================================================================================
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
July 31, 1998
- --------------------------------------------------------------------------------
Value Line
Aggressive
Income Trust
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Aggressive Income Trust
To Our Value Line
- --------------------------------------------------------------------------------
To Our Shareholders:
During the six months ended July 31, 1998 the total return of the Value Line
Aggressive Income Trust was 4.96%. The Lehman Brothers High Yield Index, a proxy
for the overall high-yield market, returned 3.24% over the same period.
Thus far in 1998, we have seen record levels of high-yield (below
investment-grade) bond issuance, as companies have taken advantage of low
interest rates and increasing amounts of capital dedicated to high-yield bonds.
And although performance has been satisfactory, this increase in supply has put
downward pressure on high-yield Bond prices thereby increasing yields. In
addition, incremental volatility in the equity and U.S. Treasury bond markets
caused in part by international/emerging market turmoil has also negatively
impacted the high-yield market by driving prices lower. Furthermore, increased
credit risks in the form of a possible global economic deceleration looming
larger on the horizon has also begun to increase the yield premium that
high-yield bonds must provide. We believe high-yield bonds remain fundamentally
attractive, however, and expect any protracted weakness will ultimately be met
with adequate demand.
Among the investments held by the Trust are those in the telecommunications
industry, both domestic and international. Our posture remains bullish on this
industry for two main reasons: technological advancement and statutory
deregulation. Both have created new opportunities and opened previously closed
markets to new competitors. The high-yield market has become a primary source of
capital for companies funding substantial telecommunications infrastructure
projects, and we believe many of these projects represent very attractive
investments. In addition, our exposure to cable television has been increased,
as we believe several high profile equity infusions into the industry will only
emphasize the value of cable's high capacity residential interface. Radio is
another field we view favorably, as many companies continue to realize
efficiencies afforded by the deregulation of the broadcasting industry. We
continue to underweight commodity industries such as paper, chemicals, steel and
mining, as slowing global demand for these products has put pressure on
realizable prices. In addition, domestic producers have experienced a weakened
competitive position compared to foreign companies who have benefited from their
currency depreciating relative to the U.S. dollar.
This has been an especially volatile period for the financial markets in
general, and high-yield bonds in particular. Liquidity, an improving but
historically lacking characteristic of the high-yield market, has recently
become more dearly valued. This is evidenced by the recent outperfomance of
large capitalization equities and U.S. Treasuries. Should this emphasis on
liquidity increase, high-yield bonds may tend to underperform. Other heightened
risks, as mentioned above, include growing international turmoil and an already
unusually lengthy economic expansion. Longer term, however, we maintain a
fundamentally positive outlook on the high-yield bond asset class due to its
historically attractive risk/return profile.
We thank you for the confidence you have placed in The Value Line Aggressive
Income Trust and we look forward to serving your investments needs in the
future.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
September 18, 1998
- --------------------------------------------------------------------------------
2
<PAGE>
Value Line Aggressive Income Trust
Aggressive Income Trust Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The U.S. economy has slowed considerably since the early part of this year,
principally as a result of the fallout from the deepening financial crises that
now engulfs Asia, Russia, and parts of Latin America. As such, this nation's
gross domestic product, which expanded at a frenetic 5.5% pace in the opening
three months of 1998, increased by just a modest 1.6% rate in the second
quarter. Moreover, based on the data released since then, we do not think that
the expansion will strengthen appreciably over the final months of the year.
At this point, though, we do not believe that this slower pace of economic
activity is the opening act in a serious business downturn. Our sense is that
the global crises will gradually recede over the next year and that the ongoing
low rate of inflation in this country will encourage the Federal Reserve to
perhaps relax the monetary reins a bit over the next several quarters. The
combination of low inflation and stable-to-lower interest rates should, in turn,
help to keep this nation's economy moving forward, albeit slowly, in 1999.
