Registration No. 33-17423
File No. 811-5339
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. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 14 [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)
(972) 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, 1996 on November 20, 1996.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[X] on January 31, 1997 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>
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 of WHAT IS CONCORDE FUNDS, INC.?; WHAT ARE THE
Registrant FUNDS' INVESTMENT OBJECTIVES AND POLICIES?;
DO THE FUNDS HAVE ANY INVESTMENT
LIMITATIONS OR STRATEGIES DESIGNED TO
REDUCE RISK?; MAY THE FUNDS ENGAGE IN OTHER
INVESTMENT PRACTICES?
5. Management of the Fund WHO MANAGES THE FUNDS?; WHAT ABOUT
BROKERAGE TRANSACTIONS?; GENERAL
INFORMATION ABOUT THE FUNDS
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 FUNDS
7. Purchase of Securities HOW IS A FUND'S SHARE PRICE DETERMINED?;
Being Offered HOW DO I OPEN AN ACCOUNT AND PURCHASE
SHARES?; WHAT RETIREMENT PLANS DO THE FUNDS
OFFER?; MAY SHAREHOLDERS REINVEST
DIVIDENDS? MAY SHAREHOLDERS EXCHANGE
SHARES?
8. Redemption or HOW DO I SELL MY SHARES? MAY SHAREHOLDERS
Repurchase EXCHANGE SHARES?
9. Pending 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 General Information
History
13. Investment Objectives Included in Prospectus under "WHAT ARE THE
and Policies FUNDS' INVESTMENT OBJECTIVES AND
POLICIES?"; Investment Restrictions;
Description of Bond Ratings; Investment
Policies and Practices
14. Management of the Fund Directors and Officers of the Corporation
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 Certified Public Accountants
17. Brokerage Allocation Allocation of Portfolio Brokerage
and Other Practices
18. Capital Stock and Other Included in Prospectus under "GENERAL
Securities INFORMATION ABOUT THE FUNDS"
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 DO THE FUNDS
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. Calculation of Determination of Net Asset Value and
Performance Data Performance
23. Financial Statements Financial Statements
_______________
* Answer negative or inapplicable
<PAGE> 1
- -------------------
CONCORDE FUNDS LOGO
- ------------------- -------------------
CONCORDE FUNDS LOGO
-------------------
JANUARY 31, 1997
CONCORDE FUNDS, INC.
1500 THREE LINCOLN CENTRE
5430 LBJ FREEWAY
DALLAS, TEXAS 75240
TELEPHONE: (972) 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. Concorde Value
Fund will invest principally in undervalued 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 January 31, 1997, which is
incorporated by reference in the Prospectus. Copies of the Statement of
Additional Information will be provided without charge upon request to the FUNDS
at the above address or telephone number.
<PAGE> 2
A MESSAGE FROM THE PRESIDENT OF
CONCORDE FINANCIAL CORPORATION
Concorde Financial Corporation, the investment advisor for Concorde Funds,
Inc., serves as investment advisor and financial counsellor to individuals,
trusts, and qualified plans. In managing assets, our organization's focus has
always been to concentrate on appropriate risk and return. This focus is present
in our managing of the assets of Concorde Value Fund, and the newest member of
our fund family, Concorde Income Fund.
CONCORDE VALUE FUND. In managing equity investments, we believe the best
investment policy is to buy quality, well-managed companies at a discount to
their intrinsic value. We are prepared to hold them for long-term total returns
regardless of what the consensus view of the overall stock market's value
happens to be.
CONCORDE INCOME FUND. In managing a diversified income-oriented portfolio,
we primarily seek current income but also intend to take advantage of
opportunities for capital appreciation and growth of investment income. We
believe this can best be achieved by considering traditional income-producing
securities as well as securities which provide inducements to participate in the
potential growth of an issuer.
We at Concorde Financial Corporation pledge our commitment to the highest
possible standard of professional performance for the benefit of investors in
Concorde Value Fund and Concorde Income Fund.
Sincerely
/s/ GARY B. WOOD
Gary B. Wood, Ph.D.
President
ii
<PAGE> 3
EXPENSES
The following information is provided in order to assist you in understanding
the various costs and expenses that, as an investor in a FUND, you will bear
directly or indirectly. It should not be considered to be a representation of
past or future expenses. Actual expenses may be greater or lesser than those
shown. "Annual Operating Expenses" for the VALUE FUND are based on actual
expenses incurred for the fiscal year ending September 30, 1996. "Annual
Operating Expenses" for the INCOME FUND are the annualized operating expenses
the INCOME FUND expects to pay during the current fiscal year. 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 (net of reimbursements)..................... 0.72% 0.80%(1)
Total fund operating expenses (net of reimbursements)...... 1.62% 1.50%(1)
</TABLE>
* A fee of $10.00 is charged for each wire redemption.
(1) Other expenses and total fund operating expenses for the Income
Fund before reimbursements are estimated to be 2.47% and 3.17%, respectively.
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.................................................... $ 17 $ 15
3 years................................................... $ 52 $ 48
5 years................................................... $ 89 $ 82
10 years.................................................. $193 $180
</TABLE>
1
<PAGE> 4
FINANCIAL HIGHLIGHTS
The following financial highlights for the VALUE FUND for the periods ended
September 30, 1988 through 1996 and for the Income Fund for the period from
January 22, 1996 (inception) through September 30, 1996 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 FUNDS' Annual Report to Shareholders.
CONCORDE VALUE FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
---------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988*
------- ------- ------- ------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.......................... $13.33 $12.28 $13.11 $11.13 $10.51 $ 8.35 $12.61 $11.29 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment income......... 0.07 0.06 0.04 0.07 0.16 0.24 0.19 0.16 0.06
Net realized and unrealized
gains (losses) on
investments................. 1.73 1.47 0.55 2.05 0.71 2.12 (3.55) 1.32 1.23
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................. 1.80 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) (0.06) (0.03) (0.14) (0.25) (0.20) (0.38) (0.13) (0.00)
Distributions from net
realized gains.............. (0.12) (0.42) (1.39) (0.00) (0.00) (0.00) (0.52) (0.03) (0.00)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from distributions.... (0.18) (0.48) (1.42) (0.14) (0.25) (0.20) (0.90) (0.16) (0.00)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year
(period)...................... $14.95 $13.33 $12.28 $13.11 $11.13 $10.51 $ 8.35 $12.61 $11.29
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN............ 13.64% 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)............................ $12,580 $12,235 $12,003 $12,630 $12,532 $13,649 $11,735 $12,527 $7,416
Ratio of expenses to average net
assets............................ 1.62% 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................ 0.53% 0.52% 0.33% 0.54% 1.50% 2.47% 1.88% 1.32% 0.49%
Portfolio turnover rate............ 26.10% 22.42% 75.43% 71.69% 51.69% 25.36% 48.83% 32.34% 13.40%
Average commission rate paid....... $0.0551
Shares outstanding at end of year
(period).......................... 841,293 917,929 977,095 963,554 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.
