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ANNUAL REPORT
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January 31, 2000
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Value Line
Aggressive
Income Trust
[LOGO]
VALUE LINE
No-Load
Mutual
Funds
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<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, 2000, the total return for the Value
Line Aggressive Income Trust was 7.16%. Over the same period, the average high
yield bond fund (as measured by Lipper Analytical Services) returned 2.30%.
The last year has been a challenging one for high-yield bonds. Continued
economic strength has caused treasury yields to rise significantly over the past
year which pushed down bond prices. Most fixed-income sectors posted either only
slightly positive or negative returns for the year. Even more troubling for high
yield bonds, however, is that default rates have risen to their highest levels
since the recession of 1991. We think at least three factors explain why
business failures have increased during an era of such widespread prosperity.
The first is the aftershock from the Southeast Asian devaluation crisis which
began in 1997 and reached its peak in severity in 1998. This resulted in sharply
slower global economic growth, which in turn caused many commodities to decline
precipitously in price. The lower prices realized by paper, steel and energy
producers caused lower cash flows and rendered several issuers unable to honor
their debt obligations. Second, many industries experienced significant
regulatory changes affecting their competitive environment. The healthcare
sector, in particular, experienced several defaults as a result of alterations
to the government reimbursement system. Finally, the sheer record-breaking
number of new high-yield bond deals that have come to market in the last two
years, many of them more speculative in nature, have made it unavoidable that
there would be an increase in defaults.
We continue to maintain our exposure to the securities of select companies in
our favorite industries - namely, media and telecommunications. In this case
deregulation has created tremendous opportunity for value creation through the
combination of existing properties or the marketing of new services. Radio
broadcasters, in particular, have enjoyed tremendous growth in cash flow, one of
the fundamental determinants of creditworthiness. Cable television system
operators are positioning themselves to enjoy significantly enhanced revenue
streams by investing in infrastructures that allow them to offer additional
viewing options, high-speed Internet access, and ultimately, telephony. Wireless
telecommunications is enjoying explosive growth - these companies continue to
add new customers at a rapid pace, proving out the tremendous demand for their
services. We also continue to benefit from continued investment in the energy
sector. Energy prices have risen extraordinarily from the depths of the cyclical
bottoms mentioned above, providing increased cash flow and rising asset values
for both oil and natural gas producers. The companies who provide drilling,
maintenance, and supply services to hydrocarbon producers have benefited as
well. We maintain minimal exposure to industries such as healthcare and retail,
as we are not nearly as comfortable with the asset values underneath these
companies.
One aspect of the market that still remains affected by the credit crunch of
1998 is the liquidity premium. This is the yield differential between larger,
widely followed credits and smaller, more obscure companies. Historically,
investors demand additional yield to hold less liquid names, in order to
compensate for their not being as easily tradable. During the credit crunch of
1998, this spread increased dramatically, as nervous investors flocked to the
safest, most liquid companies as confidence in the credit markets was tested. As
the market recovered, the liquidity spread narrowed, but it is still wider than
the historical averages. This suggests that investors still remain somewhat
cautious about the state of the markets. We are cautiously optimistic about the
coming year. We expect the default rate to ease, and although the Federal
Reserve is poised to undertake multiple tightenings, we expect the economy to
slow only gradually, providing modest returns to high yield investors.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
Chairman and President
March 3, 2000
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2
<PAGE>
Value Line Aggressive Income Trust
Income Trust Shareholders
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Economic Observations
The American economy continues to perform well as we proceed through the first
quarter of 2000. Evidence of this healthy level of business activity can be
found in the strong pace of manufacturing, the continued healthy gains in
personal income, and the comparatively high levels of consumer spending.
Overall, we estimate that Gross Domestic Product growth will exceed 4% in the
opening quarter and average 3.5%-4.0% for the year as a whole. That would make
2000 the tenth year in a row of sustained economic growth in this country.
Inflationary pressures, meanwhile, continue to be held in check for the most
part, in spite of a further recent surge in oil and gasoline prices, with strong
increases in productivity and ongoing technological innovations being at least
partially responsible for this comparative pricing stability. Nevertheless, an
increase in cost pressures does seem likely over the next several quarters. The
Federal Reserve, taking note of this somewhat higher expense structure, is
likely to chart a more restrictive monetary course in the months ahead. As such,
we now expect the lead bank to vote two additional, albeit modest, interest rate
increases before midyear.
