UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file Number 811-2260
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Value Line Leveraged Growth Investors , Inc.
- ---------------------------------------------------------
(Exact name of registrant as specified in charter)
220 East 42nd Street, New York, N.Y. 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-907-1500
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Date of fiscal year end: December 31, 2003
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Date of reporting period: June 30, 2003
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Item I. Reports to Stockholders.
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A copy of the Semi-Annual Report to Stockholders for the period ended
is included with this Form.
Item 2. Code of Ethics
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Not applicable.
Item 3. Audit Committee Financial Expert.
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Not applicable.
Item 9. Controls and Procedures.
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(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in rule 30a-2(c) under the
Act (17 CFR 270.30a-2(c) ) based on their evaluation of these
controls and procedures as of a date within 90 days of the filing
date of this report, are appropriately designed to ensure that
material information relating to the registrant is made known to
such officers and are operating effectively.
(b) The registrant's principal executive officer and principal
financial officer have determined that there have been no
significant changes in the registrant's internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation, including corrective
actions with regard to significant deficiencies and material
weaknesses.
Item 10. Exhibits.
- -------- ---------
(a) Not applicable.
(b) (1) Certification pursuant to Rule 30a-2 under the Investment
Company Act of 1940 (17 CFR 270.30a-2) attached hereto as
Exhibit 99.CERT.
(2) Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By /s/ Jean B. Buttner
-----------------------
Jean B. Buttner, President
Date: August 29, 2003
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jean B. Buttner
-----------------------
Jean B. Buttner, President, Principal Executive Officer
By: /s/ David T. Henigson
-----------------------
David T. Henigson, Vice President, Treasurer, Principal Financial Officer
Date: August 29, 2003
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================================================================================
INVESTMENT ADVISER Value Line, Inc. ------------------
220 East 42nd Street SEMI-ANNUAL REPORT
New York, NY 10017-5891 ------------------
JUNE 30, 2003
DISTRIBUTOR Value Line Securities, Inc. ------------------
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 219729
Kansas City, MO 64121-9729 VALUE LINE
LEVERAGED GROWTH
INDEPENDENT PricewaterhouseCoopers LLP INVESTORS, INC.
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Sound View Drive, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Marion N. Ruth
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Nancy L. Bendig
VICE PRESIDENT
Brett Mitstifer
VICE PRESIDENT
Stephen E. Grant [LOGO]
VICE PRESIDENT VALUE LINE
David T. Henigson NO-LOAD
VICE PRESIDENT AND MUTUAL
SECRETARY/TREASURER FUNDS
Joseph Van Dyke
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF THE
FUND WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND, ACCORDINGLY, THEY
DO NOT EXPRESS AN OPINION THEREON.
THIS UNAUDITED REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM THE
DISTRIBUTOR).
#526702
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
TO OUR VALUE LINE LEVERAGED
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TO OUR SHAREHOLDERS:
Equity market returns over the first half of 2003, particularly since the lows
of mid-March, have been strong. During January and February, the threat of war
with Iraq had a dampening effect on the market. However, with the fighting and
bombing that marked the inception of the war on March 19th, the uncertainty that
Wall Street finds so unsettling was eliminated. Thus began a rally that was
further fueled by the short length of the war, which appeased those who were
worried about the economic impact of a protracted engagement.
For the first half of 2003, the Fund returned 7.73% versus 11.76% for the S&P
500(1).
As of June 30, 2003, the portfolio remained more heavily invested in consumer
discretionary stocks -- particularly retailers and homebuilders -- than the S&P
500. Earnings growth in this group has been strong, which reflects the powerful
boost the consumer has provided to the economy during this multi-year bear
market. While our concentration in retailing stocks was beneficial during the
first quarter of 2003, many of these stocks suffered during the June quarter as
investors questioned whether the consumer would continue to spend in the face of
ongoing job cuts and a lackluster economy. The portfolio was also overweighted
in the health care sector, as many names in this group have shown above-average
growth rates. Here, we saw stock gains in the pharmaceutical, biotechnology,
pharmacy benefit manager and managed care companies. The portfolio was less
invested than its benchmark in those industries that are less favored by our
Timeliness Ranking System. As a case in point, we had limited exposure to
technology, both information technology and telecommunications services, which
was clearly a hindrance as we saw many companies in these sectors produce large
gains during the spring rally. However, the improvement in earnings necessary to
move stocks in this group higher in the Timeliness Ranking System has not yet
materialized; that is, stock prices have increased in advance of earnings
growth, precluding us from participating more fully in the technology sector.
