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
--------
Value Line Leveraged Growth Investors, Inc.
- ---------------------------------------------------------
(Exact name of registrant as specified in charter)
220 East 42nd Street, New York, N.Y. 10017
- --------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-907-1500
------------
Date of fiscal year end: December 31, 2004
-----------------
Date of reporting period: June 30, 2004
-------------
Item I. Reports to Stockholders.
- ------ ------------------------
A copy of the Semi-Annual Report to Stockholders for the period ended
is included with this Form.
- --------------------------------------------------------------------------------
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 BFDS
P.O. Box 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
REGISTERED PUBLIC 1177 Avenue of the Americas
ACCOUNTING FIRM 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
Brett Mitstifer
VICE PRESIDENT
Stephen E. Grant
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT AND
SECRETARY/TREASURER
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 REGISTERED PUBLIC ACCOUNTING
FIRM 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).
#530543
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
JUNE 30, 2004
- --------------------------------------------------------------------------------
VALUE LINE
LEVERAGED GROWTH
INVESTORS, INC.
[VALUE LINE LOGO]
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
To Our Value Line Leveraged
- --------------------------------------------------------------------------------
To Our Shareholders:
The first half of 2004 was a frustrating time for equity investors. During this
period, we witnessed the first 5% correction in the S&P 500 Index since the
current market rally began in early 2003. Rising oil prices, the handover of
power in Iraq, and the first increase in interest rates in several years all
contributed to a high degree of uncertainty. Corporate profit growth was the
one bright spot as year-over-year growth could well exceed 20% in the first
half. While equity markets do like to "climb a wall of worry", so far that
climb has been a difficult one with the S&P 500 Index(1) generating a modest
3.44% return through June 30th. The Leveraged Growth Investors Fund returned
0.93% in the comparable period.
In managing the fund, we rely on the Value Line Timeliness Ranking System,
which favors those companies that have high current earnings, strong earnings
growth, positive earnings surprises, reasonable valuations and improving
relative price performance. As the year began, technology and consumer
discretionary stocks were favored by the Timeliness Ranking System due to
strong earnings and price momentum in 2003. These sectors, however, were two of
the worst performances for the first six months of this year. We selectively
reduced our holdings and overall exposure in these sectors as earnings and/or
price momentum deteriorated. The energy and industrial sectors were the best
performers during the first half of 2004, due to rising oil prices and an
expanding manufacturing base. The fund was overweighted in both sectors during
this period and we will continue to emphasize these sectors as long as the U.S.
economy continues to expand over the second half of the year. The prospect of
continued modestly rising interest rates, on top of the June 30th FOMC interest
rate hike, kept our holdings in financial stocks to a minimum. We anticipate
that many interest-sensitive companies will experience margin pressures as
slowly rising rates decelerate sales growth and ultimately detract from
earnings growth.
Going forward, we remain committed to investing in those companies that show
strong earnings growth and positive earnings surprises. We believe that the
fund is well positioned to benefit from today's market and economic
environment, as long as corporate profits remain strong, consumers and business
owners continue to spend at a moderate pace, labor markets continue to improve,
and interest rates remain accommodative, albeit at levels higher than in the
recent past.
We thank you for your confidence in Value Line and appreciate your continued
support.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
August 12, 2004
- --------------------------------------------------------------------------------
(1) THE STANDARD & POOR'S 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.
- --------------------------------------------------------------------------------
2
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
GROWTH INVESTORS SHAREHOLDERS
- --------------------------------------------------------------------------------
ECONOMIC OBSERVATIONS
The U.S. economic expansion, which proceeded strongly from the middle of 2003
through the opening six months of this year, has more recently started to show
some signs of fatigue. True, the business upturn is hardly collapsing, and we
are still seeing improvement in the capital goods area and in certain
industrial sectors. However, manufacturing, in general, is now growing more
slowly than it had been, while the retail and residential construction markets
are pulling back a little. Our sense is that growth will now proceed at a
moderate 3% to 4% rate over the next several quarters to a year.
The slowing in growth may well have positive ramifications. That is because the
current deceleration in economic activity appears mild and seems unlikely to
evolve into a full-fledged slowdown barring another surge in oil prices.
(Higher oil prices limit economic growth by taking money out of the pockets of
consumers and businesses). If we are correct and the economy shifts to a
modestly slower, but sustainable pace, with accompanying lower inflation, the
Federal Reserve, which has increased interest rates twice in the past several
months, might well be inclined to proceed slowly and somewhat cautiously in
raising rates over the next several months.