Performance Data:*
1 year ended 5 years ended 10 years ended
12/31/99 12/31/99 12/31/99
------------------------------------------------
Average Annual Total Return* 9.05% 11.11% 10.22%
1 year ended 5 years ended 10 years ended
1/31/00 1/31/00 1/31/00
------------------------------------------------
Average Annual Total Return* 7.16% 11.31% 10.41%
* 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.
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 CHART IN THE PRINTED MATERIAL.]
Value Line Lehman Brothers
Aggressive Income Trust Aggregate Bond Index
----------------------- --------------------
2/90 $10,000 $10,000
4/90 $ 9,832 $ 9,948
7/90 $10,368 $10,551
10/90 $ 9,311 $10,629
1/91 $ 9,927 $11,163
4/91 $11,136 $11,459
7/91 $11,581 $11,680
10/91 $12,146 $12,310
1/92 $12,652 $12,618
4/92 $12,940 $12,719
7/92 $13,465 $13,406
10/92 $13,507 $13,520
1/93 $14,208 $14,002
4/93 $14,777 $14,406
7/93 $15,468 $14,769
10/93 $16,032 $15,125
1/94 $16,872 $15,282
4/94 $16,038 $14,529
7/94 $15,893 $14,783
10/94 $15,839 $14,570
1/95 $15,748 $14,928
4/95 $16,548 $15,591
7/95 $17,242 $16,277
10/95 $18,182 $16,850
1/96 $19,495 $17,458
4/96 $20,188 $16,939
7/96 $20,596 $17,179
10/96 $21,749 $17,835
1/97 $23,027 $18,027
4/97 $22,880 $18,139
7/97 $24,531 $19,028
10/97 $25,511 $19,421
1/98 $26,473 $19,960
4/98 $27,177 $20,118
7/98 $27,189 $20,525
10/98 $23,511 $21,234
1/99 $25,114 $21,572
4/99 $26,501 $21,380
7/99 $25,690 $21,036
10/99 $25,267 $21,348
1/00 $26,912 $21,174
(Period covered is from 2/1/90 to 1/31/00)
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* 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, 2000
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<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITS (0.6%)
FOREIGN TELECOMMUNICATIONS (0.6%)
$ 2,000,000 GT Group Telecom Inc. (consisting of Senior Discount Notes. Zero coupon
until 2/1/05, 13 1/4% thereafter and Warrants to purchase 4.9106
shares of Class "B" Common Stock, @ $.01/share, Warrants expire
2/1/10) due 2/1/10(1) .................................................... $ 1,065,000
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TOTAL UNITS (Cost $1,060,260) ............................................. 1,065,000
------------
CONVERTIBLE BONDS & NOTES (2.4%)
OILFIELD SERVICES/EQUIPMENT (1.2%)
6,000,000 Pride International, Inc. Zero Coupon Subordinated Debentures
(each debenture is convertible to 13.974 shares of Common
Stock at anytime) 4/24/18................................................ 2,062,500
PETROLEUM--PRODUCING (1.2%)
3,340,000 Lomak Petroleum, Inc. 6%, Subordinated Debentures (each debenture is
convertible to 51.948 shares of Common Stock @ $12.88,
at anytime) 2/1/07 ....................................................... 2,004,000
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TOTAL CONVERTIBLE BONDS & NOTES (Cost $4,068,379) .......................... 4,066,500
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CORPORATE BONDS & NOTES (72.8%)
ADVERTISING (1.8%)
1,130,000 Adams Outdoor Advertising Ltd., Senior Notes, 10 3/4%, 3/15/06.............. 1,163,900
2,000,000 Lamar Media Corp., Senior Sub. Notes, 8 5/8%, 9/15/07....................... 1,955,000
------------
3,118,900
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AUTO PARTS (ORIGINAL EQUIPMENT)(1.1%)
2,000,000 Federal-Mogul Corp., Notes, 7 3/4%, 7/1/06.................................. 1,836,694
CABLE TV (9.5%)
3,000,000 Diva Systems Corp., Senior Discount Notes, Series"B", (zero coupon
until 3/1/03, 12 5/8% thereafter) 3/1/08.................................. 1,226,250
6,500,000 Knology Holdings Inc., Senior Discount Notes, (zero coupon until 10/15/02,
11 7/8% thereafter) 10/15/07.............................................. 4,249,375
4,000,000 Mediacom LLC, Capital Corp., Senior Notes, 7 7/8%, 2/15/11 (1).............. 3,440,000
2,000,000 NTL Inc., Senior Deferred Coupon Notes, (zero coupon until
4/1/03, 9 3/4% thereafter) 4/1/08......................................... 1,342,500
4,000,000 United International Holdings Inc., Senior Discount Notes,
(zero coupon until 2/15/03, 10 3/4% thereafter) 2/15/08................... 2,650,000
2,000,000 United Pan-Europe Communications, N.V., Senior Discount Notes,
(zero coupon until 11/1/04, 13 3/8% thereafter) 11/1/09 (1) .............. 1,077,500
1,000,000 United Pan-Europe Communications, N.V., Senior Notes,
