================================================================================
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ANNUAL REPORT
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January 31, 1998
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Value Line
Aggressive
Income Trust
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Aggressive Income Trust
To Our Value Line Aggressive
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To Our Shareholders:
For the twelve months ended January 31, 1998, the Value Line Aggressive Income
Trust posted a total return (changes in net asset value plus reinvestment of
dividends) of 14.97%. The average high-yield bond fund's return, as measured by
Lipper Analytical Services, was 13.86% over the same time period.
1997 was an excellent year for high-yield bonds, with a record number of new
bonds issued and a record amount of money flowing into high-yield bond mutual
funds. The Aggressive Income Trust invests in bonds which are rated
below-investment-grade. We consider the financial strength ratings given in the
Standard and Expanded Editions of The Value Line Investment Survey, as well as
the ratings given by Moody's and Standard & Poor's. Companies issuing high-yield
bonds generally have relatively high debt-to-equity and debt-to-cash flow
ratios, which make them fairly sensitive to the health of the overall economy.
Clearly, our economy's ability to maintain strong non-inflationary growth so
late into this economic expansion has contributed significantly to the strong
returns experienced in the high-yield bond market.
Industry selection is a very important portion of our management process.
Historically, when high-yield companies encounter financial difficulties, the
resulting defaults are concentrated within a few industries. We believe avoiding
industries with weak/declining fundamentals, while focusing on those with
strong/improving credit ratios will produce superior results for our
shareholders over the long term. Obviously this is a dynamic situation --
different economic cross-currents are constantly changing the landscape,
requiring vigilant monitoring. At the individual company level, there are
numerous credit statistics that we track, and each industry has its own relevant
data set. Close attention is paid to the trends of these statistics, as well as
trends in each company's equity prices. We believe equity performance can be a
leading indicator of high-yield bond performance, and thus monitor this data
closely.
Over the past year, we have maintained substantial positions in the
telecommunications services industry, and have increased our stake in the
foreign telecommunications sector. Deregulation has created extraordinary
telecommunications opportunities domestically. We believe the same phenomenon
will occur overseas. Deregulation has also created a favorable operating
atmosphere for radio broadcasters, and we will continue to take advantage of
opportunities in this field as they present themselves. We also like the cable
television industry because of the stability and non-cyclicality of the cash
flows generated by these businesses. We continue to avoid the supermarket
industry, as well as the commodity producers -- steel, paper, and chemicals.
Cyclicality in these industries always concerns us, and the Asian turmoil which
has surfaced over the last several months has magnified these risks.
We thank you for your continued confidence in the Value Line Aggressive Income
Trust and look forward to serving your investment needs in the future.
Sincerely,
/s/ JEAN BERNHARD BUTTNER
Jean Bernhard Buttner
Chairman and President
March 5, 1998
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2
<PAGE>
Value Line Aggressive Income Trust
Income Trust Shareholders
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Economic Observations
The economic expansion remains alive and well, as we make our way through the
first few months of 1998. To be sure, the uptrend is not proceeding at 1997's
frenetic pace, when growth averaged better than 3.5% for the full 12 months.
But, with most of the key consumer and industrial markets continuing to show
surprising resiliency, and with jobs still being created at a strong pace, the
economy now looks as though it will expand by 2.5%-3.0% during the opening six
months of the year.
Meanwhile, the difficulties in Asia seem as though they will have only a
moderate effect on this nation's business uptrend going forward. Obviously, the
problems afflicting that part of the globe will lead to selective reductions in
demand for goods and services produced in the United States. Nevertheless,
assuming that the affected nations take the remedial steps recommended by the
leading international monetary authorities and the situation there begins to
stabilize, the likely opening-half rate of growth could well be maintained for
the balance of the year. That's a slightly better showing than we would have
forecast several months earlier.
This suggests that the Federal Reserve will keep interest rates about where they
are for the time being. That, in fact, would seem to be the sensible approach.
The economy is still too strong and the labor markets too tight (thereby keeping
alive the threat of higher inflation) for the Fed to think of relaxing the
credit reins at this point. At the same time, the situation in Asia is still
unresolved. And despite some hopeful signs there, at least a modest threat to
our economic well being is still present. Thus, to raise rates with that
uncertainty still around would likewise probably be counterproductive.
