<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust
Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust
SERVICING AGENT Co.
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
TRUSTEES Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
Charles E. Reed
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Christopher Bischof
VICE PRESIDENT
Richard Cunniffe
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT and
SECRETARY/TREASURER
Jack M. Houston
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
</TABLE>
THIS AUDITED 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
TRUST (OBTAINABLE FROM THE DISTRIBUTOR).
VLF#701196
------------------------------------
ANNUAL REPORT
------------------------------------
JANUARY 31, 1997
----------------------------------------
VALUE LINE
AGGRESSIVE
INCOME TRUST
[LOGO]
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
To Our Value Line Aggressive
- -------------------------------------------
To Our Shareholders:
We are pleased to send you this Value Line Aggressive Income Trust (the "Trust")
annual report for the fiscal year ended January 31, 1997.
For the year, your Trust posted a total return (changes in net asset value plus
reinvestment of dividends) of 18.12%. By comparison, the Lehman Brothers
Aggregate Bond Index (representative of the fixed-income market as a whole)
returned only 3.26%, while the Merrill Lynch High-Yield Master II Index (a
standard performance measure for higher-yield bonds) registered a gain of
10.35%.
As you can see from the performance of the Lehman Aggregate Bond Index noted
above, the broad bond market performed poorly over the period, with the yield on
the ten-year U.S. Treasury Note rising from 5.57% to 6.50%. The outperformance
of the high-yield market was due to several factors: a rising stock market,
higher coupon income, and a tightening of the yield spread of high-yield bonds
over U.S. Treasury bonds.
The excellent performance by your Trust over the past fiscal year was the result
of a number of factors:
Strong industry selections: Your Trust's management maintained its over-weighted
position in telecommunications, a top-performing sector, through the fiscal
year. The telecommunications sector has accounted for a growing portion of new
high-yield issues to date, and we expect this trend to continue. Particular
subsectors of the telecommunications sector that we expect to continue to come
to the high-yield market include personal communications services (PCS) and
competitive local exchange carriers (CLECs). Balancing the risk and reward
assessments of these new offerings will remain a focus of our efforts. To date,
we have invested across a range of CLEC issuers, and are currently evaluating
several opportunities in PCS providers. In addition, we increased our weighting
in the oilfield services and financial services industries, both top-performing
sectors over the past year. Furthermore, we have scaled down our allocation to
the radio/TV sector, a top-performing segment in the prior year, as a result of
the consolidation unleashed in that industry as a result of the
Telecommunications bill enacted last year. Meanwhile, we remained under-weighted
in retailing, restaurants, and homebuilding, three sectors whose performance
lagged during the year.
Credit stability: The rate of default on high-yield bonds declined sharply last
year, according to Moody's Investors Service, from 1.51% of outstanding
principal in 1995, to 1.31% in 1996. Credit ratings for holdings in your Trust,
however, remained stable over the year. None was materially downgraded by a
major credit-rating agency.
Positions in BB-rated bonds: Bonds rated BB tend to have greater sensitivity to
interest-rate movements than those rated single B or lower. During the 12 months
ended January 31, 1997, the price of 10-year U.S. Treasury notes declined, and
the yield rose by one percentage point, to 6.50%. Though our BB-rated bonds
tracked this price change, we reduced our exposure to these higher-rated credits
during the first half of the year, lessening the impact of the price decline.
Our allocations among industry sectors are likely to shift as valuations change.
We expect to trim our holdings in telecommunications and financial services,
which performed so well last year. Meanwhile, as we see attractive opportunities
in retailing, restaurants, supermarkets, and home building, where valuations are
near historical lows, we are likely to increase our holdings in these sectors.
We will continue to keep a diversified portfolio that meets your Trust's
objectives of maximizing high current income, while striving to constantly
improve our credit selection to minimize undue volatility of principal.
Furthermore, we believe that high-yield bonds will continue to represent good
relative value within the universe of fixed-income securities.
We thank you for your continued confidence in the Value Line Aggressive Income
Trust, and we look forward to serving your investment needs in the future.