Series "B" 11 1/4% , 2/1/10 (1)........................................... 1,013,750
2,000,000 United Pan-Europe Communications, N.V., Senior Discount Notes,
(zero coupon until 2/1/05, 13 3/4% thereafter) 2/1/10 (1)................. 1,057,500
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16,056,875
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</TABLE>
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5
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
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<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT (7.0%)
$ 4,000,000 Big City Radio Inc., Senior Discount Notes, (zero coupon until
3/15/01, 11 1/4% thereafter) 3/15/05...................................... $ 2,555,000
1,000,000 CD Radio, Inc., Senior Secured Notes, 14 1/2%, 5/15/09...................... 940,000
2,000,000 Chancellor Media Corp., Senior Sub. Notes, Series "B", 8 1/8%, 12/15/07..... 1,980,000
4,000,000 Radio Unica Corp., Senior Discount Notes, (zero coupon unitl 8/1/02,
11 3/4% thereafter) 8/1/06................................................ 2,575,000
2,000,000 Regal Cinemas Inc., Senior Sub. Notes, 9 1/2%, 6/1/08....................... 1,380,000
4,000,000 Telemundo Holdings Inc., Senior Discount Notes, Series "B",
(zero coupon until 8/15/03, 11 1/2% thereafter) 8/15/08................... 2,415,000
------------
11,845,000
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ENVIRONMENTAL (1.3%)
2,500,000 Allied Waste North America, Inc., Senior Notes, Series "B", 7 7/8%, 1/1/09.. 2,156,250
FOREIGN TELECOMMUNICATIONS (13.4%)
3,000,000 Clearnet Communications Inc., Senior Discount Notes, (zero coupon
until 5/1/04, 10 1/8% thereafter) 5/1/09.................................. 1,788,750
7,000,000 Dolphin Telecom PLC, Senior Discount Notes, (zero coupon until 6/1/03,
11 1/2% thereafter), 6/1/08............................................... 3,246,250
2,000,000 Esprit Telecom Group PLC , Senior Notes, 11 1/2%, 12/15/07.................. 1,970,000
2,000,000 Global Crossing Holdings LTD, Senior Notes, 9 1/2%, 11/15/09 (1)............ 1,925,000
3,000,000 Microcell Telecommunications, Inc., Senior Discount Notes, Series "B",
(zero coupon until 12/1/01, 14% thereafter) 6/1/06........................ 2,696,250
4,500,000 Orion Network Systems, Inc., Senior Discount Notes, (zero coupon
until 1/15/02, 12 1/2% thereafter) 1/15/07................................ 2,289,375
1,000,000 Primus Telecommunications Inc., Senior Notes, 12 3/4%, 10/15/09............. 1,010,000
3,000,000 RSL Communications PLC., Senior Discount Notes, (zero coupon
until 3/1/03, 10 1/8% thereafter) 3/1/08.................................. 1,781,250
4,000,000 Viatel Inc., Senior Discount Notes, (zero coupon until 4/15/03,
12 1/2% thereafter) 4/15/08............................................... 2,430,000
4,000,000 World Access Inc., Senior Notes, 13 1/4%, 1/15/08........................... 3,605,000
------------
22,741,875
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HOME APPLIANCE (0.8%)
1,500,000 Windmere-Durable Holdings, Inc., Senior Sub. Notes, 10%, 7/31/08............ 1,421,250
HOTEL/GAMING (4.2%)
2,000,000 Hilton Hotels Corp., Senior Notes, 7.95%, 4/15/07........................... 1,843,325
2,000,000 ITT Corp., Notes, 6 3/4%, 11/15/05.......................................... 1,750,911
2,000,000 Park Place Entertainment Corp., Senior Sub. Notes, 7 7/8%, 12/15/05......... 1,890,000
2,000,000 Trump Atlantic City Associates/Funding Inc., Secured First Mortgage
Notes, 11 1/4%, 5/1/06.................................................... 1,557,500
------------
7,041,736
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</TABLE>
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6
<PAGE>
Value Line Aggressive Income Trust
January 31, 2000
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<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNET (1.2%)
$ 1,000,000 Covad Communications Group, Senior Notes, 12%, 2/15/10(1)................... $ 1,007,500
1,000,000 Globix Corp., Senior Notes, 12 1/2%, 2/1/10 (1)............................. 1,005,000
------------
2,012,500
------------
MACHINERY (3.7%)
2,500,000 Columbus McKinnon Corp., Senior Sub. Notes, 8 1/2%, 4/1/08.................. 2,193,750
2,500,000 Mark IV Industries Inc., Senior Sub. Notes, 7 1/2%, 9/1/07.................. 2,225,000
2,000,000 Terex Corp., Senior Sub. Notes, Series "D" 8 7/8%, 4/1/08 .................. 1,862,500