Performance Data:*
1 year ended 5 years ended 10 years ended
12/31/97 12/31/97 12/31/97
----------------------------------------------
Average Annual Total Return* 14.09% 13.36% 10.79%
1 year ended 5 years ended 10 years ended
1/31/98 1/31/98 1/31/98
----------------------------------------------
Average Annual Total Return* 14.97% 13.25% 11.07%
* 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.
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3
<PAGE>
Value Line Aggressive Income Trust
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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.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
VALUE LINE AGGRESSIVE INCOME TRUST AND THE
LEHMAN AGGREGATE BOND INDEX*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Value Line Aggressive Lehman Aggregate
Income Trust Bond Index
------------ ----------
1/1/88 $ 9,467 $10,000
4/30/88 $ 9,633 $ 9,970
7/31/88 $ 9,885 $10,088
10/31/88 $10,030 $10,539
1/31/89 $10,271 $10,572
4/30/89 $10,132 $10,762
7/31/89 $10,352 $11,622
10/31/89 $10,338 $11,792
1/31/90 $10,214 $11,795
4/30/90 $10,543 $11,733
7/31/90 $10,591 $12,444
10/31/90 $ 9,511 $12,537
1/31/91 $10,140 $13,167
4/30/91 $11,375 $13,515
7/31/91 $11,830 $13,776
10/31/91 $12,407 $14,519
1/31/92 $12,924 $14,882
4/30/92 $13,218 $15,002
7/31/92 $13,755 $15,812
10/31/92 $13,797 $15,947
1/31/93 $14,513 $16,515
4/30/93 $15,594 $16,992
7/31/93 $15,800 $17,419
10/31/93 $16,377 $17,840
1/31/94 $17,234 $18,024
4/30/94 $16,382 $17,136
7/31/94 $16,234 $17,438
10/31/94 $16,179 $17,185
1/31/95 $16,086 $17,607
4/30/95 $16,904 $18,390
7/31/95 $17,612 $19,198
10/31/95 $18,572 $19,874
1/31/96 $19,913 $20,591
4/30/96 $20,622 $19,979
7/31/96 $21,838 $20,262
10/31/96 $22,216 $21,036
1/31/97 $23,521 $21,262
4/30/97 $23,372 $21,395
7/31/97 $25,058 $22,443
10/31/97 $26,059 $22,907
1/31/98 $27,042 $23,542
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(Period covered is from 2/1/88 to 1/31/98)
* 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.
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4
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments January 31, 1998
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<TABLE>
<CAPTION>
Principal
Amount Value
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<S> <C> <C>
UNITS (4.9%)
ENTERTAINMENT (1.4%)
$2,000,000 Star Choice Communication, Inc., (consisting of 13%, Senior Secured Notes
and 23.16 Warrants to purchase 1 share of Common Stock, at $.01/share,
Warrants expire 12/15/05) due 12/15/05(1)................................. $ 2,080,000
FOREIGN TELECOMMUNICATION SERVICES (2.0%)
3,500,000 Colt Telecom Group PLC, (consisting of Senior Discount Notes and Warrants
to purchase 19.698 ordinary shares @(pound)0.10/share,
zero coupon until 12/15/01, 12% thereafter), due 12/15/06................. 2,869,965
TELECOMMUNICATION SERVICES (1.5%)
2,000,000 Allegiance Telecom Inc., (consisting of Senior Discount Notes and Warrants
to purchase .0034224719 shares of common stock @ $.01/share, Warrants
expire 2/3/08, zero coupon until 2/15/03, 11 3/4% thereafter), due 2/15/08(1) 1,125,000
2,000,000 KMC Telecom Holdings Inc., (consisting of Senior Discount Note and Warrants
to purchase .21785 shares of common stocks, @ $.01/share, Warrants
expire 4/15/08, zero coupon until 2/15/03, 12 1/2% thereafter) due 2/15/08(1) 1,105,000
-----------
2,230,000
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TOTAL UNITS (Cost $6,547,686) .............................................. 7,179,965
-----------
CORPORATE BONDS & NOTES (80.7%)
ADVERTISING (1.4%)
2,000,000 Outdoor Systems, Inc., Senior, Sub. Notes, 8 7/8%, 6/15/07.................. 2,110,000
AIR TRANSPORT (1.1%)
1,500,000 Kitty Hawk Inc., Senior Notes, 9.95%, 11/15/04(1)........................... 1,569,375
CABLE TV (8.1%)
2,000,000 Century Communications Corp., Senior Notes, 8 3/4%, 10/1/07................. 2,085,000
1,000,000 Frontiervision Operating Partners LP, Capital Corp.,
