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Our objective in managing the fixed income portion of
a portfolio is to protect principal and to provide a consistent and
acceptable after-tax rate of total return. In the current environment
of volatile interest rate swings and changing yield curves, intermediate
term bonds (5-10 yr.) provide most of the return of a long bond with
substantially reduced risk. Hence, our fixed income philosophy currently
emphasizes high quality (A or better), 5-10 year bonds. We use convertible
bonds and preferred stocks extensively due to their attractive income/growth
and risk/reward features, in addition to the more traditional use
of government, corporate and tax-exempt obligations. The fixed income
security selection process involves:
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A.
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Credit Quality |
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B. |
Maturity Structure |
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Yield Curve |
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Duration to Maturity |
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Yield to Maturity |
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C. |
Taxable |
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Convertibles |
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Government |
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Agencies |
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Mortgage-backed |
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Finance |
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Industrials |
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Utilities |
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Call protection |
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D. |
Tax Exempt |
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After tax total return |
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General obligation vs. Revenue |
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Geography |
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Call protection |
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Insured bonds |
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