-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RgFiZ/iWA3afiZDpNJO4Kmo9fJkuLr3nFCuVeYdVmcljgRtWIvSTCMWJ/It6nwDF 1nophWDvQteVN4r4V0vPmQ== 0000912057-96-015699.txt : 19960730 0000912057-96-015699.hdr.sgml : 19960730 ACCESSION NUMBER: 0000912057-96-015699 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960729 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALUE LINE INC CENTRAL INDEX KEY: 0000717720 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 133139843 STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11306 FILM NUMBER: 96600494 BUSINESS ADDRESS: STREET 1: 220 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129071500 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 2O549 FORM 10-K Annual Report Pursuant to Section l3 or l5(d) of the Securities Exchange Act of l934 For the fiscal year ended April 3O, l996 Commission File Number 0-ll3O6 VALUE LINE, INC. (Exact name of registrant as specified in its charter) New York l3-3l39843 (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 220 East 42nd Street, New York, N.Y. lOOl7-5891 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 907-1500 Securities registered pursuant to Section l2(b) of the Act: None Securities registered pursuant to Section l2(g) of the Act: Common Stock, $.10 par value Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months and (2) has been subject to such filing requirements for the past 9O days. Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock held by non-affiliates on June 28, 1996 was $66,883,950. There were 9,976,975 shares of the Company's Common Stock outstanding at June 28, 1996. DOCUMENTS INCORPORATED BY REFERENCE. The following documents are incorporated by reference with this filing: Part III: l996 Definitive Proxy Statement. Part I Item l. BUSINESS. Value Line, Inc. (the "Company"), a New York corporation, was organized in l982 and is the successor to substantially all of the operations of Arnold Bernhard & Company, Inc. ("AB&Co."). The Company's primary businesses are producing investment related periodical publications through its wholly-owned subsidiary Value Line Publishing, Inc. ("VLP") and providing investment advisory services to mutual funds, institutions, and individual clients. VLP publishes The Value Line Investment Survey, one of the nation's major periodical investment services, as well as The Value Line Investment Survey - Expanded Edition, The Value Line Mutual Fund Survey, The Value Line No-Load Fund Advisor, The Value Line OTC Special Situations Service, The Value Line Options Survey, The Value Line Convertibles Survey and The Value Line Industry Review which is only available in electronic format. The Company's periodical publications are direct marketed through media and direct mail to retail and institutional investors. The Company is investment adviser for the Value Line Family of Mutual Funds, which on April 30, l996, included 16 open-end investment companies with various investment objectives. In addition, the Company manages investments for private and institutional clients and, through VLP, provides financial database information through computer media and computer time-sharing facilities (DataFile and other services). VLP also markets personal computer software services (VALUE/SCREEN III) and other electronic products for institutional investors. The Company is registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of l94O. In addition to VLP, the Company's other wholly-owned subsidiaries include a registered broker-dealer, Value Line Securities, Inc., and an advertising agency, Vanderbilt Advertising Agency, Inc. These subsidiaries primarily provide services used by the Company in its publishing and investment management businesses. Compupower Corporation, another subsidiary, serves the subscription fulfillment needs of publishers. The name "Value Line," as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. As used herein, except as the context otherwise requires, the term "Company" includes the Company and its consolidated subsidiaries. A. Investment Information and Publications. VLP publishes investment related publications and produces electronic products described below: 2 1. Publications: The Value Line Investment Survey is a weekly investment related periodical that in addition to various timely articles on current economic, financial and investment matters ranks common stocks for future relative performance based on computer-generated statistics of financial results and stock market performance. The key evaluations for each stock covered are "Timeliness(TM)" and "Safety." "Timeliness(TM)" relates to the probable relative price performance of a stock over the next six to twelve months, as compared to the rest of the approximately l,7OO covered stocks. Rankings are updated each week and range from Rank l for the expected best performing stocks to Rank 5 for the expected poorest performers. "Safety" rankings are a measure of risk and are based primarily on the issuer's relative financial strength and the stock's price stability. "Safety" ranges from Rank l for the least risky stocks to Rank 5 for the riskiest. Value Line employs approximately 90 analysts and statisticians who prepare articles of interest for each periodical and who evaluate stock performance and provide future earnings estimates and quarterly written evaluations with weekly updates when relevant. The annual subscription price of The Value Line Investment Survey is $570. The Expanded Edition of The Value Line Investment Survey was introduced by the Company in April 1995. It provides detailed descriptions of 1,800 additional small- and medium-capitalization stocks, many listed on NASDAQ, beyond the 1,700 stocks of larger- capitalization companies traditionally covered in The Value Line Investment Survey. Like The Value Line Investment Survey, the Expanded Edition has its own "Summary & Index" providing updated ranks and other data, as well as "screens" of key financial performance measures. The "Ratings and Reports" section, providing updated reports on about 140 stocks each week, has been organized to correspond closely to the industries reviewed in the Standard Edition of The Value Line Investment Survey. A new combined Index, published quarterly, allows the subscriber to locate easily a specific stock among the 3,500 stocks covered. The Expanded Edition includes a number of new as well as standard features: - - A new Performance Ranking System incorporates many of the elements of the Value Line Timeliness/TM Ranking System, modified to accom-modate the 1,800 stocks in the Expanded Edition. The Performance/TM Rank is based on earnings growth and price momentum and is designed to predict relative price performance over the next six to 12 months. - - An expanded Business Section provides detail about companies, focusing on business lines and strategies. - - An enlarged Assets and Liabilities Section provides long-term statistics and a more complete balance sheet on each company. - - New Total-Return Statistics provide an "at a glance" look at a particular stock's performance -- appreciation plus dividends -- over the past three months, six months, and one, three, and five 3 years. The principal difference between the Expanded Edition and The Value Line Investment Survey is that the Expanded Edition does not include financial forecasts or analysts' comments. This modification has allowed Value Line to offer this service at a low price. The cost of the Expanded Edition to current subscribers of The Value Line Investment Survey is $125 per year and $695 per year for new subscribers combining both Editions. The Value Line Mutual Fund Survey provides full-page profiles of 1500 mutual funds and condensed coverage of an additional 550 funds. Every two weeks subscribers receive an updated issue, containing about 150 fund reports, plus a "Performance & Index" providing current rankings and performance figures for the full universe of more than 2,000 funds. The Value Line Mutual Fund Survey also includes semi-annual profiles and analyses on 100 of the nation's major fund families. Additionally, subscribers receive a 12-page periodical monthly newsletter containing articles of general interest to subscribers and readers, "The Value Line Mutual Fund Advisor," with articles on investment trends and issues concerning mutual fund investors. Funds are ranked for both risk and overall risk-adjusted performance using strictly quantitative means. A large binder is provided to house the periodic fund reports. A second binder is provided to full-term subscribers for the periodical monthly newsletter. The annual subscription price of The Value Line Mutual Fund Survey is $295. The Company instituted on-line distribution of individual one-page reports from The Value Line Investment Survey and The Value Line Mutual Fund Survey through the CompuServe on-line network. The price per page for these documents is $5. The Value Line No-Load Fund Advisor is a periodical monthly newsletter for investors who wish to manage their own portfolios of no- and low-load, open-end mutual funds. Each issue features strategies for maximizing total return, with special attention given to tax considerations. Also featured are in-depth interviews with noted portfolio managers, model portfolios for a range of investor profiles, and information about retirement planning, industry news, and listings (with descriptions) of new funds worthy of further consideration. A full statistical review, including latest performance, rankings, and sector weightings, is updated each month on 600 leading no-load and low-load funds. The annual subscription price of The Value Line No-Load Fund Advisor is $107. The Value Line OTC Special Situations Service, published periodically 24 times a year, concentrates on fast-growing, smaller companies whose stocks are perceived by Company analysts as having exceptional appreciation potential. The annual subscription price of The Value Line OTC Special Situations Service is $429. The Value Line Options Survey, a periodical weekly service published 48 times a year, evaluates and ranks for future performance the most active options listed on United States exchanges (approximately 8,000). The annual subscription price of The Value 4 Line Options Survey is $445. An electronic version of this publica-tion, The Value Line Daily Options Survey was introduced during the latter part of fiscal 1995. The Value Line Convertibles Survey, a periodical service published 48 times a year, evaluates and ranks for future market performance approximately 58O convertible securities (bonds and preferred stocks) and approximately 75 warrants. The annual subscription price of The Value Line Convertibles Survey is $625. The Value Line Industry Review, a periodical monthly publication now available only in electronic form, evaluates 104 industry groups for relative performance. Providing detailed and extensive sector analysis, it is designed to meet the needs of professional portfolio managers. The annual subscription price of The Value Line Industry Review is $1,075. The Total Return Service is a customized data service derived from The Value Line Industry Review publication. It was developed to help publicly traded companies meet the SEC's mandated executive-compensa-tion disclosure requirements. The service consists of a line graph comparing the total return of a public company's stock over the last five years to a published equity market index and a published or constructed industry index. 2. Electronic Products: Value Line Investment Survey for Windows is a powerful menu-driven software program with fast filtering, ranking, reporting and graphing capabilities on over 5,000 stocks, including the 1,700 stocks covered in the Company's benchmark publication, The Value Line Investment Survey. The product was introduced to the market during June 1996 and available during July 1996 for distribution. Value Line Fund Analyzer and Value Line No-Load Analyzer are electronic versions of the Mutual Fund Survey launched in the latter part of fiscal 1995. Value Line Investment Survey for Windows provides over 200 search fields on each stock, more than 50 charting and graphing variables for comparative research, and 10 years of historical financial data for scrutinizing performance, risk and yield. The software includes Portfolio Manager, a special module that lets users create and track their own stock portfolios. An exclusive E-page feature on the CD-ROM version allows the user to view and print actual full-page stock reports from the respected Value Line Investment Survey publication. In addition, weekly updates and technical support are available through Value Line Online, the Company's proprietary Bulletin Board. To access the 1,700 stocks covered exclusively in The Value Line Investment Survey publication, subscribers are offered a two-month trial subscription with monthly updates and Value Line Online weekly data for $55, or a full year subscription for $595. This product is available on both CD-ROM and 3.5 disk. 5 A Special 5,000 Stock Edition, a powerful yet economical profes-sional tool on CD-ROM, is available with monthly updates and Value Line Online weekly data for $95 for a two-month trial subscription, or $995 for a full year. This Special Edition contains full financial and business descriptions on over 5,000 stocks, Timeliness and Safety Rankings on 3,500 stocks, and 1,700 stocks with analysts' comments and estimates found in The Value Line Investment Survey publication. Both versions are compatible with Windows 95 or 3.1. A system of 486 or higher is recommended, with 8MB RAM minimum and 35MB of free hard disc space. VALUE/SCREEN III is a data and software service for screening common stocks. It is intended for use by investors with personal computers and is sold primarily to retail investors. It provides extensive financial data on about 1,600 companies covered by The Value Line Investment Survey. Users can screen on as many as 49 variables for companies' financial performance and for investment objectives. Value Line DataFile contains historic annual and quarterly financial records for more than 5,400 companies in numerous industries, including air transport, industrial services, beverage, machinery, bank, insurance and finance, savings and loan associations, toys, and securities brokers. DataFile is sold to the institutional market. The Company also offers an Estimates and Projections File, with year-ahead and three- to five-year estimates of financial performance and projections of stock-price ranges, as well as a Convertible Securities File, The Value Line Industry Review, and custom services. B. Investment Management. As of April 30, 1996, the Company was the investment adviser for 16 mutual funds registered under the Investment Company Act of l94O. Value Line Securities, Inc., a wholly owned subsidiary of the Company, underwrites and distributes shares of the Value Line Funds. State Street Bank and Trust Company, an unaffiliated entity, acts as custodian of the Funds' assets. Shareholder services for the Value Line Funds are provided by National Financial Data Services. 6 Total net assets of the Value Line Funds at April 30, 1996, were: (in millions) The Value Line Fund, Inc. $ 360 The Value Line Income Fund, Inc. 148 The Value Line Special Situations Fund, Inc. 102 Value Line Leveraged Growth Investors, Inc. 382 The Value Line Cash Fund, Inc. 341 Value Line U.S. Government Securities Fund, Inc. 221 Value Line Centurion Fund, Inc. 572 The Value Line Tax Exempt Fund, Inc. 231 Value Line Convertible Fund, Inc. 74 Value Line Aggressive Income Trust 48 Value Line New York Tax Exempt Trust 38 Value Line Strategic Asset Management Trust 984 Value Line Intermediate Bond Fund, Inc. 16 Value Line Small-Cap Growth Fund, Inc. 20 Value Line Asset Allocation Fund, Inc. 60 Value Line U.S. Multinational Company Fund, Inc. 13 ------ $3,610 The investment advisory contracts between each of the Value Line Funds and the Company provide that the Company will render investment research, advice, and supervision to the funds. These contracts must be approved annually in accordance with statutory procedures. The Company furnishes each fund with its investment program, subject to such fund's fundamental investment policies and to control and review by such fund's Board of Directors or Trustees. Each contract also provides that the Company will furnish, at its expense, various administrative services, office space, equipment and administrative personnel necessary for managing the affairs of the funds. Advisory fee rates vary among the funds and may be subject to certain limitations. Each mutual fund may use "Value Line" in its name only so long as the Company acts as its investment adviser. The Company has agreed to waive its advisory fees payable by the Value Line U.S. Multina-tional Company Fund, Inc. and to absorb all operating expenses (other than brokerage commissions) until September 30, 1996. Value Line Asset Management ("VLAM"), a division of the Company, manages pension funds and institutional and individual portfolios by utilizing the techniques developed for The Value Line Investment Survey. VLAM has varied investment advisory agreements with its clients which call for payments to the Company calculated on the basis of the market value of the securities portfolio under management. The Company also acts as investment adviser for the Hyperion Value Line Equity Trust, a Canadian mutual fund, and as sub-advisor to other mutual funds. 7 C. Wholly-Owned Operating Subsidiaries: 1. Vanderbilt Advertising Agency, Inc.: Vanderbilt Advertising Agency, Inc. ("Vanderbilt") places advertising for the Company's publications, investment advisory services, and mutual funds. Commission income generated by Vanderbilt serves to reduce the Company's advertising expenses. 2. Compupower Corporation: Compupower provides computerized subscription fulfillment services for the Company and for other publishers. For the year ended April 3O, l996, approximately 36% of Compupower's revenues were derived from services rendered to the Company. 3. Value Line Securities, Inc.: Value Line Securities, Inc. ("VLS") is registered as a broker-dealer under the Securities Exchange Act of l934 and is a member of the National Association of Securities Dealers, Inc. VLS acts as the underwriter and distributor of the Value Line Funds. Shares of the Value Line Funds are sold to the public without a sales charge (i.e., on a "no-load" basis), and VLS derives no revenue from such sales. Since l986, VLS has effected listed portfolio brokerage transactions for certain of the Value Line Funds, clearing such transactions on a fully disclosed basis through unaffiliated broker-dealers who receive a portion of the gross commissions. Value Line Securities also receives 12b-1 fees from certain of the Value Line Funds. D. Other Businesses. The Company publishes the Value Line Arithmetic Composite and the Value Line Geometric Composite, daily indices of the stock market performance of the approximately l,7OO common stocks contained in The Value Line Investment Survey. The calculation of both indices is done by a firm unaffiliated with the Company. Futures contracts based upon fluctuations in the Value Line Arithmetic Composite are traded on the Kansas City Board of Trade, and options on the Index are traded on the Philadelphia Stock Exchange. The Company receives fees in connection with these activities. E. Investments. The Company invests in the Value Line Funds and in other marketable securities. F. Employees. At April 30, 1996, the Company and its subsidiaries employed 381 8 persons. The Company, its affiliates, and its officers, directors, and employees may from time to time own securities which are also held in the portfolios of the Value Line Funds or recommended in the Company's publications. The Company has imposed rules upon itself and such persons requiring monthly reports of securities transactions for their respective accounts and restricting trading in various types of securities in order to avoid possible conflicts of interest. G. Assets. The Company's assets identifiable to each of its principal business segments were as follows: April 30, 1996 1995 (in thousands) Investment Information & Publications $ 15,902 $ 11,788 Investment Management 271,088 208,930 Corporate Assets 46,836 44,280 -------- -------- $333,826 $264,998 ======== ========= H. Competition. The investment management and the investment information and publications industries are very competitive. There are many competing firms and a wide variety of product offerings. Some of the firms in these industries are substantially larger and have greater financial resources than the Company. The Company believes that it is one of the world's largest independent securities research organiza-tions and that it publishes the world's largest investment service periodicals in terms of number of subscriptions and annual revenues. I. Executive Officers. The following table lists the names, ages (at June 28, 1996), and principal occupations and employment during the past five years of the Company's Executive Officers. All officers are elected to terms of office for one year. Except as otherwise indicated, each of the following has held an executive position with the companies indicated for at least five years. 