In terms of positioning the portfolio, we believe that a recovery in the economy
- -- however slowly that may unfold -- will buoy sectors beyond those dependent
upon the consumer. Therefore, we will be making a concerted effort to continue
shifting assets from the overweighted consumer discretionary area to the
currently underweighted industrials and information technology sectors as they
move up in the Value Line Timeliness Ranking System. These groups should benefit
as corporations begin to spend again.
First-quarter results were generally better than expected, and since then, there
have been some signs that business activity is no longer declining. In the
second quarter, upside earnings surprises were more prevalent than downward
surprises. Revenue growth, however, remained somewhat elusive. Instead,
improvements in profitability appear to be a function of the widespread business
belt-tightening that we have seen over the past few years. Nonetheless, the
potential for corporate profits in the future looks promising. That is,
corporations have become so lean and cost-efficient that they should realize
significant gains in a more favorable economic environment.
We thank you for your continued confidence in Value Line.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
August 22, 2003
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(1) THE S & P 500 INDEX CONSISTS OF 500 STOCKS WHICH ARE TRADED ON THE NEW YORK
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE AND THE NASDAQ NATIONAL MARKET
SYSTEM AND IS REPRESENTATIVE OF THE BROAD STOCK MARKET. THIS IS AN UNMANAGED
INDEX AND DOES NOT REFLECT CHARGES, EXPENSES OR TAXES, AND IT IS NOT
POSSIBLE TO DIRECTLY INVEST IN THIS INDEX.
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2
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
GROWTH INVESTORS SHAREHOLDERS
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ECONOMIC OBSERVATIONS
The U.S. economic recovery, which had been proceeding at an uninspiring pace for
the better part of two years, showed a bit more spirit in the second quarter of
this year, as the nation's gross domestic product increased at a modest 2.4%
rate, pushed forward by a selective recovery in manufacturing, by strong housing
demand, and by improving retail sales. True, there were still pockets of
weakness around, most notably in the employment area, where non-farm payrolls
declined further and the unemployment rate climbed above 6%. Overall, though,
the economic picture at the end of the opening half was a lot brighter than it
had been at the start of the year, when talk of a possible double-dip recession
was still being heard.
Now, as we make our way through the second half of 2003, we are starting to see
evidence of a further improvement in business activity, with both the retail and
manufacturing sectors strengthening even more, albeit still selectively, while
housing remains resilient. The weak link in the recovery chain is still the
employment situation, which, at best, is starting to show signs of stability
following months of steady erosion. The ongoing support of the Federal Reserve,
which continues to maintain its low-interest-rate policies, along with the
earlier passage of a tax cut and fiscal stimulus package, should provide the
additional help needed by the economy to push GDP growth up into the 3.5% to 4%
range during the second half of the year.
Inflation, meantime, remains muted, thanks, in part, to subdued labor costs.
Adequate supplies of raw materials are also helping to keep the costs of
production low. We caution, though, that as the U.S. economy moves further along
the recovery trail over the next several years, some increase in pricing
pressures may emerge. Absent a stronger long-term business recovery than we now
envision, or a resumption of the earlier sharp rise in oil and gas prices
stemming from a surprisingly long conflict in the Middle East, inflation should
remain in check through the latter years of this decade. Long-term interest
rates, which have moved higher recently, as the economy has perked up, should
stabilize at modestly higher levels over the next several years.
