<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
Charles E. Reed
Leo R. Futia
John W. Chandler
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Alan N. Hoffman
VICE PRESIDENT
Stephen E. Grant
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT and
SECRETARY/TREASURER
Jack M. Houston
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
</TABLE>
THIS REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE
FROM THE DISTRIBUTOR).
VLF612156
------------------------------------
ANNUAL REPORT
------------------------------------
DECEMBER 31, 1996
----------------------------------------
VALUE LINE
LEVERAGED GROWTH
INVESTORS, INC.
[LOGO]
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
To Our Value Line Leveraged
- -------------------------------------------
TO OUR SHAREHOLDERS:
Looking back just over a year, you may recall that 1995 was a great year for
stocks; broad, unmanaged market indexes like the Standard & Poor's 500 were up
almost 38% for the year. The experts warned then that 1996 probably wouldn't be
a stock-market disaster, but it was unlikely that we'd see another year of
double-digit returns.
Well, the experts were wrong, and 1996 was another excellent year to be invested
in U.S. equities. Value Line Leveraged Growth Investors posted a solid 22.31%
return for the year (including reinvested dividends), almost matching the S&P
500's very strong 22.96% total return. For the second half of the year, your
Fund returned 10.13%, versus 11.68% for the benchmark S&P 500.
A large portion of our performance in 1996 rested on the splendid record of the
stocks in those sectors where Leveraged Growth has been focusing, including
technology, financial services, and the health-care and drug arena. In terms of
major sectoral changes, we began to establish positions in the energy area
(especially oilfield services) over the last year, though energy stocks have
previously not been a holding.
We continue to be relatively sanguine about prospects for stock investments in
1997. Our expectations rest on the likelihood of continued modest economic
growth with little inflationary pressure (see our accompanying Economic
Observations for further details), the prospects for a bipartisan federal budget
agreement that addresses the deficit, and the positive outlook for earnings
gains among the first-rate companies whose stocks are held in the portfolio. If
there is a risk on the horizon, it's that the economy could expand too rapidly
and prompt the Federal Reserve to move toward a tighter monetary policy, which
would result in rising interest rates and a contraction in stock prices.
As always, we appreciate your interest in and support of Value Line Leveraged
Growth Investors, and we offer you our best wishes for health and prosperity as
1997 unfolds.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
February 26, 1997
- --------------------------------------------------------------------------------
2
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Growth Investors Shareholders
- -------------------------------------------
ECONOMIC OBSERVATIONS
The signs continue to point toward a moderation in the rate of economic growth.
For example, not only are the nation's factories a little less busy these days,
but improvements in the auto, housing, and retail markets all appear to be
leveling off. To be sure, there are still isolated instances in which selected
sectors are gaining in strength. On the whole, though, the next few quarters
should see a somewhat slower rate of economic expansion, with real,
inflation-adjusted gross domestic product increasing on an average of 2.0%-2.5%.
Inflation, meanwhile, continues to be practically nonexistent, with prices at
both the producer (or wholesale) and consumer levels either falling or going up
marginally. This healthy inflation trend, moreover, is unlikely to be reversed
anytime soon given the lack of serious shortages on either the labor or the raw
materials fronts.
Interest rates, meanwhile, reflecting the very modest rate of economic growth
and the benign nature of inflation, are unlikely to change all that much over
the next year. Nevertheless, we caution that recent remarks by Federal Reserve
Chairman Alan Greenspan, in which he noted that the Fed has, in the past,
occasionally raised rates before higher inflation actually took hold would seem
to suggest that whatever changes in borrowing costs may evolve over the next few
quarters will probably involve a move toward higher rather than lower rates.
Finally, we believe that these basic themes, in which moderation prevails on the
economic growth, inflation, and interest-rate fronts, will remain in place over
the course of the current year. In fact, barring an unsettling series of
currency, political, or military shocks in the international markets, overall
stability should persist into 1998.
*PERFORMANCE DATA:
<TABLE>
<CAPTION>
GROWTH OF
AN ASSUMED
AVERAGE ANNUAL INVESTMENT OF
TOTAL RETURN $10,000
--------------- -------------
<S> <C> <C>
1 year ended 12/31/96............................ 22.31% $ 12,231
5 years ended 12/31/96........................... 12.84% $ 18,295
10 years ended 12/31/96........................... 14.32% $ 38,121
</TABLE>
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL-GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE
OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ITS ORIGINAL COST.