9 Name Age Principal Occupation or Employment - --------------------- --- ---------------------------------- Jean Bernhard Buttner 61 Chairman of the Board, President, and Chief Executive Officer of the Company and AB&Co. Chairman of the Board of each of the Value Line Funds. Samuel Eisenstadt 74 Senior Vice President and Research Chairman. David T. Henigson 38 Vice President since 1992 and Treasurer since 1994; Director of Compliance and Internal Auditor; Vice President of each of the Value Line Funds since 1992 and Secretary and Treasurer since 1994. Howard A. Brecher 42 Vice President since 1996 and Secretary since 1992; Secretary and General Counsel of AB&Co. since 1991. Item 2. PROPERTIES. On June 4, 1993, the Company entered into a new lease agreement for approximately 80,000 square feet that provided for the relocation of its office space to 220 East 42nd Street, New York, New York. The Company owns a distribution facility of approximately 23,OOO square feet in North Bergen, New Jersey. The primary purpose of this location is the distribution of the Company's publication products. Compupower leases its approximately 8,OOO-square foot-office and computer facility in Secaucus, New Jersey. During January 1996, a subsidiary of the Company purchased for cash an approximately 85,000 square foot warehouse facility for $4,100,000. The new facility will consolidate into a single facility the distribution operations for the various Company publications and the fulfillment operations of Compupower Corporation. The remaining building capacity will provide warehouse storage, a disaster recovery site and will provide for future business expansion. The Company believes the capacity of these facilities is sufficient to meet the Company's current and expected future requirements. 10 Item 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the stockholders during the fourth quarter of the fiscal year ended April 30, l996. Part II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Registrant's Common Stock is traded in the over-the-counter market. The approximate number of record holders of the Registrant's Common Stock at April 3O, l996 was 1,361. Over-the-counter price quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The range of the bid and asked quotations and the dividends paid on these shares during the past two fiscal years were as follows: Dividend High Low Declared Quarter Ended Bid Asked Bid Asked Per Share July 31, 1994...... 34 36 31 1/2 33 .20 October 31, 1994... 32 34 1/2 30 1/2 32 1/2 .20 January 31, 1995... 30 1/2 33 29 30 3/4 .0 April 30, 1995..... 31 33 1/4 26 3/4 29 .20 July 31, 1995...... 32 32 3/4 28 1/2 28 1/2 .20 October 31, 1995... 33 3/4 34 1/4 29 3/4 29 3/4 .20 January 31, 1996... 39 1/2 39 1/2 32 1/2 32 3/4 .20 April 30, 1996..... 39 3/8 40 1/2 32 1/2 34 1/2 .20 11 Item 6. SELECTED FINANCIAL DATA. Earnings per share for each of the fiscal years shown below are based on the weighted average number of shares outstanding. Years ended April 30, 1996 1995 1994 1993 1992 (in thousands, except per share amounts) Revenues: Investment periodicals and related publications... $ 58,509 $ 55,912 $ 57,830 $ 56,127 $ 53,745 Investment management fees and services $ 26,564 $ 23,182 $ 24,220 $ 22,274 $ 20,816 Settlement of disputed securities transactions $ 2,054 $ 617 $ 408 $ - $ 862 Total revenues $ 87,127 $ 79,711 $ 82,458 $ 78,401 $ 75,423 Income from operations...... $ 32,486 $29,660 $ 32,464 $ 30,667 $ 30,012 Net income........ $ 41,714 $ 23,168 $ 28,902 $ 27,723 $ 26,265 Earnings per share........... $ 4.18 $ 2.32 $ 2.90 $ 2.78 $ 2.64 Total assets..... $333,826 $264,998 $200,321 $176,095 $152,457 Long term debt.... $ - $ - $ - $ 3,000 $ - Cash dividends declared per share $ .80 $ .60 $ .80 $ .60 $ .60 12 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Operating Results Net income for the twelve months ended April 30, 1996 of $41,714,000 or $4.18 per share was $18,546,000 or 80% higher than the prior year's net income of $23,168,000 or $2.32 per share. Net income, sales, operating income and income from securities transactions for the twelve months ended April 30, 1996 all set new record highs for the Company. Net earnings for the fiscal year ended April 30, 1995 of $23,168,000 or $2.32 per share compared with net earnings of $28,902,000 or $2.90 per share for fiscal year 1994. The decrease in net earnings for fiscal 1995 from the fiscal 1994's level was primarily due to a decline in Income from Securites Transactions of $7,047,000, including losses of $4,980,000 related to the Company's strategy of realizing capital losses which would to reduce income taxes. The $1,550,000 expended in support of The Value Line Cash Fund during fiscal 1995 also contributed to the decrease. Revenues of $87,127,000 for fiscal 1996 compare to revenues of $79,711,000 and $82,458,000 for fiscal year's 1995 and 1994, respectively. Subscription revenues of $58,509,000 were 5% higher than revenues of $55,912,000 for fiscal 1995. Full term subscription levels to all products increased 23% from the prior year's level while full term circulation increased 10% to The Value Line Investment Survey. The increase in subscription levels was a result of increased marketing including an advance renewal program in November 1995 that was offered to The Value Line Investment Survey's subscribers in anticipation of a 9% price increase that was effective February 1, 1996. The Value Line Investment Survey - Expanded edition contributed in excess of $2,350,000 of revenues during fiscal 1996, it's first year of circulation and revenues from The Value Line Investment Survey increased by $2,316,000 during this same period. These increases were partially offset by decreases in revenues from the print version of Value Line Mutual Fund Survey. Subscription revenues of $55,912,000 for the fiscal year ended April 30, 1995 decreased 3.3% from fiscal 1994. The decrease in publications revenues is primarily a result of the decline in subscription levels for the Value Line Investment Survey due to the uncertain financial market conditions that existed during the first three quarters of fiscal 1995. Revenues derived from investment management fees and services for the twelve months ended April 30, 1996 of $26,564,000 were $3,382,000 or 15% higher than the level at April 30, 1995. The increase in revenues resulted primarily from a 14% increase in the average annual net assets under management in the Company's mutual funds. Assets in the Company's mutual funds at April 30, 1996 increased 21% from the levels at April 30, 1995. Investment management fees and services revenues of $23,182,000 for the fiscal year ended April 30, 1995 decreased 4.3% from the fiscal 1994 level. The decrease in fiscal 1995 was primarily a result of a 6.5% decline in the average annual assets under management in the Value Line mutual funds during the fiscal year. Mutual fund net assets under management at April 30, 1995 were approximately equal to 13 the net assets under management at April 30, 1994. Revenues for fiscal year 1996, 1995 and 1994 include proceeds of $2,054,000, $617,000 and $408,000, respectively, from the settlement of a disputed securities transaction. Expenses for the twelve months ended April 30, 1996 of $54,641,000 were 9% above the prior year's level of $50,051,000. Advertising expenses of $15,322,000 were $573,000 or 4% above the prior year's level. Advertising expenses for The Value Line Investment Survey increased 37% while additional marketing expenses of $1,355,000 were also incurred in fiscal 1996 for a variety of new products. These increases were offset by a significant reduction in advertising expenses for the print version of the Value Line Mutual Fund Survey during the development of a new electronic version. Salary and employee benefit expenses of $20,892,000 for fiscal 1996 were 10% higher than the prior year's level of $18,935,000 as a result of general salary increases, the fulfillment of vacant staff positions and an increase in the employee profit sharing plan from 12% in fiscal 1995 to 15% in fiscal 1996. Office and administration expenses of $10,039,000 increased 16% from the prior year's level of $8,620,000. The increase is attributed to additional professional fees related to potential business expansion alternatives, a lawsuit in which the Company is the plaintiff, various tax matters and conversion fees in connection with the upgrade of the Company's fulfillment software. Relocation expenses also increased as a result of a decision to consolidate the Company's fulfillment, distribution and warehouse operations in the recently acquired facility. These increases were partially offset by decreases resulting from amortization of a deferred free rent credit and a decrease in software amortization related to a decision during fiscal 1995 to replace Compupower's fulfillment software. Expenses for the fiscal year ended April 30, 1995, exclusive of the non-recurring expense of $1,550,000 were $47,884,000, a decrease of $1,702,000 or 3% over fiscal 1994's level of $49,586,000. Advertising expenses of $14,749,000 for the twelve months ended April 30, 1995 decreased $3,596,000 from expenses of $18,345,000 for the comparable period in fiscal 1994. The decrease in advertising expenses resulted from management's decision to effectively market products during improved financial market conditions. Salaries and employee benefit expenses of $18,935,000 for the twelve months of fiscal 1995 were $1,662,000 above the prior level of $17,273,000 primarily as a result of the additional staff in support of the Mutual Fund Survey and the cost of replacement staff and recruiting fees at Compupower and the Mutual Fund management and research divisions. Office and administration expenses of $8,003,000 increased $838,000 or 12% from the prior year's level as a result of a $445,000 increase in depreciation and amortization expenses affiliated with the new office facility and the computer hardware upgrade, $315,000 of accelerated amortization resulting from a decision to upgrade the fulfillment software at Compupower and an increase in professional fees. These increases were offset by a reduction in rent expenses of $767,000 or 34%. Income from securities transactions for fiscal year 1996 of $35,898,000 increased $27,239,000 from the prior year's level of $8,659,000. The increase in capital gains produced by the Company's trading portfolios of $12,440,000, and from sales of equity and fixed income share holdings in the Value Line mutual funds of $8,888,000, in 14 connection with our annual portfolio realignment were the major contributors to the additional income from securities transactions. Capital gains distributions from the Company's mutual funds also increased $4,710,000 during fiscal 1996. Income from securities transactions of $8,659,000 for the fiscal year ended April 30, 1995 decreased by $7,047,000 or 45% from $15,706,000 at April 30, 1994. In addition to a $764,000 decrease in capital gains produced by the Hedge, Tilt and Stem portfolios, the Company also incurred losses of $4,980,000 in connection with tax planning matters. Sales of mutual fund shares, unrelated to the tax planning matters, have produced $326,000 of capital losses during the 1995 fiscal year as compared to a $101,000 gain in fiscal year 1994. The decline was largely the result of a decision to liquidate an investment in one of the Company's mutual funds during the latter part of fiscal 1995 in order to redeploy these assets in other investment vehicles. Liquidity and Capital Resources The Company has liquid resources which are used in its business totaling $266,534,000 at April 30, 1996. In addition to $88,799,000 in working capital, the Company has marketable securities with a market value of $177,735,000, that, although classified as non-current assets are also readily marketable as the need for capital arises. The Company has entered into agreements to sell and repurchase U.S. Government Agency debt securities with a market value of $39,681,000 at April 30, 1996. The repurchase obligations of $36,994,000 have been entered into on a short term basis. The securities, currently available for sale, mature during calendar year 1997 and are readily marketable should management decide to liquidate the Company's investments and related obligations. During June 1996, the Company sold approximately $10,000,000 of these U.S. Government Agency securities and satisfied the related $9,100,000 repurchase obligation. The Company's cash position, including its investment in The Value Line Cash Fund, has decreased $13,274,000 at April 30, 1996, primarily as a result of the purchase of additional equity and fixed income shares in the Value Line Mutual Funds and the purchase of a distribution facility during January 1996. Management believes that the Company's cash and other liquid asset resources used in its business together with future cash flows from operations will be sufficient to finance current and forecasted operations. Management anticipates no significant borrowing requirements during fiscal 1997 other than the short term refinancing of the remaining repurchase obligations. 15 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements of the registrant and its subsidiaries are included as a part of this Form lO-K: Page Numbers Reports of independent accountants 23 Consolidated balance sheets--April 3O, 1996 and 1995 27 Consolidated statements of income and retained earnings --years ended April 3O, 1996, 1995 and 1994 28 Consolidated statements of cash flows --years ended April 3O, 1996, 1995 and 1994 29 Notes to the consolidated financial statements 30 Supplementary schedules 42 Quarterly Results (Unaudited): (in thousands, except per share amounts) Income Earnings Total From Net Per Revenues Operations Income Share 1996, by Quarter - First............ $20,028 $ 7,549 $10,224 $1.02 Second........... 22,811 10,134 8,250 .83 Third............ 21,689 7,512 14,291 1.43 Fourth........... 22,599 7,291 8,949 .90 Total $87,127 $32,486 $41,714 $4.18 1995, by Quarter - First............ $20,214 $ 5,090 $ 3,428 $ .34 Second........... 20,423 7,985 6,961 .70 Third............ 19,425 7,223 7,011 .70 Fourth........... 19,649 9,362 5,768 .58 Total $79,711 $29,660 $23,168 $2.32 1994, by Quarter - First............ $19,615 $ 9,149 $ 8,370 $ .84 Second........... 20,079 8,712 8,139 .82 Third............ 21,636 7,503 8,992 .90 Fourth........... 21,128 7,100 3,401 .34 Total $82,458 $32,464 $28,902 $2.90 16 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no disagreements with the independent accountants on accounting and financial disclosure matters. Part III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, l996, except that the information pertaining to Executive Officers is set forth in Part I herein under the caption "Executive Officers of the Registrant." Item 11. EXECUTIVE COMPENSATION. Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, 1996. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, 1996. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, 1996. 17 Part IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements See Item 8. 2. Schedules Schedule I - Marketable Securities. Schedule XIII - Other Investments. All other Schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 3. Exhibits 3.1 Articles of Incorporation of the Company, as amended through April 17, 1983 are incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 3.1 filed with the Securities and Exchange Commission on April 7, 1983. 3.2 Certificate of Amendment of Certificate of Incorporation dated October 24, 1989. 10.8 Form of tax allocation arrangement between the Company and AB&Co. incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 10.8 filed with the Securities and Exchange Commission on April 7, 1983. 10.9 Form of Servicing and Reimbursement Agreement between the Company and AB&Co., dated as of November 1, 1982 incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 10.9 filed with the Securities and Exchange Commission on April 7, 1983. 10.10 Value Line, Inc. Profit Sharing and Savings Plan as amended and restated effective May 1, 1989, including amendments through April 30, 1995. 10.13 Lease for the Company's premises at 220 East 42nd Street, New York, N.Y. incorporated by reference to the Annual Report on Form 10-K for the year ended April 30, 1994. 21 Subsidiaries of the Registrant. 18 (b) Reports on Form 8-K. A Form 8-K was filed on March 26, 1996 indicating the termination of Price Waterhouse LLP (PW) as the Company's independent accountants on March 25, 1996. On that same date, the Company engaged Horowitz & Ullmann as its new independent accountants. The termination of the engagement of PW and the selection of Horowitz & Ullmann were recom- mended by the Audit Committee of the Board of Directors and approved by the entire Board of Directors. (c) Exhibits. Subsidiaries of the Registrant, Exhibit 21 attached. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 1O-K for the fiscal year ended April 3O, 1996, to be signed on its behalf by the undersigned, thereunto duly authorized. VALUE LINE, INC. (Registrant) By: /s/ Jean Bernhard Buttner ---------------------------------- Jean Bernhard Buttner Chairman & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, 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 Bernhard Buttner ---------------------------------- Jean Bernhard Buttner Principal Executive Officer By: /s/ Stephen R. Anastasio ---------------------------------- Stephen R. Anastasio Principal Financial and Accounting Officer Dated: 20 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 1O-K for the fiscal year ended April 3O, 1996, to be signed on its behalf by the undersigned as Directors of the Registrant. s/Jean Bernhard Buttner s/William S. Kanaga Jean Bernhard Buttner William S. Kanaga s/Harold Bernard, Jr. s/Howard A. Brecher Harold Bernard, Jr. Howard A. Brecher s/W. Scott Thomas s/Samuel Eisenstadt W. Scott Thomas Samuel Eisenstadt s/David T. Henigson David T. Henigson Dated: 21 LETTERHEAD Report of Independent Accountants To the Board of Directors and Shareholders of Value Line, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statement of income and retained earnings and of cash flows present fairly, in all material respects, the financial position of Value Line, Inc. and its subsidiaries at April 30, 1996 and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Value Line, Inc., and its subsidiaries as of April 30, 1995 and 1994 were audited by other auditors whose report dated June 26, 1995 expressed an unqualified opinion on those statements. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. Our audits of the consolidated financial statements referred to above also included an audit of the Financial Statement Schedules listed in Item 14 (a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated statements. /s/ Horowitz and Ullman, P.C. HOROWITZ & ULLMANN, P.C. CERTIFIED PUBLIC ACCOUNTANTS New York, NY June 28, 1996 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Value Line, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flows present fairly, in all material respects, the financial position of Value Line, Inc. and its subsidiaries at April 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits of the consolidated financial statements referred to above also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/Price Waterhouse LLP PRICE WATERHOUSE LLP New York, New York June 26, 1995 [LETTERHEAD] CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the registration statement on Form S-8 (No. 2-90593) of our report dated June 28, 1996 relating to the consolidated financial statements of Value Line, Inc. and subsidiaries for the year ended April 30, 1996 which appears on page 23 of this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appear in this Form 10-K. /s/Horowitz & Ullmann, P.C. HOROWITZ & ULLMANN, P.C. Certified Public Accountants New York, NY July 3, 1996 25 Value Line, Inc. Consolidated Balance Sheets (in thousands, except share amounts) Apr. 30, Apr. 30, Assets 1996 1995 -------- -------- Current Assets: Cash and cash equivalents (including short term investments of $31,116 and $43,608, respectively) $31,752 $45,026 Trading securities 64,314 48,187 Short term securities available for sale 39,681 39,099 Accounts receivable, net of allowance for doubtful accounts of $528 and $350, respectively 2,997 3,348 Receivable from affiliates 1,965 1,641 Prepaid expenses and other current assets 2,872 1,416 -------- -------- Total current assets 143,581 138,717 Long term securities available for sale 177,735 118,013 Property and equipment, net 12,120 7,922 Goodwill 390 346 -------- -------- Total assets $333,826 $264,998 ======== ======== Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $8,433 $6,358 Securities sold under agreements to repurchase 36,994 36,994 Accrued salaries 1,808 1,466 Dividends and interest payable 2,058 534 Accrued taxes payable 5,489 3,054 -------- -------- Total current liabilities 54,782 48,406 Unearned revenue 42,993 36,789 Deferred charges 1,530 1,808 Deferred income taxes 13,255 4,806 Shareholders' Equity: Common stock, $.10 par value; authorized 30,000,000 shares; issued 10,000,000 shares 1,000 1,000 Additional paid-in capital 944 940 Retained earnings 196,834 163,101 Treasury stock, at cost (23,025 shares on April 30, 1996, and 24,650 on April 30, 1995) (443) (474) Unrealized gains on securities available for sale, net of taxes 22,931 8,622 -------- -------- Total shareholders' equity 221,266 173,189 -------- -------- Total liabilities and shareholders' equity $333,826 $264,998 ======== ======== The accompanying notes are an integral part of these financial statements. 26 Value Line, Inc. Consolidated Statements of Income and Retained Earnings (in thousands, except per share amounts)
Years ended April 30, 1996 1995 1994 -------- -------- -------- Revenues: Investment periodicals and related publications $58,509 $55,912 $57,830 Investment management fees & services 26,564 23,182 24,220 Settlement of disputed securities transactions 2,054 617 408 -------- -------- -------- Total revenues 87,127 79,711 82,458 -------- -------- -------- Expenses: Advertising and promotion 15,322 14,749 18,345 Salaries and employee benefits 20,892 18,935 17,273 Printing, paper and distribution 8,388 6,197 6,803 Office and administration 10,039 8,620 7,573 Mutual fund support expenses - 1,550 - -------- -------- -------- Total expenses 54,641 50,051 49,994 -------- -------- -------- Income from operations 32,486 29,660 32,464 Income from securities transactions, net 35,898 8,659 15,706 -------- -------- -------- Income before income taxes 68,384 38,319 48,170 Provision for income taxes 26,670 15,151 19,268 -------- -------- -------- Net income $41,714 $23,168 $28,902 Retained earnings, at beginning of year 163,101 145,918 124,995 Dividends declared (7,981) (5,985) (7,979) -------- -------- -------- Retained earnings, at end of year $196,834 $163,101 $145,918 ======== ======== ======== Earnings per share $4.18 $2.32 $2.90 ======== ======== ========
