================================================================================
------------------
SEMI-ANNUAL REPORT
------------------
July 31, 1997
------------------
Value Line
Aggressive
Income Trust
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<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")
semi-annual report for the period ended July 31, 1997.
For the six-month period, your Trust posted a total return (change in net asset
value plus reinvestment of dividends) of 6.53%. By comparison, the Lehman
Brothers Aggregate Bond Index (representative of the fixed-income market as a
whole) returned 5.56%.
As you can see from the performance of the Lehman Aggregate Bond Index noted
above, the bond market as a whole did not perform as well as the high-yield
sector over the period. The superior high-yield market performance was due to a
rising stock market, higher coupon income typical of the sector, and a
tightening of the yield spread of high-yield bonds over U.S. Treasury bonds.
These are the same factors that benefited this sector in the prior year.
The excellent performance by your Trust over the past six months was the result
of a number of factors:
Strong Industry Selections: Your Trust's management increased its weighting in
the financial services sector during the first six months of this fiscal year.
The decline in interest rates over the half-year period aided this sector by
stimulating new mortgage issuance and other forms of consumer lending.
Furthermore, this sector is consolidating rapidly, which is likely to lead to
credit rating upgrades from the major rating agencies. This sector has accounted
for a growing portion of new high-yield issues to date, a trend we expect to
continue. Your Trust's management also maintained its over-weighted position in
telecommunications, another top-performing sector, through the latest interim.
Particular subsectors of the telecommunications industry 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. In addition, we have increased our weighting in the oilfield services
and thrift industries, both top-performing sectors over the past year.
Furthermore, we have increased our allocation to the radio/TV sector, a
top-performing segment in the prior year, as a result of the consolidation
unleased in that industry following the enactment of the Telecommunications bill
last year. Meanwhile, we remain under-weighted in retailing, restaurants, and
supermarkets, three areas where performance has 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. Through the latest six months, that figure
has totalled 0.83%. However, to date no defaults have occurred among the
holdings in your Trust. In fact, credit ratings for holdings have 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 six
months ended July 31, 1997, the price of 10-year U.S. Treasury notes rose, and
the yield declined by about one half of one percentage point, to 6.01%. 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 due to our view that
lower-rated issues offered greater opportunity.
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line Aggressive Income Trust
Income Trust Shareholders
- --------------------------------------------------------------------------------
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,
/s/Jean Bernhard Buttner
---------------------------
Jean Bernhard Buttner
Chairman and President
September 12, 1997
Economic Observations
The economy continues to push ahead, with such important indicators as the level
of manufacturing activity and the rate of employment growth exhibiting a
reasonably good degree of strength. Such trends, and a continuing healthy level
of consumer confidence, suggest that growth will average 2.5%-3.0% during the
closing half of the year. Thereafter, we would expect the expansion pace to
moderate somewhat, with real, inflation-adjusted GDP growth holding in the range
of 2.0%-2.5% in 1998.
Inflation, meanwhile, continues to be remarkably subdued. This healthy pricing
trend, which is all the more impressive given the longevity of the business
upcycle, is, moreover, unlikely to change dramatically in the months ahead.
Underscoring our optimism in this area is the earlier hammering out of a budget
package which should reduce the government's need to borrow to finance the
deficit and the fact that there is still a lack of serious shortages on either
the labor or the raw-materials fronts. Interest rates, meantime, reflecting the
current, relatively moderate pace of economic growth and the subdued pricing
structure, are unlikely to increase much over the next few months. Nevertheless,
we caution that given the seeming resiliency of the business expansion, an
inflation-wary Federal Reserve will probably not shy away from tightening the
monetary reins if the present pricing stability gives way. And an upward move in
rates, if sufficiently pronounced, would be poorly received, in our opinion, by
both the stock and the bond markets and, as well, by the U.S. economy down the
road. The recent increase in volatility in the financial markets suggests that
many are now questioning whether the current, benign environment can last much
longer. We think a cautious investment strategy is now in order.