Our current benign economic forecast, it should be noted, excludes any
allowance for a further escalation in global military conflict or a new act of
terrorism, neither of which can be accurately predicted as to scope or timing.
PERFORMANCE DATA:*
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
---------------------------------------
1 year ended 6/30/04 .......... +8.30% $10,830
5 years ended 6/30/04 ......... -5.32% $ 7,610
10 years ended 6/30/04 ......... +10.37% $26,812
- --------------------------------------------------------------------------------
* 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. THE PERFORMANCE DATA DO NOT
REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. CALL 1-800-243-2729 TO
OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END.
- --------------------------------------------------------------------------------
3
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
PORTFOLIO HIGHLIGHTS AT JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
VALUE PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
- -----------------------------------------------------------------------------------------------
Pfizer Inc. ................................... 302,000 $10,353 3.2%
Citigroup Inc. ................................ 189,000 8,789 2.7
American International Group, Inc. ............ 123,000 8,767 2.7
Cisco Systems, Inc. ........................... 311,500 7,382 2.3
QUALCOMM Incorporated ......................... 100,000 7,298 2.3
Fisher Scientific International, Inc. ......... 124,500 7,190 2.2
CVS Corp. ..................................... 160,500 6,744 2.1
L-3 Communications Holdings, Inc. ............. 97,500 6,513 2.0
eBay, Inc. .................................... 63,500 5,839 1.8
Dell, Inc. .................................... 160,000 5,731 1.8
FIVE LARGEST INDUSTRY CATEGORIES
VALUE PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
- ------------------------------------------------------------------------------
Financial Services - Diversified ......... $23,651 7.3%
Telecommunications Equipment ............. 19,685 6.1
Drug ..................................... 16,782 5.2
Medical Supplies ......................... 15,414 4.8
Pharmacy Services ........................ 15,409 4.8
FIVE LARGEST NET SECURITY PURCHASES*
COST
ISSUE (IN THOUSANDS)
- -------------------------------------------------
QUALCOMM Incorporated ......... $6,292
Walgreen Co. .................. 5,217
Georgia-Pacific Corp. ......... 4,852
Pfizer Inc. ................... 4,692
Motorola, Inc. ................ 4,266
FIVE LARGEST NET SECURITY SALES*
PROCEEDS
ISSUE (IN THOUSANDS)
- ----------------------------------------------------------
Omnicom Group, Inc. .................... $10,669
Lehman Brothers Holdings, Inc. ......... 9,141
Medtronic, Inc. ........................ 8,341
Intel Corp. ............................ 7,716
Lowe's Companies, Inc. ................. 7,084
* FOR THE SIX MONTH PERIOD ENDED 6/30/04
- --------------------------------------------------------------------------------
4
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Schedule of Investments (unaudited) June 30, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- ------------------------------------------------------------------
COMMON STOCKS (98.5%)
AEROSPACE /
DEFENSE (3.5%)
57,000 Armor Holdings, Inc.* ................ $1,938
48,000 Engineered Support Systems, Inc. 2,808
97,500 L-3 Communications
Holdings, Inc. ..................... 6,513
------
11,259
AIR TRANSPORT (1.0%)
40,000 FedEx Corp. .......................... 3,268
AUTO PARTS (0.6%)
48,500 Autoliv Inc. ......................... 2,047
BANK (0.9%)
55,000 Commerce Bancorp, Inc. ............... 3,026
