Registration No. 33-17423
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11 [X]
(Check appropriate box or boxes.)
________________________________
CONCORDE VALUE FUND, INC.
(Exact name of Registrant as Specified in Charter)
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(Address of Principal Executive Offices) (Zip Code)
(214) 387-8258
(Registrant's Telephone Number, including Area Code)
Gary B. Wood, Ph.D. Copy to:
Concorde Financial Corporation Richard L. Teigen
1500 Three Lincoln Centre Foley & Lardner
5430 LBJ Freeway 777 East Wisconsin Avenue
Dallas, Texas 75240 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
__________________________________
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment
Company Act of 1940, and filed its required Rule 24f-2 Notice for the
Registrant's fiscal year ended September 30, 1995 on November __, 1995.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[_] on (date) pursuant to paragraph (a) of Rule 485
[X] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If applicable, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Page 1 of ____ pages
The Exhibit Index is located at page ____ of
the sequential numbering system.
<PAGE>
CONCORDE FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
Part A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis A MESSAGE FROM THE PRESIDENT OF CONCORDE
FINANCIAL CORPORATION; EXPENSES
3. Condensed Financial FINANCIAL HIGHLIGHTS; WHAT HAS BEEN THE
Information FUNDS' PERFORMANCE?
4. General Description WHAT IS CONCORDE FUNDS, INC.?; WHAT ARE THE
of Registrant FUNDS' INVESTMENT OBJECTIVES AND POLICIES?;
DO THE FUNDS HAVE ANY INVESTMENT
LIMITATIONS OR STRATEGIES DESIGNED TO
REDUCE RISK?
5. Management of the WHO MANAGES THE FUNDS?; WHAT ABOUT
Fund BROKERAGE TRANSACTIONS?; GENERAL
INFORMATION ABOUT THE FUND
5A. Management's WHAT HAS BEEN THE FUNDS' PERFORMANCE?
Discussion of Fund
Performance
6. Capital Stock and WHAT REPORTS WILL I RECEIVE?; WHAT ABOUT
Other Securities DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES?; GENERAL INFORMATION ABOUT THE FUND?
7. Purchase of HOW IS A FUND'S SHARE PRICE DETERMINED?;
Securities Being HOW DO I OPEN AN ACCOUNT AND PURCHASE
Offered SHARES?; WHAT RETIREMENT PLANS DOES THE
FUND OFFER?; MAY SHAREHOLDERS REINVEST
DIVIDENDS?
8. Redemption or HOW DO I SELL MY SHARES?
Repurchase
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives Included in Prospectus under "WHAT ARE THE
and Policies FUNDS' INVESTMENT OBJECTIVES AND
POLICIES?"; Investment Restrictions;
Description of Bond Ratings
14. Management of the Directors and Officers of the Fund
Registrant
15. Control Persons and Directors and Officers of the Fund;
Principal Holders of Principal Shareholders
Securities
16. Investment Advisory and Investment Advisor; Custodian; Independent
Other Services Accountants
17. Brokerage Allocation Allocation of Portfolio Brokerage
18. Capital Stock and Other Included in Prospectus under "GENERAL
Securities INFORMATION ABOUT THE FUND"
19. Purchase, Redemption Included in Prospectus under "HOW IS A
and Pricing of FUND'S SHARE PRICE DETERMINED?"; "HOW DO
Securities Being I OPEN AN ACCOUNT AND PURCHASE SHARES?";
Offered "WHAT RETIREMENT PLANS DOES THE FUND
OFFER?"; "MAY SHAREHOLDERS REINVEST
DIVIDENDS?"; "HOW DO I SELL MY SHARES?";
Determination of Net Asset Value and
Performance; Redemption of Fund Shares
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Determination of Net Asset Value and
Performance Data Performance
23. Financial Statements Financial Statements
* Answer negative or inapplicable
<PAGE> 1
[CONCORDE FUNDS, INC. LOGO]
[CONCORDE FUNDS, INC. LOGO]
DECEMBER , 1995
CONCORDE FUNDS, INC.
1500 THREE LINCOLN CENTRE
5430 LBJ FREEWAY
DALLAS, TEXAS 75240
TELEPHONE: (214) 387-VALU (8258)
(FUND INFORMATION)
(800) 338-1579 (ACCOUNT INFORMATION)
CONCORDE FUNDS, INC., (the "FUNDS") is a no load, open-end, diversified
management investment company offering shares in two separate mutual funds, each
with a different investment objective. Concorde Value Fund seeks to produce long
term growth of capital, without exposing capital to undue risk, principally
through investing in out-of-favor common stocks. Concorde Income Fund seeks
current income, primarily through investing in a diversified portfolio of income
producing securities. Growth of capital is a secondary objective.
------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------------------------------
This Prospectus sets forth concisely the information about the FUNDS that
prospective investors should know before investing. Please read this Prospectus
and retain it for future reference. Additional information about the FUNDS has
been filed with the Securities and Exchange Commission in the form of a
Statement of Additional Information, dated December , 1995, which is
incorporated by reference in the Prospectus. Copies of the Statement of
Additional Information will be provided without charge upon request to the FUNDS
at the above address or telephone number.
<PAGE> 2
A MESSAGE FROM THE PRESIDENT OF
CONCORDE FINANCIAL CORPORATION
Concorde Financial Corporation, the investment advisor for Concorde Funds,
Inc., serves as investment advisor and financial counsellor to individuals,
trusts, and qualified plans. In managing assets, our organization's focus has
always been to concentrate on appropriate risk and return. This focus is present
in our managing of the assets of Concorde Value Fund, and the newest member of
our fund family, Concorde Income Fund.
CONCORDE VALUE FUND. In managing equity investments, we believe the best
investment policy is to buy quality, well-managed companies at a discount to
their intrinsic value. We are prepared to hold them for long-term total returns
regardless of what the consensus view of the overall stock market's value
happens to be.
CONCORDE INCOME FUND. In managing a diversified income-oriented portfolio,
we primarily seek current income but also intend to take advantage of
opportunities for capital appreciation and growth of investment income. We
believe this can best be achieved by considering traditional income-producing
securities as well as securities which provide inducements to participate in the
potential growth of an issuer.
We at Concorde Financial Corporation pledge our commitment to the highest
possible standard of professional performance for the benefit of investors in
Concorde Value Fund and Concorde Income Fund.
Sincerely
/s/ GARY B. WOOD
Gary B. Wood, Ph.D.
President
ii
<PAGE> 3
EXPENSES
The following information is provided in order to assist you in understanding
the various costs and expenses that, as an investor in a FUND, you will bear
directly or indirectly. It should not be considered to be a representation of
past or future expenses. Actual expenses may be greater or lesser than those
shown. "Annual Operating Expenses" for the VALUE FUND are based on actual
expenses incurred for the fiscal year ending September 30, 1995. "Annual
Operating Expenses" for the INCOME FUND are the annualized operating expenses
the INCOME FUND expects to pay during the current fiscal year. The "Management
fees" for the INCOME FUND are an estimate of the fees expected to be paid by the
INCOME FUND during its first twelve month period of operations. The example
assumes a 5% annual rate of return pursuant to requirements of the Securities
and Exchange Commission. The hypothetical rate of return for each FUND is not
intended to be representative of past or future performance. The INCOME FUND is
new and actual operating expenses and investment return may be more or less than
those shown:
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
VALUE INCOME
FUND FUND
----- ------
<S> <C> <C>
Maximum sales load imposed on purchases......................... None None
Maximum sales load imposed on dividends......................... None None
Deferred sales load............................................. None None
Redemption fee.................................................. None* None*
Exchange fee.................................................... None None
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
VALUE INCOME
FUND FUND
----- ------
<S> <C> <C>
Management fees................................................. 0.90% 0.70%
12b-1 fees...................................................... None None
Other expenses.................................................. -- 0.80%
Total fund operating expenses................................... -- 1.50%
</TABLE>
* A fee of $7.50 is charged for each wire redemption.
EXAMPLE
<TABLE>
<CAPTION>
VALUE INCOME
FUND FUND
----- ------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each time period:
1 year..................................................................... $ $ 15
3 years.................................................................... $ $ 48
5 years.................................................................... $ $ 82
10 years................................................................... $ $180
</TABLE>
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FINANCIAL HIGHLIGHTS
The following financial highlights for the VALUE FUND have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The financial
highlights should be read in conjunction with the financial statements and
related notes included in the Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988*
-------- -------- -------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year...... $13.11 $11.13 $10.51 $ 8.35 $12.61 $11.29 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment
income............... 0.04 0.07 0.16 0.24 0.19 0.16 0.06
Net realized and
unrealized gains
(losses) on
investments.......... 0.55 2.05 0.71 2.12 (3.55) 1.32 1.23
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............. 0.59 2.12 0.87 2.36 (3.36) 1.48 1.29
------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.03) (0.14) (0.25) (0.20) (0.38) (0.13) (0.00)
Distributions from net
realized gains......... (1.39) (0.00) (0.00) (0.00) (0.52) (0.03) (0.00)
------ ------ ------ ------ ------ ------ ------ ------
Total from
distributions.......... (1.42) (0.14) (0.25) (0.20) (0.90) (0.16) (0.00)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year............ $12.28 $13.11 $11.13 $10.51 $ 8.35 $12.61 $11.29
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN.... 5.04% 19.16% 8.49% 28.79% -28.04% 13.25% 12.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's)............... $12,003 $12,630 $12,532 $13,649 $11,735 $12,527 $7,416
Ratio of expenses to
average net assets....... 1.69% 1.64% 1.68% 1.78% 1.75% 1.93% 2.13%
Ratio of net investment
income to average
net assets............... 0.33% 0.54% 1.50% 2.47% 1.88% 1.32% 0.49%
Portfolio turnover rate.... 75.43% 71.69% 51.69% 25.36% 48.83% 32.34% 13.40%
Shares outstanding at
end of year.............. 977,095 963,554 1,126,309 1,298,530 1,405,070 993,752 657,085
</TABLE>
---------------
* Period from December 4, 1987 (commencement of operations) through September
30, 1988. Total investment return and other ratios are not annualized.
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WHAT IS CONCORDE FUNDS, INC.?
Concorde Funds, Inc. (the "FUNDS") is a no-load open-end diversified
management investment company registered under the Investment Company Act of
1940. It was incorporated under the laws of Texas on September 21, 1987. On
, 1995, the FUNDS' corporate name was changed from Concorde Value
Fund, Inc. to Concorde Funds, Inc. and it became a series investment company
with two separate classes of common stock, each of which is a separate mutual
fund, namely, Concorde Value Fund (the "VALUE FUND") and Concorde Income Fund
(the "INCOME FUND"). Each FUND is described in this Prospectus in order to help
you compare the similarities and differences between the FUNDS so that you can
determine which FUND, or whether a combination of the FUNDS, best meets your
personal investment objectives. The VALUE FUND is the continuation of the
original Concorde Value Fund, Inc. As an open-end investment company the FUNDS
obtain their assets by continuously selling their shares to the public. Proceeds
from the sale of shares are invested by a FUND in securities of other companies.
In this way, the FUND:
- Combines the resources of many investors, with each individual investor having
an interest in every one of the securities owned by the FUND;
- Provides each individual investor with diversification by investing in the
securities of many different companies in a variety of industries; and
- Furnishes professional portfolio management to select and watch over
investments. See "WHO MANAGES THE FUNDS?" for a discussion of the FUNDS'
investment advisor.
A FUND will redeem any of its outstanding shares on demand of the owner at the
next determined net asset value of the shares. There are no sales, redemption or
Rule 12b-1 distribution charges.
WHAT ARE THE FUNDS' INVESTMENT
OBJECTIVES AND POLICIES?
VALUE FUND. The VALUE FUND's investment objective is to produce long-term
growth of capital, without exposing capital to undue risks, principally through
investing in out-of-favor common stocks. The VALUE FUND's investment advisor,
Concorde Financial Corporation (the "Advisor") considers out-of-favor stocks to
have some combination of the following characteristics: (a) a price/earnings
ratio below the average price/earnings ratio of publicly traded stocks; (b) a
price/book value ratio below the average price/book value ratio of publicly
traded stocks; (c) a dividend yield higher than the average dividend yield of
publicly traded stocks; (d) small market capitalization (i.e. less than
$500,000,000); (e) low growth expectations (i.e. analysts expect earnings growth
to be less than the average expected earnings growth of publicly traded
companies); or (f) coverage by a smaller number of analysts (i.e. six or less).
For purposes of the foregoing, "publicly traded" stocks are considered to be
stocks quoted on the Nasdaq Stock Market or listed on a national securities
exchange. The Advisor's investment philosophy is contrarian in concept and is
based in large part on the premise that market analysts tend to extrapolate the
current performance of companies. The Advisor believes that as a result,
companies with strong recent growth in earnings often have high price/earnings
ratios as analysts predict a continuation of the positive trend whereas
companies with poor recent profit growth have low price/earnings ratios as
analysts expect continued hard times. The Advisor believes that market analysts
tend to be either too optimistic or too pessimistic, as the case may be. By
investing in out-of-favor stocks the Advisor believes that the VALUE FUND can be
in a position to outperform the market while reducing its risk of
underperforming the market. However in
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investing in out-of-favor stocks there is the risk that improving fundamentals
may not be recognized as quickly as would be the case with more widely followed
stocks and that the market for out-of-favor stocks may be more volatile than the
market for stocks where there is greater trading volume. There is also the risk
that the negative opinion held by the majority is correct. Therefore, there can
be no assurances that the VALUE FUND's investment objective will be achieved or
that the VALUE FUND's portfolio will not decline in value.
In selecting common stocks, the Advisor relies primarily on publicly available
information as well as research information supplied by brokerage firms. The
Advisor considers various financial characteristics of issuers such as earnings
growth, book value, net current asset value per share, replacement cost and
dividends and studies the financial statements of the issuer and other issuers
in the same industry. No strict formulas are used in determining whether the
characteristics of an undervalued stock are present.
No minimum or maximum percentage of the VALUE FUND's assets is required to be
invested in common stocks or any other type of security. During times when a
high level of securities prices generally prevails there may be a scarcity of
common stocks available that meet the Advisor's investment criteria. At these
times the VALUE FUND may invest in preferred stocks, particularly those which
are convertible into common stock, fixed-income securities such as U.S. Treasury
Bonds and investment grade, nonconvertible corporate bonds and debentures.
Additionally, investments in nonconvertible preferred stocks and debt securities
will be made only during times when there is a potential for growth of capital
(i.e., during periods of declining interest rates when the market value of such
securities generally increases). The VALUE FUND will limit its investments in
nonconvertible corporate bonds and debentures to those which have been assigned
one of the highest four ratings of either Standard & Poor's Corporation (AAA,
AA, A and BBB) or Moody's Investors Service, Inc. (Aaa, Aa, A and Baa). A
description of the foregoing ratings is set forth in the Statement of Additional
Information under the caption "Description of Bond Ratings."
INCOME FUND. The INCOME FUND'S primary investment objective is to produce
current income. Growth of capital is a secondary objective and will be sought
only when compatible with the primary objective. The INCOME FUND will attempt to
achieve its investment objectives by investing primarily in a diversified
portfolio of U.S. dollar denominated investment grade debt securities selected
for their income characteristics relative to the risk involved. The INCOME FUND
intends to invest between 20% and 50% of its assets in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities with
maturities ranging from two to ten years. The balance of the portfolio will be
invested in other approved securities as the Advisor determines according to
market conditions including the following: dividend paying common stocks
(including common stocks of real estate investment trusts and royalty trusts);
preferred stocks; convertible securities; corporate debt securities, including
commercial paper; mortgage and other asset backed securities; U.S. bank
obligations, including banker's acceptances and certificates of deposit;
repurchase agreements; U.S. state and local government securities; foreign
securities; and exchange-traded master limited partnerships. During periods of
rising interest rates, a greater percentage of the INCOME FUND'S assets may be
invested in securities that are less sensitive to interest rate changes.
The INCOME FUND's principal objective is to obtain current income. However,
unlike funds investing solely for income, the INCOME FUND intends also to take
advantage of opportunities for modest capital appreciation and growth of
investment income. The INCOME FUND may purchase securities which are convertible
into, or exchangeable for, common stock when the
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Advisor believes they offer the potential for higher total return than
nonconvertible securities. It may also purchase income securities that carry
warrants or common stock purchase rights attached as an added inducement to
participate in the potential growth of an issuer.
The INCOME FUND has adopted an investment policy pursuant to which it will not
purchase securities of any issuer if such purchase would at that time cause more
than 20% of the value of the INCOME FUND'S assets to be invested in securities
rated less than investment grade. Investment grade securities are (i) corporate
bonds, debentures or notes rated at least BBB by Standard & Poor's Corporation
("S&P"), or Baa by Moody's Investor's Service, Inc. ("Moody's") at the time of
acquisition; and (ii) any type of unrated debt security that the Advisor
determines at the time of acquisition to be of a quality comparable to the
foregoing. If a security held by the INCOME FUND falls below a Baa rating by
Moody's or a BBB rating by S&P, the INCOME FUND will consider all circumstances
deemed relevant in determining whether to hold the security. Securities rated
BBB by S&P or Baa by Moody's, although investment grade, exhibit speculative
characteristics and are more sensitive than higher rated securities to changes
in economic conditions. A description of the foregoing ratings is set forth in
the Statement of Additional Information.
The INCOME FUND may invest up to 20% of its assets in securities that are
rated below investment grade. The INCOME FUND, however, will not invest in any
securities rated lower than B at the time of purchase. Investments in high yield
securities (i.e., less than investment grade), while producing greater income
and opportunity for gain than investments in higher rated securities, entail
relatively greater risk of loss of income or principal. Lower grade obligations
are commonly referred to as "Junk Bonds". Market prices of high yield, lower
grade obligations may fluctuate more than market prices of higher rated
securities. Lower grade, fixed income securities tend to reflect short-term
corporate and market developments to a greater extent than higher rated
obligations which, assuming no change in their fundamental quality, react
primarily to fluctuations in the general level of interest rates. For further
information about below investment grade securities, see "May the Funds Engage
in Other Investment Practices -- Low Rated Securities."
The values of the securities held by the INCOME FUND are subject to price
fluctuations resulting from various factors, including rising or declining
interest rates ("market risks") and the ability of the issuers of such
investments to make scheduled interest and principal payments ("financial
risks"). The Advisor attempts to minimize these risks when selecting investments
by taking into account interest rates, terms and marketability of obligations,
as well as the capitalization, earnings, liquidity and other indicators of the
issuer's financial condition.
The INCOME FUND may invest in zero coupon U.S. government and corporate debt
securities which do not pay current interest, but are purchased at a discount
from their face value. The market prices of zero coupon securities generally are
more volatile than the prices of securities that pay interest periodically and
in cash, and are likely to respond to changes in interest rates to a greater
degree than do other types of debt securities having similar maturities and
credit quality. The INCOME FUND may also invest in closed-end investment
companies, restricted securities, covered call options on common stock,
warrants, put bonds and variable rate securities. See "May the Funds Engage In
Other Investment Practices" for a discussion of other investment restrictions
and practices.
The FUNDS' investment objectives and the foregoing investment policies are not
fundamental and the FUNDS' Board of Directors may change the investment
objectives and such policies without shareholder approval. A change in a FUND'S
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<PAGE> 8
investment objective may result in the FUND having an investment objective
different from the investment objective which a shareholder considered
appropriate at the time of investment in the FUND. At least 30 days prior to any
change by a FUND in its investment objective, the FUND will provide written
notice to all of its shareholders regarding such proposed change.
DO THE FUNDS HAVE ANY INVESTMENT LIMITATIONS OR STRATEGIES DESIGNED TO REDUCE
RISK?
Each FUND has adopted certain investment limitations designed to reduce its
exposure to risk of loss of capital. The FUNDS will not purchase securities on
margin; participate in a joint-trading account; sell securities short; buy, sell
or write put or call options except for hedging purposes described below or
engage in futures trading. The FUNDS are subject to additional investment
limitations as follows:
- Neither FUND will purchase more than 10% of the voting securities of any
issuer.
- Neither FUND will invest more than 5% of its assets in the securities of
companies that have a continuous operating history of less than three years.*
- Neither FUND will purchase the securities of any issuer if such purchase would
cause more than 5% of the value of the FUND's total assets to be invested in
the securities of any one issuer, exclusive of U.S. Government Securities.
- The VALUE FUND will not invest more than 5% of its net assets in warrants.
- Neither FUND will invest more than 25% of its assets in any one industry.
- The VALUE FUND will not lend money (except by purchasing publicly distributed
debt securities) or lend its portfolio securities.
- Neither FUND will borrow money except from a bank and only for temporary or
emergency purposes, and in no event in excess of 5% of the value of its total
assets, or pledge any of its assets except to secure borrowings and only to an
extent not greater than 10% of the value of the FUND's net assets.