- --------------------------------------------------------------------------------
3
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
VALUE LINE LEVERAGED GROWTH INVESTORS
AND THE S&P 500 STOCK INDEX*
Value Line Leveraged Growth
Investors Fund S&P 500
10000 10000
01/01/1987 10281 10527
12/31/1987 10941 12269
12/31/1988 14470 16148
12/31/1989 14237 15655
12/31/1990 20837 20425
12/31/1991 20324 21981
12/31/1992 23616 24197
12/31/1993 22740 24517
12/31/1994 31168 33730
12/31/1995 38121 41474
12/31/1996
</TABLE>
(PERIOD COVERED IS 1/1/87 TO 12/31/96)
- --------------------------------------------------------------------------------
*THE STANDARD & POOR'S 500 INDEX (S&P 500) IS AN UNMANAGED INDEX THAT IS
REPRESENTATIVE OF THE LARGER-CAPITALIZATION STOCKS TRADED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Portfolio Highlights at December 31, 1996 (unaudited)
- -------------------------------------------
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS*
<S> <C> <C> <C>
VALUE PERCENTAGE OF
ISSUE SHARES (IN THOUSANDS) NET ASSETS
- ---------------------------------------------------------------------------------------------------
SunAmerica Inc.................................. 320,000 $ 14,200 3.8%
EMC Corp........................................ 357,300 11,836 3.2
Intel Corp...................................... 90,000 11,784 3.2
3Com Corp....................................... 150,000 11,006 3.0
Gillette Co..................................... 120,000 9,330 2.5
Citicorp........................................ 90,000 9,270 2.5
Green Tree Financial Corp....................... 200,000 7,725 2.1
Deere & Co...................................... 187,500 7,617 2.1
Fifth Third Bancorp............................. 120,000 7,537 2.0
Harley-Davidson, Inc............................ 160,000 7,520 2.0
<CAPTION>
FIVE LARGEST INDUSTRY CATEGORIES*
VALUE PERCENTAGE OF
INDUSTRY (IN THOUSANDS) NET ASSETS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Computer & Peripherals.......................... $ 44,636 12.0%
Computer Software & Services.................... 35,341 9.5
Medical Supplies................................ 25,335 6.9
Telecommunications Equipment.................... 19,219 5.2
Financial Services.............................. 17,776 4.8
<CAPTION>
FIVE LARGEST NET SECURITY PURCHASES*+
COST
ISSUE (IN THOUSANDS)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Great Atlantic & Pacific Tea Co., Inc........... $4,397
United States Surgical Corp..................... 4,306
Monsanto Co..................................... 4,035
Louisiana Land & Exploration Co................. 4,013
Cascade Communications Corp..................... 3,970
<CAPTION>
FIVE LARGEST NET SECURITY SALES*+
PROCEEDS
ISSUE (IN THOUSANDS)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Hewlett-Packard Co.............................. $8,096
Clayton Homes, Inc.............................. 6,798
International Business Machines Corp............ 6,165
Merck & Co., Inc................................ 5,837
McDonald's Corp................................. 4,642
</TABLE>
* EXCLUSIVE OF FIXED INCOME SECURITIES
+ FOR THE SIX MONTH PERIOD ENDED 12/31/96
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Schedule of Investments December 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (IN THOUSANDS)
<C> <S> <C>
- -----------------------------------------------------------------------------------------------
COMMON STOCKS (97.5%)
ADVERTISING (1.2%)
100,000 Omnicom Group, Inc.......................................... $ 4,575
AEROSPACE/DEFENSE (1.6%)
90,000 McDonnell Douglas Corp...................................... 5,760
BANK (4.0%)
90,000 Bank of Boston Corp......................................... 5,783
90,000 Citicorp.................................................... 9,270
---------------
15,053
BANK-MIDWEST (2.0%)
120,000 Fifth Third Bancorp......................................... 7,537
BEVERAGE-
SOFT DRINK (2.0%)
140,000 Coca-Cola Co................................................ 7,368