<TABLE>
<CAPTION>
Performance Data:*
1 year ended 5 years ended 10 years ended
6/30/97 6/30/97 6/30/97
------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Return* 15.54% 12.49% 8.99%
<CAPTION>
1 year ended 5 years ended 10 years ended
7/31/97 7/31/97 7/31/97
------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Return* 19.11% 12.75% 9.30%
</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
Schedule of Investments
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITS (10.9%)
COMPUTER SOFTWARE SERVICES (3.9%)
$ 1,750,000 Decisionone Holdings Corp., consisting of (11 1/2%, Senior Discount Debenture
and Warrants to purchase 1.9 shares of common stocks @ $23,
expire 8/1/07), due 8/1/08................................................ $ 1,045,625
3,000,000 Primus Telecommunications Group Inc., consisting of (11 3/4%, Senior Notes
and Warrants to purchase 1.74513 shares of common stock @ 9.075,
expire 8/1/04), due 8/1/04................................................ 3,075,000
-----------
4,120,625
ENTERTAINMENT (1.2%)
2,000,000 Orion Network Systems, Inc., consisting of (Senior Discount Notes and Warrants
to purchase 0.6628 shares of Common Stock, zero coupon until 1/15/02,
12 1/2% thereafter), due 1/15/07.......................................... 1,240,000
HOME APPLIANCE (0.5%)
500,000 Signature Brands Inc., consisting of (13%, Senior Subordinated Notes and
Warrants to purchase common stock), due 8/15/02........................... 538,750
TELECOMMUNICATION SERVICES (5.3%)
3,500,000 Colt Telecom Group PLC, consisting of (Senior Discount Notes and Warrants to
purchase 19.698 ordinary shares @(pound)0.10, zero coupon until 12/15/01,
12% thereafter), due 12/15/06............................................. 2,336,250
4,000,000 Ionica PLC, consisting of (15%, Senior Discount Notes and Warrants to purchase
19.698 ordinary shares @(pound)0.10, zero coupon until 5/1/02, 15% thereafter),
due 5/1/07................................................................ 2,255,000
1,000,000 Teletrac Inc., consisting of (14%, Senior Note and Warrants to purchase
.537495 shares of common stocks), due 8/1/07(1)........................... 1,000,000
-----------
5,591,250
-----------
TOTAL UNITS (Cost $10,923,852) ............................................. 11,490,625
-----------
CORPORATE BONDS & NOTES (61.6%)
AUTO PARTS (OEM) (3.1%)
2,000,000 Aetna Industries, Inc., 11.875%, Senior Notes, 10/1/06...................... 2,210,000
1,000,000 Hawk Corp., 10 1/4%, Senior Notes, 12/1/03.................................. 1,045,000
-----------
3,255,000
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
Value Line Aggressive Income Trust
July 31, 1997(unaudited)
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK (2.0%)
$ 1,000,000 Banknorth Capital Trust I, Capital Securities Series "A", 10.52%, 4/30/27(1) $ 1,051,270
1,000,000 Haven Capital Trust I, Capital Securities, 10.46%, 2/1/27(1)................ 1,021,600
-----------
2,072,870
COAL/ALTERNATE ENERGY (1.1%)
1,000,000 AES Corp., Senior Sub. Notes, 10 1/4%, 7/15/06.............................. 1,107,500
ENTERTAINMENT (10.2%)
1,000,000 Busse Broadcasting Corp., Senior Secured Notes, 11 5/8%, 10/15/00........... 1,041,250
500,000 Commodore Media Inc., Senior Sub. Notes, (7 1/2%, until 5/1/98,
12 1/4% thereafter), 5/1/03............................................... 550,000
3,000,000 Digital Television Services LLC, Senior Sub. Notes, 12 1/2%, 8/1/07(1)...... 2,977,500
2,000,000 EchoStar Satellite Broadcasting Corp., Senior Secured Discount Notes,
(zero coupon until 3/15/00, 13 1/8%, thereafter) 3/15/04.................. 1,472,500
2,000,000 EchoStar DBS Corp., Senior Secured Notes, 12 1/2%, 7/1/02(1)................ 2,035,000
1,000,000 Paxson Communicating Corp., Senior Sub. Notes, 11 5/8%, 10/1/02............. 1,095,000
2,000,000 United International Holdings, Inc., Senior Secured Discount Notes, Ser-B,
11/15/99, (zero coupon)................................................... 1,582,500
-----------
10,753,750
FINANCIAL SERVICES (10.0%)
3,000,000 Cityscape Financial Corp., Senior Notes, 12 3/4%, 6/1/04(1)................. 2,872,500
650,000 Homeside Inc., Senior Secured Second Priority Notes, 11 1/4%, 5/15/03....... 760,500
1,750,000 Imperial Credit Capital Trust I, Remarketed Par Securities, Series "A",
