Accrued Interest
Bond interest accrues daily based on a 360-day year. The accrued portion is that which has been earned since the last interest payment date. Bonds which earn interest on the date of payment only are said to trade "flat." Income bonds do not accrue interest either.

ADJ
The letters "ADJ" after an index (Example: S&P 500 ADJ) adds the dividends in the total return as well as appreciation. All Century Management performance composites include dividends as part of the total return.

Adjustable Rate
Interest rate or dividend which is adjusted periodically, usually based on a standard market rate such as that prevailing on Treasury Bonds or notes. Typically, such issues have a set floor or ceiling which limit the adjustment.

Annualize
Converting the rate of return from a period of less than one year to an annual (yearly) basis. For example, a security which returns 1% a month returns 12% on an annualized basis. Also known as annualized rate or annualized return. The term is similar to "run rate".

Average Capital Base
The average capital base represents the average paid-in capital for the time period. The formula for average capital base is: Average Capital Base = Beginning Market Value + Sum of (Each Change in Capital X (Days Left in Period / Total Days in Period))

Bear Market
A market in which prices of a certain group of securities are falling or are expected to fall. Although figures can vary, a downturn of 15%-20% or more in multiple indexes (Dow or S&P) is considered an entry into a bear market.

Bull Market
A market in which prices of a certain group of securities are rising or are expected to rise. Typically, this is a period of optimism in the market.

Call Feature
Right to redeem debentures prior to maturity at a stated price which usually begins at a premium to par (100 percent) and declining annually. Of late, new convertible issues are non-callable for at least two years, except under very limited circumstances.

Capitalization
The sum of a corporation's long-term debt, stock and retained earnings. Also, the market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share (this is called market capitalization, or "market cap").

Capital Expenditures
Capital to maintain and expand plant and equipment.

Cash Flow
Cash flow equals earnings plus depreciation. This is cash flow after taxes but before capital expenditures. If you deducted capital expenditures, it would be free cash flow (see "Free Cash Flow").

CFA
Chartered Financial Analyst. Sponsored by the CFA Institute, formerly known as the Association for Investment Management and Research (AIMR), it is the highest professional credential that a securities analyst can have in our industry. The expertise gained from this program is stock and bond analysis, as well as portfolio management. It requires three, 6-hour exams in three years on such topics as financial accounting and quantitative analysis, and three years' experience as an investment professional. As of August 2001 there are 37,150 CFA's. You can search the CFA Institute web site to look up the complete details regarding this credential.

CFA Institute (formerly known as AIMR)
The Association for Investment Management and Research (AIMR), which changed its name on May 9, 2004 to the CFA Institute, is an international, nonprofit organization of more than 50,000 investment practitioners and educators in over 100 countries. Founded in January 1990, AIMR was created from the merger of the Financial Analysts Federation (FAF) and the Institute of Chartered Financial Analysts (ICFA). The FAF was originally established in 1947 as a service organization for investment professionals. The ICFA was founded in 1959 to examine candidates and award the Chartered Financial Analyst (CFA) designation.

The CFA Institute's mission is to serve its members and investors as a global leader in educating and examining investment managers and analysts and sustaining high standards of professional conduct. The CFA Institute's membership is global in scope, and its activities are worldwide.

The Research Foundation of CFA Institute sponsors practitioner-oriented research through funding and publishing a diverse assortment of monographs, tutorials, and research papers to broaden investment professionals' knowledge and understanding of their field.

The CFA Institute offers services in three broad categories: Education through seminars and publications; Professional Conduct and Ethics; and Standards of Practice and Advocacy.

CFA Institute's members are employed as securities analysts, portfolio managers, strategists, consultants, educators, and other investment specialists. These professionals practice in a variety of fields, including investment counseling and management, banking, insurance, and investment banking and brokerage firms.

CFP
Certified Financial Planner. Sponsored by the Certified Financial Planner Board of Standards, the CFP certification is now available in 11 countries. The CFP credential has become recognized as the global symbol for competent and ethical financial planning advice. The expertise gained through this certification process includes knowledge on risk management, investments, retirement planning, tax planning, and estate planning. A two-day, 10-hour exam is required as well as three years of client experience (with bachelor's degree; five years without). As of August 2001, there are 37,573 Certified Financial Planners. You can search the CFP Board web site to look up the complete details regarding this credential.

ChFC
Chartered Financial Consultant. This professional designation is sponsored by The American College, in Bryn Mawr, PA. Charted Financial Consultants must complete a minimum of eight courses and 16 hours of supervised examinations. They must also fulfill stringent experience and ethics requirements. Over 38,000 individuals have been awarded the ChFC designation since its inception in 1982. Individuals who earn this designation can provide expert advice on financial planning, wealth planning, estate planning, income taxation, life and health insurance, business taxation and planning, investments, and retirement planning.