PERFORMANCE DATA:**
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
---------------- ----------------------
1 year ended 6/30/03 ................ -8.83% $ 9,117
5 years ended 6/30/03 ............... -2.05% $ 9,016
10 years ended 6/30/03 ............... 9.08% $23,843
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3
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
PORTFOLIO HIGHLIGHTS AT JUNE 30, 2003 (UNAUDITED)
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TEN LARGEST HOLDINGS
VALUE PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
- --------------------------------------------------------------------------------------------
Johnson & Johnson .......................... 200,000 $10,340 3.0%
Microsoft Corp. ............................ 400,000 10,244 3.0
Medtronic, Inc. ............................ 212,000 10,170 3.0
Citigroup, Inc. ............................ 235,500 10,079 2.9
Fifth Third Bancorp ........................ 174,000 9,977 2.9
Pfizer, Inc. ............................... 287,000 9,801 2.8
American International Group, Inc. ......... 175,000 9,657 2.8
Harley-Davidson, Inc. ...................... 230,500 9,188 2.7
Kohl's Corp. ............................... 172,500 8,863 2.6
Wal-Mart Stores, Inc. ...................... 162,000 8,694 2.5
FIVE LARGEST INDUSTRY CATEGORIES
VALUE PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
- --------------------------------------------------------------------------------
Medical Supplies ............................. $35,175 10.2%
Financial Services - Diversified ............. 27,791 8.1
Retail Store ................................. 24,568 7.1
Computer Software & Services ................. 24,035 7.0
Medical Services ............................. 18,761 5.4
FIVE LARGEST NET SECURITY PURCHASES*
COST
ISSUE (IN THOUSANDS)
- --------------------------------------------------------------------------------
Noble Corporation ............................................. $3,529
Kinder Morgan, Inc. ........................................... 3,420
PepsiCo, Inc. ................................................. 3,410
Home Depot, Inc. (The) ........................................ 3,399
Avon Products, Inc. ........................................... 3,381
FIVE LARGEST NET SECURITY SALES*
PROCEEDS
ISSUE (IN THOUSANDS)
- --------------------------------------------------------------------------------
AnnTaylor Stores Corp. ....................................... $7,415
Medtronic, Inc. .............................................. 5,260
Lowe's Companies, Inc. ....................................... 4,443
Fifth Third Bancorp .......................................... 4,438
Abercrombie & Fitch Co. Class "A" ............................ 3,686
* FOR THE SIX MONTH PERIOD ENDED 6/30/03
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4
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2003
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- ---------------------------------------------------------------
COMMON STOCKS (97.3%)
ADVERTISING (1.4%)
65,000 Omnicom Group, Inc. .................. $4,661
AEROSPACE/DEFENSE (1.0%)
50,000 General Dynamics Corp. ............... 3,625
BANK (3.0%)
105,000 Wells Fargo & Co. .................... 5,292
100,000 Zions Bancorporation ................. 5,061
------
10,353
BANK -- MIDWEST (2.9%)
174,000 Fifth Third Bancorp .................. 9,977
BEVERAGE --
ALCOHOLIC (0.9%)
64,000 Anheuser-Busch
Companies, Inc. ...................... 3,267
BEVERAGE --
SOFT DRINK (2.5%)
110,000 Coca-Cola Co. ........................ 5,105
78,500 PepsiCo, Inc. ........................ 3,493
------
8,598
BIOTECHNOLOGY (3.5%)
181,600 Amgen Inc.* .......................... 12,164
BUILDING --
MATERIALS (0.8%)
64,500 Jacobs Engineering
Group, Inc.* ......................... 2,719
CHEMICAL --
SPECIALTY (1.5%)
94,000 Airgas, Inc. ......................... 1,575
110,500 International Flavors &
Fragrances, Inc. ..................... 3,528
------
5,103
VALUE
SHARES (IN THOUSANDS)
- ---------------------------------------------------------------
COMPUTER &
PERIPHERALS (2.1%)
125,000 Dell Computer Corp.* ................. $3,995
