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Article by DailyStocks_admin    (03-24-08 03:39 AM)

The Daily Magic Formula Stock for 03/22/2008 is Value Line Inc. According to the Magic Formula Investing Web Site, the ebit yield is 11% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.

BUSINESS OVERVIEW

Value Line, Inc. (the "Company" or “Value Line”), a New York corporation, was organized in 1982 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


•

Licensing certain Value Line trademarks and Value Line proprietary ranking system information to third parties under written agreements for use in third party managed and marketed investment products


•

Providing investment management and distribution services to the Value Line Funds, institutions and individual accounts and providing distribution services to the Value Line Funds.

The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company.

A. Investment Related Periodicals & Publications

The investment related periodicals offered by Value Line Publishing Inc. (“VLP”), a wholly owned subsidiary of the Company, cover a broad spectrum of investments including stocks, mutual funds, options, convertible securities, and exchange traded funds (“ETFs”). The Company’s services are of interest to individual and professional investors, as well as to institutions including municipal and university libraries and investment firms. The services generally fall into four categories:


•

Comprehensive reference periodical publications


•

Targeted, niche periodical newsletters


•

Investment analysis software


•

Current and historical financial databases

The comprehensive services (The Value Line Investment Survey, The Value Line Investment Survey-Small and Mid-Cap Edition, The Value Line 600, and The Value Line Mutual Fund Survey) provide both statistical and text coverage of a large number of investment securities, with an emphasis placed on Value Line’s proprietary statistical rankings. The Value Line Investment Survey is the Company’s premier service published each week and covering approximately 1,700 stocks.

The niche newsletters (The Value Line Special Situations Service, Value Line Select, The Value Line No-Load Fund Advisor, The Value Line Convertibles Survey, Value Line Daily Options, and Value Line ETF Survey) provide information on a less comprehensive basis for securities that the Company believes will be of interest to subscribers. Certain of these services make use of Value Line’s proprietary statistical rankings.

Investment analysis software (The Value Line Investment Analyzer and Mutual Fund Survey for Windows ®) includes data sorting and filtering tools. In addition, for institutional and professional subscribers, VLP offers current and historical financial databases (DataFile, Estimates & Projections, Convertibles and Mutual Funds) via CD-ROM or online.

Value Line offers online versions of most of its products at the Company’s website, www.valueline.com. Subscribers to the print versions generally receive free access to the corresponding online versions. The most comprehensive of the Company’s online efforts is The Value Line Research Center, which allows subscribers to access most of the investment services the Company publishes at a packaged price, but only via the Internet.

The print and electronic services include, but are not limited to the following:

The Value Line Investment Survey®

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 primarily on computer-generated statistics of financial results and stock price performance. Two of the evaluations for covered stocks are "Timeliness™" and "Safety™.” Timeliness relates to the probable relative price performance of one stock over the next six to twelve months, as compared to the rest of the approximately 1,700 covered stocks. Rankings are updated each week and range from Rank 1 for the expected best performing stocks to Rank 5 for the expected poorest performers. "Safety" Ranks are a measure of risk and are based on the issuer's relative financial strength and its stock's price stability. "Safety" ranges from Rank 1 for the least risky stocks to Rank 5 for the riskiest. VLP employs 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 more frequent updates when relevant. The Value Line Investment Survey is also referred to as The Value Line Investment Survey - Standard Edition.

The Value Line Investment Survey - Small and Mid-Cap Edition

The Value Line Investment Survey - Small and Mid-Cap Edition is a weekly publication introduced in 1995 that provides detailed descriptions of approximately 1,800 small and medium-capitalization stocks, many listed on NASDAQ, beyond the approximately 1,700 stocks of larger-capitalization companies covered in The Value Line Investment Survey - Standard Edition. Like The Value Line Investment Survey, the Small and Mid-Cap Edition has its own "Summary & Index" providing updated performance ranks and other data, as well as "screens" of key financial 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 Value Line Investment Survey - Standard Edition. A combined Index, published quarterly, allows subscribers to easily locate a specific stock among the approximately 3,500 stocks covered.

One unique feature in the Small and Mid-Cap Edition is The Performance Ranking System. It incorporates many of the elements of the Value Line Timeliness Ranking System, modified to accommodate the approximately 1,800 stocks in the Small and Mid-Cap Edition. The Performance Rank is based on earnings growth and price momentum, and is designed to predict relative price performance over the next six to 12 months.