The investment limitations described above are discussed in further detail in
the Statement of Additional Information. Except as discussed below these
investment limitations and others set forth in the Statement of Additional
Information are fundamental policies and may be changed only with the approval
of the shareholders of the appropriate FUND as described in the Statement of
Additional Information. The Restriction marked with an asterisk (*) above is not
a fundamental policy for the INCOME FUND. Non-fundamental investment policies
may be changed without shareholder approval.
MAY THE FUNDS ENGAGE IN OTHER INVESTMENT PRACTICES?
In order to achieve their investment objectives, the FUNDS may engage in the
following investment practices in addition to those previously discussed.
PORTFOLIO LENDING. In order to realize additional income, the INCOME FUND may
lend its portfolio securities to unaffiliated persons who are deemed to be
creditworthy (principally to broker/dealers). The loans must be secured
continuously by cash collateral or U.S. government securities maintained on a
current basis in an amount at least equal to the market value, determined daily,
of the securities loaned. Cash collateral will be invested in money market
instruments. During the existence of the loan, the INCOME FUND will continue to
receive the equivalent of the interest and dividends paid by the issuer on the
securities loaned and one or more of the negotiated loan fees, interest on
securities used as collateral or interest on the securities purchased with the
collateral, either of which type of interest may be shared with the borrower.
The INCOME FUND will have the right to call the loan and obtain the securities
loaned at any time on five days' notice, including the right to call the loan to
enable
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the INCOME FUND to vote the securities. Such loans may not exceed 10% of the net
assets of the INCOME FUND.
PORTFOLIO TURNOVER. Consistent with the FUNDS' investment objectives, the
Advisor will not engage in trading for short-term profits, but when the
circumstances warrant, securities may be sold without regard to the length of
time held. The VALUE FUND will typically hold a stock until it returns to favor
with other investors. The Advisor is prepared to hold stocks for several years
or longer, if necessary. The Advisor intends to purchase a given security
whenever it believes it will contribute to the stated objective of a FUND, even
if the same security has only recently been sold. In selling a given security,
the Advisor keeps in mind that (i) profits from sales of securities held less
than three months must be limited in order to meet the requirements of
Subchapter M of the Internal Revenue Code; and (ii) profits from sales of
securities are taxable to certain shareholders. Subject to those considerations,
a FUND may sell a given security, no matter for how long or for how short a
period it has been held in the portfolio, and no matter whether the sale is at a
gain or at a loss, if the Advisor believes that it is not fulfilling its
purpose. Since investment decisions are based on the anticipated contribution of
the security in question to the applicable FUND's objectives, the rate of
portfolio turnover is irrelevant when the Advisor believes a change is in order
to achieve those objectives, and each of the FUND's annual portfolio turnover
rate may vary from year to year.
It is expected that the VALUE FUND usually will have an annual portfolio
turnover rate of less than 75% and the INCOME FUND usually will have an annual
portfolio turnover rate of 50%, although the annual portfolio turnover rate of
each FUND may vary widely from year to year depending upon market conditions.
The annual portfolio turnover rate indicates changes in a FUND's portfolio and
is calculated by dividing the lesser of purchases or sales of portfolio
securities (excluding securities having maturities at acquisition of one year or
less) for the fiscal year by the monthly average of the value of the portfolio
securities (excluding securities having maturities at acquisition of one year or
less) owned by the FUND during the fiscal year.
High portfolio turnover (i.e., over 100%) may involve correspondingly greater
brokerage commissions and other transaction costs, which are borne directly by
the FUNDS. In addition, high portfolio turnover may result in increased
short-term capital gains which, when distributed to shareholders, are taxed at
ordinary income rates.
REPURCHASE AGREEMENTS AND OTHER SHORT-TERM INVESTMENTS. Each of the FUNDS may
enter into repurchase agreements with banks or certain non-bank broker/dealers.
In a repurchase agreement, the FUND buys an interest-bearing security at one
price and simultaneously agrees to sell it back at a mutually agreed upon time
and price. The repurchase price reflects an agreed-upon interest rate during the
time the FUND's money is invested in the security. Since the security purchased
constitutes security for the repurchase obligation, a repurchase agreement can
be considered as a loan collateralized by the security purchased. The FUND's
risk is the ability of the seller to pay the agreed-upon price on the delivery
date. If the seller defaults, the FUND may incur costs in disposing of the
collateral, which would reduce the amount realized thereon. If the seller seeks
relief under the bankruptcy laws, the disposition of the collateral may be
delayed or limited. To the extent the value of the security decreases, the FUND
could experience a loss. The FUNDS' Board of Directors has established
procedures to evaluate the creditworthiness of the other parties to repurchase
agreements.
In addition, each of the FUNDS may invest in commercial paper and other cash
equivalents rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's, commercial
paper master notes (which are demand instruments bearing interest at rates which
are fixed to
7
<PAGE> 10
known lending rates and automatically adjusted when such lending rates change)
of issuers whose commercial paper is rated A-1 or A-2 by S&P or Prime-1 or
Prime-2 by Moody's and unrated debt securities which are deemed by the Advisor
to be of comparable quality. Each of the FUNDS may also invest in United States
Treasury bills and notes, and certificates of deposit of domestic branches of
U.S. banks or of Canadian banks, provided in each case that the banks have total
deposits in excess of $1,000,000,000. The FUNDS will invest in repurchase
agreements and other short-term investments only for temporary defensive
purposes or to maintain liquidity to pay potential redemption requests. However,
when investing for temporary defensive purposes, up to 100% of a FUND's assets
may be invested in such securities.
ILLIQUID SECURITIES. The INCOME FUND may invest up to 15% of its net assets in
illiquid securities, which may include restricted securities, repurchase
agreements maturing in more than seven days and other securities that are not
readily marketable. Securities eligible to be resold to qualified institutional
investors pursuant to Rule 144A under the Securities Act of 1933 may be
considered liquid by the INCOME FUND in accordance with guidelines approved by
the FUNDS' Board of Directors. Such guidelines take into account trading ability
for such securities, any contractual restrictions and the availability of
reliable pricing information, among other factors. Investing in Rule 144A
securities could have the effect of increasing the level of the INCOME FUND's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities. Risks associated with
illiquid securities include the potential inability of the INCOME FUND to
promptly sell a portfolio security after its decision to sell and, with respect
to illiquid restricted securities, the INCOME FUND may be required to pay all or
a part of the registration expenses to sell the restricted security. For further
information about illiquid securities, see the Statement of Additional
Information.
LOW-RATED SECURITIES. The INCOME FUND may invest up to 20% of its assets in
securities that are rated below investment grade (i.e., rated lower than BBB by
S&P or Baa by Moody's) or in unrated securities judged by the Advisor to be of
comparable quality. The INCOME FUND, however, will not invest in any securities
rated lower than B at the time of purchase. Debt rated BB, B, CCC, CC and C and
debt rated Ba, B, Caa, Ca and C are regarded by S&P and Moody's, respectively,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation. For
S&P, BB indicates the lowest degree of speculation and C the highest. For
Moody's, Ba indicates the lowest degree of speculation and C the highest. For
additional information on the ratings used by S&P and Moody's and a description
of low-rated securities, see the Statement of Additional information.
Low-rated securities generally offer a higher yield than that available from
higher-rated securities. However, low-rated securities involve higher risks, in
that they are especially subject to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default. In addition, the market for low-rated
securities has expanded rapidly in recent years.
The market for low-rated securities is generally thinner and less active than
that for higher quality securities, which would limit the INCOME FUND's ability
to sell such securities at fair value in response to changes in the economy or
the financial markets. While such securities may have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk
8
<PAGE> 11
exposure to adverse conditions. The Advisor will seek to reduce the risks
associated with investing in such securities by limiting the INCOME FUND's
holdings in such securities and by the depth of its own credit analysis. For
additional information about the risks of investing in low-rated securities, see
the Statement of Additional Information.
MORTGAGE-BACKED SECURITIES. The INCOME FUND may invest in mortgage-backed
securities. Mortgage-backed securities are securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans secured by real property. Mortgage-backed securities are subject
to prepayment risks in addition to market risks and financial risks.
Mortgage-backed securities include guaranteed government agency mortgage-
backed securities, which represent participation interests in pools of
residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
government or one of its agencies or instrumentalities. Such securities are
ownership interests in the underlying mortgage loans and provide for monthly
payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees paid to the guarantor of such securities
and the servicer of the underlying mortgage loans.
Mortgaged-backed securities also include collateralized mortgage obligations
("CMOs"). CMOs are securities collateralized by mortgages or mortgage-backed
securities. CMOs are issued with a variety of classes or series, which have
different maturities, and are often retired in sequence. CMOs may be issued by
governmental or non-governmental entities such as banks and other mortgage
lenders. Securities issued by entities other than governmental entities may
offer a higher yield but also may be subject to greater price fluctuations than
securities issued by governmental entities.
The INCOME FUND does not intend to invest in those mortgage-backed securities,
such as certain classes of CMOs and other types of mortgage pass-through
securities, which are designed to be highly sensitive to changes in prepayment
and interest rates and can subject the shareholder to extreme reductions of
yield and loss of principal.
ASSET-BACKED SECURITIES. The INCOME FUND may invest in asset-backed
securities. The securitization techniques used to develop mortgage-backed
securities are also applied to a broad range of assets, primarily credit card
and automobile receivables. Other types of asset-backed securities may be
developed in the future. In general, the collateral supporting asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Asset backed securities present certain
risks that are not presented by mortgage-backed securities. Primarily, these
securities do not have the benefit of the same security interest in the related
collateral as do mortgage-backed securities.
FOREIGN SECURITIES. The FUNDS may invest in securities of foreign issuers
which may be U.S. dollar-denominated or denominated in foreign currencies. Each
FUND may invest up to 15% of its total assets in securities of foreign issuers
that are U.S. dollar-denominated. The INCOME FUND may invest up to 10% and the
VALUE FUND may invest up to 5% of its total assets in securities of foreign
issuers denominated in foreign currencies. Securities of foreign issuers in the
form of American Depository Receipts ("ADRs") that are regularly traded on
recognized U.S. exchanges or in the U.S. over-the-counter market are not
considered foreign securities for purposes of these limitations. A FUND,
however, will not invest more than 20% of its total assets in such ADRs and will
only invest in ADRs that are issuer sponsored. Investments in securities of
foreign issuers involve risks which are in addition to the usual risks inherent
in domestic
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<PAGE> 12
investments. The value of a FUND's foreign investments may be significantly
affected by changes in currency exchange rates, and the FUND may incur certain
costs in converting securities denominated in foreign currencies to U.S.
dollars. In many countries, there is less publicly available information about
issuers than is available in the reports and ratings published about companies
in the United States. Additionally, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards. Dividends and interest
on foreign securities may be subject to foreign withholding taxes which would
reduce a FUND's income without providing a tax credit for the FUND's
shareholders. Although the FUNDS intend to invest in securities of foreign
issuers domiciled in nations in which the Advisor considers as having stable and
friendly governments, there is a possibility of expropriation, confiscatory
taxation, currency blockage or political or social instability which could
affect investments in those nations.
MUNICIPAL SECURITIES. The INCOME FUND may invest up to 5% of its net assets in
debt obligations issued by or on behalf of the governments of states,
territories or possessions of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, certain intrastate
agencies and certain territories of the United States. The INCOME FUND may
invest in both taxable and federal income tax-exempt municipal securities.
HEDGING INSTRUMENTS. The VALUE FUND may purchase stock index put options to
hedge against a loss in its stock portfolio caused by a general decline in the
stock market. If the index declines over the life of the option contract, the
put option becomes more valuable and the VALUE FUND will enter into a closing
contract. The realized gain would offset the presumed unrealized loss in the
VALUE FUND's portfolio. If the market rises over the life of the option
contract, the option will become worthless and expire unexercised. In such event
the VALUE FUND's loss on the option contract will be limited to the premium
paid. The value of the VALUE FUND's investments in options will not exceed 5% of
the VALUE FUND's total assets.
The INCOME FUND may write (i.e., sell) covered call options and purchase call
options to close out previously written call options but only if (i) the
investments to which the call relates are common stock or other securities that
have equity characteristics or stock indices; and (ii) the calls are listed on a
domestic securities exchange or quoted on the Nasdaq Stock Market. For a call to
be "covered," either (a) the INCOME FUND must own the underlying equity or have
an absolute and immediate right to acquire that equity without payment of
additional cash consideration, or for an additional consideration held as set
forth in (b), upon conversion or exchange of other securities held in its
portfolio; or (b) the INCOME FUND must maintain in a segregated account cash or
high quality, short-term readily marketable obligations adequate to purchase the
equities, in each case until the INCOME FUND enters into a closing purchase
transaction as to that call.
WHAT REPORTS WILL I RECEIVE?
As a shareholder of the FUNDS you will be provided at least semi-annually with
a report showing each FUND's portfolio and other information. Annually, after
the close of the FUNDS' September 30 fiscal year, you will be provided with an
annual report containing audited financial statements.
An individual account statement will be sent to you by Firstar Trust Company
after each purchase, including reinvestment of dividends, or redemption of
shares of a FUND. You will also receive an annual statement after the end of the
calendar year listing all your transactions in FUND shares during the year.
If you have questions about your account, you may call Firstar Trust Company
at (800) 338-1579. If you have general questions about the FUNDS or want more
information, you may call us at (214) 387-VALU (8258) or
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<PAGE> 13
write to us at CONCORDE FUNDS, INC., 1500 Three Lincoln Centre, 5430 LBJ
Freeway, Dallas, Texas 75240, Attention: Corporate Secretary.
WHO MANAGES THE FUNDS?
As a Texas corporation, the business and affairs of the FUNDS are managed by
its Board of Directors. Each FUND has entered into an investment advisory
agreement (the "Agreement") with the Advisor, Concorde Financial Corporation,
1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, under which
the Advisor furnishes continuous investment advisory services and management to
the FUNDS. The Advisor was formed in 1981 as an investment advisor, and since
then has advised private accounts. Gary B. Wood, Ph.D., has been President of
the Advisor since its inception, and the FUNDS' President and Senior Manager of
the management team which has advised the FUNDS since inception. The management
team for the VALUE FUND currently is comprised of Dr. Wood and two analysts,
Dennis R. Beall and Elizabeth L. Foster. Dennis R. Beall is a Portfolio Manager
with the Advisor and has been a mergers and acquisitions and investment analyst
with the Advisor since 1988. Elizabeth L. Foster, FUND Secretary, is a Portfolio
Manager with the Advisor and has been an investment analyst with the Advisor
since 1984. The management team for the INCOME FUND currently is comprised of
Dr. Wood and John A. Stetter. John A. Stetter has been a Portfolio Manager with
the Advisor since 1994. From 1988 until 1994, he was the President of his own
investment advisory firm. The Advisor is wholly-owned by Gary B. Wood, Ph.D.
The Advisor supervises and manages the investment portfolio of each of the
FUNDS and, subject to such policies as the Board of Directors of the FUNDS may
determine, directs the purchase or sale of investment securities in the
day-to-day management of the FUNDS. Under the Agreement, the Advisor, at its own
expense and without separate reimbursement from the FUNDS, furnishes office
space and all necessary office facilities, equipment, and executive personnel
for managing the FUNDS and maintaining its organization; bears all sales and
promotional expenses of the FUNDS, other than expenses incurred in complying
with the laws regulating the issue or sale of securities; and pays salaries and
fees of all officers and directors of the FUNDS (except the fees paid to
disinterested directors as such term is defined under the Investment Company Act
of 1940). For the foregoing, the Advisor receives a monthly fee at the annual
rate of 0.9% of the daily net assets of the VALUE FUND and 0.7% of the daily net
assets of the INCOME FUND. The rate of the annual advisory fee for the VALUE
FUND is higher than that paid by most mutual funds. The advisory fees paid by
the VALUE FUND in the fiscal year ended September 30, 1995 were equal to 0.90%
of the FUND's average net assets. The Advisor may voluntarily waive all or any
portion of the advisory fees otherwise payable by the INCOME FUND. Such a waiver
may be terminated at any time in the Advisor's discretion.
HOW IS A FUND'S SHARE PRICE
DETERMINED?
The net asset value (or "price") per share of each FUND is determined by
dividing the total value of the FUND's investments and other assets less any
liabilities, by the number of outstanding shares of the FUND. The net asset
value per share is determined once daily on each day that the New York Stock
Exchange is open, as of the close of regular trading on the Exchange (normally
3:00 P.M. Central time). Purchase orders for FUND shares accepted or FUND shares
tendered for redemption prior to the close of regular trading on a day the New
York Stock Exchange is open for trading will be valued as of the close of
trading, and purchase orders accepted and FUND shares tendered for redemption
after that time will be valued as of the close of regular trading on the next
trading day.
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Portfolio securities that are listed on a national securities exchange or
quoted on the Nasdaq Stock Market are valued at the last sale price on the day
the valuation is made, or if not traded on the valuation date, the most recent
bid price. Other securities for which market quotations are readily available
are valued at the latest quoted bid price. Debt securities are valued at the
latest bid prices furnished by independent pricing services. Other assets and
securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Board of Directors. Short-term
instruments (those with remaining maturities of 60 days or less) are valued at
amortized cost, which approximates market.
HOW DO I OPEN AN ACCOUNT AND PURCHASE SHARES?
BY MAIL. Please complete and sign the New Account Application form included
with this Prospectus and send it, together with your check or money order ($500
minimum for each FUND), made payable to Concorde Funds, Inc., to: CONCORDE
FUNDS, INC., c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. Note: A different procedure is used for establishing Individual
Retirement Accounts ($500 minimum) and other retirement plans ($500 minimum).
Please call (214) 387-VALU (8258) for details. All purchases must be made in
U.S. dollars and checks must be drawn on U.S. banks. No cash will be accepted.
Firstar Trust Company will charge a $15 fee against a shareholder's account for
any check returned to it for insufficient funds. The shareholder will also be
responsible for any losses suffered by the FUNDS as a result.
BY OVERNIGHT OR EXPRESS MAIL. Please use the following address to insure
proper delivery: Firstar Trust Company, Mutual Fund Services, 3rd Floor, 615 E.
Michigan Street, Milwaukee, Wisconsin 53202.
BY WIRE. To establish a new account by wire please first call Firstar Trust
Company, (800) 338-1579, to advise it of the investment and the dollar amount.
This will ensure prompt and accurate handling of your investment. A completed
New Account Application form must also be sent to the FUNDS at the address above
immediately after your investment is made so the necessary remaining information
can be recorded to your account. Your purchase request should be wired through
the Federal Reserve Bank as follows:
Firstar Bank Milwaukee, Wisconsin
ABA Number 075000022
For credit to Firstar Trust M.F.S.
Account Number 112-952-137
For further credit to Concorde Funds, Inc.
(Your account name and account number)
ADDITIONAL INVESTMENTS. You may add to your account at any time by purchasing
shares by mail (minimum $100) or by wire (minimum $500) according to the
aforementioned wiring instructions. You must notify Firstar Trust Company at
(800) 338-1579 prior to sending your wire. A remittance form which is attached
to your individual account statement should accompany any investments made
through the mail, when possible. All purchase requests must include your account
registration number in order to assure that your funds are credited properly.
As a no-load mutual fund, there are no sales commissions, so all of your
investment is used to purchase shares. All shares purchased will be credited to
your account and confirmed by a statement mailed to your address. The FUNDS do
not issue stock certificates for shares purchased. You may also invest in the
FUNDS by purchasing shares through a registered broker-dealer, who may charge
you a fee, either at the time of purchase or redemption. The fee, if charged, is
retained by the broker-dealer and not remitted to the FUNDS or the Advisor. The
FUNDS may accept telephone orders from broker-dealers who have been previously
approved by the FUNDS. It is the responsibility of the registered broker-dealer
to promptly remit purchase and redemption orders to Firstar Trust Company.
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ALL APPLICATIONS ARE SUBJECT TO ACCEPTANCE BY THE FUNDS, AND ARE NOT BINDING
UNTIL SO ACCEPTED. THE FUNDS DO NOT ACCEPT TELEPHONE ORDERS FOR PURCHASE OF
SHARES AND RESERVE THE RIGHT TO REJECT APPLICATIONS IN WHOLE OR IN PART. The
minimum purchase amounts set forth above are subject to change at any time and
may be waived for purchases by the Advisor's employees and their family members.
Shareholders will be advised at least 30 days in advance of any increases in
such minimum amounts and the FUNDS' prospectus will be appropriately
supplemented. Applications without Social Security or Tax Identification numbers
will not be accepted.
HOW DO I SELL MY SHARES?
At any time during normal business hours you may request the FUNDS to redeem
your shares in whole or in part. Written redemption requests must be directed to
CONCORDE FUNDS, INC., c/o Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. If a redemption request is inadvertently sent to the FUNDS
at its corporate address, it will be forwarded to Firstar Trust Company, but the
effective date of redemption will be delayed until the request is received by
Firstar Trust Company. Requests for redemption which are subject to any special
conditions or which specify an effective date other than as provided herein
cannot be honored.
