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. 11 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes.)
________________________________
CONCORDE FUNDS, 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 21, 1995.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[X] on December 4, 1995 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[_] on (date) pursuant to paragraph (a) of Rule 485
[_] 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 Corporation
Registrant
15. Control Persons and Directors and Officers of the Corporation;
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>
<PAGE> 1
LOGO
LOGO
DECEMBER 4, 1995
CONCORDE FUNDS, INC.
1500 THREE LINCOLN CENTRE
5430 LBJ FREEWAY
DALLAS, TEXAS 75240
TELEPHONE: (214) 387-8258
(FUND INFORMATION)
(800) 294-1699 (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 4, 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
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<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.................................................. 0.84% 0.80%
Total fund operating expenses................................... 1.74% 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..................................................................... $ 18 $ 15
3 years.................................................................... $ 55 $ 48
5 years.................................................................... $ 95 $ 82
10 years................................................................... $206 $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...... 12.28 $13.11 $11.13 $10.51 $ 8.35 $12.61 $11.29 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment
income............... 0.06 0.04 0.07 0.16 0.24 0.19 0.16 0.06
Net realized and
unrealized gains
(losses) on
investments.......... 1.47 0.55 2.05 0.71 2.12 (3.55) 1.32 1.23
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............. 1.53 0.59 2.12 0.87 2.36 (3.36) 1.48 1.29
------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.06) (0.03) (0.14) (0.25) (0.20) (0.38) (0.13) (0.00)
Distributions from net
realized gains......... (0.42) (1.39) (0.00) (0.00) (0.00) (0.52) (0.03) (0.00)
------ ------ ------ ------ ------ ------ ------ ------
Total from
distributions.......... (0.48) (1.42) (0.14) (0.25) (0.20) (0.90) (0.16) (0.00)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year............ $13.33 $12.28 $13.11 $11.13 $10.51 $ 8.35 $12.61 $11.29
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN.... 13.32% 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)............... $12,235 $12,003 $12,630 $12,532 $13,649 $11,735 $12,527 $7,416
Ratio of expenses to
average net assets....... 1.74% 1.69% 1.64% 1.68% 1.78% 1.75% 1.93% 2.13%
Ratio of net investment
income to average
net assets............... 0.52% 0.33% 0.54% 1.50% 2.47% 1.88% 1.32% 0.49%
Portfolio turnover rate.... 22.42% 75.43% 71.69% 51.69% 25.36% 48.83% 32.34% 13.40%
Shares outstanding at
end of year.............. 917,929 977,095 963,554 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
November 21, 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 series 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
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<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; 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) 294-1699. If you have general questions about the FUNDS or want more
information, you may call us at (214) 387-8258 or write to us at CONCORDE FUNDS,
INC., 1500 Three
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<PAGE> 13
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 controlled 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) 294-1699, 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) 294-1699 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 1-800-294-1699 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
15
<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 FUNDS
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.
[GRAPH]
<TABLE>
<CAPTION>
DEC. 87 SEP. 88 SEP.89 SEP. 90 SEP. 91 SEP. 92 SEP. 93 SEP. 94 SEP. 95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 10,761 12,173 16,190 14,693 19,274 21,405 24,183 25,075 32,520
Concorde Value 9,800 11,291 12,787 9,203 11,852 12,857 15,324 16,098 18,243
</TABLE>
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 VALUE FUND PERFORMANCE.
Low inflation, declining interest rates and improving corporate earnings
contributed to the VALUE FUND's improved performance for the fiscal year ended
September 30, 1995. The VALUE FUND's return for the fiscal year reflects losses
suffered in the last calendar quarter of 1994 from portfolio holdings impacted
by the Mexican government's decision to devalue the peso in December, 1994, and
sub-par results from a few small-cap manufacturing companies caused by rapidly
escalating raw material prices. Performance in the last calendar quarter of 1994
was offset by the VALUE FUND's strong performance in the remaining nine months
of the fiscal year. From January 1, 1995, through September 30, 1995, the VALUE
FUND's total return was 20.96%, led by excellent results from portfolio holdings
in healthcare, technology, transportation and industrial cyclical stocks.