CHEMICAL-BASIC (1.2%)
110,000 Monsanto Co................................................. 4,276
CHEMICAL-
DIVERSIFIED (1.1%)
100,000 Millipore Corp.............................................. 4,137
CHEMICAL-SPECIALTY (2.9%)
240,000 *Airgas, Inc................................................ 5,280
120,000 Praxair, Inc................................................ 5,535
---------------
10,815
COMPUTER &
PERIPHERALS (12.0%)
60,000 *Cabletron Systems, Inc..................................... 1,995
60,000 *Cascade Communications Corp................................ 3,307
110,000 *Cisco Systems, Inc......................................... 6,999
140,000 *Dell Computer Corp......................................... 7,438
357,300 *EMC Corp................................................... 11,836
80,000 *Sun Microsystems, Inc...................................... 2,055
150,000 *3Com Corp.................................................. 11,006
---------------
44,636
<CAPTION>
VALUE
SHARES (IN THOUSANDS)
<C> <S> <C>
- -----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE
& SERVICES (9.5%)
50,000 *Ceridian Corp.............................................. $ 2,025
126,000 Computer Associates International, Inc...................... 6,269
180,000 First Data Corp............................................. 6,570
75,000 *FIserv Inc................................................. 2,756
80,000 *Microsoft Corp............................................. 6,610
180,000 *Oracle Systems Corp........................................ 7,515
70,000 *Parametric Technology Corp................................. 3,596
---------------
35,341
DIVERSIFIED
COMPANIES (2.5%)
100,000 Danaher Corp................................................ 4,662
112,500 *Thermo Electron Corp....................................... 4,641
---------------
9,303
DRUG (3.5%)
90,000 *Amgen, Inc................................................. 4,894
36,000 Pfizer, Inc................................................. 2,983
80,000 Schering-Plough Corp........................................ 5,180
---------------
13,057
ELECTRONICS (0.8%)
50,000 Avnet, Inc.................................................. 2,913
FINANCIAL SERVICES (4.8%)
315,000 *CUC International, Inc..................................... 7,481
40,000 Finova Group, Inc........................................... 2,570
200,000 Green Tree Financial Corp................................... 7,725
---------------
17,776
GROCERY (1.3%)
150,000 Great Atlantic & Pacific Tea Co., Inc....................... 4,781
HEALTHCARE INFORMATION
SYSTEMS (1.6%)
100,000 HBO & Co.................................................... 5,938
HOTEL/GAMING (1.1%)
160,000 Hilton Hotels Corp.......................................... 4,180
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
DECEMBER 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL
SERVICES (0.6%)
65,000 *Robert Half International, Inc............................. $ 2,234
INSURANCE-
DIVERSIFIED (1.8%)
20,000 American International Group, Inc........................... 2,165
60,000 MGIC Investment Corp........................................ 4,560
---------------
6,725
INSURANCE-LIFE (3.8%)
320,000 SunAmerica, Inc............................................. 14,200
MACHINERY (0.7%)
50,000 Dover Corp.................................................. 2,513
MACHINERY-CONSTRUCTION
& MINING (2.1%)
187,500 Deere & Co.................................................. 7,617
MEDICAL SERVICES (1.8%)
100,000 *HealthCare COMPARE Corp.................................... 4,237
80,000 Omnicare, Inc............................................... 2,570
---------------
6,807
MEDICAL SUPPLIES (6.9%)
40,000 *Boston Scientific Corp..................................... 2,400
160,000 Invacare Corp............................................... 4,400
100,000 Johnson & Johnson........................................... 4,975
80,000 Medtronic, Inc.............................................. 5,440