Senior Sub. Notes, 11%, 10/15/06.......................................... 1,121,250
1,265,000 Olympus Communications LP Capital Corp.,
Senior Notes, Series "B", 10 5/8%, 11/15/06............................... 1,416,800
2,000,000 Optel Inc., Senior Notes, Series "B", 13%, 2/15/05.......................... 2,177,500
1,000,000 RCN Corp., Senior Notes, 10%, 10/15/07(1)................................... 1,070,000
2,000,000 Rogers Cablesystems Ltd., Senior Secured Second
Priority Debenture, 10%, 12/1/07.......................................... 2,247,500
2,000,000 United International Holdings, Inc., Senior Secured Discount Notes,
Series "B", 11/15/99, (zero coupon)....................................... 1,767,500
-----------
11,885,550
</TABLE>
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5
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
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<TABLE>
<CAPTION>
Principal
Amount Value
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<S> <C> <C>
CHEMICAL-SPECIALTY (0.8%)
$1,061,000 NL Industries Inc., Senior Secured Notes, 11 3/4%, 10/15/03................. $ 1,181,689
COAL/ALTERNATE ENERGY (1.4%)
2,000,000 AES Corp., Senior Sub. Notes, 8 1/2%, 11/1/07(1)............................ 2,050,000
ENTERTAINMENT (5.5%)
1,000,000 Busse Broadcasting Corp., Senior Secured Notes, 11 5/8%, 10/15/00........... 1,080,000
2,000,000 Chancellor Media Corp., Senior Sub. Notes, Series "B", 8 3/4%, 6/15/07...... 2,070,000
500,000 Commodore Media Inc., Senior Sub. Notes, (7 1/2%, until 5/1/98,
13 1/4% thereafter), 5/1/03............................................... 558,750
2,000,000 Jacor Communications Co., Guaranteed Senior Sub. Notes, 9 3/4%, 12/15/06.... 2,175,000
1,000,000 Paxson Communicating Corp., Senior Sub. Notes, 11 5/8%, 10/1/02............. 1,075,000
1,000,000 SFX Broadcasting Inc., Senior Sub. Notes, Series "B", 10 3/4%, 5/15/06...... 1,113,750
-----------
8,072,500
FINANCIAL SERVICES (2.1%)
650,000 Homeside Inc., Senior Secured Second Priority Notes, 11 1/4%, 5/15/03....... 773,500
2,000,000 Ocwen Financial Corp., Notes, 11 7/8%, 10/1/03.............................. 2,260,000
-----------
3,033,500
FOREIGN TELECOMMUNICATIONS (9.6%)
1,000,000 Call-Net Enterprises Inc., Senior Discount Notes, (zero coupon until 8/15/02,
9.27%, thereafter) 8/15/07................................................ 692,500
2,000,000 Clearnet Communications Inc., Senior Discount Notes, (zero coupon until
12/15/00, 14 3/4%, thereafter) 12/15/05................................... 1,632,500
2,000,000 Diamond Cable Communication PLC, Senior Discount Notes,
(zero coupon until 2/15/02, 10 3/4%, thereafter) 2/15/07.................. 1,377,500
2,000,000 Esprit Telecommunication Group PLC, Senior Notes, 11 1/2%, 12/15/07......... 2,145,000
2,000,000 Facilicom International Inc., Senior Notes, 10 1/2%, 1/15/08(1)............. 2,070,000
500,000 Fonorola Inc., Senior Secured Notes, 12 1/2%, 8/15/02....................... 560,000
2,000,000 Microcell Telecommunications, Inc., Senior Discount Notes, Series "B",
(zero coupon until 12/1/01, 14%, thereafter), 6/1/06...................... 1,440,000
3,000,000 Primus Telecommunications Group Inc., Senior Notes, 11 3/4%, 8/1/04......... 3,333,750
1,000,000 Telegroup Inc., Senior Discount Notes, (zero coupon until 5/1/00,
10 1/2%, thereafter) 11/1/04(1)........................................... 821,250
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14,072,500
FURNITURE/HOME FURNISHINGS (3.4%)
2,635,000 Cort Furniture Rental Co., Senior Notes, 12%, 9/1/00........................ 2,901,794
2,000,000 Sealy Mattress Co., Senior Sub. Notes, 9 7/8%, 12/15/07(1).................. 2,105,000
-----------
5,006,794
</TABLE>
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6
<PAGE>
Value Line Aggressive Income Trust
January 31, 1998
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<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL/GAMING (2.9%)
