-------------------
ANNUAL REPORT
-------------------
January 31, 1999
-------------------
Value Line
Aggressive
Income Trust
[GRAPHIC]
VALUE LINE
No-Load
Mutual
Funds
<PAGE>
Value Line Aggressive Income Trust
To Our Value Line Aggressive
- --------------------------------------------------------------------------------
To Our Shareholders:
For the twelve months ended January 31, 1999, the Value Line Aggressive Income
Trust posted a total return (changes in net asset value plus reinvestment of
dividends) of -5.13%. The average high-yield bond fund's return, as measured by
Lipper Analytical Services, was -0.93% over the same period.
The last twelve months were a period of extraordinary volatility for the high
yield bond market. 1998 began as 1997 ended, with strong returns and positive
fund flows overpowering record new issuance. By summer, however, increasing
equity market volatility brought on by international turmoil began to stress the
financial markets. In August, the Russian government's default and the hedge
fund crisis caused an equity downdraft and a massive flight to quality in the
fixed income markets. As a result, U.S. Treasuries rallied substantially, and
prices for all other fixed income securities declined dramatically. The high
yield bond market was among the hardest hit, declining approximately 7% in
August alone, with some securities tumbling 10% to 20% or more. Additionally, a
liquidity crisis was developing. As the high yield market is an over-the-counter
market, it depends on securities dealers risking their capital to provide bids
and offers. Many of these dealers, having sustained significant losses of their
own in their high yield and emerging markets trading departments, began to
abandon their commitment to maintaining orderly markets. This was at the same
time many fund managers were trying to sell securities to cover redemptions,
exacerbating the situation. The result was a market in freefall. As the Federal
Reserve stepped in and lowered interest rates in September, October, and
November, the high-yield market began to recover. The largest and most liquid
issues began to appreciate the most, with the more aggressive, less tradable
securities lagging behind. By January, the market had made significant strides
towards recovery. For many bonds, however, a lack of liquidity continues to
limit price appreciation.
We have maintained our exposure to the telecommunications, cable television, and
broadcasting industries. Many of these companies enjoy a favorable regulatory
environment, and experience rapidly growing, high margined cash flows. Others
have the potential for substantial value creation through the exploitation of
new technologies. We continue to avoid many of the more cyclical industries. Low
commodity prices, caused by global overcapacity, slowing demand and currency
devaluations, continue to put pressure on chemical, metal, and paper producers.
An exception is the energy sector. While we have reduced our exposure, we
maintain a cautious stake in several entities which we believe have substantial
asset protection or potential upside as we believe an improvement in oil and gas
prices is possible in the near- to medium-term.
This past year has been an especially challenging one. Several securities held
by the Trust experienced declines in price based not on their fundamental
creditworthiness, but rather on an unfavorable technical environment created by
the liquidity squeeze mentioned above. In addition, during the August-September
correction, the new issue market was effectively closed. Many bonds declined in
price as a result of a fear that a company would not be able to raise new funds
to further its business plans. As the market returns to a more normalized
functioning, we are confident that these concerns will ease and these securities
will appreciate. Overall, the recent volatility only underscores our belief that
we must do the fundamental research necessary to ensure that we invest in the
"right" industries and companies - those enjoying positive fundamentals or that
offer attractive risk-adjusted returns. Over time, we are confident that this
approach will produce attractive returns for our shareholders.
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
February 25, 1999
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2
<PAGE>
Value Line Aggressive Income Trust
Income Trust Shareholders
- --------------------------------------------------------------------------------
Economic Observations
Strong growth and low inflation continue to be two of the dominant themes in the
domestic economy at this time. This enviable performance is underscored by
reports that show persisting strength in consumer spending, housing
construction, personal income, and employment. Such trends suggest that the
economy will expand by more than 3% during the first quarter of 1999. At the
same time, inflation remains quiescent, with producer and consumer price
increases still modest, overall, and with selective industrial sectors finding
it difficult to implement price increases. In some instances, prices are
actually falling.