Sincerely,
[SIGNATURE]
Jean Bernhard Buttner
CHAIRMAN and PRESIDENT
March 27, 1997
- --------------------------------------------------------------------------------
2
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Income Trust Shareholders
- -------------------------------------------
Economic Observations
The current economic expansion is now entering its seventh year. Although this
does not yet qualify as the longest peacetime period of growth on record (both
the 1960's and the 1980's experienced somewhat longer upcycles), it is still
quite noteworthy, especially since there are as yet few signs that this lengthy
run of uninterrupted prosperity is about to draw to a close. In fact, recent
reports show that there is still a good deal of strength around, with high doses
of consumer confidence, continuing solid job growth, and healthy levels of
retail, housing, and manufacturing activity pointing to economic growth that
will likely stay above 2% for most, if not all, of 1997.
Inflation, meanwhile, continues to be under control, with prices at both the
producer (or wholesale) and consumer levels either falling or going up modestly.
This healthy inflation trend, which is remarkable given the longevity of the
business expansion, is, moreover, showing few signs of running its course.
Underscoring our optimism in this area is the fact that there is still a lack of
serious shortages on either the labor or the raw materials fronts, although we
do note that the recent pickup in wage pressures could, if unchecked, pose some
threat down the road.
Interest rates, meanwhile, reflecting the likely moderate pace of upcoming
economic growth and the benign nature of inflation, are unlikely to change all
that much over the next year. Nevertheless, we caution that recent remarks by
Federal Reserve Chairman Alan Greenspan, in which he indicated that the Fed has,
in the past, occasionally raised rates before higher inflation actually took
hold, and the subsequent one-quarter of a percentage point increase in
short-term interest rates, would seem to suggest that the central bank will not
be shy about tightening the credit reins further this year, if it sees the need.
An additional upward move in rates, if sufficiently pronounced, would not be
good news for either the stock or the bond markets, or, ultimately, for the U.S.
economy.
Performance Data:*
<TABLE>
<CAPTION>
1 year ended 5 years ended 10 years ended
12/31/96 12/31/96 12/31/96
<S> <C> <C> <C>
-------------------------------------------------
Average Annual Total Return* 19.75% 12.97% 9.12%
<CAPTION>
1 year ended 5 years ended 10 years ended
1/31/97 1/31/97 1/31/97
<S> <C> <C> <C>
-------------------------------------------------
Average Annual Total Return* 18.12% 12.72% 8.93%
</TABLE>
* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL-GAINS
DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE
OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ITS ORIGINAL COST.
- --------------------------------------------------------------------------------
3
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
- -------------------------------------------
The following graph compares the performance of the Value Line Aggressive Income
Trust to that of the Lehman Brothers Aggregate Bond Index. The Value Line
Aggressive Income Trust is a professionally managed mutual fund, while the Index
is not available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
<S> <C>
VALUE LINE AGGRESSIVE INCOME TRUST AND THE LEHMAN AGGREGATE BOND INDEX*
The Value Line Aggressive/Income
Trust
1/1/87 $10,000
12/31/87 9,467
12/31/88 10,271
12/31/89 10,215
12/31/90 10,141
12/31/91 12,924
12/31/92 14,514
12/31/93 17,235
12/31/94 16,087
12/31/95 19,914
12/31/96 23,522
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
<S> <C>
VALUE LINE AGGRESSIVE INCOME TRUST AND THE LEHMAN AGGREGATE BOND INDEX*
Lehman Aggregate Bond Index
1/1/87 $10,000
12/31/87 10,489
12/31/88 11,089
12/31/89 12,371
12/31/90 13,811
12/31/91 15,610
12/31/92 17,322
12/31/93 18,905
12/31/94 18,468
12/31/95 21,597
12/31/96 22,302
</TABLE>
(Period covered is from 2/1/87 to 1/31/97)
- --------------------------------------------------------------------------------
* THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS REPRESENTATIVE OF THE BROAD
FIXED-INCOME MARKET. IT INCLUDES GOVERNMENT, INVESTMENT-GRADE CORPORATE, AND
MORTGAGE-BACKED BONDS. THE RETURNS FOR THE INDEX DO NOT REFLECT EXPENSES,
WHICH ARE DEDUCTED FROM THE TRUST'S RETURNS.