$2,000,000 HMH Properties Inc., Senior Notes, Series "B", 9 1/2%, 5/15/05.............. $ 2,145,000
2,000,000 Trump Atlantic City Associates/Funding Inc.,
Secured First Mortgage Notes, 11 1/4%, 5/1/06............................. 2,080,000
-----------
4,225,000
MACHINERY (4.2%)
1,845,000 Hawk Corp., Senior Notes, 10 1/4%, 12/1/03.................................. 2,006,437
2,000,000 International Knife & Saw, Inc., Senior Sub. Notes, 11 3/8%, 11/15/06....... 2,180,000
2,000,000 Wyman-Gordon Co., Senior Notes, 8%, 12/15/07................................ 2,049,520
-----------
6,235,957
MARITIME (1.9%)
1,000,000 Global Ocean Carriers Ltd., Senior Notes, 10 1/4%, 7/15/07.................. 898,750
2,000,000 PanOceanic Bulk Carriers Ltd.,
First Preferred Ship Mortgage Notes, 12% 12/15/07(1)...................... 1,957,500
-----------
2,856,250
MEDICAL SERVICES (2.8%)
2,000,000 Tenet HealthCare Corp., Senior Sub. Notes, 8 5/8%, 1/15/07.................. 2,100,220
2,000,000 Vencor Inc., Senior Sub. Notes, 8 5/8%, 7/15/07............................. 2,055,000
-----------
4,155,220
METAL FABRICATING (2.6%)
1,500,000 International Utilities Structures Inc., Senior Sub. Notes, 10 3/4%, 2/1/08(1) 1,533,750
2,000,000 Neenah Corp., Senior Sub. Notes, Series "B", 11 1/8%, 5/1/07................ 2,222,500
-----------
3,756,250
METALS & MINING-DIVERSIFIED (0.8%)
1,000,000 Westmin Resources Limited, Senior Secured Notes, 11%, 3/15/07............... 1,150,000
NATURAL GAS-DIVERSIFIED (3.2%)
2,000,000 Mariner Energy Inc., Senior Sub. Notes, Series "B", 10 1/2%, 8/1/06......... 2,072,500
2,500,000 National Energy Group Inc., Senior Notes, Series "D", 10 3/4%, 11/1/06...... 2,596,875
-----------
4,669,375
OFFICE EQUIPMENT & SUPPLIES (1.0%)
1,350,000 Mail-Well Corp., Senior Sub. Notes, 10 1/2%, 2/15/04........................ 1,454,625
</TABLE>
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7
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
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<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OILFIELD SERVICES/EQUIPMENT (5.8%)
$2,000,000 Cliffs Drilling Co., Senior Guaranteed Notes, Series "D", 10 1/4%, 5/15/03.. $ 2,187,500
1,000,000 Deeptech International, Senior Secured Notes, 12%, 12/15/00................. 1,067,500
1,000,000 First Wave Marine Inc., Senior Notes, 11%, 2/1/08........................... 1,032,500
2,000,000 Offshore Logistics Inc., Senior Notes, 7 7/8%, 1/15/08(1)................... 2,005,000
2,000,000 Pride Petroleum Services, Inc., Senior Notes, 9 3/8%, 5/1/07................ 2,165,000
-----------
8,457,500
PAPER & FOREST PRODUCTS (0.7%)
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.................................... 1,028,750
PETROLEUM-PRODUCING (1.4%)
2,000,000 Coho Energy Inc., Senior Sub. Notes, 8 7/8%, 10/15/07....................... 2,007,500
RETAIL SPECIAL LINES (1.4%)
2,000,000 Commemorative Brands Inc., Senior Sub. Notes, 11%, 1/15/07.................. 2,022,500
RETAIL STORE (0.7%)
1,000,000 Eye Care Centers of America, Inc., Senior Notes, 12%, 10/1/03............... 1,090,000
TELECOMMUNICATION SERVICES (16.5%)
1,000,000 American Communications Services Inc., Senior Notes, 13 3/4%, 7/15/07(1).... 1,210,000
1,000,000 Cencall Communications Inc., Senior Discount Notes,
(zero coupon until 1/15/99, 10 1/8% thereafter) 1/15/04................... 970,000
2,000,000 Dobson Communications Corp., Senior Notes, 11 3/4%, 4/15/07................. 2,187,500
1,600,000 GST USA Inc., Senior Discount Notes,
(zero coupon until 12/15/00, 13 7/8% thereafter), 12/15/05................ 1,330,000
2,000,000 HighwayMaster Communications Inc., Senior Sub. Notes,
Guaranteed, Series "B", 13 3/4%, 9/15/05.................................. 2,095,000
1,000,000 Hyperion Telecommunications Inc., Senior Discount Notes,
Series "B", (zero coupon until 4/15/01, 13% thereafter) 4/15/03........... 765,000
750,000 Hyperion Telecommunications Inc., Senior Secured Notes
Series "B", 12 1/4%, 9/1/04............................................... 860,625
