The Cheviot Value Management Composite Cheviot Value Management (CVM) manages the investment of over $200 million in a variety of accounts for clients who have investment objectives ranging from growth to stable income to preservation of capital and various combinations thereof. In order to report a single rate of return that is representative of the actual results achieved for our clients, we have aggregated (for accounting purposes only) all fee-paying client accounts, including terminated accounts, over $250,000 that we manage on a fully discretionary basis. Such accounts are combined for performance reporting purposes to provide a “composite” return (our “composite”) that has been constructed in compliance with the industry-standard requirements of the Association for Investment Management and Research (“AIMR”). The composite includes approximately 75% of the market value of all accounts under our management. Performance results are presented before management and custodial fees but after all trading costs. The net of fee performance would typically be 1% less per annum than the gross of fees performance. The composite was created in 1997 based on data beginning January 1, 1992, and has been maintained ever since. The composite includes only assets managed by CVM. The composite is a balanced portfolio allocated principally among the following asset classes: equities (common stocks), fixed income (bonds) and cash. Cash is allocated in accordance with views of the CVM Chief Investment Officer as to the relative desirability of being more or less fully invested in other asset classes from time to time. We segregate the returns of the following asset classes in the composite: equities, fixed income, and cash. Therefore, we can compare our equity returns to the returns of a recognized stock market benchmark such as the S&P 500 or other equity-only investment benchmarks. We can also compare the returns of our total composite portfolio to what we believe to be an appropriate benchmark, namely the Vanguard Balanced Index Fund that invests 60% of its assets in a widely diversified stock portfolio and 40% of assets in a widely diversified bond portfolio. While the stock market has slumped since the late 1990s, our value-driven, balanced portfolio approach has provided positive returns to our clients (as demonstrated by the composite). The CVM composite, in comparison to the stock market, has been a consistent model of balance and stability. Our reduced overall portfolio volatility and limited downside risk does not, however, prevent CVM’s composite from providing higher returns than the relevant benchmarks. The investment policy for most of our clients is to stress capital preservation as much as capital growth. The returns of our composite demonstrate the benefits of that policy: it provides reasonable and positive returns while protecting clients from unacceptable declines in a bear market. Therefore, even though our common stocks did better than both the S&P 500 and the overall composite throughout its history, we do not have any regrets about not being more heavily positioned in equities. We have sought to construct our clients’ portfolios as the financial equivalent of a bridge built to withstand a 100-year flood or a building constructed to withstand a 100-year earthquake. We believe that this portfolio construction continues to bear fruit in the aftermath of the greatest stock market bubble in U.S. history–and its subsequent collapse.