CONCORDE INCOME FUND
<TABLE>
<CAPTION>
JANUARY 22, 1996
(INCEPTION)
THROUGH
SEPTEMBER 30,
1996*
------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................................................................... $ 10.00
---------
Income (loss) from investment operations:
Net investment income.................................................................................... 0.25
Net realized and unrealized gains (losses) on investments................................................ (0.18)
---------
Total from investment operations....................................................................... 0.07
---------
Less distributions:
Dividends from net investment income..................................................................... (0.13)
Distributions from net realized gains.................................................................... 0.00
---------
Total from distributions............................................................................... (0.13)
---------
Net asset value, end of period............................................................................. $ 9.94
=========
TOTAL INVESTMENT RETURN....................................................................................... 0.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....................................................................... $ 2,217
Ratio of expenses to average net assets.................................................................... 2.01%
Ratio of net investment income to average net assets....................................................... 2.51%
Portfolio turnover rate.................................................................................... 29.77%
Average commission rate paid............................................................................... $ 0.1403
Shares outstanding at end of period........................................................................ 223,052
</TABLE>
- ---------------
* Total investment return and other ratios are not annualized.
2
<PAGE> 5
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. The VALUE FUND will
invest principally in undervalued common stocks. The VALUE FUND's investment
advisor, Concorde Financial Corporation (the "Advisor") considers the following
valuation criteria, among other considerations, in determining that a common
stock is undervalued: (a) price/earnings ratio; (b) price/cash flow ratio; (c)
price/intrinsic value ratio; (d) dividend yield; (e) price/sales ratio; or (f)
total capitalization/cash flow ratio. When analyzing the above criteria, the
Advisor may consider and compare the relative value of a common stock with the
following: (a) all common stocks within a particular broad-based universe; (b)
all common stocks within a particular company's industry group; or (c) a common
stock's own historical valuation history. The Advisor will use its judgment to
determine the appropriate combination of valuation criteria, among other
factors, in assessing if a common stock is undervalued. By investing in
undervalued 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 investing in undervalued stocks there is the risk that
improving fundamentals may not be recognized as quickly as anticipated by the
Advisor. 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 studies the financial statements of the issuer
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<PAGE> 6
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
may be made during times when there is perceived to be 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 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
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<PAGE> 7
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 securities rated below investment grade, 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
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.
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 as described in the
following section, or engage in futures trading. The
5
<PAGE> 8
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 three days' notice, including the right to call the loan
to enable 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 reaches a
valuation level such that the Advisor believes that the stock is no longer
undervalued. 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
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<PAGE> 9
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 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
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<PAGE> 10
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 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
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<PAGE> 11
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 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
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<PAGE> 12
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.
SECURITIES OF OTHER REGISTERED INVESTMENT COMPANIES. The FUNDS may invest up
to 10% of their net assets in shares of registered investment companies. The
FUNDS will not purchase or otherwise acquire shares of any registered investment
company (except as part of a plan of merger, consolidation or reorganization
approved by the shareholders of the FUNDS) if (a) the FUND and its affiliated
persons would own more than 3% of any class of securities of such registered
company; or (b) more than 5% of its net assets would be invested in the shares
of any one registered investment company.
Any investment in a registered investment company involves investment risk.
Additionally, an investor could invest directly in the registered investment
companies in which the FUND invests. By investing indirectly through a FUND, an
investor bears not only his or her proportionate share of the expenses of the
FUND (including operating costs and investment advisory fees) but also indirect
similar expenses of the registered investment companies in which the FUND
invests. An investor may also indirectly bear expenses paid by registered
investment companies in which the FUND invests related to the distribution of
such registered investment company's shares.
HEDGING INSTRUMENTS. Although the INCOME FUND does not presently intend to do
so, the FUNDS 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 FUND will enter into a closing contract. The realized gain
would offset the presumed unrealized loss in the 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 FUND's loss on the option contract will be
limited to the premium paid.
The FUNDS 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 FUND must own the underlying security or have an
absolute and immediate right to acquire that security 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 FUND must maintain in a segregated account cash or liquid
securities adequate to purchase the securities, in each case until the 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
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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 (972) 387-8258 or write to us at CONCORDE FUNDS,
INC., 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240,
Attention: Corporate Secretary.
WHO MANAGES THE FUNDS?
As a Texas corporation, the business and affairs of the FUNDS are managed by
its Board of Directors. Each FUND has entered into an investment advisory
agreement (the "Agreement") with the Advisor, Concorde Financial Corporation,
1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, under which
the Advisor furnishes continuous investment advisory services and management to
the FUNDS. The Advisor was formed in 1981 as an investment advisor, and since
then has advised private accounts. Gary B. Wood, Ph.D., has been President of
the Advisor since its inception, and the FUNDS' President and Senior Manager of
the management team which has advised the FUNDS since inception. The management
team for the VALUE FUND currently is comprised of Dr. Wood and three analysts,
Dennis R. Beall, Elizabeth L. Foster and John A. Stetter. 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. 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 management team for the INCOME FUND
currently is comprised of Dr. Wood and John A. Stetter. 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 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
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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.
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. Options purchased
or written by the FUNDS are valued at the closing current bid price, when
available. 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 (972) 387-8258 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 $20 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
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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.
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, Custodial by all person(s) required
(Uniform Gift to Minors Act), to sign for the account,
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).
<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 within 15 days of request. 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
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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 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 $10.00 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 $10.00
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
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<PAGE> 17
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 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.
15
<PAGE> 18
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 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 the employer contributes 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.
16
<PAGE> 19
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 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 will 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 is 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.
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.
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
17
<PAGE> 20
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 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.