The principal differences between the Small and Mid-Cap Edition and The Value Line Investment Survey’s Standard Edition are that the Small and Mid-Cap Edition does not include Value Line’s Timeliness Ranks, financial forecasts, analyst comments, or a Selection & Opinion section. These modifications allow VLP to offer this service at a relatively low price.

The Value Line Mutual Fund Survey

The Value Line Mutual Fund Survey is published once every three weeks and was introduced in 1993. It provides full-page profiles of about 700 mutual funds and condensed coverage of about 1,250 funds. Every three weeks, subscribers receive an updated issue, containing over 200 fund reports, plus a "Performance & Index" providing current rankings and performance figures for the full universe of about 2,000 funds, as well as articles on investment trends and developments of concern to mutual fund investors. Funds are ranked for both risk and overall risk-adjusted performance, using strictly quantitative means. The Value Line Mutual Fund Survey also includes annual profiles and analyses on 100 of the nation's major fund families.

The Value Line No-Load Fund Advisor

The Value Line No-Load Fund Advisor is a 32-page monthly newsletter featuring no-load and low-load, open-end mutual funds. It was introduced in 1994. Each issue offers strategies for maximizing total return, and model portfolios for a range of investor profiles. It also includes information about retirement planning, industry news, and specific fund reviews. 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 Value Line Special Situations Service

The Value Line Special Situations Service concentrates on fast-growing, smaller companies whose stocks are perceived by VLP analysts as having exceptional appreciation potential. It was introduced in 1951.

The Value Line Options Survey

The Value Line Options Survey is a semi-monthly service that evaluates and ranks for expected performance approximately 8,000 U.S. equity options. It was introduced in 1973. An electronic version of this product, The Value Line Daily Options Survey (available over the Internet), was introduced during fiscal 1995. An enhanced version was introduced in fiscal 2002. It evaluates and ranks U.S. equity options (approximately 130,000). Features include an interactive database and a new spreadsheet.

The Value Line Convertibles Survey

Introduced in 1972, the Value Line Convertibles Survey is a semi-monthly print and online service that evaluates and ranks approximately 660 convertible securities (bonds and preferred stocks) and approximately 100 warrants for future market performance. The Value Line Electronic Convertibles, which was introduced in 2001, provides daily price updates and analysis online.

Value Line Select

Value Line Select, a monthly publication, was first published in 1998. It focuses each month on a company that senior VLP analysts have chosen. Recommendations are backed by in-depth research and are subject to ongoing monitoring.

The Value Line 600

The Value Line 600 is a monthly service, which contains full-page reports on approximately 600 stocks. Its reports provide information on many actively traded, larger capitalization issues as well as some smaller growth stocks. Since it was introduced in fiscal 1996, it has proven to be popular among investors who want the same type of analysis provided in The Value Line Investment Survey, but who do not want or need coverage of the approximately 1,700 companies contained in that publication. Readers also receive supplemental reports as well as a monthly Index, which includes updated statistics.

Value Line Investment Analyzer

Value Line Investment Analyzer is a powerful menu-driven software program with fast filtering, ranking, reporting and graphing capabilities utilizing over 350 data fields for about 8,000 stocks, industries and indices, including the approximately 1,700 stocks covered in VLP’s benchmark publication, The Value Line Investment Survey.

Value Line Investment Analyzer allows subscribers to search over 350 data fields and apply more than 60 charting and graphing variables for comparative research. In addition to containing digital replicas of the entire Value Line Investment Survey, the Analyzer includes daily data updates through its integration with the Value Line databases via Internet connection. The software includes a portfolio module that lets users create and track their own stock portfolios in depth and up to ten years of historical financial data for scrutinizing performance, risk, yield and return.

Value Line Mutual Fund Survey for Windows ®

Value Line Mutual Fund Survey for Windows ®, a monthly CD-ROM product with weekly internet updates, is the electronic version of The Value Line Mutual Fund Survey. The program features powerful sorting and filtering analysis tools. It includes features such as style attribution analysis, a portfolio stress tester, portfolio rebalancing, correlation of fund returns and hypothetical assets. Windows is a registered trademark of Microsoft Corp. Value Line, Inc. and Microsoft Corp. are not affiliated companies.