CM
This is the acronym for Century Management. CM is a licensed, registered investment advisory firm. The firm was started in 1974 by Arnold Van Den Berg. The legal name for the firm is Van Den Berg Management Inc. DBA Century Management. The CM corporate office is located at 805 Las Cimas Parkway, Suite 430, Austin, Texas 78746. Telephone is 800-664-4888 or 512-329-0050. More information on CM can be found on this website.

CM Value I Equities Only
"CM equities only" represents the return from the equities within the CM Value I Composite.

CM Value I Total Account
Includes all asset classes such as equities, fixed income, money market funds and cash within our CM Value I Composite (also known or referred to as the CM Standard Composite).

CM Value I Composite (also known or referred to as the Standard Composite)
This consists of the accounts of every client both past and present who has had an account with Century Management, for which the investment management charge was fee based and the brokerage fee was transaction based, since the company's inception in September, 1974. The performance of the accounts in this composite is based on all buys, sells, dividends, interest, deposits, and withdrawals for each and every client of record.

CM Value II Composite (also known as CM Bundled Composite )
This consists of the accounts of every client both past and present who has had an account with Century Management, for which the investment management charge was fee based and the brokerage fee was asset based, since 1984. The performance of the accounts in this composite is based on all buys, sells, dividends, interest, deposits, and withdrawals for each and every client of record.

Convertible Preferred
Similar to a convertible bond, except it represents equity in the corporation. Unlike interest payments, dividend income is not a pre-tax income item for the issuing corporations. Corporations holding convertible preferred are entitled to an 85 percent exclusion of dividends.

CRPS
Chartered Retirement Plans Specialist. Sponsored by the College for Financial Planning, this designation covers the design, installation and administration of retirement plans for the business community. This designation is awarded after successful completion of the program and final exam. You can search the College for Financial Planning web site to look up the complete details regarding this credential.

Current Yield
Stated interest or dividend rate expressed as a percentage of the market price of the convertible security.

Cyclical Industry
An industry whose performance is closely tied to the overall economy and thus highly sensitive to business cycles. Examples are autos, chemicals, construction, paper, steel and heavy equipment.

Derivatives
A security, such as an option or futures contract, whose value depends on the performance of an underlying security. Futures contracts, forward contracts and options are the most common types of derivatives. Derivatives are generally used by institutional investors to increase overall portfolio return or to hedge portfolio risk.

Dollar Cost Averaging
A method of accumulating assets by investing a fixed amount of dollars of securities at set intervals. The investor buys more shares when the price is low and fewer shares when the price is high. The overall cost is lower than it would be if a constant number of shares were bought at set intervals.

DJIA Index
The 30 stocks now in the Dow Jones Industrial Average are all major factors in their industries, and their stocks are widely held by individuals and institutional investors. The Dow Jones Industrial Average accounted for more than 28% of the investable U.S. market, as measured by the DJ .U.S. Total Market Index ($8.9 trillion as of December 31, 2002). The Dow Jones averages are unique in that they are price weighted rather than market capitalization weighted. Their component weightings are therefore affected only by changes in the stocks' prices, in contrast with other indexes' weightings that are affected by both price changes and changes in the number of shares outstanding. When the averages were initially created, their values were calculated by simply adding up the component stocks' prices and dividing by the number of components. Later, the practice of adjusting the divisor was initiated to smooth out the effects of stock splits and other corporate actions.

Discounted Cash Flow
Value of future expected cash receipts and expenditures at a common date, calculated by using an Internal Rate of Return. The Internal Rate of Return method finds the average return on investment earned through the life of the investment. It determines the discount rate that equates the present value of future cash flows to the cost of the investment.

Earnings Per Share (EPS)
Portion of a company's profit allocated to each outstanding share of common stock. For example, a corporation that earned $10 million last year and has 10 million shares outstanding would report earnings of $1 per share. This figure is calculated after paying taxes and after paying preferred shareholders and bondholders.

Earnings Yield
Relationship of earnings per share to the current price. Earnings divided by price. This is the inverse of a P/E ratio. The earnings yield allows one to compare the relative attractiveness of stocks, bonds and money market instruments. Example: if a company has a P/E ratio of 20, it has an earnings yield of 5%.

EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortization. The advantage of looking at a company's earnings before interest, taxes, depreciation, and amortization is that it will make an apple to apple comparison between those companies that have debt and those that do not, as well as those companies that fall under different tax brackets. This will allow you to look at the operating earnings of a company before the expense of interest costs or taxes.

Ernst & Young, LLP
Ernst & Young is one of the world's leading professional services and accounting organizations. Ernst & Young audits 18.4% of Business Week's Global 1,000 companies.