The VALUE FUND's asset allocation as of September 30, 1995, was approximately
78% in common stocks and 22% in interest-bearing cash equivalents, with the
largest sector weightings in healthcare, finance and insurance, energy and
natural resources, and industrial cyclicals. The VALUE FUND benefited during the
fiscal year from outstanding total return performance in healthcare, which
gained 56.8% as a group, led by St. Jude Medical, Merck and Johnson & Johnson,
and technology, which gained 48.2% as a group, led by Teradyne and Intel. Other
holdings that performed well during the period include Pepsico, Philip Morris,
Potash Corporation of Saskatchewan, Nations Bank, and B.F. Goodrich. The VALUE
FUND also benefited from the merger and acquisition activity during the past
twelve months on Wall Street with Chicago and North Western, InterTrans, and
Puritan-Bennett all experiencing large gains via takeovers.
The gains mentioned above were offset by sub-par results in retail stocks,
down 11.7% as a group, and consumer durable stocks, down 28.5% as a group. On
the retail side, Tandycrafts and Dress Barn reported lower operating results
because of a continued soft retail economy. Consumer durable stocks, namely
Ameriwood, O'Sullivan, and Sun Coast, experienced difficulties with rapidly
escalating raw materials prices and operating in a soft consumer retail
environment.
19
<PAGE> 22
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> 23
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 FUNDS... 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 4, 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>
LOGO
APPLICATION AND PROSPECTUS
Dallas, Texas
December 4, 1995
<PAGE> 24
<TABLE>
<S> <C>
LOGO NEW ACCOUNT APPLICATION
PLEASE MAIL IN THE ENCLOSED RETURN ENVELOPE TO:
CONCORDE FUNDS, 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 1-800-294-1699 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.)
<TABLE>
<S> <C>
/ / By Check: I have enclosed a check made payable to Concorde Value Fund or
Concorde Income Fund for $_______________
/ / By Wire: $_______________ _______________
Amount Date of Wire
A. Call 1-800-294-1699 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 Value Fund,____________________________
(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 accounts 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>
STATEMENT OF ADDITIONAL INFORMATION December 4, 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 4, 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) 387-8258.
CONCORDE FUNDS, INC.
Table of Contents
Page No.
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . B-1
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . B-1
INVESTMENT POLICIES AND PRACTICES . . . . . . . . . . . . . . . . . . B-4
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . B-15
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . B-17
INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . B-18
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . B-19
REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . B-21
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . B-22
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . B-24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . B-24
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . B-25
DESCRIPTION OF BOND RATINGS . . . . . . . . . . . . . . . . . . . . . B-26
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 4, 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.
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 November 21,
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 4, 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. 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.
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 CORPORATION
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 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.
* 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.
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
Pension or Total
Retirement Compensation
Benefits Estimated from
Aggregate Accrued as Annual Corporation
Compensation Part of Benefits and Fund
from Fund Upon Complex Paid
Name of Person Corporation Expenses Retirement to Director
John R. Bradford, $0 $0 $0 $0
Ph.D.
Gilbert F. Hartwell 0 0 0 0
John H. Wilson 0 0 0 0
Gary B. Wood, Ph.D. 0 0 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 15, 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 127,958 14.0%
William E. Watson
MDPA Pension
#3 Bent Tree Court
Lufkin, TX 75901 108,609 11.8%
C. Wayne and Jane Nance
214 North Bay EB
Bullard, Texas 75757 88,005 9.6%
Ralph and Deborah Cunningham
#2 Saddlewood Estates
Houston, Texas 77024 52,026 5.6%
Officers and Director
as a group (5 persons) 36,363 3.9%
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 controlled 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 $104,664, $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 82.34%. An initial investment of $1,000 in the VALUE FUND at
December 4, 1987 would have been worth $1,823 as of September 30, 1995.
The average annual compounded rate of return of the VALUE FUND over this
period was 7.98%. The average annual compounded rate of return of the
VALUE FUND for the 5-year period ended September 30, 1995 was 14.65%. The
VALUE FUND's compounded rate of return for the 1-year period ended
September 30, 1995 was 13.32%.