Value Line DataFile

Value Line DataFile contains current and historic annual and quarterly financial records for about 7,600 active companies and over 5,000 companies that no longer exist in nearly 100 industries. DataFile has over 400 annual and over 80 quarterly fields for each of the companies included in the database. DataFile is sold to the institutional market. Value Line DataFile II, which includes less historical data, is also available. This version complies with Microsoft Access. In fiscal 1997, VLP introduced the Value Line Mutual Fund DataFile. It covers about 13,000 mutual funds with up to 20 years of historical data with almost 200 data fields. VLP also offers an Estimates and Projections File, with year-ahead and three- to five-year estimates of financial data and projections of stock-price ranges on companies covered in The Value Line Investment Survey, as well as a Convertible Securities File and custom services.

Value Line Research Center

The Value Line Research Center, an internet-only service, provides on-line access to certain of VLP’s leading publications covering stocks, mutual funds, and options and convertible securities as well as special situation stocks. This service includes full online subscriptions to The Value Line Investment Survey, The Value Line Mutual Fund Survey, The Value Line Daily Options Survey, The Value Line Investment Survey - Small and Mid-Cap Edition, The Value Line Convertibles Survey, The Value Line Special Situations Service and Value Line ETF Survey.

B. Licensing Programs

The Company has licensed for fees certain trademarks and proprietary information for products, including unit investment trusts, annuity trusts, managed accounts and exchange traded funds. The sponsors of these products act as wholesalers and distribute the products by syndicating them through an extensive network of national and regional brokerage firms. These broad marketing networks are assembled and re-assembled each time that a product is introduced into the retail marketplace by a licensed product sponsor.

The sponsors of these various products will typically license one or more proprietary ranking systems, which may include Value Line Timeliness, Safety, Technical and Performance ranks, as screens for their portfolios. The sponsors are also given permission to associate Value Line trademarks with the products. Value Line collects a licensing fee from each of the product sponsors/managers primarily based upon the market value of assets invested in each product’s portfolio. Since these fees are based on the market value of the respective portfolio, the payments to Value Line, which are typically received on a quarterly basis, will fluctuate.

Value Line’s primary licensed products have been structured as Unit Investment Trusts, Exchange Traded Funds, Closed-end Funds (all three of which have now been converted into Exchange Traded Funds) and other types of managed products, all of which have in common some degree of reliance on ranking systems for their portfolio creation.

Examples of Value Line’s licensing methodology can be found in the following five Value Line indexed Exchange Traded Fund portfolios now listed on the American Stock Exchange:

First Trust Value Line Dividend Fund (FVD)

The FVD portfolio seeks to provide total return through a combination of current income and capital appreciation by investing in stocks selected by the third party licensee from among U.S. exchange listed securities of companies that pay above average dividends and have the potential for capital appreciation.

First Trust Value Line 100 (FVL)

FVL’s objective is to provide capital appreciation. It seeks to outperform the S&P 500 Index by adhering to a disciplined strategy of investing in a diversified portfolio of the 100 common stocks ranked #1 using Value Line's Timeliness Ranking System. This fund was a closed end fund that became an ETF in June 2007.

First Trust Value Line Equity Allocation Fund (FVI)

The FVI portfolio invests in a subset of the #1 and #2 ranked stocks per the Value Line Timeliness, Safety, and Technical Ranking Systems. The third party licensee purchases stocks in the index generated by the Company with the objective of capital appreciation.

PowerShares Value Line Timeliness Select Fund (PIV)

The PIV portfolio is constructed as an Index of 50 stocks within the 100 Rank #1 Timeliness stocks which factors Value Line Safety and Technical ranks into the portfolio selection process.

PowerShares Value Line Industry Rotation Fund (PYH)

The PYH portfolio contains 50 stocks chosen from the highest ranked stocks for Timeliness from each of the top 50 industries based on Industry Timeliness ranks, and the second highest ranked stocks for Timeliness from each of the top 25 industries based on Industry Timeliness ranks. The total number of stocks held by the Index is 75 stocks.

Total assets managed by third parties participating in licensing programs were $6.4 billion as of April 30, 2007.

C. Investment Management Services

As of April 30, 2007, the Company was the investment adviser for 14 mutual funds registered under the Investment Company Act of 1940. Value Line Securities, Inc., a wholly owned subsidiary of the Company, acts as distributor for the Value Line Mutual Funds (“Value Line Funds”). State Street Bank and Trust Company, an unaffiliated entity, acts as custodian of the Funds' assets and provides fund accounting and administrative services to the Value Line Funds. Shareholder services for the Value Line Funds are provided by Boston Financial Data Services, an affiliate of State Street, which is not related to the Company.

Investment management fees and service and distribution fees 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.