We believe this healthy pace of economic activity will continue in the next few
quarters, with growth averaging 2.5%-3.0% for the year as a whole. Our sense, as
well, is that the economic crisis that is still afflicting much of Asia and
parts of Latin America (especially Brazil) will gradually recede over the next
12 to 18 months. At the same time, we expect inflation to remain subdued. The
Federal Reserve, encouraged by this benign state of economic affairs, will
probably maintain its current monetary stance over the next several months, at
least. Any subsequent adjustment in interest rates will probably be modest given
the likely absence of excesses in growth or inflation in the domestic economy.
Performance Data:*
1 year ended 5 years ended 10 years ended
12/31/98 12/31/98 12/31/98
------------------------------------------------
Average Annual Total Return* -5.27% 8.30% 9.52%
1 year ended 5 years ended 10 years ended
1/31/99 1/31/99 1/31/99
------------------------------------------------
Average Annual Total Return* -5.13% 8.28% 9.58%
* 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
- --------------------------------------------------------------------------------
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.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
VALUE LINE AGGRESSIVE INCOME TRUST AND THE
LEHMAN BROTHERS AGGREGATE BOND INDEX*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIALS.]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value Line Aggressive Lehman Brothers Aggregate
Income Trust Bond Index
<S> <C> <C>
4/89 $ 9,864 $10,179
7/89 $10,272 $10,993
10/89 $10,064 $11,154
1/90 $ 9,944 $11,156
4/90 $ 9,777 $11,098
7/90 $10,331 $11,771
10/90 $ 9,259 $11,858
1/91 $ 9,872 $12,454
4/91 $11,074 $12,784
7/91 $11,517 $13,030
10/91 $12,078 $13,733
1/92 $12,582 $14,077
4/92 $12,868 $14,190
7/92 $13,391 $14,956
10/92 $13,432 $15,084
1/93 $14,129 $15,621
4/93 $14,695 $16,072
7/93 $15,382 $16,477
10/93 $15,943 $16,874
1/94 $16,778 $17,049
4/94 $15,949 $16,209
7/94 $15,805 $16,492
10/94 $15,751 $16,255
1/95 $15,661 $16,654
4/95 $16,456 $17,394
7/95 $17,146 $18,159
10/95 $18,081 $18,798
1/96 $19,386 $19,476
4/96 $20,076 $18,898
7/96 $20,481 $19,165
10/96 $21,628 $19,898
1/97 $22,899 $20,112
4/97 $22,753 $20,237
7/97 $24,395 $21,228
10/97 $25,369 $21,667
1/98 $25,326 $22,268
4/98 $27,026 $22,445
7/98 $27,038 $22,898
10/98 $23,380 $23,690
1/99 $24,975 $24,067
</TABLE>
(Period covered is from 2/1/89 to 1/31/99)
- --------------------------------------------------------------------------------
* The Lehman Brothers Aggregate Bond Index is representative of the broad
fixed-income market. It includes government, investment-grade corporate, and
mortgage-backed bonds. The returns for the Index do not reflect expenses,
which are deducted from the Trust's returns.
- --------------------------------------------------------------------------------
4
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments January 31, 1999
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITS (2.1%)
ENTERTAINMENT (1.5%)
$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) .................................. $ 2,700,000
OILFIELD SERVICES/EQUIPMENT (0.6%)
1,000,000 Key Energy Service Inc., (Consisting of 14%, Senior Sub. Notes and Warrants
to purchase 13.55 shares of Common Stock, @ $4.88125/share,
Warrants expire 1/15/09), due 1/15/09 (1) ............................... 1,002,500
-----------
TOTAL UNITS (Cost $4,000,000) .............................................. 3,702,500
-----------
CORPORATE BONDS & NOTES (80.2%)
ADVERTISING (3.7%)
2,000,000 Adams Outdoor Advertising Ltd., Senior Notes, 10 3/4%, 3/15/06.............. 2,185,000
1,000,000 Lamar Advertising Co., Senior Sub. Notes, 9 5/8%, 12/1/06................... 1,092,500