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments
January 31, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
- ------------------------------------------------------------------------------------------------------------
UNITS (5.8%)
BROADCASTING/CABLE TV (1.3%)
$ 2,000,000 Orion Network Systems, Inc., consisting of (Senior Discount Notes and Warrants to
purchase Common Stock, zero coupon until 1/15/02, 12 1/2% thereafter) due
1/15/07......................................................................... $ 1,115,000
HOME APPLIANCE (0.7%)
500,000 Health-o-Meter, Inc., consisting of (13%, Senior Subordinated Notes and Warrants
to purchase Common Stock) due 8/15/02........................................... 552,500
TELCOMMUNICATION SERVICES (3.8%)
3,500,000 Colt Telecom Group PLC, consisting of (Senior Discount Notes and Warrants to
purchase ordinary shares, zero coupon until 12/15/01, 12% thereafter), due
12/15/06........................................................................ 2,152,500
1,000,000 RSL Communications Ltd., consisting of (12 1/4%, Senior Notes and Warrants to
purchase class A Common Stock) due 11/15/06 (1)................................. 1,037,500
-----------
3,190,000
-----------
TOTAL UNITS (COST $4,656,057)..................................................... 4,857,500
-----------
CORPORATE BONDS & NOTES (66.4%)
AUTO PARTS (1.2%)
1,000,000 Hawk Corp., 10 1/4%, Senior Notes, 12/1/03 (1).................................... 1,018,750
BROADCASTING/CABLE TV (8.2%)
500,000 Busse Broadcasting Corp., Senior Secured Notes, 11 5/8%, 10/15/00................. 509,375
500,000 Commodore Media Inc., Senior Subordinated Notes, (7 1/2%, until 5/1/98, 13 1/4%
thereafter) 5/1/03.............................................................. 525,000
2,000,000 EchoStar Satellite Broadcasting Corp., Senior Secured Discount Notes, (zero coupon
until 3/15/00, 13 1/8%, thereafter) 3/15/04..................................... 1,437,500
1,000,000 International Cabletel Inc., Senior Deferred Coupon Notes, (zero coupon until
10/15/98, 10 7/8%, thereafter) 10/15/03......................................... 840,000
1,000,000 Paxson Communicating Corp., Senior Subordinated Notes, 11 5/8%, 10/1/02........... 1,048,750
1,000,000 Spanish Broadcasting Systems, Inc., Senior Subordinated Notes, (7 1/2%, until
6/15/97, 12 1/2% thereafter) 6/15/02............................................ 1,052,500
2,000,000 United International Holdings, Inc., Senior Secured Discount Notes, Ser-B, (zero
coupon), 11/15/99............................................................... 1,455,000
-----------
6,868,125
COAL/ALTERNATE ENERGY (2.5%)
AES Corp., Senior Subordinated Notes,:
490,000 9 3/4%, 6/15/00................................................................ 510,213
1,000,000 10 1/4%, 7/15/06................................................................ 1,085,000
500,000 Panda Funding Corp., Subordinated Notes, Series "A", 11 5/8%, 8/20/12 (1)......... 514,375
-----------
2,109,588
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments
- -------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE & SERVICES (1.2%)
$ 950,000 ComputerVision Corp., Senior Subordinated Notes, 11 3/8%, 8/15/99................. $ 985,625
FINANCIAL SERVICES (5.4%)
1,000,000 Homeside Inc., Senior Secured Second Priority Notes, 11 1/4%, 5/15/03............. 1,138,750
1,250,000 Imperial Credit Industries, Inc., Senior Notes, 9 7/8%, 1/15/07 (1)............... 1,281,250
1,000,000 Ocwen Financial Corp., Notes, 11 7/8%, 10/1/03.................................... 1,093,750
1,000,000 Wilshire Financial Services Group, Inc., Notes, 13%, 1/1/04....................... 1,002,500
-----------
4,516,250
FURNITURE/HOME FURNISHINGS (3.5%)
2,635,000 Cort Furniture Rental Co., Senior Notes, 12%, 9/1/00.............................. 2,931,438
GROCERY (1.2%)
1,000,000 Grand Union Co., 12%, Senior Notes, 9/1/04........................................ 1,012,500
HOTEL/GAMING (3.6%)
1,000,000 Aztar Corp., Senior Subordinated Notes, 13 3/4%, 10/1/04.......................... 1,102,500
1,000,000 GB Properties Funding Corp., First Mortgage Notes, 10 7/8%, 1/15/04............... 798,750
500,000 Lady Luck Gaming Financial Corp., First Mortgage Notes, 11 7/8%, 3/1/01........... 491,875
500,000 Showboat Inc., Senior Subordinated Notes, 13%, 8/1/09............................. 567,500
-----------
2,960,625
MEDICAL SERVICES (1.7%)
1,500,000 Paracelsus Healthcare Corp., Senior Subordinated Notes, 10%, 8/15/06.............. 1,456,875
OFFICE EQUIPMENT & SUPPLIES (1.2%)
1,000,000 Mail-Well Corp., Senior Subordinated Notes, 10 1/2%, 2/15/04...................... 1,018,750
OILFIELD SERVICES/EQUIPMENT (1.9%)
1,000,000 Deeptech International, Senior Secured Notes, 12%, 12/15/00....................... 1,071,250
500,000 Falcon Drilling Co., Inc., Senior Subordinated Notes, Series "B", 12 1/2%,