Value Line Asset Management ("VLAM"), a division of the Company, manages pension funds and institutional and individual portfolios. VLAM has investment advisory agreements with its clients, which call for payments to the Company calculated on the basis of the market value of the assets under management. VLAM engages third party solicitors who are paid ongoing fees based on the market value of assets raised by their efforts.

D. Wholly-Owned Operating Subsidiaries

Wholly owned subsidiaries of the Company include VLP, Value Line Securities, Inc. (“VLS”), Vanderbilt Advertising Agency, Inc. (“VAA”), Compupower Corporation (“CPWR”) and Value Line Distribution Center (“VLDC”).

1. VLP is the publishing unit for the investment related periodical publications.

2. VAA places advertising on behalf of the Company's publications, investment advisory services, and mutual funds.

3. CPWR provides computerized subscription fulfillment services and subscriber relations services for VLP publications.

4. VLS is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. VLS is the distributor for 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). VLS receives service and distribution fees, pursuant to rule 12b-1 of the Investment Company Act of 1940 from certain Value Line Funds. The 12b-1 plan is a compensatory plan and the fees payable to VLS under the 12b-1 plan are payable without regard to actual expenses incurred, which means the distributor may earn a profit under the plan.

5. VLDC primarily handles all of the mailings of the publications to VLP’s subscribers. Additionally, VLDC provides office space for Compupower’s subscriber relations and data processing departments, and provides a disaster recovery site for the New York operations.

E. Trademarks

The Company holds trademark and service mark registrations for various names in multiple countries. Value Line believes that these trademarks and service marks provide significant value to the Company and are an important factor in the marketing of its products and services.

F. Investments

The Company invests in the Value Line Funds, fixed income government obligations and other marketable securities. As of April 30, 2007, the Company had $49,716,000 invested in the Value Line equity funds and $19,868,000 in the Value Line money market fund. Combined, this represents approximately 1.9% of total Value Line Funds net assets at April 30, 2007.

G. Employees

At April 30, 2007, the Company and its subsidiaries employed 206 people.

The Company, its affiliates, 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. Analysts are not permitted to own securities of the companies they cover. The Company has adopted rules requiring monthly reports of securities transactions by employees for their respective accounts and restricting trading in various types of securities in order to avoid possible conflicts of interest.

CEO BACKGROUND

Jean Bernhard Buttner* (72). Chairman of the Board, President, and Chief Executive and Operating Officer of the Company and Arnold Bernhard & Co., Inc.; Chairman of the Board and President and Director or Trustee of each of the Value Line Funds. Trustee, Choate Rosemary Hall since 2004. Mrs. Buttner is the mother of Dr. Edgar A. Buttner and Mrs. Janet Eakman.

Dr. Edgar A. Buttner (44). Research Associate, Harvard University since 2003; Instructor, McLean Hospital since 2002; Postdoctoral Fellow, Massachusetts Institute of Technology, 1997–2001. Director of Arnold Bernhard & Co., Inc.

Howard A. Brecher* (53). Vice President and Secretary of the Company; Vice President, Secretary, Treasurer, General Counsel and Director of Arnold Bernhard & Co., Inc.; Assistant Secretary and Assistant Treasurer of each of the Value Line Funds since 2005.

Janet Eakman (47). Private Investor. Director of Arnold Bernhard & Co., Inc.

David T. Henigson* (49). Vice President and Chief Compliance Officer of the Company; Chief Compliance Officer, Vice President and Secretary of each of the Value Line Funds; Vice President and Director of Arnold Bernhard & Co., Inc.

Dr. Herbert Pardes (73). President and CEO of New York-Presbyterian Hospital.

Marion N. Ruth (72). President, Ruth Realty (real estate broker). Director or Trustee of each of the Value Line Funds until 2005; Director of Value Line, Inc., 2000–2004.

Edward J. Shanahan (64). President and Headmaster, Choate Rosemary Hall; Director and Chairman, Foundation for Greater Opportunity (independent educational foundation).

COMPENSATION

Base Salary

Base salaries for the Company’s executives take into account the compensation policies of similar companies competing in the businesses in which the Company is engaged. The Committee believes that the base salary levels as established are reasonable and competitive and necessary to attract and retain key employees.

Annual Incentive Compensation Plan

Bonus payments are awarded to executives based upon competitive market conditions, individual performance and the success of the Company. The performance of the Company and its departments and attainment of individual goals and objectives are given approximately equal weighting in determining bonuses paid to executive officers. The Company’s compensation approach takes into account a full range of the criteria important to the Company’s long-term strategies, rather than relying on inflexible numerical performance targets.

