UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file Number 811-4471
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Value Line Aggressive Income Trust
- ------------------------------------------------
(Exact name of registrant as specified in charter)
220 East 42nd Street, New York, N.Y. 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-907-1500
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Date of fiscal year end: January 31, 2005
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Date of reporting period: July 31, 2004
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Item I. Reports to Stockholders.
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A copy of the Semi-Annual Report to Stockholders for the period ended
7/31/04 is included with this Form.
Item 2. Code of Ethics
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Not applicable.
Item 3. Audit Committee Financial Expert.
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Not applicable.
Item 10. Controls and Procedures.
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(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in rule 30a-2(c) under the Act
(17 CFR 270.30a-2(c) ) based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of
this report, are appropriately designed to ensure that material
information relating to the registrant is made known to such
officers and are operating effectively.
(b) The registrant's principal executive officer and principal
financial officer have determined that there have been no
significant changes in the registrant's internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation, including corrective
actions with regard to significant deficiencies and material
weaknesses.
Item 11. Exhibits.
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(a) Not applicable.
(b) (1) Certification pursuant to Rule 30a-2 under the
Investment Company Act of 1940 (17 CFR 270.30a-2)
attached hereto as Exhibit 99.CERT.
(2) Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By /s/ Jean B. Buttner
----------------------------------
Jean B. Buttner, President
Date: September 21, 2004
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jean B. Buttner
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Jean B. Buttner, President, Principal Executive Officer
By: /s/ David T. Henigson
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David T. Henigson, Vice President, Treasurer, Principal Financial Officer
Date: September 21, 2004
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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 BFDS
P.O. Box 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
REGISTERED PUBLIC 300 Madison Avenue
ACCOUNTING FIRM New York, NY 10017
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Sound View Drive, Suite 100
Greenwich, CT 06830
TRUSTEES Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Marion N. Ruth
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Bradley T. Brooks
VICE PRESIDENT
Jeffrey D. Geffen
VICE PRESIDENT
Sigourney B. Romaine
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT AND
SECRETARY/TREASURER
Joseph Van Dyke
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF
THE TRUST WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS, AND, ACCORDINGLY,
THEY DO NOT EXPRESS AN OPINION THEREON.
THIS UNAUDITED REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE TRUST (OBTAINABLE FROM
THE DISTRIBUTOR).
#530546
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SEMI-ANNUAL REPORT
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JULY 31, 2004
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VALUE LINE
AGGRESSIVE INCOME TRUST
[VALUE LINE GRAPHIC]
VALUE LINE AGGRESSIVE INCOME TRUST
To Our Value Line Aggressive
- --------------------------------------------------------------------------------
To Our Shareholders:
During the six months ended July 31, 2004 the total return of the Value Line
Aggressive Income Trust was 1.49%. This showing outperformed the Lehman
Brothers High Yield Index (1), a proxy for the overall high yield market, which
was up 0.81% over the same period.
The last six months have been an uninspiring period, as the high yield market
has been trying to gauge the strength of the U.S. economy going forward. Recent
economic data point to deceleration, as the 4% plus GDP growth seen over the
past year slowed to below 3% (2.8%) for the second quarter in the U.S. This is
to be expected with the increase in oil prices acting as a tax on economic
activity, combined with the gradual tightening stance of the Federal Reserve.
During the past few months, the overnight Fed Funds rate (the rate at which
banks borrow and lend excess reserves to each other) has been raised to 1.5%
from the 45-year low of 1.0%, and we expect this tightening cycle to continue
for the next year or so. U.S. corporate default rates have fallen to 3% in the
trailing twelve-month period according to Moody's, due to the strong economy
and favorable refinancing environment and are expected to remain in this area
for the next few quarters. With economic comparisons likely becoming slightly
more difficult next year due to tighter monetary policy, we look for a more
moderate growth pace in 2005 and thus continue to take a conservative
investment stance. Given this situation, we look for returns over the next
twelve-month period to roughly match the 6.5% current yield of the fund.
While the U.S. economy's growth appears to be moderating, we continue to focus
our investments in the more liquid and stronger credits available in the High
Yield sector. During the past six months, we have continued to add to our
overweight position (18% versus 15% six months ago) in the energy sector. The
large increase in oil and natural gas commodity prices this year augurs well
for continued strong earnings and cash flows by these companies. While energy
prices can be volatile, we believe oil will stay well above $30 a barrel in the
foreseeable future given the strong global demand for these resources,
especially in the developing countries in Asia. If this proves true, our
investments in this sector should continue to perform well. Following the
various energy segments, we have 4.0% to 4.5% weightings of the fund in the
retailing, homebuilding, and chemical sectors. Preserving capital in difficult
market environments, while allowing for an attractive dividend yield, remains
our goal. Thank you for your continued investment.
Sincerely,
[GRAPHIC OMITTED]
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
September 10, 2004
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(1) THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD INDEX IS REPRESENTATIVE OF
THE BROAD BASED FIXED-INCOME MARKET. IT INCLUDES NON-INVESTMENT GRADE
CORPORATE BONDS. THE RETURNS FOR THE INDEX DO NOT REFLECT CHARGES,
EXPENSES, OR TAXES, AND IT IS NOT POSSIBLE TO DIRECTLY INVEST IN THIS
UNMANAGED INDEX.