10 1/4%, 6/14/02(1)....................................................... 1,752,188
2,000,000 Mego Mortgage Corp., Senior Sub. Notes, 12 1/2%, 12/1/01.................... 1,997,500
1,000,000 Ocwen Financial Corp., Notes, 11 7/8%, 10/01/03............................. 1,115,000
2,000,000 Resource America Inc., Senior Notes, 12%, 8/1/04(1)......................... 2,005,000
-----------
10,502,688
FURNITURE/HOME FURNISHINGS (2.8%)
2,635,000 Cort Furniture Rental Co., Senior Notes, 12%, 9/1/00........................ 2,931,438
INDUSTRIAL SERVICES (1.5%)
1,500,000 International Knife & Saw, Inc., Senior Sub. Notes, 11 3/8%, 11/15/06....... 1,631,250
INSURANCE-DIVERSIFIED (0.6%)
500,000 Integon Capital I, Capital Securities Series "A", 10 3/4%, 2/15/27.......... 616,250
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
MACHINERY (1.2%)
$ 1,250,000 Continental Global Group, Inc., Senior Notes, Series "A", 11%, 4/1/07(1).... $ 1,315,625
METAL FABRICATING (2.0%)
2,000,000 Neenah Corp., Senior Sub. Notes, 11 1/8%, 5/1/07(1)......................... 2,152,500
METALS & MINING-DIVERSIFIED (1.0%)
1,000,000 Westmin Resources Limited, Senior Secured Notes, 11%, 3/15/07............... 1,052,500
OFFICE EQUIPMENT & SUPPLIES (1.4%)
1,350,000 Mail-Well Corp., Senior Sub. Notes, 10 1/2%, 2/15/04........................ 1,441,125
OILFIELD SERVICES/EQUIPMENT (1.0%)
1,000,000 Deeptech International, Senior Secured Notes, 12%, 12/15/00................. 1,067,500
PAPER & FOREST PRODUCTS (1.0%)
1,000,000 Stone Container Corp., Senior Sub. Units, (consisting of 10 3/4%,
Senior Sub. Debentures, Series "B", and
1 1/2% Supplemental Interest Certificates) 12 1/4%, 4/1/02................ 1,045,000
PETROLEUM-INTEGRATED (3.9%)
2,500,000 Clark R & M Holdings Inc., Senior Secured Notes, Series "A"
(zero coupon), 2/15/00.................................................... 1,937,500
2,000,000 Statia Terminals International N.V., First Mortgage Notes, 11 3/4%, 11/15/03(1) 2,160,000
-----------
4,097,500
RETAIL SPECIAL LINES (2.0%)
2,000,000 Commemorative Brands Inc., Senior Sub. Notes, 11%, 1/15/07.................. 2,075,000
RETAIL STORE (1.0%)
1,000,000 Eye Care Centers of America, Inc., Senior Notes, 12%, 10/1/03............... 1,097,500
STEEL (1.1%)
1,035,000 ACME Metals Inc., Senior Secured Discount Notes, (zero coupon until 8/1/97,
13 1/2% thereafter), 8/1/04............................................... 1,163,081
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
Value Line Aggressive Income Trust
July 31, 1997(unaudited)
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (10.3%)
$ 2,000,000 Clearnet Communications Inc., Senior Discount Notes, (zero coupon until
12/15/00, 14 3/4%, thereafter), 12/15/05.................................. $ 1,452,500
4,000,000 Dobson Communications Corp., Senior Notes, 11 3/4%, 4/15/07................. 3,900,000
500,000 Fonorola Inc., Senior Second Notes, 12 1/2%, 8/15/02........................ 559,375
1,600,000 GST USA Inc., Senior Discount Notes, (zero coupon until 12/15/00,
13 7/8% thereafter), 12/15/05............................................. 1,076,000
500,000 Globalstar LP/GlobalStar Capital, Senior Notes, 11 1/4%, 6/15/04(1)......... 477,500
2,500,000 IXC Communications Inc., Senior Notes, Series "B" 12 1/2%, 10/1/05.......... 2,843,750
1,000,000 Microcell Telecommunications, Inc., Senior Discount Notes,
(zero coupon until 12/1/01, 14%, thereafter), 6/01/06..................... 596,250
-----------
10,905,375
THRIFT (4.4%)
500,000 Dime Bancorp, Senior Notes, 10 1/2%, 11/15/05............................... 542,500
2,000,000 First Palm Beach Bancorp, Inc., Senior Debentures, 10.35%, 6/30/02(1)....... 2,042,200
1,000,000 Patriot Capital Trust I, Capital Securities, 10.30%, 6/1/27(1).............. 1,055,520
1,000,000 Telebanc Capital Trust I, Capital Securities, Series "A", 11%, 6/1/27(1).... 1,017,500
-----------
4,657,720
TOTAL CORPORATE BONDS & NOTES (Cost $65,046,010) ........................... 64,941,172
-----------
CONVERTIBLE BONDS & NOTES (0.8%)
TELECOMMUNICATIONS SERVICES (0.8%)
200,000 GST Telecommunications, Inc., Senior Sub Discount Notes,
(zero coupon until 12/15/00, 13 7/8% thereafter), 12/15/05(1)............. 181,750
1,000,000 Winstar Communications, Inc., Senior Sub. Discount Notes