140,000 Stryker Corp................................................ 4,183
100,000 United States Surgical Corp................................. 3,937
---------------
25,335
OFFICE EQUIPMENT
& SUPPLIES (2.0%)
120,000 Danka Business Systems PLC (ADR)............................ 4,245
185,625 *Staples, Inc............................................... 3,353
---------------
7,598
<CAPTION>
VALUE
SHARES (IN THOUSANDS)
<C> <S> <C>
- -----------------------------------------------------------------------------------------------
OILFIELD SERVICES/
EQUIPMENT (0.9%)
65,000 *BJ Services Co............................................. $ 3,315
PETROLEUM-
PRODUCING (1.0%)
70,000 Louisiana Land & Exploration Co............................. 3,754
RAILROAD (1.0%)
95,000 *Wisconsin Central Transportation Corp...................... 3,764
RECREATION (2.0%)
160,000 Harley-Davidson, Inc........................................ 7,520
RETAIL BUILDING
SUPPLY (1.1%)
80,000 Home Depot, Inc............................................. 4,010
RETAIL-
SPECIAL LINES (2.8%)
220,000 *CompUSA, Inc............................................... 4,538
120,000 Gap, Inc.................................................... 3,615
100,000 *PETsMART, Inc.............................................. 2,187
---------------
10,340
RETAIL STORE (2.0%)
140,625 Dollar General Corp......................................... 4,500
70,000 *Kohl's Corp................................................ 2,748
---------------
7,248
SEMICONDUCTOR (3.2%)
90,000 Intel Corp.................................................. 11,784
SHOE (1.1%)
70,000 NIKE, Inc. Class B.......................................... 4,183
TELECOMMUNICATIONS
EQUIPMENT (5.2%)
200,000 *ADC Telecommunications, Inc................................ 6,225
67,500 *Andrew Corp................................................ 3,582
200,000 *Newbridge Networks Corp.................................... 5,650
100,000 *Tellabs, Inc............................................... 3,762
---------------
19,219
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
SCHEDULE OF INVESTMENTS
- -------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER
(IN THOUSANDS) SHARE AMOUNT)
- -----------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATION
SERVICES (1.9%)
35,000 Cincinnati Bell, Inc........................................ $ 2,157
260,000 *Loral Space & Communications Ltd........................... 4,777
---------------
6,934
TOILETRIES/
COSMETICS (2.5%)
120,000 Gillette Co................................................. 9,330
---------------
TOTAL COMMON STOCKS AND TOTAL INVESTMENT SECURITIES (97.5%)
(COST $200,063)........................................... 361,876
---------------
SHORT-TERM INVESTMENTS (2.2%)
U.S. TREASURY
OBLIGATIONS (0.8%)
$ 213 **U.S. Treasury Bills 4.99%, 3/6/97......................... 211
1,060 U.S. Treasury Bills 4.85%, 3/6/97........................... 1,051
1,600 **U.S. Treasury Bills 5.02%, 3/13/97........................ 1,584
---------------
2,846
<CAPTION>
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER
(IN THOUSANDS) SHARE AMOUNT)
<C> <S> <C>
- -----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.4%)
(INCLUDING ACCRUED INTEREST)
$ 5,100 Collateralized by $5,085,000 U.S. Treasury Notes 6 3/4%, due
5/31/99, with a value of $5,213,000 (with Morgan Stanley &
Co., Inc. 6 1/4%, dated 12/31/96, due 1/2/97, delivery
value of $5,102,000)...................................... $ 5,101
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST $7,947)............................................. 7,947
---------------
CASH AND RECEIVABLES
LESS LIABILITIES (0.3%)....................................................... 1,237
---------------
NET ASSETS (100%)............................................................. $ 371,060
---------------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER OUTSTANDING SHARE
($371,060,000 DIVIDED BY 11,776,700 SHARES
OF CAPITAL STOCK OUTSTANDING).................................................