18
<PAGE> 21
[GRAPH]
<TABLE>
<CAPTION>
S&P Concorde
500 Value
------ --------
<S> <C> <C>
Dec. 87 10,761 9,800
11,214 10,540
11,737 11,290
11,374 11,601
11,500 11,371
11,600 11,081
12,133 12,172
12,087 12,191
11,676 11,111
Sep. 88 12,173 11,291
12,511 11,081
12,333 10,791
12,548 11,175
13,467 11,672
13,132 11,936
13,438 12,290
14,135 12,574
14,707 13,132
14,624 12,605
15,944 13,051
16,257 13,213
Sep. 89 16,190 12,787
15,814 11,701
16,137 11,590
16,524 11,670
15,415 10,921
15,614 11,086
16,028 11,427
15,627 11,009
17,151 11,516
17,034 11,604
16,980 11,307
15,445 10,018
Sep. 90 14,693 9,203
14,630 8,607
15,575 9,192
16,009 9,721
16,707 10,635
17,902 11,436
18,335 11,605
18,379 11,515
19,173 11,830
18,295 11,808
19,147 12,033
19,601 12,067
Sep. 91 19,274 11,852
19,532 12,055
18,745 11,682
20,889 12,395
20,501 12,718
20,767 13,261
20,362 13,284
20,961 13,422
21,064 13,503
20,750 13,006
21,599 13,318
21,156 13,053
Sep. 92 21,405 12,857
21,478 13,042
22,208 13,539
22,482 14,212
22,670 14,481
22,979 14,457
23,464 14,843
22,896 14,704
23,507 14,938
23,575 14,938
23,481 14,950
24,371 15,289
Sep. 93 24,183 15,324
24,684 15,523
24,449 15,371
24,745 15,703
25,587 16,031
24,893 15,978
23,810 15,611
24,115 15,467
24,508 15,625
23,908 15,506
24,692 15,782
25,702 16,373
Sep. 94 25,075 16,098
25,636 16,059
24,703 15,482
25,069 15,081
25,718 15,054
26,718 15,245
27,507 15,642
28,315 16,066
29,445 16,477
30,128 17,078
31,126 17,873
31,203 17,887
Sep. 95 32,520 18,243
32,403 17,927
33,822 18,612
34,475 18,713
35,647 18,823
35,979 19,322
36,324 19,710
36,858 20,085
37,805 20,543
37,949 20,306
36,272 19,433
37,037 20,084
Sep. 96 39,119 20,737
</TABLE>
MANAGEMENT'S DISCUSSION OF VALUE FUND PERFORMANCE. The VALUE FUND's total
return of 13.64% during the twelve-month period compares favorably to total
returns of 10.87% for the Wilshire Mid-Cap Value Index and 11.44% for the S&P
Barra Value Index. For the same period, the S&P 500 recorded a total return of
20.29%, while the NASDAQ Composite Index rose 17.56% and the Russell 2000 rose
13.19%.
The VALUE FUND generated positive returns during each of the four fiscal year
quarters. Positive contributions came from stocks in the energy and natural
resources (Total ADR, Potash Corporation), financial services (American
Travellers Corporation, Delphi Financial Group, State Street Boston), health
care (Johnson & Johnson, Merck, US Healthcare) and retail (Younkers, Inc.)
industries. The energy sector benefited from rising oil and gas prices, a pickup
in worldwide exploration activity and increasing expectations of industry growth
over the next several years. Financial services, particularly brokerage and
insurance firms, benefited from a generally positive interest rate and capital
markets environment. In addition, American Travellers Corporation and Younkers,
Inc., were targets of industry takeover activity and contributed significantly
to the VALUE FUND's fiscal year performance. Health care stocks responded
positively to outstanding near term earnings results and expectations for
continued growth in the future.
Some industry groups did not perform as well: consumer durables (O'Sullivan
Industries, Sun Coast Industries), transportation (Southwest Airlines),
19
<PAGE> 22
technology (Texas Instruments, Teradyne, LTX Corporation) and utilities (Destec
Energy). Underperformance was generally the result of individual company
earnings or operating performance rather than industry-wide weakness.
Semiconductor and technology stocks were an exception because of the 1996
industry slowdown exceeding most expectations. Other individual stocks
contributing to sub-par performance included Alcan Aluminum, Cyprus AMAX
Minerals, Superior Industries, Tandycrafts, and Tele-Communications, Inc.
The graph displayed above shows that the VALUE FUND's performance since
December 4, 1987 (inception) has lagged the performance of the S&P 500, a
broad-based market index. More recently, the VALUE FUND has performed more in
line with the S&P 500 Index and selected value indices. The graph below shows
total return performance for the three-year period from September 30, 1991 to
September 30, 1996 for the VALUE FUND, the S&P 500, the S&P/Barra Value Index,
and the Wilshire Mid Cap Value Index. As the graph indicates, the FUND's
three-year performance compares more favorably to the value indices than to the
S&P 500. The S&P 500 is an index representing the aggregate market value of the
common equity of 500 stocks primarily traded on the NYSE (New York Stock
Exchange), and they tend to be larger-cap stocks. The stocks in the VALUE FUND's
portfolio are small-, medium- and large-capitalization, and the FUND is
currently considered a medium capitalization fund. As a result, its stocks more
closely match the stocks in these selected value indices, based on
capitalization and other factors which the Advisor uses to determine that an
individual stock is undervalued. (See WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES
AND POLICIES?).
20
<PAGE> 23
[PERFORMANCE COMPARISON GRAPH]
The S&P 500 is an index representing the aggregate market value of the common
equity of 500 stocks primarily traded on the NYSE (New York Stock Exchange), and
they tend to be larger-cap stocks.
The S&P Barra Value Index is constructed by dividing the stocks in the S&P 500
Index according to their price-to-book ratios. The index contains firms with
lower price-to-book ratios and has 50% of the capitalization of the S&P 500
Index. Although the Index is created based on price-to-book ratios, the
companies in the Index generally have these characteristics as well: low price-
to-earnings ratios, high dividend yields, and low historical and predicted
earnings growth. Because of these characteristics, the S&P Barra Value Index has
had higher weights in the Energy, Utility, and Financial sectors than the S&P
500. Companies in these sectors tend to have betas less than 1.00 with respect
to the S&P 500; consequently, the beta of the S&P Barra Value Index has ranged
between 0.85 and 1.00 since 1975.