(zero coupon until 10/15/00, 14% thereafter) 10/15/05(1).................. 613,750
-----------
TOTAL CONVERTIBLE BONDS & NOTES (Cost $918,905) ............................ 795,500
-----------
PREFERRED BONDS & NOTES (1.9%)
FINANCIAL SERVICES (1.9%)
2,000,000 BankUnited Capital Trust, Pfd. Securities, Series A, 10 1/4%, 12/31/26...... 1,992,500
-----------
TOTAL PREFERRED BONDS & NOTES (Cost $2,010,000) ............................ 1,992,500
-----------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
================================================================================
<TABLE>
<CAPTION>
Number of
Shares or
Warrants Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (10.9%)
ENTERTAINMENT (4.0%)
10,000 CapStar Broadcasting Partners, Senior exchangeable, 12%, 7/1/09 (1)......... $ 1,040,000
10,000 Citadel Broadcasting Co., exchangeable Series "A", 13 1/4%, (1)............. 1,062,500
20,000 Spanish Broadcasting Systems Inc., Senior exchangeable, 14 1/4%, ........... 2,100,000
-----------
4,202,500
HOTEL/GAMING (3.3%)
100,484 Lady Luck Gaming, 11 1/2%, 6/06/05(3)....................................... 3,516,940
TELECOMMUNICATIONS SERVICES (1.7%)
556 ICG Holdings Inc., 14 1/4%, 5/1/07(3)....................................... 594,920
21,432 Nextlink Communication Inc., Senior exchangeable, 14%, 2/1/09............... 1,226,967
-----------
1,821,887
TEXTILE (1.9%)
80,000 Anvil Holdings Inc., Senior exchangeable, 13%, 2/1/09(1).................... 2,000,000
-----------
TOTAL PREFERRED STOCKS (Cost $8,760,079) ................................... 11,541,327
-----------
COMMON STOCKS (0.7%)
OFFICE EQUIPMENT & SUPPLIES (0.7%)
21,307 Mail-Well Holdings, Inc. (2)................................................ 695,141
-----------
TOTAL COMMON STOCK (Cost $53,500) .......................................... 695,141
-----------
WARRANTS (1.0%)
ENTERTAINMENT (0.3%)
9,500 American Telecasting Inc. (to purchase Common Stock, @ $12.65,
expire 6/15/00)(2)........................................................ 475
20,000 Spanish Broadcasting Systems, Inc. (to purchase common stock @ $.01,
expire 6/30/99)........................................................... 280,000
-----------
280,475
HOUSEHOLD PRODUCTS (0.0%)
500 Chattem Inc., (to purchase Common Stock, @$16.79 expire, 6/17/99)(2)........ 8,750
RETAIL STORE (0.0%)
500 Eye Care Centers of America, (to purchase Common Stock, expire 10/1/03)(2).. 5,004
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line Aggressive Income Trust
July 31, 1997(unaudited)
================================================================================
<TABLE>
<CAPTION>
Number of
Warrants or
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (0.7%)
6,005 Advance Radio Telecom Corp., (to purchase Common Stock, @ $.01,
expire 11/12/06)(2)....................................................... $ 30,025
6,600 Clearnet Communications Inc., (to purchase class "A" non-voting shares,
@ $16.36, expire 9/15/05)(2).............................................. 36,300
4,125 Intelcom Group Inc., (to purchase Common Stock, 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)............................................ 18,187
2,095 Ionica PLC, (to purchase Common Stock, @(pound).10, expire 8/15/06)(2)...... 597,075
4,000 Microcell Telecommunications Inc. "Initial", (to purchase class "B"
non-voting shares, @ $.01, expire 12/31/97)(1)(2)......................... 50,000
4,000 Microcell Telecommunications Inc. "Conditional", (to purchase class "B"
non-voting shares, @ $.01, expire 06/1/06)(1)(2).......................... 2,500
1,000 Nextel Communications Inc., Series "A", (to purchase Common Stock,
expire 4/25/99)(1)(2)..................................................... 10
20,000 Nextlink Communications Inc., Series "A", (to purchase Common Stock,
expire 4/25/09)(1)(2)..................................................... 0
-----------
779,505
TOTAL WARRANTS (Cost $571,014) ............................................. 1,073,735
-----------
TOTAL INVESTMENT SECURITIES (87.8%) (Cost $88,283,360) ..................... 92,530,000
-----------
REPURCHASE AGREEMENT (1.9%) (including accrued interest)
$ 2,000,000 Collateralized by $1,900,000 U.S. Treasury Notes 7 1/2%, due 11/15/01
with a value of $2,041,442 (With First Chicago Capital Markets, Inc., 5.77%,