A redemption request must be received in "Good Order" by Firstar Trust Company
for the request to be processed. "Good Order" means the request for redemption
must include:
- Your letter of instruction specifying the name of the FUND and either the
number of shares or the dollar amount of shares to be redeemed. The letter of
instruction must be signed by all registered shareholders exactly as the
shares are registered and must include your account registration number and
the additional requirements listed below that apply to the particular account.
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
<S> <C>
Individual, Joint Tenants, Redemption request signed
Sole Proprietorship, by all person(s) required
Custodial (Uniform Gift to to sign for the account,
Minors Act), General Partners exactly as it is
registered.
Corporations, Associations Redemption request and a
corporate resolution,
signed by person(s)
required to sign for the
account, accompanied by
signature guarantee(s).
</TABLE>
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
<S> <C>
Trusts Redemption request signed
by the trustee(s) with a
signature guarantee. (If
the Trustee's name is not
registered on the
account, a copy of the
trust document certified
within the last 60 days
is also required).
</TABLE>
- Signature guarantees if proceeds of redemption are to be sent by wire
transfer, to a person other than the registered holder, to an address other
than the address of record, and if a redemption request includes a change of
address. Transfers of shares also require signature guarantees. Signature
guarantees may be obtained from any commercial bank or trust company in the
United States or a member of the New York Stock Exchange and some savings and
loan associations.
Shareholders who have an IRA or other retirement plan must indicate on their
redemption request whether or not to withhold federal income tax. Redemption
requests not indicating an election to have federal tax withheld will be subject
to withholding. If you are uncertain of the redemption requirements, please
contact, in advance, Firstar Trust Company.
The redemption price per share for each FUND is the next determined net asset
value
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<PAGE> 16
after Firstar Trust Company receives a redemption request in "Good Order". The
amount paid will depend on the market value of the investments in the
appropriate FUND's portfolio at the time of determination of net asset value,
and may be more or less than the cost of the shares redeemed. Payment for shares
redeemed will be mailed to you typically within one or two days, but no later
than the seventh day after receipt by Firstar Trust Company of the redemption
request in "Good Order" unless a FUND is requested to redeem shares for which it
may not yet have received good payment (e.g. cash, bank money order or certified
check on a U.S. bank.) In such event the FUND may delay the mailing of a
redemption check until such time as it has assured itself that good payment for
the purchase price of the shares has been collected. (It will normally take up
to 3 days to clear local personal or corporate checks and up to 7 days to clear
other personal and corporate checks.) Wire transfers may be arranged through
Firstar Trust Company who will assess a $7.50 wiring charge against your
account.
You may redeem shares of the FUNDS by telephone. To redeem shares by
telephone, you must check the appropriate box on the New Account Application as
the FUNDS do not make this feature available to shareholders automatically. Once
this feature has been requested, you may redeem shares by phoning Firstar Trust
Company at 1-800-330-1579 or 1-414-765-4124 and giving the account name, account
number and either the number of shares or the dollar amount to be redeemed. For
your protection, you may be asked to give the social security number or tax
identification number listed on the account as further verification. Proceeds
redeemed by telephone will be mailed or wired only to your address or bank of
record as shown on the records of Firstar Trust Company. Telephone redemptions
must be in amounts of $1,000 or more. If the proceeds are sent by wire, a $7.50
wire fee will apply.
In order to arrange for telephone redemptions after a FUND account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, you must send a written request to Firstar Trust Company.
The request must be signed by each registered holder of the account with the
signatures guaranteed by a commercial bank or trust company in the United
States, a member firm of the New York Stock Exchange or other eligible guarantor
institution. Further documentation may be requested from corporations,
executors, administrators, trustees and guardians.
The FUNDS reserve the right to refuse a telephone redemption if it believes it
is advisable to do so. Procedures for redeeming shares of the FUNDS by telephone
may be modified or terminated by the FUNDS at any time. Neither the FUNDS nor
Firstar Trust Company will be liable for following instructions for telephone
redemption transactions which they reasonably believe to be genuine, provided
reasonable procedures are used to confirm the genuineness of the telephone
instructions, but may be liable for unauthorized transactions if they fail to
follow such procedures. These procedures include requiring you to provide some
form of personal identification prior to acting upon your telephone instructions
and recording all telephone calls.
You should be aware that during periods of substantial economic or market
change, telephone or wire redemptions may be difficult to implement. If you are
unable to contact Firstar Trust Company by telephone, you may redeem shares by
delivering the redemption request to Firstar Trust Company by mail as described
above.
The FUNDS reserve the right to redeem the shares held in any account if at the
time of any transfer or redemption of shares in the account, the value of the
remaining shares in the account falls below $250. You will be notified in
writing that the value of your account is less than the minimum and allowed at
least 60 days to make an additional
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<PAGE> 17
investment. The receipt of proceeds from the redemption of shares held in an
Individual Retirement Account will constitute a taxable distribution of benefits
from the IRA unless a qualifying rollover contribution is made. Involuntary
redemptions will not be made because the value of shares in an account falls
below $250 solely because of a decline in a FUND's net asset value.
Your right to redeem shares of the FUNDS will be suspended and your right to
payment postponed for more than seven days for any period during which the New
York Stock Exchange is closed because of financial conditions or any other
extraordinary reason and may be suspended for any period during which (a)
trading on the New York Stock Exchange is restricted pursuant to rules and
regulations of the Securities and Exchange Commission, (b) the Securities and
Exchange Commission has by order permitted such suspension or (c) such
emergency, as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable for a
FUND to dispose of its securities or fairly to determine the value of its net
assets.
MAY SHAREHOLDERS EXCHANGE SHARES?
You may exchange your shares for shares in the other FUND at any time. The
registration of the account from which the exchange is being made and the amount
to which the exchange is made must be identical. State securities laws may
restrict your ability to make exchanges.
Exchange requests are subject to a $500 minimum, except for telephone
exchanges which are subject to a $1,000 minimum. The value to be exchanged and
the price of the shares being purchased will be the net asset value next
determined after receipt of instructions for the exchange. AN EXCHANGE FROM ONE
FUND TO ANOTHER IS TREATED THE SAME AS AN ORDINARY SALE AND PURCHASE FOR FEDERAL
INCOME TAX PURPOSES AND YOU WILL REALIZE A CAPITAL GAIN OR LOSS. THIS IS NOT A
TAX-FREE EXCHANGE. There are no fees charged on exchange requests. Exchange
requests should be directed to Firstar Trust Company. The FUNDS reserve the
right to modify or terminate the exchange privilege upon 60 days' written notice
to each shareholder prior to the modification or termination taking effect. The
responsibility of the FUNDS and Firstar Trust Company for the authenticity of
telephone exchange instructions is limited as described under "How Do I Sell My
Shares."
WHAT ABOUT DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?
Each FUND intends normally to distribute substantially all of its net
investment income and net realized capital gains to its shareholders so as to
avoid paying income tax on its net investment income and net realized capital
gains or being subject to a federal excise tax on undistributed net investment
income or net realized capital gains. The INCOME FUND will pay dividends
quarterly. The record date for such dividends normally will be in March, June,
September and December. The record date for the VALUE FUND's dividends normally
will be in December.
For federal income tax purposes, distributions by the FUNDS, whether invested
by you in additional shares or received by you in cash, will be taxable to you
as either ordinary income or capital gains. You will be notified annually as to
the federal tax status of dividends and distributions, including the eligibility
of dividends for the dividends received deduction for corporations.
In addition to federal taxes, you may also be subject to state and local
taxes, depending on the laws of your home state and locality.
MAY SHAREHOLDERS REINVEST DIVIDENDS?
You may elect to have all dividends and capital gains distributions reinvested
or paid in cash. Please refer to the share purchase application form
accompanying this Prospectus for further information. If you do not specify an
election, all dividends and capital gains
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<PAGE> 18
distributions will automatically be reinvested in full and fractional shares of
the appropriate FUND calculated to the nearest 1,000th of a share. Shares are
purchased at the net asset value in effect on the business day after the
dividend record date and are credited to your account on the dividend payment
date. Cash dividends are also paid on such date. You will be advised of the
number of shares purchased and the price following each reinvestment. An
election to reinvest or receive dividends and distributions in cash will apply
to all shares of the FUND registered in your name, including those previously
purchased.
You may change an election at any time by notifying the FUNDS in writing. If
such a notice is received between a dividend declaration date and payment date,
it will become effective on the day following the payment date. The FUNDS may
modify or terminate its dividend reinvestment program at any time on thirty
days' notice to participants.
WHAT RETIREMENT PLANS DO THE FUNDS OFFER?
The FUNDS offer the following retirement plans that may fit your needs and
allow you to shelter some of your income from taxes:
- INDIVIDUAL RETIREMENT ACCOUNT ("IRA"). Individual shareholders may establish
their own tax-sheltered IRA. Earnings on amounts held in the IRA are not taxed
until withdrawal.
- SIMPLIFIED EMPLOYEE PENSION PLAN (SEP/IRA). The SEP/IRA is a pension plan in
which both the employer and the employee may contribute to an IRA. The SEP/IRA
is also available to self-employed individuals.
- RETIREMENT PLANS. The plans, including both a profit-sharing plan and a
pension plan, are available for use by sole proprietors, partnerships and
corporations.
- 403(B)(7) PLAN. The 403(b)(7) plan is available for use by employees of
certain educational, non-profit hospital and charitable corporations.
- 401(K) PLAN. The 401(k) plan is a cash or deferred arrangement profit-sharing
plan available to employers of all sizes to benefit their employees.
Contact the FUNDS for complete information kits, including forms, concerning
the above plans, their benefits, provisions and fees. Consultation with a
competent financial and tax advisor regarding these plans is recommended.
WHAT ABOUT BROKERAGE TRANSACTIONS?
Each Agreement authorizes the Advisor to select the brokers or dealers that
will execute the purchases and sales of the FUNDS' portfolio securities. In
placing purchase and sale orders for the FUNDS, it is the policy of the Advisor
to seek the best execution of orders at the most favorable price in light of the
overall quality of brokerage and research services provided.
Each Agreement permits the Advisor to cause the FUNDS to pay a broker which
provides brokerage and research services to the Advisor
a commission for effecting securities
transactions in excess of the amount another broker would have charged for
executing the transaction, provided the Advisor believes this to be in the best
interests of the FUNDS. Although the FUNDS do not intend to market shares
through intermediary broker-dealers, the FUNDS may place portfolio orders with
broker-dealers who recommend the purchase of shares to clients if the Advisor
believes the commissions and transaction quality are comparable to that
available from other brokers and allocate portfolio brokerage on that basis.
GENERAL INFORMATION ABOUT THE FUND
DESCRIPTION OF SHARES AND VOTING RIGHTS. The FUNDS' authorized capital
consists of a single class of 30,000,000 shares of Common
16
<PAGE> 19
Stock, $1.00 par value. The Common Stock is divisible into an unlimited number
of "series," each of which is a separate FUND. Each share of a FUND represents
an equal proportionate interest in that FUND. Shareholders are entitled: (i) to
one vote per full share of Common Stock; (ii) to such distributions as may be
declared by the FUNDS' Board of Directors out of funds legally available; and
(iii) upon liquidation, to participate ratably in the assets available for
distribution. There are no conversion or sinking fund provisions applicable to
the shares, and the holders have no preemptive rights and may not cumulate their
votes in the election of directors. Consequently, the holders of more than 50%
of the shares of Common Stock voting for the election of directors can elect the
entire Board of Directors and in such event the holders of the remaining shares
voting for the election of directors will not be able to elect any person or
persons to the Board of Directors. The shares are redeemable and are
transferable. All shares issued and sold by the FUNDS will be fully paid and
non-assessable. Fractional shares of Common Stock entitle the holder to the same
rights as whole shares.
The Board of Directors may classify or reclassify any unissued shares of the
FUNDS and may designate or redesignate the name of any outstanding series of
shares of the FUNDS. As a general matter, shares are voted in the aggregate and
not by series, except where voting by series would be required by Texas law or
the Investment Company Act of 1940 (e.g., a change in investment policy or
approval of an investment advisory agreement). All consideration received from
the sale of shares of any series of the FUNDS' shares, together with all income,
earnings, profits and proceeds thereof, belong to that series and be charged
with the liabilities in respect of that series and of that series' share of the
general liabilities of the FUNDS in the proportion that the total net assets of
the series bear to the total net assets of all series of the FUNDS' shares. The
net asset value of a share of any series are based on the assets belonging to
that series less the liabilities charged to that series and dividends may be
paid on shares of any series of Common Stock only out of lawfully available
assets belonging to that series. In the event of liquidation or dissolution of
the FUNDS, the holders of each series will be entitled out of the assets of the
FUNDS available for distribution, to the assets belonging to that series.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Firstar Trust Company,
Milwaukee, Wisconsin, is the custodian for all securities and cash of the FUNDS
and serves as the FUNDS' transfer and dividend disbursing agent.
17
<PAGE> 20
WHAT HAS BEEN THE FUNDS' PERFORMANCE?
PERFORMANCE INFORMATION. The calculation assumes reinvestment of all dividends
and distributions and reflects the effect of all recurring fees.
PERFORMANCE COMPARISON
9/30/95 VALUE OF $10,000 INVESTED ON 12/4/87
[PERFORMANCE GRAPH]
The FUNDS may provide performance data from time to time in advertisements,
reports to shareholders and other communications with shareholders.
FUND performance may be shown by presenting one or more performance
measurements, including "average annual total return", "total return",
"cumulative total return" and "yield."
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a FUND for the
stated period, assuming the reinvestment of all dividends. Thus, these figures
reflect the change in the value of an investment in a FUND during a specified
period. Average annual total return figures are annualized and, therefore,
represent the average annual percentage change over the period in question.
Total return figures are not annualized and represent the aggregate percentage
of dollar value change over the period in question. Cumulative total return
reflects a FUND's performance over a stated period of time.
A FUND's yield is a measure of the net investment income per share earned by
the FUND over a specified one-month period expressed as a percentage of the
maximum offering price of the FUND's shares at the end of the period. Yield is
an annualized figure, which means that it is assumed that the FUND
18
<PAGE> 21
generates the same level of net investment income over a one-year period. Net
investment income is assumed to be compounded semiannually when it is
annualized.
The FUNDS may also compare their performance to other mutual funds with
similar investment objectives and to the industry as a whole as reported by
Lipper Analytical Services, Inc., Morningstar OnDisc, Money, Forbes, Business
Week and Barron's magazines and The Wall Street Journal, (Lipper Analytical
Services, Inc. and Morningstar OnDisc are independent ranking services that rank
mutual funds based upon total return performance.) The FUNDS may also compare
their performance to the Dow Jones Industrial Average, NASDAQ Composite Index,
NASDAQ Industrials Index, Value Line Composite Index, the Standard & Poor's 500
Stock Index, the Standard & Poor's/Barra Value Index, the Consumer Price Index
and the Lehman Brothers Intermediate Government/Corporate Index.
MANAGEMENT'S DISCUSSION OF FUND
PERFORMANCE.
[to be provided]
19
<PAGE> 22
<TABLE>
<S> <C>
LOGO NEW ACCOUNT APPLICATION
PLEASE MAIL IN THE ENCLOSED RETURN ENVELOPE TO:
CONCORDE FUNDS, INC., C/O FIRSTAR TRUST COMPANY
POST OFFICE BOX 701, MILWAUKEE, WISCONSIN 53201-0701
</TABLE>
NEW ACCOUNT REGISTRATION (PLEASE TYPE OR PRINT)
Note: Do not use this application for IRAs, SEPs or if establishing one of the
Fund's prototype retirement plans. Please complete the enclosed reply card
or call 1-800-338-1579 or 1-214-387-8258 for the appropriate application.
--------------------------------------------------------------------------------
Owner (Individual, Corporation, Partnership, Trust) Social Security/Taxpayer
I.D. Number
--------------------------------------------------------------------------------
Co-Owner* (if any) Social Security/Taxpayer I.D. Number
--------------------------------------------------------------------------------
Mailing Address (Individuals should provide their residence address)
( )
--------------------------------------------------------------------------------
City State Zip Code Daytime Phone
* Indicate nature of co-ownership:
/ / Community Property (No Right of Survivorship)
/ / Joint Tenants with Rights of Survivorship
/ / Tenants in Common
/ / Other (Please specify):
Any registration in the names of two or more co-owners will be without right of
survivorship, unless otherwise specified. Shares may be registered in the name
of a custodian for a minor under applicable state law. In such cases, the name
of the state should be indicated, and the taxpayer identification or social
security number should be that of the minor. Shares registered in the name of a
trust should also identify the name(s) of Trustee(s) and Trust date.
INITIAL INVESTMENT (MINIMUM $500)
Please establish my account in / / Concorde Value Fund / / Concorde Income
Fund. (Share certificates will not be issued.)
/ / By Check: I have enclosed a check made payable to Concorde Value Fund or
Concorde Income Fund for $
<TABLE>
<S> <C> <C>
/ / By Wire: $_______________ __________________________
Amount Date of Wire
A. Call 1-800-338-1579 to insure proper credit
B. Complete and return this application
C. Wire your investment through any Federal Reserve bank, as follows:
Firstar Bank Milwaukee, Wisconsin ABA Number 075000022
For credit to Firstar Trust M.F.S. Account Number 112-952-137
For further credit to Concorde Funds, Inc. _______________________
(Your Account Name)
</TABLE>
ELECTION REGARDING DISTRIBUTIONS
If no option is checked, all distributions will be reinvested.
/ / I would like all distributions to be reinvested in my account.
/ / I would like dividends to be paid in cash and capital gains reinvested.
/ / I would like all distributions to be paid to me in cash.
TELEPHONE REDEMPTION (OPTIONAL)
/ /Permits the redemption of a minimum of $1,000. The proceeds will be mailed to
the address above or deposited to your bank account.
-----------------------------------------------------------------------------
Name on Bank Account
-----------------------------------------------------------------------------
Bank Name Account Number
-----------------------------------------------------------------------------
Bank Address
To ensure proper crediting to your bank account, please attach a deposit slip
for the account shown above.
* A $7.50 fee will be applied to any redemption when the proceeds are wired.
SIGNATURE AND CERTIFICATION
I(we) represent that I (we) am (are) of legal age and have legal capacity in
state of residence to make this purchase. I (we) affirm that I (we) have
received and read the current prospectus of the Fund and agree to its terms.
Signatures of all owners are required for registration as co-owners.
I (we) am (are) a citizen(s) of / / U.S. / / Other ________________________
Please specify
I (we) certify under penalties of perjury that:
A. The Social Security Number(s) or other Tax I.D. Number stated above is
correct.
B. I am not subject to backup withholding because:*
(1) the IRS has not notified me that I am subject to backup withholding; or
(2) the IRS has notified me that I am no longer subject to backup
withholding.
* If this statement is not true in your case, please strike out this part before
signing.
-------------------------------------------------------------------------------
Signature of Owner, Trustee, or Custodian Date
-------------------------------------------------------------------------------
Signature of Co-Owner, if any Date
<PAGE> 23
DIRECTORS OF THE FUND
JOHN R. BRADFORD, Ph.D.
Vice President of Development of Compliance Services Group, Inc.
GILBERT F. HARTWELL
Chairman of the Board of Hartwell's Office World, Inc.
JOHN H. WILSON
President of U.S. Equity Corporation
GARY B. WOOD, Ph.D.
President, Treasurer and a director of Concorde Financial Corporation and
Concorde Capital Corporation; Chairman of the Board and a director of OmniMed
Corporation and International Hospital Corporation
OFFICERS OF THE FUND
GARY B. WOOD, Ph.D.