3/15/05......................................................................... 556,875
-----------
1,628,125
PAPER & FOREST PRODUCTS (3.0%)
1,000,000 Doman Industries, Ltd., Senior Notes, 8 3/4%, 3/15/04............................. 950,000
1,500,000 Stone Container Corp., 10 3/4%, 6/15/97........................................... 1,518,750
-----------
2,468,750
PETROLEUM-INTEGRATED (4.7%)
2,500,000 Clark R & M Holdings Inc., Senior Secured Notes, Series "A" (zero coupon),
2/15/00......................................................................... 1,831,250
2,000,000 Statia Terminals International N.V., First Mortgage Notes, 11 3/4%, 11/15/03
(1)............................................................................. 2,117,500
-----------
3,948,750
PETROLEUM-PRODUCING (1.3%)
1,000,000 Abraxas Petroleum Corp., Senior Notes, 11 1/2%, 11/1/04 (1)....................... 1,080,000
RETAIL STORE (1.3%)
1,000,000 Eye Care Centers of America, Inc., Senior Notes, 12%, 10/1/03..................... 1,076,250
STEEL (1.3%)
1,035,000 ACME Metals Inc., Senior Secured Discount Notes (zero coupon until 8/1/97, 13 1/2%
thereafter), 8/1/04............................................................. 1,085,456
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
January 31, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATION SERVICES (22.5%)
$ 1,000,000 Advanced Radio Telecommunications, Corp., Senior Secured Notes, 12 1/2%, 12/15/98
(1)(3).......................................................................... $ 1,000,000
1,000,000 American Communications Services Inc., Senior Discount Notes, (zero coupon until
11/1/00, 13%thereafter), 11/1/05................................................ 630,000
1,000,000 Cellular Communication International, Inc., Senior Discount Notes, (zero coupon)
8/15/00......................................................................... 670,000
1,000,000 Centennial Cellular Corp., Senior Notes, 8 7/8%, 11/1/01.......................... 973,750
2,000,000 Clearnet Communications Inc. Senior Discount Notes, (zero coupon until 12/15/00,
14 3/4%, thereafter), 12/15/05.................................................. 1,297,500
1,000,000 Comcast Cellular Corp., Series "B" Participating Notes, (zero coupon), 3/15/05.... 730,000
500,000 Fonorola Inc., Senior Secured Notes, 12 1/2%, 8/15/02............................. 545,000
1,600,000 GST USA Inc. Senior Discount Notes, (zero coupon until 12/15/00, 13 7/8%
thereafter), 12/15/05........................................................... 960,000
1,000,000 Hyperion Telecommunications, Inc., Series "B", Senior Discount Notes, (zero coupon
until 4/15/01, 13% thereafter), 4/15/03......................................... 577,500
2,000,000 IXC Communications Inc., Senior Notes, Series "B" 12 1/2%, 10/1/05................ 2,247,500
1,000,000 Intermedia Communications of Florida, Inc., Senior Notes, Series "B" 13 1/2%,
6/1/05.......................................................................... 1,144,220
2,000,000 International Wireless Communications Holdings, Inc., Senior Secured Discount
Notes, (zero coupon), 8/15/01................................................... 1,140,000
1,095,000 Ionica PLC, Senior Notes, 13 1/2%,8/15/06......................................... 1,272,937
1,000,000 Microcell Telecommunications, Inc. Senior Discount Notes, (zero coupon until
12/1/01, 14% thereafter), 6/1/06................................................ 590,000
1,000,000 Millicom International Cellular S.A., Senior Subordinated Discount Notes, (zero
coupon until 6/1/01, 13 1/2%thereafter), 6/1/06................................. 656,250
2,000,000 Nextell Communications Inc., Senior Discount Notes, (zero coupon until 2/15/99,
9 3/4%, thereafter), 8/15/04.................................................... 1,417,500
1,000,000 Omnipoint Corp., Senior Notes, 11 5/8%, 8/15/06................................... 1,043,750
2,000,000 Sprint Spectrum L.P., Senior Discount Notes, (zero coupon until 8/15/01, 12 1/2%
thereafter), 8/15/06............................................................ 1,367,500
1,000,000 Winstar Communications, Inc., Senior Discount Notes, (zero coupon until 10/15/00,
14% thereafter), 10/15/05....................................................... 600,000
-----------
18,863,407
THRIFT (0.7%)
500,000 Dime Bancorp, Senior Notes, 10 1/2%, 11/15/05..................................... 546,875
-----------
TOTAL CORPORATE BONDS & NOTES (COST $53,916,553).................................. 55,576,139
-----------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments
- -------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
or Shares Value
<C> <S> <C>
- ------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES (1.0%)
TELECOMMUNICATIONS SERVICES (1.0%)