3,000,000 Outdoor Systems, Inc., Senior Sub. Notes, 8 7/8%, 6/15/07................... 3,210,000
-----------
6,487,500
AUTO PARTS (ORIGINAL EQUIPMENT)(1.2%)
2,000,000 Federal-Mogul Corp., Notes, 7 3/4%, 7/1/06 ................................. 2,057,140
AUTO PARTS (REPLACEMENT) (1.1%)
2,000,000 Safelite Glass Corp., Senior Sub. Notes, Series "B", 9 7/8%, 12/15/06 ...... 1,847,500
CABLE TV (10.2%)
3,000,000 Adelphia Communications Corp., Senior Notes, Series "B", 9 7/8%, 3/1/07 .... 3,330,000
3,000,000 Century Communications Corp., Senior Notes, 83/4%, 10/1/07.................. 3,315,000
5,000,000 Knology Holdings Inc., Senior Discount Notes, (zero coupon until 10/15/02,
11 7/8% thereafter) 10/15/07 ............................................. 2,537,500
2,000,000 Onepoint Communications Corp., Senior Notes, 14 1/2%, 6/1/08 (1) ........... 1,045,000
2,000,000 Optel Inc., Senior Notes, Series "B", 13%, 2/15/05.......................... 2,025,000
3,000,000 Rogers Cablesystems Ltd., Senior Secured Second
Priority Debenture, 10%, 12/1/07 ......................................... 3,431,250
5,000,000 21st Century Telecom Group, Senior Discount Notes, (zero coupon until 2/15/03,
12 1/4% thereafter) 2/15/08 ............................................. 2,100,000
-----------
17,783,750
</TABLE>
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5
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED COMPANIES (1.6%)
$3,000,000 Mark IV Industries, Inc., Senior Sub. Notes, 7 1/2%, 9/1/07 ................ $ 2,868,750
ENTERTAINMENT (7.7%)
5,000,000 Big City Radio Inc., Senior Discount Notes, (zero coupon until 3/15/01,
11 1/4% thereafter) 3/15/05 .............................................. 3,425,000
2,000,000 Chancellor Media Corp., Senior Sub. Notes, Series "B", 8 1/8%, 12/15/07 .... 2,085,000
2,000,000 Hollywood Entertainment Corp., Senior Sub. Notes, Series "B", 10 5/8%,
8/15/04 .................................................................. 2,040,000
2,000,000 Pegasus Communications Corp., Senior Notes, Series "B", 9 5/8%, 10/15/05 ... 2,075,000
3,500,000 Radio Unica Corp., Senior Discount Notes, (zero coupon until 8/1/02,
11 3/4% thereafter) 8/1/06 .............................................. 1,903,125
2,000,000 Star Choice Communications, Inc., Senior Secured Notes, 13%, 12/15/05 ...... 1,985,000
-----------
13,513,125
FOREIGN TELECOMMUNICATIONS (14.7%)
3,000,000 Clearnet Communications Inc., Senior Discount Notes,
(zero coupon until 12/15/00, 14 3/4% thereafter) 12/15/05 ................ 2,621,250
8,500,000 Dolphin Telecom PLC, Senior Discount Notes, (zero coupon until 6/1/03,
11 1/2% thereafter), 6/1/08 (1) .......................................... 3,729,375
2,000,000 Econophone Inc., Senior Notes, 13 1/2%, 7/15/07............................. 2,045,000
1,000,000 Esprit Telecommunication Group PLC, Senior Notes, 11 1/2%, 12/15/07......... 1,050,000
4,000,000 Facilicom International Inc., Senior Notes, 10 1/2%, 1/15/08 ............... 3,230,000
3,000,000 Hermes Europe Railtel BV., Senior Notes, 11 1/2%, 8/15/07 .................. 3,262,500
4,000,000 Microcell Telecommunications, Inc., Senior Discount Notes, Series "B"
(zero coupon until 12/1/01, 14% thereafter), 6/1/06 ...................... 3,095,000
3,600,000 RSL Communications PLC., Senior Discount Notes,
(zero coupon until 3/1/03, 10 1/8% thereafter) 3/1/08 .................... 1,975,500
3,000,000 Telegroup Inc., Senior Discount Notes, (zero coupon until 5/1/00,
10 1/2% thereafter) 11/1/04 ............................................. 1,740,000
5,000,000 Viatel Inc., Senior Discount Notes, (zero coupon until 4/15/03,
12 1/2% thereafter) 4/15/08 .............................................. 3,031,250
-----------
25,779,875