President and Treasurer
ELIZABETH L. FOSTER
Secretary
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP
200 Crescent Court
Suite 300
Dallas, Texas 75201
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
--------------------------------------------------------------------------------
SPECIAL SERVICES AVAILABLE
Individual Retirement Account ("IRA")
Simplified Employee Pension Plan ("SEP/IRA")
Defined Contribution Retirement Plans
(Profit Sharing Plan and Pension Plan for
sole proprietors, partnerships and corporations)
Section 401(k) Plan
Section 403(b)(7) Plan
Dividend Reinvestment Plan
<PAGE> 24
Table of Contents
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
A MESSAGE FROM THE PRESIDENT
OF CONCORDE FINANCIAL CORPORATION... ii
EXPENSES.............................. 1
FINANCIAL HIGHLIGHTS.................. 2
WHAT IS CONCORDE FUNDS, INC.? ........ 3
WHAT ARE THE FUNDS' INVESTMENT
OBJECTIVES AND POLICIES?............ 3
DO THE FUNDS HAVE ANY INVESTMENT
LIMITATIONS OR STRATEGIES DESIGNED
TO REDUCE RISK?..................... 6
MAY THE FUNDS ENGAGE IN OTHER
INVESTMENT PRACTICES?............... 6
WHAT REPORTS WILL I RECEIVE?.......... 10
WHO MANAGES THE FUNDS?................ 11
HOW IS A FUND'S SHARE PRICE
DETERMINED?......................... 11
HOW DO I OPEN AN ACCOUNT AND PURCHASE
SHARES?............................. 12
HOW DO I SELL MY SHARES?.............. 13
MAY SHAREHOLDERS EXCHANGE SHARES?..... 15
WHAT ABOUT DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES?............ 15
MAY SHAREHOLDERS REINVEST
DIVIDENDS?.......................... 15
WHAT RETIREMENT PLANS DO THE FUNDS
OFFER?.............................. 16
WHAT ABOUT BROKERAGE TRANSACTIONS?.... 16
GENERAL INFORMATION ABOUT THE FUND.... 16
WHAT HAS BEEN THE FUNDS'
PERFORMANCE?........................ 18
No person has been authorized to give any
information or to make any representations
other than those contained in this Prospectus
and the Statement of Additional Information
dated December , 1995, and, if given or made,
such information or representation may not be
relied upon as having been authorized by
Concorde Value Fund, Inc. This Prospectus does
not constitute an offer to sell securities in
any state or jurisdiction in which such
offering may not lawfully be made.
</TABLE>
[CONCORDE FUNDS, INC. LOGO]
A NO-LOAD
EQUITY MUTUAL FUND
APPLICATION AND PROSPECTUS
Dallas, Texas
December , 1995
STATEMENT OF ADDITIONAL INFORMATION December __, 1995
CONCORDE FUNDS, INC.
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Concorde Funds, Inc.
dated December __, 1995. Requests for copies of the prospectus should be
made in writing to Concorde Funds, Inc., 1500 Three Lincoln Centre, 5430
LBJ Freeway, Dallas, Texas 75240, Attention: Corporate Secretary or by
calling (214) 387-VALU (8258).
<PAGE>
CONCORDE FUNDS, INC.
Table of Contents
Page No.
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT POLICIES AND PRACTICES . . . . . . . . . . . . . . . . . . . 4
DIRECTORS AND OFFICERS OF THE FUND . . . . . . . . . . . . . . . . . . 15
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . . 19
REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . 21
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . . 22
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . 24
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 24
DESCRIPTION OF BOND RATINGS . . . . . . . . . . . . . . . . . . . . . . 26
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated December __, 1995 and, if
given or made, such information or representations may not be relied upon
as having been authorized by Concorde Funds, Inc.
This Statement of Additional Information does not constitute an
offer to sell securities.
<PAGE>
GENERAL INFORMATION
Concorde Funds, Inc. (the "Corporation") was incorporated under
the laws of Texas on September 21, 1987. The Corporation was called
"Concorde Value Fund, Inc." from September 21, 1987 until
____________ 1995. The Corporation is authorized to establish and operate
one or more separate series of mutual funds. The Corporation currently
consists of two separate funds namely "Concorde Value Fund" (the "VALUE
FUND") and "Concord Income Fund" (the "INCOME FUND") (collectively, the
"FUNDS" or individually, "FUND"). The VALUE FUND is the continuation of
the original Concorde Value Fund, Inc.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated December __, 1995 of the
FUNDS under the caption "WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES AND
POLICIES?", the investment objective of the VALUE FUND is to produce long-
term growth of capital, without exposing capital to undue risk,
principally through investing in out-of-favor common stocks, and the
investment objective of the INCOME FUND is to produce current income,
primarily through investing in a diversified portfolio of income providing
securities. Growth of capital is a secondary objective of the INCOME
FUND. Consistent with these investment objectives, each of the FUNDS has
adopted certain investment restrictions which are matters of fundamental
policy and cannot be changed without approval of the holders of the lesser
of: (i) 67% of the FUND's shares present or represented at a shareholders
meeting at which the holders of more than 50% of such shares are present
or represented; or (ii) more than 50% of the outstanding shares of the
FUND as follows:
1. Neither FUND will purchase securities on margin,
participate in a joint-trading account, sell securities short, or write or
invest in put or call options, except as set forth in investment
restriction 16.
2. The VALUE FUND's investments in warrants, valued at the
lower of cost or market, will not exceed 5% of the value of the VALUE
FUND's net assets and of such 5% not more than 2% of the Value Fund's net
assets at the time of purchase may be invested in warrants that are not
listed on the New York or American Stock Exchanges. Warrants are options
to purchase securities at a specified price, valid for a specified period
of time. Warrants are pure speculation in that they have no voting
rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. If the VALUE FUND does not exercise a
warrant, its loss will be the purchase price of the warrant.
3. Neither FUND will borrow money or issue senior securities,
except for temporary bank borrowings or for emergency or extraordinary
purposes (but not for the purpose of purchase of investments) and then
only in an amount not in excess of 5% of the value of its total assets,
and will not pledge any of its assets except to secure borrowings and then
only to an extent not greater than 10% of the value of the FUND's net
assets. Neither FUND will purchase securities while it has any
outstanding borrowings.
4. The VALUE FUND will not lend money (except by purchasing
publicly distributed debt securities) and will not lend its portfolio
securities. The INCOME FUND will not make loans, except it may acquire
debt securities from the issuer or others which are publicly distributed
or are of a type normally acquired by institutional investors and except
that it may make loans of portfolio securities if any such loans are
secured continuously by collateral at least equal to the market value of
the securities loaned in the form of cash and/or securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
provided that no such loan will be made if upon the making of that loan
more than 10% of the value of the INCOME FUND'S total assets would be the
subject of such loans.
5. Neither FUND will purchase securities of other investment
companies except (a) as part of a plan of merger, consolidation or
reorganization approved by the shareholders of the FUND or (b) securities
of registered closed-end investment companies on the open market where no
commission or profit results, other than the usual and customary broker's
commission and where as a result of such purchase the FUND would hold less
than 3% of any class of securities, including voting securities, of any
registered closed-end investment company and less than 5% of the FUND's
net assets, taken at current value, would be invested in securities of
registered closed-end investment companies. The Advisor will not waive
its investment advisory fee with respect to those FUND assets, if any,
invested in registered closed-end investment companies.
6. Neither FUND will make investments for the purpose of
exercising control or management of any company.
7. Each FUND will limit its purchases of securities of any
issuer (other than the United States or an instrumentality of the United
States) in such a manner that it will satisfy at all times the
requirements of Sections 5(b)(1) of the Investment Company Act of 1940
(i.e., that at least 75% of the value of its total assets is represented
by cash and cash items (including receivables), U.S. Government
Securities, securities of other investment companies and other securities
for the purpose of the foregoing limited in respect to any one issuer to
an amount not greater than 5% of the value of the total assets of the FUND
and not more than 10% of the outstanding voting securities of such
issuer.)
8. Neither FUND will concentrate 25% or more of the value of
its assets, determined at the time an investment is made, exclusive of
U.S. government securities, in securities issued by companies engaged in
the same industry.
9. Neither FUND will purchase from or sell to any of its
officers or directors or firms for which any of them is an officer or
director any securities except shares of the FUNDS.
10. Neither FUND will acquire or retain any security issued by
a company if any of the directors or officers of the Corporation, or
directors, officers or other affiliated persons of its investment advisor,
beneficially own more than 1/2% of such company's securities and all of
the above persons owning more than 1/2% own together more than 5% of its
securities.
11. Neither FUND will act as an underwriter or distributor of
securities other than shares of the FUNDS and the VALUE FUND will not
purchase any securities which are restricted from sale to the public
without registration under the Securities Act of 1933, as amended. The
INCOME FUND may invest in restricted securities subject to the limitations
set forth in investment restriction 15.
12. Neither FUND will purchase or sell real estate or real
estate mortgage loans; provided, however, that the INCOME FUND may invest
in mortgage-backed securities.
13. Neither FUND will purchase or sell commodities or
commodities contracts.
14. The VALUE FUND will not invest more than 5% of its total
assets in securities of issuers which have a record of less than three
years of continuous operation, including the operation of any predecessor
business of a company which came into existence as a result of any merger,
consolidation, reorganization or purchase of substantially all of the
assets of such predecessor business.
15. The VALUE FUND's investments in illiquid and/or not readily
marketable securities (including repurchase agreements maturing in more
than seven days) will not exceed 10% of its total assets and the INCOME
FUND'S investments in such illiquid securities will not exceed 15% of its
total assets.
16. The VALUE FUND's investment in options will be limited to
the purchase of put options on stock indexes and the value of all such
options will not exceed 5% of the VALUE FUND's total assets. The VALUE
FUND also may sell put options on stock indexes but only to close out
existing options. The INCOME FUND may write covered call options and
purchase call options to close out previously written call options but
only if the investments to which the call relates are common stock or
other securities that have equity characteristics or stock indices and the
calls are listed on a domestic securities exchange or quoted on the Nasdaq
Stock Market.
17. Neither FUND will invest in oil, gas and other mineral
leases, or enter into arbitrage transactions.
The INCOME FUND has adopted certain other investment
restrictions which are not fundamental policies and which may be changed
by the Corporation's Board of Directors without shareholder approval.
These additional restrictions are as follows:
1. The INCOME FUND'S investments in warrants will be limited
to 5% of the INCOME FUND'S net assets. Included within that amount, but
not to exceed 2% of the total value of the INCOME FUND'S net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange.
2. The INCOME FUND will not invest more than 5% of its total
assets in securities of any issuer which has a record of less than three
(3) years of continuous operation, including the operation of any
predecessor business of a company which came into existence as a result of
a merger, consolidation, reorganization or purchase of substantially all
of the assets of such predecessor business.
If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a
change in values of a FUND's assets will not constitute a violation of
that restriction.
INVESTMENT POLICIES AND PRACTICES
Lending Portfolio Securities
The INCOME FUND may lend a portion of its portfolio securities
although the INCOME FUND will not engage in any such transaction if it
would cause more than 10% of its net assets to be subject to such loans.
Income may be earned on collateral received to secure the loans. Cash
collateral would be invested in money market instruments. U.S. Government
securities collateral would yield interest or earn discount. Part of this
income might be shared with the borrower. Alternatively, the INCOME FUND
could allow the borrower to receive the income from the collateral and
charge the borrower a fee. In either event, the INCOME FUND would receive
the amount of dividends or interest paid on the loaned securities.
Usually these loans would be made to brokers, dealers or
financial institutions. Loans would be fully secured by collateral
deposited with the INCOME FUND's custodian in the form of cash and/or
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This collateral must be increased within one business
day in the event that its value shall become less than the market value of
the loaned securities. While there may be delays in recovery or even loss
of rights in the collateral should the borrower fail financially, the
loans will be made only to firms deemed by Concorde Financial Corporation,
the FUNDS' investment advisor (the "Advisor") to be of good standing.
Loans will not be made unless, in the judgment of the Advisor, the
consideration which can be earned from such loans justifies the risk.
The borrower, upon notice, must redeliver the loaned securities
within 5 business days. In the event that voting rights with respect to
the loaned securities pass to the borrower and a material proposal
affecting the securities arises, the loan may be called or the INCOME FUND
will otherwise secure or be granted a valid proxy in time for it to vote
on the proposal.
In making such loans, the INCOME FUND may utilize the services
of a loan broker and pay a fee therefor. The INCOME FUND may incur
additional custodian fees for services in connection with the lending of
securities.
Mortgage-Backed Securities
The INCOME FUND may invest in Mortgage-Backed Securities, which
are securities that directly or indirectly represent a participation in,
or are secured by and payable from, mortgage loans secured by real
property. Mortgage-Backed Securities include: (i) Guaranteed Government
Agency Mortgage-Backed Securities; (ii) Privately-Issued Mortgage-Backed
Securities; and (iii) collateralized mortgage obligations and multiclass
pass-through securities. These securities are described below.
Guaranteed Government Agency Mortgage-Backed Securities.
Mortgage-Backed Securities include Guaranteed Government Mortgage-Backed
Securities, which represent participation interests in pools of
residential mortgage loans originated by United States governmental or
private lenders and guaranteed, to the extent provided in such securities,
by the United States government or one of its agencies or
instrumentalities. Such securities, with the exception of collateralized
mortgage obligations, are ownership interests in the underlying mortgage
loans and provide for monthly payments that are a "pass-through" of the
monthly interest and principal payments (including any prepayments) made
by the individual borrowers on the pooled mortgage loans, net of any fees
paid to the guarantor of such securities and the servicer of the
underlying mortgage loans.
The Guaranteed Government Agency Mortgage-Backed Securities in
which the INCOME FUND may invest will include those issued or guaranteed
by the Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"). As more fully described below,
these securities may include collateralized mortgage obligations,
multiclass pass-through securities and stripped mortgage-backed
securities.
Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and
Urban Development. The National Housing Act of 1934, as amended (the
"Housing Act"), authorizes Ginnie Mae to guarantee the timely payment of
the principal of and interest on certificates that are based on and backed
by a pool of mortgage loans insured by the Federal Housing Administration
Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by
the Veterans' Administration under the Servicemen's Readjustment Act of
1944, as amended ("VA Loans"), or by pools of other eligible mortgage
loans. The Housing Act provides that the full faith and credit of the
United States government is pledged to the payment of all amounts that may
be required to be paid under any guarantee. To meet its obligations under
such guarantee, Ginnie Mae is authorized to borrow from the United States
Treasury with no limitations as to amount.
Fannie Mae Certificates. Fannie Mae is a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act. Fannie Mae was originally
established in 1938 as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder owned and privately managed corporation by legislation enacted
in 1968. Fannie Mae provides funds to the mortgage market primarily by
purchasing home mortgage loans from local lenders, thereby replenishing
their funds for additional lending. Fannie Mae acquires funds to purchase
home mortgage loans from many capital market investors that originally may
not invest in mortgage loans directly, thereby expanding the total amount
of funds available for housing.
Each Fannie Mae Certificate will entitle the registered holder
thereof to receive amounts representing such holder's pro rata interest in
scheduled principal payments and interest payments (at such Fannie Mae
Certificate's pass-through rate, which is net of any servicing and
guarantee fees on the underlying mortgage loans), and any principal
prepayments, on the mortgage loans in the pool represented by such Fannie
Mae Certificate and such holder's proportionate interest in the full
principal amount of any foreclosed or otherwise finally liquidated
mortgage loan. The full and timely payment of principal of and interest
on each Fannie Mae Certificate will be guaranteed by Fannie Mae, which
guarantee is not backed by the full faith and credit of the United States
government.
Freddie Mac Certificates. Freddie Mac is a corporate
instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac was
established primarily for the purpose of increasing the availability of
mortgage credit for the financing of needed housing. The principal
activity of Freddie Mac currently consists of the purchase of first lien,
conventional, residential mortgage loans and participation interests in
such mortgage loans and the resale of the mortgage loans so purchased in
the form of mortgage securities, primarily Freddie Mac Certificates.
Freddie Mac guarantees to each registered holder of a Freddie
Mac Certificate the timely payment of interest at the rate provided for by
such Freddie Mac Certificate, whether or not received. Freddie Mac also
guarantees to each registered holder of a Freddie Mac Certificate ultimate
collection of all principal of the related mortgage loans, without any
offset or deduction, but, generally, does not guarantee the timely payment
of scheduled principal. Freddie Mac may remit the amount due on account
of its guarantee of collection of principal at any time after default on
an underlying mortgage loan, but not later than 30 days following (i)
foreclosure sale, (ii) payment of claim by any mortgage insurer, or (iii)
the expiration of any right of redemption, whichever occurs later, but in
any event no later than one year after demand has been made upon the
mortgagor for accelerated payment of principal. The obligations of
Freddie Mac under its guarantee are obligations solely of Freddie Mac and
are not backed by the full faith and credit of the United States
government.
Privately-Issued Mortgage-Backed Securities. Mortgage-Backed
Securities include Privately-Issued Mortgage-Backed Securities, which are
issued by private issuers and represent an interest in or are
collateralized by (i) Mortgage-Backed Securities issued or guaranteed by
the U.S. Government or one of its agencies or instrumentalities
("Privately-Issued Agency Mortgage-Backed Securities"), or (ii) whole
mortgage loans or non-Agency collateralized Mortgage-Backed Securities
("Privately-Issued Non-Agency Mortgage-Backed Securities"). These
securities are structured similarly to the Ginnie Mae, Fannie Mae and
Freddie Mac mortgage pass-through securities described above and are
issued by originators of the investors in mortgage loans, including
savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
Privately-Issued Agency Mortgage-Backed Securities usually are backed by a
pool of Ginnie Mae, Fannie Mae and Freddie Mac Certificates. Privately-
Issued Non-Agency Mortgage-Backed Securities usually are backed by a pool
of conventional fixed rate or adjustable rate mortgage loans that are not
guaranteed by an entity having the credit status of Ginnie Mae, Fannie Mae
or Freddie Mac, and generally are structured with one or more types of
credit enhancement. As more fully described below, these securities may
include collateralized mortgage obligations, multiclass pass-through
securities and stripped mortgage-backed securities.
Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. Mortgage-Backed Securities include collateralized mortgage
obligations or "CMOs," which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but
also may be collateralized by other Mortgage-Backed Securities or whole
loans (such collateral collectively hereinafter referred to as "Mortgage
Assets"). CMOs include multiclass pass-through securities, which can be
equity interests in a trust composed of Mortgage Assets. Payments of
principal of and interest on the Mortgage Assets, and any reinvestment
income thereon, provide the funds to pay debt service on the CMOs or make
scheduled distributions on the multiclass pass-through securities. CMOs
may be issued by agencies or instrumentalities of the United States
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. The
issuer of a series of CMOs may elect to be treated as a Real Estate
Mortgage Investment Conduit.
In a CMO, a series of bonds or certificates is issued in
multiple classes. Each class of CMOs, often referred to as a "tranche,"
is issued at a specific fixed or floating coupon rate and has a stated
maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier
than their stated maturities or final distribution dates. Interest is
paid or accrues on classes of the CMOs on a monthly, quarterly or
semiannual basis. The principal of and interest on the Mortgage Assets
may be allocated among the several classes of a CMO series in innumerable
ways, some of which bear substantially more risk than others.
Miscellaneous. The yield characteristics of Mortgage-Backed
Securities differ from traditional debt securities. Among the major
differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans generally may be prepaid at any
time. As a result, if a Fund purchases such a security at a premium, a
prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have
the opposite effect of increasing yield to maturity. Conversely, if a
Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. Certain classes of CMOs and other types of
mortgage pass-through securities, including those whose interest rates
fluctuate based on multiples of a stated index, are designed to be highly
sensitive to changes in prepayment and interest rates and can subject the
holders thereof to extreme reductions of yield and loss of principal.
Prepayments on a pool of mortgage loans are influenced by a
variety of economic, geographic, social and other factors, including
changes in the mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgaged properties and servicing
decisions. Generally, however, prepayments on fixed rate mortgage loans
will increase during a period of falling interest rates and decrease
during a period of rising interest rates. Accordingly, amounts available
for reinvestment by the INCOME FUND are likely to be greater during a
period of declining interest rates and, as a result, likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Mortgage-Backed Securities may decrease in value as a result of
increases in interest rates and may benefit less than other fixed income
securities from declining interest rates because of the risk of
prepayment.
No assurance can be given as to the liquidity of the market for
certain Mortgage-Backed Securities, such as CMOs and multiclass pass-
through securities. Determination as to the liquidity of such securities
will be made in accordance with guidelines established by the
Corporation's Board of Directors. In accordance with such guidelines, the
Advisor will monitor the INCOME FUND's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information.
Interest rates on variable rate Mortgage-Backed Securities are
subject to periodic adjustment based on changes or multiples of changes in
an applicable index. The One-Year Treasury Index and LIBOR are among the
common interest rate indexes. The One Year Treasury Index is the figure
derived from the average weekly quoted yield on U.S. Treasury Securities
adjusted to a constant maturity of one year. LIBOR, the London interbank
offered rate, is the interest rate that the most creditworthy
international banks dealing in U.S. dollar-denominated deposits and loans
charge each other for large dollar-denominated loans. LIBOR is also
usually the base rate for large dollar-denominated loans in the
international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or twelve month intervals.
Illiquid Securities
Each of the FUNDS may invest in illiquid securities subject to
the limitations set forth in investment restriction 15. The Board of
Directors of the Corporation or its delegate has the ultimate authority to
determine, to the extent permissible under the federal securities laws,
which securities are liquid or illiquid for purposes of those limitations.
Securities eligible to be resold pursuant to Rule 144A under the
Securities Act may be considered liquid by the Board of Directors.
Restricted securities, which may be purchased only by the INCOME
FUND, may be sold by the INCOME FUND only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is
required, the INCOME FUND may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the INCOME FUND may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the INCOME FUND
might obtain a less favorable price than prevailed when it decided to
sell. Restricted securities will be priced at fair value as determined in
good faith by the Board of Directors of the Corporation. If through the
appreciation of restricted securities or the depreciation of unrestricted
securities, the INCOME FUND should be in a position where more than 15% of
the value of its net assets are invested in illiquid assets, including
restricted securities, the INCOME FUND will take such steps as it deemed
advisable, if any, to protect liquidity.