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 $26,409 on
transactions involving securities having a total market value of
$8,166,815, $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 $24,216, $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.
FINANCIAL STATEMENTS
The following financial statements are incorporated by reference
to the Concorde Value Fund, Inc. Annual Report dated September 30, 1995
(File No. 811-5339), as filed with the Securities and Exchange Commission
on November 29, 1995:
Concorde Value Fund, Inc.
Financial Highlights
Portfolio of Investments in Securities
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
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.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statements (Financial Highlights included in Part A
and all incorporated by reference to the Concorde Value Fund,
Inc. Annual Report dated September 30, 1995 (File No. 811-5339)
(as filed with the Securities and Exchange Commission on
November 29, 1995) in Part B
Concorde Value Fund, 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.
(1.2) Statement of Creation of Series of Shares of Common Stock
of Concorde Value Fund, Inc.
(1.3) Articles of Amendment to Articles of Incorporation of
Concorde Value Funds, Inc.
(2) Registrant's Amended and Restated By-Laws; Exhibit 2 to
Amendment No. 11 to Registrant's Registration Statement on
Form N-1A ("Amendment No. 11") is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(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;
Exhibit 5.2 to Post-Effective Amendment No. 11 is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
(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.
(11) Consent of Independent Auditors.
(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.
(15) None.
(16) Schedule for computation of performance quotation.
(17) Financial Data Schedule.
(18) None.
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 October 30, 1995
Series A Common Stock (VALUE FUND) 79
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 B-16 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 certifies that it meets
all of the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and 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 17th day of November, 1995.
CONCORDE FUNDS, INC.
(Registrant)
By: /s/ Gary B. Wood, Ph.D.
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, Ph.D. Principal Executive, November 17, 1995
Gary B. Wood, Ph.D. Financial and Accounting
Officer and Director
/s/ Gilbert F. Hartwell Director November 17, 1995
Gilbert F. Hartwell
____________________________ Director November 17, 1995
John H. Wilson
/s/ John R. Bradford, Ph.D. Director November 17, 1995
John R. Bradford, Ph.D.
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1.1) Registrant's Articles of Incorporation
(1.2) Statement of Creation of Series of Common
Stock of Concorde Value Fund, Inc.
limitations and relative rights of
such series
(1.3) Articles of Amendment to Articles of
Incorporation of Concorde Value Fund,
Inc.
(2) Registrant's Amended and Restated By-Laws*
(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*
(15) None
(16) Schedule for computation of performance
quotation
(17) Financial Data Schedule
(18) None
_______________
* Incorporated by reference.
Exhibit 1.1
ARTICLES OF INCORPORATION
OF
CONCORDE VALUE FUND, INC.
The undersigned, a natural person of the age of eighteen years
or more, acting as sole incorporator of a corporation under the Texas
Business Corporation Act (the "Act"), hereby adopts the following Articles
of Incorporation for such corporation:
ARTICLE I
The name of the corporation (which is hereinafter called the
"Corporation") is CONCORDE VALUE FUND, INC.
ARTICLE II
The period of existence is perpetual.
ARTICLE III
The purpose or purposes for which the Corporation is organized
are:
A. To engage in the business of a diversified open-end
management investment company.
B. To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, assign,
negotiate, transfer, exchange or otherwise dispose of or turn to account
or realize upon, securities (which term "securities" shall for the
purposes of this Article III, without limitation of the generality
thereof, be deemed to include any stocks, shares, bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interest therein, or in any property or assets) created or issued by any
person, firms, associations, corporations, syndicates, combinations,
organizations, governments or subdivisions thereof.
C. To deposit its funds from time to time in such checking
account or accounts as may be reasonably required, and to deposit its
funds at interest in a bank, savings bank or trust company in good
standing organized under the laws of the United States of America or any
state thereof, or of the District of Columbia.
D. To enter into, make and perform contracts of every kind and
description.
E. To hold property without restriction or limit as to amount.
F. To conduct research and investigations with respect to
securities, organizations and business conditions in the United States and
elsewhere; to secure information and advice pertaining to the investment
and employment of the assets and funds of the Corporation and to pay
compensation to others for the furnishing of any or all of the foregoing.