HOME APPLIANCE (1.9%)
2,000,000 Salton Maxim Housewares Inc., Senior Sub. Notes, 103/4%, 2/15/05 (1) ....... 2,025,000
1,500,000 Windmere-Durable Holdings, Inc., Senior Sub. Notes, 10%, 7/31/08 ........... 1,361,250
-----------
3,386,250
</TABLE>
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6
<PAGE>
Value Line Aggressive Income Trust
January 31, 1999
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL/GAMING (4.4%)
$2,000,000 Hilton Hotels Corp., Senior Notes, 7.95%, 4/15//07.......................... $ 2,111,700
2,000,000 ITT Corp., Notes, 6 3/4%, 11/15/05.......................................... 1,802,680
2,000,000 Park Place Entertainment Corp., Senior Sub. Notes, 7 7/8%, 12/15/05 (1)..... 1,995,000
2,000,000 Trump Atlantic City Associates/Funding Inc., Secured First Mortgage Notes,
11 1/4%, 5/1/06 ......................................................... 1,855,000
-----------
7,764,380
MACHINERY (1.1%)
2,000,000 Columbus McKinnon Corp., Senior Sub. Notes, 8 1/2%, 4/1/08.................. 1,900,000
MEDICAL SERVICES (2.1%)
2,000,000 Mariner Post-Acute Network, Inc., Senior Sub. Notes, 9 1/2%, 11/1/07....... 1,545,000
2,000,000 Tenet HealthCare Corp., Senior Sub. Notes, 8%, 1/15/05...................... 2,059,540
-----------
3,604,540
METAL FABRICATING (1.3%)
2,250,000 Neenah Corp., Senior Sub. Notes, Series "B", 11 1/8%, 5/1/07 ............... 2,323,125
NATURAL GAS PRODUCING (1.3%)
3,500,000 Ram Energy, Inc., Senior Notes, 11 1/2%, 2/15/08............................ 2,248,750
OILFIELD SERVICES/EQUIPMENT (1.6%)
3,000,000 Pride Petroleum Services, Inc., Senior Notes, 9 3/8%, 5/1/07................ 2,827,500
PAPER & FOREST PRODUCTS (1.7%)
3,000,000 Stone Container Corp., Senior Sub. Units, (consisting of 11 1/4%,
Senior Sub. Debentures, Series "B", and 11/2% Supplemental
Interest Certificates) 12 3/4%, 4/1/02.................................... 3,011,250
PETROLEUM-PRODUCING (2.9%)
2,000,000 Coho Energy Inc., Senior Sub. Notes, 8 7/8%, 10/15/07....................... 1,655,000
3,000,000 Ocean Energy Inc., Senior Notes, Series "B", 7 5/8%, 7/1/05................. 2,911,800
1,000,000 Southwest Royalties Inc., Senior Notes, Series "B", 1 01/2%, 10/15/04....... 442,500
-----------
5,009,300
RETAIL STORE (2.7%)
2,000,000 Frank's Nursery & Crafts, Inc., Senior Sub. Notes, 10 1/4%, 3/1/08 ......... 1,995,000
2,250,000 Kmart Corp., Debentures, 12 1/2%, 3/1/05.................................... 2,722,500
-----------
4,717,500
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
or Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (17.8%)
$ 3,000,000 Allegiance Telecom, Inc., Senior Discount Notes, Series "B",
(zero coupon until 2/15/03, 11 3/4% thereafter) 2/15/08 .................. $ 1,616,250
2,000,000 American Cellular Corp., Senior Notes, 10 1/2%, 5/15/08 (1) ................ 2,080,000
1,500,000 Centennial Cellular Operating Co., Senior Sub. Notes, 10 3/4%, 12/15/08 (1). 1,590,000
12,250,000 DTI Holdings Inc., Senior Discount Notes, Series "B",
(zero coupon until 3/1/03, 12 1/2% thereafter) 3/1/08 .................... 3,047,188
1,000,000 Dobson Communications Corp., Senior Notes, 11 3/4%, 4/15/07................. 1,070,000
1,000,000 Dobson/Sygnet Communications Corp., Senior Notes, 12 1/4%, 12/15/08 (1)..... 1,065,000
10,000,000 GST Network Funding, Inc., Senior Secured Discount Notes,
(zero coupon until 5/1/03, 10 1/2% thereafter) 5/1/08 (1) ................ 4,587,500
5,000,000 Hyperion Telecommunications Inc., Senior Discount Notes, Series "B",
(zero coupon until 4/15/01, 13% thereafter) 4/15/03 ...................... 3,818,750
2,000,000 Iridium LLC/Capital Corp., Senior Notes, Series "B", 14%, 7/15/05 ......... 1,895,000
5,000,000 KMC Telecom Holdings Inc., Senior Discount Notes, (zero coupon until