$ 200,000 GST Telecommunications, Inc., Senior Subordinated Discount Notes, (zero coupon
until 12/15/00, 13 7/8%thereafter), 12/15/05 (1)................................ $ 182,000
1,000,000 Winstar Communications, Inc., Senior Subordinated Discount Notes (zero coupon
until 10/15/00, 14% thereafter) 10/15/05 (1).................................... 653,750
-----------
TOTAL CONVERTIBLE BONDS & NOTES (COST $893,328)................................... 835,750
-----------
PREFERRED BONDS & NOTES (2.4%)
FINANCIAL SERVICES (2.4%)
2,000,000 BankUnited Capital, Trust Pfd. Securities, Series A, 10 1/4%, 12/31/26 (1)........ 2,020,000
-----------
TOTAL PREFERRED BONDS & NOTES (COST $2,010,000)................................... 2,020,000
-----------
PREFERRED UNITS (1.2%)
TELECOMMUNICATION SERVICES (1.2%)
20,000 Nextlink Communications, Inc., consisting of (14%, Senior Exchangeable Redeemable
Preferred Stock and Contingent Warrants to purchase Junior Stock @ $.01, expire
2/1/09)......................................................................... 1,020,000
-----------
TOTAL PREFERRED UNITS (COST $1,000,000)........................................... 1,020,000
-----------
PREFERRED STOCKS (0.7%)
TELECOMMUNICATIONS SERVICES (.7%)
537 ICG Holdings Inc., 14 1/4%, 5/1/07 (4)............................................ 585,330
-----------
TOTAL PREFERRED STOCKS (COST $506,250)............................................ 585,330
-----------
COMMON STOCKS (0.3%)
OFFICE EQUIPMENT & SUPPLIES (0.3%)
14,205 Mail-Well Holdings, Inc. (1)(2)................................................... 253,914
-----------
TOTAL COMMON STOCK (COST $53,500)................................................. 253,914
-----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
January 31, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
Number of
Warrants Value
<C> <S> <C>
- ------------------------------------------------------------------------------------------------------------
WARRANTS (0.2%)
BROADCASTING/CABLE TV (0.0%)
9,500 American Telecasting Inc., (to purchase Common Stock @ $12.65, expire 6/15/99)
(1)(2).......................................................................... $ 475
HOUSEHOLD PRODUCTS (0.0%)
500 Chattem Inc., (to purchase Common Stock @ $16.79, expire, 6/17/99) (1)(2)......... 8,750
RETAIL STORE (0.0%)
500 Eye Care Centers of America, (to purchase Common Stock, expire 10/1/03) (2)....... 5,005
TELECOMMUNICATION SERVICES (0.2%)
6,005 Advance Radio Telecom Corp., (to purchase Common Stock @ $.01, expire 11/12/06)
(1)(2).......................................................................... 30,025
6,600 Clearnet Communications Inc., (to purchase class "A" non-voting shares @ $16.36,
expire 9/15/05) (1)(2).......................................................... 39,600
1,000 Hyperion Telecommunications, Inc., (to purchase Common Stock @ 0.02, expire
4/15/01) (1)(2)................................................................. 20,000
4,125 ICG Holdings Inc., (to purchase Common Stock @ $12.51, expire 9/15/05) (1)(2)..... 45,408
500 Intermedia Communication of Florida, (to purchase Common Stock @ $10.86, expire
6/1/00) (1)(2).................................................................. 11,875
2,000 International Wireless Communication Holdings Inc., (to purchase Common Stock @
$.01, expire 8/15/01) (1)(2).................................................... 20
1,095 Ionica PLC, (to purchase Common Stock @ L.10, expire 8/15/06) (1)(2).............. 0
4,000 Microcell Telecommunications Inc., "Initial", (to purchase class "B" non-voting
shares @ $.01, expire 12/31/97) (1)(2).......................................... 26,000
4,000 Microcell Telecommunications Inc., "Conditional", (to purchase class "B"
non-voting shares @ $.01, expire 12/31/97) (1)(2)............................... 1,000
1,000 Nextel Communications Inc., Series "A", (to purchase Common Stock, expire 4/25/99)
(1)(2).......................................................................... 10
-----------
173,938
-----------
TOTAL WARRANTS (COST $355,054).................................................... 188,168
-----------
TOTAL INVESTMENT SECURITIES (78.0%) (COST $63,390,742)............................ 65,336,801
-----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments
January 31, 1997
- -------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
- ------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (12.4%) (including accrued interest)
$10,385,000 Collateralized by $9,655,000 U.S. Treasury Notes 7 7/8%, due 8/15/01 with a value
of $10,583,474 (With Morgan Stanley & Co. 5.52%, dated 1/31/97, due 2/3/97
delivery value $10,389,777)..................................................... $10,386,592
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (9.6%).......................................... 8,041,529
-----------
