Equity Securities:

Equity securities classified as available-for-sale, consist of investments in common stocks and ETFs that attempt to replicate the performance of certain equity indexes and ETFs that hold preferred shares primarily of financial institutions.

As of April 30, 2012 and 2011, the aggregate cost of the equity securities classified as available-for-sale, which consist of investments in the First Trust Value Line Dividend, PGF PowerShares preferred stock and S&P Dividend ETFs, and certain shares of equity securities was $3,749,000 and $1,360,000, respectively, and the market value was $3,881,000 and $1,466,000, respectively.

Proceeds from sales of equity securities classified as available-for-sale during the twelve months ended April 30, 2012 were $89,000 and the related capital gains of $11,000 were reclassified from Accumulated Other Comprehensive Income in the Balance Sheet to the Consolidated Statement of Income. There were no sales or proceeds from sales of equity securities during the fiscal years ended April 30, 2011, and 2010. The increases in gross unrealized gains on equity securities classified as available-for-sale due to changes in market conditions of $25,000 and $106,000, net of deferred taxes of $9,000 and $37,000, respectively, were included in Shareholders’ Equity at April 30, 2012 and 2011, respectively.

Government Debt Securities (Fixed Income Securities):

Fixed income securities consist of government debt securities issued by the United States federal government. There were no fixed income securities as of April 30, 2012.

The changes in the value of equity and fixed income securities investments are recorded in Other Comprehensive Income in the Consolidated Financial Statements. Realized gains and losses are recorded on the trade date in the Consolidated Statements of Income when securities are sold, mature or are redeemed. As of April 30, 2012 and April 30, 2011, there were unrealized gains of $85,000 and $63,000, net of deferred taxes of $47,000 and $34,000, respectively.

The carrying value and fair value of securities available-for-sale at April 30, 2012 were as follows:


			Gross		Gross
			Unrealized		Unrealized
($ in thousands)	Cost		Gains		Losses			Fair Value
Common stocks	$	103	$	14	$	(5	)	$	112
ETFs - equities		2,257		201		(5	)		2,453
Inverse ETFs - equities		1,389		-		(73	)		1,316
	$	3,749	$	215	$	(83	)	$	3,881

The carrying value and fair value of securities available-for-sale at April 30, 2011 were as follows:


($ in thousands)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
FDIC insured commercial paper and U.S. Treasury securities	$	11,217	$	4	$	(13	)	$	11,208

Common stocks		181		9		-			190
ETFs		1,179		97		-			1,276
	$	12,577	$	110	$	(13	)	$	12,674

Proceeds from maturities and sales of government debt securities classified as available-for-sale during the twelve months ended April 30, 2012, 2011 and 2010 were $11,196,000, $38,021,000, and $69,941,000, respectively. During fiscal years 2012 and 2011, losses on sales of fixed income securities of $22,000 and $68,000, respectively, were reclassified from Accumulated Other Comprehensive Income in the Consolidated Balance Sheets to the Consolidated Statements of Income. During fiscal 2010, capital gains net of capital losses on sales of fixed income securities of $176,000 were reclassified from Accumulated Other Comprehensive Income in the Consolidated Balance Sheet to the Consolidated Statement of Income.

The average yield on the FDIC insured and government debt securities classified as available-for-sale at April 30, 2011 was 0.24%.

Income from securities transactions was comprised of the following:

	Fiscal Years ended April 30,
($ in thousands)	2012			2011			2010
Dividend income	$	68		$	16		$	3
Interest income (1)		16			118			856
Realized gains (losses) on equity and fixed income securities available-for-sale (2)		(11	)		(68	)		176
Realized gains on trading securities		-			-			243
Unrealized gains (losses) on securities available-for-sale		-			5			(377	)
Interest expense		-			(2	)		(21	)
Other		(3	)		(4	)		(43	)
Total income from securities transactions, net	$	70		$	65		$	837

(1) Interest income recorded, net of bond amortization of $0, $14,000 and $1,042,000 during fiscal years of 2012, 2011 and 2010, respectively.

(2) These amounts were reclassified from Accumulated Other Comprehensive Income in the Consolidated Balance Sheets to the Consolidated Statements of Income.