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2
VALUE LINE AGGRESSIVE INCOME TRUST
Income Trust Shareholders
- --------------------------------------------------------------------------------
Economic Observations
The U.S. economic expansion, which proceeded strongly from the middle of 2003
through the opening few months of this year, has more recently started to show
signs of fatigue. True, the business upturn is hardly collapsing, and we are
still seeing improvement in the capital goods area and in certain industrial
sectors. However, consumer spending is now increasing more slowly than it had
been, while the homebuilding market shows evidence of cooling off a little. Our
sense is that gross domestic product growth will now proceed at a moderate
3.0%-3.5% over the next several quarters.
The slowing in growth may well have positive ramifications. That is because the
current deceleration in economic activity appears mild and seems unlikely to
evolve into a full-fledged slowdown barring another surge in oil prices.
(Higher oil prices limit economic growth by taking money out of the pockets of
consumers and businesses). If we are correct and the economy shifts to a
modestly slower, but sustainable pace, with accompanying lower inflation, the
Federal Reserve might well be inclined to proceed slowly and cautiously in
raising interest rates.
Our current benign economic forecast, it should be noted, excludes any
allowance for a further escalation in global military conflict or new acts of
terrorism, neither of which can be accurately predicted as to scope or timing.
Performance Data:*
GROWTH OF AN ASSUMED AVERAGE ANNUAL
INVESTMENT OF $10,000 TOTAL RETURN
----------------------- ---------------
1 year ended 07/31/04 .......... $11,211 12.11%
5 years ended 07/31/04 ......... $10,776 1.51%
10 years ended 07/31/04 ......... $17,418 5.71%
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* THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS 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. THE PERFORMANCE DATA DOES NOT
REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. CALL 1-800-243-2729 TO
OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END.
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3
VALUE LINE AGGRESSIVE INCOME TRUST
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FUND EXPENSES:
Example
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and service (12-b1) fees; and other Fund expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period (February 1,2004 through July
31,2004).
Actual Expenses
The first line of the table provides information about actual account values
and actual expenses.You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example an $8,600 account value
divided by $1,000=8.6), then multiply the result by the number in the first
line under the heading "Expenses Paid During Period" to estimate the expenses
you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare the 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder report of the other
funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads),redemption fees,or exchange fees. Therefore, the second line of
the table is useful for comparing ongoing cost only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would not have changed for
this Fund as there are no transactional costs for this Fund.
EXPENSES*
PAID DURING
BEGINNING ENDING PERIOD
ACCOUNT ACCOUNT 2/1/04
VALUE VALUE THRU
2/1/04 7/31/04 7/31/04
----------- --------- ------------
Actual ........................................... $1,000 $1,015 $ 7.11
Hypothetical (5% return before expenses) ......... $1,000 $1,018 $ 7.12
- --------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSES RATIO OF 1.42%
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 TO REFLECT THE ONE-HALF PERIOD.
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4
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments (unaudited) July 31, 2004
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PRINCIPAL
AMOUNT VALUE
- ------------ ------------
CONVERTIBLE BONDS & NOTES (3.4%)
DIVERSIFIED COMPANY(0.7%)
$ 400,000 Gencorp, Inc., Subordinated Notes, 5 3/4%, (each note is convertible to 54.2888 shares of Common
Stock at any time) 4/13/07 ........................................................................ $ 400,500
---------
DRUG (0.8%)
500,000 Enzon, Inc., Subordinated Notes, 4 1/2% (each note is convertible to 14.0884 shares of Common
Stock at anytime) 7/1/08 .......................................................................... 459,375
---------
ENTERTAINMENT (0.3%)
250,000 Liberty Media Corp., Senior Subordinated Notes, 3 1/2%, (each note is convertible to 36.8189
shares of Common Stock at any time) 1/15/31 ....................................................... 215,938
---------
INDUSTRIAL SERVICES (0.9%)
517,000 Interim Services, Inc. Surbordinated Notes, 4 1/2%, (each note is convertible to 26.8052 shares of
Common Stock at any time) 6/1/05 .................................................................. 517,000
---------
TOBACCO (0.7%)
500,000 Vector Group, Ltd., Subordinated Notes, 6 1/4%, (each note is convertible to 29.7089 shares of
Common Stock at anytime) 7/15/08 .................................................................. 437,500