The Wilshire Mid-Cap Value Index is comprised of securities that (a) fall
between the 501st and 1250th largest companies in the Wilshire 5000, an index of
all actively traded common stocks in the United States, and (b) that fit
Wilshire Asset Management's value stock characteristics. Those characteristics
include a high dividend yield, lower, stable earnings growth, low return on
equity, low price/book ratio, low price/earnings ratio and low beta.
21
<PAGE> 24
[PERFORMANCE COMPARISON GRAPH]
<TABLE>
<S> <C> <C> <C>
1/22/96 10,000.00 10,000.00 10,000.00
Jan. 96 10,112.00 10,020.00 10,020.00
Feb. 96 9,993.69 9,899.76 9,900.00
Mar. 96 9,942.72 9,899.76 9,900.00
Apr. 96 9,907.92 9,839.37 9,939.00
May 96 9,900.00 9,769.51 9,770.00
Jun. 96 10,004.00 9,879.91 9,880.00
Jul. 96 10,034.00 9,790.00 9,790.00
Aug. 96 10,042.00 9,889.86 9,890.00
Sep. 96 10,182.00 10,070.80 10,071.00
</TABLE>
The Lehman Brothers Intermediate Government/Corporate Index contains a group
of bonds with maturities between 1.00 and 9.99 years. The group is a subset of
approximately 4,000 publicly issued corporate and U.S. Government debt rated BAA
or better, and each issue has at least $100 million par amount outstanding.
MANAGEMENT'S DISCUSSION OF INCOME FUND PERFORMANCE. The INCOME FUND initiated
operations on January 22, 1996 and utilized its flexible income approach to
gradually become fully invested by the end of the fiscal year. The first
dividend of $0.13 per share was declared and distributed in late September, with
quarterly dividend distributions anticipated in the future. Total return for the
period from inception through September 30, 1996, was 0.71%, compared to the
Lehman Brothers Intermediate Government/Corporate Index, which posted a total
return of 1.83% for the same period. The Lehman Brothers Intermediate
Government/Corporate Index contains a group of bonds with maturities between
1.00 and 9.99 years. The group is a subset of approximately 4,000 publicly
issued corporate and U.S. Government debt rated BAA or better, and each issue
has at least $100 million par amount outstanding. The US Treasury and Agency
securities in the INCOME FUND turned in slightly negative total returns, while
the equity-oriented securities in the portfolio recorded gains resulting in
total positive performance for the entire portfolio.
The INCOME FUND has the flexibility to emphasize various income-oriented asset
classes. After interest rates rose through July 1996, the Advisor concluded that
the bond
22
<PAGE> 25
market offered greater value than equity-oriented income securities, and the
portfolio was adjusted accordingly by emphasizing the fixed income portion. As
it turns out, the equity market continued to outperform the bond market into the
third quarter. Despite its underweighting, the equity portion of the portfolio
performed well as the stock market continued to rise.
Fixed income securities held during the period consisted primarily of US
Treasury and Agency Notes and corporate preferred stocks. As the INCOME FUND
became more fully invested over time, the average maturity of the bond positions
was lengthened to approximately 6.7 years at September 30, 1996, indicating a
moderately bullish approach to the bond market. Preferred stocks, which
typically move in line with the fixed income market, turned in a positive total
return, primarily because of their high dividends.
Equities, which include income-producing common and convertible preferred
stocks, provided significant total returns as the effect of the positive equity
market environment outweighed the effect of interest rate movements. Although
individual returns varied, financial and real estate issues were responsible for
the majority of the total equity return of the portfolio. Of particular note,
Bankers Trust, Capstead Mortgage and First Industrial Realty recorded gains
while Hanson PLC, ARCO Exchangeable Notes and GTE Corporation incurred losses.
23
<PAGE> 26
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> 27
<TABLE>
<S> <C>
[CONCORD 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 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 issued.)
<TABLE>
<S> <C> <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
</TABLE>
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 Funds,
---------------------------------------------------------------------------
(Your Account Name)
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 $10.00 fee will be applied to any redemption when the proceeds are wired.
SIGNATURE AND CERTIFICATION
I have received and read the Prospectus for Concorde Funds, Inc., ("Fund"). I
understand the Fund's investment objectives and policies and agree to be bound
by the terms of the Prospectus. I am of legal age in my state of residence and
have full authority to purchase shares of the Fund and to establish and use any
related privileges.
UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER OR
TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
BECAUSE I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS, OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- --------------------------------------------------------------------------------
Signature of Individual Date
- --------------------------------------------------------------------------------
Signature of Joint Owner Date
- --------------------------------------------------------------------------------
Signature of Authorized Officers, Partners, Trustees Date
or Others
<PAGE> 28
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?..................................................... 5
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 TAX............. 15
MAY SHAREHOLDERS REINVEST DIVIDENDS?.................................. 16
WHAT RETIREMENT PLANS DO THE FUNDS OFFER?............................. 16
WHAT ABOUT BROKERAGE TRANSACTIONS?.................................... 16
GENERAL INFORMATION ABOUT THE FUNDS................................... 17
WHAT HAS BEEN THE FUNDS' PERFORMANCE?................................. 17
</TABLE>
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 January 31, 1997, and, if given or made, such
information or representation may not be relied upon as having been authorized
by Concorde Funds, 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.
[CONCORDE FUNDS LOGO]
APPLICATION AND PROSPECTUS
Dallas, Texas
January 31, 1997
STATEMENT OF ADDITIONAL INFORMATION January 31, 1997
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 January 31, 1997. 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 (972) 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-16
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . B-18
INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . B-19
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . B-21
REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . B-23
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . B-23
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . B-26
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . B-26
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . B-27
DESCRIPTION OF BOND RATINGS . . . . . . . . . . . . . . . . . . . . . B-28
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 January 31, 1997 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 January 31, 1997 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. The VALUE
FUND invests principally in undervalued common stocks. 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. The FUNDS will not sell securities short, buy securities on
margin, purchase warrants, participate in a joint-trading account or deal
in options; provided, however, that the FUNDS may invest in and commit
their assets to writing and purchasing put and call options on securities
and stock indexes to the extent permitted by the Investment Company Act of
1940, as amended.
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 make investments for the purpose of
exercising control or management of any company.