2/15/03, 12 1/2% thereafter) 2/15/08 .................................... 2,568,750
3,654,000 MGC Communications Inc., Senior Secured Notes, Series "B", 13%, 10/1/04 ... 2,603,475
4,000,000 Omnipoint Corp., Senior Notes, Series "A", 11 5/8%, 8/15/06................. 3,210,000
2,000,000 Teligent Inc., Senior Notes, 11 1/2%, 12/1/07............................... 1,900,000
-----------
31,051,913
TEXTILE (1.2%)
2,000,000 Westpoint Stevens Inc., Senior Notes, 7 7/8%, 6/15/08....................... 2,060,000
-----------
TOTAL CORPORATE BONDS & NOTES (Cost $151,881,513) .......................... 140,242,148
-----------
CONVERTIBLE PREFERRED STOCK (1.8%)
FOREIGN TELECOMMUNICATION (0.2%)
2,642 Viatel Inc., Series "A", Par $100. (each share is convertible to 7.5758
shares of Common Stock @$13.20 beginning 4/8/99), 10%, 4/15/10 (1)(3) .... 375,296
TELECOMMUNICATION SERVICES (1.6%)
10,000 ICG Communications Inc., Par $50. (each share is convertible to 2.0811
shares of Common Stock @$24.025, at any time), 6 3/4%, 11/15/09........... 475,000
40,000 IXC Communications, Inc., Par $50. (each share is convertible to 0.6874
shares of Common Stock @$72.73, at any time), 6 3/4%, 12/31/49 (1)........ 1,397,500
65,000 Intermedia Communications, Inc., Par $25. (each share is convertible to
0.5942 shares of Common Stock @$42.075, beginning 11/16/98), 7%,
12/31/49 (1) ............................................................. 958,750
-----------
2,831,250
-----------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $4,188,377) ........................ 3,206,546
-----------
</TABLE>
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8
<PAGE>
Value Line Aggressive Income Trust
January 31, 1999
================================================================================
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK (4.4%)
ENTERTAINMENT (4.0%)
2,139 Cumulus Media, Inc., 13 3/4%, each share is exchangeable one for one into
Senior Notes Series "A", Par $1000, 7/1/09 (3)............................ $ 2,438,460
2,066 Paxson Communications Corp., 12 1/2%, each share is exchangeable one for
one into Debentures, Par $1000, 10/31/06 (3).............................. 1,880,060
2,446 Spanish Broadcasting Systems, Inc., 14 1/4%, each share is exchangeable
one for one into Debentures, Par $1000, 3/15/05 (3) ...................... 2,568,300
-----------
6,886,820
TELECOMMUNICATION SERVICES (0.4%)
732 ICG Holdings, Inc., 14 1/4%, Exchangeable into Senior Notes, Par $1000,
5/1/07 (3) .............................................................. 732,000
-----------
TOTAL PREFERRED STOCK (Cost $7,450,153) .................................... 7,618,820
-----------
COMMON STOCKS (0.3%)
CABLE TV (0.0%)
2,000 Optel Inc. (non-voting)(1).................................................. 40,000
FOREIGN TELECOMMUNICATIONS (0.1%)
5,235 Primus Telecom Group Inc.................................................... 76,562
TELECOMMUNICATION EQUIPMENT (0.0%)
948 Loral Space & Communications Inc. .......................................... 20,856
TELECOMMUNICATION SERVICES (0.2%)
6,001 Advanced Radio Telecom Corp. ............................................... 50,258
17,657 GST Telecommunications Inc.................................................. 148,981
4,125 ICG Telecommunications Inc.................................................. 77,602
2,190 Intermedia Communications Inc............................................... 30,386
1,878 Intermedia Communications Inc. (1).......................................... 26,057
2,361 Nextel Communications Inc................................................... 75,552
-----------
408,836
-----------
TOTAL COMMON STOCK (Cost $386,503) ......................................... 546,254
-----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