But even a modest deceleration in U.S. economic activity is likely to mean a
further slowing in corporate profit growth. Even after the sharp declines of the
past two months, such a slowing in profit growth could well lead to further
accentuated volatility in both the stock and bond markets in the months ahead.
Performance Data:*
1 year ended 5 years ended 10 years ended
6/30/98 6/30/98 6/30/98
-----------------------------------------------
Average Annual Total Return* 12.56% 11.86% 10.81%
1 year ended 5 years ended 10 years ended
7/31/98 7/31/98 7/31/98
------------------------------------------------
Average Annual Total Return* 10.83% 11.94% 10.88%
* 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 (6.9%)
CABLE TV (1.1%)
$2,000,000 Onepoint Communications Corp., (consisting of 141/2%, Senior Notes and
Warrants to purchase .635 shares of Common Stock, @ $.01/share,
Warrants expire 6/1/08) due 6/1/08 (1).................................... $ 1,920,000
ENTERTAINMENT (1.7%)
3,000,000 TVN Entertainment Corp., (consisting of 14%, Senior Notes and Warrants to
purchase 10.777 shares of Common Stock, @ $.01/share, Warrants
expire 8/1/08) due 8/1/08(1).............................................. 3,015,000
FOREIGN TELECOMMUNICATION (1.9%)
5,000,000 Viatel Inc., (consisting of Senior Discount Notes and .5032
shares of Series "A", PIK, Preferred Stock, zero coupon until
4/15/03, 12 1/2%, thereafter), due 4/01/08 (1) 3,287,500
TELCOMMUNICATION SERVICES (2.2%)
7,250,000 DTI Holdings Inc., (consisting of Senior Discount Notes and 5 Warrants to
purchase 7.76 shares of Common Stock, @ $.01/share, Warrants expire 3/1/03
zero coupon until 3/1/03, 12 1/2%, thereafter), due 3/1/08 (1)............ 3,860,625
-----------
TOTAL UNITS (Cost $12,329,111) ............................................. 12,083,125
-----------
CORPORATE BONDS & NOTES (76.4%)
ADVERTISING (1.8%)
3,000,000 Outdoor Systems, Inc., Senior Sub. Notes, 8 7/8%, 6/15/07................... 3,165,000
CABLE TV (11.2%)
3,000,000 Adelphia Communications Corp., Senior Notes, Series "B", 9 7/8%, 3/1/07..... 3,277,500
3,000,000 Century Communications Corp., Senior Notes, 8 3/4%, 10/1/07................. 3,202,500
500,000 Classic Cable Inc., Senior Sub. Notes, 9 7/8%, 8/1/08(1).................... 522,500
3,000,000 Knology Holdings Inc., Senior Discount Notes, (zero coupon until 10/15/02,
11 7/8%, thereafter) 10/15/07............................................. 1,706,250
1,265,000 Olympus Communications LP Capital Corp., Senior Notes, Series "B",
10 5/8%, 11/15/06......................................................... 1,391,500
3,000,000 Optel Inc., Senior Notes, Series "B", 13%, 2/15/05.......................... 3,292,500
3,000,000 Rogers Cablesystems Ltd., Senior Secured Second Priority Debenture,
10%, 12/1/07.............................................................. 3,337,500
5,000,000 21st Century Telecom Group, Senior Discount Notes, (zero coupon until 2/15/03,
12 1/4%, thereafter) 2/15/08.............................................. 2,800,000
-----------
19,530,250
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
Value Line Aggressive Income Trust
July 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT (9.2%)
$ 2,000,000 Albritton Communications Co., Senior Sub. Debentures,