6. 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.)
7. 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.
8. 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.
9. 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.
10. 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 14.
11. 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.
12. Neither FUND will purchase or sell commodities or
commodities contracts.
13. 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.
14. 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.
15. Neither FUND will invest in oil, gas and other mineral
leases, or enter into arbitrage transactions.
The FUNDS have 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.
3. 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 10% 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.
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 three 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 14. 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 Advisor will 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
Index Options Transactions. The FUNDS may purchase put and call
options and write call options on stock indexes. A stock index fluctuates
with changes in the market values of the stock included in the index.
Options on stock indexes give the holder the right to receive an amount of
cash upon exercise of the options. Receipt of this cash amount will
depend upon the closing level of the stock index upon which the option is
based being greater than (in the case of a call) or less than (in the case
of a put) the exercise price of the option. The amount of cash received,
if any, will be the difference between the closing price of the index and
the exercise price of the option, multiplied by a specified dollar
multiple. The writer (seller) of the option is obligated, in return for
the premiums received from the purchaser of the option, to make delivery
of this amount to the purchaser. Unlike the options on securities
discussed below, all settlements of index options transactions are in
cash.
Some stock index options are based on a broad market index such
as the S&P 500 Index, the NYSE Composite Index or the AMEX Major Market
Index, or on a narrower index such as the Philadelphia Stock Exchange
Over-the-Counter Index. Options currently are traded on the Chicago Board
of Options Exchange, the AMEX and other exchanges. Over-the-counter index
options, purchased over-the-counter options and the cover for any written
over-the-counter options would be subject to the VALUE FUND's 10%
limitation and the INCOME FUND's 15% limitation on investment in illiquid
securities. See "Illiquid Securities."
Each of the exchanges has established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which the FUNDS may buy or sell; however, the Advisor
intends to comply with all limitations.
Index options are subject to substantial risks, including the
risk of imperfect correlation between the option price and the value of
the underlying securities comprising the stock index selected and the risk
that there might not be a liquid secondary market for the option. Because
the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the FUNDS will
realize a gain or loss from the purchase of writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market
segment, rather than upon movements in the price of a particular stock.
Trading in index options requires different skills and techniques than are
required for predicting changes in the prices of individual stocks. The
FUNDS will not enter into an option position that exposes a FUND to an
obligation to another party, unless the FUND either (i) owns an offsetting
position in securities or other options; and/or (ii) maintains with the
FUND'S custodian bank (and marks-to-market, on a daily basis) a segregated
account consisting of cash or liquid securities that, when added to the
premiums deposited with respect to the option, are equal to the market
value of the underlying stock index not otherwise covered.
The Advisor may utilize index options as a technique to leverage
the portfolios of the FUNDS. If the Advisor is correct in its assessment
of the future direction of stock prices, the share prices of the FUNDS
will be enhanced. If the Advisor has the FUNDS take a position in options
and stock prices move in a direction contrary to the Advisor's forecast
however, the FUNDS would incur losses greater than the FUNDS would have
incurred without the options position.
Options on Securities. The FUNDS may buy put and call options
and write (sell) call options on securities. By writing a call option and
receiving a premium, a FUND may become obligated during the term of the
option to deliver the securities underlying the option at the exercise
price if the option is exercised. By buying a put option, a FUND has the
right, in return for a premium paid during the term of the option, to sell
the securities underlying the option at the exercise price. By buying a
call option, a FUND has the right, in return for a premium paid during the
term of the option, to purchase the securities underlying the option at
the exercise price. Options on securities written by the FUNDS will be
traded on recognized securities exchanges.
When writing call options on securities, a FUND may cover its
position by owning the underlying security on which the option is written.
Alternatively, the FUND may cover its position by owning a call option on
the underlying security, on a share for share basis, which is deliverable
under the option contract at a price no higher than the exercise price of
the call option written by the FUND or, if higher, by owning such call
option and depositing and maintaining in a segregated account cash or
liquid securities equal in value to the difference between the two
exercise prices. In addition, the FUNDS may cover their position by
depositing and maintaining in a segregated account cash or liquid
securities equal in value to the exercise price of the call option written
by the FUND. The principal reason for the FUNDS to write call options on
stocks held by the FUNDS is to attempt to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone.
When a FUND wishes to terminate the FUND's obligation with
respect to an option it has written, the FUND may effect a "closing
purchase transaction." The FUND accomplishes this by buying an option of
the same series as the option previously written by the FUND. The effect
of the purchase is that the writer's position will be canceled. However,
a writer may not effect a closing purchase transaction after the writer
has been notified of the exercise of an option. When a FUND is the holder
of an option, it may liquidate its position by effecting a "closing sale
transaction." The FUND accomplishes this by selling an option of the same
series as the option previously purchased by the FUND. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected. If any call or put option is not exercised or sold, the
option will become worthless on its expiration date.
A FUND will realize a gain (or a loss) on a closing purchase
transaction with respect to a call option previously written by the FUND
if the premium, plus commission costs, paid by the FUND to purchase the
put option is less (or greater) than the premium, less commission costs,
received by the FUND on the sale of the call option. A FUND also will
realize a gain if a call option which the FUND has written lapses
unexercised, because the FUND would retain the premium.
A FUND will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put option previously purchased by
the FUND if the premium, less commission costs, received by the FUND on
the sale of the call or the put option is greater (or less) than the
premium, plus commission costs, paid by the FUND to purchase the call or
the put option. If a put or a call option which the FUND has purchased
expires out-of-the-money, the option will become worthless on the
expiration date, and the FUND will realize a loss in the amount of the
premium paid, plus commission costs.
Although certain securities exchanges attempt to provide
continuously liquid markets in which holders and writers of options can
close out their positions at any time prior to the expiration of the
option, no assurance can be given that a market will exist at all times
for all outstanding options purchased or sold by the FUNDS. In such
event, the FUNDS would be unable to realize their profits or limit their
losses until the FUNDS would exercise options they hold and the FUNDS
would remain obligated until options they wrote were exercised or expired.
Because option premiums paid or received by the FUNDS are small
in relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in common stocks.