1,000,000 ICG Holdings Inc., Senior Discount Notes,
(zero coupon until 3/15/02, 11 5/8% thereafter) 3/15/07................... 715,000
2,500,000 IXC Communications Inc., Senior Notes, Series "B" 12 1/2%, 10/1/05.......... 2,893,750
1,000,000 Intermedia Communications Inc., Senior Discount Notes, Series "B",
(zero coupon until 7/15/02, 11 1/4%, thereafter) 7/15/07.................. 731,250
2,000,000 MGC Communications Inc., Senior Notes, 13%, 10/1/04(1)...................... 2,000,000
1,000,000 Nextel Communications Inc., Senior Discount Notes,
(zero coupon until 9/15/02, 10.65% thereafter) 9/15/07.................... 662,500
</TABLE>
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8
<PAGE>
Value Line Aggressive Income Trust
January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
or Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
$2,000,000 Omnipoint Corp., Senior Notes, Series "A", 11 5/8%, 8/15/06................. $ 2,192,500
2,000,000 Orion Network Systems, Inc., Senior Discount Notes,
(zero coupon until 1/15/02, 12 1/2%, thereafter) 1/15/07.................. 1,520,000
3,000,000 Sprint Spectrum LP, Financial, Senior Discount Notes,
(zero coupon until 8/15/01, 12 1/2%, thereafter) 8/15/06.................. 2,475,000
1,500,000 Teligent Inc., Senior Notes, 11 1/2%, 12/1/07............................... 1,575,000
-----------
24,183,125
THRIFT (1.4%)
2,000,000 First Palm Beach Bancorp, Inc., Senior Debentures, Series "B", 10.35%, 6/30/02 2,125,000
-----------
TOTAL CORPORATE BONDS & NOTES (Cost $113,656,719) .......................... 118,398,960
-----------
PREFERRED BONDS & NOTES (1.4%)
FINANCIAL SERVICES (1.4%)
2,000,000 BankUnited Capital Trust, Pfd. Securities, Series A, 10 1/4%, 12/31/26...... 2,065,000
-----------
TOTAL PREFERRED BONDS & NOTES (Cost $2,040,000) ............................ 2,065,000
-----------
PREFERRED STOCKS (3.1%)
ENTERTAINMENT (1.6%)
2,133 Spanish Broadcasting Systems Inc., 14 1/4%,
Senior Pfd exchangeable Stock 3/15/05(1)(3)............................... 2,271,645
TELECOMMUNICATIONS SERVICES (1.5%)
638 ICG Holdings Inc., 14 1/4%, Senior Pfd exchangeable Stock 5/1/07(3)......... 746,460
22,957 Nextlink Communication Inc., 14%, Senior Pfd exchangeable Stock 2/1/09(3)... 1,429,094
-----------
2,175,554
-----------
TOTAL PREFERRED STOCKS (Cost $3,669,473) ................................... 4,447,199
-----------
COMMON STOCKS (0.1%)
CABLE TV (0.0%)
2,000 Optel Inc. (non-voting)(1).................................................. 20
TELECOMMUNICATION SERVICES (0.1%)
17,657 GST Telecommunications Inc. ................................................ 198,641
-----------
TOTAL COMMON STOCK (Cost $181,603) ......................................... 198,661
-----------
</TABLE>
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9
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Warrants Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.6%)
CABLE TV (0.0%)
9,500 American Telecasting Inc. (to purchase Common Stock,
@ $12.65, expire 6/15/99) (2)............................................. $ 95
ENTERTAINMENT (0.3%)
2,000 Spanish Broadcasting Systems, Inc. (to purchase Common Stock @ $.01,
expire 6/30/99)(1)(2)..................................................... 400,000
FOREIGN TELECOMMUNICATION SERVICES (0.0%)
6,600 Clearnet Communication Inc. (to purchase class "A" non-voting shares,
@$16.36, expire 9/15/05)(1)(2)............................................ 39,600
3,000 Primus Telecommunications Group Inc., (to purchase Common Stock,
@$9.075, expire 8/1/04)(2)................................................ 60,000
-----------
99,600
RETAIL STORE (0.0%)
500 Eye Care Centers of America, (to purchase Common Stock, expire 10/1/03)(2).. 1,750
TELECOMMUNICATION SERVICES (0.3%)
6,005 Advance Radio Telecom Corp., (to purchase Common Stock,
@$.01, expire 11/12/06)(1)(2)............................................. 54,045