------------
6,281,250
------------
MEDICAL SERVICES (1.4%)
2,500,000 Tenet HealthCare Corp., Senior Notes, 8%, 1/15/05........................... 2,372,588
OILFIELD SERVICES/EQUIPMENT (3.0%)
2,000,000 Key Energy Services Inc., Senior Sub. Notes, Series "B", 14%, 1/15/09....... 2,185,000
1,000,000 RBF Finance Co., Senior Secured Notes, 11 3/8%, 3/15/09..................... 1,057,500
2,000,000 Trico Marine Services Inc. Senior Notes, Series"G", 8 1/2%, 8/1/05.......... 1,845,000
------------
5,087,500
------------
PAPER & FOREST PRODUCTS (0.5%)
1,000,000 Repap New Brunswick, Inc., Second Priority Senior Secured Notes,
10 5/8%, 4/15/05.......................................................... 915,000
PETROLEUM -- PRODUCING (6.2%)
4,000,000 Bellwether Exploration Co., Senior Sub. Notes, 10 7/8%, 4/1/07.............. 3,505,000
2,000,000 Chesapeake Energy Corp., Senior Notes, Series "B", 8 1/2%, 3/15/12.......... 1,652,500
2,000,000 Denbury Management Inc, Senior Sub. Notes, 9%, 3/1/08....................... 1,780,000
2,000,000 Lomak Petroleum Inc, Senior Sub. Notes, 8 3/4%, 1/15/07..................... 1,795,000
2,000,000 Ocean Energy Inc., Senior Notes, Series "B", 7 5/8%, 7/1/05................. 1,866,025
------------
10,598,525
------------
RETAIL STORE (2.6%)
2,000,000 Ames Department Stores, Inc., Senior Notes, 10%, 4/15/06.................... 1,875,000
2,250,000 Kmart Corp., Debentures, 12 1/2%, 3/1/05.................................... 2,506,182
------------
4,381,182
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TELECOMMUNICATION EQUIPMENT (1.4%)
4,000,000 Spectrasite Holdings Inc., Senior Discount Notes, (zero coupon until
4/15/04, 11 1/4% thereafter) 4/15/09...................................... 2,320,000
</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>
TELECOMMUNICATION SERVICES (12.7%)
$ 2,000,000 American Cellular Corp., Senior Notes, 10 1/2%, 5/15/08..................... $ 2,235,000
2,500,000 Centennial Cellular Operating Co., Senior Sub. Notes, 10 3/4%, 12/15/08 .... 2,606,250
12,250,000 DTI Holdings Inc., Senior Discount Notes, Series "B", (zero coupon
until 3/1/03, 12 1/2% thereafter) 3/1/08.................................. 5,497,188
5,000,000 GST Network Funding, Inc., Senior Secured Discount Notes,
(zero coupon until 5/1/03, 10 1/2% thereafter) 5/1/08..................... 2,768,750
2,000,000 Hyperion Telecommunications Inc., Senior Secured Notes,
Series "B", 12 1/4%, 9/1/04............................................... 2,125,000
1,130,000 ICG Services Inc., Senior Discount Notes, (zero coupon until
5/1/03, 9 7/8% thereafter) 5/1/08......................................... 614,437
3,000,000 KMC Telecom Holdings Inc., Senior Discount Notes, (zero coupon
until 2/15/03, 12 1/2% thereafter) 2/15/08................................ 1,676,250
2,000,000 Nextel Communications, Inc., Senior Notes, 9 3/8%, 11/15/09(1).............. 1,920,000
2,000,000 Omnipoint Corp., Senior Notes, Series "A", 11 5/8%, 8/15/06................. 2,110,000
------------
21,552,875
------------
TEXTILE (1.0%)
2,000,000 Westpoint Stevens Inc., Senior Notes, 7 7/8%, 6/15/05....................... 1,785,000
------------
TOTAL CORPORATE BONDS & NOTES (Cost $128,113,366) .......................... 123,525,000
------------
CONVERTIBLE PREFERRED STOCKS (2.8%)
CABLE TV (0.6%)
3,000 Adelphia Communications Corp., Series "D", Par $200. (each share is
convertible to 2.45549 shares of Common Stock @$81.45
beginning 5/15/02), 5 1/2%, 12/31/49...................................... 572,625
5,000 Unitedglobalcom, Series "C", Par $50. (each share is convertible to 1.1862
shares of Common Stock @$42.15 beginning 12/31/00), 7%, 12/31/49 (1)...... 431,250
------------
1,003,875
------------
FOREIGN TELECOMMUNICATIONS (0.3%)
10,000 Global Telesystems Group, Inc., Par $50. (each share is convertible to 1.4492
shares of Common Stock @$34.50 beginning 3/15/02), 7 1/4%, 12/31/49 (1)... 446,250
INTERNET (0.4%)
10,000 Psinet Inc., Series "C", Par $50. (each share is convertible to 1.6034
shares of Common Stock @$31.1837 at any time), 6 3/4%, 12/31/49........... 712,500
</TABLE>
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8
<PAGE>
Value Line Aggressive Income Trust
January 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (1.5%)
10,000 Broadwing, Inc., Series"B"Par $50. (each share is convertible to 1.4420
