- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
Value Line
Leveraged Growth
Investors, Inc.
[LOGO]
----------
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Leveraged Growth Investors, Inc.
To Our Value Line Leveraged
- --------------------------------------------------------------------------------
To Our Shareholders:
The second half of 1997 witnessed an extremely difficult environment for equity
investing, but Leveraged Growth Investors managed to outperform the broad market
(as reflected in the Standard & Poor's 500 Index) during that period. The
second-half total return (including reinvested dividends) for your Fund amounted
to 11.36%, or more than three-quarters of a percentage point better than the
unmanaged S&P 500. However, our negative experience during the first half of the
year (as reported in our June 30th Semiannual Report) caused full-year results
to lag the overall market.
Leveraged Growth* S&P 500*
----------------- --------
Last 6 months
of the year .............................. 11.36% 10.58%
Full year ................................ 23.79% 33.36%
* Includes reinvested dividends.
The primary condition affecting stock-market activity since June 30th has been
the economic turbulence in several Asian countries, including Thailand,
Singapore, Malaysia, Indonesia, and South Korea. We continue to monitor these
Pacific Rim jurisdictions carefully, and it appears that some U.S. companies
(especially in the semiconductor industry and other technology sectors) may be
exposed to negative currency relationships and a weakening economy. On the
whole, however, we believe that the market's reaction to the Asian situation has
been overdone, and that barring any unexpected worsening in the situation
overtime, most of the damage to U.S. investors is behind us.
One compensatory effect of the Asian disruption has been the positive
performance of the domestic bond market, as overseas investors have sought the
relative security of U.S. Treasury instruments. This trend toward low and stable
interest rates will benefit the equity market as well, as lower rates generally
result in expanding price-earnings multiples, which will push stock prices
higher.
We expect the economy to expand at a moderate pace (leading to rising corporate
earnings) and productivity to continue to improve (see our accompanying Economic
Observations insert). Meanwhile, inflationary pressures are decidedly muted and,
as noted above, interest rates remain low and stable. All of this should
translate into a healthy environment for equity investing, especially among the
issues favored by the Value Line Timeliness Ranking System.
Please accept our thanks for your continued interest in Value Line. We wish you
the best for a happy, healthy, and prosperous 1998.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chyairman and President
February 2, 1998
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2
<PAGE>
Value Line Leveraged Growth Investors, Inc.
Growth Investors Shareholders
- --------------------------------------------------------------------------------
Economic Observations
It has now been a number of months since the crisis in Asia first made the
headlines in this country, and about that long since the pessimists began to
predict that there would be serious repercussions over here. During that time,
however, there has been little in the economic reports to suggest that this
feared sharp falloff in business activity was taking place on a wide scale.
True, a number of companies are now noting some Asia-related weakness, with
cautionary statements accompanying certain profit reports. In fact, the Asian
problems do raise concerns regarding earnings prospects through the first half
of this year--at least. For the most part, however, economic activity is
sufficiently strong to suggest that corporate earnings will continue to rise,
albeit at a modest pace.
Encouragingly, this long-running business expansion looks as though it will
persist. Overall, the current tenor of the economic data would seem to be
consistent with a growth rate of 2.0%-2.5% for the next several quarters, versus
perhaps 3% had the difficulties in Asia not evolved. We add, however, that even
our reduced expectations assume that the problems in that region will begin to
ease selectively over the next several months, as efforts by the world's leading
banking authorities gradually produce the desired stability.
Meantime, there continues to be limited pressure on the inflation front, with
prices for industrial goods, energy products, and precious metals continuing in
a flat to lower trend. Our sense, for now, is that these favorable pricing
trends will stay intact for the balance of the year. Overall, with the economy
likely to remain on a modest, yet sustainable, growth track, and with inflation
expected to hold at low levels, interest rates should continue to be relatively
stable, thus lending some support to the financial markets during the months
ahead.
*Performance Data:
Growth of
Average an Assumed
Annual Investment of
Total Return $10,000
------------ -------------
1 year ended 12/31/97 ...................... 23.79% $12,379
5 years ended 12/31/97 .................... 18.35% $23,220
10 years ended 12/31/97 .................... 16.46% $45,904
* 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.
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3
<PAGE>
Value Line Leveraged Growth Investors, Inc.