U.S. Government Securities
Each of the FUNDS may invest in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities which include
Treasury securities which differ only in their interest rates, maturities
and times of issuance. Treasury Bills have initial maturities of one year
or less; Treasury Notes have initial maturities of one to ten years; and
Treasury Bonds generally have initial maturities of greater than ten
years. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Ginnie Mae Certificates, are supported
by the full faith and credit of the U.S. Treasury; others, such as those
of the Federal Home Loan Banks, by the right of the issuer to borrower
from the Treasury; others, such as those issued by Fannie Mae, by
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. While the U.S. Government provides
financial support to such U.S. Government sponsored agencies or
instrumentalities, no assurance can be given that it will always do so
since it is not so obligated by law.
High Yield Securities
As set forth in the Prospectus, the INCOME FUND may invest in
high yield, high risk, lower-rated securities, commonly known as "junk
bonds." Investments in such securities are subject to the risk factors
outlined below.
The high yield market is relatively new and at times is subject
to substantial volatility. An economic downturn or increase in interest
rates may have a more significant effect on the high yield securities in
an underlying registered investment company's portfolio and their markets,
as well as on the ability of securities' issuers to repay principal and
interest. Issuers of high yield securities may be of low creditworthiness
and the high yield securities may be subordinated to the claims of senior
lenders. During periods of economic downturn or rising interest rates the
issuers of high yield securities may have greater potential for insolvency
and a higher incidence of high yield bond defaults may be experienced.
The prices of high yield securities have been found to be less
sensitive to interest rate changes than higher-rated investments but are
more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to
obtain additional financing. If the issuer of a high yield security owned
by the INCOME FUND defaults, the INCOME FUND may incur additional expenses
in seeking recovery. Periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of high yield
securities and the INCOME FUND's net asset value. Yields on high yield
securities will fluctuate over time. Furthermore, in the case of high
yield securities structured as zero coupon or pay-in-kind securities,
their market prices are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than market prices of
securities which pay interest periodically and in cash.
Certain securities held by the INCOME FUND, including high yield
securities, may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market, the INCOME
FUND would have to replace the security with a lower yield security,
resulting in a decreased return for the investor. Conversely, a high
yield security's value will decrease in a rising interest rate market, as
will the value of the INCOME FUND's assets.
The secondary market for high yield securities may at times
become less liquid or respond to adverse publicity or investor perceptions
making it more difficult for the INCOME FUND to value accurately high
yield securities or dispose of them. To the extent the INCOME FUND owns
or may acquire illiquid or restricted high yield securities, these
securities may involve special registration responsibilities, liabilities
and costs, and liquidity difficulties, and judgment will play a greater
role in valuation because there is less reliable and objective data
available.
Special tax considerations are associated with investing in high
yield bonds structured as zero coupon or pay-in-kind securities. The
INCOME FUND will report the interest on these securities as income even
though it receives no cash interest until the security's maturity or
payment date. Further, the INCOME FUND must distribute substantially all
of its income to its shareholders to qualify for pass-through treatment
under the tax law. Accordingly, the INCOME FUND may have to dispose of
its portfolio securities under disadvantageous circumstances to generate
cash or may have to borrow to satisfy distribution requirements.
Credit ratings evaluate the safety of principal and interest
payments, not the market value risk of high yield securities. Since
credit rating agencies may fail to timely change the credit ratings to
reflect subsequent events, the investment adviser to the INCOME FUND
should monitor the issuers of high yield securities in the portfolio to
determine if the issuers will have sufficient cash flow and profits to
meet required principal and interest payments, and to attempt to assure
the securities' liquidity so the INCOME FUND can meet redemption requests.
To the extent that the INCOME FUND invests in high yield securities, the
achievement of its investment objective may be more dependent on its own
credit analysis than is the case for higher quality bonds. The INCOME
FUND may retain a portfolio security whose rating has been changed.
Hedging Instruments
Stock Index Put Options. The VALUE FUND may purchase stock
index put options for hedging purposes as described in the Prospectus. A
put option on a stock index gives the holder (buyer) the right to receive
an amount of cash equal to the result obtained by subtracting the closing
price of the stock index from the exercise price of the option expressed
in dollars times a specified multiple. A stock index fluctuates with
changes in the market values of the stocks included in the index. For
example, some stock index options are based on a broad market index such
as the S&P 500 or the Value Line Composite Index, or a narrower market
index such as the S&P 100. Indexes may also be based on an industry or
market segment such as the AMEX Oil and Gas Index or the Computer and
Business Equipment Index. Options on stock indexes are currently traded
on the following exchanges: The Chicago Board Options Exchange, New York
Stock Exchange, American Stock Exchange, Pacific Stock Exchange and the
Philadelphia Stock Exchange.
Put options will be purchased in order to hedge against an
anticipated decline in stock market prices that might adversely affect the
value of the VALUE FUND's portfolio securities. If the VALUE FUND
purchases a put option on a stock index, the amount of the payment it
receives upon exercising the option depends on the extent of any decline
in the level of the stock index below the exercise price. Such payments
would tend to offset a decline in the value of the VALUE FUND's portfolio
securities. If, however, the level of the stock index increases and
remains above the exercise price while the put option is outstanding, the
VALUE FUND will not be able to profitably exercise the option and will
lose the amount of the premium and any transaction costs. Such loss may
be offset by an increase in the value of the VALUE FUND's portfolio
securities. The VALUE FUND will sell put options only to close out
positions in put options which the VALUE FUND has purchased.
The VALUE FUND's ability to effectively hedge all or a portion
of the securities in its portfolio in anticipation of or during a market
decline through transactions in put options on stock indexes depends on
the degree to which price movements in the underlying index correlate with
the price movements in the VALUE FUND's portfolio securities. Inasmuch as
the VALUE FUND's portfolio securities will not duplicate the components of
an index, the correlation will not be perfect. Consequently, the VALUE
FUND will bear the risk that the prices of its portfolio securities being
hedged will not move in the same amount as the prices of the VALUE FUND's
put options on the stock indexes. It is also possible that there may be a
negative correlation between the index and the VALUE FUND's portfolio
securities which would result in a loss on both such portfolio securities
and the options on stock indexes acquired by the VALUE FUND.
The premium paid by the VALUE FUND when purchasing a put option
will be recorded as an asset in the VALUE FUND's statement of assets and
liabilities. This asset will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the
net asset value per share of the VALUE FUND is computed, or in the absence
of such sale, the latest bid price. The asset will be extinguished upon
expiration of the option, the selling of an identical option in a closing
transaction or upon the exercise of the option. This asset is a waiting
asset. If it is not sold or exercised prior to its expiration, it becomes
worthless. The time value component of the premium decreases as the
option approaches expiration, and the VALUE FUND may have all or a large
part of the premium paid.
Call Options. The INCOME FUND may write (i.e. sell) covered
call options as described in the Prospectus. Except for calls written on
stock indices, when the INCOME FUND writes a call, it receives a premium
and agrees to sell the related investments to a purchaser of a call during
the call period (usually not more than nine months) at a fixed exercise
price (which may differ from the market price of the related investments)
regardless of market price changes during the call period. If the call is
exercised,the INCOME FUND forgoes any gain from an increase in the market
price over the exercise price.
To terminate its obligation on a call which it has written, the
INCOME FUND may purchase a call in a "closing purchase transaction." A
profit or loss will be realized depending on the amount of option
transaction costs and whether the premium previously received is more or
less than the price of the call purchased. A profit may also be realized
if the call lapses unexercised, because the INCOME FUND retains the
premium received. Any such profits are considered short-term gains for
federal income tax purposes and, when distributed, are taxable as ordinary
income.
Calls on stock indices are similar to calls on equities except
that all settlements are in cash and gain or loss depends on changes in
the index in question rather than on price movements in individual
equities. When the INCOME FUND writes a call on a stock index, it
receives a premium and agrees that, during the call period, a purchaser of
a call upon exercise of the call will receive from the INCOME FUND an
amount of cash if the closing level of the stock index upon which the call
is based is greater than the exercise price of the call, which amount of
cash is equal to the difference between the closing price of the index and
the exercise price of the call times a specified multiple.
General Considerations. There can be no guarantee that a liquid
secondary market will exist on a given exchange, in order for an option
position to be closed out. Furthermore, if trading is halted in an
underlying security, the trading of options is usually halted as well. In
the event that an option cannot be traded, the only alternative to the
holder is to exercise the option.
The hours of trading for options may not conform to the hours
during which the underlying securities are traded. To the extent that the
options markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
markets that cannot be reflected in the options markets. The purchase and
writing of options is a highly specialized activity which involves
investment techniques and risks different from those associated with
ordinary portfolio securities transactions.
Municipal Securities
The INCOME FUND may invest in debt obligations issued by or on
behalf of the governments of states, territories or possessions of the
United States, the District of Columbia and their political subdivisions,
agencies and instrumentalities, certain interstate agencies and certain
territories of the United States. The two principal classifications of
municipal securities are "general obligation" and "revenue" securities.
"General obligation" securities are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest.
"Revenue" securities are usually payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue source.
Industrial development bonds are usually revenue securities, the credit
quality of which is normally directly related to the credit standing of
the industrial user involved. Within these principal classifications of
municipal securities, there are a variety of categories of municipal
securities, including fixed and variable rate securities, municipal bonds,
municipal notes, municipal leases, custodial receipts and participation
certificates. Certain of the municipal securities in which the INCOME
FUND may invest represent relatively recent innovations in the municipal
securities markets. Because the INCOME FUND does not intend to invest a
substantial amount of its assets in municipal securities, the interest on
which is exempt from federal income tax, the INCOME FUND does not expect
to be entitled to pass through to its shareholders the tax-exempt nature
of any interest income attributable to investments in municipal
securities.
DIRECTORS AND OFFICERS OF THE FUND
The name, address, age, principal occupations during the past
five years and certain other information with respect to each of the
directors and officers of the Corporation are as follows:
JOHN R. BRADFORD, Ph.D., 72
7619 University Avenue
Suite 2A
Lubbock, Texas 79423
(A DIRECTOR OF THE FUND)
Dr. Bradford is Vice President of Development of Compliance
Services Group, Inc., an international integrated environmental management
consulting and engineering service company.
GILBERT F. HARTWELL, 71
6810 Larkwood Street
Houston, Texas 77074
(A DIRECTOR OF THE FUND)
Mr. Hartwell is Chairman of the Board of Hartwell's Office
World, Inc., Houston, Texas, an office business machine company which he
founded in 1972.
JOHN H. WILSON, 53
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(A DIRECTOR OF THE FUND)
Mr. Wilson is President of U.S. Equity Corporation, a venture
capital firm. Mr. Wilson currently serves on the Board of Directors of
Whitehall Corporation, a multifaceted manufacturing concern, Capital
Southwest Corporation, a venture capital firm, Norwood Promotional
Products, Inc., a manufacturer of advertising specialty products, and
Encore Wire Corporation, a manufacturer of electrical wire and cable.
GARY B. WOOD, Ph.D.*, 45
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(PRESIDENT, TREASURER AND A DIRECTOR OF THE FUND)
____________
* Dr. Wood is a director who is an "interested person" of the FUND as
that term is defined in the Investment Company Act of 1940.
Dr. Wood is President, Secretary, Treasurer and a director of
the Advisor and Concorde Capital Corporation, an investment advisory firm
affiliated with the Advisor. He is also Chairman of the Board and a
director of OmniMed Corporation, Houston, Texas, a medical equipment
business and has been an officer and director of such corporation and its
predecessor Uro-Tech Management Corporation, Dallas, Texas, since June,
1983. He is also Chairman of the Board of International Hospital
Corporation, Dallas, Texas, a hospital construction and management firm.
Dr. Wood currently serves on the Board of Directors of Harken Energy
Corporation, a public corporation headquartered in Dallas, Texas, and is
Chairman of the Board and a director of Positron Corporation, a public
corporation headquartered in Houston, Texas.
ELIZABETH L. FOSTER, 40
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(SECRETARY OF THE FUND)
Ms. Foster is currently a Portfolio Manager for the Advisor and
has been employed by such firm in various capacities since 1983.
During the fiscal year ended September 30, 1995 the Corporation
did not pay any directors' fees. The Corporation's standard arrangement
with directors is to reimburse each director for expenses incurred in
connection with attendance at meetings of the Board of Directors.
COMPENSATION TABLE
Total
Pension or Compensation
Retirement Estimated from
Aggregate Benefits Annual Corporation
Compensation Accrued as Benefits and Fund
from Part of Fund Upon Complex Paid
Name of Person Corporation Expenses Retirement to Director
John R. Bradford, $0 $0
Ph.D.
Gilbert F. Hartwell $0 $0
John H. Wilson $0 $0
Gary B. Wood, Ph.D. $0 $0
PRINCIPAL SHAREHOLDERS
Set forth below are the names and addresses of all holders of
the VALUE FUND's shares who as of November __, 1995 beneficially owned
more than 5% of the then outstanding shares of the VALUE FUND as well as
the number of shares of the VALUE FUND beneficially owned by all officers
and directors of the Corporation as a group.
Name and Address Number of Shares Percent
of Beneficial Owner of VALUE FUND of Class
I. David and Lee R. Bufkin
R.R. Box 390
Brenham, Texas 77833
William E. Watson
MDPA Pension
#3 Bent Tree Court
Lufkin, TX 75901
C. Wayne and Jane Nance
214 North Bay EB
Bullard, Texas 75757
Ralph and Deborah Cunningham
#2 Saddlewood Estates
Houston, Texas 77024
Keith and Gayle Johansen
10434 Lennox Lane
Dallas, Texas 75229
Officers and Director
as a group (5 persons)
INVESTMENT ADVISOR
As set forth in the Prospectus under the caption "WHO MANAGES
THE FUNDS?" the investment advisor to the FUNDS is Concorde Financial
Corporation (the "Advisor"). The Advisor is wholly-owned by Gary B. Wood,
Ph.D. Pursuant to an investment advisory agreement between each FUND and
the Advisor (the "Agreement") the Advisor furnishes continuous investment
advisory and management services to the FUNDS. During the fiscal years
ended September 30, 1995, September 30, 1994 and September 30, 1993 the
VALUE FUND paid the Advisor advisory fees of $___________, $110,669 and
$119,465, respectively.
Each FUND pays all of its expenses not assumed by the Advisor
including, but not limited to: the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto; the expense of
registering its shares with the Securities and Exchange Commission and in
the various states; the printing and distribution cost of prospectuses
mailed to existing shareholders; the cost of director and officer
liability insurance, reports to shareholders, reports to government
authorities and proxy statements; interest charges; brokerage commissions
and expenses incurred in connection with portfolio transactions. The FUND
also pays: the fees of directors who are not interested persons of the
Corporation; compensation of administrative and clerical personnel;
association membership dues; auditing and accounting services; legal fees
and expenses; fees and expenses of any custodian or trustees having
custody of a FUND's assets; expenses of calculating the net asset value
and repurchasing and redeeming shares; charges and expenses of dividend
disbursing agents; registrars and stock transfer agents, including the
cost of keeping all necessary shareholder records and accounts and
handling any problems related thereto.
The Advisor has undertaken to reimburse each FUND to the extent
that the aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, brokerage commissions and
extraordinary items, exceed that percentage of the average net assets of
the FUND for such year, as determined by valuations made as of the close
of each business day of the year, which is the most restrictive percentage
provided by the state laws of the various states in which the shares of
the FUND are qualified for sale. If the states in which the shares of the
FUND are qualified for sale impose no such restrictions, the Advisor will
not be obligated to reimburse the FUND. As of the date of this Statement
of Additional Information the shares of the FUNDS are not qualified for
sale in any state which imposes an expense limitation. Each FUND monitors
its expense ratio on a monthly basis. If the accrued amount of the
expenses of the FUND exceeds an applicable expense limitation, the FUND
will create an account receivable from the Advisor for the amount of such
excess. In such a situation, the monthly payment of the Advisor's fee
will be reduced by the amount of such excess, subject to adjustment month
by month during the balance of the FUND's fiscal year if accrued expenses
thereafter fall below this limit. The adjustment will be reconciled at
the end of the fiscal year and not carried forward.
Each Agreement will remain in effect as long as its continuance
is specifically approved at least annually, by (i) the Board of Directors
of the Corporation, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of the
Corporation, and (ii) by the vote of a majority of the directors of the
Corporation who are not parties to the Agreement or interested persons of
the Advisor, cast in person at a meeting called for the purpose of voting
on such approval. Each Agreement provides that it may be terminated at
any time without the payment of any penalty, by the Board of Directors of
the Corporation or by vote of a majority of a FUND's shareholders, on
sixty days written notice to the Advisor, and by the Advisor on the same
notice to the FUND and that it shall be automatically terminated if it is
assigned.
Each Agreement provides that the Advisor will not be liable to
the FUND or its shareholders for anything other than willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or
duties. The Agreement also provides that the Advisor and its officers,
directors and employees may engage in other businesses, devote time and
attention to any other business whether of a similar or dissimilar nature,
and render investment advisory services to others.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "HOW IS A
FUND'S SHARE PRICE DETERMINED?" the net asset value of the FUND will be
determined as of the close of trading on each day the New York Stock
Exchange is open for trading. The New York Stock Exchange is open for
trading Monday through Friday except New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the New York Stock Exchange
will not be open for trading on the preceding Friday and when any such
holiday falls on a Sunday, the New York Stock Exchange will not be open
for trading on the succeeding Monday, unless unusual business conditions
exist, such as the ending of a monthly or the yearly accounting period.
The New York Stock Exchange also may be closed on national days of
mourning.
The FUNDS may occasionally advertise performance data such as
total return or, with respect to the INCOME FUND only, yield. To
facilitate the comparability of these statistics from one mutual fund to
another, the Securities and Exchange Commission has developed guidelines
for the calculation of these statistics. Any total rate of return
quotation for a FUND will be for a period of three or more months and will
assume the reinvestment of all dividends and capital gains distributions
which were made by the FUND during that period. Any period total rate of
return quotation of a FUND will be calculated by dividing the net change
in value of a hypothetical shareholder account established by an initial
payment of $1,000 at the beginning of the period by $1000. The net change
in the value of a shareholder account is determined by subtracting $1,000
from the product obtained by multiplying the net asset value per share at
the end of the period by the sum obtained by adding (A) the number of
shares purchased at the beginning of the period plus (B) the number of
shares purchased during the period with reinvested dividends and
distributions. Any average annual compounded total rate of return
quotation of a FUND will be calculated by dividing the redeemable value at
the end of the period (i.e. the product referred to in the preceding
sentence) by $1,000. A root equal to the period, measured in years, in
question is then determined and 1 is subtracted from such root to
determine the average annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
n
P(1+T) = ERV
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment
made at the beginning of the stated periods at the end
of the stated periods.
A yield quotation is based upon a 30 day period and is
computed by dividing the net investment income per share earned during a
30-day (or one-month) period by the net asset value per share on the last
day of the period and annualizing the result on a semiannual basis by
adding one to the quotient, raising the sum to the power of six,
subtracting one from the result and then doubling the difference. The
INCOME FUND's net investment income per share earned during the period is
based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned
during the period minus expenses accrued for the period, net of
reimbursements.
This calculation can be expressed as follows:
a-b 6
Yield = 2[(----+1) -1]
cd
Where: a= dividends and interest earned during the period.
b= expenses accrued for the period (net of
reimbursements).
c= the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d= maximum offering price per share on the last day of
the period.
The total return of the VALUE FUND for the period December 4,
1987, the day the VALUE FUND commenced operations, through September 30,
1995 was _____%. An initial investment of $1,000 in the VALUE FUND at
December 4, 1987 would have been worth $_____ as of September 30, 1995.
The average annual compounded rate of return of the VALUE FUND over this
period was ____%. The average annual compounded rate of return of the
VALUE FUND for the 5-year period ended September 30, 1995 was ____%. The
VALUE FUND's compounded rate of return for the 1-year period ended
September 30, 1995 was ____%.
The foregoing performance results are based on historical
earnings and should not be considered as representative of the performance
of the VALUE FUND in the future. An investment in a FUND will fluctuate
in value and at redemption its value may be more or less than the initial
investment.
REDEMPTION OF FUND SHARES
Subject to a FUND's compliance with applicable regulations, each
FUND has reserved the right to pay the redemption price of shares
redeemed, either totally or partially, by a distribution in kind of
securities (instead of cash) from the FUND's portfolio. The securities so
distributed would be valued at the same amount as that assigned to them in
calculating the net asset value for the shares redeemed. If a holder of
FUND shares receives a distribution in kind, he would incur brokerage
charges when converting the securities to cash. Holders of FUND shares
who in any 90 day period redeem no more than the lesser of $250,000 or 1%
of the FUND's net assets at the beginning of the 90 day period will be
paid the redemption price in cash.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the FUNDS are made by
the Advisor subject to review by the Corporation's Board of Directors. In
placing purchase and sale orders for portfolio securities for a FUND, it
is the policy of the Advisor to seek the best execution of orders at the
most favorable price in light of the overall quality of brokerage and
research services provided, as described in this and the following
paragraph. In selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations.
