Note 2-Investments:

Securities Available-for-Sale:

Securities held by the Company and its subsidiaries are classified as available-for-sale securities in accordance with FASB’s ASC 320, Investments - Debt and Equity Securities.

Equity Securities:

As of July 31, 2011 and April 30, 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 $1,360,000 for both periods and the market value was $1,392,000 and $1,466,000, respectively. There were no sales or proceeds from sales of equity securities during the three months ended July 31, 2011 or July 31, 2010.

The decrease in gross unrealized gains on equity securities classified as available-for-sale due to changes in market conditions of $74,000, net of deferred taxes of $26,000, was included in Shareholders’ Equity at July 31, 2011. The increase in gross unrealized gains on equity securities classified as available-for-sale due to changes in market conditions of $106,000, net of deferred taxes of $37,000, was included in Shareholders’ Equity at April 30, 2011.

Government Debt Securities (Fixed Income Securities):

Government debt securities consist of securities issued by the United States federal government. The aggregate cost and fair value at July 31, 2011 for government debt securities classified as available-for-sale were as follows:

	(in thousands)
Maturity	Historical Cost		Fair Value		Gross Unrealized Holding Gains/(Losses)
Due within 1 year	$	8,214	$	8,204	$	(10	)
Total investment in government debt securities	$	8,214	$	8,204	$	(10	)

The aggregate cost and fair value at April 30, 2011 for government debt securities classified as available-for-sale were as follows:

	(in thousands)
Maturity	Historical Cost		Fair Value		Gross Unrealized Holding Gains/(Losses)
Due within 1 year	$	11,217	$	11,208	$	(9	)
Total investment in government debt securities	$	11,217	$	11,208	$	(9	)

The increase in gross unrealized losses of $6,000 and $74,000 on fixed income securities classified as available-for-sale net of deferred income tax of $2,000 and $26,000, respectively, were included in Accumulated Other Comprehensive Income on the Consolidated Condensed Balance Sheets as of July 31, 2011 and April 30, 2011, respectively.

Proceeds from sales of government debt securities classified as available-for-sale during the three months ended July 31, 2011 and July 31, 2010 were $2,998,000 and $6,706,000, respectively. During the three months ended July 31, 2011, losses on sales of fixed income securities of $5,000 were reclassified from Accumulated Other Comprehensive Income in the Balance Sheet to the Consolidated Condensed Statement of Income. During the three months ended July 31, 2010 there were no realized gains or losses on fixed income securities.

The average yield on the Government debt securities classified as available-for-sale at July 31, 2011 and April 30, 2011 was 0.23% and 0.24%, respectively.

During the three months ended July 31, 2011 and 2010, income from securities transactions also included $12,000 and $0 of dividend income; $8,000 and $39,000 of interest income, respectively.

Investment in Unconsolidated Entities:

Equity Method Investment:

The Company recorded an asset, Investment in EAM, on its Consolidated Condensed Balance Sheet with an initial valuation as of December 23, 2010 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, valued at $51,690,000, 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. The value of VLI’s investment in EAM at July 31, 2011 and April 30, 2011 reflects the fair value at December 23, 2010 of the non-voting revenues and 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 December 23, 2010, plus earnings from EAM less earnings distributed to VLI by EAM, during the period from December 23, 2010 through the balance sheets dates.

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 this asset 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 requirements. EAM did not record any impairment losses for its assets during the first quarter of fiscal year 2012.

The overall results of EAM’s investment management operations during the three months ended July 31, 2011, before interest holder distributions, include total investment management fees earned from the Value Line Funds of $3,301,000, 12b-1 fees of $928,000 and other income of $4,000. For the same period, total investment management fee waivers were $230,000 and 12b-1 fee waivers were $618,000. During the three months ended July 31, 2011, EAM’s net income was $162,000, after giving effect to Value Line’s non-voting revenues interest of $1,491,000, but before distributions to voting profits interest holders and to the Company in respect of its non-voting profits interest. During the three months ended July 31, 2011, the Company recorded income of $1,491,000 and profits of $81,000 from its non-voting revenues and its non-voting profits interests in EAM without incurring any directly related expenses. Operating expenses of EAM during the three months ended July 31, 2011, were $2,580,000 and EAM’s net income was $162,000 available for distribution to profit interest holders. At July 31, 2011, EAM’s total assets were $58,091,000, total liabilities were $1,471,000 and total equity was $56,620,000.