dated 7/31/97, due 8/1/97 delivery value $2,000,321)...................... 2,000,321
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (10.3%) .................................... 10,827,053
-----------
NET ASSETS (100.0%) ....................................................................... $105,357,374
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE,
PER OUTSTANDING SHARE ..................................................................... $ 8.36
===========
</TABLE>
(1) 144A Security where certain conditions for public sale may exist.
(2) Non-income producing security
(3) PIK (Payment-in-kind). Interest payment is made with additional securities.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line Aggressive Income Trust
Statement of Assets
and Liabilities at July 31, 1997 (unaudited)
================================================================================
Dollars
(in thousands
except per
share amount)
-------------
Assets:
Investment securities, at value
(cost-- $88,283) ........................................... $ 92,530
Repurchase agreement (cost $2,000) ........................... 2,000
Cash ......................................................... 282
Receivable for securities sold ............................... 15,224
Interest receivable .......................................... 1,509
Receivable for trust shares sold ............................. 432
---------
Total Assets ............................................. 111,977
---------
Liabilities:
Payable for securities purchased ............................. 6,244
Payable for trust shares repurchased ......................... 28
Dividends payable to shareholders ............................ 238
Accrued expenses:
Advisory fee ............................................... 64
Other ...................................................... 46
---------
Total Liabilities ........................................ 6,620
---------
Net Assets: .................................................. $ 105,357
=========
Net Assets:
Capital Stock, at $.01 par value (authorized
unlimited, outstanding 12,600,449
shares of beneficial interest) ............................. 126
Additional paid-in capital ................................... 110,043
Accumulated net realized loss on
investments ................................................ (9,059)
Unrealized net appreciation of
investments ................................................ 4,247
---------
Net Assets ............................................... $ 105,357
=========
Net Asset Value, Offering and
Redemption Price per Outstanding
Share ...................................................... $ 8.36
=========
Statement of Operations
for the Six Months Ended July 31, 1997 (unaudited)
Dollars
(in thousands)
-------------
Investment Income:
Interest income ............................................. $ 4,485
Other income ................................................ 56
-------
4,541
-------
Expenses:
Advisory fee ................................................ 339
Transfer agent fees ......................................... 31
Auditing and legal fees ..................................... 18
Registration and filing fees ................................ 18
Printing, checks and stationery ............................. 17
Custodian fees .............................................. 10
Trustees' fees and expenses ................................. 8
Taxes and other expenses .................................... 5
-------
Total Expenses before
custody credits ..................................... 446
Less custody credits .................................. (9)
-------
Net Expenses .......................................... 437
-------
Net Investment Income ....................................... 4,104
-------
Realized and Unrealized Gain/Loss on
Investments
Realized Loss-- Net ....................................... (70)
Change in Unrealized
Appreciation-- Net ...................................... 2,332
-------
Net Realized Loss and Change in Net
Unrealized Appreciation
on Investments ............................................ 2,262
-------
Net Increase in Net Assets
from Operations ........................................... $ 6,366
=========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