Series "B", 9 3/4%, 11/30/07............................................... $ 2,200,000
3,000,000 Big City Radio Inc., Senior Discount Notes, (ero coupon until 3/15/01,
11 1/4%, thereafter) 3/15/05.............................................. 2,340,000
3,000,000 Chancellor Media Corp., Senior Sub. Notes, Series "B", 8 3/4%, 6/15/07...... 3,135,000
3,000,000 Hollywood Entertainment Corp., Senior Sub. Notes, Series "B", 10 5/8%, 8/15/04 3,045,000
3,500,000 Radio Unica Corp., Senior Discount Notes, (zero coupon unitl 8/1/02,
1 3/4%, thereafter) 8/1/06 (1)........................................... 2,226,875
3,000,000 Star Choice Communications, Inc., Senior Secured Notes, 13%, 12/15/05....... 3,105,000
-----------
16,051,875
ENVIRONMENTAL (0.6%)
1,000,000 GNI Group Inc., Senior Notes, 10 7/8%, 7/15/05 (1).......................... 1,018,750
FOREIGN TELECOMMUNICATIONS (12.6%)
3,000,000 Clearnet Communications Inc., Senior Discount Notes,
(zero coupon until 12/15/00, 14 3/4%, thereafter) 12/15/05................ 2,606,250
3,500,000 Colt Telecom Group PLC, Senior Discount Notes, (zero coupon until 12/15/01,
12%, thereafter), 12/15/06................................................ 2,839,375
3,000,000 Dolphin Telecom PLC, Senior Discount Notes, (zero coupon until 6/1/03,
11 1/2%, thereafter), 12/15/06 (1)........................................ 1,728,750
3,000,000 Econophone Inc., Senior Notes, 13 1/2%, 7/15/07............................. 3,352,500
3,000,000 Esprit Telecommunication Group PLC, Senior Notes, 11 1/2%, 12/15/07......... 3,232,500
2,000,000 Facilicom International Inc., Senior Notes, 10 1/2%, 1/15/08................ 2,020,000
3,000,000 Microcell Telecommunications, Inc., Senior Discount Notes, Series "B",
(zero coupon until 12/1/01, 14%, thereafter), 6/1/06...................... 2,325,000
5,000,000 Telegroup Inc., Senior Discount Notes, (zero coupon until 5/1/00,
10 1/2%, thereafter) 11/1/04.............................................. 3,950,000
-----------
22,054,375
FURNITURE/HOME FURNISHINGS (1.6%)
2,635,000 Cort Furniture Rental Co., Senior Notes, 12%, 9/1/00........................ 2,826,038
HOME APPLIANCE (0.7%)
1,250,000 Windmere-Durable Holdings, Inc., Senior Sub. Notes, 10%, 7/31/08............ 1,275,000
HOTEL/GAMING (1.7%)
3,000,000 Trump Atlantic City Associates/Funding Inc., Secured First Mortgage Notes,
11 1/4%, 5/1/06........................................................... 2,947,500
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
MACHINERY (1.9%)
$ 3,000,000 International Knife & Saw, Inc., Senior Sub. Notes, 11 3/8%, 11/15/06....... $ 3,240,000
MEDICAL SERVICES (3.5%)
3,000,000 Paragon Health Network, Inc., Senior Sub. Notes, 9 1/2%, 11/1/07 (4)........ 3,037,500
3,000,000 Tenet HealthCare Corp., Senior Sub. Notes, 8 5/8%, 1/15/07.................. 3,102,060
-----------
6,139,560
METAL FABRICATING (1.3%)
2,000,000 Neenah Corp., Senior Sub. Notes, Series "B" 11 1/8%, 5/1/07................. 2,180,000
NATURAL GAS--DIVERSIFIED (5.3%)
2,500,000 Mariner Energy Inc., Senior Sub. Notes, Series "B", 10 1/2%, 8/1/06......... 2,518,750
3,500,000 National Energy Group Inc., Senior Notes, Series "D", 10 3/4%, 11/1/06...... 3,158,750