NET ASSETS (100.0%)............................................................................ $83,764,922
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER OUTSTANDING SHARE........................... $ 8.21
-----------
</TABLE>
(1)144A SECURITY WHERE CERTAIN CONDITIONS FOR PUBLIC SALE MAY EXIST.
(2)NON-INCOME PRODUCING SECURITY.
(3)UNREGISTERED SECURITY, WHEN ISSUED.
(4)PIK (PAYMENT-IN-KIND). INTEREST PAYMENT IS MADE WITH ADDITIONAL SECURITIES.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Statement of Assets and Liabilities
Statement of Operations
at January 31, 1997
for the Year Ended January 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
----------------
<S> <C>
Assets:
Investment securities, at value
(cost--$63,391)......................... $ 65,337
Repurchase agreement (cost $10,387)....... 10,387
Cash...................................... 1,018
Receivable for securities sold............ 8,237
Interest receivable....................... 1,296
Receivable for trust shares sold.......... 1,049
---------
Total Assets.......................... 87,324
---------
Liabilities:
Payable for securities purchased.......... 3,181
Payable for trust shares repurchased...... 33
Dividends payable to shareholders......... 217
Accrued expenses:
Advisory fee............................ 50
Other................................... 78
---------
Total Liabilities..................... 3,559
---------
Net Assets:............................... $ 83,765
---------
Net Assets:
Capital Stock, at $.01 par value
(authorized unlimited, outstanding
10,203,803 shares of beneficial
interest)............................... $ 102
Additional paid-in capital................ 90,722
Accumulated net realized loss on
investments............................. (9,021)
Undistributed net investments income...... 16
Unrealized net appreciation of
investments............................. 1,946
---------
Net Assets............................ $ 83,765
---------
Net Asset Value, Offering and Redemption
Price per Outstanding Share............. $ 8.21
---------
</TABLE>
<TABLE>
<CAPTION>
Dollars
(IN THOUSANDS)
---------------
<S> <C>
Investment Income:
Interest income............................ $ 5,900
Other income............................... 124
---------
6,024
Expenses:
Advisory fee............................... 425
Registration and filing fees............... 39
Auditing and legal fees.................... 35
Transfer agent fees........................ 34
Custodian fees............................. 25
Printing, checks and stationery............ 21
Trustees' fees and expenses................ 13
Taxes and other expenses................... 11
Postage and insurance...................... 11
Telephone and wire charges................. 5
---------
Total Expenses before custody
credits............................... 619
Less custody credits................... (7)
---------
Net Expenses........................... 612
---------
Net Investment Income...................... 5,412
---------
Realized and Unrealized Gain on Investments
Realized Gain--Net....................... 3,979
Change in Unrealized Appreciation--Net... 334
---------
Net Realized Gain and Change in Net
Unrealized Appreciation on Investments... 4,313
---------
Net Increase in Net Assets from
Operations............................... $ 9,725
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Statement of Changes in Net Assets
for the Years Ended January 31, 1997 and 1996
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
--------------------
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Operations:
Net investment income................................................................ $ 5,412 $ 3,303
Realized gain on investments--net.................................................... 3,979 1,577
Change in net unrealized appreciation................................................ 334 2,601
--------------------
Net increase in net assets from operations........................................... 9,725 7,481
--------------------
Distributions to Shareholders:
Net investment income................................................................ (5,396) (3,336)
--------------------
Trust Share Transactions:
Net proceeds from sale of shares..................................................... 103,830 28,957
Net proceeds from reinvestment of distribution to shareholders....................... 3,613 2,225
--------------------
107,443 31,182
Cost of shares repurchased........................................................... (69,783) (23,311)
--------------------
Increase from share transactions..................................................... 37,660 7,871
--------------------
Total Increase in Net Assets........................................................... 41,989 12,016
Net Assets:
Beginning of year.................................................................... 41,776 29,760
--------------------