Free Cash Flow
Money that is left after all expenses, which include taxes, interest, and capital expenditures. Therefore, this is money that is not needed to run the business. This is extra and can be paid out in the form of a dividend, it can buy back stock, or it can be reinvested into the company if it will show a good return.

Fundamental Analysis
A method of evaluating securities that involves closely examining a company's financial and operating condition, especially sales, earnings, growth potential, assets, debt, management, products and competition.

Global Investment Performance Standards (GIPS)
The Global Investment Performance Standards (GIPS) are ethical standards to be used by investment Managers for creating performance presentations that ensure fair representation and full disclosure. Global standardization of investment performance reporting will allow investors to compare investment managers and will allow managers to compete for new business in foreign markets.

Greater Fool Theory
The theory that an investor will purchase overvalued securities because there will almost always be a "fool" willing to purchase these securities at an even higher price. According to the greater fool theory, questionable securities are not purchased because of their quality, but with the hope of quickly selling it off to another investor (the greater fool), who is also hoping to quickly flip it. Unfortunately, speculative bubbles always burst eventually, leading to a rapid depreciation in share price due to selling off.

Gross Domestic Product (GDP)
The monetary value of all the goods and services produced by an economy over a specified period. It includes consumption, government purchases, investments and exports minus imports. This is perhaps the best indicator of the economic health of a country. Growth of the U.S. economy is measured by the change in inflation-adjusted GDP.

Gross National Product (GNP)
An economic statistic which includes GDP plus any income earned by residents from their overseas investments, minus income earned within the domestic economy by overseas residents. Basically, it's the total amount of money citizens of a country earn internationally.

Gross of Fees
This means before any fees are taken from the account, including those charged by investment advisor, custodian and broker.

Index
A benchmark against which investment or economic performance is measured. Examples include both the Standard & Poors 500-stock index and the Consumer Price Index.

Margin of Safety
Difference between the price an investor pays for a security and the securities private market value or intrinsic value. For example, if the "Widget Company" has a private market value of $100 per share and the investor pays only $40 dollars per share in the open market, then the investor has a built in margin of safety in the amount of $60 per share. Using a margin of safety helps reduce the risk level of a portfolio.

Market Capitalization (aka: Market Cap)
Total dollar value of all outstanding shares. It's calculated by multiplying the total number of shares times the current market price. This term is often referred to as market cap. Market cap is a measure of a company's size. Brokerages vary on their exact definitions, but the current approximate classes of market capitalization are:
Mega Cap - Market cap of $200 billion and greater
Big/Large Cap - $10-$200 billion
Mid Cap - $2 billion to $10 billion
Small Cap - $300 million to $2 billion
Micro Cap - $50 million to $300 million
Nano Cap - Under $50 million

Market Bubbles, Speculation & Manias
A speculative market or stock in which the values rise very rapidly then fall sharply. A temporary market condition created through excessive buying, and an unfounded run-up in prices occurs. Speculative bubbles are generally a result of the "bandwagon effect". Investors, seeing an upward trend in prices, quickly enter long positions in an attempt to participate in the stocks' profitability. Typically, these bubbles are followed by even faster sell-offs once prices begin to decline. It's called a bubble because it will eventually burst. A good example of this was the dot-com bubble of the late 1990s.

NASDAQ
The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on the NASDAQ Stock Market. Launched in 1971, the NASDAQ Composite Index is a broad based index. Today, the Index includes over 3,000 securities, more than most other stock market indices. The NASDAQ Composite is calculated under a market capitalization weighted methodology index. To be eligible for inclusion in the Composite, the security's U.S. listing must be exclusively on the NASDAQ Stock Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing).

Net of Fees
This means after all fees have been taken from the account, including those charged by investment advisor, custodian and broker.

Nikkei Index
The leading and most respected index of Japanese stocks. It is published by Nihon Keizai Shimbun-Sha, a well-known financial newspaper publishing firm.

Price/Earnings Ratio (P/E)
Price of a stock divided by its earnings per share. Also known as "Earnings Multiple" or "Multiple" because it shows how much investors are willing to pay per dollar of earnings. It gives investors an idea of how much they are paying for a company's earning power. The higher the P/E, the more investors are paying and, therefore, the more earnings growth they are expecting.

- Leading P/E
A leading PE ratio is calculated by dividing the current price of the stock by the company's estimated earnings per share for the coming fiscal year. You are evaluating the stock based on what you (or analysts) feel the company is expected to earn in the next year. Note that Value Line (and many other investment advisors) calculate PE ratios based on the previous 6 months earnings per share and estimated earnings per share for the next 6 months.