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
full faith and 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 as of November 1, 1996 are as
follows:
JOHN R. BRADFORD, Ph.D., 74
7619 University Avenue
Suite 2A
Lubbock, Texas 79423
(A DIRECTOR OF THE CORPORATION)
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, 72
6810 Larkwood Street
Houston, Texas 77074
(A DIRECTOR OF THE CORPORATION)
Mr. Hartwell is a Director of Century Business Machines,
Houston, Texas, an office business machine company and the successor to
Hartwell's Office World, Inc. Mr. Hartwell was the Chairman and founder
of Hartwell's Office World, Inc.
JOHN H. WILSON, 54
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(A DIRECTOR OF THE CORPORATION)
Mr. Wilson is President of U.S. Equity Corporation, a venture
capital firm. Mr. Wilson is also President and a Director of Whitehall
Corporation, a multifaceted manufacturing concern. He currently serves on
the Board of Directors of Capital Southwest Corporation, a venture capital
firm, Norwood Promotional Products, Inc., a manufacturer of advertising
specialty products, Encore Wire Corporation, a manufacturer of electrical
wire and cable, and Palm Harbor Homes, Inc., a producer of manufactured
homes.
GARY B. WOOD, Ph.D.*, 46
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(PRESIDENT, TREASURER AND A DIRECTOR OF THE CORPORATION)
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, 41
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(SECRETARY OF THE CORPORATION)
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, 1996 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.
The table below sets forth the compensation paid by the
Corporation to each of the current directors of the Corporation during the
fiscal year ended September 30, 1996:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Estimated Annual from Corporation
Compensation from as Part of Fund Benefits Upon and Fund Complex
Name of Person Corporation Expenses Retirement Paid to Director
<S> <C> <C> <C> <C>
John R. Bradford, Ph.D. $0 $0 $0 $0
Gilbert F. Hartwell 0 0 0 0
John H. Wilson 0 0 0 0
Gary B. Wood, Ph.D. 0 0 0 0
</TABLE>
PRINCIPAL SHAREHOLDERS
Set forth below are the names and addresses of all holders of
each FUND's shares who as of October 31, 1996 beneficially owned more than
5% of the then outstanding shares of a FUND as well as the number of
shares of each 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. 5, Box 390
Brenham, Texas 77833 129,696 15.5%
William E. Watson
MDPA Pension Plan
#3 Bent Tree Court
Lufkin, TX 75901 82,449 9.8%
C. Wayne and Jane A. Nance
214 North Bay EB
Bullard, Texas 75757 89,354 10.6%
Ralph S. and Deborah E.
Cunningham
#2 Saddlewood Estates
Houston, Texas 77024 55,485 6.6%
Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94104 589,739 70.3%
Officers and Directors
as a group (5 persons) 12,462 1.5%
_______________
* At October 31, 1996, Charles Schwab & Co. owned of record
589,739 shares of the VALUE FUND or 70.3% of the then
outstanding shares. All of the shares owned by Charles
Schwab & Co. were owned of record only and included the shares
held by I. David and Lee R. Bufkin, C. Wayne and Jane A. Nance
and Ralph S. and Deborah E. Cunningham.
Name and Address Number of Shares Percent
of Beneficial Owner of VALUE FUND of Class
I. David and Lee R. Bufkin
R.R. 5, Box 390
Brenham, TX 44833 41,237 17.4%
William E. Watson MDPA
Pension Plan
#3 Bent Tree Court
Lufkin, TX 75901 40,528 17.1%
Walter J. Stetter
IRA Rollover
4322 Melissa Lane
Dallas, TX 75229 31,901 13.5%
Gerrett B. Lok IRA Rollover
12544 Matisse Lane
Dallas, TX 75230 25,000 10.6%
NationsBank of Texas,
Trustee
Debrahlee G. Kung Trust
5500 Preston Road
Dallas, TX 75205 20,305 8.6%
Mr. and Mrs. S.D. Chesebro
5473 Sugar Hill Drive
Houston, TX 77056 12,260 5.2%
L. W. Wright IRA Rollover
7315 Lane Park Court
Dallas, TX 75225 17,143 7.2%
C. M. Rampacek IRA Rollover
2203 Bluff Creek
Kingwood, TX 77345 13,296 5.6%
Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94104 165,664 69.9%
Officers and Directors as a
group (5 persons) 1,350 .6%
_______________________
* At October 31, 1996, Charles Schwab & Co. owned of record 165,664
shares of the VALUE FUND or 69.9% of the then outstanding shares. All of
the shares owned by Charles Schwab & Co. were owned of record only and
included shares held by I. David and Lee R. Bufkin, Walter J. Stetter IRA
Rollover, Gerrett B. Lok IRA Rollover, Mr. and Mrs. S. D. Chesebro, L. W.
Wright IRA Rollover and C. M. Rampacek IRA Rollover.
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, 1996, September 30, 1995 and September 30, 1994 the
VALUE FUND paid the Advisor advisory fees of $112,373, $104,664 and
$110,669, respectively. During the period from January 22, 1996
(commencement of operations) through September 30, 1996, the INCOME FUND
paid the Advisor advisory fees of $9,440.
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,
1996 was 107.28%. An initial investment of $1,000 in the VALUE FUND at
December 4, 1987 would have been worth $2,072 as of September 30, 1996.
The average annual compounded rate of return of the VALUE FUND over this
period was 8.61%. The average annual compounded rate of return of the
VALUE FUND for the 5-year period ended September 30, 1996 was 11.82%. The
VALUE FUND's compounded rate of return for the 1-year period ended
September 30, 1996 was 13.64%.
The INCOME FUND'S total return for the period from January 22,
1996, the day the INCOME FUND commenced operations, through September 30,
1996 was 0.71%.
The foregoing performance results are based on historical
earnings and should not be considered as representative of the performance
of the FUNDS 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, 1996,
September 30, 1995 and September 30, 1994 to brokers totaled $14,755 on
transactions involving securities having a total market value of
$6,955,104, $26,409 on transactions involving securities having a total
market value of $8,166,815 and $97,234 on transactions involving
securities having a total market value of $17,933,157, respectively.
Brokerage commissions paid by the INCOME FUND during the period from
January 22, 1996 (commencement of operations) through September 30, 1996
to brokers totaled $4,548 on transactions involving securities having a
total market value of $2,761,110. 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, 1996, September 30, 1995 and September
30, 1994, the VALUE FUND paid Firstar Trust Company $25,054, $24,216 and
$23,464, respectively, pursuant to the fund accounting services agreement.