Chief Executive Officer Compensation For Fiscal 2007

In reviewing the Chief Executive Officer’s performance during the past year, the Compensation Committee took note of the Company’s success in several financial and other measures, such as operating profit margin, return on sales, assets and equity and growth in net income, revenues and profits per employee and the Company’s strong total shareholder return through June 30, 2007. Net income and earnings per share increased over the 2006 results. Licensing revenues are growing strongly.

The Company’s consultants, Steven Hall & Partners, did a statistical analysis of both Mrs. Buttner’s salary and the financial performance of the Company by several criteria in comparison with performance and compensation at the peer group of other corporations in the publishing, investment management, and information industries developed by the consultants and listed on page 11. The Hall firm observed that although Value Line was not among the larger companies in the peer group in terms of revenue, its return on sales, equity and assets ranked high in the peer group.

The Committee noted Mrs. Buttner’s personal leadership contributions in successfully guiding the Company to outstanding performance, including rapid increases in licensing revenues as well as outstanding independent ratings of several of the Company’s mutual funds. The Hall firm concluded that a substantial incentive award was called for in light of Mrs. Buttner’s achievements in fiscal 2007 and the compensation programs of the peer group companies and other similar companies.

The Steven Hall firm pointed to their data showing that the CEO’s current cash compensation is at the bottom 25 th percentile relative to the peer group cash compensation. When stock option and restricted stock compensation to many of the other CEO’s of peer group firms is considered, Mrs. Buttner’s total compensation ranks at the bottom of the peer group. Because of the large majority interest held by Mrs. Buttner in the Company in terms of beneficial ownership, the Company has not awarded stock-based compensation. After extensive consideration, the Committee recommended a cash bonus this year in the sum of $300,000 for Mrs. Buttner, which would have exceeded its recommendation for any recent year.

Despite her outstanding achievements, Mrs. Buttner requested that the recommended bonus not be paid to her as, in light of her equity position, she felt it was in the best interests of the Company at this time to retain and reinvest that sum. With the Committee’s concurrence, the Board of Directors decided not to further pursue the bonus payment in light of Mrs. Buttner’s request.

MANAGEMENT DISCUSSION FROM LATEST 10K

Executive Summary of the Business

The Company's primary businesses are producing investment related periodical publications, licensing certain Value Line trademarks and Value Line proprietary ranking system information to third parties for use in selecting securities for third party marketed products, such as unit investment trusts, closed-end fund products and exchange traded funds, and providing investment management services to the Value Line Funds and other managed accounts.

The Company’s target audiences within the investment related periodical publications field are individual investors who look for complete research in one package and institutions that want to offer detailed research to their students or professional users.

Depending upon the product, the Company offers three months or less, annual, or multi-year subscriptions. Generally, all subscriptions are paid for in advance of fulfillment. Renewal orders are solicited primarily through a series of renewal efforts that include letters, email, and telesales efforts. New orders are generated primarily from targeted direct mail campaigns for specific products. Other sales channels used by the Company include advertising in media publications, the Internet, cross selling via telesales efforts and Internet promotions through a third party.

Institutional subscribers consist of investment management companies, colleges, and libraries. The Company has a dedicated department that solicits the institutional subscriptions. Fees for institutional services are based on university or college enrollment and number of users.

Cash received for retail and institutional orders is recorded as unearned revenues until the order is fulfilled. As the subscriptions are fulfilled, the Company recognizes revenue in equal installments over the life of the particular subscription.

The Company’s businesses consolidate into two business segments. The investment related periodical publications (retail and institutional) and licensing of trademarks and proprietary ranking system information consolidate into one segment titled Investment Periodicals, Publications and Licensing. The second segment consolidates the investment management services to the Value Line Funds and other managed accounts into a business segment titled Investment Management.

Results of Operations


The investment periodicals and related publications revenues were down 4.4% and 4.9% for fiscal 2007 and fiscal 2006. As a percentage of total operating revenues, investment periodicals and related publications revenues have fallen from 59.4% in fiscal 2005 to 54.5% in fiscal 2007. While the Company continues to bring in new subscribers through various marketing channels, primarily direct mail and the Internet, total product line circulation continues to decline. Factors that have contributed to the decline in the investment periodicals and related publications revenues include the increasing amount of competition in the form of free and paid investment research on the Internet and research provided by brokerage firms at no cost to their clients.