G. To exercise in respect of all securities, property and
assets owned by it, all rights, powers and privileges which could be
exercised by any natural person owning the same securities, property or
assets.
H. To acquire all or any part of the good will, property or
business of any firm, person, association or corporation heretofore or
hereafter engaged in any business similar to any business which this
Corporation has the power to conduct, and to hold, utilize, enjoy, and in
any manner dispose of the whole or part of the rights, property and
business so acquired and to assume in connection therewith any liabilities
of any such person, firm, association or corporation.
I. To purchase, receive, or otherwise acquire, hold, own,
pledge, transfer, or otherwise dispose of shares of its own capital stock,
out of stated capital or any restricted surplus, as contemplated by
Article 2.03(G) of the Act.
J. To carry out all or any part of the aforesaid objects and
purposes and to conduct its business in all or any of its branches in any
or all states, territories, districts and possessions of the United States
of America and in foreign countries; to maintain offices and agencies in
any and all states, territories, districts and possessions of the United
States of America and in foreign countries.
K. To transact any or all lawful business for which
corporations may be incorporated under the Act.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any clause of this or any other Article of
these Articles of Incorporation, or any amendment thereto, and shall each
be regarded as independent and construed as powers as well as objects and
purposes.
The Corporation shall be authorized to exercise and enjoy all
the powers, rights and privileges granted to or conferred upon
corporations of a similar character by the laws of the State of Texas now
or hereafter enacted, and the enumeration of the foregoing powers shall
not be deemed to exclude any powers, rights or privileges so granted or
conferred.
ARTICLE IV
A. The aggregate number of shares which the Corporation shall
have authority to issue is Thirty Million (30,000,000), consisting of one
class only, designated as "Common Stock," of the par value of $1.00 per
share and of the aggregate par value of Thirty Million
Dollars ($30,000,000).
B. The Corporation may issue and sell shares of its own Common
Stock in such amounts and on such terms and conditions, for such purposes
and for such amount or kind of consideration now or hereafter permitted by
the laws of the State of Texas, the Bylaws and these Articles of
Incorporation, as its Board of Directors may determine; provided, however,
that the consideration per share to be received by the Corporation upon
the sale of any shares of its Common Stock shall not be less than the par
value thereof. Each share of the Common Stock of the Corporation now or
hereafter issued shall be subject to redemption by the shareholders of the
Corporation and, subject to the suspension of such rights of redemption as
provided in the Bylaws, each holder of the Common Stock of the
Corporation, upon request to the Corporation and after complying with any
and all redemption procedures set forth in the Bylaws or otherwise
established by the Board of Directors, shall be entitled to require the
Corporation to redeem all or any part of the shares of Common Stock
standing in the name of such holder on the books of the Corporation at the
net asset value of such shares. Any shares of its Common Stock redeemed
by the Corporation shall be deemed to be cancelled and restored to the
status of authorized but unissued shares. Payment of the redemption price
for such shares may be paid in cash or assets of the Corporation other
than cash in accordance with procedures set forth in the Bylaws or
otherwise established by the Board of Directors. The method of computing
net asset value of shares of the Common Stock of the Corporation for
purposes of the issuance and sale thereof or the redemption by the
Corporation and the time as of which such net asset value shall be
computed shall be as set forth in the Bylaws.
C. If, at any time when a request for transfer or redemption
of the Corporation's shares of Common Stock is received by the Corporation
or its agent, the value (computed as set forth in the Bylaws) of the
shares in a shareholder's account is less than One Thousand
Dollars ($1,000), after giving effect to such transfer or redemption, the
Corporation may cause the remaining shares in such shareholder's account
to be redeemed in accordance with such procedures as the Board of
Directors shall adopt.
ARTICLE V
Holders of shares of capital stock of the Corporation shall not
have any preemptive right to acquire additional, unissued or treasury
shares of the Corporation, or securities of the Corporation convertible
into or carrying a right to subscribe to or acquire such shares.