Value Line Aggressive Income Trust
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
for the Six Months Ended July 31, 1997 (unaudited) and for the Year Ended January 31, 1997
Six Months Ended Year Ended
July 31, 1997 January 31,
(unaudited) 1997
----------------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Net investment income ............................................... $ 4,104 $ 5,412
Realized (loss) gain on investments-- Net ........................... (70) 4,125
Change in net unrealized appreciation ............................... 2,332 188
-------------------------
Net increase in net assets from operations........................... 6,366 9,725
-------------------------
Distributions to Shareholders:
Net investment income ............................................... (4,120) (5,396)
-------------------------
Trust Share Transactions:
Net proceeds from sale of shares .................................... 67,592 103,830
Net proceeds from reinvestment of distribution to shareholders....... 2,673 3,613
-------------------------
70,265 107,443
Cost of shares repurchased .......................................... (50,919) (69,783)
-------------------------
Increase from share transactions .................................... 19,346 37,660
-------------------------
Total Increase in Net Assets .......................................... 21,592 41,989
Net Assets:
Beginning of period ................................................. 83,765 41,776
-------------------------
End of period ...................................................... $105,357 $ 83,765
========================
Undistributed net investment income at end of period .................. $ -- $ 16
========================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Aggressive Income Trust
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 statements. 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.
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12
<PAGE>
Value Line Aggressive Income Trust
July 31, 1997(unaudited)
================================================================================
(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 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:
Six Months
Ended Year
July 31, Ended
1997 January 31,
(unaudited) 1997
-----------------------
(in thousands)
Shares sold .................................. 8,326 13,168
Shares issued to
shareholders in
reinvestment of dividends .................. 328 458
-----------------------
8,654 13,626
Shares repurchased ........................... (6,258) (8,887)
-----------------------
Net increase ................................. 2,396 4,739
========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months Ended
July 31, 1997
(unaudited)
--------------
(in thousands)
PURCHASES:
Investment Securities ................................... $123,730
========
SALES:
Investment Securities ................................... $100,740
========
At July 31, 1997, the aggregate cost of investments in securities for Federal
income tax purposes was $88,299,298. The cost basis has been adjusted for
deferral of wash sale losses of $15,938. The aggregate appreciation and
depreciation of investments at July 31, 1997 based on a comparison of investment
values and their costs for Federal income tax purposes, was $4,773,981 and
$543,279, respectively, resulting in a net appreciation of $4,230,702.
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 year's 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 $338,932 was paid or payable to Value Line, Inc. (the
"Adviser") for the six months ended July 31, 1997. This was computed at an
annual rate of 3/4 of 1% per
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13
<PAGE>
Value Line Aggressive Income Trust
Notes to Financial Statements July 31, 1997(unaudited)
================================================================================
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.
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 July 31, 1997, the Adviser owned 134,427 shares of beneficial interest in the
Trust, representing 1.07% of the outstanding shares.
In addition, certain officers and Trustees owned 15,012 shares of beneficial
interest in the Trust, representing less than 1% of the outstanding shares.