shares of Common Stock @$34.674, beginning 4/1/02), 6 3/4%, 12/31/49...... $ 610,000
65,000 Intermedia Communications, Inc., Par $25. (each share is convertible
to 0.5942 shares of Common Stock @$42.075, beginning 10/17/01),
7%, 12/31/49 (1).......................................................... 1,941,875
------------
2,551,875
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,326,500) ....................... 4,714,500
------------
PREFERRED STOCKS (9.9%)
ENTERTAINMENT (4.6%)
1,642 Cumulus Media, Inc., 13 3/4%, each share is exchangeable one for one
into Senior Notes Series "A", Par $1,000, 7/1/09 (3)...................... 1,810,305
3,000 Granite Broadcasting Corp., 12 3/4%, each share is exchangeable one for one
into Debentures, Par $1,000, 4/1/09 (3)................................... 3,067,500
2,896 Paxson Communications Corp., 12 1/2%, each share is exchangeable one for
one into Debentures, Par $1,000, 10/31/06 (3)............................. 3,012,230
------------
7,890,035
------------
TELECOMMUNICATION EQUIPMENT (1.3%)
2,130 Crown Castle International Corp., 12 3/4%, each share is exchangeable one
for one into Debentures, Par $1,000, 12/15/10 (3)......................... 2,172,112
TELECOMMUNICATION SERVICES (4.0%)
2,202 Dobson Communications Corp., 13%, each share is exchangeable one for
one into Debentures, Par $1,000, 5/1/09 (3)............................... 2,410,967
1,000 E. Spire Communications Inc., 13 3/4%, each share is exchangeable one for
one into Debentures, Par $1,000, 10/15/09 (3)............................. 305,000
2,000 ICG Holdings Inc., 14 1/4%, each share is exchangeable one for one into
Debentures, Par $1,000, 5/1/09 (3)........................................ 1,750,000
41,400 Nextlink Communications Inc., 14%, each share is exchangeable one for
one into Debentures, Par $ 50, 2/1/09 (3)................................. 2,235,600
------------
6,701,567
------------
TOTAL PREFERRED STOCK (Cost $16,334,689) .................................. 16,763,714
------------
</TABLE>
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9
<PAGE>
Value Line Aggressive Income Trust
Schedule of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (3.4%)
CABLE TV (0.0%)
2,000 Optel Inc. (non-voting) (1)................................................. $ 20
ENTERTAINMENT (0.8%)
42,800 Spanish Broadcasting Systems, Inc., Class "B" (1) .......................... 1,326,533
FOREIGN TELECOMMUNICATIONS (0.8%)
26,600 Clearnet Communications Inc................................................. 1,034,075
5,235 Primus Telecom Group Inc.................................................... 167,193
12,568 World Access Inc............................................................ 216,798
------------
1,418,066
TELECOMMUNICATION EQUIPMENT (0.0%)
948 Loral Space & Communications Inc. .......................................... 18,605
TELECOMMUNICATION SERVICES (1.8%)
3,030 Adelphia Business Solutions, Inc. .......................................... 155,288
6,001 Advanced Radio Telecom Corp................................................. 146,649
4,376 Allegiance Telecom Inc. .................................................... 461,121
17,657 GST Telecommunications Inc. ................................................ 153,395
4,125 ICG Telecommunications Inc.................................................. 99,516
8,713 Intermedia Communications Inc. ............................................. 374,669
10,758 MGC Communications, Inc. ................................................... 613,878
2,361 Nextel Communications Inc. ................................................. 251,151
20,515 Viatel Inc.................................................................. 757,773
------------
3,013,440
------------
TOTAL COMMON STOCKS (Cost $1,780,716) ...................................... 5,776,664
------------
WARRANTS (1.9%)
CABLE (0.0%)
9,000 Diva Systems Corp., (to purchase 1 share of Common Stock,
@ $.01/share, expires 3/1/08) (2)......................................... 90
ENTERTAINMENT (0.4%)
6,500 CD Radio Inc., (to purchase 3.65 shares of Common Stock,
@ $28.60/share, expires 5/15/09) (1)(2)................................... 565,500
FOREIGN TELECOMMUNICATION (1.5%)
1,750 Colt Telecom Group PLC (to purchase 31.2 ordinary shares,
@(pound).75625/share, expires 12/31/06) (1)(2)............................ 2,269,750
2,095 Ionica PLC (to purchase 34.7 shares of Common Stock,