End of year.......................................................................... $ 83,765 $ 41,776
--------------------
Undistributed net investment income
at end of year....................................................................... $ 16 $ --
--------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Notes to Financial Statements January 31, 1997
- -------------------------------------------
1.Significant Accounting Policies
Value Line Aggressive Income Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The primary investment objective of the Trust is
to maximize current income through investment in a diversified portfolio of
high-yield fixed-income securities. As a secondary investment objective, the
Trust will seek capital appreciation but only when consistent with its primary
objective. Lower rated or unrated (i.e. high-yield) securities are more likely
to react to developments affecting market risk (general market liquidity) and
credit risk (issuers' inability to meet principal and interest payments on their
obligations) than are more highly rated securities, which react primarily to
movements in the general level of interest rates. The ability of issuers of debt
securities held by the Trust to meet their obligations may be affected by
economic developments in a specific industry. The following significant
accounting policies are in conformity with generally accepted accounting
principles for investment companies. Such policies are consistently followed by
the Trust in the preparation of its financial statments. Generally accepted
accounting principles may require management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results may differ from those estimates.
(A) Security Valuation. The Trustees have determined that the value of bonds and
other fixed income corporate securities be calculated on the valuation date by
reference to valuations obtained from an independent pricing service that
determines valuations for normal institutional-size trading units of debt
securities, without exclusive reliance upon quoted prices. This service takes
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data in determining valuations.
Securities, other than bonds and other fixed income securities, not priced in
this manner are valued at the midpoint between the latest available and
representative bid and asked prices or, when stock exchange valuations are used,
at the latest quoted sale price as of the regular close of business of the New
York Stock Exchange on the valuation date. Other assets and securities for which
market valuations are not readily available are valued at their fair value as
the Trustees may determine. Short term instruments with maturities of 60 days or
less, at the date of purchase, are valued at amortized cost which approximates
market.
(B) Repurchase Agreements. In connection with transacting in repurchase
agreements, the Trust'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 Trust 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) Distributions. It is the policy of the Trust to distribute all of its net
investment income to shareholders. Dividends from net investment income will be
declared daily and paid monthly. Net realized capital gains, if any, are
distributed to shareholders annually or more frequently if necessary to comply
with the Internal Revenue Code. Income dividends and capital gains distributions
are automatically reinvested in additional shares of the Trust unless the
shareholder has requested otherwise. Income earned by the Trust on weekends,
holidays and other days on which the Trust is closed for business is declared as
a dividend on the next day on which the Trust is open for business.
(D) Federal Income Taxes. It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including
- --------------------------------------------------------------------------------
13
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Notes to Financial Statements
- -------------------------------------------
the distribution requirements of the Tax Reform Act of 1986, and to distribute
all of its taxable income to its shareholder. Therefore, no federal income tax
or excise tax provision is required.
For the year ended January 31, 1997, permanent book tax differences due to the
expiration of capital loss carryovers of $2,608,000 were reclassified from
accumulated net realized loss on investments to additional paid-in capital.
(E) Investments. Securities transactions are recorded on a trade date basis.
Realized gain and loss from securities transactions are recorded on the
identified-cost basis. Interest income, adjusted for amortization of discount,
including original-issue discount required for federal income tax purposes on
investments, is earned from settlement date and recognized on the accrual basis.
(F) 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.
