Concord believes bonds should be an integral part of most conservative portfolios. Bonds represent a source of income, a way of protecting principal, a means of minimizing taxes and a potential source of capital appreciation.

     The bonds we buy are investment grade and of short to intermediate maturity. Bonds are either taxable or tax exempt as appropriate for each client. All bonds under our management are monitored for credit rating changes. If a national bond rating service downgrades one of our bonds to below investment grade, it will be either put on a "watch list" or sold outright. We do not take undue risks with our bonds.

     While some bond managers simply buy bonds and hold them to maturity, we periodically change the duration (similar to average life) of the portfolio to reflect our forecast for interest rate trends. For example, if we believe we are near a cyclical high point for interest rates, we will extend duration to lock in high interest rates for a longer period of time. Similarly, if we believe interest rates are headed higher, we will shorten duration to minimize the negative impact that higher rates would cause on bond values. This active management strategy should protect principal and increase the potential for capital appreciation.

     The fixed interest rate forecast and appropriate management strategies are developed by the fixed income teams at Concord and our affiliate, Madison Investment Advisors. It is then up to the portfolio manager to determine the best way to implement these strategies for each portfolio they manage.