The accompanying notes are an integral part of these financial statements. 27 Value Line, Inc. Consolidated Statements of Cash Flows (in thousands)
Years ended April 30, 1996 1995 1994 -------- -------- -------- Cash flows from operating activities: Net income $41,714 $23,168 $28,902 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,288 1,293 866 Accretion of discount (582) (484) --- (Gains)/losses on sale of trading securities and securities held for sale (11,631) 4,077 (6,851) Unrealized (gains)/losses on trading securities (9,030) (3,445) 1,060 Loss on write-down of equipment (166) 166 --- Deferred income taxes 4,205 653 (510) Changes in assets and liabilities: Increase/(decrease) in unearned revenue 6,204 1,260 (56) (Increase)/decrease in deferred charges (278) 1,048 1,121 Increase/(decrease) in accounts payable and accrued expenses 727 (1,676) 642 Increase in accrued salaries 342 213 77 Increase/(decrease) in interest payable (471) 534 (10) Increase/(decrease) in accrued taxes payable (1,027) 955 (366) (Increase)/decrease in prepaid expenses and other current assets (1,456) 388 (529) (Increase)/decrease in accounts receivable 555 (735) (1,907) (Increase)/decrease in receivable from affiliates (324) (190) 32 -------- -------- -------- Total adjustments (11,644) 4,057 (6,431) -------- -------- -------- Net cash provided by operations 30,070 27,225 22,471 -------- -------- -------- Cash flows from investing activities: Proceeds from sales of securities 18,085 46,945 6,218 Purchase of securities (52,211) (35,374) (30,382) Proceeds from sale of trading securities 64,333 74,964 90,761 Purchase of trading securities (61,574) (70,708) (77,908) Acquisition of property, and equipment, net (6,026) (1,376) (5,838) -------- -------- -------- Net cash provided by/(used in) investing activities (37,393) 14,451 (17,149) -------- -------- -------- Cash flows from financing activities: Proceeds from sale of treasury stock 35 --- 72 Dividends paid (5,986) (7,980) (7,480) Loan repayment --- (3,000) --- -------- -------- -------- Net cash (used in) financing activities (5,951) (10,980) (7,408) -------- -------- -------- Net increase/(decrease) in cash and cash equivalents (13,274) 30,696 (2,086) Cash and cash equivalents at beginning of period 45,026 14,330 16,416 -------- -------- -------- Cash and cash equivalents at end of period $31,752 $45,026 $14,330 ======== ======== ========
The accompanying notes are an integral part of these financial statements. 28 Value Line, Inc. Notes to Consolidated Financial Statements Note 1-Organization and Summary of Significant Accounting Policies: Value Line, Inc. (the "Company") is incorporated in New York State and carries on the investment periodicals and related publications and investment management activities formerly performed by Arnold Bernhard & Co., Inc. (the "Parent") which owns approximately 80% of the issued and outstanding common stock of the Company. Principles of consolidation: The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Revenue recognition: Subscription revenues are recognized ratably over the terms of the subscriptions which range from three months to three years. Accordingly, the amount of subscription fees to be earned by servicing subscriptions after the date of the balance sheet is shown as unearned revenue. The unearned revenue shown on the balance sheet is a noncurrent deferred credit. This classification recognizes that the fulfillment of this commitment will require the use of significantly less current assets than the amount of the unearned revenues and, accordingly, combining it with current liabilities would significantly understate the liquidity position of the Company. Investment management fees are recorded as revenue as the related services are performed. Securities Sold Under Agreements to Repurchase: The Company has entered into agreements to sell and repurchase U.S. Government Agency debt securities. The securities are recorded at market value and are included in "Short-term securities available for sale" on the Consolidated Balance Sheets. Valuation of Securities: Effective May 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). As a result of adopting SFAS 115, the Company changed the method by which it values its long-term securities portfolio, which consists of shares of the Value Line Mutual Funds, and short-term securities portfolio, which the Company classifies as available for sale, from the lower of aggregate cost or market to market value.Unrealized gains and losses on these securities are reported, net of applicable taxes, as a separate component of Shareholders' Equity. Realized gains and losses on sales of the securities are recorded in earnings on trade date and are determined on the identified cost method. SFAS 115 cannot be retroactively applied to the financial statements of periods prior to May 1, 1994. Trading securities, which consist of securities held by Value Line Securities, Inc., the Company's broker-dealer subsidiary, and certain adjustable rate preferred shares held by the Company, are valued at market with unrealized gains and losses included in earnings. Goodwill: Goodwill represents the excess of the purchase price over the fair value of net assets acquired and is being amortized over a period of 40 years. Earnings per share: Earnings per share are based on the weighted average number of shares of common stock and common stock equivalents outstanding during each year. Cash and Cash Equivalents: For purposes of the Consolidated Statements of Cash Flows, the Company considers all cash held at banks and short term liquid investments with an original maturity of less than three months to be cash and cash equivalents. As of April 30, 1996 and 1995, cash equivalents included $25,238,000 and $41,503,000, respectively, invested in the Value Line money market funds. Reclassification: Certain prior year amounts disclosed in the Consolidated Financial Statements and Notes thereto have been reclassified to conform to current year presentation. Note 2-Supplementary Cash Flow Information: Cash payments for income taxes were $24,056,000, $12,974,000 and $20,171,000, in 1996, 1995 and 1994, respectively. Interest payments of $2,618,000, $1,315,000 and $183,000 were made in 1996, 1995, and 1994, respectively. Note 3-Related Party Transactions: The Company acts as investment adviser and manager for sixteen open-end investment companies known as the Value Line Family of Funds (see Note 4). The Company earns investment management fees calculated based upon the average daily net asset values of the respective funds. The Company also earns brokerage commission income, net of clearing fees, on securities transactions executed by Value Line Securities, Inc. on behalf of the funds and other advisory clients of the Company that are cleared on a fully disclosed basis through non-affiliated brokers. For the years ended April 30, 1996, 1995 and 1994, investment management fees and brokerage commission income, net of clearing fees, amounted to $19,686,000, $17,782,000 and $19,098,000, respectively. The related receivables from the funds for management advisory fees included in Receivable from affiliates in the Consolidated Balance Sheets were $1,631,000 and $1,352,000, at April 30, 1995 and 1994, respectively. For the years ended April 30, 1996, 1995 and 1994, the Company was reimbursed $438,000, $414,000 and $454,000, respectively, for payments it made on behalf of and services it provided to the Parent. At April 30, 1996 and 1995, Receivable from affiliates included a receivable from the Parent of $89,000 and $257,000, respectively. For the years ended April 30, 1996, 1995 and 1994, the Company made federal income tax payments to the Parent amounting to $19,952,000, $10,225,000 and $16,020,000, respectively. At April 30, 1996 and 1995, prepaid expenses and other current assets included a receivable of $563,000 and accrued taxes payable included a payable of $438,000 to the Parent, respectively. These data are in accordance with the tax sharing arrangement described in Note 6. Note 4-Investments: Trading Securities: Securities held by Value Line Securities, Inc. had an aggregate cost of $48,066,000 and $40,767,000 and a market value of $64,314,000 and $48,187,000 at April 30, 1996 and April 30, 1995, respectively. Short-Term Securities Available for Sale: Short-term securities available for sale consists of Value Line, Inc.'s holdings in the following securities: Federal National Mortgage Association (FNMA), floating rate notes due August 5, 1997; par value $30,325,000. Federal Farm Credit Bank (FFCB), floating rate notes due February 12, 1997; par value $10,000,000. The market value of the Company's holdings in the FNMA and FFCB, which approximates cost, at April 30, 1996 was $29,831,000 and $9,850,000 and at April 30, 1995 was $29,438,000 and $9,661,000, respectively. These notes were purchased at a discount from their respective face values. The accretion of this discount has been included as an addition to the cost of the securities and reflected as interest income in the Consolidated Statements of Income and Retained Earnings. Long-Term Securities Available for Sale: The aggregate cost of the long-term securities was $142,456,000 and $104,749,000 and the market value was $177,734,000 and $118,013,000 at April 30, 1996 and April 30, 1995, respectively. The change in gross unrealized gains on these securities of $22,014,000 and $13,264,000, net of the change in deferred taxes of $7,705,000 and $4,642,000, were included in shareholders' equity at April 30, 1996 and 1995, respectively. Realized gains from the sales of these securities were $3,581,000 and realized losses were $5,306,000 during fiscal years 1996 and 1995, respectively. The proceeds received from sales of these securities during the fiscal year ended April 30, 1996 were $18,085,000 and $46,934,000 during the fiscal year ended April 30, 1995, respectively. At April 30, 1994, these securities were recorded at the lower of aggregate cost or market. For the years ended April 30, 1996, 1995 and 1994, Income from securities transactions, net consisted of $5,275,000, $4,938,000 and $5,094,000 of dividend income; $20,814,000, $396,000 and $11,789,000 of net realized capital gains; $2,758,000, $1,912,000 and $56,000 of interest income; and $2,148,000, $1,865,000 and $183,000 of related interest expense, respectively. Net income from securities transactions also included $9,197,000 and $3,279,000 of unrealized gains for the year's ended April 30, 1996 and 1995, respectively and $1,060,000 of unrealized losses on marketable securities for the year ended April 30, 1994. Note 5-Property and Equipment: Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements, over the remaining terms of the leases. For income tax purposes, depreciation of furniture and equipment is computed using accelerated methods and buildings and leasehold improvements are depreciated over prescribed, extended tax lives. Property and equipment consisted of the following: April 30, 1996 1995 ------------------- (in thousands) Land $785 $59 Building and leasehold improvements 6,695 3,442 Furniture and equipment 11,020 9,789 ------------------- 18,500 13,290 Accumulated depreciation and amortization (6,380) (5,368) ------------------- $12,120 $7,922 ------------------- ------------------- During January 1996, the Company purchased for cash an approximately 85,000 square foot warehouse facility for $4,100,000 under a newly formed subsidiary, Value Line Distribution Center, Inc. The new facility will house the distribution operations for the various Company publications and the fulfillment operations of the Compupower Corporation. The remaining building capacity will provide warehouse storage, a disaster recovery site and will provide for future business expansion. Note 6-Federal, State and Local Income Taxes: The Company computes its tax in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The provision for income taxes includes the following: Years ended April 30, 1996 1995 1994 ------------------------------------ (in thousands) Current: Federal $18,612 $10,733 $15,676 State and local 3,852 3,765 4,102 ------------------------------------ 22,464 14,498 19,778 Deferred: Federal 4,034 795 (523) State and local 172 (142) 13 ------------------------------------ 4,206 653 (510) ------------------------------------ $26,670 $15,151 $19,268 ------------------------------------ Deferred taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. The tax effect of temporary differences giving rise to the Company's deferred tax (liability)/asset are as follows: Years ended April 30, 1996 1995 1994 ---------------------------------- (in thousands) Unrealized gains on securities held for sale ($12,347) ($4,642) - Unrealized gains on trading securities (5,661) (2,489) (1,279) Relocation reserve 220 263 675 Depreciation (572) (363) (393) Deferred charges 959 770 267 Accretion of securities under repurchase agreements (319) - - Other, net 42 694 258 ----------------------------------- ($17,678) ($5,767) ($472) ----------------------------------- ----------------------------------- Included in accrued taxes payable in current liabilities in the Consolidated Balance Sheets are deferred federal tax liabilities of $4,664,000 and $1,373,000 at April 30, 1996 and 1995, respectively. Also included in accrued taxes payable are deferred state and local tax benefits of $241,000 and $413,000 at April 30, 1996 and 1995, respectively. The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pretax income as a result of the following: Years ended April 30, 1996 1995 1994 ---------------------------- (in thousands) Tax expense at the U.S. statutory rate $24,016 $13,458 $16,917 Increase (decrease) in tax expense from: State and local income taxes, net of federal income tax benefit 2,611 2,351 2,670 Effect of tax exempt income and dividend deductions (586) (684) (768) Other, net 629 26 449 ------------------------------ $26,670 $15,151 $19,268 ------------------------------ ------------------------------ The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing arrangement which requires it to make tax payments to the Parent equal to the Company's liability as if it filed a separate return. Note 7-Employees' Profit Sharing and Savings Plan: Substantially all employees of the Company and its subsidiaries are members of the Value Line, Inc. Profit Sharing and Savings Plan (the "Plan"). In general, this is a qualified, contributory plan which provides for a discretionary annual Company contribution which is determined by a formula based upon the salaries of eligible employees and the amount of consolidated net operating income as defined in the Plan. Plan expense, included in salaries and employee benefits in the Consolidated Statements of Income and Retained Earnings, for the years ended April 30, 1996, 1995 and 1994 was $1,331,000, $968,000 and $1,470,000, respectively. Note 8-Incentive Stock Options: On April 17, 1993, the Incentive Stock Option Plan expired. On the date of expiration, 22,550 options available for grant were cancelled. Information on the 1983 Incentive Stock Option Plan for the three years ended April 30, 1996, is as follows: Number of Option Shares Prices --------- ---------- Outstanding at May 1, 1993 10,200 $17.00 to $29.75 Granted - Exercised (3,950) $17.00 to $20.00 Cancelled - ---------- Outstanding at April 30, 1994 6,250 $17.50 to $29.75 Granted - Exercised - Cancelled - ---------- Outstanding at April 30, 1995 6,250 17.50 to $29.75 Granted - Exercised (1,625) $17.50 to $29.75 Cancelled - --------- Outstanding at April 30, 1996 4,625 17.50 to $29.75 --------- --------- Options outstanding at April 30, 1996 expire at various dates through March 2003. At April 30, 1996, 3,375 of the outstanding options were exercisable. Of the common stock held in treasury at April 30, 1995, 4,625 shares were held for exercise of stock options. Note 9-Treasury Stock: Treasury stock, at cost, for the three years ended April 30, 1996, consists of the following: Shares Amount -------- ------------- (in thousands) Balance May 1, 1993 28,600 $550 Exercise of incentive stock options (3,950) (76) -------- ------------ Balance April 30, 1994 24,650 474 Exercise of incentive stock options - - -------- ------------ Balance April 30, 1995 24,650 474 Exercise of incentive stock options (1,625) (31) -------- ------------ Balance April 30, 1996 23,025 $443 -------- ------------ -------- ------------ The Company's Board of Directors authorized the purchase of up to 1,000,000 shares of the Company's common stock from time to time in negotiated transactions. Note 10-Securities Sold under Agreements to Repurchase: On June 28, 1994, the Company entered into short-term agreements to repurchase certain securities sold. These agreements were entered into to repurchase the Federal National Mortgage Association Floating Rate Notes due August 5, 1997 (FNMA), par value $30,325,000, and Federal Farm Credit Bank Floating Rate Notes due February 12, 1997 (FFCB), par value $10,000,000, stated in Note 4. The outstanding balance of the obligations under the repurchase agreements in the aggregate amount of $36,994,000 accrue interest at a stated annual interest rate of 5.3% and mature on May 6, 1996 ($27,899,000) with respect to the FNMA and May 12, 1996 ($9,095,000) for the obligation to repurchase the FFCB securities. During June 1996, the Company sold the FFCB securities and satisfied its obligation under the repurchase agreement. The Company intends to refinance the FNMA obligation on a short term basis. Note 11-Lease Commitments: On June 4, 1993, the Company entered into a 15 year lease agreement that provides new primary office space, replacing the previous lease that expired during the second quarter of fiscal year 1994. The lease includes free rental periods as well as scheduled base rent escalations over the term of the lease. The total amount of the base rent payments is being charged to expense on the straight-line method over the term of the lease. The Company has recorded a Deferred charge on its Consolidated Balance Sheets to reflect the excess of annual rental expense over cash payments since inception of the lease. Future minimum payments, exclusive of forecasted increases in real estate taxes and wage escalations, under operating leases for office space, with remaining terms of one year or more, are as follows: Year ended April 30: (in thousands) 1997 $1,536 1998 1,536 1999 1,784 2000 1,827 2001 1,827 Thereafter 13,195 --------- $21,705 Rental expense for the years ended April 30, 1996, 1995 and 1994 under operating leases covering office space was $1,402,000, $1,481,000 and $2,248,000 respectively. Note 12-Business Segments: The Company operates in two business segments: Investment Periodicals and related Publications, and Investment Management. Identifiable assets consisted of: April 30, 1996 1995 --------------------------------- Identifiable assets: (in thousands) Investment periodicals and related publications $15,902 $11,788 Investment management 271,088 208,930 Corporate assets 46,836 44,280 --------- ---------- Total $333,826 $264,998 ---------- ---------- ---------- ---------- Revenues and income from operations were as follows: Years ended April 30, 1996 1995 1994 ------------------------------ Revenues: (in thousands) Investment periodicals and related publications $58,649 $56,041 $58,005 Intersegment revenues (140) (129) (175) --------------------------------- 58,509 55,912 57,830 Investment management 26,564 23,182 24,220 Settlement of disputed securities trans. 2,054 617 408 --------------------------------- Consolidated revenues $87,127 $79,711 $82,458 Income from operations: Investment periodicals and related publications $15,492 $15,396 $17,285 Investment management 14,940 13,647 14,771 Settlement of disputed securities trans. 2,054 617 408 -------------------------------- Consolidated income from operations $32,486 $29,660 $32,464 -------------------------------- -------------------------------- Note 13-Net Capital: The Company's wholly owned subsidiary, Value Line Securities, Inc. is subject to the net capital provisions of Rule 15c3-1 under the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital of $100,000 and requires that aggregate indebtedness, as defined, shall not exceed fifteen times net capital, as defined. Additionally, dividends may only be declared if aggregate indebtedness is less than twelve times net capital. At April 30, 1996, Value Line Securities', Inc. net capital, as defined, of $50,216,022 exceeded required net capital by $49,241,172 and the ratio of aggregate indebtedness to net capital was .29 to 1. Note 14-Financial Instruments with Off-Balance-Sheet Risk and Concentration of Credit Risk: The Company executes, as agent, securities transactions on behalf of the Value Line mutual funds. If either the mutual fund or a counterparty fail to perform, the Company may be required to discharge the obligations of the nonperforming party. In such circumstances, the Company may sustain a loss if the market value of the security is different from the contract value of the transaction. In the normal course of business, the Company enters into contractual commitments, principally financial futures contracts for securities indices. Financial futures contracts provide for the delayed delivery of financial instruments for which the seller agrees to make delivery at a specified future date, at a specified price or yield. The contract or notional amount of these contracts reflects the extent of involvement the Company has in these contracts. At April 30, 1996, the underlying notional value of such commitments was $11,787,300. Risk arises from the potential inability of counterparties to meet the terms of their contracts and from movements in securities values. The Company limits its credit risk associated with such instruments by entering exclusively into exchange traded futures contracts. No single customer accounted for a significant portion of the Company's sales in 1996, 1995 or 1994, nor accounts receivable for 1996 or 1995. Note 15-Estimated Fair Value of Financial and Derivative Instruments: Statement of Accounting Standards No. 119, "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments," requires disclosure of information regarding derivative instruments, which include financial index futures contracts. Derivative instruments held for trading purposes are reflected at fair value at April 30, 1996. The fair value and the average fair value of derivative instruments at April 30, 1996 and for the year then ended consists of liabilities of $128,600 and $138,957, respectively. Net trading gains related to equity securities aggregated $18,622,301 for the year ended April 30, 1996. Net trading losses related to derivative financial instruments amounted to $1,525,168 for the year ended April 30, 1996. Note 16-Mutual Fund Support Expenses: On June 28, 1994, the Company purchased, as part of its investment management operations for which it receives fee income, U.S. Government Agency notes with a market value as of that date of $38,615,000 from the Value Line Cash Fund, for which it is the investment adviser. In order to maintain a $1.00 per share net asset value, as part of the same transaction, the Company reimbursed the Value Line Cash Fund $1,550,000 for losses the Fund incurred on the sale which the Company may recoup in the future. Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 4,000 AAR CORP $82,198 $81,500 2,600 ABR INFORMATION SVCS INC 123,955 162,500 3,000 ABT BLDG PRODS CORP 63,750 61,500 4,000 ACXIOM CORP 113,000 110,000 4,000 ADAC LABS 56,700 65,500 2,600 ADAPTEC INC 154,375 149,500 5,050 ADVANTA CORP 125,408 282,169 5,500 AIR EXPRESS INTL CORP 105,875 154,000 2,000 ALLIED GROUP INC 76,000 71,750 3,000 ALLIED PRODS CORP DEL 47,430 79,125 8,400 ALLIED SIGNAL INC 357,932 488,250 1,800 ALLSTATE CORP 70,254 69,975 10,200 AMERICAN BANKERS INS GROUP INC 291,925 402,900 6,100 AMERICAN EXPRESS CO 234,054 295,850 4,200 AMERICAN INTL GROUP INC 226,639 383,775 6,000 AMERICAN TRAVELLERS CORP 120,000 117,000 7,100 AMGEN INC 341,700 408,250 5,200 APTARGROUP INC 192,479 195,650 6,100 AUSPEX SYS INC 78,538 118,187 5,000 AUTOMATIC DATA PROCESSING INC 140,813 194,375 2,000 AVERY DENNISON CORP 107,536 114,000 13,100 AVONDALE INDS INC 182,200 250,537 10,000 BAKER HUGHES INC 269,170 317,500 11,600 BALLY ENTERTAINMENT GROUP 109,921 242,150 5,000 BECTON DICKINSON + CO 270,311 403,125 5,000 BED BATH + BEYOND INC 179,125 295,312 4,000 BEL FUSE INC 64,700 74,500 10,000 BENTON OIL + GAS CO 147,000 175,000 8,000 BLOUNT INTL INC 165,653 248,000 3,000 BMC SOFTWARE INC 160,000 182,625 5,900 BOSTON SCIENTIFIC CORP 167,308 254,437 6,600 CABOT CORP 151,337 176,550 10,000 CALENERGY INC 251,748 260,000 300 CALLAWAY GOLF CO 7,359 8,025 3,600 CAMPBELL SOUP CO 147,583 225,000 5,000 CARDINAL HEALTH INC 288,425 313,750 4,000 CARNIVAL CORP 113,740 116,000 2,400 CASCADE COMMUNICATIONS CORP 142,280 240,600 5,900 CASEYS GEN STORES INC 138,827 127,219 Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 11,800 CATO CORP NEW 109,150 112,100 24,300 CENTERIOR ENERGY CORP 271,067 167,062 4,000 CERIDIAN CORP 131,120 191,000 3,000 CHESAPEAKE ENERGY CORP 128,262 212,250 4,000 CHRONIMED INC 82,200 99,500 5,200 CINCINNATI BELL INC 127,802 256,100 4,200 CNA FINL CORP 409,101 408,450 400 COASTAL CORP 11,412 15,850 6,500 COCA COLA CO 253,898 529,750 2,000 COGNOS INC 115,600 135,500 6,000 COHERENT INC 102,750 321,750 12,100 COMPUTER ASSOC INTL INC 578,892 887,837 6,600 COMPUTER DATA SYS INC 95,743 117,150 2,000 COMPUTER SCIENCES CORP 80,165 148,000 6,150 CONMED CORP 100,721 182,962 8,600 CONSECO INC 277,146 313,900 4,800 CRANE CO 167,388 199,200 1,800 CSX CORP 93,033 92,250 4,000 CTS CORP 106,782 167,000 7,000 CURATIVE TECHNOLOGIES INC 138,475 156,625 23,800 DANAHER CORP 554,790 937,125 5,000 DANKA BUS SYS 217,375 240,000 7,000 DATA GEN CORP 89,470 107,625 2,200 DEERE + CO 60,064 85,525 18,000 DIGITAL SYS INTL INC 270,402 355,500 10,700 DIONEX CORP 248,275 391,888 1,600 DISNEY WALT CO 88,048 99,200 9,000 DOVER CORP 292,195 463,500 3,300 DU PONT E I DE NEMOURS + CO 192,174 265,237 4,000 DURIRON INC 101,000 105,000 8,500 DYNATECH CORP 177,000 218,875 6,000 EAGLE HARDWARE AND GRODEN 68,250 60,750 8,000 ECKERD CORP DEL 330,896 382,000 17,000 EQUIFAX INC 279,123 414,740 10,800 FEDERAL NATL MTG ASSN 296,744 330,750 6,600 FIFTH THIRD BANCORP 233,125 364,650 3,000 FINOVA GROUP INC 137,055 166,500 2,900 FISERV INC 71,150 88,450 7,800 FLUOR CORP 398,859 515,775 Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 4,000 FOSTER WHEELER CORP 165,908 185,000 14,500 GAP INC 364,123 436,812 12,000 GENERAL COMMUNICATION INC 96,228 93,000 6,000 GENERAL MTRS CORP 258,580 325,500 7,000 GENERAL NUTRITION COS INC 132,938 136,500 1,500 GENETICS INST INC 108,750 106,500 12,000 GENRAD INC 152,720 181,500 10,800 GLEASON CORP 437,724 425,250 2,200 GLENAYRE TECHNOLOGIES INC 102,850 102,850 19,000 GLOBAL MARINE INC 103,075 216,125 6,800 GOODRICH B F CO 204,527 270,300 2,600 GREAT ATLANTIC + PAC TEA INC 91,806 90,675 15,400 HALLIBURTON CO 547,992 883,575 2,400 HARLEY DAVIDSON INC 103,481 105,900 3,000 HBO + CO 111,900 356,250 600 HEALTHSOUTH CORP 22,368 22,275 11,000 HENRY JACK + ASSOC INC 289,718 345,125 5,000 HERBALIFE INTL INC 65,000 65,000 13,000 HERTIAGE MEDIA CORP 212,244 498,875 4,200 HEWLETT PACKARD CO 401,976 444,675 5,000 HFS INC 137,213 256,875 2,200 HILTON HOTELS CORP 211,344 232,100 4,000 HOLOGIC INC 113,000 118,000 2,400 HOME DEPOT INC 91,082 113,700 4,100 HOUSEHOLD INTL INC 197,071 283,413 2,600 IDEXX LABS INC 118,950 115,700 4,600 ILLINOIS TOOL WKS INC 189,414 309,350 5,000 INPUT/OUTPUT INC 141,177 173,750 4,000 INTEL CORP 271,500 271,000 4,800 INTERNATIONAL BUSINESS MACHS 390,244 516,000 4,000 INTERVOICE INC 107,000 112,000 29,500 INVACARE CORP 638,991 767,000 8,000 JABIL CIRCUIT INC 86,400 94,000 21,700 JLG INDS INC 307,163 1,182,650 12,103 JOHNSON + JOHNSON 488,821 1,119,527 4,000 JONES APPAREL GROUP INC 148,448 205,500 6,000 KROGER CO 233,610 246,750 4,100 LA QUINTA INNS INC 100,591 119,925 2,000 LCS INDS COM NEW 41,100 52,500 Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 3,000 LEADER FINL CORP 107,250 132,000 5,200 LIZ CLAIBORNE 148,712 189,150 2,200 LOEWS CORP 139,178 167,750 3,800 LOGICON INC 110,257 113,050 12,000 LONGHORN STEAKS INC 294,600 325,500 5,000 LORAL SPACE + COMMUNICATIONS 37,338 71,875 3,000 LSI INDS INC 50,400 55,500 800 LUXOTTICA GROUP S P A 61,124 64,400 13,500 MANPOWER INC WIS 379,805 499,500 4,000 MARRIOT INTL INC 186,356 195,000 4,000 MASLAND CORP 78,500 81,500 8,125 MATTEL INC 132,282 211,250 10,100 MBNA CORP 182,290 286,587 11,200 MCDONALDS CORP 327,793 536,200 3,600 MCDONNELL DOUGLAS CORP 75,972 347,400 7,600 MDL INFORMATION SYS INC 131,600 210,900 3,100 MEDIC COMPUTER SYS INC 140,430 289,850 11,100 MEDTRONIC INC 358,451 589,687 2,000 MERCANTILE STORES INC 118,620 124,750 6,900 MERCK + CO INC 301,907 417,450 9,200 MERIDIAN DATA INC 146,860 159,850 3,600 MGIC INVT CORP WIS 185,968 195,300 12,000 MICROGRAFX INC 197,250 192,000 600 MICROSOFT CORP 32,625 68,025 3,000 MILLER HERMAN INC 89,625 91,875 6,900 MIRAGE RESORTS INC 164,677 361,387 19,300 MONEY STORE INC 452,276 487,325 10,000 MTS SYS CORP 169,500 210,000 6,000 MYLEX CORP 127,386 146,250 13,950 NATIONAL DATA CORP 249,731 491,737 20,000 NATIONAL ED CORP 154,900 297,500 5,100 NATIONSBANK CORP 261,303 406,725 3,000 NATURES SUNSHINE PRODS INC 69,000 75,000 4,000 NCI BLDG SYS INC 94,200 145,000 4,448 NELLCOR PURITAN BENNETT INC 132,050 217,952 8,500 NIKE INC 432,930 743,750 6,000 NOBLE DRILLING CORP 58,128 90,000 5,100 NORWEST CORP 113,668 184,238 14,300 OAKWOOD HOMES CORP 549,135 638,138 Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 4,000 OEC MED SYS INC 51,240 46,000 9,000 OLYMPIC FINL LTD 183,665 200,250 3,400 OMNICARE INC 178,928 204,000 12,000 OMNICOM GROUP 302,610 520,500 4,500 ORACLE SYS CORP 146,250 151,875 9,000 ORCHARD SUPPLY HARDWARE 186,242 239,625 20,000 ORNDA HEALTHCORP 352,500 550,000 4,800 OXFORD HEALTH PLANS INC 183,100 242,400 2,000 PAIRGAIN TECHNOLOGIES INC 111,000 191,000 16,300 PARK ELECTROCHEMICAL CORP 524,126 407,500 8,000 PARTNERRE LTD 240,000 226,000 4,000 PENNCORP FINL GROUP INC 105,740 122,500 2,000 PEOPLESOFT INC 92,000 126,000 11,100 PEPSICO INC 475,359 704,850 3,300 PETSMART INC 122,925 146,437 12,800 PFIZER INC 557,234 881,600 8,100 PHILIP MORRIS COS INC 731,240 730,013 4,400 PHP HEALTHCARE CORP 137,489 134,200 20,000 PHYSICIANS COMPUTER NETWORK IN 187,750 225,000 12,500 PRAXAIR INC 259,897 482,812 11,000 PRICE COSTCO INC 190,625 209,000 4,100 PRIDE PETE SVCS INC 36,387 67,137 5,500 PRIMARK CORP 166,347 195,250 14,000 PROTOCOL SYS INC 208,134 273,000 18,200 QUICK + REILLY GROUP INC 474,558 555,100 4,000 QUIKSILVER INC 116,500 152,000 2,000 QUINTILES TRANSNATIONAL CORP 118,600 146,500 3,000 RAYCHEM CORP 155,405 233,625 8,000 READING + BATES CORP 152,480 196,000 3,000 REGIS CORP MINNESOTA 70,500 110,625 10,000 RENAL TREATMENT CTRS INC 129,750 290,000 4,000 RESOUND CORP 52,700 49,500 3,000 RESPIRONICS INC 66,900 65,578 2,200 REYNOLDS + REYNOLDS CO 102,075 102,076 8,300 RICHFOOD HLDGS INC 182,849 270,787 3,000 ROBERT HALF INTL INC 123,555 172,500 8,800 ROSS STORES INC 269,350 303,600 4,000 SAFESKIN CORP 88,200 117,000 27,200 SAFEWAY INC 523,116 918,000 Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 3,100 SANIFILL INC 99,773 134,462 8,500 SCHERING PLOUGH CORP 285,371 487,687 3,100 SCI SYS INC 94,162 132,912 4,000 SEACOR HLDGS INC 134,700 165,000 6,000 SHAW GROUP INC 83,550 117,750 11,500 SHELL CDA LTD 354,582 392,765 7,700 SHOWBIZ PIZZA TIME INC 171,512 167,475 1,600 SKYLINE CORP 38,848 39,200 5,800 SMITH INTL INC 97,098 172,550 7,000 SODAK GAMING INC 164,350 180,250 6,400 SONAT OFFSHORE DRILLING INC 274,917 351,200 6,000 SOUTHERN ENERGY HOMES INC 104,550 105,750 7,000 SPECTRAN CORP 74,725 88,812 4,400 SPRINT CORP 136,148 185,350 12,000 STAPLES INC 120,000 228,000 3,000 STAR BANC CORP 118,665 197,625 4,800 STERLING SOFTWARE INC. 179,688 373,200 8,000 STRUCTURAL DYNAMICS RESH CORP 195,500 255,000 2,400 STURM RUGER + CO INC 96,144 96,900 23,200 SUN ENERGY PARTNERS L P 103,864 98,600 4,000 SUN MICROSYSTEMS INC 140,500 217,000 8,800 SUNAMERICA INC 366,755 479,600 4,000 SUNDSTRAND CORP 126,620 147,000 6,300 SUNTRUST BKS INC 324,476 444,150 8,000 SYMBOL TECHNOLOGIES INC 206,416 370,000 6,900 SYSCO CORP 186,269 221,662 21,000 SYSTEM SOFTWARE ASSOC INC 463,942 501,375 6,000 TECHNE CORP 158,480 168,000 1,600 TELECOM CORP OF NEW ZEALAND 106,096 108,000 8,100 TEXAS INDS INC 419,418 518,400 3,700 TEXAS INSTRS INC 246,737 209,050 3,500 THERMEDICS INC 102,585 105,875 4,800 THERMO ELECTRON CORP 289,344 295,800 5,200 TIDEWATER INC 165,612 221,000 6,100 TRAVELERS GROUP INC 380,670 375,150 5,000 TSI INC MINN 89,000 91,250 15,100 UNICOM CORP 492,240 415,250 4,800 UNION CARBIDE CORP 144,256 218,400 4,900 UNITED DOMINION INDS LTD 87,622 117,600 Value Line, Inc Schedule I - Marketable Securities Shares Common Stock Name Cost Market 3,600 UNITED HEALTHCARE CORP 224,658 210,600 20,000 UNIVERSAL ELECTRS INC 191,500 210,000 4,000 UNIVERSAL HEALTH SVCS INC 203,698 222,000 7,200 US FACS CORP 131,952 132,300 9,600 USF + G CORP 133,725 152,400 5,200 UST INC 146,526 166,400 2,500 USX U S STL GROUP 82,075 82,500 6,200 VALMONT INDS INC 129,750 198,400 1,800 VIKING OFFICE PRODS INC 106,425 106,875 4,000 VIVUS 112,700 121,000 6,700 WABAN INC 166,863 164,150 6,000 WHOLE FOODS MKT INC 99,750 122,250 15,900 WILLIAMS COS INC 696,690 812,887 2,000 WISCONSIN CENT TRANSN CORP 150,600 169,000 11,300 WOLVERINE WORLD WIDE INC 236,665 348,887 6,000 WOODHEAD INDUSTRIES 94,500 93,000 11,500 WORLDCOM INC GA 433,437 540,500 5,000 XIRCOM INC 75,625 81,625 4,000 ZALE CORP NEW 69,500 74,500 500 ZIONS BANCORP 34,140 37,250 4,000 ZOLL MED CORP 62,200 58,000 6,000 ZOOM TELEPHONICS INC 115,548 138,094 ----------- ----------- $48,066,092 $64,313,698 =========== =========== Value Line, Inc. Schedule XIII - Other Investments
Historical Mutual Fund Investments Cost Market Value The Value Line Fund, Inc. $18,330,707 $25,266,394 The Value Line Special Situations Fund, Inc. 5,214,484 6,857,773 The Value Line Income Fund, Inc. 4,622,975 6,157,892 Value Line Leveraged Growth Investors, Inc. 26,141,088 36,667,269 Value Line U.S. Government Securities Fund, Inc. 2,787,569 2,751,085 The Value Line Tax Exempt Fund, Inc., High Yield Portfolio 11,323,692 11,623,921 Value Line Convertible Fund, Inc. 10,832,698 12,314,635 Value Line Aggressive Income Trust 4,723,333 4,915,617 Value Line New York Tax Exempt Trust 3,715,427 3,689,899 Value Line Intermediate Bond Fund Inc. 9,260,554 9,032,780 Value Line Small-Cap Growth Fund 8,360,490 11,739,281 Value Line Asset Allocation Fund, Inc. 28,014,279 36,637,666 Value Line US Multinational Company Fund 9,128,400 10,079,940 -------------------------------- Total $142,455,696 $177,734,152 ================================
EX-99.3-2 2 EXHIIBT 99.3.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF VALUE LINE, INC. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The following Amendment to the Certificate of Incorporation was authorized by a vote of the Board of Directors on July 19, 1989 and adopted by the shareholders on October 5, 1989. 1. The name of the corporation (the "Corporation") under which this Corporation was formed is Eulav Services, Inc. 2. The Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State on October 29, 1982. 3. The Certificate of Incorporation of the Corporation is hereby amended to effect certain changes authorized by Section 402 of the Business Corporation Law relating to Directors liability. 4. The Certificate of Incorporation is hereby amended by adding after Article "EIGHTH" of the Certificate of Incorporation Article "NINTH" of the Certificate of Incorporation which shall read as follows: 99 "NINTH: No Director of the Corporation shall be personally liable to the Corporation or its shareholders for damages for any breach of duty in such capacity, except for gross negligence and to the extent that such elimination or limitation of liability is expressly prohibited by the Business Corporation Law of the State of New York. No amendment, modification or repeal of this Article shall adversely affect any right or protection of any director that exists at the time of such amendment, modification or repeal." IN WITNESS WHEREOF, I have made and signed this certificate this 24th day of October, 1989 an I affirm the statements contained therein are true under penalties of perjury. By: /s/Thomas J. Sexton --------------------------------- Thomas J. Sexton - Vice President By: /s/Rodd M. Baxter --------------------------------- Rodd M. Baxter - Secretary 100 EX-99.10-10 3 EXHIBIT 99.10.10 VALUE LINE, INC. PROFIT SHARING AND SAVINGS PLAN As amended and restated effective May 1, 1989 Including amendments through August 10, 1995 VALUE LINE, INC. PROFIT SHARING AND SAVINGS PLAN TABLE OF CONTENTS PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.01 "Account". . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.02 "Administrative Committee" . . . . . . . . . . . . . . . . . . 2 1.03 "Affiliated Company" . . . . . . . . . . . . . . . . . . . . . 2 1.04 "Beneficiary". . . . . . . . . . . . . . . . . . . . . . . . . 2 1.05 "Benefit Commencement Date". . . . . . . . . . . . . . . . . 2 1.06 "Board of Directors" . . . . . . . . . . . . . . . . . . . . 2 1.07 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.08 "Company". . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.09 "Compensation" . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 "Eligible Employee". . . . . . . . . . . . . . . . . . . . . 3 1.11 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.12 "Employer Contribution". . . . . . . . . . . . . . . . . . . 3 1.13 "Entry Date" . . . . . . . . . . . . . . . . . . . . . . . . 3 1.14 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 "Investment Fund". . . . . . . . . . . . . . . . . . . . . . 3 1.16 "Member" . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.17 "Normal Retirement Age". . . . . . . . . . . . . . . . . . . 3 1.18 "Participating Employer" . . . . . . . . . . . . . . . . . . 4 1.19 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.20 "Plan Year". . . . . . . . . . . . . . . . . . . . . . . . . 4 1.21 "Total Disability" . . . . . . . . . . . . . . . . . . . . . 4 1.22 "Trust Agreement". . . . . . . . . . . . . . . . . . . . . . 4 1.23 "Trust Fund" . . . . . . . . . . . . . . . . . . . . . . . . 4 1.24 "Trustee". . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.25 "Valuation Date" . . . . . . . . . . . . . . . . . . . . . . 4 1.26 "Voluntary Contribution" . . . . . . . . . . . . . . . . . . 4 ARTICLE 2 DEFINITIONS AND RULES FOR DETERMINING SERVICE . . . . . . . 5 2.01 "Approved Absence" . . . . . . . . . . . . . . . . . . . . . 5 2.02 "Break in Service" . . . . . . . . . . . . . . . . . . . . . 5 2.03 "Eligibility Computation Period" . . . . . . . . . . . . . . 5 2.04 "Employment Commencement Date" . . . . . . . . . . . . . . . 5 2.05 "Hours of Service" . . . . . . . . . . . . . . . . . . . . . 5 2.06 "Maternity or Paternity Leave of Absence". . . . . . . . . . 6 i 2.07 "Month of Service" . . . . . . . . . . . . . . . . . . . . . 6 2.08 "Vesting Computation Period" . . . . . . . . . . . . . . . . 6 2.09 "Year of Service". . . . . . . . . . . . . . . . . . . . . . 6 2.10 Rules for Crediting Service After a Break in Service.. . . . 6 ARTICLE 3 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 8 3.01 Eligibility to Participate . . . . . . . . . . . . . . . . . . 8 3.02 Commencement of Participation. . . . . . . . . . . . . . . . 8 3.03 Break in Service Before Participation. . . . . . . . . . . . 8 3.04 Break in Service After Participation . . . . . . . . . . . . 8 3.05 Cessation of Participation . . . . . . . . . . . . . . . . . 8 ARTICLE 4 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 9 4.01 Employer Contributions . . . . . . . . . . . . . . . . . . . 9 4.02 Voluntary Contributions . . . . . . . . . . . . . . . . . . . 9 ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS. . . . . . . . . . . . . . . . 10 5.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 10 5.02 Limitations on Voluntary Contributions Applicable to Highly Compensated Employees . . . . . . . . . . . . . . . . . . . 11 5.03 Correction of Excess Voluntary Contributions . . . . . . . . 12 5.04 Limitations on Contributions Applicable to All Members . . . 12 5.05 Reduction of Excess Annual Additions . . . . . . . . . . . . 13 5.06 Deduction Limitation Applicable to Employer Contributions. . 13 ARTICLE 6 MEMBERS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . 14 6.01 Separate Accounts. . . . . . . . . . . . . . . . . . . . . . 14 6.02 Contributions to Account . . . . . . . . . . . . . . . . . . 14 6.03 Valuation of Accounts. . . . . . . . . . . . . . . . . . . . 14 6.04 Segregated Accounts. . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 7 TRUST FUND AND INVESTMENT OF ACCOUNTS . . . . . . . . . . . 15 7.01 Trust Fund and Trustee . . . . . . . . . . . . . . . . . . . 15 7.02 Investment Funds . . . . . . . . . . . . . . . . . . . . . . 15 7.03 Investment Direction . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 8 VESTING AND FORFEITURE. . . . . . . . . . . . . . . . . . . 17 8.01 Voluntary Contribution Account . . . . . . . . . . . . . . . 17 8.02 Employer Contribution Account. . . . . . . . . . . . . . . . 17 8.03 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . 17 ii 8.04 Restoration of Forfeitures . . . . . . . . . . . . . . . . . 17 8.05 Application of Forfeitures . . . . . . . . . . . . . . . . . 18 8.06 Change in Vesting Schedule . . . . . . . . . . . . . . . . . 18 ARTICLE 9 LOANS TO MEMBERS. . . . . . . . . . . . . . . . . . . . . . 19 9.01 General. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 9.02 Eligibility for Loan . . . . . . . . . . . . . . . . . . . . 19 9.03 Maximum Loan Amount. . . . . . . . . . . . . . . . . . . . . 20 9.04 Loan Terms . . . . . . . . . . . . . . . . . . . . . . . . . 20 9.05 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 20 9.06 Treatment of Loan Payments . . . . . . . . . . . . . . . . . 21 9.07 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 9.08 Termination of Employment . . . . . . . . . . . . . . . . . .21 ARTICLE 10 WITHDRAWALS OF VOLUNTARY CONTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . 22 10.01 Withdrawals of Voluntary Contributions. . . . . . . . . . . 22 10.02 General Rules Applying to Withdrawals . . . . . . . . . . . 22 ARTICLE 11 DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT. . . . . . . 23 11.01 Termination of Employment Prior to Normal Retirement Age. . 23 11.02 Termination of Employment At or After Normal Retirement Age 23 11.03 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 11.04 Form of Payment Following Termination of Employment - Members With Hire Dates Prior to May 1, 1995 . . . . . . . . . . . 24 11.05 Form of Payment of Death Benefits . . . . . . . . . . . . . 25 11.06 Form of Payment - Members with Hire Dates on or After May 1, 1995. . . . . . . . . . . . . . . . . . . . . 25 11.07 Direct Transfer of Eligible Rollover Distribution . . . . . 25 11.08 Beneficiary Designation . . . . . . . . . . . . . . . . . . 25 11.09 Married Members - Waiver of Joint and Survivor Annuity . . 26 11.10 Rules Applying to Installment Distributions . . . . . . . . 27 11.11 Mandatory Distribution. . . . . . . . . . . . . . . . . . . 27 ARTICLE 12 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 28 12.01 Plan Administrator. . . . . . . . . . . . . . . . . . . . . 28 12.02 Administrative Committee's Authority and Powers . . . . . . 