40,000 International Business
Machines Corp. ....................... 3,300
------
7,295
COMPUTER SOFTWARE &
SERVICES (7.0%)
54,000 Adobe Systems, Inc. .................. 1,732
41,000 First Data Corp. ..................... 1,699
241,675 Fiserv, Inc.* ........................ 8,606
400,000 Microsoft Corp. ...................... 10,244
40,000 Symantec Corp* ....................... 1,754
------
24,035
DIVERSIFIED --
COMPANIES (0.5%)
25,000 Danaher Corp ......................... 1,701
DRUG (3.8%)
60,000 Forest Laboratories, Inc.* ........... 3,285
287,000 Pfizer, Inc. ......................... 9,801
------
13,086
EDUCATIONAL
SERVICES (1.0%)
64,800 Education Management Corp.* .......... 3,446
ELECTRICAL
EQUIPMENT (2.5%)
300,000 General Electric Co. ................. 8,604
ENTERTAINMENT
TECHNOLOGY (1.3%)
60,000 Electronic Arts Inc.* ................ 4,439
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5
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- ---------------------------------------------------------------
FINANCIAL SERVICES --
DIVERSIFIED (8.1%)
175,000 American International
Group, Inc. .............................. $9,657
235,500 Citigroup, Inc. .......................... 10,079
67,000 Federal Home Loan
Mortgage Corp. ........................... 3,402
69,000 Federal National
Mortgage Association ..................... 4,653
------
27,791
GROCERY (0.5%)
36,000 Whole Foods Market, Inc.* ................ 1,711
HOME APPLIANCE (1.0%)
55,000 Whirlpool Corp. .......................... 3,504
HOMEBUILDING (3.2%)
65,700 KB Home .................................. 4,072
65,000 Lennar Corp. Class "A" ................... 4,647
6,500 Lennar Corp. Class "B" ................... 447
28,100 Pulte Homes, Inc. ........................ 1,733
------
10,899
HOUSEHOLD
PRODUCTS (2.6%)
57,000 Colgate-Palmolive Co. .................... 3,303
62,500 Procter & Gamble Co. (The) ............... 5,574
------
8,877
INDUSTRIAL
SERVICES (0.7%)
89,000 Kroll, Inc.* ............................. 2,408
INSURANCE -- PROPERTY/
CASUALTY (0.8%)
34,500 Everest Re Group, Ltd .................... 2,639
MEDICAL SERVICES (5.4%)
269,000 HCA, Inc. ................................ 8,619
148,200 Laboratory Corp. of America
Holdings* ................................ 4,468
135,000 Oxford Health Plans, Inc.* ............... 5,674
------
18,761
VALUE
SHARES (IN THOUSANDS)
- ---------------------------------------------------------------
MEDICAL SUPPLIES (10.2%)
150,000 Biomet, Inc. ............................. $4,299
52,500 Cardinal Health, Inc. .................... 3,376
124,500 Fisher Scientific
International, Inc.* ..................... 4,345
200,000 Johnson & Johnson ........................ 10,340
212,000 Medtronic, Inc. .......................... 10,170
46,000 St. Jude Medical, Inc.* .................. 2,645
------
35,175
NATURAL GAS --
DIVERSIFIED (1.0%)
62,500 Kinder Morgan, Inc. ...................... 3,416
OFFICE EQUIPMENT &
SUPPLIES (1.1%)
200,000 Staples, Inc.* ........................... 3,670
OILFIELD SERVICES/
EQUIPMENT (1.9%)
88,000 BJ Services Co.* ......................... 3,287
96,000 Noble Corporation* ....................... 3,293
------
6,580
PETROLEUM --
PRODUCING (1.0%)
54,000 Apache Corp .............................. 3,513
PHARMACY
SERVICES (1.0%)
50,000 Express Scripts Inc. Class "A"* .......... 3,410
RAILROAD (0.9%)
156,500 Norfolk Southern Corp. ................... 3,005
RECREATION (3.6%)
230,500 Harley-Davidson, Inc. .................... 9,188
169,000 Mattel, Inc. ............................. 3,197
------
12,385
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6
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
JUNE 30, 2003
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VALUE
SHARES (IN THOUSANDS)
- ---------------------------------------------------------------
RESTAURANT (0.5%)
53,500 Cheesecake Factory,
Incorporated (The)* .............. $ 1,920
RETAIL BUILDING
SUPPLY (3.5%)
103,000 Home Depot, Inc. (The) ........... 3,411
198,500 Lowe's Companies, Inc. ........... 8,526
--------
11,937
RETAIL -- SPECIAL
LINES (4.1%)
131,500 Abercrombie & Fitch Co.