BEVERAGE -- SOFT
DRINK (1.9%)
65,000 Coca-Cola Company (The) .............. 3,281
86,500 Cott Corp.* .......................... 2,803
------
6,084
BIOTECHNOLOGY (2.2%)
81,000 Genentech, Inc.* ..................... 4,552
36,000 Invitrogen Corp.* .................... 2,592
------
7,144
CHEMICAL -- BASIC (1.0%)
73,000 du Pont (E.I.) de Nemours &
Co., Inc. .......................... 3,243
COAL (0.5%)
60,000 Massey Energy Co. .................... 1,693
COMPUTER &
PERIPHERALS (1.8%)
160,000 Dell, Inc.* .......................... 5,731
VALUE
SHARES (IN THOUSANDS)
- ------------------------------------------------------------------
COMPUTER SOFTWARE &
SERVICES (3.9%)
40,000 Accenture Ltd. Class "A"* ............ $1,099
75,000 Adobe Systems, Inc. .................. 3,488
225,000 Cognizant Technology Solutions
Corp. Class "A"* ................... 5,717
50,000 Symantec Corp.* ...................... 2,189
------
12,493
DIVERSIFIED --
COMPANIES (3.2%)
88,000 Danaher Corp. ........................ 4,563
75,000 Fortune Brands, Inc. ................. 5,657
------
10,220
DRUG (5.2%)
62,000 Biogen Idec, Inc.* ................... 3,921
65,000 Covance Inc.* ........................ 2,508
302,000 Pfizer, Inc. ......................... 10,353
------
16,782
E-COMMERCE (0.3%)
150,000 Sapient Corp.* ....................... 901
EDUCATIONAL
SERVICES (1.9%)
65,000 Career Education Corp.* .............. 2,961
98,100 Education Management Corp.* .......... 3,224
------
6,185
ELECTRICAL
EQUIPMENT (2.0%)
103,000 Rockwell Automation, Inc. ............ 3,863
90,000 Thomas & Betts Corp.* ................ 2,451
------
6,314
- --------------------------------------------------------------------------------
5
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- -------------------------------------------------------------------
ELECTRICAL UTILITY --
CENTRAL (0.6%)
49,000 TXU Corp ............................... $1,985
ELECTRONICS (2.4%)
120,000 Arrow Electronics, Inc.* ............... 3,218
50,000 Harman International
Industries, Inc. ..................... 4,550
------
7,768
ENTERTAINMENT (1.3%)
130,000 Disney (Walt) Co. (The) ................ 3,314
55,000 Radio One, Inc. Class "D"* ............. 880
------
4,194
ENTERTAINMENT
TECHNOLOGY (2.3%)
270,000 Activision, Inc.* ...................... 4,293
210,000 Pixelworks, Inc.* ...................... 3,217
------
7,510
FINANCIAL SERVICES --
DIVERSIFIED (7.3%)
123,000 American International
Group, Inc. .......................... 8,767
189,000 Citigroup Inc. ......................... 8,789
35,000 Countrywide Financial Corp. ............ 2,459
141,000 MBNA Corp. ............................. 3,636
------
23,651
FOOD PROCESSING (2.0%)
202,000 Archer-Daniels-Midland Co. ............. 3,389
75,000 Kellogg Co. ............................ 3,139
------
6,528
VALUE
SHARES (IN THOUSANDS)
- --------------------------------------------------------------------
GROCERY (0.6%)
20,000 Whole Foods Market, Inc. ............... $1,909
HEALTHCARE
INFORMATION
SYSTEMS (0.4%)
50,000 eResearch Technology, Inc.*. ........... 1,400
HOTEL/GAMING (2.1%)
90,000 International Game Technology .......... 3,474
66,000 Station Casinos, Inc. .................. 3,194
------
6,668
HUMAN RESOURCES (0.9%)
150,000 Korn/Ferry International* .............. 2,906
INDUSTRIAL
SERVICES (0.3%)
40,000 Navigant Consulting, Inc.* ............. 858
INTERNET (1.8%)
63,500 eBay, Inc.* ............................ 5,839
MEDICAL SERVICES (3.9%)
30,000 Aetna Inc. ............................. 2,550
114,000 DaVita Inc.* ........................... 3,515
69,000 Oxford Health Plans, Inc. .............. 3,798
30,000 Quest Diagnostics, Inc. ................ 2,548
------
12,411