3,500,000 Ram Energy, Inc., Senior Notes, 11 1/2%, 2/15/08............................. 3,491,250
-----------
9,168,750
OILFIELD SERVICES/EQUIPMENT (3.0%)
2,000,000 Parker Drilling Co., Senior Guaranteed Notes, Series "D", 9 3/4%, 11/15/06.. 2,025,000
3,000,000 Pride Petroleum Services, Inc., Senior Notes, 9 3/8%, 5/1/07................ 3,127,500
-----------
5,152,500
PAPER & FOREST PRODUCTS (1.2%)
2,000,000 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........................................................... 2,052,500
PETROLEUM--PRODUCING (1.1%)
2,000,000 Coho Energy Inc., Senior Sub. Notes, 8 7/8%, 10/15/07....................... 1,910,000
RETAIL SPECIAL LINES (2.1%)
3,600,000 Commemorative Brands Inc., Senior Sub. Notes, 11%, 1/15/07.................. 3,645,000
RETAIL STORE (1.8%)
3,000,000 Frank's Nursery & Crafts, Inc., Senior Sub. Notes, 10 1/4%, 3/1/08 (1)...... 3,090,000
TELECOMMUNICATION SERVICES (15.8%)
3,000,000 Allegiance Telecom, Inc., Senior Discount Notes, Series "B",
(zero coupon until 2/15/03, 11 3/4%, thereafter) 2/15/08.................. 1,586,250
2,000,000 American Cellular Corp., Senior Notes, 10 1/2%, 5/15/08 (1)................. 2,035,000
2,000,000 Dobson Communications Corp., Senior Notes, 11 3/4%, 4/15/07................. 2,170,000
5,000,000 GST Network Funding, Inc., Senior Secured Discount Notes,
(zero coupon until 5/1/03, 10 1/2%, thereafter) 5/1/08 (1)................ 3,106,250
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
Value Line Aggressive Income Trust
July 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 3,000,000 HighwayMaster Communications Inc., Senior Sub. Notes, Guaranteed,
Series "B", 13 3/4%, 9/15/05.............................................. $ 1,942,500
5,000,000 Hyperion Telecommunications Inc., Senior Discount Notes, Series "B",
(zero coupon until 4/15/01, 13%, thereafter) 4/15/03...................... 3,862,500
1,000,000 Intermedia Communications Inc., Senior Discount Notes, Series "B",
(zero coupon until 7/15/02, 11 1/4%, thereafter) 7/15/07.................. 756,250
3,000,000 KMC Telecom Holdings Inc., Senior Discount Notes,
(zero coupon until 2/15/03, 12 1/2%, thereafter) 2/15/08 (1).............. 1,811,250
2,000,000 MGC Communications Inc., Senior Secured Notes, Series "B" 13%, 10/1/04...... 1,960,000
3,000,000 Omnipoint Corp., Senior Notes, Series "A", 11 5/8%, 8/15/06................. 3,198,750
2,000,000 Orion Network Systems, Inc., Senior Discount Notes,
(zero coupon until 1/15/02, 12 1/2%, thereafter) 1/15/07.................. 1,572,500
2,000,000 Teligent Inc., Senior Notes, 11 1/2%, 12/1/07............................... 2,050,000
1,500,000 US Exchange LLC, Senior Notes, 15%, 7/1/08 (1).............................. 1,518,750
-----------
27,570,000
-----------
TOTAL CORPORATE BONDS & NOTES (Cost $133,625,944) .......................... 133,017,098
-----------
PREFERRED STOCK (5.4%)
ENTERTAINMENT (3.8%)
2,000 Cumulus Media, Inc., 13 3/4%, Senior Pfd. Exchangeable Stock,
Series "A", 7/1/09(3)..................................................... 2,130,000
1,945 Paxson Communications Corp., 12 1/2%, Senior Pfd. Exchangeable Stock,
10/31/06 (3).............................................................. 2,032,525
2,284 Spanish Broadcasting Systems, Inc., 14 1/4%, Senior Pfd.