@(pound).10/share, expires 8/15/06)(1)(2)................................. 21
</TABLE>
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10
<PAGE>
Value Line Aggressive Income Trust
January 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN TELECOMMUNICATION (1.5%)-- (continued)
4,000 Microcell Telecommunications Inc. "Conditional" (to purchase 3.072
class "B", non-voting shares, @ $.01/share, expires 6/1/06) (1) (2)....... $ 300,000
------------
2,569,771
OILFIELD SERVICES/EQUIPMENT (0.0%)
1,000 Key Energy Services Inc., (to purchase 13.55 shares of Common Stock,
@$4.88125/share expires 1/15/09 (1) (2)................................... 30,000
TELECOMMUNICATION SERVICES (0.0%)
76,250 DTI Holdings Inc. (to purchase 1.552 shares of Common Stock,
@$.01/share, expires 3/1/08)(1)(2)........................................ 762
3,000 KMC Telecom Holdings Inc. (to purchase .21785 shares of Common Stock,
@$.21785/share, expires 4/15/08) (1)(2)................................... 75,000
------------
75,762
------------
TOTAL WARRANTS (Cost $782,256) ............................................. 3,241,123
------------
TOTAL INVESTMENT SECURITIES (93.8%) (Cost $155,466,167) .................... 159,152,501
REPURCHASE AGREEMENTS (6.8%)
(including accrued interest)
$5,000,000 Collateralized by $4,155,000 U.S. Treasury Bonds, 10 1/2%, due 8/15/05
with a value of $5,108,025 (with State Street Bank and Trust Company,
5.67%, dated 1/31/00, due 2/1/00 delivery value $5,000,788)............... 5,000,788
6,500,000 Collateralized by $6,042,000 U.S. Treasury Bonds, 7 1/2%,
due 11/15/16 with a value of $6,623,106 (with Warburg Dillon Read LLC,
5.60%, dated 1/31/00, due 2/1/00 delivery value $6,501,011)............... 6,501,011
------------
TOTAL REPURCHASE AGREEMENTS (6.8%) (Cost $11,501,799) ...................... 11,501,799
------------
LIABILITIES LESS CASH AND OTHER ASSETS (-0.6%) ............................................ (1,067,849)
------------
NET ASSETS (100.0%) ....................................................................... $169,586,451
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE,
PER OUTSTANDING SHARE .................................................................. $ 7.22
============
</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, 2000
- --------------------------------------------------------------------------------
(In thousands
except
per share
amount)
------------
Assets:
Investment securities, at value
(cost-- $155,466) ........................................ $ 159,152
Repurchase agreements (cost $11,502) ....................... 11,502
Interest receivable ........................................ 2,058
Dividends receivable ....................................... 17
Receivable for securities sold ............................. 1,008
Receivable for trust shares sold ........................... 647
---------
Total Assets ........................................... 174,384
---------
Liabilities:
Due to custodian ........................................... 20
Payable for securities purchased ........................... 3,810
Payable for trust shares repurchased ....................... 433
Dividends payable to shareholders .......................... 344
Accrued expenses:
Advisory fee ............................................. 91
Other .................................................... 100
---------
Total Liabilities ...................................... 4,798
---------
Net Assets: ................................................ $ 169,586
=========
Net Assets:
Shares of beneficial interest,
at $.01 par value
(authorized unlimited,
outstanding 23,489,320) .................................. $ 235
Additional paid-in capital ................................. 192,296
Accumulated net realized loss
on investments ........................................... (26,631)
Unrealized net appreciation
of investments ........................................... 3,686
---------
Net Assets ............................................. $ 169,586
=========
Net Asset Value, Offering and
Redemption Price
per Outstanding Share .................................... $ 7.22
=========
Statement of Operations
for the Year Ended January 31, 2000
- --------------------------------------------------------------------------------
(In thousands)
-------------
Investment Income:
Interest income ............................................ $ 16,950