2,000 Highwaymaster Communication Inc., (to purchase 6.56 shares of Common Stock
@$9.625, expire 1/1/00)(1)(2)............................................. 20,000
4,125 ICG Holdings Inc. (to purchase Common Stock, @$12.51 expire 10/15/05(1)(2).. 70,125
500 Intermedia Communication of Florida (to purchase 2.19 shares of Common Stock,
@ $10.86, expire 6/1/00)(1)(2)............................................ 52,500
2,095 Ionica PLC (to purchase 34.7 shares of Common Stock, @ stg(pound)10,
expire 8/15/06)(1)(2)..................................................... 83,800
2,000 MGC Communication Inc., (to purchase 8.07 shares of Common Stock,
@$.01, expire 10/1/04)(1)(2).............................................. 60,000
4,000 Microcell Telecommunications Inc. "Conditional" (to purchase 3.072 class "B"
non-voting shares, @CAD $.01, expire 06/1/06)(1)(2)....................... 50,000
1,000 Nextel Communications Inc., Series "A", (to purchase Common Stock,
expire 4/25/99)(2)........................................................ 10
2,000 Orion Network Systems Inc., (to purchase 0.6628 shares of Common Stock,
@$.01, expire 1/15/07)(2)................................................. 24,000
-----------
414,480
-----------
TOTAL WARRANTS (Cost $564,644) ............................................. 915,925
-----------
TOTAL INVESTMENT SECURITIES (90.8%)
(Cost $126,660,125) ...................................................... 133,205,710
</TABLE>
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10
<PAGE>
Value Line Aggressive Income Trust
January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (8.4%)
(including accrued interest)
$12,300,000 Collateralized by $12,122,000 U.S. Treasury Notes 6 1/4%,
due 7/31/98 with a value of $12,553,682 (With UBS Securities LLC, 5.55%,
dated 1/30/98, due 2/2/98 delivery value $12,305,689)..................... $ 12,301,896
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (.8%) ...................................... 1,204,359
------------
NET ASSETS (100.0%) ....................................................................... $146,711,965
====== ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER OUTSTANDING SHARE .................................................................. $8.66
============
</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
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11
<PAGE>
Value Line Aggressive Income Trust
Statement of Assets and Liabilities
at January 31, 1998
- --------------------------------------------------------------------------------
Dollars
(in thousands
except
per share
amount)
------------
Assets:
Investment securities, at value
(cost-- $126,660) ........................................ $ 133,205
Repurchase agreement (cost $12,302) ........................ 12,302
Cash ....................................................... 81
Receivable for securities sold ............................. 3,061
Interest receivable ........................................ 2,521
Receivable for trust shares sold ........................... 489
---------
Total Assets ........................................... 151,659
---------
Liabilities:
Payable for securities purchased ........................... 4,446
Payable for trust shares repurchased ....................... 48
Dividends payable to shareholders .......................... 284
Accrued expenses:
Advisory fee ............................................. 81
Other .................................................... 88
---------
Total Liabilities ...................................... 4,947
---------
Net Assets: ................................................ $ 146,712
=========
Net Assets:
Capital Stock, at $.01 par value
(authorized unlimited,
outstanding 16,941,670 shares
of beneficial interest) .................................. $ 169
Additional paid-in capital ................................. 146,397
Accumulated net realized loss
on investments ........................................... (6,425)