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TOTAL CONVERTIBLE BONDS & NOTES
(COST $1,957,345) ................................................................................. 2,030,313
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CORPORATE BONDS & NOTES (81.0%)
AUTO & TRUCK (1.1%)
750,000 Broder Bros. Co., Senior Notes, 11 1/4%, 10/15/10 .................................................. 691,875
---------
AUTO PARTS (1.3%)
750,000 Cummins Engine, Inc., Notes, 6.45%, 3/1/05 ........................................................ 765,000
---------
CABLE TV (3.0%)
750,000 Charter Communications Holdings, Senior Notes, 9 5/8%, 11/15/09 ................................... 570,000
750,000 MediaCom LLC, Senior Notes, 9 1/2%, 1/15/13 ....................................................... 693,750
1,000,000 RCN Corp., Senior Discount Notes, (zero coupon until 10/15/02, 11 1/8% thereafter) 10/15/07(3) .... 525,000
---------
1,788,750
---------
CHEMICAL -- DIVERSIFIED (0.9%)
500,000 Equistar Chemicals, LP, Senior Notes, 10 1/8%, 9/1/08 ............................................. 548,125
---------
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5
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------ ------------
CHEMICAL -- SPECIALTY (3.2%)
$ 600,000 Arco Chemical Co., Debentures, 9.80%, 2/1/20 .......................................... $ 597,000
800,000 OM Group, Inc., Senior Subordinated Notes, 9 1/4%, 12/15/11 ........................... 818,000
500,000 Polyone Corp. Senior Notes, 8 7/8%, 5/1/12 ............................................ 496,250
---------
1,911,250
---------
COAL -- ALTERNATE ENERGY (4.6%)
750,000 Consolidation Coal Co., Notes, Series MTN, 8 1/4%, 6/1/07(1) .......................... 800,625
650,000 Massey Energy Co., Notes, 6.95%, 3/1/07 ............................................... 677,625
750,000 Massey Energy Co., Senior Notes, 6 5/8%, 11/15/10 ..................................... 765,000
500,000 W.H. Holdings (Cayman Islands) Ltd., Senior Notes, 9 1/2%, 4/1/11 ..................... 522,500
---------
2,765,750
---------
DIVERSIFIED COMPANIES (4.9%)
500,000 American Standard, Inc., Senior Notes, 8 1/4%, 6/1/09 ................................. 570,000
1,000,000 Dow Jones CDX NA HY Trust, Pass-thru Certificates, Series 3-1, 7 3/4%, 12/29/09(1) .... 978,130
1,000,000 Dow Jones CDX NA NY Trust, Pass-thru Certificates, Series 3-3, 8%, 12/29/09(1) ........ 971,250
500,000 Geon Co., Debentures, 7 1/2%, 12/15/15 ................................................ 412,500
---------
2,931,880
---------
ELECTRICAL EQUIPMENT (2.8%)
835,000 BRL Universal Equipment, Secured Notes, 8 7/8%, 2/15/08 ............................... 894,494
750,000 Thomas & Betts Corp., Notes, 6.39%, 2/10/09 ........................................... 789,604
---------
1,684,098
---------
ELECTRONICS (2.2%)
750,000 Avnet, Inc. Notes, 7 7/8%, 2/15/05 .................................................... 787,500
500,000 Avnet, Inc. Notes, 9 3/4%, 2/15/08 .................................................... 568,125
---------
1,355,625
---------
ENTERTAINMENT (1.9%)
600,000 American Casino & Entertainment, Senior Secured Notes, 7.85%, 2/1/12(1) ............... 612,000
500,000 Royal Caribbean Cruises Ltd., Senior Notes, 7 1/4%, 8/15/06 ........................... 526,250
---------
1,138,250
---------
ENVIRONMENTAL (0.9%)
500,000 IMCO Recycling, Inc., Secured Notes, 10 3/8%, 10/15/10 ................................ 540,000
---------
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6
VALUE LINE AGGRESSIVE INCOME TRUST
July 31, 2004
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------ ------------
FINANCIAL SERVICES (0.8%)
$ 43,000 IOS Capital LLC, Senior Notes, 7 1/4%, 6/30/08 ............................... $ 44,398
500,000 Vesta Insurance Group, Inc., Senior Debentures, 8 3/4%, 7/15/25 .............. 410,000
---------
454,398
---------
FOOD PROCESSING (2.7%)
500,000 Land O Lakes Inc., Senior Notes, 8 3/4%, 11/15/11 ............................ 462,500
600,000 Smithfield Foods, Inc., Senior Subordinated Notes, 7 5/8%, 2/15/08 ........... 631,500
500,000 Universal Foods Corp. Notes, 6 1/2%, 4/1/09 .................................. 513,240
---------
1,607,240
---------
FOREIGN TELECOMMUNICATIONS (0.0%)
500,000 World Access, Inc., Senior Notes, 13 1/4%, 1/15/08(2) (3) .................... 23,125
---------
GROCERY (0.9%)
500,000 Delhaize America, Inc. Guranteed Notes, 7 3/8%, 4/15/06 ...................... 529,487
---------
HEALTHCARE INFORMATION SYSTEMS (3.4%)
500,000 Curative Health Services Inc. Senior Notes, 10 3/4%, 5/1/11(1) ............... 452,500
500,000 Iasis Healthcare Corp., Senior Subordinated Notes, 13%, 10/15/09 ............. 536,250
1,000,000 Rotech Healthcare Inc., Senior Subordinated Notes, 9 1/2%, 4/1/12 ............ 1,062,500
---------
2,051,250
---------
HOME APPLIANCE (1.9%)
500,000 Salton, Inc., Senior Subordinated Notes, 12 1/4%, 4/15/08 .................... 386,250
750,000 Windmere-Durable Holdings, Inc., Senior Subordinated Notes, 10%, 7/31/08 ..... 750,000
---------
1,136,250
---------
HOME BUILDING (3.5%)
500,000 William Lyon Homes, Inc., Senior Subordinated Notes, 10 3/4%, 4/1/13 ......... 560,000
500,000 Senior Housing Properties Trust, Senior Notes, 8 5/8%, 1/15/12 ............... 546,250