2.Trust Share Transactions
Transactions in shares of beneficial interest in the Trust were as follows:
<TABLE>
<CAPTION>
Year Ended January
31,
--------------------
1997 1996
<S> <C> <C>
--------------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Shares sold........................ 13,168 3,983
Shares issued to shareholders in
reinvestment of dividends........ 458 310
--------------------
13,626 4,293
Shares repurchased................. (8,887) (3,207)
--------------------
Net increase....................... 4,739 1,086
--------------------
</TABLE>
3.Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
<TABLE>
<CAPTION>
Year Ended
January 31, 1997
<S> <C>
----------------
<CAPTION>
(IN THOUSANDS)
<S> <C>
PURCHASES:
U.S. Treasury Obligations......... $ 960
Other Investment Securities....... 159,438
----------------
$ 160,398
----------------
SALES:
U.S. Treasury Obligations......... $ 931
Other Investment Securities....... 138,420
----------------
$ 139,351
----------------
</TABLE>
At January 31, 1997, the aggregate cost of investments in securities for Federal
income tax purposes was $63,462,601. The cost basis has been adjusted for
deferral of wash sale losses of $71,859. The aggregate appreciation and
depreciation of investments at January 31, 1997 based on a comparison of
investment values and their costs for Federal income tax purposes, was
$2,487,051 and $612,851, respectively, resulting in a net appreciation of
$1,874,200.
For Federal income tax purposes, the Trust had a capital loss carryover at
January 31, 1997 of approximately $8,867,000, of which $2,442,000 will expire in
1998, $3,439,000 in 1999, $600,000 in 2000 and $2,386,000 in 2003. During the
year ended January 31, 1997, the Trust utilized prior years' carryover losses of
approximately $4,133,000 to offset net realized gains. To the extent future
capital gains are offset by such capital losses, the Trust does not anticipate
distributing any such gains to the shareholders.
4.Investment Advisory Contract, Management Fees and
Transactions With Affiliates
An advisory fee of $424,802 was paid or payable to Value Line, Inc. (the
"Adviser"), for the year ended January 31,
- --------------------------------------------------------------------------------
14
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
January 31, 1997
- -------------------------------------------
1997. This was computed at an annual rate of 3/4 of 1% per year on the first
$100 million of the Trust's average daily net assets for the period, and 1/2 of
1% on the average net assets in excess thereof. The Adviser provides research,
investment programs and supervision of the investment portfolio and pays costs
of administrative services and office space. The Adviser also provides persons,
satisfactory to the Trust's Trustees, to act as officers of the Trust and pays
their salaries and wages. The Trust bears all other costs and expenses. During
the year ended January 31, 1997, $2,880 was paid to the Adviser for printing
services.
Certain officers and directors of the Adviser and its subsidiary, Value Line
Securities, Inc. (the Trust's distributor and a registered broker/dealer), are
also officers and a Trustee of the Trust.
At January 31, 1997, the Adviser and its subsidiaries owned 128,489 shares of
beneficial interest in the Trust, representing 1.26% of the outstanding shares.
In addition, certain officers and trustees owned 14,352 shares of beneficial
interest in the Trust, representing .14% of the outstanding shares.
- --------------------------------------------------------------------------------
15
<PAGE>
VALUE LINE AGGRESSIVE INCOME TRUST
Financial Highlights
- -------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended January 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------
Net asset value, beginning of year................. $ 7.64 $ 6.80 $ 8.00 $ 7.35 $ 7.18
----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ .75 .69 .68 .67 .67
Net gains or losses on securities
(both realized and unrealized)............. .57 .85 (1.20 ) .65 .17
----------------------------------------------------------
Total from investment operations............. 1.32 1.54 (.52 ) 1.32 .84
----------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income......... (.75 ) (.70 ) (.68 ) (.67 ) (.67 )
----------------------------------------------------------
Change in net assets......................... .57 .84 (1.20 ) .65 .17
----------------------------------------------------------
Net asset value, end of year....................... $ 8.21 $ 7.64 $ 6.80 $ 8.00 $ 7.35
----------------------------------------------------------
Total return....................................... 18.12 % 23.79 % (6.66 %) 18.74 % 12.30 %
----------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands)............. $ 83,765 $ 41,776 $ 29,760 $ 46,223 $ 33,527
Ratio of expenses to average net assets............ 1.10 % 1.22 % 1.27 % 1.20 % 1.15 %
Ratio of net investment income
to average net assets............................ 9.70 % 9.67 % 9.23 % 8.84 % 9.40 %
Portfolio turnover rate............................ 276 % 284 % 221 % 320 % 148 %
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16