ARTICLE VI
The Corporation will not commence business until it has received
for the issuance of shares of Common Stock consideration of the value of
at least One Thousand Dollars ($1,000), consisting of money, labor done or
property actually received.
ARTICLE VII
The number of directors constituting the Board of directors
shall initially be five (5), and the names and addresses of the initial
directors are:
Name Address
Hugh E. Hackney Suite 1400, Bryan Tower
Dallas, Texas 75201
Gilbert F. Hartwell 6810 Larkwood Street
Houston, Texas 77074
Margaret T. Miller 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
J. Richard Rolater 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Gary B. Wood, Ph.D. 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Thereafter, the number of directors shall be such number (not less than
three) as is fixed from time to time by the Bylaws of the Corporation.
ARTICLE VIII
The post office address of the initial registered office of the
Corporation is 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas,
Texas 75240, and the name of is initial registered agent at such address
is Gary B. Wood, Ph.D.
ARTICLE IX
The name and address of the sole incorporator is:
Name Address
Gary B. Wood, Ph.D. 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
ARTICLE X
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the shareholders:
A. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase
of shares of Common Stock, and may, in addition, require such
orders to be in such minimum amounts as it shall determine.
B. The holders of any fractional shares of Common Stock
shall be entitled to the payment of dividends on such fractional
shares, to receive the net asset value thereof upon redemption,
to share in the assets of the Corporation upon liquidation and
to exercise voting rights with respect thereto.
C. The Board of Directors shall have full power in
accordance with good accounting practice: (a) to determine what
receipts of the Corporation shall constitute income available
for payment of dividends and what receipts shall constitute
principal and to make such allocation of any particular receipt
between principal and income as it may deem proper; and (b) from
time to time, in its discretion (i) to determine whether any and
all expenses and other outlays paid or incurred (including any
and all taxes, assessments or governmental charges which the
Corporation may be required to pay or hold under any present or
future law of the United States of America or of any other
taxing authority therein) shall be charged to or paid from
principal or income or both; and (ii) to apportion any and all
of said expenses and outlays, including taxes, between principal
and income.
D. Each holder of record of stock of this Corporation
shall be entitled to one (1) vote for each share thereof
standing registered in his name on the books of the Corporation.
At all elections of directors of the Corporation, each
shareholder shall be entitled to vote the shares owned of record
by him for him for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of
cumulative voting.
E. The Board of Directors shall have power to determine
from time to time whether and to what extent and at what time
and places and under what conditions and regulations the books,
accounts and documents of the Corporation, or any of them, shall
be open to the inspection of shareholders, except as otherwise
provided by statute or by law; and except as so provided, no
shareholder shall have any right to inspect any book, account or
document of the Corporation unless authorized to do so by
resolution of the Board of Directors.
ARTICLE XI
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate distributors, custodians, transfer
agents, registrars and/or dividend disbursing agents for the stock and
assets of the Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such distributor, custodian,
transfer agent, registrar and/or dividend disbursing agent.
Executed this ____ day of _________, 1987.
_______________________________________
Gary B. Wood, Ph.D.
Sole Incorporator
Exhibit 1.2
STATEMENT OF CREATION
OF SERIES OF SHARES OF COMMON STOCK
OF
CONCORDE VALUE FUND, INC.
_______________
The undersigned officer of Concorde Value Fund, Inc., a Texas
corporation registered as an open-end investment company under the
Investment Company Act of 1940 (the "Corporation"), does hereby certify:
FIRST: That the name of the corporation is CONCORDE VALUE FUND,
INC. (the "Corporation").
SECOND: That, pursuant to Article 2.12.C of the Texas Business
Corporation Act, the Board of Directors of the Corporation adopted the
following resolutions to establish series of shares of the Corporation's
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 9,000,000
B Concorde Income Fund 10,000,000
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.
THIRD: That the Board of Directors of the Corporation duly
adopted said resolutions by unanimous written consent dated October 13,
1995.
FOURTH: That the resolutions were duly adopted by all necessary
action on the part of the Corporation.
Dated as of this 17th day of November, 1995
CONCORDE VALUE FUND, INC.
By: /s/ Gary B. Wood
Gary B. Wood, Ph.D.