Value Line’s electronic publications revenues are derived from institutional and retail subscribers. For the year ended April 30, 2007, institutional revenues increased $1,034,000 or 29%, while revenues from retail subscribers were down $452,000 or 6%. The decrease in electronic retail publications revenues is attributable to the decrease in circulation within the Company’s software products.

Licensing revenues

Licensing fee revenues have grown $1,845,000, $2,475,000 and $1,404,000 respectively each of the last three years ended April 30, 2007, 2006,and 2005. As of April 30, 2007, total third party sponsored assets attributable to the licensing business represent $6.4 billion in various products. The Company believes the growth of the business is dependent upon the desire of third party marketers to use the Value Line trademarks and proprietary research for their products, signing new licensing agreements, and the marketplace’s acceptance of new products. While assets and revenues grew in fiscal year 2007 and in fiscal year 2006, the Company did not sign any new agreements with sponsors in fiscal year 2007. It did however expand existing relationships with additional third party products offered. Value Line believes it was an early entrant into this new market five years ago and today the market has matured and the Company and its third party sponsors face more competition in the marketplace.

Investment management fees and distribution services revenues

The investment management fees and distribution services revenues were down $1,312,000 for the year ended April 30, 2007 compared to year ended April 30, 2006, but up $702,000 and $1,008,000 in years ended April 30, 2006 and 2005. While management fees in fiscal year 2007 were up $1,623,000 from fiscal year 2006 there was a net decrease in investment management fees and distribution services revenues for fiscal 2007 due to 12b-1 fee waivers for certain of the Value Line funds. For the twelve months ended April 30, 2007, 2006, and 2005, 12b-1 fee waivers were $3,127,000, $282,000, and $0. For the twelve months ended April 30, 2007, 2006, and 2005, total management fee waivers were $250,000, $40,000, and $0. The Company and its subsidiary, VLS, have no right to recoup the previously waived amounts of management fees and 12b-1 fees. Beginning November 2004, VLS suspended its business of executing trades for any of the Value Line Funds, from which it had earned net commission revenues. Due to increased net assets, higher investment management fees mostly offset the decline in net commission revenues for fiscal 2005.

The table below illustrates the total fund assets for years ended April 30, 2007, 2006, and 2005. The second table shows the two channels the equity funds are available. Shares of SAM and Centurion are available to the public only through the purchase of certain variable annuity and variable life insurance contracts issued by The Guardian Insurance & Annuity Company, Inc. (“GIAC”).

The Company believes that the 5.6% and 40.8% growth in equity funds for fiscal 2007 and fiscal 2006, excluding SAM and Centurion, has been in large part due to the superior performance for certain Value Line Funds at various intervals in terms of short, mid and long-term returns over the two years. As of March 31, 2007, 80% of the equity funds, excluding SAM and Centurion, had a four or five star ratings by Morningstar. The largest distribution channel for the Value Line funds remains the fund supermarket platforms such as Schwab, Ameritrade, and National City Bank.


Advertising and promotion for the year ended April 30, 2007 increased $957,000 from fiscal year 2006. The primary increase is within the fees paid to third party intermediaries, such as Schwab to market the Value Line Funds. This expense will fluctuate based on assets invested in the Value Line Funds by clients of the intermediaries, the change in market value of such assets, and the addition of any new intermediary selling agreements. The Company anticipates third party intermediary expenses will continue to increase as assets continue to grow. Costs associated with direct mail remained substantially the same, while the overall number of pieces mailed increased year to year. The Company also increased its expenditures in print media promoting the Value Line Funds and The Value Line Investment Survey in separate campaigns in select markets. For the year ended April 30, 2006 as compared to April 30, 2005, advertising expenses decreased $6,784,000 primarily from the reduction in media advertising and the frequency of marketing campaigns and fewer pieces having been mailed in fiscal year 2006 for the Company’s investment periodicals.

Salary and employee benefits

The Company employed 206 employees at year-end April 30, 2007, as compared to 228 at year-end April 30, 2006 and 245 at year-end April 30, 2005. The Company has increased productivity by the combination of roles and responsibilities along with selective outsourcing. Some duplication of effort has been eliminated and certain tasks, such as data entry, have been outsourced to third party vendors that the Company believes can provide better controls and faster results at a favorable cost.