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN VALUE LINE LEVERAGED GROWTH INVESTORS
AND THE S&P 500 STOCK INDEX*
[THE FOLLOWING TABLE WAS RPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
Value Line
Leveraged Growth Investors S & P 500
-------------------------- ---------
1/1/88 $10,000 $10,000
3/31/88 $10,397 $10,571
6/30/88 $10,915 $11,273
9/30/88 $10,426 $11,308
12/31/88 $10,643 $11,655
3/31/89 $11,455 $12,479
6/30/89 $12,289 $13,579
9/30/89 $13,998 $15,031
12/31/89 $14,075 $15,339
3/31/90 $13,545 $14,879
6/30/90 $14,928 $15,813
9/30/90 $12,588 $13,642
12/31/90 $13,849 $14,871
3/31/91 $16,938 $17,031
6/30/91 $16,578 $16,992
9/30/91 $17,907 $17,901
12/31/91 $20,268 $19,402
3/31/92 $18,853 $18,912
6/30/92 $17,090 $19,271
9/30/92 $17,818 $19,879
12/31/92 $19,769 $20,880
3/31/93 $20,554 $21,791
6/30/93 $21,340 $21,897
9/30/93 $23,687 $22,463
12/31/93 $22,971 $22,984
3/31/94 $21,761 $22,112
6/30/94 $20,550 $22,205
9/30/94 $22,068 $23,291
12/31/94 $22,120 $23,288
3/31/95 $23,990 $25,555
6/30/95 $27,015 $27,995
9/30/95 $30,374 $30,219
12/31/95 $30,318 $32,039
3/31/96 $32,584 $33,758
6/30/96 $33,669 $35,273
9/30/96 $36,530 $36,363
12/31/96 $37,081 $39,395
3/31/97 $34,692 $40,446
6/30/97 $41,223 $47,507
9/30/97 $47,142 $51,069
12/31/97 $45,905 $52,535
(Period covered is 1/1/88 to 12/31/97)
- --------------------------------------------------------------------------------
* 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.
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4
<PAGE>
Value Line Leveraged Growth Investors, Inc.
Portfolio Highlights at December 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
Ten Largest Holdings
<TABLE>
<CAPTION>
Value Percentage of
Issue Shares (in thousands) Net Assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dell Computer Corp. ....................................... 200,000 $16,800 3.9%
SunAmerica Inc. ........................................... 360,000 15,390 3.6
EMC Corp. ................................................. 540,000 14,816 3.4
Fifth Third Bancorp ....................................... 150,000 12,263 2.8
Gillette Co. .............................................. 100,000 10,044 2.3
Computer Associates International, Inc. ................... 189,000 9,993 2.3
Schering-Plough Corp. ..................................... 160,000 9,940 2.3
Deere & Co. ............................................... 170,000 9,913 2.3
Intel Corp. ............................................... 140,000 9,835 2.3
HBO & Co. ................................................. 200,000 9,600 2.2
</TABLE>
Five Largest Industry Categories
<TABLE>
<CAPTION>
Value Percentage of
Industry (in thousands) Net Assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer & Peripherals ....................................... $ 52,683 12.2%
Computer Software & Services ................................. 33,617 7.8
Oilfield Services/Equipment .................................. 33,264 7.7
Telecommunications Equipment ................................. 21,641 5.0
Drug ......................................................... 20,621 4.8
</TABLE>
Five Largest Net Security Purchases*
<TABLE>
<CAPTION>
Cost
Issue (in thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
United Healthcare Corp. ...................................... $ 4,725
Diamond Offshore Drilling, Inc. .............................. 4,537
International Business Machines Corp. ........................ 4,391
ENSCO International Inc. ..................................... 4,375
Nautica Enterprises, Inc. .................................... 4,342
</TABLE>
Five Largest Net Security Sales*
<TABLE>
<CAPTION>
Proceeds
Issue (in thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Coca-Cola Co. ................................................ $ 7,930
Newbridge Networks Corp. ..................................... 6,167
Boeing Co. ................................................... 6,034
Danaher Corp. ................................................ 5,037
Monsanto Co. ................................................. 4,781
</TABLE>
* For the six month period ended 12/31/97
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5
<PAGE>
Value Line Leveraged Growth Investors, Inc.
