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Investments | 6 Months Ended
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Oct. 31, 2014
Investments, Debt and Equity Securities [Abstract] |
Investments |
Note 2 - Investments:
Securities Available-for-Sale:
Investments held by the Company and its subsidiaries are classified as securities available-for-sale in accordance with FASB’s ASC 320, Investments - Debt and Equity Securities. All of the Company’s securities classified as available-for-sale are readily marketable and have a maturity of twelve months or less and are classified as current assets on the Consolidated Condensed Balance Sheets.
Equity Securities:
Equity securities classified as available-for-sale, consist of investments in common stocks, ETFs that attempt to replicate the performance of certain equity indexes, ETFs that attempt to replicate the inverse of the price performance of certain equity indexes and ETFs that hold preferred shares primarily of financial institutions. As of October 31, 2014 and April 30, 2014, the Company held equity securities consisting primarily of ETFs and select common stock holdings of blue chip companies with a concentration on large capitalization companies with high relative dividend yields, all classified as securities available-for-sale on the Consolidated Condensed Balance Sheets. Additionally, as of October 31, 2014 and April 30, 2014, the Company held non-leveraged ETFs, classified as securities available-for-sale, whose performance inversely corresponds to the market value changes of investments in other ETF securities held in the equity portfolio for dividend yield.
As of October 31, 2014 and April 30, 2014, the aggregate cost of the equity securities classified as available-for-sale, which consist of investments in the iShares Dow Jones Select Dividend Index (DVY), SPDR S&P Dividend (SDY), First Trust Value Line Dividend Index (FVD), PowerShares Financial Preferred (PGF), certain common shares, and inverse equity index ETFs, was $8,871,000 and $8,847,000, respectively, and the fair value was $9,223,000 and $9,226,000, respectively.
There were no sales or proceeds from sales of equity securities during the six months ended October 31, 2014 and October 31, 2013. The decrease in gross unrealized gains on equity securities classified as available-for-sale of $27,000, net of deferred taxes of $10,000 was included in Shareholders’ Equity at October 31, 2014. The increase in gross unrealized gains on equity securities classified as available-for-sale of $61,000, net of deferred taxes of $21,000 was included in Shareholders’ Equity at October 31, 2013.
The changes in the value of equity securities investments are recorded in Other Comprehensive Income in the Consolidated Condensed Financial Statements. Realized gains and losses are recorded as of the trade date in the Consolidated Condensed Statements of Income when securities are sold, mature or are redeemed. As of October 31, 2014 and April 30, 2014, accumulated other comprehensive income included unrealized gains of $353,000 and $379,000, net of deferred taxes of $124,000 and $133,000, respectively.
The carrying value and fair value of securities available-for-sale at October 31, 2014 were as follows:
($ in thousands) |  | Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |
Common stocks |  | $ | 101 |  |  | $ | 64 |  |  | $ | (6 | ) |  | $ | 159 |
ETFs - equities |  |  | 3,902 |  |  |  | 1,521 |  |  |  | (2 | ) |  |  | 5,421 |
Inverse ETFs - equities |  |  | 4,868 |  |  |  | - |  |  |  | (1,225 | ) |  |  | 3,643 |
|  | $ | 8,871 |  |  | $ | 1,585 |  |  | $ | (1,233 | ) |  | $ | 9,223 |
The carrying value and fair value of securities available-for-sale at April 30, 2014 were as follows:
($ in thousands) |  | Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |
Common stocks |  | $ | 101 |  |  | $ | 47 |  |  | $ | (12 | ) |  | $ | 136 |
ETFs - equities |  |  | 3,878 |  |  |  | 1,280 |  |  |  | (2 | ) |  |  | 5,156 |
Inverse ETFs - equities |  |  | 4,868 |  |  |  | - |  |  |  | (934 | ) |  |  | 3,934 |
|  | $ | 8,847 |  |  | $ | 1,327 |  |  | $ | (948 | ) |  | $ | 9,226 |
Income from Securities Transactions: Income from securities transactions was comprised of the following:
|  | Three Months Ended October 31, |  |  | Six Months Ended October 31, |
($ in thousands) |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Dividend income |  | $ | 39 |  |  | $ | 36 |  |  | $ | 77 |  |  | $ | 72 |
Interest income |  |  | - |  |  |  | - |  |  |  | 3 |  |  |  | - |
Other |  |  | 27 |  |  |  | (2 | ) |  |  | 27 |  |  |  | - |
Total income from securities transactions, net |  | $ | 66 |  |  | $ | 34 |  |  | $ | 107 |  |  | $ | 72 |
Investment in Unconsolidated Entities: Equity Method Investment:
As of October 31, 2014 and April 30, 2014, the Company’s investment in EAM Trust, on the Consolidated Condensed Balance Sheets was $57,962,000 and $57,850,000, respectively.
The value of VLI’s investment in EAM at October 31, 2014 and April 30, 2014 reflects the fair value of contributed capital of $55,805,000 at inception which included $5,820,000 of cash and liquid securities in excess of working capital requirements contributed to EAM’s capital account by VLI, 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 subsequent to its initial investment through the dates of the Consolidated Condensed Balance Sheets.
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 2015 or 2014.
The components of EAM’s investment management operations, provided to the Company by EAM, were as follows:
|  | Three Months Ended October 31, |  |  | Six Months Ended October 31, |
($ in thousands) (unaudited) |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Investment management fees earned from the Value Line Funds, net of fee waivers |  | $ | 3,690 |  |  | $ | 3,580 |  |  | $ | 7,477 |  |  | $ | 7,065 |
12b-1 fees and other fees, net of fee waivers |  | $ | 1,349 |  |  | $ | 1,294 |  |  | $ | 2,709 |  |  | $ | 2,413 |
Other income |  | $ | 4 |  |  | $ | 8 |  |  | $ | 9 |  |  | $ | 10 |
Investment management fee waivers (1) |  | $ | 41 |  |  | $ | 23 |  |  | $ | 69 |  |  | $ | 47 |
12b-1 fee waivers (1) |  | $ | 374 |  |  | $ | 379 |  |  | $ | 769 |  |  | $ | 902 |
Value Line’s non-voting revenues interest |  | $ | 1,803 |  |  | $ | 1,663 |  |  | $ | 3,636 |  |  | $ | 3,261 |
EAM’s net income (2) |  | $ | 292 |  |  | $ | 382 |  |  | $ | 670 |  |  | $ | 724 |
(1) During fiscal 2015 and 2014, investment management fee waivers related to one of the Value Line Mutual Fixed Income Funds. During fiscal 2015 and 2014, the 12b-1 fee waivers related to six and seven of the Value Line Mutual Funds, respectively.
(2) Represents EAM’s net income, after giving effect to Value Line’s non-voting revenues interest, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.
|  | October 31, |  |  | April 30, |
($ in thousands) |  | 2014 |  |  | 2014 |
|  | (unaudited) |  |  |  |
EAM’s total assets |  | $ | 60,002 |  |  | $ | 59,965 |
EAM’s total liabilities (1) |  |  | (3,065 | ) |  |  | (3,158 | )
EAM’s total equity |  | $ | 56,937 |  |  | $ | 56,807 |
(1) At October 31, 2014 and April 30, 2014, EAM’s total liabilities included a payable to VLI for its accrued non-voting revenues and non-voting profits interests of $1,935,000 and $1,887,000, respectively.

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