Production and distribution

Year Ended April 30,

Production and distribution expenses for the fiscal year ended April 30, 2007 were $92,000 below expenses for fiscal 2006. Production and distribution expenses for the fiscal year ended April 30, 2006 were $1,516,000 below expenses for fiscal 2005. The decline in expenses was primarily due to lower demand for paper, printing and mailing costs that resulted primarily from a decrease in circulation of the print products. Partially offsetting the savings in fiscal 2007 was an increase in the cost of paper and an increase in postage rates.

Production and distribution expenses for the fiscal year ended April 30, 2007 were $92,000 below expenses for fiscal 2006. Production and distribution expenses for the fiscal year ended April 30, 2006 were $1,516,000 below expenses for fiscal 2005. The decline in expenses was primarily due to lower demand for paper, printing and mailing costs that resulted primarily from a decrease in circulation of the print products. Partially offsetting the savings in fiscal 2007 was an increase in the cost of paper and an increase in postage rates.

MANAGEMENT DISCUSSION FOR LATEST QUARTER


Results of Operations

Net income for the nine months ended January 31, 2008 of $20,773,000 or $2.08 per share was $1,401,000 or 7% above net income of $19,372,000 or $1.94 per share for the nine months of the prior fiscal year . Net income of $8,471,000 for the third quarter of fiscal 2008 was 18% above net income of $7,192,000 for the third quarter last fiscal year. Operating income of $27,718,000 for the nine months ended January 31, 2008 was $71,000 below operating income of $27,789,000 last fiscal year. Operating income of $9,337,000 for the third quarter of fiscal 2008 was 5% above operating income of $8,859,000 for the third quarter last fiscal year. The Company’s income from securities transactions of $5,683,000 for the nine months ended January 31, 2008 was 37% above last year’s. Shareholders’ equity of $85,469,000 at January 31, 2008 was 19% higher than shareholders’ equity of $72,030 ,000 at January 31, 2007.

The investment periodicals and related publications revenues were down $2,038,000 or 6% for the nine months ended January 31, 2008 as compared to the nine months ended January 31, 2007. As a percentage of total operating revenues, investment periodicals and related publications revenues have decreased from 55% during the first nine months of fiscal 2007 to 51% during the first nine months of fiscal 2008. While the Company continues to bring in new subscribers through various marketing channels, primarily direct mail and the Internet, total product line circulation continues to decline. Factors that have contributed to the decline in the investment periodicals and related publications revenues include the increasing amount of competition in the form of free and paid investment research on the Internet and research provided by brokerage firms at no cost to their clients.

Value Line’s electronic publications revenues derive 46% from institutional accounts and 54% from retail subscribers. For the nine months ended January 31, 2008, institutional revenues increased $743,000 or 22%, while revenues from retail subscribers were down $347,000 or 7% as compared to the nine months ended January 31, 2007. The decrease in electronic retail publications revenues is attributable to the decrease in circulation within the Company’s software products. Circulation of The Value Line Investment Analyzer decreased 19%, which resulted in a $411,000 decline in revenues from this product, partially offset by an increase in the circulation and revenues from online subscriptions to The Value Line Investment Survey. For the nine months ended January 31, 2008 print publication revenues decreased $2,434,000 or 9% below last fiscal year.

Licensing revenues

Licensing fee revenues have increased $228,000 or 4% for the nine months ended January 31, 2008 as compared to the nine months ended January 31, 2007. The slow growth in licensing fees revenues is primarily due to the volatility in the equity markets and the conversion of three closed-end funds traded on the American Stock Exchange, to open-end Exchange Traded Funds during the second half of calendar 2006 through the first half of 2007. These three conversions, initiated in part as a result of the actions of companies that invest in closed-end funds for the purpose of encouraging trust action to eliminate discount NAV pricing, resulted in the withdrawal of assets that in turn, lowered the Company’s asset based licensing fees for the nine months of fiscal 2008. As of January 31, 2008, total third party sponsored assets attributable to the licensing business represent $6.1 billion in various products. The Company believes the growth of the business is dependent upon the desire of third party marketers to use the Value Line trademarks and proprietary research for their products, signing new licensing agreements, and the marketplace’s acceptance of new products. Value Line believes it was an early entrant into this new market seven years ago and today the market has matured and the Company and its third party sponsors face more competition in the marketplace.