During the period from January 22, 1996 (commencement of operations)
through September 30, 1996, the INCOME FUND paid Firstar Trust Company
$12,641.
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
Kinder & Wyman, P.C., 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 audited financial statements are incorporated by
reference to the Concorde Funds, Inc. Annual Report dated September 30,
1996 (File No. 811-5339), as filed with the Securities and Exchange
Commission on November 27, 1996:
Concorde Value Fund
Financial Highlights
Portfolio of Investments in Securities
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
Concorde Income Fund
Financial Highlights
Portfolio of Investments in Securities
Statement of Assets and Liabilities
Statement of Operations for the period from January 22,
1996 (inception) through September 30, 1996
Statement of Changes in Net Assets for the period from
January 22, 1996 (inception) through September 30,
1996
Notes to Financial Statements
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. At any meeting of shareholders duly
called and held 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
vote not less than 10% of the FUNDS' outstanding shares, the Secretary of
the Corporation shall promptly call a meeting of shareholders for the
purpose of voting upon the question of removal of any director. 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.) Audited Financial Statements (Financial Highlights included in
Part A and all incorporated by reference to the Concorde Funds,
Inc. Annual Report dated September 30, 1996 (File No. 811-5339)
(as filed with the Securities and Exchange Commission on
November 27, 1996) in Part B
Concorde Value Fund
Financial Highlights
Portfolio of Investments in Securities
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
Concorde Income Fund
Financial Highlights
Portfolio of Investments in Securities
Statement of Assets and Liabilities
Statement of Operations for the period from January 22, 1996
(inception) through September 30, 1996
Statement of Changes in Net Assets for the period from
January 22, 1996 (inception) through September 30, 1996
Notes to Financial Statements
(b.) Exhibits
(1.1) Registrant's Articles of Incorporation; Exhibit 1.1 to
Amendment No. 12 to Registrant's Registration Statement on
Form N-1A ("Amendment No. 12") is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(1.2) Statement of Creation of Series of Shares of Common Stock
of Concorde Value Fund, Inc; Exhibit 1.2 to Amendment No.
12 is incorporated by reference pursuant to Rule 411 under
the Securities Act of 1933.
(1.3) Articles of Amendment to Articles of Incorporation of
Concorde Value Funds, Inc; Exhibit 1.3 to Amendment No. 12
is incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
(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.
(5.2) Investment Advisory Agreement for the INCOME FUND;
Exhibit 5.2 to 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.
(9) Shareholder Servicing Agent Agreement with First Wisconsin
Trust Company.
(9.1) Fund Accounting Servicing Agreement with Firstar Trust
Company.
(10) Opinion of Foley & Lardner, counsel for Registrant; Exhibit
10 to Amendment No. 12 is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(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.
(14.2) Simplified Employee Pension Plan.
(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.
(15) None.
(16) Schedule for computation of performance quotation; Exhibit
16 to Amendment No. 12 is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(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 31, 1996
Series A Common Stock (VALUE FUND) 67
Series B Common Stock (INCOME FUND) 9
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-17 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 vote 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas and State of
Texas on the 26th day of November, 1996.
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 26, 1996
Gary B. Wood, Ph.D. Financial and
Accounting Officer
and Director
___________________________ Director November __, 1996
Gilbert F. Hartwell
/s/ John H. Wilson Director November 27, 1996
John H. Wilson
/s/ John R. Bradford, Ph.D. Director November 25, 1996
John R. Bradford, Ph.D.
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(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
<R/>
(15) None
(16) Schedule for computation of performance
quotation*
(17) Financial Data Schedule
(18) None
_______________
* Incorporated by reference.
Exhibit 5.1
INVESTMENT ADVISORY AGREEMENT
Agreement made this ____ day of __________, 1987, between
Concorde Value Fund, Inc., a Texas corporation (the "Fund"), and Concorde
Financial Corporation, a Texas corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940 (the "Act");
WHEREAS, upon so registering with the Securities and Exchange
Commission, the Fund will be a registered investment company; and
WHEREAS, the Fund desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as its investment adviser.
NOW, THEREFORE, the Fund and the Adviser do mutually promise and
agree as follows:
1. Employment. The Fund hereby employs the Adviser to manage
the investment and reinvestment of the assets of the Fund for the period
and on the terms set forth in this Agreement. The Adviser hereby accepts
such employment for the compensation herein provided and agrees during
such period to render the services and to assume the obligations herein
set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the board of directors of the Fund may determine, direct the purchase
and sale of investment securities in the day to day management of the
Fund. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Fund, but without compensation or
reimbursement of expenses for such services from the Fund. Nothing herein
contained shall be deemed to require the Fund to take any action contrary
to its Articles of Incorporation or any applicable statute or regulation,
or to relieve or deprive the board of directors of the Fund of its
responsibility for and control of the affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund and maintaining its organization. The Adviser
shall pay the salaries and fees of all officers and directors of the Fund
persons of the Fund, as defined in the Act, and who are not officers or
employees of the Fund). The Adviser shall also bear all sales and
promotional expenses of the Fund, except for expenses incurred in
complying with laws regulating the issue or sale of securities. The
Adviser shall not be required to pay any other expenses of the Fund except
as provided herein if the total expenses borne by the Fund, including the
Adviser's fee, but excluding all federal, state and local taxes, interest,
brokerage commissions and extraordinary items, in any year exceed that
percentage of the average net assets of the Fund for such year, as
determined by valuations made as of the close of each business day, which
is the most restrictive percentage provided by the state laws of the
various states in which the Fund's common stock is qualified for sale. If
the states in which the Fund's common stock is qualified for sale impose
no such restrictions, the Adviser shall not be obligated to pay any
expenses of the Fund except those specifically referred to herein. The
expenses of the Fund's operations borne by the Fund include by way of
illustration and not limitation, directors fees paid to those directors
who are not interested persons of the Fund, as defined in the Act, the
costs of preparing and printing its registration statements required under
the Securities Act of 1933 and the Act (and amendments thereto), the
expense of registering its shares with the Securities and Exchange
Commission and in the various states, the printing and distribution cost
of prospectuses mailed to existing shareholders, the cost of stock
certificates, director and officer liability insurance, reports to
shareholders, reports to government authorities and proxy statements,
interest charges, taxes, legal expenses, compensation of administrative
and clerical personnel, association membership dues, auditing and
accounting services, insurance premiums, brokerage and other expenses
connected with the execution of portfolio securities transactions, fees
and expenses of the custodian of the Fund's assets, expenses of
calculating the net asset value and repurchasing and redeeming shares,
printing and mailing expenses, charges and expenses of dividend disbursing
agents, registrars and stock transfer agents and the cost of keeping all
necessary shareholder records and accounts.