================================================================================
<TABLE>
<CAPTION>
Warrants Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (1.0%)
CABLE TV (0.0%)
9,500 American Telecasting Inc. (to purchase Common Stock, @ $12.65/share,
expires 6/15/99) (2) .................................................... $ 95
2,000 Onepoint Communications Inc. (to purchase 0.635 shares of Common Stock,
@$.01/share, expires 6/1/08) (1) (2) ..................................... 2,000
-----------
2,095
ENTERTAINMENT (0.2%)
2,000 Spanish Broadcasting Systems, Inc. (to purchase Common Stock,
@ $.01/share, expires 6/30/99) (1)(2) .................................... 410,000
FOREIGN TELECOMMUNICATION (0.7%)
6,600 Clearnet Communication Inc. (to purchase class "A" non-voting shares,
@$16.36/share, expires 9/15/05) (1)(2) ................................... 26,400
1,750 Colt Telecom Group PLC (to purchase 31.2 ordinary shares,
@(pound).75625/share, expires 12/31/06) (1)(2) ........................... 1,058,750
2,095 Ionica PLC (to purchase 34.7 shares of Common Stock,
@(pound).10/share, expires 8/15/06)(1)(2) ................................ 21
4,000 Microcell Telecommunications Inc. "Conditional" (to purchase 3.072 class "B"
non-voting shares, @ $.01/share, expires 6/1/06) (1) (2).................. 96,000
-----------
1,181,171
TELECOMMUNICATION SERVICES (0.1%)
3,000 Allegiance Telecom Inc. (to purchase .0034224719 shares Common Stock,
@$.01/share, expires 2/3/08) (1)(2) ...................................... 91,894
61,250 DTI Holdings Inc. (to purchase 7.76 shares of Common Stock, @$.01/share,
expires 3/1/08)(1)(2) ................................................... 3,062
3,000 HighwayMaster Communication Inc. (to purchase 6.566 shares of Common Stock,
@$9.625/share, expires 9/15/05) (1) (2)................................... 6,000
500 Hyperion Telecommunications Inc. (to purchase 6.06 shares of Commonn Stock,
@$.00308/shares, expires 4/15/01) (1) (2) ................................ 37,750
3,000 KMC Telecom Holdings Inc. (to purchase .21785 shares of Common Stock,
@$.01/share, expires 4/15/08) (1)(2) ..................................... 1,500
2,000 MGC Communications Inc. (to purchase 5.29 shares of Common Stock,
@$.01/share, expires 10/1/04) (1)(2) ..................................... 60,000
-----------
200,206
-----------
TOTAL WARRANTS (Cost $572,288) ............................................. 1,793,472
-----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
Value Line Aggressive Income Trust
January 31, 1999
================================================================================
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CANADIAN (0.1%)
ENTERTAINMENT (0.1%)
69,480 Star Choice Communications, Inc............................................. $ 132,387
------------
TOTAL COMMON STOCK CANADIAN (Cost $48,196) ................................. 132,387
------------
TOTAL INVESTMENT SECURITIES (89.9%) (Cost $168,527,030) .................... 157,242,127
REPURCHASE AGREEMENT (8.0%)
(including accrued interest)
$13,900,000 Collateralized by $13,255,000 U.S. Treasury Notes, 6 1/2%,
due 8/30/01 with a value of $14,198,435 (With First Chicago Capital
Markets, Inc. 4.68%, dated 1/29/99, due 2/1/99 delivery value $13,905,421) 13,901,807
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%) ..................................... 3,660,753
------------
NET ASSETS (100.0%) ....................................................................... $174,804,687
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE,
PER OUTSTANDING SHARE .................................................................. $ 7.45
============
</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.