500,000 Technical Olympic USA, Inc., Senior Subordinated Notes, 7 1/2%, 3/15/11 ...... 465,000
500,000 Technical Olympic USA, Inc., Senior Subordinated Notes, 10 3/8%, 7/1/12 ...... 528,750
---------
2,100,000
---------
HOTEL/GAMING (3.5%)
500,000 Boyd Gaming Corp., Senior Subordinated Notes, 6 3/4%, 4/15/14(1) ............. 480,625
1,000,000 Hilton Hotels Corp., Senior Notes, 7 1/2%, 12/15/17 .......................... 1,055,000
500,000 Meritage Corp., Senior Notes, 9 3/4%, 6/1/11 ................................. 552,500
---------
2,088,125
---------
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7
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------ ------------
INFORMATION SERVICES (1.3%)
$ 750,000 Titan Corp., Senior Subordinated Notes, 8%, 5/15/11 ........................................ $ 757,500
---------
INSURANCE -- PROPERTY CASUALTY (0.8%)
500,000 PXRE Capital Trust I, Pass Thru Securities, 8.85%, 2/1/27 .................................. 495,000
---------
MACHINERY (0.9%)
500,000 JLG Industries, Inc., Senior Subordinated Notes, 8 3/8%, 6/15/12 ........................... 515,000
---------
MARITIME (0.5%)
300,000 Teekay Shipping Corp., Guaranteed 1st Preferred Shipping Mortgage Notes, 8.32%, 2/1/06 ..... 311,625
---------
MEDICAL SERVICES (0.9%)
500,000 Res-Care, Inc., Senior Notes, 10 5/8%, 11/15/08 ............................................ 530,000
---------
METALS & MINING (2.1%)
700,000 USEC, Inc., Senior Notes, 6 5/8%, 1/20/06 .................................................. 700,000
500,000 Wolverine Tube, Inc., Senior Subordinated Notes, Series "B", 10 1/2%, 4/1/09 ............... 540,000
---------
1,240,000
---------
NATURAL GAS -- DIVERSIFIED (2.1%)
726,000 Energy Corp., of America, Senior Subordinated Notes, Series "A", 9 1/2%, 5/15/07 ........... 696,960
500,000 Gold Kist, Inc. Senior Notes, 10 1/4%, 3/15/14(1) .......................................... 540,000
---------
1,236,960
---------
OILFIELD SERVICES/EQUIPMENT (8.7%)
1,000,000 Bluewater Finance Ltd., Senior Subordinated Notes, 10 1/4%, 2/15/12 ........................ 1,050,000
250,000 Compagnie Generale de Geophysics, Inc., Senior Subordinated. Notes, 10 5/8%, 11/15/07 ...... 265,313
600,000 Gulfmark Offshore, Inc., Senior Notes, 7 3/4%, 7/15/14(1) .................................. 580,500
750,000 Lone Star Technologies, Inc., Senior Subordinated Notes, 9%, 6/1/11 ........................ 787,500
316,000 Newpark Resources, Inc. Senior Subordinated Notes, Series "B", 8 5/8%, 12/15/07 ............ 322,320
600,000 Petroleum Geo-Services, Senior Notes, 10%, 11/15/10 ........................................ 636,000
610,000 Sonat, Inc., Notes, 7 5/8%, 7/15/11 ........................................................ 555,100
500,000 Seitel, Inc., Senior Notes, 11 3/4%, 7/15/11(1) ............................................ 502,500
500,000 Transmontaigne, Inc., Senior Subordinated Notes, 9 1/8%, 6/1/10 ............................ 540,000
---------
5,239,233
---------
PACKAGING & CONTAINER (4.4%)
500,000 Caraustar Industries, Inc., Senior Subordinated Notes, 9 7/8%, 4/1/11 ...................... 517,500
690,000 Four M Corp., Senior Secured Notes, Series "B", 12%, 6/1/06 ................................ 690,000
500,000 Pliant Corp., Senior Subordinated Notes, 13%, 6/1/10 ....................................... 457,500
1,000,000 Tekni-Plex, Inc., Senior Subordinated Notes, 12 3/4%, Series "B", 6/10/10 .................. 985,000
---------
2,650,000
---------
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8
VALUE LINE AGGRESSIVE INCOME TRUST
July 31, 2004
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------- -------------
PAPER & FOREST PRODUCTS (0.8%)
$518,000 Scotia Pacific Co., LLC. Collateralized Notes, Series "B", 7.11%, 1/20/14 .......... $ 471,380
----------
PETROLEUM -- PRODUCING (2.3%)
750,000 Paramount Resources Ltd., Senior Notes, 7 7/8%, 11/1/10 ............................ 723,750
400,000 Paramount Resources Ltd., Senior Notes, 8 7/8%, 7/15/14 ............................ 397,000
250,000 Petroleum Helicopters, Inc., Senior Notes, Series "B", 9 3/8%, 5/1/09 .............. 265,000
----------
1,385,750
----------
R.E.I.T. (0.4%)
250,000 Crescent Real Estate Equities, Senior Notes, 9 1/4%, 4/15/09 ....................... 262,500
----------
RETAIL -- SPECIAL LINES (0.8%)
500,000 Phillips Van Heusen Corp., Senior Notes, 7 1/4%, 2/15/11(1) ........................ 510,000
----------
RETAIL STORE (4.2%)
250,000 Dillard Department Stores, Inc., Notes, 7.85%, 10/11/12 ............................ 253,750
500,000 Dillards, Inc., Notes, 6.43%, 8/1/04 ............................................... 500,000
500,000 Dollar General Corp., Guaranteed Notes, 8 5/8%, 6/15/10 ............................ 556,250
596,000 J.C. Penney Co., Inc., Notes, 9 3/4%, 6/15/21 ...................................... 610,900
587,000 J.C. Penney Co., Inc. Debentures, 8 1/4%, 8/15/22 .................................. 600,207
----------
2,521,107
----------
SHOE (1.2%)
750,000 Payless Shoesource, Inc. Senior Subordinated Notes, 8 1/4%, 8/1/13 ................. 735,000
----------
STEEL (3.5%)
800,000 Allegheny Technologies, Inc., Notes, 8 3/4%, 12/15/11 .............................. 832,000
750,000 Ispat Inland ULC, Secured Notes, 9 3/4%, 4/1/14(1) ................................. 774,375