$ 31.51
---------------
</TABLE>
* NON-INCOME PRODUCING
** THESE SECURITIES ARE SEGREGATED TO COVER INITIAL MARGIN
REQUIREMENTS ON THE FOLLOWING OPEN SHORT FINANCIAL FUTURES CONTRACTS:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED CONTRACT
CONTRACTS LOSS VALUE
(IN THOUSANDS)
<S> <C> <C> <C>
-------------------------------------------
S & P 500 Index
March/97.................................................. 200 $ 506 $ 74,450
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
Statement of Assets and Liabilities
at December 31, 1996
<TABLE>
<CAPTION>
DOLLARS
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNT)
-------------------
<S> <C>
ASSETS:
Investment securities, at value
(Cost--$200,063).......................................... $ 361,876
Short-term investments (Cost--$7,947)....................... 7,947
Cash........................................................ 81
Variation margin on futures contracts....................... 1,460
Dividends receivable........................................ 185
Receivable for capital shares sold.......................... 86
--------
TOTAL ASSETS............................................ 371,635
--------
LIABILITIES:
Payable for capital shares repurchased...................... 213
Accrued expenses:
Advisory fee.............................................. 237
Other..................................................... 125
--------
TOTAL LIABILITIES....................................... 575
--------
NET ASSETS.................................................. $ 371,060
--------
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value (authorized 50,000,000,
outstanding 11,776,700 shares)............................ $ 11,777
Additional paid-in capital.................................. 198,386
Accumulated net realized loss on investments................ (410)
Unrealized net appreciation of investments.................. 161,307
--------
NET ASSETS.................................................. $ 371,060
--------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
OUTSTANDING SHARE ($371,060,000 DIVIDED BY 11,776,700
SHARES OUTSTANDING)....................................... $ 31.51
--------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C>
DOLLARS)
(IN THOUSANDS
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $3).......... $ 2,446
Interest.................................................... 731
---------------
Total Income............................................ 3,177
---------------
EXPENSES:
Advisory fee................................................ 2,815
Transfer agent fees......................................... 146
Auditing and legal fees..................................... 49
Custodian fees.............................................. 47
Telephone and wire charges.................................. 33
Commitment fee.............................................. 32
Registration and filing fees................................ 28
Interest expense............................................ 27
Printing and stationery..................................... 27
Insurance, dues and other................................... 19
Postage..................................................... 17
Directors' fees and expenses................................ 13
---------------
Total Expenses before Custody Credits................... 3,253
Less: Custody Credits................................... (4)
---------------
Net Expenses............................................ 3,249
---------------
INVESTMENT LOSS--NET........................................ (72)
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NET:
Realized Gain--Net (includes $3,472 loss on futures
contracts)............................................... 32,084
Change in Unrealized Appreciation (includes $506
depreciation on futures contracts outstanding)........... 43,388
---------------
NET REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON
INVESTMENTS............................................... 75,472
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 75,400
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATIONS:
Investment (loss) income--net......... $ (72) $ 980
Realized gain on investments--net..... 32,084 39,174
Change in unrealized appreciation..... 43,388 58,015
----------------------
Net increase in net assets from
operations............................ 75,400 98,169
----------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net................ (4) (976)
Realized gain from investment
transactions--net..................... (35,996) (33,913)
----------------------
Total distributions................... (36,000) (34,889)
----------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares.......... 143,236 155,520
Proceeds from reinvestment of
distributions to shareholders......... 34,250 33,320
Cost of shares repurchased............ (183,106) (179,643)
----------------------
(Decrease) Increase from capital share
transactions.......................... (5,620) 9,197
----------------------
TOTAL INCREASE.......................... 33,780 72,477
NET ASSETS:
Beginning of year..................... 337,280 264,803
----------------------
End of year........................... $ 371,060 $ 337,280
----------------------
UNDISTRIBUTED INVESTMENT INCOME--NET, AT
END OF YEAR........................... $ -- $ 4
----------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
Value Line Leveraged Growth Investors, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company whose sole investment objective is to realize
capital growth. The Fund may employ "leverage" by borrowing money and using it
for the purchase of additional securities. Borrowing for investment increases
both investment opportunity and investment risk.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates of certain reported
amounts in the financial statements. Actual results may differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
(A) SECURITY VALUATION. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market system are
valued at the closing sales price on the date as of which the net asset value is
being determined. In the absence of closing sales prices for such securities and
for securities traded in the over-the- counter market, the security is valued at
the midpoint between the latest available and representative asked and bid