Undistributed net investment income ........................ 26
Net unrealized appreciation
of investments ........................................... 6,545
---------
Net Assets ............................................. $ 146,712
=========
Net Asset Value, Offering and
Redemption Price
per Outstanding Share .................................... $ 8.66
=========
Statement of Operations
for the Year Ended January 31, 1998
- --------------------------------------------------------------------------------
Dollars
(in thousands)
------------
Investment Income:
Interest income ........................................... $ 10,082
Other income .............................................. 139
--------
10,221
--------
Expenses:
Advisory fee .............................................. 787
Transfer agent fees ....................................... 55
Registration and filing fees .............................. 45
Auditing and legal fees ................................... 39
Taxes and other expenses .................................. 38
Custodian fees ............................................ 29
Printing, checks and stationery ........................... 24
Trustees' fees and expenses ............................... 15
--------
Total Expenses before
custody credits ..................................... 1,032
Less custody credits .................................. (13)
--------
Net Expenses .......................................... 1,019
--------
Net Investment Income ..................................... 9,202
--------
Realized and unrealized Gain
on Investments
Realized Gain-- Net ..................................... 1,969
Change in Unrealized
Appreciation-- Net .................................... 4,599
--------
Net Realized Gain and Change in
Net Unrealized Appreciation
on Investments .......................................... 6,568
--------
Net Increase in Net Assets
from Operations ......................................... $ 15,770
========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Aggressive Income Trust
Statement of Changes in Net Assets
for the Years Ended January 31, 1998 and 1997
- --------------------------------------------------------------------------------
1998 1997
-----------------------
(Dollars in thousands)
Operations:
Net investment income .............................. $ 9,202 $ 5,412
Realized gain on investments-- Net ................. 1,969 3,979
Change in net unrealized appreciation .............. 4,599 334
-----------------------
Net increase in net assets from operations ......... 15,770 9,725
-----------------------
Distributions to Shareholders:
Net investment income .............................. (9,192) (5,396)
-----------------------
Trust Share Transactions:
Net proceeds from sale of shares ................... 130,541 103,830
Net proceeds from reinvestment of
distributions to shareholders ..................... 6,131 3,613
-----------------------
136,672 107,443
Cost of shares repurchased ......................... (80,303) (69,783)
-----------------------
Increase from share transactions ................... 56,369 37,660
-----------------------
Total Increase in Net Assets ......................... 62,947 41,989
Net Assets:
Beginning of year .................................. 83,765 41,776
-----------------------
End of year ........................................ $ 146,712 $ 83,765
=======================
Undistributed net investment income at end of year ... $ 26 $ 16
=======================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<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 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.
- --------------------------------------------------------------------------------
14
<PAGE>
Value Line Aggressive Income Trust
January 31, 1998
- --------------------------------------------------------------------------------
(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 shareholders.
Therefore, no federal income tax or excise tax provision is required.