Among these are the Advisor's evaluation of the broker's efficiency in
executing and clearing transactions, block trading capability (including
the broker's willingness to position securities) and the broker's
financial strength and stability. The most favorable price to a FUND
means the best net price without regard to the mix between purchase or
sale price and commission, if any. For example, over-the-counter
securities may be purchased and sold directly with principal market makers
who retain the difference in their cost in the security and its selling
price or from non-principal market makers who are paid commissions
directly. A FUND may allocate portfolio brokerage on the basis of
recommendations to purchase shares of the FUND made by brokers if the
Advisor reasonably believes the commissions and transaction quality are
comparable to that available from other brokers.
In allocating brokerage business for the FUNDS, the Advisor also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Advisor believes these services have substantial value, they are
considered supplemental to the Advisor's own efforts in the performance of
its duties under the Agreement. Other clients of the Advisor may
indirectly benefit from the availability of these services to the Advisor,
and the FUNDS may indirectly benefit from services available to the
Advisor as a result of transactions for other clients. The Agreement
provides that the Advisor may cause a FUND to pay a broker which provides
brokerage and research services to the Advisor a commission for effecting
a securities transaction in excess of the amount another broker would have
charged for effecting the transaction, if the Advisor determines in good
faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing broker
viewed in terms of either the particular transaction or the Advisor's
overall responsibilities with respect to the FUND and the other accounts
as to which he exercises investment discretion. Brokerage commissions
paid by the VALUE FUND during the fiscal years ended September 30, 1995,
September 30, 1994 and September 30, 1993 to brokers totaled
$_____________ on transactions involving securities having a total market
value of $____________, $97,234 on transactions involving securities
having a total market value of $17,933,157 and $117,566 on transactions
involving securities having a total market value of $17,986,958,
respectively. All of such brokers provided research services to the
Advisor.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the FUNDS. As such, Firstar Trust
Company holds all securities and cash of the FUNDS, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Corporation. Firstar Trust Company does not
exercise any supervisory function over the management of the FUNDS, the
purchase and sale of securities or the payment of distributions to
stockholders. Firstar Trust Company also acts as the FUNDS' fund
accountant, transfer agent and dividend disbursing agent. Firstar Trust
Company has entered into a fund accounting services agreement with the
FUNDS pursuant to which it acts as fund accountant. As fund accountant
Firstar Trust Company maintains and keeps current the books, accounts,
journals and other records of original entry relating to the business of
each FUND and calculates each FUND's net asset value on a daily basis. In
consideration of such services, the FUNDS pays monthly to Firstar Trust
Company a fee based on its average daily net assets, with a minimum annual
amount, and reimburses it for its out-of-pocket expenses. During the
fiscal years ended September 30, 1995, September 30, 1994 and September
30, 1993, the VALUE FUND paid Firstar Trust Company $________, $23,464 and
$3,572, respectively, pursuant to the fund accounting services agreement.
TAXES
As set forth in the Prospectus under the caption "WHAT ABOUT
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?" the FUNDS will endeavor
to qualify annually for and elect tax treatment applicable to a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code").
Dividends from a FUND's net investment income and distributions
from the FUND's net realized capital gains are taxable to shareholders,
whether received in cash or in additional shares of Common Stock. The 70%
dividends-received deduction for corporations may apply to such dividends
and distributions, subject to proportionate reductions if the aggregate
dividends received by the FUND from domestic corporations in any year are
less than 100% of the FUND's gross income.
Any dividend or capital gains distribution paid shortly after a
purchase of shares of Common Stock, will have the effect of reducing the
per share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, if the net asset value of the shares of Common
Stock immediately after a dividend or distribution is less than the cost
of such shares to the shareholder, the dividend or distribution will be
taxable to the shareholder even though it results in a return of capital
to him.
Shareholders may realize a capital gain or capital loss in any
year in which they redeem shares of Common Stock. The gain or loss is the
difference between the shareholder's basis (cost) and the redemption price
of the shares redeemed.
The FUNDS may be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividend payments and redemption
proceeds if a shareholder fails to furnish the FUNDS with his Social
Security or other taxpayer identification number and certify under penalty
of perjury that such number is correct and that he is not subject to
backup withholding due to the under reporting of income. The
certification form is included as part of the share purchase application
and should be completed when the account is opened.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP, Dallas, Texas, has been selected as the
independent certified public accountants for the FUNDS. The selection of
the FUNDS' independent certified public accountants is subject to annual
ratification by the FUNDS' shareholders.
SHAREHOLDER MEETINGS
The Texas Business Corporation Act permits registered investment
companies, such as the Corporation, to operate without an annual meeting
of shareholders under specified circumstances if an annual meeting is not
required by the Investment Company Act of 1940. The Corporation has
adopted the appropriate provisions in its Bylaws and may, at its
discretion, not hold an annual meeting in any year in which the election
of directors is not required to be acted on by shareholders under said
Act.
The Corporation's Bylaws also contain procedures for the removal
of directors by its shareholders. If any meeting of shareholders duly
call and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to
not less than 10% of the FUNDS' outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
director; and
Whenever ten or more shareholders of record who have been such
for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000
or at least one percent (1%) of the total outstanding shares, whichever is
less, shall apply to the Secretary in writing, stating that they wish to
communicate with other shareholders with a view to obtaining signatures to
a request for a meeting of shareholders and accompanied by a form of
communication and request which they wish to transmit the Secretary shall
within five business days after such application either: (1) afford to
such applicants access to a list of the names and addresses of all
shareholders as recorded on the books of the Corporation; or (2) inform
such applicants as to the approximate number of shareholders of record and
the approximate cost of mailing to them the proposed communication and
form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all shareholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the directors to the effect that in their opinion
either such material contains untrue statements of factor omits to state
facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of
such opinion.
After opportunity for hearing upon the objections specified in
the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the directors or by such applicants shall, enter
an order either sustaining one or more of such objections or refusing to
sustain any of them. If the Securities and Exchange Commission shall
enter an order refusing to sustain any of such objections, or if, after
the entry of an order sustaining one or more of such objections, the
Securities and Exchange Commission shall find, after notice and
opportunity for hearing, that all objections so sustained have been met,
and shall enter an order so declaring,the Secretary shall mail copies of
such material to all shareholders with reasonable promptness after the
entry of such order and the renewal of such tender.
DESCRIPTION OF BOND RATINGS
As set forth in the Prospectus under the caption "WHAT ARE THE
FUNDS' INVESTMENT OBJECTIVES AND POLICIES?" the FUNDS may invest in
publicly distributed debt securities assigned one of the highest four
ratings of either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and the INCOME FUND may invest up to 20% of its assets in
securities that are rated below investment grade, but not lower than a B
rating. A brief description of the ratings symbols and their meanings
follows.
Standard & Poor's Corporation. A Standard & Poor's corporate or
municipal debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights;
AAA - Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in the
higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by larger
uncertainties or major risk exposures to adverse conditions.
Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by
a large, or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's bond rating symbols may contain numerical modifiers of a
generic rating classification. The modifier 1 indicates that the bond
ranks at the higher end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statements
(all included in Parts A and B)
Concorde Funds, Inc.
Financial Highlights
Portfolio of Investments in Securities
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
(b.) Exhibits
(1.1) Registrant's Articles of Incorporation; Exhibit 1 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
(1.2) Board resolutions creating series of Common Stock and
establishing preferences, limitations and relative rights
of such series (submitted in draft form).
(2) Registrant's Amended and Restated By-Laws.
(3) None
(4) None
(5.1) Investment Advisory Agreement for the VALUE FUND; Exhibit 5
to Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
(5.2) Investment Advisory Agreement for the INCOME FUND.
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin Trust Company;
Exhibit 8 to Registrant's Registration Statement on Form
N-1A is incorporated by reference pursuant to Rule 411
under the Securities Act of 1933.
(9) Shareholder Servicing Agent Agreement with First Wisconsin
Trust Company; Exhibit 9 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(9.1) Fund Accounting Services Agreement with Firstar Trust
Company; Exhibit 9.1 to Amendment No. 9 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act of
1933.
(10) Opinion of Foley & Lardner, counsel for Registrant; Exhibit
10 to Amendment No. 8 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(11) Consent of Independent Auditors (to be filed by amendment)
(12) None
(13) Subscription Agreement; Exhibit 13 to Amendment No. 2 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
(14.1) Individual Retirement Custodial Account; Exhibit 14.1 to
Amendment No. 4 to Registrant's Registration Statement on
Form N-1A is incorporated by reference pursuant to Rule 411
under the Securities Act of 1933.
(14.2) Simplified Employee Pension Plan; Exhibit 14.2 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
(14.3) Defined Contribution Retirement Plan; Exhibit 14.3 to
Amendment No. 6 to Registrant's Registration Statement on
Form N-1A is incorporated by reference pursuant to Rule 411
under the Securities Act of 1933.
(14.4) Prototype 403(b)(7) plan; Exhibit 14.4 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act of
1933.
(16) Schedule for computation of performance quotation.
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of September 30, 1995
Series A Common Stock (VALUE FUND) __
Item 27. Indemnification
Section 2.02 of the Texas Business Corporation Act and Article
VII, Section 7 of the Registrant's By-Laws provide for the indemnification
of Registrant's directors and officers in a variety of circumstances,
which may include liabilities under the Securities Act of 1933.
The By-Laws provide that any director, officer, agent or
employee of Registrant and any person similarly serving another enterprise
at the request of Registrant is entitled to indemnification against
expenses, judgments, fines and amounts paid in settlement reasonably
incurred in any threatened, pending or completed proceeding if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful; provided that Registrant may not indemnify any such person in
relation to matters to which such person shall be adjudged in such action,
suit or proceeding to be liable for gross negligence, willful misfeasance,
bad faith or reckless disregard of the duties and obligations involved in
the conduct of his office. Unless ordered by a court, the determination
that indemnification of an individual is proper is to be made by (i) the
board of directors, by a majority vote of a quorum which consists of
directors who were not parties to the action, suit or proceeding nor
interested persons of Registrant as defined in Section 2(a)(19) of the
Investment Company Act of 1940; (ii) if such a quorum cannot be obtained,
by a majority vote of a committee consisting of not less than two of such
directors; (iii) if the required quorum is not obtainable and the
committee cannot be established or if a quorum of disinterested directors
so direct, by independent legal counsel in a written opinion; or (iv) by
the shareholders.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor
Information with respect to Dr. Wood is incorporated by
reference to page 6 of the Statement of Additional Information pursuant to
Rule 411 under the Securities Act of 1933.
Item 29. Principal Underwriters
Registrant has no principal underwriters.
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are in the physical possession of either
Registrant's Treasurer, Gary B. Wood, Ph.D., at Registrant's corporate
offices, 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240,
or Registrant's custodian, fund accountant, transfer agent and dividend
disbursing agent, Firstar Trust Company, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
With respect to shareholder meetings, Registrant undertakes as
follows:
(a) Upon the written request of the holders of shares
entitled to not less than 10% of the FUNDS' outstanding shares,
to call a meeting of shareholders for the purpose of voting upon
the question of removal of any director; and
(b) Whenever ten or more shareholders of record who have
been such for at least six months preceding the date of
application, and who hold in the aggregate either shares having
a net asset value of at least $25,000 or at least one percent
(1%) of the total outstanding shares, whichever is less, shall
apply to the Secretary in writing, stating that they wish to
communicate with other shareholders with a view to obtaining
signatures to a request for a meeting of shareholders and
accompanied by a form of communication and request which they
wish to transmit the Secretary shall within five business days
after such application either: (1) afford to such applicants
access to a list of the names and addresses of all shareholders
as recorded on the books of the Corporation; or (2) inform such
applicants as to the approximate number of shareholders of
record and the approximate cost of mailing to them the proposed
communication and form of request.
If the Secretary elects to follow the course specified in
clause (2) of the last sentence of the preceding paragraph, the
Secretary, upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at
their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission,
together with a copy of the material to be mailed, a written
statement signed by at least a majority of the directors to the
effect that in their opinion either such material contains
untrue statements of factor omits to state facts necessary to
make the statements contained therein not misleading, or would
be in violation of applicable law, and specifying the basis of
such opinion.
After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange
Commission may, and if demanded by the directors or by such
applicants shall, enter an order either sustaining one or more
of such objections or refusing to sustain any of them. If the
Securities and Exchange Commission shall enter an order refusing
to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Securities
and Exchange Commission shall find, after notice and opportunity
for hearing, that all objections so sustained have been met, and
shall enter an order so declaring,the Secretary shall mail
copies of such material to all shareholders with reasonable
promptness after the entry of such order and the renewal of such
tender.
Registrant undertakes to file a post-effective amendment to this
amended Registration Statement within four to six months of the effective
date of this amended Registration Statement which will contain financial
statements (which need not be certified) as of and for the time period
reasonably close or as soon as practicable to the date of such post-
effective amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas and State of
Texas on the 8th day of September, 1995.
CONCORDE VALUE FUND, INC.
(Registrant)
By: /s/ Gary B. Wood
Gary B. Wood, Ph.D.
President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date(s) indicated.
Name Title Date
/s/ Gary B. Wood Principal Executive, September 8, 1995
Gary B. Wood, Ph.D. Financial and Accounting
Officer and Director
_______________________ Director September __, 1995
Gilbert F. Hartwell
/s/ John H. Wilson Director September 8, 1995
John H. Wilson
/s/ John R. Bradford Director September 8, 1995
John R. Bradford, Ph.D.
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1.1) Registrant's Articles of Incorporation*
(1.2) Board resolutions creating series of Common
Stock and establishing preferences,
limitations and relative rights of
such series (submitted in draft form)
(2) Registrant's Amended and Restated By-Laws
(submitted in draft form)
(3) None
(4) None
(5.1) Investment Advisory Agreement for the
VALUE FUND*
(5.2) Investment Advisory Agreement for the
INCOME FUND
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin
Trust Company*
(9) Shareholder Servicing Agent Agreement
with First Wisconsin Trust Company*
(9.1) Fund Accounting Services Agreement with
Firstar Trust Company*
(10) Opinion of Foley & Lardner, Counsel for
Registrant*
(11) Consent of Independent Auditors**
(12) None
(13) Subscription Agreement*
(14.1) Individual Retirement Custodial Account*
(14.2) Simplified Employee Pension Plan*
(14.3) Defined Contribution Retirement Plan*
(14.4) Prototype 403(b)(7) plan*
(16) Schedule for computation of performance
quotation**
* Incorporated by reference
** To be filed by amendment
Exhibit 1.2
RESOLUTIONS OF THE BOARD
OF DIRECTORS OF CONCORDE VALUE FUND, INC.
ESTABLISHING SERIES OF COMMON STOCK
RESOLVED, that pursuant to Article 2.12C.(1) of the Texas
Business Corporation Act, the following number of authorized and unissued
shares of Common Stock of the Corporation be, and hereby are, divided into
and classified as the series set forth below, with each representing
interests in the respective fund set forth next to the respective series,
and each such series having all of the preferences, limitations and
relative rights set forth below:
Series Fund Shares
A Concorde Value
Fund
B Concorde Income
Fund
FURTHER RESOLVED, that all shares of Common Stock of the
Corporation issued and outstanding immediately prior to the effective date
of these resolutions as an amendment to the Corporation's Articles of
Incorporation shall be reclassified as Series A Common Stock and shall
have all of the preferences, limitations and relative rights of such
series.
FURTHER RESOLVED, that each series of Common Stock now or
hereafter created shall have the following preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms or conditions of redemption:
1. Each holder of shares of Common Stock of the Corporation,
irrespective of the series, shall be entitled to one (1) vote for each
full share (and a fractional vote for each fractional share) then standing
in his or her name on the books of the Corporation; provided, however,
that shares of any series of Common Stock owned, other than in a fiduciary
capacity, by the Corporation or by another corporation in which the
Corporation owns shares entitled to cast a majority of all the votes
entitled to be cast by all shares outstanding and entitled to vote of such
corporation, shall not be voted at any meeting of shareholders. On any
matter submitted to a vote of shareholders all shares of the Corporation's
Common Stock then issued and outstanding and entitled to vote,
irrespective of the series, shall be voted in the aggregate and not by
series, except that: (a) when otherwise expressly provided by the Texas
Business Corporation Act, the Investment Company Act of 1940 and the
regulations thereunder, or other applicable law, shares shall be voted by
individual series; and (b) when the matter to be acted upon does not
affect any interest of a particular series of the Corporation's Common
Stock, then only shares of the affected series shall be entitled to vote
thereon. At all elections of directors of the Corporation, each
shareholder shall be entitled to vote the shares owned of record by him or
her for as many persons as there are directors to be elected, but shall
not be entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation for the issue
or sale of shares of any series of the Corporation's Common Stock,
together with all assets in which such consideration is invested and
reinvested, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any
such funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the series of
the Corporation's Common Stock with respect to which such assets, payment
or funds were received by the Corporation for all purposes, subject only
to the rights of creditors, and shall be so handled upon the books of
account of the Corporation. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein referred to as
"assets belonging to" such series. Any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily attributable
to any particular series of the Corporation's Common Stock shall be
allocable among any one or more series of the Corporation's Common Stock
in such a manner and on such basis as the Board of Directors, in its sole
discretion, shall deem fair and equitable. The power to make such
allocations may be delegated by the Board of Directors from time to time
to one or more of the officers of the Corporation.
3. The assets belonging to any series of the Corporation's
Common Stock shall be charged with the liabilities in respect of such
series of the Corporation's Common Stock, and shall also be charged with
the share of the general liabilities of the Corporation allocated to such
series determined as hereinafter provided. The determination of the Board
of Directors shall be conclusive as to: (a) the amount of such
liabilities, including the amount of accrued expenses and reserves; (b)
any allocation of the same to a given series, and (c) whether the same are
allocable to one or more series. The liabilities so allocated to a series
are herein referred to as "liabilities belonging to" such series. Any
liabilities which are not readily attributable to any particular series of
the Corporation's Common Stock shall be allocable among any one or more
series of the Corporation's Common Stock in such manner and on such basis
as the Board of Directors, in its sole discretion, shall deem fair and
equitable. The power to make such allocations may be delegated by the
Board of Directors from time to time to one or more of the officers of the
Corporation.
4. Shares of a series of the Corporation's Common Stock shall
be entitled to such dividends and distributions, in stock or in cash or
both, as may be declared from time to time by the Board of Directors,
acting in its sole discretion, with respect to such series; provided,
however, that dividends and distributions on shares of a series of the
Corporation's Common Stock shall be paid only out of the lawfully
available "assets belonging to" such series as such phrase is defined
herein.
5. In the event of the liquidation or dissolution of the
Corporation, shareholders of a series of the Corporation's Common Stock
shall be entitled to receive, as a series, out of the assets of the
Corporation available for distribution to shareholders, but other than
general assets not belonging to any particular series, the assets
belonging to such series, and the assets so distributable to the holders
of any series of the Corporation's Common Stock shall be distributed among
such holders in proportion to the number of shares of such series of the
Corporation's Common Stock held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging
to any particular series of the Corporation's Common Stock and available
for distribution, such distribution shall be made to the holders of all
series of the Corporation's Common Stock in proportion to the net asset
value of the respective series of the Corporation's Common Stock
determined as set forth in the Bylaws of the Corporation.
6. Each holder of shares of the Corporation's Common Stock,
irrespective of the series, may, upon request to the Corporation
accompanied by surrender of the appropriate stock certificate or
certificates, if any, in proper form for transfer and after complying with
any other conversion procedures established by the Board of Directors,
convert such shares into shares of any other series of the Corporation's
Common Stock on the basis of their relative net asset values (determined
in accordance with the Bylaws of the Corporation) less a conversion charge
or discount determined by the Board of Directors. Any fee so imposed
shall be uniform as to all shareholders.
BYLAWS
OF
CONCORDE FUNDS, INC.
(as adopted on ____________, 1995)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of shareholders
shall be held at 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas,
Texas, or at such other location in Texas or any other state as the board
of directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of shareholders for the election of
directors and the transaction of such other business as may properly come
before it, if the annual meeting shall be held, shall be held during the
month of January of each year (or during such other month as the board of
directors shall determine), at such date and time as shall be fixed by the
board of directors and stated in the notice of such meeting. Any business
of the corporation may be transacted at the annual meeting without being
specifically designated in the notice, except such business as is
specifically required by statute to be stated in the notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not required to
be acted on by shareholders under the Investment Company Act of 1940.