Other income ............................................... 182
--------
17,132
--------
Expenses:
Advisory fee ............................................... 1,040
Transfer agent fees ........................................ 57
Auditing and legal fees .................................... 46
Printing, checks and stationery ............................ 45
Custodian fees ............................................. 38
Taxes and other expenses ................................... 29
Registration and filing fees ............................... 24
Trustees' fees and expenses ................................ 14
--------
Total Expenses before
custody credits ...................................... 1,293
Less: custody credits .................................. (5)
--------
Net Expenses ........................................... 1,288
--------
Net Investment Income ...................................... 15,844
--------
Realized and unrealized Gain (Loss)
on Investments
Realized Loss-- Net ...................................... (19,054)
Change in Unrealized
Appreciation-- Net ..................................... 14,971
--------
Net Realized Loss and Change in
Net Unrealized Appreciation
on Investments ........................................... (4,083)
--------
Net Increase in Net Assets
from Operations .......................................... $ 11,761
========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
Value Line Aggressive Income Trust
Statement of Changes in Net Assets
for the Years Ended January 31, 2000 and 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
------------------------
(In thousands)
<S> <C> <C>
Operations:
Net investment income ........................................ $ 15,844 $ 15,677
Realized gain (loss) on investments-- Net .................... (19,054) (5,192)
Change in net unrealized appreciation ........................ 14,971 (17,830)
------------------------
Net increase/decrease in net assets from operations .......... 11,761 (7,345)
------------------------
Distributions to Shareholders:
Net investment income ........................................ (15,942) (15,605)
------------------------
Trust Share Transactions:
Net proceeds from sale of shares ............................. 176,284 164,217
Net proceeds from reinvestment of distribution to shareholders 10,772 10,593
------------------------
187,056 174,810
Cost of shares repurchased ................................... (188,094) (123,767)
------------------------
Decrease/increase from share transactions .................... (1,038) 51,043
------------------------
Total Decrease/Increase in Net Assets .......................... (5,219) 28,093
Net Assets:
Beginning of year ............................................ 174,805 146,712
------------------------
End of year .................................................. $ 169,586 $ 174,805
========================
Undistributed net investment income at end of year ............. $ -- $ 98
========================
</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, 2000
- --------------------------------------------------------------------------------
(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,
-------------------------
2000 1999
-------------------------
(in thousands)
Shares sold .................................. 24,277 20,676
Shares issued to shareholders
in reinvestment of dividends ................. 1,485 1,330
-------------------------
25,762 22,006
Shares repurchased ........................... (25,723) (15,498)
-------------------------
Net increase ................................. 39 6,508
=========================
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
Year Ended
January 31, 2000
----------------
(in thousands)
PURCHASES:
Investment Securities ................................... $223,495
========
SALES:
Investment Securities ................................... $223,742
========
At January 31, 2000, the aggregate cost of investments in securities including
repurchase agreements for Federal income tax purposes was $169,040,504. The cost
basis has been adjusted for deferral of wash sale losses of $2,072,538. The
aggregate appreciation and depreciation of investments at January 31, 2000 based
on a comparison of investment values and their costs for Federal income tax
purposes, was $8,056,670 and $6,442,874, respectively, resulting in a net
appreciation of $1,613,796.