28 12.03 Delegation of Duties. . . . . . . . . . . . . . . . . . . . 28 12.04 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 28 12.05 Compensation. . . . . . . . . . . . . . . . . . . . . . . . 29 12.06 Exercise of Discretion. . . . . . . . . . . . . . . . . . . 29 12.07 Fiduciary Liability . . . . . . . . . . . . . . . . . . . . 29 12.08 Indemnification by Participating Employers. . . . . . . . . 29 52 12.09 Plan Participation by Fiduciaries . . . . . . . . . . . . . 30 12.10 Missing Persons . . . . . . . . . . . . . . . . . . . . . . 30 12.11 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE 13 AMENDMENT AND TERMINATION OF PLAN. . . . . . . . . . . . . 31 13.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 31 13.02 Right to Terminate Plan . . . . . . . . . . . . . . . . . . 31 13.03 Consequences of Termination . . . . . . . . . . . . . . . . 31 ARTICLE 14 PARTICIPATION BY AFFILIATED COMPANIES. . . . . . . . . . . 32 14.01 Participation . . . . . . . . . . . . . . . . . . . . . . . 32 14.02 Delegation of Powers and Authority. . . . . . . . . . . . . 32 14.03 Termination of Participation. . . . . . . . . . . . . . . . 32 ARTICLE 15 TOP-HEAVY PLAN PROVISIONS. . . . . . . . . . . . . . . . . 34 15.01 Applicability . . . . . . . . . . . . . . . . . . . . . . . 34 15.02 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 34 15.03 Vesting Requirement and Schedule. . . . . . . . . . . . . . 36 15.04 Minimum Contribution. . . . . . . . . . . . . . . . . . . . 36 15.05 Compensation Limitation . . . . . . . . . . . . . . . . . . 37 15.06 Aggregate Limit on Contributions and Benefits for Key Employees . . . . . . . . . . . . . . . . . . . . . . . . .37 ARTICLE 16 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 38 16.01 Trust Fund Sole Source of Payments for Plan . . . . . . . . 38 16.02 Exclusive Benefit . . . . . . . . . . . . . . . . . . . . . 38 16.03 Non-Alienation. . . . . . . . . . . . . . . . . . . . . . . 38 16.04 Qualified Domestic Relations Order. . . . . . . . . . . . . 38 16.05 Employment Rights . . . . . . . . . . . . . . . . . . . . . 38 16.06 Return of Contributions.. . . . . . . . . . . . . . . . . . 39 16.07 Merger, Consolidation or Transfer . . . . . . . . . . . . . 39 16.08 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 39 16.09 Rules of Construction . . . . . . . . . . . . . . . . . . . 39 APPENDIX A RULES APPLYING TO PLAN LOANS . . . . . . . . . . . . . . . A-1 53 VALUE LINE, INC. PROFIT SHARING AND SAVINGS PLAN PURPOSE The purpose of the Value Line, Inc. Profit Sharing and Savings Plan (the "Plan") is to provide eligible employees of Value Line, Inc. (the "Company"), Arnold Bernhard & Co., Inc., and any Affiliated Company which adopts the Plan on behalf of its employees with retirement income through a program of employer contributions and employee voluntary after-tax contributions. The Plan is intended to (1) qualify as a profit-sharing plan for purposes of Sections 401(a), 402, 412, and 417 of the Internal Revenue Code of 1986, as amended (the "Code"), and (2) comply with the requirements of the Employee Retirement Income Security Act of 1974, as amended. The Plan (formerly known as the Arnold Bernhard & Co., Inc. Profit Sharing and Savings Plan) was originally adopted by Arnold Bernhard & Co., Inc. effective May 1, 1951. The Plan was amended and restated effective May 1, 1976; amended effective May 1, 1978; amended and restated effective May 1, 1982, May 1, 1983, May 1, 1984 and May 1, 1985. The Internal Revenue Service issued a favorable determination letter dated June 16, 1987 (File Folder Number 130011445) with respect to the Plan as amended and restated effective May 1, 1985, including amendments adopted on August 10, 1987. This plan document sets forth the provisions of the Plan as amended and restated effective May 1, 1989 except as otherwise specifically provided in the Plan. All issues arising with respect to participation in the Plan prior to May 1, 1989 shall be determined by the terms and provisions of the Plan as in effect prior to May 1, 1989 except as otherwise specifically provided in the Plan. The Internal Revenue Service issued a favorable determination letter dated July 7, 1995 (File Folder Number 133007416) with respect to the Plan as amended and restated effective May 1, 1989, including amendments adopted as of April 30, 1995. This document also includes all amendments to the Plan through August 10, 1995. 54 ARTICLE 1 DEFINITIONS Wherever used herein, the following terms shall have the following meanings: 1.01 "ACCOUNT" means the entire interest of a Member in the Trust Fund and shall include the following subaccounts: (A) "EMPLOYER CONTRIBUTION ACCOUNT" means that portion of the Member's Account attributable to the Employer Contributions made on the Member's behalf by a Participating Employer and the earnings thereon. (B) "VOLUNTARY CONTRIBUTION ACCOUNT" means that portion of the Member's Account attributable to a Member's Voluntary Contributions, if any, and the earnings thereon. (C) "ROLLOVER CONTRIBUTION ACCOUNT" means that portion of the Member's Account attributable to a Member's rollover contributions made prior to May 1, 1995 in accordance with the rollover requirements of Section 402(c) of the Code. 1.02 "ADMINISTRATIVE COMMITTEE" means the committee appointed from time to time by the Board of Directors to administer the Plan in accordance with Article 12. 1.03 "AFFILIATED COMPANY" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 1.04 "BENEFICIARY" means any person entitled to receive payment of a Member's Account pursuant to Section 11.08 as a result of the death of the Member. 1.05 "BENEFIT COMMENCEMENT DATE" means the first day of the first period for which a Participant's Account is payable in the form of an annuity. 1.06 "BOARD OF DIRECTORS" means the Board of Directors of Value Line, Inc. 1.07 "CODE" means the Internal Revenue Code of 1986, as amended. 1.08 "COMPANY" means Value Line, Inc. 1.09 "COMPENSATION" means for any Plan Year a Member's wages as defined in Section 3401(a) of the Code (for purposes of income tax withholding) determined without regard to any rules that limit 55 remuneration included in wages based on the nature or location of the employment or the services performed, subject to the following inclusions and exclusions: (a) excluding bonuses; (b) excluding (even if includible in gross income) reimbursements or other expense allowances, fringe benefits (cash or noncash), moving expenses, deferred compensation, and welfare benefits; and (c) excluding commissions earned in excess of draw, provided, however, that such commissions will be included (i) in the case of a Member whose total of salary plus draw is less than $60,000 (ii) but only to the extent that the total of a Member's salary, draw and such commissions do not exceed $60,000. The maximum amount of Compensation that may be taken into account in any Plan Year shall not exceed the dollar limitation contained in Section 401(a)(17) of the Code in effect as of the beginning of the Plan Year. 1.10 "ELIGIBLE EMPLOYEE" means any Employee employed by a Participating Employer, but excluding (a) any Employee who is covered by a collective bargaining agreement to which a Participating Employer is a party, and which agreement does not provide for participation in the Plan; (b) any Employee who is a nonresident alien and who does not receive any United States source income from the Company or any Affiliated Company; and (c) any individual who is a "leased employee" within the meaning of Section 414(n)(2) of the Code. 1.11 "EMPLOYEE" means any individual who is a "common-law employee" of the Company or an Affiliated Company. 1.12 "EMPLOYER CONTRIBUTION" means the contribution made by a Participating Employer on behalf of Members as described in Section 4.01. 1.13 "ENTRY DATE" means each April 30 and October 31. 1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.15 "INVESTMENT FUND" means one or more of the investment vehicles made available to Members for investment of their Accounts pursuant to Article 7. 1.16 "MEMBER" means any Eligible Employee or former Eligible Employee who has met the participation requirements set forth in Article 3. 56 1.17 "NORMAL RETIREMENT AGE" means (a) with respect to Employees hired prior to May 1, 1995, age 65; and (b) with respect to Employees hired on or after May 1, 1995, the later of age 65 or the completion of 5 Years of Service. 1.18 "PARTICIPATING EMPLOYER" means the Company, Arnold Bernhard & Co., Inc., or any Affiliated Company which is designated as a Participating Employer by the Administrative Committee, and which has adopted the Plan by proper corporate action. 1.19 "PLAN" means the Value Line, Inc. Profit Sharing and Savings Plan. 1.20 "PLAN YEAR" means the 12-consecutive month period beginning each May 1. 1.21 "TOTAL DISABILITY" means a Member's total and permanent disability as determined for purposes of entitlement to Social Security disability benefits. 1.22 "TRUST AGREEMENT" means the agreement between the Employer and the Trustee under which the assets are held, administered and managed. 1.23 "TRUST FUND" means all assets under the Plan held by the Trustee. 1.24 "TRUSTEE" means any person, bank, or such other trustee or trustees under the Trust Agreement as may be appointed by the Company to hold, invest and disburse the funds of the Plan. 1.25 "VALUATION DATE" means the last day of each Plan Year, and such other dates as may be determined by the Administrative Committee for valuing the Trust Fund. 1.26 "VOLUNTARY CONTRIBUTION" means the voluntary after-tax contribution made to the Plan by a Member pursuant to Section 4.02. 57 ARTICLE 2 DEFINITIONS AND RULES FOR DETERMINING SERVICE 2.01 "APPROVED ABSENCE" means an Employee's approved leave of absence from employment with the Company or an Affiliated Company because of military service, illness, disability, pregnancy, educational pursuits, service as a juror, or temporary employment with a government agency, or other leave of absence approved by the Company or Affiliated Company. An Approved Absence also includes any leave of absence in accordance with the requirements of the Family and Medical Leave Act of 1993. The Company or Affiliated Company shall determine the first and last days of any Approved Absence. 2.02 "BREAK IN SERVICE" means a 12-consecutive month period during which an Employee fails to complete more than 501 Hours of Service with the Company or an Affiliated Company. Solely for purposes of determining whether an Employee has a Break in Service, Hours of Service shall be recognized during an Approved Absence or a Maternity or Paternity Leave of Absence. During such absence, the Employee shall be credited with the Hours of Service which would have been credited but for the absence, or, if such hours cannot be determined, with eight hours per day. 2.03 "ELIGIBILITY COMPUTATION PERIOD" means (a) the 12-consecutive month period beginning on an Employee's Employment Commencement Date, or (b) in the case of an Employee who fails to complete 1,000 or more Hours of Service during his first Eligibility Computation Period, any Plan Year commencing after the Employee's Employment Commencement Date. 2.04 "EMPLOYMENT COMMENCEMENT DATE" means the first day on which an Employee performs an Hour of Service for the Company or an Affiliated Company. 2.05 "HOURS OF SERVICE" means the following: (a) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, for the performance of duties for the Company or an Affiliated Company. Each such hour shall be credited to the Employee for the computation period or periods in which the duties are performed. (b) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, by the Company or an Affiliated Company on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, disability, layoff, jury duty, government-required military duty, or leave of absence. Each such hour shall be credited to the Employee for the computation period or periods in which such period occurs, subject to the following rules: (i) No more than 501 Hours of Service shall be credited under this paragraph (b) to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period), and 58 (ii) Hours of Service will not be credited under this paragraph (b) for which payment by the Company or an Affiliated Company is made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation, unemployment compensation, or disability insurance laws or where payment solely reimburses the Employee for medical or medically related expenses incurred by the Employee. (c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliated Company. The same Hours of Service shall not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. Hours of Service to be credited to an individual under this Section 2.05 will be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations which is incorporated herein by reference. 2.06 "MATERNITY OR PATERNITY LEAVE OF ABSENCE" means an absence from work by reason of the Employee's pregnancy, birth of a child of the Employee, placement of a child with the Employee in connection with adoption, or any absence for purposes of caring for such a child for a period immediately following such birth or placement. 2.07 "MONTH OF SERVICE" means a calendar month during which an Employee completes at least 83 Hours of Service. 2.08 "VESTING COMPUTATION PERIOD" means a Plan Year. 2.09 "YEAR OF SERVICE" means an Eligibility Computation Period or a Vesting Computation Period Year during which an Employee completes -- (a) at least 1,000 Hours of Service with the Company or an Affiliated Company; or (b) 3 Months of Service during the period February 1 through April 30; provided, however, that an Employee shall be credited with a Year of Service pursuant to this paragraph (b) only with respect to his first year of employment. Notwithstanding the foregoing, this paragraph (b) shall not apply to any Employee whose Employment Commencement Date occurs on or after May 1, 1995. 2.10 RULES FOR CREDITING SERVICE AFTER A BREAK IN SERVICE. If a Member is reemployed by the Company or an Affiliated Company after a Break in Service, the following special rules shall apply in determining his Years of Service: (a) In the case of a Member who is reemployed before the occurrence of 5 consecutive Breaks in Service -- 59 (i) Years of Service completed prior to such break will not be taken into account until the Member has completed a Year of Service following his reemployment; and (ii) both pre-break and post-break Years of Service will count in vesting his pre-break and post-break account balances. (b) In the case of a Member who is reemployed after the occurrence of 5 or more consecutive Breaks in Service (or he is reemployed prior to such occurrence but does not make the repayment provided for in Section 8.04) -- (i) separate Employer Contribution Accounts will be maintained to reflect the Member's pre- break and post-break account balances; and (ii) all Years of Service after such Breaks in Service will be disregarded for the purposes of vesting the pre-break account balance, but both pre-break and post-break Years of Service will count for purposes of vesting the account balance that accrues after such break. 60 ARTICLE 3 PARTICIPATION 3.01 ELIGIBILITY TO PARTICIPATE. Each Eligible Employee who is employed by a Participating Employer shall be eligible to participate in the Plan if he is credited with a Year of Service during an Eligibility Computation Period. 3.02 COMMENCEMENT OF PARTICIPATION. Each Eligible Employee who meets the requirement of Section 3.01 shall become a Member in the Plan commencing as of the first Entry Date coinciding with or next following his completion of such requirements. 3.03 BREAK IN SERVICE BEFORE PARTICIPATION. If an Eligible Employee incurs a Break in Service before he becomes eligible to participate in the Plan and he later is reemployed, he shall be treated as a new Employee at the time of his reemployment for purposes of the participation requirements. 3.04 BREAK IN SERVICE AFTER PARTICIPATION. If an Eligible Employee incurs a Break in Service after he becomes a Member and he later is reemployed, he shall again become a Member in the Plan commencing on his Employment Recommencement Date. 3.05 CESSATION OF PARTICIPATION. An individual will cease to be eligible to participate in the Plan with respect to Employer Contributions and Voluntary Contributions as of the date (a) he ceases to be an Eligible Employee or (b) termination of employment. After such date, he shall continue to be a Member only with respect to the allocation of earnings, losses and expenses made in accordance with Article 6 until the balance credited to his Account is distributed. 61 ARTICLE 4 CONTRIBUTIONS 4.01 EMPLOYER CONTRIBUTIONS. (a) For each Plan Year, a Participating Employer may make Employer Contributions to the Trust Fund in such amount as may be determined by the Administrative Committee in its sole discretion. (b) Employer Contributions shall be allocated to the Employer Contribution Account on behalf of each Member who: (i) is actively employed by a Participating Employer on the last day of the Plan Year and (ii) has been credited with at least 1,000 Hours of Service during the Plan Year. Notwithstanding the foregoing requirements, contributions also shall be made on behalf of Members whose employment was terminated during the Plan Year after attaining age 65 or whose employment was terminated by reason of death or Total Disability. (c) The amount of the Employer Contribution to be allocated to each eligible Member's Account for a Plan Year shall be equal to the ratio that such Member's Compensation for the Plan Year bears to the Compensation for all eligible Members for the Plan Year. (d) Employer Contributions made on behalf of any Member shall be subject to the limitations set forth in Article 5. (e) Employer Contributions shall be paid by a Participating Employer in cash or other property to the Trust Fund not later than the due date (including extensions) prescribed by law for filing the Participating Employer's federal income tax return for the Participating Employer's taxable year for which the Employer Contributions are claimed as an income tax deduction. 4.02 VOLUNTARY CONTRIBUTIONS. (A) A Member may make voluntary non-deductible contributions to the Plan by payroll deduction, lump sum cash payment, or both. In no event shall a Member's Voluntary Contributions for any Plan Year exceed 10% of his Compensation for such Plan Year. (B) A Member's election to make Voluntary Contributions, or to change or suspend such Contributions, shall be made in the form, manner, and in accordance with the notice requirements, prescribed by the Administrative Committee. (C) Voluntary Contributions shall be transferred by a Participating Employer to the Trust Fund as soon as practicable, but in no event later than 90 days after the day on which a Member's Compensation has been reduced with respect to such contribution. (D) Voluntary Contributions shall be subject to the limitations set forth in Article 5. The Administrative Committee may reject, amend or revoke the election of any Member at any 62 time if the Administrative Committee determines that such change or revocation is necessary to insure that the limitations of Article 5 are not exceeded. ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS 5.01 DEFINITIONS. The following definitions shall apply for purposes of this Article 5: (A) "ANNUAL ADDITION" means, effective for Plan Years beginning after December 31, 1986, the sum of the following amounts allocated to a Member's Account during the Limitation Year: (i) employer contributions, (ii) employee contributions, (iii) forfeitures, and (iv) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of the Code. The amount of a Member's Annual Additions shall be determined without regard to the limitations set forth in Section 5.02. (B) "415 COMPENSATION" means wages as defined in Section 3401(a) of the Code and all other payments of compensation to an employee by his employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under Sections 6041(d), 6051(a)(3), and 6052 of the Code. The maximum amount of 415 Compensation that may be taken into account in any Plan Year shall not exceed the dollar limitation contained in Section 401(a)(17) of the Code in effect as of the beginning of the Plan Year. (C) "HIGHLY COMPENSATED EMPLOYEE" means, with respect to any Plan Year beginning after December 31, 1986, (i) any Employee who at any time during the Look-back Year: (A) received 415 Compensation in excess of the dollar limitation contained in Section 414(q)(1)(B) of the Code in effect at the beginning of such year; (B) received 415 Compensation in excess of the dollar limitation contained in Section 414(q)(1)(C) of the Code in effect at the beginning of such year and was a member of the top-paid 20 percent (20%) of Employees during such year; (C) was an officer of the Company or any Affiliated Company and received 415 Compensation during such year greater than 50 percent (50%) of the dollar limitation in effect under Section 415(b)(1)(A) of the Code at the beginning of such year; or (D) was a 5-percent owner. (ii) The term Highly Compensated Employee also means, with respect to any Plan Year, any Employee who, at any time during such Plan Year, (A) is one of the 100 employees who received the most compensation from the Company or any Affiliated Company during the Plan Year, or (B) is a 5-percent owner. (iii) A family member of a Highly Compensated Employee, or former Highly Compensated Employee, shall be treated as a Highly Compensated Employee to the extent required by Section 414(q) of the Code and the regulations thereunder. (iv) The Look-back Year shall be the 12-consecutive month period immediately preceding the Plan Year; provided, however, that the Administrative Committee may elect for any Plan Year to make the Look-back Year calculation on the basis of the calendar year ending with or within such Plan Year in accordance with Section 1.414(q)-1T Q&A-14 of the Income Tax Regulations. (v) The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of employees in the top-paid group, the top 100 employees, the number of employees treated as officers and the compensation that is considered, will be made in accordance with Section 414(q) of the Code and the regulations thereunder. (d) "LIMITATION YEAR" means the Plan Year. (e) "NON-HIGHLY COMPENSATED EMPLOYEE" means an Employee who is neither a Highly Compensated Employee nor a "Family Member" (within the meaning of Section 414(q)(6)(B) of the Code). 