- --------------------------------------------------------------------------------
11
<PAGE>
Value Line Aggressive Income Trust
Statement of Assets and Liabilities
at January 31, 1999
- --------------------------------------------------------------------------------
Dollars
(in thousands
except
per share
amount)
------------
Assets:
Investment securities, at value
(cost-- $168,527).................. $157,242
Repurchase agreement (cost $13,902) . 13,902
Cash ................................ 52
Interest receivable ................. 3,036
Receivable for trust shares sold .... 1,591
--------
Total Assets .................... 175,823
--------
Liabilities:
Payable for trust shares repurchased 322
Dividends payable to shareholders ... 496
Accrued expenses:
Advisory fee ...................... 93
Other ............................. 107
--------
Total Liabilities ............... 1,018
--------
Net Assets: ......................... $174,805
========
Net Assets:
Capital Stock, at $.01 par value
(authorized unlimited,
outstanding 23,450,303 shares
of beneficial interest)............ $ 235
Additional paid-in capital .......... 193,935
Accumulated net realized loss
on investments..................... (8,178)
Undistributed net investment income.. 98
Unrealized net depreciation
of investments .................... (11,285)
--------
Net Assets ...................... $174,805
========
Net Asset Value, Offering and
Redemption Price
per Outstanding Share ............. $ 7.45
========
Statement of Operations
for the Year Ended January 31, 1999
- --------------------------------------------------------------------------------
Dollars
(in thousands)
------------
Investment Income:
Interest income ..................... $ 16,818
Other income ........................ 155
--------
16,973
--------
Expenses:
Advisory fee ........................ 1,049
Transfer agent fees ................. 57
Auditing and legal fees ............. 44
Taxes and other expenses ............ 43
Custodian fees ..................... 36
Registration and filing fees ........ 32
Printing, checks and stationery ..... 27
Trustees' fees and expenses ......... 15
--------
Total Expenses before
custody credits ............... 1,303
Less: custody credits ........... (7)
--------
Net Expenses .................... 1,296
--------
Net Investment Income ............... 15,677
--------
Realized and unrealized Gain (Loss)
on Investments
Realized Loss--Net................. (5,192)
Change in Unrealized
Appreciation--Net ............... (17,830)
--------
Net Realized Loss and Change in
Net Unrealized Appreciation
on Investments .................... (23,022)
--------
Net Decrease in Net Assets
from Operations ................... $ (7,345)
========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Aggressive Income Trust
Statement of Changes in Net Assets
for the Years Ended January 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------------------------
(Dollars in thousands)
<S> <C> <C>
Operations:
Net investment income ............................................... $ 15,677 $ 9,202
Realized gain (loss) on investments-- Net ........................... (5,192) 1,969
Change in net unrealized appreciation ............................... (17,830) 4,599
-------------------------
Net increase/decrease in net assets from operations.................. (7,345) 15,770
-------------------------
Distributions to Shareholders:
Net investment income ............................................... (15,605) (9,192)
-------------------------
Trust Share Transactions:
Net proceeds from sale of shares .................................... 164,217 130,541
Net proceeds from reinvestment of distribution to shareholders....... 10,593 6,131
-------------------------
174,810 136,672
Cost of shares repurchased .......................................... (123,767) (80,303)
-------------------------
Increase from share transactions .................................... 51,043 56,369
-------------------------
Total Increase in Net Assets .......................................... 28,093 62,947
Net Assets:
Beginning of year ................................................... 146,712 83,765
------------------------
End of year ........................................................ $174,805 $146,712
=========================
Undistributed net investment income at end of year .................... $ 98 $ 26
========================
</TABLE>
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 value.
(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, 1999
- --------------------------------------------------------------------------------
(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.
(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:
Year Ended
January 31,
------------------
1999 1998
------------------
(in thousands)
Shares sold ..................... 20,676 15,725
Shares issued to shareholders
in reinvestment of dividends .... 1,330 735
------------------
22,006 16,460
Shares repurchased .............. (15,498) (9,722)
------------------
Net increase .................... 6,508 6,738
==================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Year Ended
January 31, 1999
------------
(in thousands)
PURCHASES:
Investment Securities........... $248,045
========
SALES:
Investment Securities .......... $207,126
========
At January 31, 1999, the aggregate cost of investments in securities including
repurchase agreements for Federal income tax purposes was $183,040,215. The cost
basis has been adjusted for deferral of wash sale losses of $611,378. The
aggregate appreciation and depreciation of investments at January 31, 1999 based
on a comparison of investment values and their costs for Federal income tax
purposes, was $3,685,986 and $15,582,267, respectively, resulting in a net
depreciation of $11,896,281.