MEDICAL SUPPLIES (4.8%)
124,500 Fisher Scientific
International, Inc.* ................. 7,190
30,000 IDEXX Laboratories, Inc.* .............. 1,888
31,500 Varian Medical Systems, Inc.* .......... 2,499
43,500 Zimmer Holdings, Inc.* ................. 3,837
------
15,414
- --------------------------------------------------------------------------------
6
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
JUNE 30, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- -------------------------------------------------------------------
METALS & MINING --
DIVERSIFIED (1.5%)
60,000 Phelps Dodge Corp. .................... $4,651
NATURAL GAS --
DIVERSIFIED (2.4%)
148,000 Patina Oil & Gas Corp. ................ 4,421
115,000 XTO Energy, Inc. ...................... 3,426
------
7,847
OFFICE EQUIPMENT &
SUPPLIES (1.5%)
25,000 Lexmark International, Inc.* .......... 2,413
85,000 Staples, Inc. ......................... 2,491
------
4,904
OILFIELD
SERVICES/EQUIPMENT (1.8%)
80,000 Schlumberger Ltd. ..................... 5,081
29,000 Transocean Inc.* ...................... 839
------
5,920
PAPER & FOREST
PRODUCTS (2.4%)
145,000 Georgia Pacific Corp. ................. 5,362
59,500 Potlatch Corp. ........................ 2,478
------
7,840
PETROLEUM --
INTEGRATED (1.1%)
65,000 Kerr-McGee Corp. ...................... 3,495
PETROLEUM --
PRODUCING (2.5%)
56,000 Anadarko Petroleum Corp. .............. 3,282
108,000 Apache Corp. .......................... 4,703
------
7,985
VALUE
SHARES (IN THOUSANDS)
- -------------------------------------------------------------------
PHARMACY
SERVICES (4.8%)
83,000 Accredo Health, Inc.* ................. $3,233
160,500 CVS Corp. ............................. 6,744
150,000 Walgreen Co. .......................... 5,432
------
15,409
POWER (0.6%)
67,000 Headwaters Inc.*. ..................... 1,737
RAILROAD (1.5%)
185,000 Norfolk Southern Corp. ................ 4,906
RECREATION (0.7%)
37,000 Harley-Davidson, Inc. ................. 2,292
RETAIL BUILDING
SUPPLY (1.7%)
151,500 Home Depot, Inc. (The) ................ 5,333
RETAIL -- SPECIAL
LINES (0.7%)
35,000 Urban Outfitters, Inc.* ............... 2,132
RETAIL STORE (1.4%)
59,000 Nordstrom, Inc. ....................... 2,514
50,000 Penney (J.C.) Co., Inc. ............... 1,888
------
4,402
SECURITIES
BROKERAGE (1.3%)
45,000 Legg Mason, Inc. ...................... 4,095
SEMICONDUCTOR (2.3%)
70,000 Analog Devices, Inc. .................. 3,296
230,000 Motorola, Inc. ........................ 4,197
------
7,493
TELECOMMUNICATION
SERVICES (1.4%)
90,000 Nextel Communications, Inc.
Class "A"* .......................... 2,399
76,000 Western Wireless Corp.
Class "A"* .......................... 2,197
------
4,596
- --------------------------------------------------------------------------------
7
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
- --------------------------------------------------------------
TELECOMMUNICATIONS
EQUIPMENT (6.1%)
90,000 Andrew Corp.* ..................... $ 1,801
311,500 Cisco Systems, Inc.* .............. 7,382
120,000 Marvell Technology Group Ltd.* 3,204
100,000 QUALCOMM, Inc. .................... 7,298
--------
19,685
TOILETRIES &
COSMETICS (1.6%)
70,000 Avon Products, Inc. ............... 3,230
55,000 Helen of Troy Ltd.*. .............. 2,028
--------
5,258
WIRELESS
--NETWORKING (0.6%)
27,000 Research In Motion Ltd.* .......... 1,848
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (98.5%)
(COST $269,461,000).......................... $317,259
--------
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER
(IN THOUSANDS) SHARE AMOUNT)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.3%)
(INCLUDING ACCRUED INTEREST)
$1,000 Collateralized by $955,000 U.S.