prices. Unrealized gain or loss on open futures contracts is calculated based on
the closing price reported on the exchange on which the futures contracts are
traded. Securities for which market quotations are not readily available or
which are not readily marketable and all other assets of the Fund are valued at
fair value as the Board of Directors may determine in good faith. Short-term
instruments with maturities of 60 days or less, at the date of purchase, are
valued at amortized cost which approximates market value.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization, and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no Federal income tax or excise tax provision is required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are accounted
for on the date the securities are purchased or sold. Interest income is accrued
as earned. Realized gains and losses on sales of securities are calculated for
financial accounting and Federal income tax purposes on the identified cost
basis. Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
(E) AMORTIZATION. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
(F) FINANCIAL FUTURES CONTRACTS. A financial futures contract is an agreement
between two parties to buy or sell financial instruments at a set price on a
future date. Upon entering into such a contract the Fund is required to pledge
to the broker cash, or U.S. Government securities, equal to the minimum "initial
margin" requirements of the applicable futures exchange. Pursuant to the
contract,
- --------------------------------------------------------------------------------
11
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
- -------------------------------------------
the Fund agrees to receive from or to pay the broker an amount of cash equal to
the daily fluctuation in the value of the contract. Such receipts or payments
are known as "variation margin" and are recorded by the Fund as unrealized gains
or losses. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
2.CAPITAL SHARE TRANSACTIONS, DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Transactions in capital stock were as follows: (in thousands except per share
amounts)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
--------------------
Shares sold....................................... 4,499 5,497
Shares issued to shareholders in reinvestment of
dividends and distributions..................... 1,077 1,178
--------------------
5,576 6,675
Shares repurchased................................ 5,633 6,265
--------------------
Net (decrease) increase........................... (57) 410
--------------------
Dividends per share from net investment income.... $ .0004 $ .091
--------------------
Distributions per share from net realized gains... $ 3.3810 $ 3.159
--------------------
</TABLE>
3.PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
<TABLE>
<CAPTION>
1996
--------------
(IN THOUSANDS)
<S> <C>
PURCHASES:
Investment Securities............................. $ 123,767
--------------
SALES:
Investment Securities............................. $ 173,499
--------------
</TABLE>
At December 31, 1996, the aggregate cost of investments securities and
repurchase agreements for federal income tax purposes, was $208,306,000. The
aggregate appreciation and depreciation of investments at December 31, 1996,
based on a comparison of investment values and their costs for federal income
tax purposes was $163,739,000 and $2,222,000, respectively, resulting in a net
appreciation of $161,517,000.
Permanent book-tax differences relating to shareholder distributions are
reclassified within the composition of net asset accounts. In the current year
the net investment loss of $72,000 was reclassified to paid-in capital. Net
investment loss, net realized gain (loss), and net assets were not affected by
this reclassification.
4.INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES, AND
TRANSACTIONS WITH AFFILIATES
An advisory fee of $2,815,000 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the year ended December 31, 1996.
This was computed at an annual rate of 3/4 of 1% of average daily net assets for
the year and paid monthly. The Adviser provides research, investment programs
and supervision of the investment portfolio and pays costs of administrative
services, office space, equipment and compensation of administrative,
bookkeeping and clerical personnel necessary for managing the affairs of the
Fund. The Adviser also provides persons, satisfactory to the Fund's Board of
Directors, to act as officers and employees of the Fund and pays their salaries
and wages. The Fund bears all other costs and expenses.
A fee of $2,880 for printing services was paid or payable to the Adviser for the
year ended December 31, 1996.
Certain officers and directors of the Adviser and its wholly owned subsidiary,
Value Line Securities, Inc. (the Fund's distributor and a registered
broker/dealer), are also officers and a director of the Fund. During the year
ended December 31, 1996, the Fund paid brokerage commissions totalling $202,000
to the distributor, which clears its transactions through unaffiliated brokers.
- --------------------------------------------------------------------------------
12
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
- -------------------------------------------
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan, owned 707,000 shares of the Fund's capital stock, representing
6.1% of the outstanding shares at December 31, 1996.
5.BORROWING ARRANGEMENT
The Fund has a line of credit agreement with State Street Bank and Trust (SSBT),
in the amount of $37,500,000. The terms of the agreement are as follows: The
first $12.5 million is available on a committed basis which at the Fund's option
may be either at the Bank's prime rate or at the Federal Funds Rate plus 1%,
whichever is less, and will be subject to a commitment fee of 1/4 of 1% on the
unused portion thereof; amounts in excess of $12.5 million are made available on
an unsecured basis at the same interest rate options stated above.
The Fund had no borrowings outstanding at December 31, 1996. The weighted
average amount of bank loans outstanding for the year ended December 31, 1996,
amounted to approximately $398,000 at a weighted average interest rate of 6.7%.