5.02 LIMITATIONS ON VOLUNTARY CONTRIBUTIONS APPLICABLE TO HIGHLY COMPENSATED EMPLOYEES. (a) Effective for Plan Years beginning after December 31, 1986, the Actual Contribution Percentage for Members who are Highly Compensated Employees for the Plan Year shall not exceed the greater of: (i) the Actual Contribution Percentage of the Members who are Non-highly Compensated Employees for the Plan Year multiplied by 1.25; or (ii) the Actual Contribution Percentage for Members who are Non-highly Compensated Employees for the Plan Year multiplied by 2.0, provided that the Actual Contribution Percentage for Members who are Highly Compensated Employees does not exceed the -65- Actual Contribution Percentage for Members who are Non-highly Compensated Employees by more than 2 percentage points. (b) "ACTUAL CONTRIBUTION PERCENTAGE" means, for a specified group of Members for a Plan Year, the average of the ratios (calculated separately for each participant in such group) of (i) the amount of Voluntary Contributions actually paid over to the trust on behalf of such Member for the Plan Year to (ii) the Member's 415 Compensation for such Plan Year (whether or not the Employee was a Member for the entire Plan Year). 5.03 CORRECTION OF EXCESS VOLUNTARY CONTRIBUTIONS. In the event that the limitations set forth in Section 5.02 are exceeded for any Plan Year, excess Voluntary Contributions with respect to a Plan Year, plus any income or minus any loss allocable thereto, shall be distributed to Members on whose behalf such excess contributions were made. The amount of a Member's excess Voluntary Contributions shall be determined in accordance with Section 401(m)(6) of the Code and the regulations thereunder. Such distribution shall be made no later than the last day of the following Plan Year. 5.04 LIMITATIONS ON CONTRIBUTIONS APPLICABLE TO ALL MEMBERS. (a) In no event shall the Annual Addition to a Member's Account for any Limitation Year exceed the lesser of: (i) $30,000 (or, if greater, one-fourth of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the Limitation Year), or (ii) 25% of the Member's 415 Compensation for the Limitation Year. (B) If a Member also is covered under another defined contribution plan, a welfare benefit fund (as defined in Section 419(e) of the Code), or an individual medical account (as defined in Section 415(l)(2) of the Code), maintained by an Employer, then the Annual Addition which may be credited to a Member's Account under paragraph (a) above for any Limitation Year shall be reduced by the Annual Additions credited to the Member's account under such other plans and welfare benefit funds for the same limitation year. (c) If a Member also participates, or has previously participated, in one or more defined benefit plans (as defined in Section 414(j) of the Code) maintained by an Employer, then in no event shall the sum of the Member's Defined Contribution Fraction (as defined in Section 415(e)(3) of the Code) and the Member's Defined Benefit Fraction (as defined in Section 415(e)(2) of the Code) for such Member exceed 1.0 in any Limitation Year. If such limitation is exceeded, then such Member's Annual Addition to this Plan shall be reduced to the extent necessary so that such fraction does not exceed 1.0, but only if the defined benefit plan in which the Member is participating does not permit a reduction of the Member's benefit thereunder that would reduce such fraction to 1.0. (d) Solely for purposes of this Section 5.04, the term "Employer" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code as modified by Section 415(h)) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code as modified by Section 414(h)) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 5.05 REDUCTION OF EXCESS ANNUAL ADDITIONS. In the event that the Annual Addition credited to a Member's Account exceeds the limitations contained in Section 5.04 of the Plan in any Limitation Year, then such excess Annual Addition shall be reduced as follows: (a) First, the amount of his Voluntary Contributions shall be reduced to the extent that such reduction results in a reduction of the amount by which a Member's Annual Addition exceeds such limitations. (b) Second, the amount of his Employer Contributions shall be reduced to the extent that such reduction results in a reduction of the amount by which a Member's Annual Addition exceeds such limitations. Any reduction of Employer Contributions shall be held unallocated in a suspense account and applied to reduce employer contributions in succeeding Plan Years in accordance with Section 8.05. Notwithstanding anything contained herein or in the Trust Agreement to the contrary, if the Plan is terminated while there remains a balance in any suspense account, such amounts shall be paid to the Participating Employer which contributed said amounts. 5.06 DEDUCTION LIMITATION APPLICABLE TO EMPLOYER CONTRIBUTIONS. In no event shall the amount of Employer Contributions for any Plan Year exceed the amount deductible with respect to such Plan Year under Section 404 of the Code. ARTICLE 6 MEMBERS' ACCOUNTS 6.01 SEPARATE ACCOUNTS. An Account in the Trust Fund shall be established and maintained for each Member. The records of each such Account shall reflect the manner in which each Account is invested and the value of such investments, any withdrawals by or distributions to the Member or other persons, any charges or credits made to such Account, and such other information as the Administrative Committee or the Trustee may deem appropriate. 6.02 CONTRIBUTIONS TO ACCOUNT. All contributions made by the Employer on behalf of a Member or made by a Member on his own behalf, shall be paid to the Trustee and shall be allocated to the Member's Account in accordance with the provisions of this Plan. 6.03 VALUATION OF ACCOUNTS. The value of each Member's Account shall be determined as of each Valuation Date, at which time the Administrative Committee shall adjust the balance of each Member's Account to reflect any of the following which have occurred since the last Valuation Date: (a) contributions, withdrawals, distributions and other charges or credits attributable to the Member's Account; (b) the net earnings, gains, losses and expenses and any appreciation or depreciation in market value of the Investment Funds selected by the Member for investment of his Account; and (c) with respect to any amounts credited to the Member's Account which are not invested in any of the Investment Funds, the net increase or decrease, as the case may be, in the value of the Trust Fund due to investment earnings, gains or losses and any expenses of the Trust Fund, which adjustment shall be made in the same proportion that the balance in the Member's Account as of the last Valuation Date (reduced by any withdrawals, distributions or transfers from such Account since the last Valuation Date and by the principal amount of all outstanding loans to such Member) bore to the total balance of all Members' Accounts (as so reduced) as of such last Valuation Date. 6.04 SEGREGATED ACCOUNTS. The Administrative Committee may direct the Trustee to establish a segregated account and to transfer to such segregated account the balance of the Account of any Member who pursuant to Article 11 has elected to defer distribution or to receive distribution in installments. The Trustee shall invest such -68- segregated accounts in such Investment Fund(s) or other investment vehicles as may be selected by the Administrative Committee. ARTICLE 7 TRUST FUND AND INVESTMENT OF ACCOUNTS 7.01 TRUST FUND AND TRUSTEE. The Administrative Committee may enter into a Trust Agreement or Agreements with a Trustee or Trustees to establish a Trust Fund under the Plan. Any Trust Agreement is designated as, and shall constitute, a part of this Plan and all rights which may accrue to any person under the Plan shall be subject to the terms and conditions of such Trust Agreement. The Administrative Committee may modify the Trust Agreement from time to time to accomplish the purposes of the Plan. 7.02 INVESTMENT FUNDS. (a) The Administrative Committee shall select such investment vehicles as it determines appropriate to meet the requirements of Section 404(c) of ERISA and the regulations thereunder relating to the investment of Members' Accounts at the direction of the Members. Such investment vehicles may include mutual funds from the Value Line family of funds. The Administrative Committee may select such additional investment vehicles as it determines appropriate for the investment of Members' Accounts. (b) The Administrative Committee may prescribe such rules and restrictions on the investment of Members' Accounts in any such investment vehicle as it deems appropriate. (c) In the event that the fees of any investment manager or investment advisor are attributable to a particular investment vehicle, the Administrative Committee may, in its discretion, determine how such expenses shall be allocated among Members' Accounts. 7.03 INVESTMENT DIRECTION. (a) The Administrative Committee, or its designees, shall provide Members with such information and materials with respect to the Investment Funds as may be required by Section 404(c) of ERISA. (b) A Member shall have the right to direct the Administrative Committee to invest his Account in any of the Investment Funds designated for participant investment in accordance with Section 7.02 of the Plan. A Member's investment direction (or any change in his investment direction) shall be made in the manner and in such form as the Administrative Committee shall direct. (c) A Member's investment election (or any change in his investment election) shall be made in increments of 5 percent. (d) A Member's investment election shall remain in effect until the Member properly files a change of election with the Administrative Committee. (e) In the event that any Member shall not have directed the investment of all or a portion of the balance in his account at any time, the Member shall be deemed to have directed that such balance be invested in the Value Line Cash Fund and such assets shall remain in such Investment Fund until such time as the Member directs otherwise. (f) A Member may change his investment election with respect to existing investments, new contributions, or both, effective as of the first day following a quarterly Valuation Date. Such change must be made in writing or in accordance with such other methods as may be established by the Administrative Committee in accordance with the requirements of Section 404(c) of ERISA. ARTICLE 8 VESTING AND FORFEITURE 8.01 VOLUNTARY CONTRIBUTION ACCOUNT. A Member's interest in his Voluntary Contribution Account and Rollover Contribution Account, if any, shall be fully vested and nonforfeitable at all times. 8.02 EMPLOYER CONTRIBUTION ACCOUNT. (a) Upon a Member's Total Disability, death, or attainment of his Normal Retirement Age while an Employee, his interest in his Employer Contribution Account shall be fully vested and nonforfeitable. (b) If a Member terminates employment before attaining his Normal Retirement Age for any reason other than Total Disability or death, his vested interest in his Employer Contribution Account shall be determined in accordance with the following schedule: COMPLETED YEARS OF SERVICE VESTED INTEREST Less than 3 0% 3 20% 4 40% 5 60% 6 80% 7 or more 100% 8.03 FORFEITURE. If an Employee terminates employment and receives (or is deemed to receive) a distribution of his entire vested account balance, then the nonvested portion of his Employer Contribution Account will be treated as a forfeiture. For purposes of this Section 8.03, if the value of a Member's vested account balance is zero, then such Member shall be deemed to have received a distribution of his entire vested account balance as of the date of his termination of employment. 8.04 RESTORATION OF FORFEITURES. (a) In the case of a Member who received a distribution of his entire vested account balance under the Plan and who again becomes an Eligible Employee, then the amount forfeited pursuant to Section 8.03 shall be restored if the Eligible Employee repays the full amount of the distribution before the earlier of: (i) 5 years after the first date on which the Member is subsequently reemployed; or -72- (ii) the date the Member incurs 5 consecutive Breaks in Service following the date of the distribution. (b) In the case of a Member who is deemed to have received a distribution of his entire vested interest under the Plan and who again becomes an Eligible Employee, then the amount forfeited pursuant to Section 8.03 shall be restored if the Member again becomes an Eligible Employee before the date on which he incurs 5 consecutive Breaks in Service. (c) A Member who is reemployed after the occurrence of 5 consecutive Breaks in Service shall not have any restoration rights with respect to the previously forfeited balance in his Employer Contribution Account. 8.05 APPLICATION OF FORFEITURES. (a) Forfeitures of Employer Contributions shall be used to pay Plan expenses or to reduce the amount of Employer Contributions which are to be made by the Employer for the following Plan Year. (b) If an amount must be restored to a reemployed Member's Employer Contribution Account in accordance with Section 8.04, such restoration shall be made, as directed by the Administrative Committee, from forfeitures attributable to, or net income of the Trust which would otherwise be allocated to Members employed by such Participating Employer, and/or from a contribution made by such Participating Employer for that purpose. 8.06 CHANGE IN VESTING SCHEDULE. If the Plan's vesting schedule is amended, or the Plan is amended in any way that directly or indirectly affects the calculation of a Member's vested interest in his Employer Contribution Account, or if the Plan is deemed amended by an automatic change to or from the top-heavy vesting schedule, each Member with at least 3 Years of Service may elect to have his vested interest calculated under the Plan without regard to such amendment or change. A Member's election under this section must be made during the period beginning with the date the amendment is adopted or deemed to be made and ending on the latest of: (a) 60 days after the amendment is adopted; (b) 60 days after the amendment becomes effective; or (c) 60 days after the Member is issued written notice of the amendment by the Administrative Committee. ARTICLE 9 LOANS TO MEMBERS 9.01 GENERAL. The Administrative Committee shall prescribe the terms and conditions for making loans to Members from their Accounts consistent with the provisions of this Article and the prohibited transaction exemption requirements of the Code and ERISA and other applicable law. 9.02 ELIGIBILITY FOR LOAN. A Member who meets the following requirements shall be eligible to receive a loan from the Plan: (a) The Member must be actively employed by a Participating Employer and must have completed at least 5 Years of Service. (b) The Member must establish to the satisfaction of the Administrative Committee that a loan is needed to meet an immediate and heavy financial need caused by a serious illness, accident, or catastrophe incurred by (i) the Member, or (ii) any of the following individuals if the individual received over one-half of their support from the Member for the entire twelve month-period prior to the date on which such loan is requested: (A) the Member's spouse, if living with the Member, (B) the Member's sons and daughters, both natural and legally adopted, (C) the Member's parents or grandparents, or (D) the Member's brothers or sisters, provided that their principal place of residence prior to the date that the loan is requested is the Member's household. Such immediate and heavy financial need also may include the need to pay tuition and related educational fees for the next 12 months of post- secondary education for the Member's children. The Member must demonstrate that such need cannot be met by other reasonably available financial resources of the Member. The Administrative Committee may require such assurances and certifications as it may deem necessary to determine whether the Member has an immediate and heavy financial need. -74- 9.03 MAXIMUM LOAN AMOUNT. In no event shall any loan made pursuant to this Article 9 be in an amount which would cause the outstanding aggregate balance of all loans made to the Member under this Plan and all other qualified plans maintained by the Company or any Affiliated Company to exceed the lesser of (a) or (b): (a) $50,000 reduced by the excess (if any) of (i) the highest outstanding balance of loans from the Plan to the Member during the one-year period ending on the day before the date the loan is made, over (ii) the outstanding balance of loans from the Plan to the Member on the date the loan is made; or (b) 50% of the current balance of the vested portion of the Member's Employer Contribution Account, determined as of the most recent Valuation Date occurring prior to the date on which the loan is made. 9.04 LOAN TERMS. Loans shall be made to Members in accordance with the following terms: (a) A loan to a Member shall be evidenced by the Member's recourse promissory note in the form prescribed by the Administrative Committee. (b) The period for repayment of a loan shall not exceed 5 years. (c) The annual interest rate on loans will be One Percent Plus the Prime Lending Rate stated in the Money Rates section of THE WALL STREET JOURNAL on the first business day of the month in which the loan application is approved by the Administrative Committee. (d) Loan repayments on principal and interest shall be amortized in level payments payable each payroll period over the term of the loan; provided, that a Member who is on an approved leave of absence shall continue to repay the loan through monthly payments of principal and interest due on the first day of each calendar month in United States currency unless the Administrative Committee determines, in its sole discretion, that repayments may be made quarterly if extreme adverse circumstances apply. 9.05 COLLATERAL. Notwithstanding anything to the contrary in Section 16.03, a Member who accepts a Plan loan shall be deemed to have assigned to the Trustee, as security for the loan, all of his right, title and interest in the Plan. The Administrative Committee may require such additional security for the loan as it deems necessary or prudent. 9.06 TREATMENT OF LOAN PAYMENTS. A loan shall be considered to be an investment of the Trust Fund. Any payment to the Plan of interest on a loan to a Member, as well as repayments of loan principal, shall be credited to the Member's Account and shall be accounted for as investment earnings or return of principal, as the case may be, on that Account. 9.07 DEFAULT. (a) If not paid as and when due, in addition to any other remedies permitted by law, any outstanding Plan loan (including interest accrued and unpaid thereon) to a Member may be charged against the Member's Employer Contribution Account. The outstanding loan balance shall be treated as repaid to the extent of such charge. (b) The Administrative Committee shall charge the unpaid loan balance against the Member's Employer Contribution Account whether or not the Member has attained age 59-1/2 or terminated employment, and whether or not such charge is on account of any financial hardship of the Member. 9.08 TERMINATION OF EMPLOYMENT. The unpaid balance of a loan shall immediately become payable in full upon a Member's termination of employment. -76- ARTICLE 10 WITHDRAWALS OF VOLUNTARY CONTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT 10.01 WITHDRAWALS OF VOLUNTARY CONTRIBUTIONS. A Member may, in the form and manner and at such times as may be prescribed by the Administrative Committee, direct payment to himself of part or all of the balance of his Voluntary Contribution Account or Rollover Contribution Account, if any. 10.02 GENERAL RULES APPLYING TO WITHDRAWALS OF VOLUNTARY CONTRIBUTIONS. The following rules shall apply to withdrawals made under this Article 10: (a) In the case of a married Member who became a participant in the Plan prior to May 1, 1995, no payment shall be made to such Member without the written consent of the Member's spouse. Any written consent required of a Member's spouse shall acknowledge the effect of the consent and shall be witnessed by a representative designated by the Administrative Committee or a notary public. The consent of a spouse shall not be required if the Administrative Committee determines that the spouse cannot be located or that the Code and ERISA otherwise do not require such consent. (b) Distribution of any withdrawal under this Article shall be made as soon as practicable following the next Valuation Date selected by the Administrative Committee for effecting such payment, unless the Administrative Committee, in its sole discretion, elects to make payment earlier. (c) A Member may not make a withdrawal from his Account more often than once in any Plan Year or at such other times as may be permitted pursuant to uniform rules prescribed by the Administrative Committee. (d) Any withdrawal made under this Article 10 shall be at least in the amount of $1,000, or, if smaller, the balance credited to the Member's Voluntary Contributions Account. 