Schedule of Investments
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS (92.5%)
ADVERTISING (2.0%)
200,000 Omnicom Group, Inc............................. $ 8,475
AIR TRANSPORT (0.5%)
70,000 Air Express International Corp................. 2,135
APPAREL (0.8%)
150,000 Nautica Enterprises, Inc.*..................... 3,488
BANK (4.0%)
90,000 BankBoston Corp................................ 8,454
70,000 Citicorp ...................................... 8,851
--------
17,305
BANK-MIDWEST (4.3%)
150,000 Fifth Third Bancorp............................ 12,263
170,000 Norwest Corp................................... 6,566
--------
18,829
BEVERAGE--SOFT
DRINK (1.0%)
125,000 Coca-Cola Enterprises Inc...................... 4,445
CHEMICAL--
SPECIALTY (1.2%)
120,000 Praxair, Inc................................... 5,400
COMPUTER &
PERIPHERALS (12.2%)
50,000 Adaptec, Inc.*................................. 1,856
165,000 Cisco Systems, Inc.*........................... 9,199
37,500 Compaq Computer Corp........................... 2,117
200,000 Dell Computer Corp.*........................... 16,800
540,000 EMC Corp.*..................................... 14,816
45,000 International Business
Machines Corp.............................. 4,705
80,000 Sun Microsystems, Inc.*........................ 3,190
--------
52,683
COMPUTER SOFTWARE
& SERVICES (7.8%)
189,000 Computer Associates
International, Inc......................... 9,993
75,000 Fiserv Inc.*................................... 3,684
70,000 Microsoft Corp.*............................... 9,048
42,000 Networks Associates, Inc.*..................... 2,221
240,000 Oracle Systems Corp.*.......................... 5,355
70,000 Parametric
Technology Corp.*.......................... 3,316
--------
33,617
DRUG (4.8%)
50,000 Merck & Co., Inc............................... 5,312
72,000 Pfizer, Inc.................................... 5,369
160,000 Schering-Plough Corp........................... 9,940
--------
20,621
FINANCIAL
SERVICES (2.1%)
80,000 FINOVA Group, Inc. (The)....................... 3,975
60,000 Franklin Resources, Inc........................ 5,216
--------
9,191
HEALTHCARE
INFORMATION
SYSTEMS (2.2%)
200,000 HBO & Co....................................... 9,600
HOUSEHOLD
PRODUCTS (1.1%)
60,000 Procter & Gamble Co............................ 4,789
INDUSTRIAL
SERVICES (1.4%)
100,000 AccuStaff Inc.*................................ 2,300
97,500 Robert Half International, Inc.*............... 3,900
--------
6,200
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6
<PAGE>
Value Line Leveraged Growth Investors, Inc.
December 31, 1997
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
INSURANCE--
DIVERSIFIED (2.2%)
15,000 American International
Group, Inc................................. $ 1,631
120,000 MGIC Investment Corp........................... 7,980
--------
9,611
INSURANCE--LIFE (3.6%)
360,000 SunAmerica Inc................................. 15,390
MACHINERY (3.3%)
27,000 Caterpillar, Inc............................... 1,311
170,000 Deere & Co..................................... 9,913
100,000 PRI Automation, Inc.*.......................... 2,888
--------
14,112
MEDICAL SERVICES (1.6%)
80,000 Omnicare, Inc.................................. 2,480
90,000 United Healthcare Corp......................... 4,472
--------
6,952
MEDICAL SUPPLIES (4.7%)
40,000 Boston Scientific Corp.*....................... 1,835
54,000 Guidant Corp................................... 3,362
100,000 Johnson & Johnson.............................. 6,587
160,000 Medtronic, Inc................................. 8,370
--------
20,154
OFFICE EQUIPMENT
& SUPPLIES (1.2%)
185,625 Staples, Inc.*................................. 5,151
OILFIELD SERVICES/
EQUIPMENT (7.7%)
65,000 BJ Services Co.*............................... 4,676
100,000 Diamond Offshore Drilling, Inc................. 4,812
120,000 ENSCO International Inc........................ 4,020
70,000 Smith International, Inc.*..................... 4,296
95,000 Tidewater, Inc................................. 5,237
120,000 Transocean Offshore, Inc....................... 5,783
60,000 Western Atlas, Inc.*........................... 4,440
--------
33,264
PACKAGING
& CONTAINER (0.5%)
60,000 Owens-Illinois, Inc.*.......................... 2,276
RAILROAD (0.5%)
95,000 Wisconsin Central
Transportion Corp.*........................ 2,221
RECREATION (2.0%)
320,000 Harley-Davidson, Inc........................... 8,760
RETAIL BUILDING
SUPPLY (1.6%)
120,000 Home Depot, Inc................................ 7,065
RETAIL--SPECIAL
LINES (3.9%)
75,000 AutoZone, Inc.*................................ 2,175
220,000 CompUSA, Inc.*................................. 6,820
180,000 Gap, Inc....................................... 6,379
45,000 Tiffany & Co................................... 1,623
--------
16,997
RETAIL STORE (2.9%)
219,726 Dollar General Corp............................ 7,965
70,000 Kohl's Corp.*.................................. 4,769
--------
12,734
SEMICONDUCTOR (2.7%)
175,000 Cirrus Logic, Inc.*............................ 1,859
140,000 Intel Corp..................................... 9,835
--------
11,694
SHOE (0.4%)
67,500 Wolverine World Wide, Inc...................... 1,527
- --------------------------------------------------------------------------------
7
<PAGE>
Value Line Leveraged Growth Investors, Inc.