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14
<PAGE>
Value Line Aggressive Income Trust
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended January 31,
July 31, 1997 ----------------------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................ $ 8.21 $ 7.64 $ 6.80 $ 8.00 $ 7.35 $ 7.18
---------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .............. .37 .75 .69 .68 .67 .67
Net gains or losses on securities
(both realized and unrealized) ... .15 .57 .85 (1.20) .65 .17
---------------------------------------------------------------------------------------
Total from investment
operations ....................... .52 1.32 1.54 (.52) 1.32 .84
---------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income ........................... (.37) (.75) (.70) (.68) (.67) (.67)
---------------------------------------------------------------------------------------
Change in net assets ............... .15 .57 .84 (1.20) .65 .17
---------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 8.36 $ 8.21 $ 7.64 $ 6.80 $ 8.00 $ 7.35
=======================================================================================
Total return ........................... 6.53%+ 18.12% 23.79% (6.66%) 18.74% 12.30%
=======================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) ....................... $ 105,357 $ 83,765 $ 41,776 $ 29,760 $ 46,223 $ 33,527
Ratio of expenses to
average net assets ................... .99%* 1.10% 1.22% 1.27% 1.20% 1.15%
Ratio of net investment income to
average net assets ................... 9.12%* 9.70% 9.67% 9.23% 8.84% 9.40%
Portfolio turnover rate ................ 126%+ 276% 284% 221% 320% 148%
</TABLE>
* Annualized.
+ Not annualized, for six month period only.
See Notes to Financial Statements
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15
<PAGE>
Value Line Aggressive Income Trust
The Value Line Family of Funds
================================================================================
1950--The Value Line Fund seeks long-term growth of capital along with modest
current income by investing substantially all of its assets in common stocks or
securities convertible into common stock.
1952--The Value Line Income Fund's primary investment objective is income, as
high and dependable as is consistent with reasonable growth. Capital growth to
increase total return is a secondary objective.
1956--The Value Line Special Situations Fund seeks to obtain long-term growth of
capital by investing not less than 80% of its assets in "special situations". No
consideration is given to achieving current income.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth by investing substantially all of its assets in common
stocks. The Fund may borrow up to 50% of its net assets to increase its
purchasing power.
1979--The Value Line Cash Fund, a money market fund, seeks high current income
consistent with preservation of capital and liquidity.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to principal. Under normal conditions, at least 80% of the value to
its assets will be invested in issues of the U.S. Government and its agencies
and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital as its sole
objective by investing primarily in stocks ranked 1 or 2 by Value Line for
year-ahead relative performance.
1984--The Value Line Tax Exempt Fund seeks to provide investors with maximum
income exempt from federal income taxes while avoiding undue risk to principal.
The Fund offers investors a choice of two portfolios: a Money Market Portfolio
and a High-Yield Portfolio.
1985--Value Line Convertible Fund seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986--Value Line Aggressive Income Trust seeks to maximize current income by
investing in high-yielding, lower-rated, fixed-income corporate securities.
1987--Value Line New York Tax Exempt Trust seeks to provide New York taxpayers
with maximum income exempt from New York State, New York City and federal
individual income taxes while avoiding undue risk to principal.
1987--Value Line Strategic Asset Management Trust* invests in stocks, bonds and
cash equivalents according to computer trend models developed by Value Line. The
objective is to professionally manage the optimal allocation of these
investments at all times.
1993--Value Line Small-Cap Growth Fund invests primarily in common stocks or
securities convertible into common stock, with its primary objective being
long-term growth of capital.
1993--Value Line Asset Allocation Fund seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the correct
asset mix.
1995--Value Line U.S. Multinational Company Fund's investment objective is
maximum total return. It invests primarily in securities of U.S. companies that
have significant sales from international operations.
* Only available through the purchase of Guardian Investor, a tax deferred
variable annuity, or ValuePlus, a variable life insurance policy.
For more complete information about any of the Value Line Funds, including
charges and expenses, send for a prospectus from Value Line Securities, Inc.,
220 East 42nd Street, New York, New York 10017-5891 or call 1-800-223-0818, 24
hours a day, 7 days a week, or visit us at www.valueline.com. Read the
prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
16
<PAGE>
================================================================================
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 419729
Kansas City, MO 64141-6729
INDEPENDENT Price Waterhouse LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
Charles E. Reed
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
David T. Henigson
Vice President and
Secretary/Treasurer
Jack M. Houston
Assistant Secretary/Treasurer
Stephen La Rosa
Assistant Secretary/Treasurer
The financial statements included herein have been taken from the records of the
Trust 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 Trust (obtainable from
the Distributor).
VLF#707088
