Restructuring
As of December 23, 2010, Value Line, Inc. (“Value Line”) completed its previously announced restructuring of its asset management business(the “Transaction”) under EULAV Asset Management (“EAM”), a Delaware statutory trust. As part of the Transaction: (1) EULAV Securities, Inc. (“ESI”), a New York corporation and wholly owned subsidiary of Value Line that acted as the distributor of the 14 Value Line Mutual Funds (the “Value Line Funds”), was restructured into a Delaware limited liability company named EULAV Securities LLC; (2) Value Line transferred 100% of Value Line’s interest in EULAV Securities LLC to EULAV Asset Management, LLC (“EAM LLC”), a Delaware limited liability company and a wholly owned subsidiary of Value Line that acted as the investment adviser to the Value Line Funds and certain separate accounts; (3) EAM LLC was converted into EAM; and (4) EAM admitted Mitchell Appel, Avi T. Aronovitz, Richard Berenger, Howard B. Sirota and R. Alastair Short (the “Shareholders”) as holders of profits interests and Value Line restructured its ownership interests in EAM as described below. According to recent SEC filings Howard B. Sirota has resigned as trustee, but retains his 20% voting profits interest. Pursuant to EAM’s Declaration of Trust (the “Declaration of Trust”), Value Line has no voting authority with respect to the election or removal of the trustees of EAM and holds an interest in certain revenues of EAM and a portion of the residual profits of EAM. The Shareholders were selected by the independent directors of Value Line and hold residual profits interests in EAM. The Shareholders paid no consideration in exchange for their interests in EAM.
The business and affairs of EAM will be managed by five individual trustees (collectively, the “Trustees”) and by its officers subject to the direction of the Trustees. The Trustees are Mitchell Appel, Avi T. Aronovitz, Richard Berenger, R. Alastair Short and a Delaware resident trustee, The Corporation Trust Company, that exercises no authority. Value Line holds non-voting interests in EAM that entitle Value Line to receive a range of 41% to 55% of EAM’s revenues (excluding distribution revenues) from EAM’s mutual fund and separate account business. In addition, Value Line will receive 50% of the residual profits of EAM (subject to temporary increase in certain limited circumstances). The Shareholders will receive the other 50% of residual profits of EAM. EAM will elect to be taxed as a pass-through entity similar to a partnership. The Declaration of Trust also provides for distribution of proceeds in the event of a full or partial sale of EAM in accordance with capital accounts (currently approximately $56 million held entirely by Value Line) and then in accordance with a sharing formula set forth in the Declaration of Trust.
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