December 31, 1997
- --------------------------------------------------------------------------------
Value
Shares (in thousands)
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS
EQUIPMENT (5.0%)
200,000 ADC Telecommunications,
Inc.*...................................... $ 8,350
101,250 Andrew Corp.*.................................. 2,430
260,000 Loral Space
& Communications Ltd*...................... 5,574
100,000 Tellabs, Inc.*................................. 5,287
--------
21,641
TELECOMMUNICATION
SERVICES (1.0%)
53,000 AirTouch Communications, Inc.* ................ 2,203
65,000 WorldCom, Inc.*................................ 1,966
--------
4,169
TOILETRIES/
COSMETICS (2.3%)
100,000 Gillette Co.................................... 10,044
--------
TOTAL COMMON STOCKS
AND TOTAL
INVESTMENT
SECURITIES (92.5%)
(Cost $192,264,000) ....................... 400,540
--------
Value
Principal (in thousands
Amounts except per
(in thousands) share amount)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (7.5%)
(including accrued interest)
$20,000 Collateralized by $18,930,000
U.S. Treasury Notes 8%, due
5/15/01, with a value of
$20,418,000 (with Morgan
Stanley & Co., Inc. 6.20%,
dated 12/31/97, due 1/2/98,
delivery value of
$20,006,889)............................... $ 20,003
12,300 Collateralized by $5,355,000
U.S. Treasury Notes 5 7/8%,
due 10/31/98 and $7,100,000,
U.S. Treasury Notes 6%, due
6/30/99, with a combined
value of $12,553,000 (with
First Chicago Capital
Markets, Inc., 5.85%, dated
12/31/97, due 1/2/98, delivery
value $12,303,998) ........................ 12,302
--------
TOTAL REPURCHASE
AGREEMENTS
(Cost $32,305,000) ........................ 32,305
--------
EXCESS OF LIABILITIES OVER
CASH AND RECEIVABLES (0.0%).................................. (30)
--------
NET ASSETS (100%) ................................... $432,815
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE
($432,815,000 / 12,163,570 shares of
capital stock outstanding) .................................... $ 35.58
========
* Non-income producing
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line Leveraged Growth Investors, Inc.
Statement of Assets
and Liabilities at December 31, 1997
- --------------------------------------------------------------------------------
Dollars
(in thousands
except per
share amount)
-------------
Assets:
Investment securities, at value
(Cost-$192,264)........................................... $400,540
Short-term investments (Cost-$32,305) ...................... 32,305
Cash ....................................................... 16
Receivable for capital shares sold ......................... 289
Dividends receivable ....................................... 152
--------
Total Assets ........................................ 433,302
--------
Liabilities:
Payable for capital shares repurchased...................... 112
Accrued expenses:
Advisory fee ............................................. 270
Other .................................................... 105
--------
Total Liabilities .................................... 487
--------
Net Assets ................................................. $432,815
--------
Net Assets consist of:
Capital stock, at $1.00 par value
(authorized 50,000,000,
outstanding 12,163,570 shares)............................ $ 12,164
Additional paid-in capital ................................. 211,142
Undistributed net realized gain on
investments .............................................. 1,233
Unrealized net appreciation of
investments............................................... 208,276
--------
Net Assets ................................................. $432,815
--------
Net Asset Value, Offering and
Redemption Price per
Outstanding Share
($432,815,000 / 12,163,570
shares outstanding) ...................................... $ 35.58
--------
Statement of Operations
for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
Dollars
(in thousands)
-----------
Investment Income:
Dividends (Net of foreign withholding
taxes of $2).............................................. $ 2,181
Interest ................................................... 573
-------
Total Income ......................................... 2,754
-------
Expenses:
Advisory fee ............................................... 3,022
Transfer agent fees ........................................ 136
Custodian fees ............................................. 46
Auditing and legal fees .................................... 39
Postage .................................................... 33
Telephone .................................................. 32
Commitment fee ............................................. 28
Insurance, dues and other .................................. 28
Printing ................................................... 27
Registration and filing fees ............................... 27
Directors' fees and expenses ............................... 15
Interest expense ........................................... 7
-------
Total Expenses Before
Custody Credits .................................... 3,440
Less: Custody Credits ................................ (3)
-------
Net Expenses ......................................... 3,437
-------
Investment Loss--Net ........................................ (683)
-------
Realized and Unrealized Gain on
Investments--Net:
Realized Gain--Net
(includes $8,294 loss on
futures contracts)...................................... 37,875
Change in Unrealized Appreciation ........................ 46,969
-------