Treasury Notes 6.50%, due
8/15/05, with a value of
$1,023,000 (with State Street
Bank & Trust Co., 1.20%,
dated 6/30/04, due 7/1/04,
delivery value $1,000,033)
(Cost $1,000,000) ................................ $ 1,000
--------
CASH AND OTHER ASSETS OVER
LIABILITIES (1.2%) ............................................. 3,953
--------
NET ASSETS (100.0%) .............................................. $322,212
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER OUTSTANDING SHARE
($322,212,267 - 11,418,324 SHARES OF
CAPITAL STOCK OUTSTANDING) ..................................... $ 28.22
========
*Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS FOR THE
AT JUNE 30, 2004 (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNT) (IN THOUSANDS)
---------------- --------------
ASSETS: INVESTMENT INCOME:
Investment securities, at value Dividends (Net of foreign withholding
(Cost - $269,461) ........................... $317,259 taxes of $12) ............................ $ 1,157
Repurchase agreement (Cost - $1,000)............ 1,000 Interest .................................... 17
Cash ........................................... 16 ---------
Receivable for securities sold ................. 9,750 Total Income .......................... 1,174
Dividends receivable ........................... 122 ---------
Receivable for capital shares sold ............. 4 EXPENSES:
Prepaid expenses ............................... 33 Advisory fee ................................ 1,235
-------- Service and distribution plan fees .......... 412
TOTAL ASSETS ................................. 328,184 Transfer agent fees ......................... 75
-------- Auditing and legal fees ..................... 33
LIABILITIES: Custodian fees .............................. 24
Payable for securities purchased ............... 5,263 Printing .................................... 23
Payable for capital shares repurchased ......... 366 Insurance, dues and other ................... 21
Accrued expenses: Postage ..................................... 20
Advisory fee ................................ 197 Interest and commitment fee expense ......... 17
Service and distribution plan fees Telephone ................................... 12
payable .................................. 66 Registration and filing fees ................ 12
Other ....................................... 80 Directors' fees and expenses ................ 10
-------- ---------
TOTAL LIABILITIES ........................ 5,972 Total Expenses Before Custody
-------- Credits ............................... 1894
NET ASSETS ..................................... $322,212 Less: Custody Credits .................... (1)
======== ----------
NET ASSETS CONSIST OF: Net Expenses ............................. 1,893
Capital stock, at $1.00 par value ---------
(authorized 50,000,000, outstanding NET INVESTMENT LOSS ......................... (719)
11,418,324 shares) .......................... $ 11,418 ---------
Additional paid-in capital ..................... 201,076 NET REALIZED AND UNREALIZED GAIN ON
Accumulated net investment loss ................ (719) INVESTMENTS:
Undistributed net realized gain on Net Realized Gain ...................... 25,526
investments ................................. 62,639 Change in Net Unrealized
Net unrealized appreciation of Appreciation ........................ (21,701)
investments ................................. 47,798 ---------
-------- NET REALIZED GAIN AND CHANGE IN NET
NET ASSETS ..................................... $322,212 UNREALIZED APPRECIATION ON
======== INVESTMENTS .............................. 3,825
NET ASSET VALUE, OFFERING AND ---------
REDEMPTION PRICE PER OUTSTANDING NET INCREASE IN NET ASSETS
SHARE ($322,212,267 - 11,418,324 FROM OPERATIONS .......................... $ 3,106
SHARES OUTSTANDING) ......................... $ 28.22 =========
========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED) AND FOR THE YEAR ENDED
DECEMBER 31, 2003
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31,
(UNAUDITED) 2003
------------------------------
(IN THOUSANDS)
OPERATIONS:
Net investment loss ................................................. $ (719) $ (816)
Net realized gain on investments .................................... 25,526 89,506
Change in net unrealized appreciation ............................... (21,701) (40,211)
------------------------------
Net increase in net assets from operations .......................... 3,106 48,479
------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions ...................... -- (43,922)
------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares ........................................ 5,641 111,695
Proceeds from reinvestment of distributions to shareholders ......... -- 40,942
Cost of shares repurchased .......................................... (28,697) (149,526)
------------------------------
Net (decrease) increase from capital share transactions ............. (23,056) 3,111
------------------------------
TOTAL (DECREASE) INCREASE IN NET ASSETS .............................. (19,950) 7,668
NET ASSETS:
Beginning of period ................................................. 342,162 334,494
------------------------------
End of period ....................................................... $ 322,212 $ 342,162
==============================
ACCUMULATED NET INVESTMENT LOSS, END OF PERIOD ....................... $ (719) $ --
==============================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2004
- --------------------------------------------------------------------------------
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.
(E) REPRESENTATIONS AND INDEMNIFICATIONS. In the normal course of business the
Fund enters into contracts that contain a variety of representations and
warranties which provide general indemnifications. The Fund's maximum exposure
under these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risk of loss to be remote.