For Federal income tax purposes, the Trust had a capital loss carryover at
January 31, 2000 of $22,413,197, of which $2,386,247 will expire in 2003,
$2,530,550 in 2007 and $17,496,400 in 2008. 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, 2000, permanent book tax differences due to the
expiration of capital loss carryovers of $599,408 were reclassified from
accumulated net realized loss on investments to additional paid-in capital.
During the year ended January 31, 2000, as permitted under Federal income tax
regulations, the Trust has elected to defer $2,145,310 of Post-October net
capital losses to the next taxable year.
- --------------------------------------------------------------------------------
15
<PAGE>
Value Line Aggressive Income Trust
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $1,040,014 was paid or payable to Value Line, Inc., the
Trust's investment adviser, (the "Adviser"), for the year ended January 31,
2000. 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 daily 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, 2000, the Adviser owned 482,058 shares of beneficial interest in
the Trust, representing 2.05% of the outstanding shares.
In addition, certain officers and trustees owned 2,171 shares of beneficial
interest in the Trust, representing .01% 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,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 7.45 $ 8.66 $ 8.21 $ 7.64 $ 6.80
----------------------------------------------------------------------------
Income from investment operations:
Net investment income ................. .73 .78 .72 .75 .69
Net gains or losses on securities
(both realized and unrealized) ...... (.23) (1.21) .45 .57 .85
----------------------------------------------------------------------------
Total from investment operations .... .50 (.43) 1.17 1.32 1.54
----------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .. (.73) (.78) (.72) (.75) (.70)
----------------------------------------------------------------------------
Net asset value, end of year ............ $ 7.22 $ 7.45 $ 8.66 $ 8.21 $ 7.64
============================================================================
Total return .............................. 7.16% (5.13)% 14.97% 18.12% 23.79%
============================================================================
Ratios/Supplemental Data
Net assets, end of year (in thousands) .... $ 169,586 $ 174,805 $ 146,712 $ 83,765 $ 41,776
Ratio of expenses to average net assets ... .82%(2) .81%(1) .95%(1) 1.10%(1) 1.22%(1)
Ratio of net investment income to
average net assets ...................... 10.04% 9.81% 8.60% 9.70% 9.67%
Portfolio turnover rate ................... 154% 140% 251% 276% 284%
</TABLE>
(1) Before offset for custody credits.
(2) Ratio reflects expenses grossed up for custody credit arrangement. The ratio
of expenses to average net assets net of custody credits would not have changed.
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, 2000, 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 accounting principles generally accepted
in the United States. 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 auditing standards generally accepted in
the United States, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 22, 2000
- --------------------------------------------------------------------------------
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. Current income is a
secondary objective.
1952--Value Line Income Fund's primary investment objective is income, as high
and dependable as is consistent with reasonable risk. Capital growth to increase
total return is a secondary objective.
1956--Value Line Special Situations Fund seeks long-term growth of capital. No
consideration is given to current income in the choice of investments.
1972--Value Line Leveraged Growth Investors' sole investment objective is to
realize capital growth.
1979--The Value Line Cash Fund, a money market fund, seeks to secure as high a
level of current income as is consistent with maintaining liquidity and
preserving capital.
1981--Value Line U.S. Government Securities Fund seeks maximum income without
undue risk to capital. Under normal conditions, at least 80% of the value to its
net assets will be invested in securities issued or guaranteed by U.S.
Government and its agencies and instrumentalities.
1983--Value Line Centurion Fund* seeks long-term growth of capital.
1984--The Value Line Tax Exempt Fund seeks to provide investors with the 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 the National Bond 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.
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 income
taxes while avoiding undue risk to principal.
1987--Value Line Strategic Asset Management Trust* seeks to achive a high total
investment return consistent with reasonable risk.
1993--Value Line Emerging Opportunities 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 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 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers 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
David H. Porter
Paul Craig Roberts
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
Chairman and President
Nathan N.J. Grant
Vice President
Bruce H. Alston
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).
#512157