Exchangeable Stock, 3/15/05 (3)........................................... 2,489,560
-----------
6,652,085
TELECOMMUNICATION SERVICES (1.6%)
682 ICG Holdings, Inc., 14 1/4%, Senior Pfd. Exchangeable Stock, 5/1/07 (3)..... 816,695
40,000 IXC Communications, Inc., (Par $50) 6 3/4%, Senior Pfd. Convertible Stock
(until 12/31/49), (1)(3).................................................. 1,915,000
-----------
2,731,695
-----------
TOTAL PREFERRED STOCK (Cost $8,975,571) .................................... 9,383,780
-----------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Warrants Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (0.4%)
CABLE TV (0.0%)
2,000 Optel Inc. (non-voting) (1)................................................. $ 80,000
FOREIGN TELECOMMUNICATION (0.1%)
5,235 Primus Telecom Group Inc. .................................................. 105,354
TELECOMMUNICATION EQUIPMENT (0.0%)
948 Loral Space & Communications Inc. .......................................... 26,248
TELECOMMUNICATION SERVICES (0.3%)
6,001 Advance Radio Telecom Corp.................................................. 40,507
17,657 GST Telecommunications Inc.................................................. 240,577
4,125 ICG Telecommunications Inc.................................................. 121,687
2,190 Intermedia Communications Inc. ............................................. 81,030
2,361 Nextel Communications Inc. ................................................. 63,230
-----------
547,031
-----------
TOTAL COMMON STOCK (Cost $386,503) ......................................... 758,633
-----------
WARRANTS (0.8%)
CABLE TV (0.0%)
9,500 American Telecasting Inc. (to purchase Common Stock, @ $12.65/share,
expire 6/15/00) (2)....................................................... 95
ENTERTAINMENT (0.3%)
2,000 Spanish Broadcasting Systems, Inc. (to purchase Common Stock @ $.01/share,
expire 6/30/99) (1)(2).................................................... 410,000
FOREIGN TELECOMMUNICATION (0.4%)
6,600 Clearnet Communication Inc. (to purchase class "A" non-voting shares,
@$16.36/share, expire 9/15/05) (1)(2)..................................... 39,600
1,750 Colt Telecom Group PLC (to purchase 19.698 ordinary shares, @(pound)0.10/share,
expire 12/31/06) (1)(2)................................................... 577,500
2,095 Ionica PLC (to purchase 34.7 shares of Common Stock, @ stg(pound)10/share,
expire 8/15/06)(1)(2)..................................................... 41,900
4,000 Microcell Telecommunications Inc. "Conditional" (to purchase 3.072 class "B"
non-voting shares, @CAD $.01/share, expire 6/1/06) (1) (2)................ 92,000
-----------
751,000
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
Value Line Aggressive Income Trust
July 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Warrants or
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (0.1%)
3,000 Allegiance Telecom Inc. (to purchase .0034224719 shares Common Stock,
@$.01/share, expire 2/3/08) (1)(2)........................................ $ 60,000
3,000 HighwayMaster Communication Inc. (to purchase 6.56 shares of Common Stock,
@$9.625/share, expire 1/1/00) (1) (2)..................................... 6,000
3,000 KMC Telecom Holdings Inc. (to purchase .21785 shares of Common Stock,
@$.01/share, expire 4/15/08) (1)(2)....................................... 1,500
2,000 MGC Communications Inc. (to purchase 8.07 shares of Common Stock,
@$.01/share, expire 10/1/04) (1)(2)....................................... 170,000
-----------
237,500
-----------
TOTAL WARRANTS (Cost $552,188) ............................................. 1,398,595
-----------
WARRANTS--CANADIAN (0.1%)
ENTERTAINMENT (0.1%)
69,480 Star Choice Communications, Inc. (23.16 Warrants to purchase 1 share of
Common stock @$.01/share, expire 12/15/05) (1) (2)........................ 153,864
-----------
TOTAL WARRANTS CANADIAN (Cost $47,501) ..................................... 153,864
-----------
TOTAL INVESTMENT SECURITIES (90.0%) (Cost $155,916,818) .................... 156,795,095
REPURCHASE AGREEMENT (8.6%)
(including accrued interest)
$14,900,000 Collateralized by $11,630,000 U.S. Treasury Bonds 11 7/8%, due 11/15/03
with a value of $15,208,082 (With Morgan Stanley & Co., Inc., 5.58%,
dated 7/31/98, due 8/3/98 delivery value $14,906,929)..................... 14,902,310
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (1.4%) ..................................... 2,514,856
-----------
NET ASSETS (100.0%) ....................................................................... $174,212,261
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER OUTSTANDING SHARE .................................................................. $ 8.50
============
</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.