Class "A"* ....................... 3,736
217,500 Bed Bath & Beyond Inc.* .......... 8,441
95,500 Gap, Inc. (The) .................. 1,792
--------
13,969
RETAIL STORE (7.1%)
98,500 Costco Wholesale Corp.* .......... 3,605
172,500 Kohl's Corp.* .................... 8,863
90,000 Target Corp. ..................... 3,406
162,000 Wal-Mart Stores, Inc. ............ 8,694
--------
24,568
THRIFT (1.4%)
120,000 Washington Mutual, Inc. .......... 4,956
TOBACCO (1.0%)
78,000 Altria Group, Inc ................ 3,544
TOILETRIES &
COSMETICS (1.0%)
58,000 Avon Products, Inc ............... 3,608
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (97.3%)
(COST $223,570,000) ............. $335,319
--------
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER
(IN THOUSANDS) SHARE AMOUNT)
- ---------------------------------------------------------------
REPURCHASE AGREEMENT (3.1%)
(INCLUDING ACCRUED INTEREST)
$ 10,600 Collateralized by $7,010,000
U.S. Treasury Bonds 8.875%,
due 8/15/17, with a value of
$10,857,000 (with UBS
Warburg LLC, 1.10%, dated
6/30/03, due 7/1/03, delivery
value $10,600,324) ............ $ 10,600
EXCESS OF LIABILITIES
OVER CASH AND OTHER
ASSETS (-0.4%) ............... (1,482)
--------
NET ASSETS (100.0%) ........... $344,437
========
NET ASSET VALUE,
OFFERING AND
REDEMPTION PRICE
PER OUTSTANDING
SHARE ($344,437,261 -
11,549,296 SHARES OF CAPITAL
STOCK OUTSTANDING) ........... $ 29.82
========
SEE NOTES TO FINANCIAL STATEMENTS.
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7
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
STATEMENT OF ASSETS AND LIABILITIES
AT JUNE 30, 2003
(UNAUDITED)
- --------------------------------------------------------------------------------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNT)
-----------------
ASSETS:
Investment securities, at value
(Cost - $223,570) ............................ $335,319
Repurchase agreement
(Cost - $10,600) ............................. 10,600
Cash ............................................ 98
Receivable for securities sold .................. 11,654
Dividends receivable ............................ 226
Receivable for capital shares sold .............. 27
Prepaid insurance and registration fees ......... 30
--------
TOTAL ASSETS .................................. 357,954
--------
LIABILITIES:
Payable for securities purchased ................ 13,073
Payable for capital shares repurchased .......... 101
Accrued expenses:
Advisory fee ................................. 211
Service and distribution plan
fees payable .............................. 70
Other ........................................ 62
--------
TOTAL LIABILITIES ......................... 13,517
--------
NET ASSETS ...................................... $344,437
========
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
11,549,296 shares) ........................... $ 11,549
Additional paid-in capital ...................... 207,779
Accumulated net investment loss ................. (423)
Undistributed net realized gain
on investments ............................... 13,783
Net unrealized appreciation
of investments ............................... 111,749
--------
NET ASSETS ...................................... $344,437
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
OUTSTANDING SHARE
($344,437,261 - 11,549,296
SHARES OUTSTANDING) .......................... $ 29.82
========
STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
- --------------------------------------------------------------------------------
(IN THOUSANDS)
---------------
INVESTMENT INCOME:
Dividends ................................... $ 1,428
Interest .................................... 16
--------
Total Income .......................... 1,444
--------
EXPENSES:
Advisory fee ................................ 1,220
Service and distribution plan fees .......... 407
Transfer agent fees ......................... 69
Auditing and legal fees ..................... 30
Interest and commitment fee expense ......... 29
Printing .................................... 24
Custodian fees .............................. 21
Postage ..................................... 19
Insurance, dues and other ................... 15
Telephone ................................... 12
Registration and filing fees ................ 12
Directors' fees and expenses ................ 10
--------
Total Expenses Before
Custody Credits ....................... 1,868
Less: Custody Credits .................... (1)
--------
Net Expenses ............................. 1,867
--------
NET INVESTMENT LOSS ......................... (423)
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net Realized Gain ...................... 22,253
Change in Net Unrealized
Appreciation ........................ 2,039
--------
NET REALIZED GAIN AND CHANGE
IN NET UNREALIZED APPRECIATION
ON INVESTMENTS ........................... 24,292
--------
NET INCREASE IN NET ASSETS FROM
OPERATIONS ............................... $23,869