Net Realized Gain and Change in
Unrealized Appreciation
on Investments ........................................... 84,844
-------
Net Increase in Net Assets
from Operations .......................................... $84,161
-------
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, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-----------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Investment (loss) income-net ................................ $ (683) $ (72)
Realized gain on investments-net .......................... 37,875 32,084
Change in unrealized appreciation ......................... 46,969 43,388
----------------------
Net increase in net assets from operations ................ 84,161 75,400
----------------------
Distributions to Shareholders:
Investment income-net ..................................... -- (4)
Realized gain from investment transactions-net ............ (35,549) (35,996)
----------------------
Total distributions ....................................... (35,549) (36,000)
----------------------
Capital Share Transactions:
Proceeds from sale of shares .............................. 163,122 143,236
Proceeds from reinvestment of distributions to shareholders 33,787 34,250
Cost of shares repurchased ................................ (183,766) (183,106)
----------------------
Increase (Decrease) from capital share transactions ....... 13,143 (5,620)
----------------------
Total Increase .............................................. 61,755 33,780
Net Assets:
Beginning of year ......................................... 371,060 337,280
----------------------
End of year ............................................... $ 432,815 $ 371,060
======================
</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 and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could 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 are valued at
the closing sales price on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or which are
not readily marketable and all other assets of the Fund are valued at fair value
as the Board of Directors may determine in good faith. Short-term instruments
with maturities of 60 days or less, at the date of purchase, are valued at
amortized cost which approximates market value.
(B) Repurchase Agreements. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization, and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) Federal Income Taxes. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) Security Transactions and Distributions. Security transactions are accounted
for on the date the securities are purchased or sold. Interest income is accrued
as earned. Realized gains and losses on sales of securities are calculated for
financial accounting and federal income tax purposes on the identified cost
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
(E) Amortization. Discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase to the security's
cost basis; premiums on debt securities are not amortized.
(F) Financial Futures Contracts. A financial futures contract is an agreement
between two parties to buy or sell financial instruments at a set price on a
future date. Upon entering into such a contract the Fund is required to pledge
to the broker cash, or U.S. Government securities, equal to the minimum "initial
margin" requirements of the
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Leveraged Growth Investors, Inc.
December 31, 1997
- --------------------------------------------------------------------------------
applicable futures exchange. Pursuant to the contract, the Fund agrees to
receive from or to pay the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
2. Capital Share Transactions, Dividends and Distributions to Shareholders
Transactions in capital stock were as follows: (in thousands except per share
amounts)
1997 1996
---------------------
Shares sold ..................................... 4,587 4,499
Shares issued to shareholders in
reinvestment of dividends and
distributions ................................. 1,006 1,077
---------------------
5,593 5,576
Shares repurchased .............................. 5,206 5,633
---------------------
Net increase (decrease) ......................... 387 (57)
=====================
Dividends per share from net
investment income ............................. $ -- $.0004
=====================
Distributions per share from
net realized gains ............................ $3.235 $3.381
=====================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
1997
--------------
(in thousands)
Purchases:
Investment Securities ................................ $145,389
----------
Sales:
Investment Securities ................................ $199,356
----------
At December 31, 1997, the aggregate cost of investment securities and repurchase
agreements for federal income tax purposes, was $227,175,000. The aggregate
appreciation and depreciation of investments at December 31, 1997, based on a
comparison of investment values and their costs for federal income tax purposes
was $210,142,000 and $4,472,000, respectively, resulting in a net appreciation
of $205,670,000.
Permanent book-tax differences have been reclassified within the composition of
net asset accounts. In the current year accumulated net investment loss of
$683,000 was reclassified to undistributed net realized gain on investments. 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 $3,022,000 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the year ended December 31, 1997.
