Related Party Transactions:

3 Months Ended

Jul. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions:

Note 7-Related Party Transactions:

Investment Management (overview):

As discussed previously in Note 1 - Organization and Summary of Significant Accounting Policies, prior to December 23, 2010, the Company’s former direct subsidiary EAM LLC was the investment adviser and manager for the Value Line Funds, and EAM LLC’s subsidiary ESI was the distributor for the Funds. EAM LLC earned investment management fees based upon the average daily net asset values of the respective Value Line Funds. Service and distribution fees were received by ESI from the Value Line Funds in accordance with service and distribution plans under rule 12b-1 of the Investment Company Act of 1940. These plans are compensation plans, which means that the distributor’s fees under the plans are payable without regard to actual expenses incurred by the distributor, and therefore the distributor may earn a profit under the plans. Expenses incurred by ESI included payments to securities dealers, banks, financial institutions and other organizations which provided distribution, marketing, and administrative services (including payments by ESI to VLI for allocated compensation and administration expenses) with respect to the distribution of the Funds’ shares. Service and distribution fees were received on a monthly basis and calculated based upon the average daily net assets of the respective Fund in accordance with each Fund’s prospectus.

As of the Restructuring Date, December 23, 2010, the Company deconsolidated its asset management and mutual fund distribution businesses and its interest in these businesses was restructured as a non-voting revenues and non-voting profits interest in EAM. Accordingly, the Company no longer reports this operation as a separate business segment, although it still maintains a significant interest in the cash flows generated by this business. Total assets in the Value Line Funds managed by EAM at July 31, 2011 were $2.15 billion, 2% above total assets of $2.1 billion in the Value Line Funds managed by EAM LLC, the predecessor of EAM, at July 31, 2010. Overall assets in the Value Line Funds at July 31, 2011 increased $50 million, or 2% since July 31, 2010 as a result of market appreciation that more than offset net redemptions within the equity funds.

During the three months ended July 31, 2010, investment management fees and distribution service fees (which we sometimes refer to as “12b-1 fees”) amounted to $4,215,000, after giving effect to account fee waivers for certain of the Value Line Funds. These amounts included 12b-1 fees of $910,000. For the same period total investment management fee waivers were $186,000 and total 12b-1 fee waivers were $620,000. With limited exceptions, the Company, EAM LLC and ESI had no right to recoup the previously waived amounts of investment management fees and 12b-1 fees. Any such recoupment of waived investment management fees is subject to the provisions of the applicable prospectus. During the three months ended July 31, 2010, separately managed accounts revenues were $51,000. Separately managed accounts had $44 million in assets as of July 31, 2010. Of the $44 million, $21 million was affiliated with Arnold Bernhard & Co., Inc. (“AB&Co.” or the “Parent”). During the third quarter of fiscal 2011, the affiliated entities cancelled their separately managed account agreements with EAM LLC.

The non-voting revenues and profits distributions due from EAM to the Company for income earned through the balance sheet date, which is included in the Investment in EAM Trust on the Consolidated Condensed Balance Sheets were $587,000 and $514,000 at July 31, 2011 and April 30, 2011, respectively. The non-voting revenues and non-voting profits interests due from EAM are payable quarterly under the provisions of the EAM Trust Agreement.

EAM Trust - VLI’s non-voting revenues and profits interests:

As a result of the Restructuring Transaction, the Company no longer engages, through subsidiaries, in the investment management or mutual fund distribution businesses. The Company does hold non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM’s investment management fee revenues from its mutual fund and separate accounts business. EAM currently has no separately managed account clients. During the three months ended July 31, 2011, the Company recorded revenues of $1,491,000 and profits of $81,000 from its non-voting interests in EAM without incurring any directly related expenses. During the period from December 23, 2010 until May 28, 2011, EAM and ES occupied a portion of the premises that the Company leases from a third party. The Company received $44,000 for the month of May, 2011 for rent and certain accounting and other administrative support services provided to EAM and ES on a transitional basis during such period.

Transactions with Parent:

During the three months ended July 31, 2011 and 2010, the Company was reimbursed $101,000 and $75,000, respectively, for payments it made on behalf of and services it provided to the Parent. At July 31, 2011 and April 30, 2011, the Receivables from affiliates included  receivables from the Parent of $1,000 and $38,000, respectively. 

The Company is a party to a tax-sharing arrangement with the Parent which allocates the tax liabilities of the two Companies between them. The Company made no Federal tax payments to the Parent during the three months ended July 31, 2011. For the three months ended July 31, 2010, the Company received $1,598,000 from the Parent for prepaid Federal income taxes.  

From time to time, the Parent has purchased additional shares of common stock of the Company in the market when and as the Parent has determined it to be appropriate. The Parent may make additional purchases of common stock of the Company from time to time in the future, although the Parent has suspended purchases of Value Line shares until Value Line’s share repurchase program is concluded (see Note 10 - Treasury Stock and Repurchase Program). As at July 31, 2011, the Parent owns approximately 86.7% of the issued and outstanding shares of common stock of the Company.