- Median P/E
The median PE ratio is a Value Line concept calculated by taking a rounded average of four middle values of the range of average P/E ratios for the company over the past 10 years. PE ratios change almost everyday (because the price of a stock changes almost every day); Value Line averages those daily ratios for a year, collects the previous 10 year averages, orders them from highest to lowest, then picks the middle 4 in that order and averages those four. Value Line philosophizes that if the current PE is slightly below or equal to the median PE, then the company is fairly valued (unless facts suggest a change in the companies fundamentals. A current PE higher than the median PE might suggest the company is overvalued.

- Relative P/E
The relative PE ratio is also a Value Line concept. It is calculated by taking a company's current PE ratio and dividing it by the median PE ratio of ALL stocks that Value Line follows. Supposedly it is meant to help an investor judge a stock PE ratio as to how it compares to the market as a whole. Value Line suggests comparing a stock's current relative PE ratio with it relative PE ratios over the past 10 years to see how this company has performed relative to how the market has performed. A value of 1 would mean that the stock has matched the market over that time period. A value below 1 would imply that the company has not performed as well as the market. A value over 1 suggests that the company has outperformed the market.

- Trailing P/E
A trailing PE ratio is calculated by dividing the current price of the stock by the company's earnings per share over the past fiscal year. This ratio assumes that earnings are reflected in the price of the stock (you are evaluating the company based on what has already happened). A question to ask yourself when you look at a trailing PE is whether earnings are calculated based on operating earnings (which do not include one time write offs/charges) or net earnings (which do).

Private Market Value (PMV)
The price at which sophisticated and informed investors are willing to pay to buy and sell a company. The sellers want the highest price and the buyers want the lowest price. By the time each party has consulted their accountants, lawyers, and business advisors, the price each side is willing to agree upon is Private Market Value. This is also referred to as the intrinsic value, appraised value, or enterprise value of a company.

Recession
Downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country's Gross Domestic Product.

Russell 3000 Index
Measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
Capitalization Statistics (as of reconstitution, June 30, 2003; Market-cap data updated May 30, 2003)
Range: $286.8 billion to $116.6 million
Average: $3.7 billion
Median: $622.3 million

Russell 2000 Index
Measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
Capitalization Statistics (as of reconstitution, June 30, 2003; Market-cap data updated May 30, 2003)
Range: $1.2 billion to $116.6 million
Average: $443.5 million
Median: $351.8 million

S&P 400
Standard & Poor's Midcap 400 index is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. The index was developed with a base level of 100 as of December 31, 1990.

S&P 500
Standard & Poor's 500 index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Time-Weighted Return
A "time-weighted" rate of return eliminates the effects of client-initiated additions and withdrawals that are beyond the control of the manager. The result is an accurate and unbiased measure of investment performance that is the same with or without cash-flows.

In calculating a time-weighted return, a portfolio is evaluated each time there is a cash flow transaction in the account (i.e., new purchases and sales, dividend and income payments, deposits or withdrawals). The performances of periods between cash flows are linked together to reflect a return for the whole period. Daily transaction data is used in the linking of each cash flow so that we may achieve the most accurate return calculation.

Unemployment - Structural
Unemployment resulting from changes in the basic composition of the economy. These changes simultaneously open new positions for trained workers. An example of structural unemployment is the technological revolution. Computers may have eliminated jobs, but they also opened up new positions for those who had the skills to operate the computers.

Unemployment - Cyclical
Unemployment resulting from changes in the business cycle. An example of cyclical unemployment is layoffs and cutbacks resulting from a recessionary economic phase.

Value Line Index (aka: Value Line Investment Survey)
The Value Line Index is a comprehensive source of information on approximately 1,700 stocks, more than 90 industries, the stock market and the economy. An equal-weighted stock index containing 1,700 companies from the NYSE, American Stock Exchange, NASDAQ and over-the-counter market. Also known as the Value Line Investment Survey. As this is an equal-weighted index, each of the 1,700 stocks is assigned identical weights in the calculation. Value Line is one of the most respected investment research firms.

Value Line Median P/E
The median is the middle value in a distribution, above and below which lie an equal number of values. The Value Line is an index of 1,700 stocks. Therefore the Value Line Median P/E represents the mid-point of these 1,700 stocks. In calculating the median P/E, Value Line uses two quarters of forward earnings and two quarters of past earnings in its calculations, as opposed to the S&P, which uses four quarters of forward earnings. This will have a smoothing effect on the numbers reported by Value Line and should help prevent under and overstatement of earnings. By using the Value Line Median P/E, one can get a better look at how the average company is performing.

Warrant
Option to buy a stock at a stated price, extending up to ten years. Warrants themselves bear no dividend and no voting rights.

Yield to Maturity
The rate of return on a bond which takes into account the market price, interest payments and time until date of maturity.

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