President
Exhibit 1.3
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF CONCORDE VALUE FUND, INC.
____________________
The undersigned officer of Concorde Value Fund, Inc., a
corporation duly organized and existing under the Texas Business
Corporation Act (the "Corporation"), does hereby certify:
FIRST: That the name of the Corporation is CONCORDE VALUE FUND,
INC.
SECOND: That Article I of the Corporation's Articles of
Incorporation is amended in its entirety to read as follows:
ARTICLE I
The name of the corporation (which is hereinafter called
the "Corporation") is CONCORDE FUNDS, INC.
THIRD: That the date of adoption of the amendment to the
Corporation's Articles of Incorporation by the shareholders of the
Corporation was November 17, 1995.
FOURTH: That the amendment to the Corporation's Articles of
Incorporation was adopted by the affirmative vote of the holders of at
least two-thirds of the outstanding Shares of Common Stock entitled to
vote thereon at a special meeting of shareholders of the Corporation,
which vote is summarized as follows:
Affirma-
tive
Shares Votes
Entitled Required Shares Shares
Shares to for Voted Voted
Class Outstanding Vote Adoption For Against
Common Stock,
$1.00 par value 913,254 913,254 608,836 827,924 0
Executed in duplicate this 17th day of November, 1995.
CONCORDE VALUE FUND, INC.
By: /s/ Gary B. Wood
Gary B. Wood, Ph.D.
President
FOLEY & LARDNER
A T T O R N E Y S A T L A W
FIRSTAR CENTER
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202-5367
A MEMBER OF GLOBALEX
WITH MEMBER OFFICES IN
MADISON BERLIN
CHICAGO TELEPHONE (414) 271-2400 BRUSSELS
WASHINGTON, D.C. DRESDEN
JACKSONVILLE TELEX 26-819 FRANKFURT
ORLANDO LONDON
TALLAHASSEE (FOLEY LARD MIL) PARIS
TAMPA SINGAPORE
WEST PALM BEACH FACSIMILE (414) 297-4900 STUTTGART
TAIPEI
WRITER'S DIRECT LINE
December 4, 1995
Concorde Funds, Inc.
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Gentlemen:
We have acted as counsel for you in connection with the
preparation of a Registration Statement on Form N-1A relating to the sale
by you of an indefinite amount of Concorde Funds, Inc. Common Stock, $1.00
par value (such Common Stock being hereinafter referred to as the "Stock")
in the manner set forth in the Registration Statement to which reference
is made. In this connection we have examined: (a) the Registration
Statement on Form N-1A; (b) your Articles of Incorporation and Bylaws, as
amended to date; (c) corporate proceedings relative to the authorization
for issuance of the Stock; and (d) such other proceedings, documents and
records as we have deemed necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares
of Stock when sold as contemplated in the Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to
the Form N-1A Registration Statement. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the
Securities Act of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
FOLEY & LARDNER
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Concorde Value Fund, Inc.:
We consent to the use of our report incorporated by reference in the
Statement of Additional Information and to the reference to our firm under
the heading "Financial Highlights" in the Prospectus and under the heading
"Independent Certified Public Accountants" in the Statement of Additional
Information, included in the Concorde Value Fund, Inc. Form N-1A as of
December 4, 1995.
KPMG Peat Marwick LLP
Dallas, Texas
December 4, 1995
Exhibit 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
CONCORDE VALUE FUND, INC.