For Federal income tax purposes, the Trust had a capital loss carryover at
January 31, 1999 of $5,516,205, of which $599,408 will expire in 2000,
$2,386,247 in 2003 and $2,530,550 in 2007. To the extent future capital gains
are offset by such capital losses, the Trust does not anticipate distributing
any such gains to the shareholders.
For the year ended January 31, 1999, permanent book tax differences due to the
expiration of capital loss carryovers of $3,439,000 were reclassified from
accumulated net realized loss on investments to additional paid-in capital.
During the year ended January 31, 1999, as permitted under Federal income tax
regulations, the Trust has elected to defer $2,049,896 of Post-October net
capital losses to the next taxable year.
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Aggressive Income Trust
Notes to Financial Statements January 31, 1999
- --------------------------------------------------------------------------------
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $1,049,295 was paid or payable to Value Line, Inc., the
Trust's investment adviser, (the "Adviser"), for the year ended January 31,
1999. This was computed at an annual rate of .75 of 1% per year on the first
$100 million of the Trust's average daily net assets for the period, and .50 of
1% on the average net assets in excess thereof. The Adviser provides research,
investment programs and supervision of the investment portfolio and pays costs
of administrative services and office space. The Adviser also provides persons,
satisfactory to the Trust's Trustees, to act as officers of the Trust and pays
their salaries and wages. The Trust bears all other costs and expenses.
Certain officers and directors of the Adviser and its subsidiary, Value Line
Securities, Inc. (the Trust's distributor and a registered broker/dealer), are
also officers and a Trustee of the Trust.
At January 31, 1999, the Adviser owned 1,003,765 shares of beneficial interest
in the Trust, representing 4.28% of the outstanding shares.
In addition, certain officers and trustees owned 88,534 shares of beneficial
interest in the Trust, representing .38% of the outstanding shares.
- --------------------------------------------------------------------------------
16
<PAGE>
Value Line Aggressive Income Trust
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended January 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 8.66 $ 8.21 $ 7.64 $ 6.80 $ 8.00
----------------------------------------------------------
Income from investment operations:
Net investment income ................. .78 .72 .75 .69 .68
Net gains or losses on securities
(both realized and unrealized) ...... (1.21) .45 .57 .85 (1.20)
----------------------------------------------------------
Total from investment operations .... (.43) 1.17 1.32 1.54 (.52)
----------------------------------------------------------
Less distributions:
Dividends from net investment income .. (.78) (.72) (.75) (.70) (.68)
----------------------------------------------------------
Net asset value, end of year .............. $ 7.45 $ 8.66 $ 8.21 $ 7.64 $ 6.80
==========================================================
Total return .............................. (5.13%) 14.97% 18.12% 23.79% (6.66%)
==========================================================
Ratios/Supplemental Data
Net assets, end of year (in thousands) .... $174,805 $146,712 $83,765 $41,776 $29,760
Ratio of expenses to average net assets.... .81%(1) .95%(1) 1.10%(1) 1.22%(1) 1.27%
Ratio of net investment income to
average net assets....................... 9.81% 8.60% 9.70% 9.67% 9.23%
Portfolio turnover rate ................... 140% 251% 276% 284% 221%
</TABLE>
(1) After offset for custody credits. Excluding the custody credits would not
have changed the expense ratio.
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, 1999, 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, 1999 by correspondence with the custodian and broker, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopersLLP
1177 Avenue of the Americas
New York, New York
March 17, 1999
- --------------------------------------------------------------------------------
Other Information (Unaudited)
Year 2000. Like other mutual funds, the Trust could be adversely affected if the
computer systems used by the Adviser and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Trust's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Trust, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Trust is unable to
predict what impact, if any, the Year 2000 Problem will have on issuers of the
portfolio securities held by the Trust.
- --------------------------------------------------------------------------------
18
<PAGE>
Value Line Aggressive Income Trust
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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 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
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).
# 505403