421,000 United States Steel Corp., Senior Notes, 9 3/4%, 5/15/10 ........................... 468,362
----------
2,074,737
----------
TELECOMMUNICATION SERVICES (1.7%)
500,000 Alamosa Delaware, Inc., Senior Notes, 8 1/2%, 1/31/12(1) ........................... 488,750
500,000 TSI Telecommunication Services Inc., Senior Subordinated Notes, 12 3/4%, 2/1/09 .... 537,500
----------
1,026,250
----------
TRUCKING -- TRANSPORTATION LEASING (0.9%)
500,000 Roadway Corp., Senior Notes, 8 1/4%, 12/1/08 ....................................... 556,491
----------
TOTAL CORPORATE BONDS & NOTES
(COST $47,398,649) ................................................................. 48,629,011
----------
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9
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ---------- -------------
CONVERTIBLE PREFERRED STOCKS (1.2%)
BEVERAGE (0.9%)
17,000 Constellation Brands, Inc., Par $25 (each share is convertible to .7319 shares of Common Stock
@ $24.38) 5 3/4%, 9/1/06 ...................................................................... $ 558,450
----------
MEDICAL (0.3%)
3,000 Baxter International, Inc., Par $50 (each share is convertible to 1.4011 shares of Common Stock
@ $71.93) 7%, 6/16/06 ......................................................................... 154,350
----------
TELECOMMUNICATION SERVICES (0.0%)
2,500 Sprint Corp., Par $25 (each share is convertible to .4182 shares of Common Stock @ $3.97)
7 1/8%, 8/17/04 ............................................................................... 23,750
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $603,508) ............................................................................... 736,550
----------
PREFERRED STOCKS (0.1%)
CABLE (0.1%)
10,000 Adelphia Communications Corp., Series "B", 13%, each share is exchangeable one for one into
Debentures, Par $100, 7/15/09(3) .............................................................. 80,000
----------
TOTAL PREFERRED STOCKS
(COST $244,875) ............................................................................... 80,000
----------
WARRANTS (0.0%)
TELECOMMUNICATION SERVICES (0.0%)
2,490 XO Communications, Inc., Series "A", Expiring 1/16/10(2) ...................................... 2,913
1,868 XO Communications, Inc. Series "B", Expiring 1/16/10(2) ....................................... 1,401
1,868 XO Communications, Inc. Series "C", Expiring 1/16/10(2) ....................................... 1,074
----------
TOTAL WARRANTS
(COST $0) ..................................................................................... 5,388
----------
COMMON STOCKS (3.0%)
COMPUTER PERIPHERALS (0.1%)
6,000 Identix, Inc.(2) .............................................................................. 32,340
10,000 Silicon Graphics, Inc.(2) ..................................................................... 15,300
----------
47,640
----------
- --------------------------------------------------------------------------------
10
VALUE LINE AGGRESSIVE INCOME TRUST
July 31, 2004
- --------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ---------- -------------
COMPUTER SOFTWARE & SERVICES (0.3%)
5,000 SEI Investments Co. ................................ $ 153,350
----------
ELECTRICAL UTILITY (WEST) (0.1%)
5,000 XCEL Energy Inc. ................................... 85,500
----------
ENVIRONMENTAL (0.0%)
5,000 Perma Fix Environmental Services, Inc.(2) .......... 8,500
----------
HOUSEHOLD PRODUCTS (0.1%)
6,000 Salton Inc.(2) ..................................... 31,980
----------
INSURANCE -- LIFE (0.1%)
6,000 Phoenix Companies, Inc. ............................ 62,220
----------
MACHINERY (0.1%)
4,000 Met-Pro Corp. ...................................... 56,440
----------
MARITIME (0.2%)
4,000 Stelmar Shipping Ltd. .............................. 133,800
----------
METALS & MINING (DIVERSIFIED) (0.3%)
7,000 BHP Billiton Ltd. .................................. 129,360
4,000 Noranda, Inc. ...................................... 67,600
----------
196,960
----------
NATURAL GAS -- DISTRIBUTION (0.6%)
5,000 Nicor Inc. ......................................... 165,550
4,000 Northern Border Partners LP. ....................... 156,360
8,000 SEMCO Energy Inc.(2) ............................... 42,640
----------
364,550
----------
OILFIELD SERVICES/EQUIPMENT (0.1%)
4,000 Willbros Group, Inc.(2) ............................ 58,840
----------
PAPER & FOREST PRODUCTS (0.2%)
6,000 Delta & Pine Land Co. .............................. 134,700
----------
PRECISION INSTRUMENT (0.0%)
6,000 RAE Systems, Inc.(2) ............................... 30,000
----------
R.E.I.T. (0.4%)
15,000 Pengrowth Energy Trust ............................. 224,250
----------
- --------------------------------------------------------------------------------
11
VALUE LINE AGGRESSIVE INCOME TRUST
Schedule of Investments (unaudited) July 31, 2004
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER OF
SHARES VALUE
- ------------- ----------------
RETAIL SPECIAL -- LINES (0.2%)
5,000 CATO Corp. .................................................................................... $ 104,350
-----------
THRIFT (0.2%)
4,000 Washington Federal Inc. ....................................................................... 100,200
-----------
TOTAL COMMON STOCKS