========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 2002
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
--------------- -------------
(IN THOUSANDS)
OPERATIONS:
Net investment loss ................................................. $ (423) $ (2,042)
Net realized gain (loss) on investments ............................. 22,253 (7,965)
Change in net unrealized appreciation ............................... 2,039 (119,473)
-------------------------------
Net increase (decrease) in net assets from operations ............... 23,869 (129,480)
-------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions ...................... -- (4,705)
-------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares ........................................ 60,184 112,981
Proceeds from reinvestment of distributions to shareholders ......... -- 4,399
Cost of shares repurchased .......................................... (74,110) (144,395)
-------------------------------
Net decrease from capital share transactions ........................ (13,926) (27,015)
-------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 9,943 (161,200)
NET ASSETS:
Beginning of period ................................................. 334,494 495,694
-------------------------------
End of period ....................................................... $ 344,437 $ 334,494
===============================
ACCUMULATED NET INVESTMENT LOSS, END OF PERIOD ....................... $ (423) $ --
===============================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 prices 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.
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10
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
JUNE 30, 2003
- --------------------------------------------------------------------------------
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows (IN THOUSANDS EXCEPT PER SHARE
AMOUNTS):
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
--------------- -------------
Shares sold ........................ 2,190 3,162
Shares issued to
shareholders in
reinvestment of
distributions ................... -- 157
----- -----
2,190 3,319
Shares repurchased ................. 2,725 4,134
----- -----
Net decrease ....................... (535) (815)
===== =====
Distributions per share
from net realized gains ......... $ -- $ .3934
====== =======
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
SIX MONTHS ENDED
JUNE 30, 2002
(UNAUDITED)
-----------------
(IN THOUSANDS)
PURCHASES:
Investment Securities .......... $73,441
=======
SALES:
Investment Securities .......... $91,069
=======
4. INCOME TAXES
At June 30, 2003, information on the tax components of capital is as follows:
(IN THOUSANDS)
---------------
Cost of investment for tax purposes .......... $234,299
--------
Gross tax unrealized appreciation ............ $116,145
Gross tax unrealized depreciation ............ (4,525)
--------
Net tax unrealized appreciation
on Investments ............................ 111,620
========
Capital loss carryforward
Expires December 31, 2010 ................. $ 5,933
========
During the year ended December 31, 2002, as permitted under federal income tax
regulations, the Fund elected to defer $2,154,000 of post-October net capital
losses to the current taxable year. To the extent future capital gains are
offset by capital losses, the Fund does not anticipate distributing any such
gains to the shareholders.
Net realized gains/losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and losses deferred on tax
straddles.
5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES, AND TRANSACTIONS WITH
AFFILIATES
An advisory fee of $1,220,000 was paid or payable to Value Line, Inc., the
Fund's investment adviser (the "Adviser"), for the six months ended June 30,
2003. This was computed at the rate of 3/4 of 1% of the average daily net assets
for the period 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.
- --------------------------------------------------------------------------------
11
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2003
- --------------------------------------------------------------------------------
The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets. For the six months
ended June 30, 2003, fees amounting to $407,000 were paid or payable to the
Distributor under this Plan.
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 directors of the Fund. In the six month
period ended June 30, 2003 the Fund paid brokerage commissions totaling $151,431
to the Distributor, which clears its transactions through unaffiliated brokers.
For the six months ended June 30, 2003, the Fund's expenses were reduced by $424
under a custody credit arrangement with the Custodian.
The Value Line, Inc. Profit Sharing and Savings Plan owned 99,346 shares of the
Fund's capital stock, representing 0.9% of the outstanding shares at June 30,
2003.