- --------------------------------------------------------------------------------
11
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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, 2004 DECEMBER 31,
(UNAUDITED) 2003
-------------------------------
Shares sold ........................ 200 3,875
Shares issued to
shareholders in
reinvestment of distri-
butions ......................... -- 1,481
-------------------------------
200 5,356
Shares repurchased ................. (1,020) (5,202)
-------------------------------
Net (decrease) increase ............ (820) 154
===============================
Distributions per share
from net realized gains ......... $ -- $ 3.9904
===============================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
SIX MONTHS ENDED
JUNE 30, 2004
(UNAUDITED)
-----------------
(IN THOUSANDS)
PURCHASES:
Investment Securities ......... $265,025
========
SALES:
Investment Securities ......... $298,077
========
4. Income Taxes
In June 30, 2004, information on the tax components of capital is as follows:
(unaudited)
(IN THOUSANDS)
---------------
Cost of investments for tax purposes ......... $270,980
--------
Gross tax unrealized appreciation ............ $49,367
Gross tax unrealized depreciation ............ (2,088)
--------
Net tax unrealized appreciation on
investments ............................... $47,279
========
Net realized gain (loss) 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 $1,235,000 was paid or payable to Value Line, Inc., the
Fund's investment adviser (the "Adviser"), for the six months ended June 30,
2004. 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.
- --------------------------------------------------------------------------------
12
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
JUNE 30, 2004
- --------------------------------------------------------------------------------
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, 2004, fees amounting to $412,000 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 months
ended June 30, 2004, the Fund paid brokerage commissions totaling $332,000 to
the Distributor, which clears its transactions through unaffiliated brokers.
For the six months ended June 30, 2004, the Fund's expenses were reduced by
$1,000 under a custody credit arrangement with the Custodian.
The Value Line, Inc. Profit Sharing and Savings Plan owned 82,093 shares of the
Fund's capital stock, representing 0.7% of the outstanding shares at June 30,
2004.
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 on June 30, 2004. The weighted average
amount of bank loans outstanding for the six months ended June 30, 2004,
amounted to approximately $144,000 at a weighted average interest rate of
2.06%. For the six months ended June 30, 2004, interest expense of
approximately $1,000 and commitment fees of approximately $16,000 relating to
borrowings under the agreement were paid or payable to SSBT.
-----------------------------------------------------------------------
PROXY VOTING
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available without charge upon request by calling 1-800-243-2729 or
on the SEC's website (http://www.sec.gov). Information regarding how
the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is also available on the
SEC's website at http://www.sec.gov or at the Fund's website at
http://vlfunds.com.
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2004 =====================================================================
(UNAUDITED) 2003 2002 2001 2000 1999
======================================================================================
NET ASSET VALUE, BEGINNING
OF PERIOD ......................... $ 27.96 $ 27.68 $ 38.43 $ 45.63 $ 57.98 $ 48.42
--------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment loss ............... (.06) (.07) (.17) (.22) (.22) (.14)
Net gains or losses on
securities (both realized and
unrealized ....................... .32 4.34 (10.19) (4.61) (7.78) 14.90
--------------------------------------------------------------------------------------
Total from investment
operations ........................ .26 4.27 (10.36) (4.83) (8.00) 14.76
LESS DISTRIBUTIONS:
Distributions from net
realized gains ................. -- (3.99) (.39) (2.37) (4.35) (5.20)
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..... $ 28.22 $ 27.96 $ 27.68 $ 38.43 $ 45.63 $ 57.98
======================================================================================
TOTAL RETURN ....................... 0.93%+ 15.60% -26.96% -10.53% -13.92% 30.99%
======================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ........................ $322,212 $342,162 $334,494 $495,694 $601,594 $763,203
Ratio of expenses to average net
assets (including interest
expense) (1) ...................... 1.15%* 1.15% 1.25% 1.16% .96% .82%
Ratio of expenses to average net
assets (excluding interest
expense) (1) ...................... 1.15%* 1.15% 1.14% 1.09% .95% .82%
Ratio of net investment loss to
average net assets ................ (0.44)%* (0.24)% (0.49)% (.54)% (.41)% (.28)%
Portfolio turnover rate ............ 81%+ 110% 28% 50% 28% 27%
(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.
+ NOT ANNUALIZED
* ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
VALUE LINE LEVERAGED GROWTH INVESTORS, INC.
- --------------------------------------------------------------------------------
(This page has been left blank intentionally.)
- --------------------------------------------------------------------------------
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 1-800-243-2729, 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
Item 2. Code of Ethics
- ------- --------------
Not applicable.
Item 3. Audit Committee Financial Expert.
- ------ ---------------------------------
Not applicable.
Item 10. Controls and Procedures.
- -------- ------------------------
(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-3(c) under the
Act (17 CFR 270.30a-3(c) ) based on their evaluation of these
controls and procedures as of the date within 90 days of 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 11. Exhibits.
- -------- ---------
(a) Certifications of principal executive officer and principal
financial officer of the registrant.
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 31, 2004
---------------
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 31, 2004
---------------