(COST $1,756,868) ............................................................................. 1,793,280
-----------
TOTAL INVESTMENT SECURITIES (88.7%)
(COST $51,961,245) ............................................................................ 53,274,542
-----------
REPURCHASE AGREEMENT (9.2%)
(INCLUDING ACCRUED INTEREST)
$3,000,000 Collateralized by $3,023,000 U.S. Treasury Bonds 5 1/4% due 2/15/29, with a value of $3,070,816
(with UBS Warburg LLC., 1.30%, dated 7/30/04, due 8/2/04 delivery value $3,000,325) ........... 3,000,325
2,500,000 Collateralized by $1,745,000 U.S. Treasury Bonds 9 7/8% due 11/15/15, with a value of $2,569,655
(with Morgan Stanley Dean Witter & Co., Inc., 1.27%, dated 7/30/04, due 8/2/04 delivery value
$2,500,265) ................................................................................... 2,500,265
-----------
TOTAL REPURCHASE AGREEMENTS
(COST $5,500,590) ............................................................................. 5,500,590
-----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%) ......................................... 1,273,653
-----------
NET ASSETS (100.0%) ........................................................................... $60,048,785
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE, PER OUTSTANDING
SHARE ($60,048,785 - 12,085,761 SHARES OF BENEFICIAL INTEREST OUTSTANDING) .................... $ 4.97
===========
(1) 144A SECURITY WHERE CERTAIN CONDITIONS FOR PUBLIC SALE MAY EXIST.
(2) NON-INCOME PRODUCING SECURITY.
(3) DEFAULTED SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12
VALUE LINE AGGRESSIVE INCOME TRUST
Statement of Assets and Liabilities Statement of Operations for the
at July 31, 2004 (unaudited) Six Months Ended July 31, 2004 (unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
DOLLARS
(IN THOUSANDS
EXCEPT PER SHARE DOLLARS
AMOUNT) (IN THOUSANDS)
----------------- ---------------
ASSETS: INVESTMENT INCOME:
Investment securities, at value Interest (net of withholding taxes of $2) ..... $ 2,264
(Cost - $51,962) .......................... $53,275 Dividends ..................................... 74
Repurchase agreements Other ......................................... 91
(Cost - $5,501 ) .......................... 5,501 --------
Cash ......................................... 106 Total Income ............................. 2,429
Interest receivable .......................... 1,119 --------
Receivable for trust shares sold ............. 240 EXPENSES:
Dividend receivable .......................... 12 Advisory fee .................................. 227
------- Service and distribution plan fee ............. 76
TOTAL ASSETS ................................ 60,253 Audit and legal fees .......................... 30
------- Transfer agent fees ........................... 26
LIABILITIES: Custodian fees ................................ 18
Dividends payable to shareholders ............ 64 Printing,checks and stationary ................ 16
Payable for trust shares repurchased ......... 34 Registration and filing fees .................. 16
Accured expenses: Trustees' fees and expenses ................... 11
Advisory fee .............................. 38 Other ......................................... 11
Service and distribution plan fees --------
payable ................................ 13 Total expenses before custody credits 431
Other ..................................... 55 Less: custody credits .................... (1)
------- ---------
TOTAL LIABILITIES ....................... 204 Net Expenses ............................. 430
------- --------
NET ASSETS ................................... $60,049 NET INVESTMENT INCOME ......................... 1,999
======= --------
NET ASSETS REALIZED AND UNREALIZED LOSS ON
Shares of beneficial interest, at $.01 par INVESTMENTS
value (authorized unlimited, Net Realized Gain ........................ 329
outstanding 12,085,761 ) .................. $ 121 Net Change in Net Unrealized
Additional paid-in capital ................... 124,698 Appreciation(Depreciation) ............ (1,494)
Distributions in excess of net --------
investment income ......................... (23) NET REALIZED GAIN AND CHANGE IN NET
Accumulated net realized loss on UNREALIZED APPRECIATION
investments ............................... (66,060) (DEPRECIATION) ON INVESTMENTS .............. (1,165)
Unrealized net appreciation of --------
investments ............................... 1,313 NET INCREASE IN NET ASSETS FROM
------- OPERATIONS ................................. $ 834
NET ASSETS ................................... $60,049 ========
-------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE, PER
OUTSTANDING SHARE ($60,048,785 -
12,085,761 SHARES OF BENEFICAL
INTEREST OUTSTANDING) ..................... $ 4.97
=======
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13
VALUE LINE AGGRESSIVE INCOME TRUST
Statement of Changes in Net Assets
for the Six Months Ended July 31, 2004 (unaudited) and for the Year Ended
January 31, 2004
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JULY 31, 2004 JANUARY 31,
(UNAUDITED) 2004
--------------- ------------
DOLLARS
(IN THOUSANDS)
OPERATIONS:
Net investment income ................................................... $ 1,999 $ 4,183
Net realized gain( loss) on investments ................................. 329 1,678