77 ARTICLE 11 DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT 11.01 TERMINATION OF EMPLOYMENT PRIOR TO NORMAL RETIREMENT AGE. In the event a Member's employment with the Company or an Affiliated Company terminates before the Member attains his Normal Retirement Age for any reason other than death, he shall be entitled to receive a distribution of the vested balance in his Account as of the Valuation Date coincident with or next following his termination of employment. (a) If the vested balance of the Member's Account does not exceed $3,500, distribution shall be made as soon as practicable following the earlier of: (i) the date on which the Administrative Committee receives a properly completed distribution election form; or (ii) the expiration of the 90-day period beginning on the date on which the Administrative Committee provides the notice required by Section 402(f) of the Code to the Member. (b) If the vested balance of a Member's Account exceeds $3,500, no distribution will be made without the prior written consent of the Member. If such consent is not given, distribution shall be made as soon as practicable following the earlier of: (i) the date on which the Administrative Committee receives a properly completed distribution election form; or (ii) the later of the Member's attainment of his Normal Retirement Age or the expiration of the 90-day period beginning on the date on which the Administrative Committee provides the notices required by Section 402(f) of the Code and Section 1.411(a)-11(c) of the Income Tax Regulations to the Member. 11.02 TERMINATION OF EMPLOYMENT AT OR AFTER NORMAL RETIREMENT AGE. In the event a Member's employment with the Company or an Affiliated Company terminates at or after the Member attains his Normal Retirement Age for any reason other than death, he shall be entitled to receive a distribution of the balance in his Account as of the Valuation Date coincident with or next following his termination of employment. Distribution shall be made as soon as practicable following the earlier of: (a) the date on which the Administrative Committee receives a properly completed distribution election form; or 78 (b) the expiration of the 90-day period beginning on the date on which the Administrative Committee provides the notices required by Section 402(f) of the Code and Section 1.411(a)-11(c) of the Income Tax Regulations to the Member. 11.03 DEATH. (a) In the event a Member dies before payment of his Account begins, his Beneficiary (as determined in accordance with Section 11.08 below) shall be entitled to receive distribution of the Account as of the Valuation Date coincident with or next following his death. Distribution shall be made as soon as practicable following the earlier of: (i) the date on which the Administrative Committee receives a properly completed distribution election form; or (ii) the expiration of the 90-day period beginning on the date on which the Administrative Committee provides the notices required by Section 402(f) of the Code and Section 1.411(a)-11(c) of the Income Tax Regulations to the designated Beneficiary. (b) Notwithstanding paragraph (a), in no event shall distribution of the Account begin later than: (i) if (A) the designated Beneficiary is the Member's spouse and (B) the balance of the Member's Account exceeds $3,500, the date on which the Member would have attained age 70-1/2; or (ii) in any other case, one year after the Member's death. 11.04 FORM OF PAYMENT FOLLOWING TERMINATION OF EMPLOYMENT - MEMBERS WITH HIRE DATES PRIOR TO MAY 1, 1995. In the case of a Member whose Employment Commencement Date occurred prior to May 1, 1995, the form of payment of such Member's Account following the Member's termination of employment shall be determined in accordance with the following rules: (a) If the vested balance of a Member's Account as of the Valuation Date coinciding with or next following the date of the Member's termination of employment is $3,500 or less, his Account will be distributed in a single lump sum payment. (b) If the vested balance of a Member's Account exceeds $3,500, the balance credited to the Member's Account will be distributed in accordance with the following rules: (i) If the Member is married on the Member's Benefit Commencement Date, the Member's Account will be distributed in the form of a joint and survivor annuity which provides an annuity for the life of the Member with a survivor annuity for the life of his spouse which is equal to fifty percent (50%) of the amount of the annuity which is payable during the joint lives of the Member and his spouse, and which is purchased from an insurance company with the vested balance credited to the 79 Member's Account. A Member and his spouse may elect in accordance with the requirements set forth in Section 11.09 to waive the joint and survivor annuity requirements and elect another form of payment described in subparagraph (ii) below. (ii) If the Member is not described in subparagraph (i) above or the Member and his spouse elect to waive the joint and survivor annuity form of payment, the vested balance credited to the Member's Account will be distributed by any of the following methods: (A) in a single lump sum; (B) in substantially equal annual or more frequent installments over a term not to exceed 15 years as specified by the Member; provided, however, that in no event may the term selected by the Member extend beyond the life expectancy of the Member or the joint and last survivor expectancy of the Member and his designated Beneficiary; or (C) in the form of an annuity; provided, however, that the annuity may not provide for payments over a period extending beyond either the life of the Member (or the lives of the Member and his designated Beneficiary) or the life expectancy of the Member (or the joint life expectancy of the Member and his designated Beneficiary). 11.05 FORM OF PAYMENT OF DEATH BENEFITS. In the case of a Member's death before payment of his Account has commenced, his Account shall be distributed to his Beneficiary in a single lump sum payment. 11.06 FORM OF PAYMENT - MEMBERS WITH HIRE DATES ON OR AFTER MAY 1, 1995. In the case of a Member whose Employment Commencement Date occurs on or after May 1, 1995, such Member's Account shall be distributed to the Member or his Beneficiary in a single lump sum payment. 11.07 DIRECT TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION. Effective for distributions made after December 31, 1992, a Member or a designated Beneficiary who is the Member's spouse may elect to have all or any portion of his Account which is eligible for rollover distribution under Section 402(c) of the Code transferred directly to an eligible retirement plan (as defined in Section 401(a)(31) of the Code). 11.08 BENEFICIARY DESIGNATION. (a) Each Member may designate, in the form and manner prescribed by the Administrative Committee, one or more persons as the Beneficiary of his Account; provided, however, that if the Member is survived by a spouse, such spouse shall be the Member's sole Beneficiary 80 unless the spouse consents, in writing, to the Member's designation of one or more other persons to be the Beneficiary of all or a portion of the Member's Account. Any Beneficiary designation made by a Member may be changed or revoked by the Member at any time or from time to time during his lifetime; provided, however, that any such change or revocation shall not reduce the portion of the Account payable to his spouse without the written consent of the spouse. Any written consent required of a Member's spouse shall acknowledge the effect of the consent and shall be witnessed by a representative designated by the Administrative Committee or a notary public. The consent of a spouse shall not be required if the Administrative Committee determines that the spouse cannot be located or that the Code and ERISA otherwise do not require such consent. (b) If no Beneficiary is designated or survives the Member, the balance of his Account shall be paid to his issue per stirpes; provided, that if there is no surviving issue, the Account shall be paid to his estate. 11.09 MARRIED MEMBERS - WAIVER OF JOINT AND SURVIVOR ANNUITY PAYMENTS. A Member and his spouse may elect to waive the joint and survivor annuity form of payment described in Section 11.04(b)(i) above and have the Member's Account distributed in another form of payment in accordance with the following rules: (a) An election may be made at any time during the 90-day period prior to the Member's Benefit Commencement Date. A Member may revoke a prior election to waive the normal form of payment without the consent of the spouse at any time before the Benefit Commencement Date. (b) Any election to waive the normal form of payment shall not be effective unless: (i) the Member's spouse consents in writing to the election; (ii) the election designates a specific beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (or the spouse expressly permits designations by the Member without any further spousal consent); (iii) the spouse's consent acknowledges the effect of the election; and (iv) the spouse's consent is witnessed by a notary public. Additionally, a Member's waiver of the joint and survivor annuity form of payment shall not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the spouse expressly permits designations by the Member without any further spousal consent). Spousal consent shall not be required if the Member establishes to the satisfaction of the Administrative Committee that there is no spouse or that the spouse cannot be located. (c) Any consent by a spouse obtained under this provision (or establishment that the consent of a spouse can not be obtained) shall be effective only with respect to such spouse. A consent that permits designations by the Member without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific beneficiary, and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of such rights. No consent obtained under this provision shall be valid unless the Member has received notice as provided in subparagraph (iv) below. 81 (d) No less than 30 days and no more than 90 days prior to a Member's Benefit Commencement Date, the Administrative Committee shall furnish to such Member a written explanation of: (i) the terms and conditions of the normal form of payment; (ii) the Member's right to make and the effect of an election to waive the normal form of payment; (iii) the rights of a Member's spouse; and (iv) the right to make, and the effect of, a revocation of a previous election to waive the joint and survivor annuity form of payment. 11.10 RULES APPLYING TO INSTALLMENT DISTRIBUTIONS. (a) If a Member elects to have his Account distributed in installments, the amount to be so distributed each year must be at least equal to the quotient obtained by dividing the Member's benefit by the life expectancy of the Member and his Beneficiary. Life expectancy and joint and last survivor expectancy shall be computed by the use of the return multiples contained in Section 1.72-9 of the Income Tax Regulations. For purposes of this computation, a Member's life expectancy may be recalculated no more frequently than annually; however, the life expectancy of a Beneficiary, other than the Member's spouse, may not be recalculated. If the Member's spouse is not the Beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the Member. (b) In the event a Member dies after the commencement of the payment of benefits under the Plan, the remaining portion of such benefits will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Member's death. (c) The Administrative Committee may establish rules permitting a Member or Beneficiary who is receiving payment of benefits in installments to elect to have the balance of the benefits distributed in a single lump sum payment. 11.11 MANDATORY DISTRIBUTION. Notwithstanding any other Plan provision, benefit payments to a Member or Beneficiary shall commence no later than April 1 of the calendar year following the calendar year in which the Member or Beneficiary attains age 70-1/2. 82 ARTICLE 12 ADMINISTRATION 12.01 PLAN ADMINISTRATOR. The Company shall be the "Administrator" of the Plan within the meaning of Section 3(16)(A) of ERISA and the "Named Fiduciary" for purposes of Section 402(a)(2) of ERISA. Such duties shall be performed on behalf of the Company by a committee which shall consist of the Chairman of the Board of Directors and such other individuals as may be appointed by the Board of Directors. 12.02 ADMINISTRATIVE COMMITTEE'S AUTHORITY AND POWERS. (a) The Administrative Committee shall have full authority and power to administer and construe the Plan, subject to applicable requirements of law. Without limiting the generality of the foregoing, the Administrative Committee shall have the following powers and duties: (i) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; (ii) To interpret the Plan, its interpretation thereof to be final and conclusive on all persons claiming benefits under the Plan; (iii) To decide all questions concerning the Plan, including the eligibility of any person to participate in the Plan and the status and rights of any Participant or Beneficiary under the Plan; and (iv) To exercise all other powers specified in the Plan. (b) The Administrative Committee may adopt such rules for the conduct of its affairs as it deems appropriate. 12.03 DELEGATION OF DUTIES AND EMPLOYMENT OF AGENTS. The Administrative Committee may delegate such of its duties and may appoint such accountants, actuaries, legal counsel, investment advisors, investment managers, claims administrators, specialists and other persons as the Administrative Committee deems appropriate in connection with administering the Plan. The Administrative Committee shall be entitled to rely conclusively upon, and shall be fully protected in any action taken by them in good faith in reliance upon any opinions or reports furnished them by any such experts or other persons. 12.04 EXPENSES. All expenses incurred in connection with the administration of the Plan, including, without limitation, administrative expenses and compensation and other expenses and charges of any person who shall be 83 employed by the Administrative Committee pursuant to Section 12.03, shall be paid from the Trust Fund unless paid separately by the Participating Employers. 12.05 COMPENSATION. No member of the Administrative Committee who is a full-time employee of a Participating Employer shall receive any compensation for his services as member of the Administrative Committee. Any expenses of the Administrative Committee shall be paid from the Trust Fund, unless paid by the Participating Employers. 12.06 EXERCISE OF DISCRETION. Any person with any discretionary power in the administration of the Plan shall exercise such discretion in a nondiscriminatory manner and shall discharge his duties with respect to the Plan in a manner consistent with the provisions of the Plan and with the standards of fiduciary conduct contained in Title I, Part 4, of ERISA. 12.07 FIDUCIARY LIABILITY. In administering the Plan, neither the Administrative Committee nor any member of the Administrative Committee nor any person to whom the Administrative Committee delegates any duty or power in connection with administering the Plan shall be liable, except in the case of his own willful misconduct, for: (a) any action or failure to act, (b) the payment of any amount under the Plan, (c) any mistake of judgment made by him or on his behalf, or (d) any omission or wrongdoing of any member of the Administrative Committee. No member of the Administrative Committee shall be personally liable under any contract, agreement, bond, or other instrument made or executed by him or on his behalf as a member of the Administrative Committee. 12.08 INDEMNIFICATION BY PARTICIPATING EMPLOYERS. To the extent not compensated by insurance or otherwise, the Participating Employers shall indemnify and hold harmless each person and each member of the Administrative Committee, and each employee of a Participating Employer designated by the Administrative Committee to carry out fiduciary responsibility with respect to the Plan from any and all claims, losses, damages, expenses (including reasonable counsel fees approved by the Company) and liabilities (including any amount paid in settlement with the approval of the Company), arising from any act or omission of such member, except where the same is judicially determined to be due to willful misconduct of such member or employee. Anything herein to the contrary notwithstanding, no assets of the Plan may be used for any such indemnification. 84 12.09 PLAN PARTICIPATION BY FIDUCIARIES. No person who is a fiduciary with respect to the Plan shall be precluded from being a Participant therein upon satisfying the requirements for eligibility. 12.10 MISSING PERSONS. If the Administrative Committee is unable to locate a Participant or Beneficiary within five (5) years after an Account becomes payable, the Administrative Committee shall mail notice by registered mail to the last known address of such person outlining the following action to be taken unless such person makes written reply to the Administrative Committee within sixty (60) days from the mailing of such notice: the Administrative Committee shall direct that the amount of such Account shall be treated as a forfeiture for the current Plan Year; provided, however, that in the event of the subsequent reappearance of such Participant or Beneficiary prior to the termination of the Plan, such forfeiture shall be restored to such Account. 12.11 CLAIMS PROCEDURE. All claims for benefits under the Plan by a Participant or his Beneficiary with respect to benefits not received by such person shall be made in writing to the Administrative Committee, which shall review such claims. If the Administrative Committee believes that a claim should be denied, it shall notify the claimant in writing of the denial within ninety (90) days after its receipt of the claim. Such notice shall: (a) set forth the specific reasons for the denial, making reference to the pertinent provisions of the Plan or the Plan documents on which the denial is based; (b) describe any additional material or information that should be received before the claim may be acted upon favorably, and explain why such material or information, if any, is needed; and (c) inform the person making the claim of his right pursuant to this Section to request review of the decision by the Administrative Committee. Any such person who believes that he has submitted all available and relevant information may appeal and denial of a claim to the Administrative Committee by submitting a written request for review to the Administrative Committee within sixty (60) days after the date on which such denial is received. Such period may be extended by the Administrative Committee for good cause. The person making the request for review may examine pertinent Plan documents. The request for review may discuss any issues relevant to the claim. The Administrative Committee shall decide whether or not to grant the claim within sixty (60) days after receipt of the request for review, but this period may be extended by the Administrative Committee for up to an additional sixty (60) days in special circumstances. If such an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. The Administrative Committee's decision shall be in writing, shall include specific reasons for the decision and shall refer to pertinent provisions of the Plan or of the Plan documents on which the decision is based. 85 ARTICLE 13 AMENDMENT AND TERMINATION OF PLAN 13.01 AMENDMENT. The Company may at any time and from time to time amend the Plan by action of the Administrative Committee without the consent of any Trustee, any other Participating Employer, or any Member or Beneficiary. Notwithstanding the foregoing: (a) no amendment that materially affects the Trustee's duties shall be effective without the written consent of the Trustee; (b) no amendment shall cause the Trust Fund to be used other than for the exclusive benefit of Members and their Beneficiaries; and (c) no amendment shall eliminate or reduce a "Section 411(d)(6) Protected Benefit" within the meaning of Section 1.411(d)-4 of the Income Tax Regulations except to the extent permitted by Section 411(d)(6) of the Code and the regulations thereunder. 13.02 RIGHT TO TERMINATE PLAN. The Company intends to maintain the Plan as a permanent tax-qualified retirement plan. Nevertheless, the Company reserves the right to terminate the Plan (in whole or in part) at any time and from time to time, by action of the Administrative Committee, without the consent of any Trustee, any other Participating Employer, or any Member or Beneficiary. 13.03 CONSEQUENCES OF TERMINATION. (a) If the Plan is terminated in whole or in part, the interest of each Member affected by the termination in his Account will become fully vested and nonforfeitable as of the date of the termination. (b) If the Plan is terminated in whole or in part, the Administrative Committee shall determine the date and manner of distribution of all Members' Accounts. (c) The Administrative Committee shall give prompt notice to each Member (or, if deceased, his Beneficiary) affected by the Plan's complete or partial termination. 86 ARTICLE 14 PARTICIPATION BY AFFILIATED COMPANIES 14.01 PARTICIPATION. Subject to the consent of the Administrative Committee, an Affiliated Company may adopt the Plan and join in the Trust Fund created hereunder. Such Affiliated Company shall become a Participating Employer upon the filing with the Administrative Committee such duly executed documents as may be required by the Administrative Committee. The contributions which may be made by each Participating Employer, and the income therefrom, shall be held by the Trustee as a part of a single Trust Fund without allocation to any Participating Employer until the Administrative Committee shall notify the Trustee of the termination of the plan as to any Participating Employer pursuant to Section 14.03(c). 