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.
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, 1997, the Fund paid brokerage commissions totalling $159,000
to the distributor, which clears its transactions through unaffiliated brokers.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Leveraged Growth Investors, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Adviser and/or affiliated companies and the Value Line, Inc. Profit Sharing
and Savings Plan, owned 883,100 shares of the Fund's capital stock, representing
7.3% of the outstanding shares at December 31, 1997.
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, 1997. The weighted
average amount of bank loans outstanding for the year ended December 31, 1997,
amounted to approximately $97,000 at a weighted average interest rate of 6.6%.
For the year ended December 31, 1997, interest expense of approximately $7,000
and commitment fees of approximately $28,000 relating to borrowings under the
agreement were paid or payable to SSBT.
6. Financial Instruments with Off-Balance Risk
At December 31, 1997, the Fund had no future contracts outstanding. During the
year ended December 31, 1997, the Fund sold stock index futures contracts to
hedge its portfolio positions against price fluctuations. Futures contracts
involve elements of credit and market risk in excess of the amounts reflected in
the Statement of Assets and Liabilities. The contracts amounts of these futures
contracts reflect the extent of the Fund's exposure to off-balance sheet risk.
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,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........... $ 31.51 $ 28.50 $ 23.18 $ 24.67 $ 22.15
----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment (loss) income ............. (.06) (.01) .09 .12 .06
Net gains or losses on securities
(both realized and unrealized) ......... 7.37 6.40 8.48 (1.05) 3.50
----------------------------------------------------------------------------------
Total from investment operations ......... 7.31 6.39 8.57 (.93) 3.56
----------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income ..... -- # (.09) (.12) (.06)
Distributions from capital gains ......... (3.24) (3.38) (3.16) (.31) (.98)
Distributions in excess of capital gains . -- -- -- (.13) --
----------------------------------------------------------------------------------
Total distributions ...................... (3.24) (3.38) (3.25) (.56) (1.04)
----------------------------------------------------------------------------------
Net asset value, end of year ................. $ 35.58 $ 31.51 $ 28.50 $ 23.18 $ 24.67
==================================================================================
Total return ................................. 23.79% 22.31% 37.06% -3.71% 16.20%
==================================================================================
Ratios/Supplemental Data:
Net assets, end of year (in thousands) ....... $ 432,815 $ 371,060 $ 337,280 $ 264,803 $ 302,345
Ratio of expenses to average net assets
(including interest expense) ............... .86%(1) .88%(1) .88% .89% .92%
Ratio of net investment (loss) income
to average net assets ...................... (0.17)% (.02)% .31% .49% .22%
Portfolio turnover rate ...................... 37% 34% 54% 49% 80%
Average commissions paid per share of
common stock investments purchased/sold .... $ .0493(2) $ .0490(2) -- -- --
Average amount of debt outstanding
during the year (in thousands) ............. $ 97 $ 398 $ 44 $ -- $ 1,651
Average number of shares outstanding during
the year (in thousands) .................... 11,411 11,752 11,357 11,635 12,410
Average amount of debt per
outstanding share during the year .......... $ .0085 $ .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.
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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, 1997, 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, 1997, 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 20, 1998
- --------------------------------------------------------------------------------
SHAREHOLDERS MEETING RESULTS (unaudited)
A special meeting of shareholders of Value Line Leveraged Growth Investors, Inc.
was held on October 30, 1997. The matters voted upon by the shareholders and the
resulting votes for each matter are presented below.
1. The election of six Directors to serve until their successors are duly
elected and qualified.
Number of Votes:
Broker
Directors For Withheld Non-Votes*
--------- --------- -------- ----------
Jean Bernhard Buttner 6,096,895 159,407 0
John W. Chandler 6,063,213 193,089 0
Leo R. Futia 6,056,325 199,977 0
David H. Porter 6,040,726 215,576 0
Paul Craig Roberts 6,099,903 156,399 0
Nancy-Beth Sheerr 6,074,763 181,539 0
2. Ratification of the selection of Price Waterhouse LLP as independent
accountants for the fiscal year ending December 31, 1997.
Number of Votes:
Broker
For Against Abstain Non-Votes*
-------- ------- ------- ----------
6,069,637 73,096 113,569 0
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
- --------------------------------------------------------------------------------
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.
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
<PAGE>
================================================================================
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
David H. Porter
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
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).
VLF712445