Section 3. Special Meeting. Special meetings of the
shareholders may be called by the board of directors, the president, vice
president or the secretary, and shall be called by the secretary upon the
written request of the holders of shares entitled to not less than ten
percent (10%) of all the votes entitled to be cast at such meeting;
provided that such holders prepay the costs to the corporation of
preparing and mailing the notice of the meeting. The business transacted
at any special meeting of shareholders shall be limited to the purposes
stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days
nor more than sixty (60) days before the date of every shareholders'
meeting, the secretary shall give to each shareholder entitled to vote at
such meeting, written or printed notice stating the time and place of the
meeting, and in the case of a special meeting the purpose or purposes for
which the meeting is called, either by mail or by presenting it to him
personally. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the shareholder at his
post office address as it appears on the records of the corporation, with
postage thereon prepaid.
Any notice required to be given to any shareholder under this
Article I need not be given to the shareholder if (1) notice of two
consecutive annual meetings and all notices of meetings held during the
period between those annual meetings, if any; or (2) all (but no less than
two) payments (if sent by first class mail) of distributions with respect
to the shares held by such shareholder during a twelve-month period, have
been mailed to that person, addressed at his address as shown on the
records of the corporation, and have been returned undeliverable. Any
action or meeting taken or held without notice to such a person shall have
the same force and effect as if the notice had been duly given and, if the
action taken by the corporation is reflected in any articles or document
filed with the Secretary of State of the State of Texas, those articles or
that document may state that notice was duly given to all persons to whom
notice was required to be given. If such a person delivers to the
corporation a written notice setting forth his then current address, the
requirement that notice be given to that person shall be reinstated.
Section 5. Quorum. At any meeting of shareholders the
presence in person or by proxy of shareholders entitled to cast a majority
of the votes thereat shall constitute a quorum; but this section shall not
affect any requirement under statute or under the charter for the vote
necessary for the adoption of any measure. If at any meeting a quorum is
not present or represented, the chairman of the meeting or the holders of
a majority of the stock present or represented may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of
stock shall be entitled to vote at any meeting of shareholders except
shares owned, other than in a fiduciary capacity, by the corporation or by
another corporation in which the corporation owns shares entitled to cast
a majority of all the votes entitled to be cast by all shares outstanding
and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class of
stock entitled to vote at a meeting of shareholders shall be entitled to
one vote on each matter submitted to a vote. In all elections for
directors every shareholder shall have the right to vote the shares owned
of record by him for as many persons as there are directors to be elected,
but shall not be entitled to exercise any right of cumulative voting. A
shareholder may vote the shares owned of record by him either in person or
by proxy executed in writing by the shareholder or by his authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from
its date unless otherwise provided in the proxy. At all meetings of
shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. A majority of the votes cast at a meeting of shareholders, duly
called and at which a quorum is present, shall be sufficient to take or
authorize any action which may properly come before the meeting, unless a
greater number is required by statute or by the charter.
Section 8. Informal Action. Any action required or
permitted to be taken at any meeting of shareholders may be taken without
a meeting, if a consent in writing, setting forth such action, is signed
by all the shareholders entitled to vote on the subject matter thereof and
such consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the
corporation shall be four (4). By vote of a majority of the entire board
of directors, the number of directors fixed by the charter or by these
bylaws may be increased or decreased from time to time to not more than
fifteen nor less than three, but the tenure of office of a director shall
not be affected by any decrease in the number of directors so made by the
board.
Section 2. Election and Qualification. Until the first
annual meeting of shareholders and until successors are duly elected and
qualify, the board of directors shall consist of the persons named as such
in the charter. At the first annual meeting of shareholders and at each
annual meeting thereafter, the shareholders shall elect directors to hold
office until the next annual meeting or until their successors are elected
and qualify. A director need not be a shareholder of the corporation, but
must be eligible to serve as a director of a registered investment company
under the Investment Company Act of 1940.
Section 3. Vacancies. Any vacancy on the board of directors
occurring between shareholders' meetings called for the purpose of
electing directors may be filled, if immediately after filling any such
vacancy at least two-thirds of the directors then holding office shall
have been elected to such office at an annual or special meeting of
shareholders, in the following manner: (i) for a vacancy occurring other
than by reason of an increase in directors, by a majority of the remaining
members of the board, although such majority is less than a quorum; and
(ii) for a vacancy occurring by reason of an increase in the number of
directors, by action of a majority of the entire board. A director
elected by the board to fill a vacancy shall be elected to hold office
until the next annual meeting of shareholders or until his successor is
elected and qualifies. If by reason of the death, disqualification or
bona fide resignation of any director or directors, more than sixty
percent (60%) of the members of the board of directors are interested
persons of the corporation, as defined in the Investment Company Act of
1940, such vacancy shall be filled within thirty (30) days if it may be
filled by the board, or within sixty (60) days if a vote of shareholders
is required to fill such vacancy; provided that such vacancy may be filled
within such longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, upon its own motion or by order upon
application. In the event that at any time less than a majority of the
directors were elected by the shareholders, the board or proper officer
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of the shareholders for the purpose of
electing directors to fill any existing vacancies in the board, unless the
Securities and Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the
corporation shall be managed under the direction of the board of
directors, which may exercise all of the powers of the corporation, except
such as are by law or by the charter or by these bylaws conferred upon or
reserved to the shareholders.
Section 5. Removal.
(a) At any meeting of shareholders, duly called and at which a
quorum is present, the shareholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed
directors.
(b) Notwithstanding any other provisions of these bylaws, the
secretary of the corporation shall promptly call a special meeting of
shareholders for the purpose of voting upon the question of removal of any
director upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting.
(c) Whenever ten or more shareholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's secretary in writing,
stating that they wish to communicate with other shareholders with a view
to obtaining signatures to a request for a meeting pursuant to
subsection (b) above and accompanied by a form of communication and
request which they wish to transmit, the secretary shall within five (5)
business days after such application either: (1) afford to such
applicants access to a list of the names and addresses of all shareholders
as recorded on the books of the corporation; or (2) inform such applicants
as to the approximate number of shareholders of record and the approximate
cost of mailing to them the proposed communication and form of request.
(d) If the secretary elects to follow the course specified in
clause (2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five (5) business days
after such tender the secretary shall mail to such applicants and file
with the Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority
of the board of directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
(e) After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
Section 6. Place of Meetings. Meetings of the board of
directors, regular or special, may be held at any place in or out of the
State of Texas as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first
meeting of each newly elected board of directors shall be held without
notice immediately after and at the same general place as the annual
meeting of the shareholders, for the purpose of organizing the board,
electing officers and transacting any other business that may properly
come before the meeting.
Section 8. Regular Meetings. Regular meetings of the board
of directors may be held without notice at such time and place as shall
from time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the board
of directors may be called at any time either by the board, the president,
a vice president or a majority of the directors in writing with or without
a meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all
meetings of the board of directors a majority of the entire board shall
constitute a quorum for the transaction of business, and the action of a
majority of the directors present at any meetings at which a quorum is
present shall be the action of the board of directors unless the
concurrence of a greater proportion is required for such action by
statute, the articles of incorporation or these bylaws. If at any meeting
a quorum is not present, a majority of the directors present may adjourn
the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present. Members of the board of directors
or a committee of the board may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time;
provided, however, that a director may not participate in a meeting by
means of a conference telephone or similar communications equipment if the
purpose of the meeting is to approve the corporation's investment advisory
agreement and/or to approve the selection of the corporation's auditors,
or if participation in such a manner would otherwise violate the
Investment Company Act of 1940 or other applicable laws. Except as set
forth in the preceding sentence, participation in a meeting by these means
constitutes presence in person at the meeting.
Section 11. Executive and Other Committees. The board of
directors may appoint from among its members an executive and other
committees composed of one (1) or more directors. The board may delegate
to such committees in the intervals between meetings of the board any of
the powers of the board to manage the business and affairs of the
corporation, except that no such committee shall have the authority of the
board of directors in reference to amending the Articles of Incorporation,
approving a plan of merger or consolidation, recommending to the
shareholders the sale, lease or exchange of all or substantially all of
the property and assets of the corporation otherwise than in the usual and
regular course of its business, recommending to the shareholders a
voluntary dissolution of the corporation or a revocation thereof,
amending, altering or repealing the Bylaws of the corporation or adopting
new Bylaws for the corporation, filling vacancies in the board of
directors or any such committee, filling any directorship to be filled by
reason of an increase in the number of directors, electing or removing
officers or members of any such committee, fixing the compensation of any
member of such committee, altering or repealing any resolution of the
board of directors which by its terms provides that it shall not be so
amendable or repealable, declaring dividends, authorizing the issuance of
shares of the corporation or taking any action required by the Investment
Company Act of 1940 to be taken by the independent directors of the
corporation or by the full board of directors.
Section 12. Informal Action. Except as set forth in the
following sentence, any action required or permitted to be taken at any
meeting of the board of directors or a committee of the board may be taken
without a meeting, if a written consent to such action is signed by all
members of the board or the committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the board or
committee. Notwithstanding the preceding sentence, no action may be taken
by the board of directors pursuant to a written consent with respect to
the approval of the corporation's investment advisory agreement, the
approval of the selection of the corporation's auditors, or any action
required by the Investment Company Act of 1940 or other applicable law to
be taken at a meeting of the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting
of each newly elected board of directors there shall be elected a
president, one or more vice presidents, a secretary and a treasurer. The
board may also elect one or more assistant secretaries and assistant
treasurers. No officer need be a director. Any two or more offices may
be held by the same person but no officer shall execute, acknowledge or
verify any instrument in more than one capacity, if such instrument is
required by law, charter or these bylaws to be executed, acknowledged or
verified by two or more officers. Each officer must be eligible to serve
as an officer of a registered investment company under the Investment
Company Act of 1940. Nothing herein shall preclude the employment of
other employees or agents by the corporation from time to time without
action by the board.
Section 2. Term, Removal and Vacancies. The officers shall
be elected to serve until the next first meeting of a newly elected board
of directors and until their successors are elected and qualify. Any
officer may be removed by the board, with or without cause, whenever in
its judgment the best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the contractual rights, if
any, of the person so removed. A vacancy in any office shall be filled by
the board for the unexpired term.
Section 3. Bonding. Each officer and employee of the
corporation who singly or jointly with others has access to securities or
funds of the corporation, either directly or through authority to draw
upon such funds, or to direct generally the disposition of such securities
shall be bonded against larceny and embezzlement by a reputable fidelity
insurance company authorized to do business in Texas. Each such bond,
which may be in the form of an individual bond, a schedule or blanket bond
covering the corporation's officers and employees and the officers and
employees of the investment adviser to the corporation and other
corporations to which said investment adviser also acts as investment
adviser, shall be in such form and for such amount (determined at least
annually) as the board of directors shall determine in compliance with the
requirements of Section 17(g) of the Investment Company Act of 1940, as
amended from time to time, and the rules, regulations or orders of the
Securities and Exchange Commission thereunder.
Section 4. President. The president shall be the principal
executive officer of the corporation. He shall preside at all meetings of
the shareholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there
may be more than one, the vice presidents, in the order determined by the
board of directors, shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president, and shall
have such other duties and powers as the board may from time to time
prescribe or the president delegate.
Section 6. Secretary and Assistant Secretaries. The
secretary shall give notice of, attend and record the minutes of meetings
of shareholders and directors, keep the corporate seal and, when
authorized by the board, affix the same to any instrument requiring it,
attesting to the same by his signature, and shall have such further duties
and powers as are incident to his office or as the board may from time to
time prescribe. The assistant secretary, if any, or, if there be more
than one, the assistant secretaries in the order determined by the board,
shall in the absence or disability of the secretary, perform the duties
and exercise the powers of the secretary, and shall have such other duties
and powers as the board may from time to time prescribe or the secretary
delegate.
Section 7. Treasurer and Assistant Treasurers. The
treasurer shall be the principal financial and accounting officer of the
corporation. He shall be responsible for the custody and supervision of
the corporation's books of account and subsidiary accounting records, and
shall have such further duties and powers as are incident to his office or
as the board of directors may from time to time prescribe. The assistant
treasurer, if any, or, if there be more than one, the assistant treasurers
in the order determined by the board, shall in the absence or disability
of the treasurer, perform all duties and exercise the powers of the
treasurer, and shall have such other duties and powers as the board may
from time to time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive
officers as such shall not receive any salary for their services or
reimbursement for expenses from the corporation; provided that the
corporation may pay fees in such amounts and at such times as the board of
directors shall determine to directors who are not interested persons of
the corporation for attendance at meetings of the board of directors.
Clerical employees shall receive compensation for their services from the
corporation in such amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales.
No affiliated person of the corporation, as defined in the Investment
Company Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Act, or the rules, regulations or orders
of the Securities and Exchange Commission thereunder, (i) acting as agent,
accept from any source any compensation for the purchase or sale of any
property or securities to or for the corporation or any controlled company
of the corporation, as defined in such Act; or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction. The
investment adviser to the corporation shall not profit directly or
indirectly from sales of securities to or from the corporation.
Section 3. Transactions with Affiliated Person. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person shall knowingly (i) sell
any security or other property to the corporation or to any company
controlled by the corporation, as defined in the Act, except shares of
stock of the corporation or securities of which such person is the issuer
and which are part of a general offering to the holders of a class of its
securities; (ii) purchase from the corporation or any such controlled
company any security or property except shares of stock of the corporation
or securities of which such person is the issuer; (iii) borrow money or
other property from the corporation or any such controlled company; or
(iv) acting as a principal effect any transaction in which the corporation
or controlled company is a joint or joint and several participant with
such person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation may employ
one or more investment advisers and sub-advisers, the employment of which
shall be pursuant to written agreements in accordance with Section 15 of
the Investment Company Act of 1940, as amended from time to time.
Section 5. Ownership of Stock by Officers and Directors. No
officer or director shall take a long or short position in the stock of
the corporation; provided, however, that officers or directors may
purchase stock of the corporation for investment purposes at the same
price as that available to the public at the time of purchase, or in
connection with the original capitalization of the corporation.
Section 6. Portfolio Transactions. The corporation shall
not purchase, acquire or retain:
(a) any security of an issuer, any of whose officers or
directors is an officer, director or investment adviser of the
corporation or an affiliated person, as defined in the
Investment Company Act of 1940, of such investment adviser;
(b) any security issued by or any interest in the business
of an investment company, insurance company, broker, dealer,
underwriter or investment adviser, except as permitted under
Sections 12(d), (e) and (g) of the Investment Company Act of
1940, as amended from time to time, or the rules, regulations or
orders of the Securities and Exchange Commission thereunder;
(c) voting securities of another issuer, the acquisition
or retention of which would result in circular or cross
ownership, as defined in Section 20(c) of the Investment Company
Act of 1940; or
(d) during the existence of any underwriting or selling
syndicate, any security, except stock of the corporation, a
principal underwriter of which is an officer, director,
distributor, administrator, investment adviser or employee of
the corporation, or is a person (other than a company of the
character described in Section 12(d)(3)(A) and (B) of the
Investment Company Act of 1940, as amended from time to time) of
which any such officer, director, distributor, administrator,
investment adviser or employee is an affiliated person, as
defined in the Investment Company Act of 1940, unless in
acquiring such security the corporation is itself acting as a
principal underwriter for the issue, except as the Securities
and Exchange Commission, by rules, regulations or order shall
permit.
ARTICLE V
UNCERTIFICATED SHARES AND TRANSFER BOOKS
Section 1. Uncertificated Shares. In accordance with
Article 2.19 of the Texas Business Corporation Act, any and all shares of
capital stock of the corporation now or hereafter authorized for issuance
shall be uncertificated shares.
Section 2. Stock Ledger. The corporation shall maintain at
its office in Dallas, Texas, or at the office of its principal transfer
agent, if any, an original or duplicate stock ledger containing the names
and addresses of all shareholders and the number of shares held by each
shareholder.
Section 3. Registered Shareholders. The corporation shall
be entitled to recognize the exclusive right of a person registered on its
books as such, as the owner of shares for all purposes, and shall not be
bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws
of the State of Texas.
Section 4. Transfer Agent and Registrar. The corporation
may maintain one or more transfer offices or agencies, each in charge of a
transfer agent designated by the board of directors, where the shares of
stock of the corporation shall be transferable. The corporation may also
maintain one or more registry offices, each in charge of a registrar
designated by the board, where such shares of stock shall be registered.
Section 5. Fixing of Record Dates and Closing of Transfer
Books. The board of directors may fix, in advance, a date as the record
date for the purpose of determining shareholders entitled to notice of, or
to vote at, any meeting of shareholders, or shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in
order to make a determination of shareholders for any other proper
purpose. Such date, in any case, shall be not more than sixty (60) days,
and in case of a meeting of shareholders not less than ten (10) days,
prior to the date on which the particular action requiring such
determination of shareholders is to be taken. In lieu of fixing a record
date, the board may provide that the stock transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If
the stock transfer books are closed or a record date is fixed for the
purpose of determine shareholders entitled to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days
immediately preceding such action.
ARTICLE VI
ACCOUNTS, REPORTS AND CUSTODIAN
Section 1. Inspection of Books. The board of directors
shall determine from time to time whether, and, if allowed, when and under
what conditions and regulations the accounts and books of the corporation
(except such as may by statute be specifically open to inspection) or any
of them, shall be open to the inspection of the shareholders and the
shareholders' rights in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer
shall, in the performance of his duties, be fully protected in relying in
good faith on the books of account or reports made to the corporation by
any of its officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records
and Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the shareholders and filed within twenty (20) days thereafter at the
principal office of the corporation in the State of Texas. The proper
officers of the corporation shall also prepare, maintain and preserve or
cause to be prepared, maintained and preserved the accounts, books and
other documents required by Article 2.44 of the Texas Business Corporation
Act and Section 31 of the Investment Company Act of 1940 and shall prepare
and file or cause to be prepared and filed the reports required by
Section 30 of the Investment Company Act of 1940. No financial statement
shall be filed with the Securities and Exchange Commission unless the
officers or employees who prepared or participated in the preparation of
such financial statement have been specifically designated for such
purpose by the board of directors.
Section 4. Auditors. No independent public accountant all
be retained or employed by the corporation to examine, certify or report
on its financial statements for any fiscal year unless such selection:
(i) shall have been approved by a majority of the entire board of
directors within thirty (30) days before or after the beginning of such
fiscal year or before the annual meeting of shareholders for such fiscal
year; (ii) shall have been ratified at the next succeeding annual meeting
of shareholders; provided that any vacancy occurring between annual
meetings due to the death or resignation of such accountant may be filled
by the board of directors; and (iii) shall otherwise meet the requirements
of Section 32 of the Investment Company Act of 1940.
Section 5. Custodian. All securities, evidences of
indebtedness and funds of the corporation shall be entrusted to the
custody of one or more custodians or depositaries, each of which shall be
either an eligible foreign custodian as defined in Rule 17f-5 under the
Investment Company Act of 1940 or a bank or trust company which is a
member of the Federal Reserve System having capital, surplus and undivided
profits of not less than Two Million Dollars ($2,000,000), as set forth in
its most recently published report of condition, and the qualifications
prescribed by and pursuant to Sections 17(f) and 26 of the Investment
Company Act of 1940 and which shall be employed as agent or agents of the
corporation by the board of directors.
Section 6. Agreement with Custodian. Each such custodian
shall be employed pursuant to a written agreement which shall conform to
the requirements prescribed by any applicable rules and regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940, and, except as otherwise provided by such rules and regulations,
shall provide substantially as follows:
(a) The custodian shall keep (i) all cash on deposit with
such other banks in the name of the custodian as the corporation
shall direct; and (ii) all securities in a separate account, not
commingled with other assets, in the name of the custodian, its
nominee or the corporation in care of the custodian, or in the
custody of the custodian or agents in street certificate or
bearer form. The custodian may utilize a central securities
clearing agency or securities depository in accordance with the
provisions of the Investment Company Act of 1940 and the rules
and regulations of the Securities and Exchange Commission
promulgated thereunder. The custodian shall receive and collect
the income or funds due with respect to such securities.
(b) Securities and cash held by the custodian may be
withdrawn only upon written order signed on behalf of the
corporation by two employees, at least one of whom shall be an
officer included within a list of five officers and employees
certified for such purpose by resolution of the board of
directors.
(c) Securities held by the custodian may be withdrawn only
for the following purposes:
(i) The sale of such securities for the account
of the corporation with delivery and payment therefore
in accordance with procedures and customs used by the
custodian in the sale of securities for the trust
estates for which it is trustee;
(ii) The delivery of securities in exchange for
or conversion into other securities alone, cash or
cash and other securities pursuant to the provisions
of such securities or a plan of merger, consolidation,
reorganization, recapitalization or readjustment of
the securities of the issuer thereof;
(iii) The surrender of warrants, rights or
similar securities in the exercise of such warrants,
rights or similar securities or the surrender of
interim receipts or temporary securities for
definitive securities;
(iv) The delivery of securities to a lender as
collateral on borrowing effected by the corporation or
to a broker selling any such securities in accordance
with "street delivery" customs;
(v) The delivery of securities as a redemption
in kind, or distribution, of stock of the corporation
or in connection with a retirement of such securities;
(vi) The delivery of securities for other proper
corporate purposes;
provided, that in each case specified in clauses (i), (iii) and
(iv) the payment, collateral or securities to be received are
delivered to the custodian simultaneously or as promptly
thereafter as possible.