For the year then ended, interest expense of approximately $27,000 and
commitment fees of approximately $32,000 relating to borrowings under the
agreement were paid or payable to SSBT.
6.FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
During the year, the Fund sold stock index futures contracts to hedge its
portfolio positions against price fluctuations. Futures contracts involve
elements of credit and market risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The contract amounts of these futures
contracts reflect the extent of the Fund's exposure to off-balance sheet risk.
At December 31, 1996, the Fund held an open short position of 200 S&P 500 index
contracts expiring March 1997 with a notional value of $74,450,000.
The Fund purchases or sells futures contracts only on exchanges or a board of
trade. The exchange or board of trade acts as the counterparty to the Fund's
futures transactions; therefore, the Fund's credit risk is limited to the
failure of the exchange or board of trade. The Fund bears the market risk which
arises from any changes in security values.
- --------------------------------------------------------------------------------
13
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR.................. $ 28.50 $ 23.18 $ 24.67 $ 22.15 $ 25.64
----------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) income.................. (.01) .09 .12 .06 .16
Net gains or losses on securities
(both realized and unrealized).............. 6.40 8.48 (1.05) 3.50 (.81)
----------------------------------------------------------------------
Total from investment operations.............. 6.39 8.57 (.93) 3.56 (.65)
----------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income.......... # (.09) (.12) (.06) (.15)
Distributions from capital gains.............. (3.38) (3.16) (.31) (.98) (2.69)
Distributions in excess of capital gains...... -- -- (.13) -- --
----------------------------------------------------------------------
Total distributions........................... (3.38) (3.25) (.56) (1.04) (2.84)
----------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR........................ $ 31.51 $ 28.50 $ 23.18 $ 24.67 $ 22.15
----------------------------------------------------------------------
TOTAL RETURN........................................ +22.31% +37.06% -3.71% +16.20% -2.46%
----------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).............. $ 371,060 $ 337,280 $ 264,803 $ 302,345 $ 290,547
Ratio of operating expenses to average net assets... .87%(1) .88% .89% .90% .93%
Ratio of interest expense to average net assets..... .01% -- -- .02% --
Ratio of net investment (loss) income to average net
assets............................................ (.02)% 31% .49% .22% .62%
Portfolio turnover rate............................. 34% 54% 49% 80% 208%
Average commissions paid per share of common stock
investments purchased/sold........................ $ .049(2) -- -- -- --
Average amount of debt outstanding during the year
(in thousands).................................... $ 398 $ 44 -- $ 1,651 --
Average number of shares outstanding during the year
(in thousands).................................... 11,752 11,357 11,635 12,410 12,530
Average amount of debt per outstanding share during
the year.......................................... $ .03 $ .004 -- $ .13 --
</TABLE>
# DIVIDEND PAID WAS LESS THAN ONE CENT.
(1)BEFORE OFFSET FOR CUSTODY CREDITS.
(2)DISCLOSURE EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER 9/1/95.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Report of Independent Accountants
- -------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Leveraged Growth
Investors, Inc. (the "Fund") at December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
February 18, 1997
- --------------------------------------------------------------------------------
15
<PAGE>
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
The Value Line Family of Funds
- -------------------------------------------
1950--THE VALUE LINE FUND seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952--THE VALUE LINE INCOME FUND'S primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956--THE VALUE LINE SPECIAL SITUATIONS FUND seeks to obtain long-term growth of
capital by investing not less than 80% of its assets in "special situations". No
consideration is given to achieving current income.
1972--VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979--THE VALUE LINE CASH FUND, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981--VALUE LINE U.S. GOVERNMENT SECURITIES FUND seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value to
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983--VALUE LINE CENTURION FUND* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984--THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985--VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986--VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income corporate securities.
1987--VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal
individual income taxes while avoiding undue risk to principal.
1987--VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times.
1992--VALUE LINE INTERMEDIATE BOND FUND seeks high current income consistent
with low volatility of principal by investing in a diversified portfolio of
investment-debt securities with a dollar-weighted average portfolio maturity of
between three and ten years.
1993--VALUE LINE SMALL-CAP GROWTH FUND invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993--VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
1995--VALUE LINE U.S. MULTINATIONAL COMPANY FUND'S investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
- --------------------------------------------------------------------------------
16