(4) Name change to Mariner Post Acute Networks effective 8/3/98.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line Aggressive Income Trust
Statement of Assets and Liabilities
at July 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands
except
per share
amount)
------------
Assets:
Investment securities, at value
(cost-- $155,917) ........................................ $ 156,795
Repurchase agreement (cost $14,902) ........................ 14,902
Cash ....................................................... 63
Interest receivable ........................................ 2,714
Receivable for trust shares sold ........................... 422
---------
Total Assets ........................................... 174,896
---------
Liabilities:
Payable for trust shares repurchased ....................... 133
Dividends payable to shareholders .......................... 375
Accrued expenses:
Advisory fee ............................................. 93
Other .................................................... 83
---------
Total Liabilities ...................................... 684
---------
Net Assets: ................................................ $ 174,212
=========
Net Assets:
Capital Stock, at $.01 par value
(authorized unlimited,
outstanding 20,489,652 shares
of beneficial interest) .................................. $ 205
Additional paid-in capital ................................. 177,128
Accumulated net realized loss
on investments ........................................... (3,999)
Unrealized net appreciation
of investments ........................................... 878
---------
Net Assets ............................................. $ 174,212
=========
Net Asset Value, Offering and
Redemption Price
per Outstanding Share .................................... $ 8.50
=========
Statement of Operations
for the Six Months Ended July 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Dollars
(in thousands)
--------------
Investment Income:
Interest income ............................................ $ 7,865
Other income ............................................... 153
-------
8,018
-------
Expenses:
Advisory fee ............................................... 526
Transfer agent fees ........................................ 28
Taxes and other expenses ................................... 26
Registration and filing fees ............................... 23
Auditing and legal fees .................................... 22
Custodian fees ............................................. 19
Printing, checks and stationery ............................ 11
Trustees' fees and expenses ................................ 8
-------
Total Expenses before
custody credits ...................................... 663
Less custody credits ................................... (5)
-------
Net Expenses ........................................... 658
-------
Net Investment Income ...................................... 7,360
-------
Realized and Unrealized Gain/Loss
on Investments
Realized Gain--Net ....................................... 2,426
Change in Unrealized
Appreciation--Net ...................................... (5,667)
-------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments ........................................... (3,241)
-------
Net Increase in Net Assets
from Operations .......................................... $ 4,119
=======
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
Statement of Changes in Net Assets
for the Six Months Ended July 31, 1998 and for the Year Ended January 31, 1998
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended
July 31, 1998 January 31,
(unaudited) 1998
---------------------------
(Dollars in thousands)
Operations:
Net investment income .......................... $ 7,360 $ 9,202
Realized gain on investments-Net ............... 2,426 1,969
Change in net unrealized appreciation .......... (5,667) 4,599
------------------------
Net increase in net assets from operations ..... 4,119 15,770
Distributions to Shareholders:
Net investment income .......................... (7,386) (9,192)
------------------------
Trust Share Transactions:
Net proceeds from sale of shares ............... 76,955 130,541
Net proceeds from reinvestment of
distribution to shareholders ................. 5,173 6,131
------------------------
82,128 136,672
Cost of shares repurchased ..................... (51,361) (80,303)
------------------------
Increase from share transactions ............... 30,767 56,369
------------------------
Total Increase in Net Assets ..................... 27,500 62,947
Net Assets:
Beginning of period ............................ 146,712 83,765
------------------------
End of period .................................. $ 174,212 $ 146,712
========================
Undistributed net investment at end of period .... $ -- $ 26
========================