Investment management fees and distribution services revenues

The investment management fees and distribution services revenues were up $1,604,000 or 7% for the nine months ended January 31, 2008 as compared to the nine months ended January 31, 2007. While management fees for the first nine months of fiscal year 2008 were up $1,737,000 or 10% as compared to the first nine months of fiscal year 2007 there was a net decrease of $206,000 or 4% in distribution services revenues due to 12b-1 fee waivers for certain of the Value Line Funds. For the nine months ended January 31, 2008 and 2007, 12b-1 fee waivers were $2,943,000 and $2,229,000, respectively. For the nine months ended January 31, 2008 and 2007, total management fee waivers were $174,000 and $191,000, respectively. The Company and its subsidiary, VLS, have no right to recoup the previously waived amounts of management fees and 12b-1 fees.

The table below illustrates the total fund assets for the nine months ended January 31, 2008 as compared to the nine months last fiscal year. The second table shows the two channels through which the equity funds are available. Shares of Value Line Strategic Asset Management Trust (“SAM”) and Value Line Centurion Fund are available to the public only through the purchase of certain variable annuity and variable life insurance contracts issued by The Guardian Insurance & Annuity Company, Inc. (“GIAC”).

The Company believes that the 5.8% growth in equity funds for the nine months of fiscal 2008, excluding SAM and Centurion Funds sold through GIAC, has been in large part due to the good performance for certain Value Line Funds at various intervals in terms of short, mid and long-term returns. As of January 31, 2008, 80% of the equity funds, excluding SAM and Centurion, had four or five star ratings by Morningstar, Inc. The largest distribution channel for the Value Line Funds remains the fund supermarket platforms including, but not limited to, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and National City Bank.

Expenses

Advertising and promotion expenses for the nine months ended January 31, 2008 decreased $652,000 as compared to the nine months ended January 31, 2007. Costs associated with direct mail decreased $1,173,000 or 30% below last fiscal year, due to a reduction in the overall number of pieces mailed year to year. Promotion expense for the three months and nine months ended January 31, 2008 declined by $381,000 as a result of the reversal of deferred advertising charges related to two of Value Line Mutual Funds. Expenditures for print media promoting the Value Line Mutual Funds in select markets increased by $512,000 for the nine months ended January 31, 2008. The major increase of $992,000 is due to fees paid to third party intermediaries, such as, Charles Schwab & Co., Inc. to market the Value Line Funds. This expense will fluctuate based on assets invested in the Value Line Funds by clients of the intermediaries, the change in market value of such assets, and the addition of any new intermediary selling agreements. The Company anticipates third party intermediary expenses will continue to increase as assets grow and more shareholders come into the Value Line Funds through intermediaries rather than direct accounts.

Salary and employee benefits

Production and distribution expenses for the nine months ended January 31, 2008 were $570,000 below expenses for the nine months ended January 31, 2007. Amortized software costs decreased $367,000 below last fiscal year due to a decrease of capitalized projects and costs. In addition, the decline in expenses was due to volume reductions in paper, printing and mailing costs that resulted primarily from a decrease in circulation of the print products. Partially offsetting the savings during the nine months of fiscal 2008 was an 8% increase in the cost of paper (since July 2006) and an 11% increase in postage rates (since May 2007).

Office and administration

Office and administration expenses for the nine months ended January 31, 2008 were $1,340,000 above expenses for the nine months ended January 31, 2007. During the first nine months of fiscal year 2008 professional fees significantly increased as compared to the first nine months of fiscal year 2007. Professional fees can fluctuate year to year based on the level of operations, such as litigation or regulatory activity requiring the use of outside professional consultants. Within Occupancy, during the last fiscal quarter of fiscal 2007, the Company amended its lease in midtown New York extending the lease expiration date to May 2013 on negotiated terms in place of the Company’s renewal option at market rate, which resulted in significantly higher rent as a result of market conditions. Under the terms of its original lease, the Company began receiving a rent concession in the amount of $767,950 credited equally during the six months beginning December 2007.

Income from securities transactions, net

For the nine months ended January 31, 2008 the Company’s income from securities transactions, net, is $1,536,000 higher than income for the nine months ended January 31, 2007. Income from securities transactions, net, includes dividend and interest income of $2,604,000 at January 31, 2008 that is $510,000 or 24% higher than income of $2,094,000 for the nine months ended January 31, 2007 due to an increase in interest rates. Realized capital gains, net of realized capital losses during the first nine months of fiscal 2008 are $2,800,000, of which $2,793,000 represents distributions from the Value Line Mutual Funds. This compares to capital gains of $1,984,000, net of realized capital losses in fiscal 2007, of which $2,061,000 represented distributions from the Value Line Mutual Funds.

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