Investment in Unconsolidated Entities:

Equity Method Investment:

The Company recorded an asset, Investment in EAM Trust, on its Consolidated Balance Sheet with an initial valuation as of the Restructuring Date of $55,805,000 as a result of the deconsolidation of EAM LLC and ESI, the former asset management and mutual fund distribution subsidiaries. In accordance with the Consolidation Topic of the FASB’s ASC, the Company recognized a pre-tax gain in net income of $50,510,000 measured as the difference between the fair value of the consideration received, including satisfaction of its non-cash post-employment compensation obligation of $1,770,000, and the carrying value of the former subsidiaries’ assets and liabilities, which was comprised of $1,180,000 of working capital (cash), transferred pursuant to the Restructuring Transaction. In addition, the Company incurred expenses of $3,764,000 associated with the Restructuring Transaction. The value of VLI’s investment in EAM at April 30, 2012 and April 30, 2011 reflects the fair value, at the Restructuring Date, of the non-voting revenues interest and non-voting profits interest received in the Restructuring Transaction, plus $5,820,000 of cash and liquid securities in excess of working capital requirements contributed to EAM’s capital account by VLI on the Restructuring Date, plus VLI’s share of non-voting revenues and non-voting profits from EAM less distributions, made quarterly to VLI by EAM, during the period from the Restructuring Date through the balance sheets dates.

The Company utilized the services of valuation consultants to determine the fair value of the EAM asset and the value of the voting profits interest granted to its former employee. The valuation methodologies utilized by the third party valuation consultants included a discounted cash flow analysis and market method calculations to determine the fair value of VLI’s non-voting revenues and non-voting profits interest and the fair value of the voting profits interest granted to a former employee. Based upon the results of the valuations and cash and other assets transferred by VLI to EAM in the transaction, the Company recorded a fair value of $55,805,000 for VLI’s non-voting EAM Trust investment.

In accordance with the EAM Trust Agreement and as mentioned above, EAM received $7,000,000 in cash and liquid securities from VLI pursuant to the Restructuring Transaction which included $1,180,000 of working capital deemed needed for operations and $5,820,000 in excess of working capital needs. It is anticipated that EAM will have sufficient liquidity and earn enough profit to conduct its current and future operations so the management of EAM will not need additional funding. Although the distributor had historically received, from the Value Line Funds under the compensation plans it had in place with the Funds, amounts in excess of its actual expenditures, in more recent years the distributor has been spending amounts on promotion of the Value Line Funds in excess of the compensation received from the Funds. Over time, EAM anticipates that its total future expenditures on such promotion will equal or exceed its total future revenues under the Funds’ distribution plans. However, if that should not occur, EAM has no obligation to reimburse the Value Line Funds.

The Company monitors its Investment in EAM Trust for impairment to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. Impairment indicators include, but are not limited to the following: (a) a significant deterioration in the earnings performance, asset quality, or business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of the industry in which the investee operates, or (d) factors that raise significant concerns about the investee’s ability to continue as a going concern such as negative cash flows, working capital deficiencies, or noncompliance with statutory capital and regulatory requirements. EAM did not record any impairment losses for its assets during the fiscal years 2012 or 2011.

The overall results of EAM’s investment management operations during the twelve months ended April 30, 2012, before interest holder distributions, include total investment management fees earned from the Value Line Funds of $12,465,000, 12b-1 fees of $3,466,000 and other income of $12,000. For the same period, total investment management fee waivers were $806,000 and 12b-1 fee waivers were $2,257,000. During the twelve months ended April 30, 2012, EAM’s net income was $461,000 after giving effect to Value Line’s non-voting revenues interest of $5,684,000, but before distributions to voting interest holders and to the Company in respect of its non-voting profits interest. At April 30, 2012, EAM’s total assets were $57,482,000, total liabilities were $1,174,000 and total equity was $56,308,000. At April 30, 2011, EAM’s total assets were $57,780,000, total liabilities were $1,630,000 and total equity was $56,150,000.

Total results of EAM’s investment management operations for the period from December 23, 2010 through April 30, 2011, before interest holder distributions, include total investment management fees earned from the Value Line Funds of $4,592,000, 12b-1 fees of $1,293,000 and other income of $3,100. For the same period, total investment management fee waivers were $303,000 and 12b-1 fee waivers were $855,000. For the period from December 23, 2010 through April 30, 2011, EAM’s net income was $336,000, after giving effect to Value Line’s non-voting revenues interest of $2,187,000, but before distributions to voting interest holders and to the Company in respect of its non-voting profits interest.