Change in net unrealized( depreciation)appreciation ..................... (1,494) 7,292
--------- ---------
Net increase in net assets from operations .............................. 834 13,153
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................................... (2,001) (4,192)
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares ........................................ 11,406 33,109
Net proceeds from reinvestment of distributions to shareholders ......... 1,587 3,262
--------- ---------
12,993 36,371
Cost of shares repurchased .............................................. (15,878) (34,237)
--------- ---------
Net (decrease) increase in net assets from share transactions ........... (2,885) 2,134
--------- ---------
TOTAL (DECREASE) INCREASE IN NET ASSETS .................................. (4,052) 11,095
NET ASSETS:
Beginning of period ..................................................... 64,101 53,006
--------- ---------
End of period ........................................................... $ 60,049 $ 64,101
========= =========
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME ......................... $ (23) $ (21)
========= =========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
VALUE LINE AGGRESSIVE INCOME TRUST
Notes to Financial Statements (unaudited) July 31, 2004
- --------------------------------------------------------------------------------
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.
(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
- --------------------------------------------------------------------------------
15
VALUE LINE AGGRESSIVE INCOME TRUST
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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) REPRESENTATIONS AND INDEMNIFICATIONS. In the normal course of business the
Trust enters into contracts that contain a variety of representations and
warranties which provide general indemnifications. The Trust's maximum exposure
under these arrangements in unknown as this would involve future claims that
maybe made against the Trust that have not yet occurred. However, based on
experience, the Trust expects the risk of loss to be remote.
(F) 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.
(G) The Trust charges a 1% redemption fee on shares held for less than 120
days. Such fees are retained by the Trust and accounted for as paid in capital.
2. Trust Share Transactions
Transactions in shares of beneficial interest in the Trust were as follows:
SIX MONTHS YEAR
ENDED ENDED
JULY 31, 2004 JANUARY 31,
(UNAUDITED) 2004
--------------- ------------
Shares sold ..................... 2,282 7,070
Shares issued to
shareholders in
reinvestment of
dividends .................... 317 686
----- -----
2,599 7,756
Shares repurchased .............. (3,188) (7,269)
------ ------
Net increase (decrease) ......... (589) 487
====== ======
Redemption fees of $33,397 were retained by the Trust for the six months ended
July 31, 2004.
3. Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
SIX MONTHS ENDED
JULY 31, 2004
(UNAUDITED)
-----------------
(IN THOUSANDS)
PURCHASES:
Investment Securities ......... $19,849
=======
SALES:
Investment Securities ......... $22,609
=======
4. Income Taxes
At July 31, 2004, information on the tax components of capital is as follows:
(UNAUDITED)
(IN THOUSANDS)
---------------
Cost of investments for tax purposes ......... $ 57,484
Gross tax unrealized appreciation ............ $ 2,555
Gross tax unrealized depreciation ............ $ (1,263)
--------
Net tax unrealized appreciation on
investments ............................... $ 1,292
========
Capital loss carryforward, expires
January 31, 2007 .......................... $ (1,692)
Capital loss carryforward, expires
January 31, 2008 .......................... (17,496)
Capital loss carryforward, expires
January 31, 2009 .......................... (20,923)
Capital loss carryforward, expires
January 31, 2010 .......................... (20,654)
Capital loss carryforward, expires
January 31, 2011 .......................... (5,624)
--------
Capital loss carryforward, at
January 31, 2004 .......................... $(66,389)
========
- --------------------------------------------------------------------------------
16
VALUE LINE AGGRESSIVE INCOME TRUST
July 31, 2004
- --------------------------------------------------------------------------------
To the extent future capital gains are offset by capital losses, the Trust does
not anticipate distributing any such gains to the shareholders.
Net investment income and net realized gain (loss) differ for financial
statement and tax purposes primarily due to differing treatment of bond
premiums.
The tax composition of dividends paid to shareholders during the six months
ended July 31, 2004 and the fiscal year ended January 31, 2004 were as follows:
JULY 31, 2004 JANUARY 31,
(UNAUDITED) 2004
--------------- ------------
(IN THOUSANDS)
Ordinary Income ......... $2,001 $4,192
5. Investment Advisory Contract, Management Fees and Transactions With
Affiliates
An advisory fee of $226,822 was paid or payable to Value Line, Inc., the
Trust's investment adviser (the "Adviser"), for the six months ended July 31,
2004. 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 year, 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.