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 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.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Aggressive Income Trust
July 31, 1998 (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, 1998, permanent book tax differences due to the
expiration of capital loss carryovers of $626,000 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 Ended
July 31, 1998 January 31,
(unaudited) 1998
-------------------------
(in thousands)
Shares sold .................................. 8,920 15,725
Shares issued to shareholders
in reinvestment
of dividends ............................... 601 735
-------------------------
9,521 16,460
Shares repurchased ........................... (5,973) (9,722)
-------------------------
Net increase ................................. 3,548 6,738
=========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Six Months Ended
July 31, 1998
(unaudited)
--------------
(in thousands)
PURCHASES:
Investment Securities ......................... $136,789
========
SALES:
Investment Securities ......................... $111,912
========
At July 31, 1998, the aggregate cost of investments in securities for Federal
income tax purposes was $155,916,818. The aggregate appreciation and
depreciation of investments at July 31, 1998 based on a comparison of investment
values and their costs for Federal income tax purposes, was $4,895,099 and
$4,016,822, respectively, resulting in a net appreciation of $878,277.
For Federal income tax purposes, the Trust had a capital loss carryover at
January 31, 1998 of approximately $6,425,000, of which $3,439,000 will expire in
1999, $600,000 in 2000 and $2,386,000 in 2003. During the year ended January 31,
1998, the Trust utilized prior year's carryover losses of approximately
$1,815,000 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 $526,060 was paid or payable to Value Line, Inc. ("the
Adviser"), for the six months ended July 31, 1998. 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 Trustee, to act as officers of the Trust and pays their salaries and
wages. The Trust bears all other costs and expenses.
- --------------------------------------------------------------------------------
13
<PAGE>
Value Line Aggressive Income Trust
Notes to Financial Statements July 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
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, 1998, the Adviser owned 886,829 shares of beneficial interest in the
Trust, representing 4.33% of the outstanding shares.
In addition, certain officers and trustees owned 133,125 shares of beneficial
interest in the Trust, representing .65% of the outstanding shares.
- --------------------------------------------------------------------------------
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, 1998 -----------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........... $8.66 $8.21 $7.64 $6.80 $8.00 $7.35
--------------------------------------------------------------------------------------
Income from
investment operations:
Net investment income ......... .39 .72 .75 .69 .68 .67
Net gains or losses on
securities (both realized
and unrealized) ............. (.16) .45 .57 .85 (1.20) .65
--------------------------------------------------------------------------------------
Total from investment
operations .................. .23 1.17 1.32 1.54 (.52) 1.32
--------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income ........... (.39) (.72) (.75) (.70) (.68) (.67)
--------------------------------------------------------------------------------------
Change in net assets .......... (.16) .45 .57 .84 (1.20) .65
--------------------------------------------------------------------------------------
Net asset value, end of period .. $8.50 $8.66 $8.21 $7.64 $6.80 $8.00
=======================================================================================
Total return .................... 4.96%+ 14.97% 18.12% 23.79% (6.66%) 18.74%
=======================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) ................ $174,212 $146,712 $83,765 $41,776 $29,760 $46,223
Ratio of expenses to
average net assets ............ .82%* .95% 1.10% 1.22% 1.27% 1.20%
Ratio of net investment income
to average net assets ......... 9.19%* 8.60% 9.70% 9.67% 9.23% 8.84%
Portfolio turnover rate ......... .75%+ 251% 276% 284% 221% 320%
</TABLE>
* Annualized.
+ Not annualized, for six months period only.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
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 PricewaterhouseCoopers LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036-2798
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830
TRUSTEES Jean Bernhard Buttner
John W. Chandler
Leo R. Futia
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Nathan Grant
Vice 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).
501428