14.02 DELEGATION OF POWERS AND AUTHORITY. A Participating Employer shall be deemed to appoint the Administrative Committee as its exclusive agent to exercise on its behalf all of the powers and authority conferred upon the Administrative Committee by the terms of the Plan including, but not by way of limitation, the power to amend and terminate the Plan and the Trust Fund created hereunder. The authority of the Administrative Committee to act as such agent shall continue with respect to all funds contributed by each Participating Employer and the income therefrom unless and until the amount of such funds and income has been distributed by the Trustee as provided in Section 14.03. 14.03 TERMINATION OF PARTICIPATION. (a) The Administrative Committee shall notify the Trustee in writing of the termination of the Plan as to any Participating Employer, and the Trustee shall not accept any further contributions under the Plan from such Participating Employer and shall set aside in a separate account such part of the Trust Fund as the Administrative Committee shall, pursuant to paragraph (b), determine to be held for the benefit of eligible employees of the Participating Employer (and their beneficiaries), as of the last day of the Plan Year which is such Participating Employer's termination date under the Plan. (b) The Administrative Committee shall give written directions to the Trustee with respect to the part of the assets of the Trust Fund segregated in a separate account pursuant to paragraph (a). Such directions shall specify the amount to be segregated and shall be in accordance with generally accepted accounting principles, and, to the maximum extent consistent with ERISA, the determination of the fair market value of the assets of the Trust Fund in the manner provided for in the Plan shall be conclusive for the purpose of such segregation. The Trustee shall follow such directions of the Administrative Committee which shall constitute a conclusive determination of the amount which should be segregated for the benefit of the eligible employees of such Participating Employer (and their beneficiaries). 87 (c) The Trust shall continue as to any Participating Employer, despite receipt by the Trustee of notice of termination of the Plan as to such Participating Employer, for such time as may be necessary to effect such termination. Upon receipt by the Trustee from the Administrative Committee of notice to terminate the Trust as to such Participating Employer, the Trustee shall, with reasonable promptness after receipt of such notice, arrange for the orderly distribution, in accordance with written instructions of the Administrative Committee which shall be given in conformity with the provisions of the Plan and ERISA, of the assets segregated with respect to such Participating Employer pursuant to this Article 14. 88 ARTICLE 15 TOP-HEAVY PLAN PROVISIONS 15.01 APPLICABILITY. If the Plan is or becomes Top-Heavy in any Plan Year, the provisions of this Article 15 shall supersede any conflicting provisions of the Plan. 15.02 DEFINITIONS. The following definitions shall apply for purposes of this Article 15: (A) "DETERMINATION DATE" means (i) the last day of the preceding Plan Year, or (ii) in the case of the first Plan Year, the last day of such Plan Year. (B) "EMPLOYER" means the Company and all Affiliated Companies. (C) "KEY EMPLOYEE" means any Employee, or former Employee who is a Key Employee within the meaning of Section 416(i)(1) of the Code and the regulations thereunder. (D) "PERMISSIVE AGGREGATION GROUP" means the Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (E) "REQUIRED AGGREGATION GROUP" means (i) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in clause (i) to meet the requirements of Section 401(a)(4) or 410 of the Code. (F) "SUPER TOP-HEAVY PLAN" means a Top-Heavy Plan with respect to which the Top-Heavy Ratio exceeds 90%. (G) "TOP-HEAVY PLAN" means with respect to any Plan Year, this plan if any of the following conditions exist: (i) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans; (ii) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%; or 89 (iii) If this Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. (H) "TOP-HEAVY RATIO" means as follows: (i) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer has not maintained any defined benefit plan which during the 5- year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account balance distributed in the 5- year period ending on the Determination Date(s), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the 5- year period ending on the Determination Date(s), both computed in accordance with Section 416 of the Code and the regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the determination date, but which is required to be taken into account on that date under Section 416 of the Code and the regulations thereunder. (ii) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of account balances under the aggregated defined contribution plan or plans for all Key Employees, determined in accordance with clause (i) above, and the present value of accrued benefit under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, determined in accordance with clause (i) above, and the present value of accrued benefits under the defined benefit plan or plans for all participants as of the Determination Date(s), all determined in accordance with Section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of any accrued benefit made in the five-year period ending on the Determination Date. (iii) For purposes of clauses (i) and (ii) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant (A) who is not a Key Employee but who was a Key Employee in a prior year, or (B) who has not been credited with at least one 90 Hour of Service with any Employer maintaining the plan at any time during the 5-year period ending on the Determination Date will be disregarded. The calculation of the Top-Heavy ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the top-heavy ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. The accrued benefits of a participant other than a Key Employee shall be determined under (A) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefits accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code. 15.03 VESTING REQUIREMENT AND SCHEDULE. (A) For any Plan Year during which the Plan is a Top-Heavy Plan, the following Vesting Schedule shall apply to any Member who has been credited with an Hour of Service after the Plan initially became a Top-Heavy Plan: Years of Service Vested Interest ---------------- --------------- Less than 2 years 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100% (B) If the Plan ceases to be a Top-Heavy Plan, such change shall be considered to be an amendment of the vesting schedule which is subject to the election requirements in Section 8.06. In no event may a Member's vested interest be decreased as a result of a change in the Plan's status. 15.04 MINIMUM CONTRIBUTION. (A) If a Member is a non-Key Employee on the last day of a Top-Heavy Plan Year, and is not a participant in any other plan maintained by a Participating Employer that provides him with such a minimum contribution or with a comparable minimum accrual, the total of the Employer contribution allocated to such Member's Account for such Top-Heavy Plan Year shall not be less than 3% of his Compensation for the Top-Heavy Plan Year, the Employer has no defined benefit plan which designates the Plan to satisfy Section 401(a)(4) or Section 410 of the Code and the highest percentage obtained by dividing the sum of the Employer contribution made for the benefit of each Key Employee by the Key Employee's 91 Compensation for such Year is less than 3%, such highest percentage shall be substituted therefor in the preceding clause. (B) In the event a Member who is a non-Key Employee is covered under both a defined contribution plan and a defined benefit plan maintained by a Participating Employer, notwithstanding anything herein to the contrary, the minimum contribution or benefit required by this Section 15.04 and by Section 416 of the Code shall be deemed satisfied if any one of the following rules are satisfied: (i) each such Member receives the defined benefit minimum as specified in Section 416(c)(1) of the Code; (ii) the defined benefit minimum (as defined in clause (i), above) is provided each such Member by the defined benefit plan and is offset by the benefits provided under the defined contribution plan; (iii) the defined contribution plan provides aggregate benefits at least comparable to those provided by the defined benefit plan; or (iv) if contributions and forfeitures under the defined contribution plan equal 5% of the Compensation for each Top-Heavy Plan. 15.05 COMPENSATION LIMITATION. For any Plan Year in which the Plan is a Top-Heavy Plan, the compensation limitation described in Section 416(d) of the Code shall apply. 15.06 AGGREGATE LIMIT ON CONTRIBUTIONS AND BENEFITS FOR KEY EMPLOYEES. If any one of the following occurs, then 1.0 shall be substituted for 1.25 in the denominators of the Defined Benefit Plan and Defined Contribution Plan Fractions used in computing the aggregate limitations set forth in Section 415 of the Code: (A) A Key Employee participates in both a defined benefit plan and a defined contribution plan of a Participating Employer and the plans are Super Top- Heavy Plans. (B) A Key Employee participates in both a defined benefit plan and a defined contribution plan of a Participating Employer and the plans are Top-Heavy Plans and an Extra Minimum Benefit or Extra Minimum Contribution is not provided for non-Key Employees. For purposes of this section, Extra Minimum Benefit or Contribution shall mean 1% more than the standard minimum benefit or contribution required for non-Key Employees under Top-Heavy Plans as prescribed by Section 416(c) of the Code. 92 ARTICLE 16 GENERAL PROVISIONS 16.01 TRUST FUND SOLE SOURCE OF PAYMENTS FOR PLAN. The Trust Fund shall be the sole source for the payment of all Members' Accounts, and the Plan's liability to make payment to any Member or Beneficiary shall be limited to the extent that the balance in such Member's Account is sufficient to make such payment. In no event shall assets of the Participating Employers be applied for the payment of Plan benefits. 16.02 EXCLUSIVE BENEFIT. The Plan is established for the exclusive benefit of the Members and their Beneficiaries, and the Plan shall be administered in a manner consistent with the provisions of Section 401(a) of the Code and ERISA. 16.03 NON-ALIENATION. Except as is permitted under Section 401(a)(13) of the Code in the case of a qualified domestic relations order (as defined in Section 414(p) of the Code) or in accordance with Article 10, no Member or Beneficiary shall have the right to alienate or assign his benefits under the Plan, and no Plan benefits shall be subject to attachment, execution, garnishment, or other legal or equitable process. If a Member or his Beneficiary attempts to alienate or assign his benefits under the Plan, or if his property or estate should be subject to attachment, execution, garnishment or other legal or equitable process, the Administrative Committee may direct the Trustee to distribute the Member's (or Beneficiary's) benefits under the Plan to members of his family, or may use or hold such benefits for his benefit or for the benefit of members of his family as the Administrative Committee deems appropriate under the circumstances. 16.04 QUALIFIED DOMESTIC RELATIONS ORDER. (A) All rights and benefits, including elections, provided to a Member in this Plan shall be subject to the rights afforded to any alternate payee (as defined in Section 414(p)(8) of the Code) under a qualified domestic relations order (as defined in Section 414(p) of the Code). (B) Notwithstanding anything in the Plan to the contrary, a distribution to an alternate payee shall be permitted if such distribution is authorized by the qualified domestic relations order without regard as to whether the affected Member is currently entitled to receive a distribution. 16.05 EMPLOYMENT RIGHTS. A Participating Employer's right to discipline or discharge its Employees shall not be affected by reason of any of the provisions of the Plan. 93 16.06 RETURN OF CONTRIBUTIONS. (A) Except as specifically provided in the Plan, under no circumstances shall any funds contributed to the Trust Fund or any assets of the Trust Fund ever revert to, or be used by, the Company or any Affiliated Company. (B) Any contributions made by a Participating Employer may be returned to the Participating Employer if: (i) the contribution is made by reason of a mistake of fact; or (ii) the contribution is conditioned on its deductibility for federal income tax purposes (each contribution shall be deemed to be so conditioned unless otherwise stated in writing by the Participating Employer) and such deduction is disallowed; provided such contribution is returned within one year of the discovery of the mistake of fact or the disallowance of the deduction for federal income tax purposes, as the case may be. The amount of contribution that may be returned shall be reduced to reflect its proportionate share of any net investment loss in the Trust Fund. 16.07 MERGER, CONSOLIDATION OR TRANSFER. The Plan shall not be merged or consolidated with, nor shall any Plan assets or liabilities be transferred to, any other qualified plan, unless each Member (if the other plan then terminated) would receive a benefit that is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated). 16.08 APPLICABLE LAW. Except as otherwise expressly required by ERISA, this Plan shall be construed and governed in accordance with the laws of the State of New York. 16.09 RULES OF CONSTRUCTION. Whenever the context so admits, the use of the masculine gender shall be deemed to include the feminine and vice versa, either gender shall be deemed to include the neuter and vice versa; and the use of the singular shall be deemed to include the plural and vice versa. 94 APPENDIX A RULES APPLYING TO PLAN LOANS The Administrative Committee has adopted the rules and procedures set forth below with respect to plan loans under Article 9 of the Plan. CAN I WITHDRAW OR BORROW MONEY FROM THE PLAN PRIOR TO MY TERMINATION OF EMPLOYMENT? Because the Plan is basically designed for long term savings, the law restricts your ability to make withdrawals from the Plan while you are employed. You may, however, request withdrawals of part or all of the balance in your VOLUNTARY CONTRIBUTION ACCOUNT at any time subject to the requirements described in the Summary Plan Description. You also may request a loan from the vested balance in your EMPLOYER CONTRIBUTION ACCOUNT in certain circumstances subject to the requirements described below. WHAT ARE THE REQUIREMENTS FOR BORROWING MONEY FROM THE PLAN? You may borrow money from the vested balance in your EMPLOYER CONTRIBUTION ACCOUNT if you meet the following requirements: - - You must be actively employed and have completed at least 5 YEARS OF SERVICE. - - You must establish to the satisfaction of the Administrative Committee that a loan is needed to meet an immediate and heavy financial need caused by a SERIOUS ILLNESS, ACCIDENT, OR CATASTROPHE incurred by you or any of the following individuals: if the individual received over one-half of their support from you for the entire twelve month-period prior to the date on which such loan is requested: - your spouse, if living with you, - your sons and daughters, both natural and legally adopted, - your parents or grandparents, or - your brothers or sisters, provided that their principal place of residence prior to the date that the loan is requested is your household. - - Such immediate and heavy financial need also may include the need to pay tuition and related educational fees for the next 12 months of post- secondary education for your children. - - You must demonstrate that such need cannot be met by other reasonably available financial resources of the Member. The Administrative Committee may require such assurances and 95 certifications as it may deem necessary to determine whether the Member has an immediate and heavy financial need. HOW DO I APPLY FOR A LOAN? You may apply for a loan by completing the loan application form(s) provided by the Plan Administrative Committee. HOW MUCH CAN I BORROW? The minimum amount you may borrow is $1,000. The maximum amount you may borrow is determined by the VESTED amount of your EMPLOYER CONTRIBUTION ACCOUNT as determined as of the most recent valuation date preceding your loan application. The following table shows the Maximum Loan Amount that is permitted based on your vested balance in your EMPLOYER CONTRIBUTION ACCOUNT: Vested Balance in Your Employer Contribution Maximum Loan Account Amount Permitted ---------------------- ---------------- $ 0 - $ 1,999 No loans allowed $ 2,000 - $ 99,000 50% of the vested account $ 100,000 or more $ 50,000 If your Maximum Loan Amount from the above table is $50,000, you must add the highest outstanding total loan balance from the previous 12 months to the amount of any new loan. This total cannot exceed $50,000. WHAT IS THE TERM OF THE LOAN? Loans must be repaid within 5 years or less. HOW DO I REPAY THE LOAN? While you are an employee, payments of principal and interest are made through payroll deductions. If you take an approved leave of absence, you must be able to continue to repay the loan through monthly payments of principal and interest. Such payments will be due on the first day of each calendar month and will be payable only in United States currency. The payments will begin with the first full pay period following the date on which you receive the loan. The repayment amounts will be equal, except for the final payment. 96 WHAT WILL THE INTEREST RATE BE? Effective for loans made on or after May 1, 1995, the annual interest rate on loans will be One Percent Plus the Prime Lending Rate stated in the Money Rates section of THE WALL STREET JOURNAL on the first business day of the month in which your loan application is approved by the Plan Administrative Committee. DO I HAVE TO GIVE ANY SECURITY FOR THE LOAN? Yes. The loan is secured by your vested balance in your EMPLOYER CONTRIBUTION ACCOUNT. In addition, you will be personally liable for the amount of the loan. DO I NEED MY SPOUSE'S CONSENT TO OBTAIN A LOAN? Yes. If you are married (and you are not legally separated or divorced), you must have your spouse's written notarized consent in order to obtain a loan. MAY I SPECIFY THE INVESTMENT FUND FROM WHICH I WANT TO BORROW? Yes. WHAT HAPPENS TO LOAN REPAYMENTS UNDER THE PLAN? Repayments of principal AND interest on your loan will be allocated to your Plan account. Each repayment will be invested according to your current investment selection when the repayment is made. CAN I PREPAY THE LOAN? Yes. There is no penalty if you want to prepay any or all of the unpaid balance on your loan. However, your minimum prepayment must be at least $1,000 or, if smaller, the outstanding balance of the loan. Partial prepayments will first be credited against accrued interest and then against the outstanding principal on the day your prepayment is received. WHAT HAPPENS IF I DEFAULT ON LOAN PAYMENTS? You will be considered to be in default if you miss ANY scheduled loan repayment. 97 Once the loan is declared in default it will become immediately due and payable as of the last day of the month in which it is declared in default. If you do not cure the default within 30 days, in addition to any other remedies permitted by law, any outstanding loan balance (including accrued, but unpaid, interest) may be charged against your Account under the Plan. If and to the extent the outstanding loan balance is charged against your Plan account, the amount of such charge shall be deemed to be a taxable distribution to you from your Plan account. The Plan Administrative Committee may elect to charge the unpaid loan balance against your Plan account, as described above, whether or not you would otherwise be entitled to a distribution from the Plan. If the unpaid loan amount is treated as a distribution, the taxable portion of this distribution will be reported to the IRS. You will be responsible for any taxes due as a result of treating the unpaid amount as a distribution. If the unpaid balance of the loan cannot be satisfied from your Plan accounts or wages, the Plan Administrative Committee will have the same legal rights and remedies as a creditor to collect the remaining amount. WHAT HAPPENS IF I TERMINATE EMPLOYMENT? If your employment is terminated for any reason, including death, the loan will become immediately due and payable in full. If your Plan account balance is distributed to you at the time of your termination, the amount to be distributed to you from the Plan will be reduced by the unpaid loan balance (including accrued interest) UNLESS you elect to repay the loan in full. If you decide to delay distribution, you must repay the loan in full and you must notify the Plan Administrative Committee in writing that you will repay the loan in full before your termination of employment. If you do not repay the loan, however, the outstanding loan balance will be treated as a taxable distribution to you. 98 EX-99.21 4 EXHIBIT 99.21 Exhibit 21 Subsidiaries of the Registrant ------------------------------ Percentage of Voting Securities State of Owned By Incorporation Registrant ------------- ----------- Compupower Corporation Delaware 100% Value Line Securities, Inc. New York l00% The Vanderbilt Advertising Agency, Inc. New York l00% Value Line Publishing, Inc. New York 100% Value Line Distribution Center, Inc. New Jersey 100% EX-27 5 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND STATEMENT OF INCOME AND RETAINED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS APR-30-1996 APR-30-1996 31,752 103,995 5,490 (528) 0 143,581 18,500 (6,380) 333,826 54,782 0 0 0 1,000 220,266 333,826 58,509 87,127 0 54,641 0 0 2,148,000 68,384 26,670 41,714 0 0 0 41,714 4.18 4.18
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