The Trust has a Service and Distribution Plan (the "Plan"). The Plan, adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, compensates
Value Line Securities, Inc., a subsidiary of the Adviser (the "Distributor")
for advertising, marketing and distributing the Trust's shares and for
servicing the Trust's shareholders at an annual rate of 0.25% of the Trust's
average daily net assets. Fees amounting to $75,607 were paid or payable to the
Distributor under this Plan for the six months ended July 31, 2004.
Certain officers and directors of the Adviser and the Distributor are also
officers and a Trustee of the Trust. At July 31, 2004, the Adviser and certain
officers and Trustees owned 2,442 shares of beneficial interest in the Trust,
representing .02% of the outstanding shares.
- --------------------------------------------------------------------------------
17
VALUE LINE AGGRESSIVE INCOME TRUST
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED YEARS ENDED JANUARY 31,
JULY 31, 2004 ========================================================================
(UNAUDITED) 2004 2003 2002 2001 2000
==========================================================================================
NET ASSET VALUE, BEGINNING OF
PERIOD ............................... $ 5.06 $ 4.35 $ 4.74 $ 5.24 $ 7.22 $ 7.45
-------- -------- -------- -------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ................ 0.16 0.34 0.41 0.49 (1) 0.66 0.73
Net gains or losses on securities
(both realized and unrealized) ..... (0.09) 0.70 (0.40) (0.50)(1) ( 1.98) (0.23)
-------- -------- -------- -------- --------- ---------
Total from investment operations ...... 0.07 1.04 0.01 (0.01) ( 1.32) 0.50
-------- -------- -------- -------- --------- ---------
Redemption fees ....................... -- 0.01 0.01 -- -- --
-------- -------- -------- -------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................... (0.16) (0.34) (0.41) (0.49) ( 0.66) (0.73)
-------- -------- -------- -------- --------- ---------
NET ASSET VALUE, END OF PERIOD ........ $ 4.97 $ 5.06 $ 4.35 $ 4.74 $ 5.24 $ 7.22
======== ======== ======== ======== ========= =========
TOTAL RETURN .......................... 1.49%+ 25.01% 0.40% (0.12)% (19.14)% 7.16%
======== ======== ======== ======== ========= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ........................... $ 60,049 $ 64,101 $ 53,006 $ 95,921 $ 116,924 $ 169,586
Ratio of expenses to average net
assets ............................... 1.42%(2)* 1.43%(2) 1.37%(2) 1.23%(2) 1.04%(2) 0.82%(2)
Ratio of net investment income to
average net assets ................... 6.62%* 6.98% 9.12% 9.72%(1) 10.61% 10.04%
Portfolio turnover rate ............... 35% 76% 59% 140% 184% 154%
(1) AS REQUIRED, EFFECTIVE FEBRUARY 1, 2001, THE TRUST ADOPTED THE PROVISIONS
OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN
AMORTIZING PREMIUM ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE
YEAR ENDED JANUARY 31, 2002, ON NET INVESTMENT AND NET REALIZED AND
UNREALIZED GAINS AND LOSSES WAS LESS THAN $.01 PER SHARE. THE EFFECT OF
THIS CHANGE WAS TO DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS FROM 9.79% TO 9.72%. PER SHARE AND RATIOS FOR THE YEAR PRIOR TO
FEBRUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN
ACCOUNTING POLICY.
(2) RATIO REFLECTS EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE
RATIO OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD HAVE
BEEN 1.24% FOR THE YEAR ENDED JANUARY 31, 2002 AND WOULD NOT HAVE CHANGED
AS OF JULY 31, 2004, JANUARY 31, 2004, JANUARY 31, 2003, JANUARY 31, 2001
AND JANUARY 31, 2000.
+NOT ANNUALIZED
*ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
18
VALUE LINE AGGRESSIVE INCOME TRUST
- --------------------------------------------------------------------------------
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge upon request by calling 1-800-243-2729 or on the SEC's web site
(http://www.sec.gov). Information regarding how the Fund voted proxies relating
to portfolio securities during the most recent 12-month period ended July 31 is
also available on the SEC's web site at http://www.sec.gov or on the Fund's web
site at http://vlfunds.com.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund will be required to file its complete schedule of portfolio holdings
with the SEC for its first and third fiscal quarters on Form N-Q for fiscal
quarters ending on or after July 9, 2004. Once filed, the Fund's Forms N-Q will
be available without charge, upon request on the SEC's website
(http://www.sec.gov) and may be available by calling Value Line at
1-800-243-2729; or on Value Line's website at http://vlfunds.com. You can also
obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330); (ii) sending your request and a
duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102;
or (iii) sending your request electronically to publicinfo@sec.gov.
- --------------------------------------------------------------------------------
19
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 AND GROWTH 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 -- THE 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. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
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 of its
net assets will be invested in securities issued or guaranteed by the 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: The Money
Market Portfolio and The National Bond Portfolio. The Trust may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
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 the maximum income exempt from New York State, New York City and
federal income taxes while avoiding undue risk to principal. The Trust may be
subject to state and local taxes and the Alternative Minimum Tax (if
applicable).
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* seeks to achieve 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.
* 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 1-800-243-2729, 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