1 year
9/30/94
to
9/30/95
1. Initial Net Asst Value @ beginning of period $12.28
2. Number of hypothetical shares purchased 81.433225
3. Amount of dividends and distributions
Shares
Distrib held @ Cumulative
per time of $$ amt Reinvest # shares # shares
share distrib distrib Rate Div Buys Div Buys
12/88 0.153200 0.000000 $0.0000 10.99 0.000000 0.000000
12/89 0.902465 0.000000 $0.0000 10.40 0.000000 0.000000
12/90 0.200755 0.000000 $0.0000 8.64 0.000000 0.000000
12/91 0.253989 0.000000 $0.0000 10.40 0.000000 0.000000
12/92 0.139092 0.000000 $0.0000 11.92 0.000000 0.000000
12/93 1.413699 0.000000 $0.0000 11.65 0.000000 0.000000
12/94 0.478504 81.433225 $38.9661 10.89 3.578156 3.578156
--------
3.578156
3.578156
4. Fees charged to shareholder accounts 0.000000
5. Ending Net Asset Value $13.33
6. Ending Redeemable Value of hypothetical investment
No. of shares bought by $1,000 81.433225
No. of shares bought by reinvested dividends 3.578156
----------
Total shares 85.011381
Total shares # end of period NAV = redeemable value $1,133.20
7. Total Return 13.32%
8. Annualized Compounded Return
y = arithmetic return = 1 + return 1.133202
1/x = days/365 1.000000
x = 1 / (days/365) 1.000000
y to the x power 1.133202
Compound return 13.32%
<PAGE>
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
CONCORDE VALUE FUND, INC.
5 year
9/30/90
to
9/30/95
1. Initial Net Asst Value @ beginning of period $8.35
2. Number of hypothetical shares purchased 119.760479
3. Amount of dividends and distributions
Shares held Cumulative
Distrib @ time of $$ amt Reinvest # shares # shares
per share distrib distrib Rate Div Buys Div Buys
12/88 0.153200 0.000000 $0.0000 10.99 0.000000 0.000000
12/89 0.902465 0.000000 $0.0000 10.40 0.000000 0.000000
12/90 0.200755 119.760479 $24.0425 8.64 2.782698 2.782698
12/91 0.253989 122.543178 $31.1246 10.40 2.992752 5.775450
12/92 0.139092 125.535929 $17.4610 11.92 1.464853 7.240303
12/93 1.413699 127.000782 $179.5409 11.65 15.411234 22.651537
12/94 0.478504 142.412016 $68.1447 10.89 6.257550 28.909087
---------
28.909087
29.909087
4. Fees charged to shareholder accounts 0.000000
5. Ending Net Asset Value $13.33
6. Ending Redeemable Value of hypothetical investment
No. of shares bought by $1,000 119.760479
No. of shares bought by reinvested dividends 28.909087
----------
Total shares 148.669566
Total shares # end of period NAV = redeemable value $1,981.77
7. Total Return 98.18%
8. Annualized Compounded Return
y = arithmetic return = 1 + return 1.981765
1/x = days/365 5.002740
x = 1 / (days/365) 0.199890
y to the x power 1.146510
Compound return 14.65%
<PAGE>
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
CONCORDE VALUE FUND, INC.
Since
inception
12/4/87
to
9/30/95
1. Initial Net Asst Value @ beginning of period $10.00
2. Number of hypothetical shares purchased 100.000000
3. Amount of dividends and distributions
Shares held Cumulative
Distrib @ time of $$ amt Reinvest # shares # shares
per share distrib distrib Rate Div Buys Div Buys
12/88 0.153200 100.000000 $15.3200 10.99 1.393995 1.393995
12/89 0.902465 101.393995 $91.5045 10.40 8.798513 10.192507
12/90 0.200755 110.192507 $22.1217 8.64 2.560382 12.752889
12/91 0.253989 112.752889 $28.6380 10.40 2.753653 15.506542
12/92 0.139092 115.506542 $16.0660 11.92 1.347822 16.854364
12/93 1.413699 116.854364 $165.1969 11.65 14.179991 31.034355
12/94 0.478504 131.034355 $62.7005 10.89 5.757618 36.791973
---------
36.791973
36.791973
4. Fees charged to shareholder accounts 0.000000
5. Ending Net Asset Value $13.33
6. Ending Redeemable Value of hypothetical investment
No. of shares bought by $1,000 100.000000
No. of shares bought by reinvested dividends 36.791973
----------
Total shares 136.791973
Total shares # end of period NAV = redeemable value $1,823.44
7. Total Return 82.34%
8. Annualized Compounded Return
y = arithmetic return = 1 + return 1.823437
1/x = days/365 7.827397
x = 1 / (days/365) 0.127756
y to the x power 1.079768
Compound return 7.98%
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
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<NET-CHANGE-IN-ASSETS> (59)
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