For the year ended January 31, 1998, permanent book tax differences due mainly
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:
1998 1997
------------------------
(in thousands)
Shares sold .................................. 15,725 13,168
Shares issued to shareholders
in reinvestment
of dividends ............................... 735 458
------- -------
16,460 13,626
Shares repurchased ........................... (9,722) (8,887)
------- -------
Net increase ................................. 6,738 4,739
======= =======
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Year Ended
January 31, 1998
--------------
(in thousands)
PURCHASES:
Investment Securities .................................. $295,105
========
SALES:
Investment Securities .................................. $236,987
========
At January 31, 1998, the aggregate cost of investments in securities for Federal
income tax purposes was $138,962,040. The aggregate appreciation and
depreciation of investments at January 31, 1998 based on a comparison of
investment values and their costs for Federal income tax purposes, was
$7,038,637 and $493,053, respectively, resulting in a net appreciation of
$6,545,584.
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 years' ended January
31, 1998, the Trust utilized prior year's carryover losses of approximately
$1,816,000 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 $786,852 was paid or payable to Value Line, Inc. (the
Adviser), for the year ended January 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
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Aggressive Income Trust
Notes to Financial Statements January 31, 1998
- --------------------------------------------------------------------------------
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 January 31, 1998, the Adviser owned 735,194 shares of beneficial interest in
the Trust, representing 4.34% of the outstanding shares.
In addition, certain officers and Trustees owned 14,883 shares of beneficial
interest in the Trust, representing .09% of the outstanding shares.
- --------------------------------------------------------------------------------
16
<PAGE>
Financial Highlights
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended January 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 8.21 $ 7.64 $ 6.80 $ 8.00 $ 7.35
--------------------------------------------------------
Income from investment operations:
Net investment income ................. .72 .75 .69 .68 .67
Net gains or losses on securities
(both realized and unrealized) ...... .45 .57 .85 (1.20) .65
------------------------------------------------------
Total from investment operations .... 1.17 1.32 1.54 (.52) 1.32
------------------------------------------------------
Less distributions:
Dividends from net investment income .. (.72) (.75) (.70) (.68) (.67)
------------------------------------------------------
Change in net assets .................. .45 .57 .84 (1.20) .65
------------------------------------------------------
Net asset value, end of year .............. $ 8.66 $ 8.21 $ 7.64 $ 6.80 $ 8.00
==========================================================
Total return .............................. 14.97% 18.12% 23.79% (6.66%) 18.74%
==========================================================
Ratios/Supplemental Data
Net assets, end of year (in thousands) .... $146,712 $83,765 $41,776 $29,760 $46,223
Ratio of expenses to average net assets.... .95% 1.10% 1.22% 1.27% 1.20%
Ratio of net investment income to
average net assets....................... 8.60% 9.70% 9.67% 9.23% 8.84%
Portfolio turnover rate ................... 251% 276% 284% 221% 320%
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
17
<PAGE>
Value Line Aggressive Income Trust
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Value Line Aggressive Income Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Aggressive Income Trust
(the "Trust") at January 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at January
31, 1998 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations were not received, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
March 25, 1998
- --------------------------------------------------------------------------------
18
<PAGE>
Value Line Aggressive Income Trust
Shareholders Meeting Results (unaudited)
- --------------------------------------------------------------------------------
A special meeting of shareholders of Value Line Aggressive Income Trust was held
on October 30, 1997. The matters voted upon by the shareholders and the
resulting votes for each matter are presented below.
1. The election of six Trustees to serve until their successors are duly elected
and qualified.
Trustees For Withheld Broker Non-Voters*
-------- -------- -------- ----------------
Jean Bernhard Buttner 8,079,785 216,450 0
John W. Chandler 8,065,722 230,514 0
Leo R. Futia 8,069,436 226,799 0
David H. Porter 8,045,343 250,892 0
Paul Craig Roberts 8,065,203 231,033 0
Nancy-Beth Sheerr 8,071,386 224,849 0
2. Ratification of the selection of Price Waterhouse LLP as independent
accountants for the fiscal year ending January 31, 1998.
For Against Abstain Broker Non-Voters*
-------- ------- ------- ----------------
8,024,035 66,212 205,988 0
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
- --------------------------------------------------------------------------------
19
<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.
- --------------------------------------------------------------------------------
20
<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
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
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#801264