6. 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 June 30, 2003. The weighted average
amount of bank loans outstanding for the six months ended June 30, 2003,
amounted to approximately $1,297,000 at a weighted average interest rate of
2.28%. For the six months ended June 30, 2003, interest expense of approximately
$15,000 and commitment fees of approximately $14,000 relating to borrowings
under the agreement were paid or payable to SSBT.
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12
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED
JUNE 30, 2003
(UNAUDITED)
==================
NET ASSET VALUE, BEGINNING OF
PERIOD ............................ $ 27.68
--------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss .............. (.04)
Net gains or losses on
securities (both realized
and unrealized ................. 2.18
----------
Total from investment
operations ..................... 2.14
----------
LESS DISTRIBUTIONS:
Distributions from net
realized gains ................. --
----------
NET ASSET VALUE, END OF PERIOD ..... $ 29.82
==========
TOTAL RETURN ....................... 7.73%+
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) .................... $344,437
Ratio of expenses to average net
assets (including interest
expense) .......................... 1.15%*(1)
Ratio of expenses to average net
assets (excluding interest
expense) .......................... 1.14%*(1)
Ratio of net investment loss to
average net assets ................ (0.26)%*
Portfolio turnover rate ............ 23%+
[WIDE TABLE CONTINUED FROM ABOVE]
YEARS ENDED DECEMBER 31,
==================================================================================
2002 2001 2000 1999 1998
================= ================ ================ ================ =============
NET ASSET VALUE, BEGINNING OF
PERIOD ............................ $ 38.43 $ 45.63 $ 57.98 $ 48.42 $ 35.58
----------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss .............. (.17) (.22) (.22) (.14) (.08)
Net gains or losses on
securities (both realized
and unrealized ................. (10.19) (4.61) (7.78) 14.90 14.13
----------------------------------------------------------------------------
Total from investment
operations ..................... (10.36) (4.83) (8.00) 14.76 14.05
----------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net
realized gains ................. (.39) (2.37) (4.35) (5.20) (1.21)
----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..... $ 27.68 $ 38.43 $ 45.63 $ 57.98 $ 48.42
============================================================================
TOTAL RETURN ....................... -26.96% -10.53% -13.92% 30.99% 39.63%
============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) .................... $ 334,494 $ 495,694 $ 601,594 $ 763,203 $ 608,498
Ratio of expenses to average net
assets (including interest
expense) .......................... 1.25%(1) 1.16%(1) .96%(1) .82%(1) .87%
Ratio of expenses to average net
assets (excluding interest
expense) .......................... 1.14%(1) 1.09%(1) .95%(1) .82%(1) .84%
Ratio of net investment loss to
average net assets ................ (0.49)% ( .54)% (.41)% (.28)% (.22)%
Portfolio turnover rate ............ 28% 50% 28% 27% 54%
+ NOT ANNUALIZED
* ANNUALIZED
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE RATIO
OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD NOT HAVE
CHANGED.
SEE NOTES TO FINANCIAL STATEMENTS.
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13
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
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14
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
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15
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
THE VALUE LINE FAMILY OF FUNDS
- --------------------------------------------------------------------------------
1950 -- THE VALUE LINE FUND seeks long-term growth of capital. Current income is
a secondary objective.
1952 -- VALUE LINE INCOME AND GROWTH FUND'S primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks long-term growth of
capital. No consideration is given to current income in the choice of
investments.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND
seeks maximum income without undue risk to capital. Under normal conditions, at
least 80% of the value of its net assets will be invested in securities issued
or guaranteed by the U.S. Government and its agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with the
maximum income exempt from federal income taxes while avoiding undue risk to
principal. The Fund offers investors a choice of two portfolios: The Money
Market Portfolio and The National Bond Portfolio. The fund may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York taxpayers
with the maximum income exempt from New York State, New York City and federal
income taxes while avoiding undue risk to principal. The Trust may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* seeks to achieve a high
total investment return consistent with reasonable risk.
1993 -- VALUE LINE EMERGING OPPORTUNITIES FUND invests primarily in common
stocks or securities convertible into common stock, with its primary objective
being long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the asset mix.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK, OR VISIT US AT WWW.VALUELINE.COM. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
- --------------------------------------------------------------------------------
16