(d) Cash held by the custodian may be withdrawn only for
the following purposes:
(i) The purchase of securities to be retained by
the custodian with delivery and payment therefor in
accordance with procedures and customs used by the
custodian in the purchase of securities for the trust
estates for which it is trustee;
(ii) The redemption or purchase of stock in the
corporation;
(iii) The payment of interest, dividends or
other distributions on stock of the corporation;
(iv) The payment of taxes, interest, the
investment adviser's fees incurred in connection with
the operation of the corporation, and operating
expenses (including, without limitation thereto, fees
for legal, accounting and auditing services);
(v) The payment in connection with the
conversion, exchange or surrender of securities owned
by the corporation;
(vi) The deposit of funds in the name of the
custodian in or with any other bank or trust company
designated by the corporation;
(vii) Other proper corporate purposes as
certified by resolution of the board of directors.
Section 7. Termination of Custodian Agreement. Any
employment agreement with a custodian shall be terminable on not more than
sixty (60) days' notice in writing by the board of directors or the
custodian and upon any such termination the custodian shall turn over only
to the succeeding custodian designated by the board of directors all
funds, securities and property and documents of the corporation in its
possession.
Section 8. Checks and Requisitions. Except as otherwise
authorized by the board of directors, all checks and drafts for the
payment of money shall be signed in the name of the corporation by a
custodian, and all requisitions or orders for the payment of money by a
custodian or for the issue of checks and drafts therefore, all promissory
notes, all assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The principal office of the corporation
in the State of Texas shall be in the City of Dallas. The corporation may
also have offices at such other places within and without the State of
Texas as the board of directors may from time to time determine. Except
as otherwise required by statute, the books and records of the corporation
may be kept outside the State of Texas.
Section 2. Seal. The corporation shall have no corporate
seal unless otherwise determined by the board of directors.
Section 3. Fiscal Year. The fiscal year of the corporation
shall be fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice
of the time, place or purpose of any meeting of shareholders or directors
is required to be given under the statute, the charter or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, either before or
after the holding thereof, or actual attendance at the meeting of
shareholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom communication is
made unlawful by any law of the United States or any rule, regulation,
proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the
board of directors, the president shall have full power and authority, in
the name and on behalf of the corporation (i) to attend, act and vote at
any meeting of shareholders of any company in which the corporation may
own shares of stock of record, beneficially (as the proxy or
attorney-in-fact of the record holder) or of record and beneficially; and
(ii) to give voting directions to the record shareholder of any such stock
beneficially owned. At any such meeting, he shall possess and may
exercise any and all rights and powers incident to the ownership of such
shares which, as the holder or beneficial owner and proxy of the holder
thereof, the corporation might possess and exercise if personally present,
and may delegate such power and authority to any officer, agent or
employee of the corporation.
Section 6. Dividends. Dividends upon the stock of the
corporation, subject to the provisions of the charter, if any, may be
declared by the board of directors in any lawful manner. The source of
each dividend payment shall be disclosed to the shareholders receiving
such dividend, to the extent required by the laws of the State of Texas
and by Section 19 of the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission thereunder. The
total of each dividend payment made to shareholders in respect of any one
fiscal year shall be approximately equal to the sum of (a) the net income
for such fiscal year exclusive of profits or losses realized upon the sale
of securities or other property; and (b) the excess of profits over losses
on the sales of securities or other property for such fiscal year;
provided the above provision shall be interpreted to give the board of
directors the power in its discretion to distribute for any fiscal year as
ordinary dividends and as capital gains distributions, respectively,
amounts sufficient to enable the corporation to avoid or reduce its tax
liability.
Section 7. Indemnification.
(a) The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in (i) good faith; and (ii) reasonably
believed (a) in the case of conduct in his official capacity as a
corporate representative, that his conduct was in the corporation's best
interests; or (b) in all other cases, that his conduct was at least not
opposed to the corporation's best interests; provided further, that with
respect to any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful. Notwithstanding any of the foregoing, the
corporation shall not indemnify corporate representatives in relation to
matters as to which any such corporate representative shall be adjudged in
such action, suit or proceeding to be liable for gross negligence, willful
misfeasance, bad faith, reckless disregard of the duties and obligations
involved in the conduct of his office, or when indemnification is
otherwise not permitted by the Texas Business Corporation Act.
(b) In the absence of an adjudication which expressly absolves
the corporate representative, or in the event of a settlement, each
corporate representative shall be indemnified hereunder only if there has
been a reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding nor interested persons of the corporation as
defined in Section 2(a)(19) of the Investment Company Act of 1940; (ii) if
such a quorum cannot be obtained, by a majority vote of a committee of the
board, designated to act in the matter by a majority vote of all
directors, consisting solely of two or more directors who at the time of
the vote are neither parties to the action, suit or proceeding nor
interested persons of the corporation as defined in Section 2(a)(19) of
the Investment Company Act of 1940; (iii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) or (ii) of this paragraph, or, if the requisite quorum of
the full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate; or (iv) by
the shareholders in a vote that excludes the shares held by directors who
are parties to the action, or suit or proceeding.
(c) The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent, shall create a rebuttable presumption that the person
was guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
(d) Expenses, including attorneys' fees, incurred in the
preparation of and/or presentation of the defense of a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized in
the manner provided in Article 2.02-1(K) of the Texas Business Corporation
Act and in accordance with the requirements of the Securities and Exchange
Commission upon receipt of: (i) an undertaking by or on behalf of the
corporate representative to repay such amount unless it shall ultimately
be determined that he or she is entitled to be indemnified by the
corporation as authorized in this bylaw; and (ii) a written affirmation by
the corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
(e) The indemnification provided by this bylaw shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under these bylaws, any agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person subject to the limitations
imposed from time to time by the Investment Company Act of 1940, as
amended.
(f) This corporation shall have power to purchase and maintain
insurance or another arrangement on behalf of any corporate representative
against any liability asserted against him or her and incurred by him or
her in such capacity or arising out of his or her status as such, whether
or not the corporation would have the power to indemnify him or her
against such liability under this bylaw, provided that no insurance or
other arrangement may be purchased or maintained to protect any corporate
representative against liability for gross negligence, willful
misfeasance, bad faith or reckless disregard of the duties and obligations
involved in the conduct of his or her office.
(g) "Corporate Representative" means an individual who is or
was a director, officer, agent or employee of the corporation or who
serves or served another corporation, partnership, joint venture, trust or
other enterprise in one of these capacities at the request of the
corporation and who, by reason of his or her position, is, was, or is
threatened to be made, a party to a proceeding described herein.
Section 8. Amendments.
(a) These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the shareholders by affirmative vote of not less
than a majority of the shares present or represented at any annual or
special meeting of the shareholders at which a quorum is in attendance.
(b) These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the board of directors by affirmative vote of
a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the shareholders shall be
amended or repealed by the board of directors if the bylaw so adopted so
provided.
(c) Any action taken or authorized by the shareholders or by
the board of directors, which would be inconsistent with the bylaws then
in effect but is taken or authorized by affirmative vote of not less than
the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be
given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Shareholders. The books of account of
the corporation shall be examined by an independent firm of public
accountants at the close of each annual fiscal period of the corporation
and at such other times, if any, as may be directed by the board of
directors of the corporation. A report to the shareholders based upon
each such examination shall be mailed to each shareholder of the
corporation of record on such date with respect to each report as may be
determined by the board of directors at his address as the same appears on
the books of the corporation. Each such report shall include the
financial information required to be transmitted to shareholders by rules
or regulations of the Securities and Exchange Commission under the
Investment Company Act of 1940 and shall be in such form as the board of
directors shall determine pursuant to rules and regulations of the
Securities and Exchange Commission.
Section 10. Information to Accompany Dividends. At the time
of the payment by the corporation of any dividend to its shareholders,
each shareholder to whom such dividend is paid shall be notified of the
account or accounts from which it is paid and the amount thereof paid from
each such account.
ARTICLE VIII
SALES, REDEMPTION AND NET ASSET VALUE OF SHARES
Section 1. Sale of Shares. Shares of any series of Common
Stock of the corporation shall be sold by it for the net asset value per
share of such series of Common Stock outstanding at the time as of which
the computation of said net asset value shall be made as hereinafter
provided in these bylaws.
Section 2. Periodic Investment and Dividend Reinvestment
Plans. The corporation, acting by and through the board of directors,
shall have the right to adopt and to offer to the shareholders and to the
public a periodic investment plan and an automatic reinvestment of
dividend plan subject to the limitations and restrictions imposed thereon
and as set forth in the Investment Company Act of 1940 and any rule or
regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of
shares of stock of the corporation issued in whole or in part in exchange
for securities, there may, at the discretion of the board of directors of
the corporation, be included in the value of said securities, for the
purpose of determining the number of shares of stock of the corporation
issuable in exchange therefor, the amount, if any, of brokerage
commissions (not exceeding an amount equal to the rates payable in
connection with the purchase of comparable securities on the New York
Stock Exchange) or other similar costs of acquisition of such securities
paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each series
of Common Stock of the corporation now or hereafter issued shall be
subject to redemption and, subject to the suspension of such right of
redemption as hereinafter provided in these bylaws, each holder of shares
of any series of Common Stock of the corporation, upon request to the
corporation and after complying with any and all redemption procedures
established by the board of directors, shall be entitled to require the
corporation to redeem all or any part of the shares of such series of
Common Stock standing in the name of such holder on the books of the
corporation at the net asset value of such shares determined as
hereinafter provided in these bylaws. To the extent required by the board
of directors, there shall be submitted with any such request a stock power
with an appropriate signature guarantee. Payment of the net asset value
of each share of each series of Common Stock of the corporation
surrendered to it for redemption shall be made by the corporation within
seven (7) days after surrender of such stock to the corporation for such
purpose, or within such other reasonable period as may be determined from
time to time by the board of directors. Such payment may be in the form
of assets of the corporation other than cash with such assets being valued
at the same amount as was used in calculating the net asset value of the
shares so redeemed; provided that holders of Common Stock who in any
ninety-day period redeem the lesser of $250,000 or 1% of the corporation's
net assets at the beginning of the ninety-day period will be paid the
redemption price in cash.
Section 5. Suspension of Right of Redemption. The board of
directors of the corporation may suspend the right of the holders of any
series of Common Stock of the corporation to require the corporation to
redeem shares of such series of Common Stock:
(a) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closing; or (b) during which trading on the New York Stock
Exchange is restricted;
(b) for any period during which an emergency, as defined
by rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (a) disposal by
the corporation of securities owned by it is not reasonably
practicable; or (b) it is not reasonably practicable for the
corporation fairly to determine the value of its net assets; or
(c) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of
these bylaws, the following rules shall apply:
(a) The net asset value of each share of each series of
Common Stock of the corporation shall be determined at such time
or times as may be disclosed in the then currently effective
Prospectus relating to such series of Common Stock of this
corporation. The board of directors may also, from time to time
by resolution, designate a time or times intermediate of the
opening and closing of trading on the New York Stock Exchange on
each day that said Exchange is open for trading as of which the
net asset value of each share of each series of Common Stock of
the corporation shall be determined or estimated.
Any determination or estimation of net asset value as
provided in this subparagraph A shall be effective at the time
as of which such determination or estimation is made.
The net asset value of each share of Common Stock of
the corporation for purposes of the issue of such Common Stock
shall be the net asset value which becomes effective as provided
in Subparagraph A above, next succeeding receipt of the
subscription to such share of Common Stock. The net asset value
of each share of Common Stock of the corporation tendered for
redemption shall be the net asset value which becomes effective
as provided in Subparagraph A above, next succeeding the tender
of such share of Common Stock for redemption.
(b) The net asset value of each share of the Common Stock
of the corporation, as of the close of business on any day,
shall be the quotient obtained by dividing the value at such
close of the net assets belonging to such series (meaning the
assets belonging to such series and any other assets allocated
to such series less the liabilities belonging to such series and
any other liabilities allocated to such series excluding capital
and surplus) of the corporation by the total number of shares of
such series outstanding at such close, all determined and
computed as follows:
(i) The assets of the corporation shall be
deemed to include (A) all cash on hand, on deposit, or
on call, (B) all bills and notes and accounts
receivable, (C) all shares of stock and subscription
rights and other securities owned or contracted for by
the corporation, other than its own common stock, (D)
all stock and cash dividends and cash distributions,
to be received by the corporation, and not yet
received by it but declared to shareholders of record
on a date on or before the date as of which the net
asset value is being determined, (E) all interest
accrued on any interest-bearing securities owned by
the corporation, and (F) all other property of every
kind and nature including prepaid expenses; the value
of such assets to be determined in accordance with the
corporation's registration statement filed with the
Securities and Exchange Comission.
(ii) The liabilities of the corporation shall be
deemed to include (A) all bills and notes and accounts
payable, (B) all administration expenses payable
and/or accrued (including investment advisory fees),
(C) all contractual obligations for the payment of
money or property including the amount of any unpaid
dividend declared upon the corporation's stock and
payable to shareholders of record on or before the day
as of which the value of the corporation's stock is
being determined, (D) all reserves, if any, authorized
or approved by the board of directors for taxes,
including reserves for taxes at current rates based on
any unrealized appreciation in the value of the assets
of the corporation, and (E) all other liabilities of
the corporation of whatever kind and nature except
liabilities represented by outstanding capital stock
and surplus of the corporation.
(iii) For the purposes hereof: (a) shares of
each series of Common Stock subscribed for shall be
deemed to be outstanding as of the time of acceptance
of any subscription and the entry thereof on the books
of the corporation and the net price thereof shall be
deemed to be an asset belonging to such series; and
(b) shares of each series of Common Stock surrendered
for redemption by the corporation shall be deemed to
be outstanding until the time as of which the net
asset value for purposes of such redemption is
determined or estimated.
(c) The net asset value of each share of each series of
Common Stock of the corporation, as of any time other than the
close of business on any day, may be determined by applying to
the net asset value as of the close of business on the preceding
business day, computed as provided in Paragraph C of this
Section of these bylaws, such adjustments as are authorized by
or pursuant to the direction of the board of directors and
designed reasonably to reflect any material changes in the
market value of securities and other assets held and any other
material changes in the assets or liabilities of the corporation
and in the number of its outstanding shares which shall have
taken place since the close of business on such preceding
business day.
(d) In addition to the foregoing, the board of directors
is empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset value of
each share of each series of Common Stock of the corporation.
EXHIBIT 5.2
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of _________, 1995, between
CONCORDE FUNDS, INC., a Texas corporation (the "Corporation") and CONCORDE
FINANCIAL CORPORATION, a Texas corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, the Corporation is registered with the Securities and
Exchange Commission as an open-end management investment company under the
Investment Company Act of 1940 (the "Act"). The Corporation's shares, par
value $1.00 per share, are initially divided into two separate investment
portfolios or funds ("Funds"), each with different investment objectives
and policies. Each share of a Fund represents an undivided interest in
the assets, subject to the liabilities, allocated to that portfolio; and
WHEREAS, the Corporation desires to retain the Advisor, which is
an investment advisor registered under the Investment Advisers Act of
1940, as the investment advisor for the Concorde Income Fund (the "Fund").
NOW, THEREFORE, the Corporation and the Advisor do mutually
promise and agree as follows:
1. Employment. The Corporation hereby employs the Advisor to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Advisor hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Advisor. The Advisor shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the board of directors of the Fund may determine, direct the purchase
and sale of investment securities in the day to day management of the
Fund. The Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation or
the Fund in any way or otherwise be deemed an agent of the Fund. However,
one or more shareholders, officers, directors or employees of the Advisor
may serve as directors and/or officers of the Corporation, but without
compensation or reimbursement of expenses for such services from the
Corporation. Nothing herein contained shall be deemed to require the
Corporation to take any action contrary to its Articles of Incorporation
or any applicable statute or regulation, or to relieve or deprive the
board of directors of the Corporation of its responsibility for and
control of the affairs of the Fund.
3. Expenses. The Advisor, at its own expense and without
reimbursement from the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund and maintaining its organization. The Advisor
shall pay the salaries and fees of all officers and directors of the
Corporation (except the fees paid to those directors who are not
interested persons of the Fund, as defined in the Act, and who are not
officers or employees of the Corporation). The Advisor shall also bear
all sales and promotional expenses of the Fund, except for expenses
incurred in complying with laws regulating the issue or sale of
securities. The Advisor shall not be required to pay any other expenses
of the Fund except as provided herein if the total expenses borne by the
Fund, including the Advisor's fees, but excluding all federal, state and
local taxes, interest, brokerage commissions and extraordinary items, in
any year exceed that percentage of the average net assets of the Fund for
such year, as determined by valuations made as of the close of each
business day, which is the most restrictive percentage provided by the
state laws of the various states in which the Fund's common stock is
qualified for sale. If the states in which the Fund's common stock is
qualified for sale impose no such restrictions, the Advisor shall not be
obligated to pay any expenses of the Fund except those specifically
referred to herein. The expenses of the Fund's operations borne by the
Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not interested persons of the Fund, as
defined in the Act, the costs of preparing and printing its registration
statements required under the Securities Act of 1933 and the Act (and
amendments thereto), the expense of registering its shares with the
Securities and Exchange Commission and in the various states, the printing
and distribution cost of prospectuses mailed to existing shareholders, the
cost of stock certificates, director and officer liability insurance,
reports to shareholders, reports to government authorities and proxy
statements, interest charges, taxes, legal expenses, compensation of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Fund shall monitor its expense ratio on a monthly basis. If
the accrued amount of the expenses of the Fund exceeds the expense
limitation established herein, the Fund shall create an account receivable
from the Advisor in the amount of such excess. In such a situation the
monthly payment of the Advisor's fee will be reduced by the amount of such
excess, subject to adjustment month by month during the balance of the
Fund's fiscal year if accrued expenses thereafter fall below the expense
limitation.
4. Compensation of the Advisor. For the services to be
rendered by the Advisor hereunder, the Fund shall pay to the Advisor an
advisory fee, paid monthly, based on the average net assets of the Fund,
as determined by valuations made as of the close of each business day of
the month. The annual advisory fee shall be 0.7 of 1% of such net assets.
For any month in which this Agreement is not in effect for the entire
month, such fee shall be reduced proportionately on the basis of the
number of calendar days during which it is in effect and the fee computed
upon the average net assets of the business days during which it is so in
effect.
5. Ownership of Shares of the Fund. The Advisor shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase or in connection with the initial
capitalization of the Fund.
6. Exclusivity. The services of the Advisor to the Fund
hereunder are not to be deemed exclusive and the Advisor shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Advisor has permitted and is
permitting the Fund to use the name "Concorde," it is understood and
agreed that the Advisor reserves the right to use and to permit other
persons, firms or corporations, including investment companies, to use
such name, and that the Fund will not use such name if the Advisor ceases
to be the Fund's sole investment advisor. During the period that this
Agreement is in effect, the Advisor shall be the Fund's sole investment
advisor.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor, the Advisor shall not be subject to
liability to the Corporation or the Fund or to any shareholder of the Fund
for any act or omission in the course of, or connected with, rendering
services hereunder, or for any losses that may be sustained in the
purchase, holding or sale of any security.
8. Brokerage Commissions. The Advisor may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Advisor a commission for effecting a
security transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Advisor determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Corporation
in the manner required by the Act, and by the vote of the majority of the
outstanding voting securities of the Fund, as defined in the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the
Corporation or by a vote of the majority of the outstanding voting
securities of the Fund, as defined in the Act, upon giving sixty (60)
days' written notice to the Advisor. This Agreement may be terminated by
the Advisor at any time upon the giving of sixty (60) days' written notice
to the Fund. This Agreement shall terminate automatically in the event of
its assignment (as defined in Section 2(a)(4) of the Act). Subject to
prior termination as hereinbefore provided, this Agreement shall continue
in effect for two (2) years from the date hereof and indefinitely
thereafter, but only so long as the continuance after such two (2) year
period is specifically approved annually by (i) the board of directors of
the Corporation or by the vote of the majority of the outstanding voting
securities of the Fund, as defined in the Act; and (ii) the board of
directors of the Corporation in the manner required by the Act; provided
that any such approval may be made effective not more than sixty (60) days
thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
CONCORDE FINANCIAL
CORPORATION
By: ______________________________ By:______________________________
Secretary President
CONCORDE FUNDS, INC.
By: ______________________________ By:______________________________
Secretary President
