account the deductions for dividends paid by the Fund).
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Shareholders who fail to provide certain required certifications to a Fund will be subject to backup withholding at the rate of 24% on all dividends (including exempt-interest dividends), distributions, and redemption proceeds paid by the Fund. Backup withholding is not a separate tax, and it may be recovered by filing a timely U.S. federal income tax return and claiming it as a credit.
U.S. persons who own (either directly or indirectly) more than 50% of the vote or value of a mutual fund, such as the Funds, could be required to report each year their “financial interest” in such fund’s “foreign financial accounts,” if any, on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”). Shareholders should consult their tax advisors regarding the applicability of this reporting requirement to their individual circumstances.
The foregoing discussion relates solely to U.S. federal income tax laws as applicable to shareholders who are U.S. persons (i.e., U.S. citizens or residents, domestic corporations and partnerships, and certain trusts and estates) and hold their shares as capital assets and is not intended to be a complete discussion of all federal tax consequences. Except as otherwise provided, this discussion does not address the special tax rules that may be applicable to particular types of investors, such as financial institutions, insurance companies, securities dealers or tax-exempt or tax-deferred plans, accounts or entities. Shareholders who are not U.S. persons may be subject to a non-resident alien U.S. withholding tax at the rate of 30% or at a lower treaty rate on certain dividends from a Fund. The withholding tax does not apply to capital gain dividends or to dividends derived from a Fund’s net interest income or short-term capital gains and so reported by the Fund.
Under legislation known as “FATCA” ​(the Foreign Account Tax Compliance Act), each Fund will be required to withhold 30% of certain ordinary dividends it pays to shareholders that fail to meet prescribed information reporting or certification requirements. In general, no such withholding will be required with respect to a U.S. person that timely provides a valid IRS Form W-9 or a non-U.S. individual that timely provides a valid IRS Form W-8BEN. A non-U.S. entity that invests in the Fund will need to provide the Fund with documentation properly certifying the entity’s status under FATCA in order to avoid FATCA withholding.
FINANCIAL STATEMENTS
Each Fund’s financial statements for the year ended December 31, 2021, including the financial highlights for each of the five fiscal years in the period ended December 31, 2021, appearing in the 2021 Annual Report to Shareholders and the report thereon of PricewaterhouseCoopers LLP, an independent registered public accounting firm, appearing therein, are incorporated by reference in this SAI.
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DESCRIPTION OF RATINGS
Description of Standard & Poor’s Ratings Services
AAA
An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
A
An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB
An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB
An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B
An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
CCC
An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
B-39
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CC
An obligation rated ‘CC’ is currently highly vulnerable to nonpayment.
C
A subordinated debt or preferred stock obligation rated ‘C’ is currently highly vulnerable to nonpayment. The ‘C’ rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A ‘C’ also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.
D
An obligation rated ‘D’ is in payment default.
Description of Moody’s Investors Service, Inc. Ratings
Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A
Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa
Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Ba
Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject to high credit risk.
Caa
Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C
Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
B-40