The Fund shall monitor its expense ratio on a monthly basis. If
the accrued amount of the expenses of the Fund exceeds the expense
limitation established herein, the Fund shall create an account receivable
from the Adviser in the amount of such excess. In such a situation the
monthly payment of the Adviser's fee will be reduced by the amount of such
excess, subject to adjustment month by month during the balance of the
Fund's fiscal year if accrued expenses thereafter fall below the expense
limitation.
4. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Fund shall pay to the Adviser an
advisory fee, paid monthly, based on the average net assets of the Fund,
as determined by valuations made as of the close of each business day of
the month. The annual advisory fee shall be 0.9 of 1% of such net assets.
For any month in which this Agreement is not in effect for the entire
month, such fee shall be reduced proportionately on the basis of the
number of calendar days during which it is in effect and the fee computed
upon the average net assets of the business days during which it is so in
effect.
5. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase or in connection with the initial
capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has permitted and is
permitting the Fund to use the name "Concorde," it is understood and
agreed that the Adviser reserves the right to use and to permit other
persons, firms or corporations, including investment companies, to use
such name, and that the Fund will not use such name if the Adviser ceases
to be the Fund's sole investment adviser. During the period that this
Agreement is in effect, the Adviser shall be the Fund's sole investment
adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
security transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing broker-
dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a) (35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Fund in the
manner required by the Act, and by the vote of the majority of the
outstanding voting securities of the Fund, as defined in the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the Fund
or by a vote of the majority of the outstanding voting securities of the
Fund, as defined in the Act, upon giving sixty (60) days' written notice
to the Adviser. This Agreement may be terminated by the Adviser at any
time upon the giving of sixty (60) days' written notice to the Fund. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a) (4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for two (2)
years from the date hereof and indefinitely thereafter, but only so long
as the continuance after such two (2) year period is specifically approved
annually by (i) the board of directors of the Fund or by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act, and (ii) the board of directors of the Fund in the manner
required by the Act, provided that any such approval may be made effective
not more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
CONCORDE FINANCIAL CORPORATION
By: By:
Secretary President
CONCORDE VALUE FUND, INC.
By: By:
Secretary President
Exhibit 8
CUSTODIAN AGREEMENT
THIS AGREEMENT made on ___________________, between Fund, Inc.,
a _________________ (hereinafter called the "Corporation"), and FIRST
WISCONSIN TRUST COMPANY, a corporation organized under the laws of the
State of Wisconsin (hereinafter called "Custodian"),
W I T N E S S E T H :
WHEREAS, the Corporation desires that its securities and cash
shall be hereafter held and administered by Custodian pursuant to the
terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Corporation and Custodian agree as follows:
1. Definitions
The word "securities" as used herein include 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 interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the
Corporation by any two of the President, a Vice President, the Secretary
and the Treasurer of the Corporation, or any other persons duly authorized
to sign by the Board of Director of the Corporation.
2. Names, Titles and Signatures of Corporation's Officers
An officer of the Corporation will certify to Custodian the
names and signatures of those persons authorized to sign the officers'
certificates described in Section 1 hereof, and the names of the members
of the Board of Director, together with any changes which may occur from
time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Corporation, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Corporation. Custodian
shall make payments of cash to, or for the account of, the Corporation
from such cash only (a) for the purchase of securities for the portfolio
of the Corporation upon the delivery of such securities to Custodian,
registered in the name of the Corporation or of the nominee of Custodian
referred to in Section 7 or in proper form for transfer, (b) for the
purchase or redemption of shares of the common stock of the Corporation
upon delivery thereof to Custodian, (c) for the payment of interest,
dividends, taxes, investment adviser's fees or operating expenses
(including, without limitation thereto, fees for legal, accounting,
auditing and custodian services and expenses for printing and postage),
(d) for payments in connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Corporation held by or to be
delivered to Custodian, or (e) for other proper corporate purposes
certified by resolution of the Board of Director of the Corporation.
Before making any such payment Custodian shall receive (and may rely upon)
an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c) or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to whom
such payment is to be made; provided, however, that an officers'
certificate need not precede the disbursement of cash for the purpose of
purchasing a money market instrument if the President, a Vice President,
the Secretary or the Treasurer of the Corporation issues appropriate oral
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Corporation.
4. Receipt of Securities
Custodian shall hold in a separate account, and physically
segregated at all times from those of any other persons, firms or
corporations, pursuant to the provisions hereof, all securities received
by it from or for the account of the Corporation. All such securities are
to be held or disposed of by Custodian for, and subject at all times to
the instructions of, the Corporation pursuant to the terms of this
Agreement. The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such securities and
investments, except pursuant to the direction of the Corporation and only
for the account of the Corporation as set forth in Section 5 of this
Agreement.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Corporation held by it pursuant to this Agreement.
Custodian agrees to transfer, exchange or deliver securities held by it
hereunder only (a) for sales of such securities for the account of the
Corporation upon receipt by Custodian of payment therefore, (b) when such
securities are called, redeemed or retired or otherwise become payable,
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom, (d) in exchange for, or upon
conversion into, other securities alone or other securities and cash
whether pursuant to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise, (e) upon conversion of
such securities pursuant to their terms into other securities, (f) upon
exercise of subscription, purchase or other similar rights represented by
such securities, (g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities, (h) for the purpose of
redeeming in kind shares of common stock of the Corporation upon delivery
thereof to Custodian, or (i) for other proper corporate purposes. As to
any deliveries made by Custodian pursuant to items (a), (b), (d), (e),
(f), and (g), securities or cash receivable in exchange therefore shall be
deliverable to Custodian. Before making any such transfer, exchange or
delivery, Custodian shall receive (and may rely upon) an officers'
certificate requesting such transfer, exchange or delivery, and stating
that it is for a purpose permitted under the terms of items (a), (b), (c),
(d), (e), (f), (g) or (h) of this Section 5 and also, in respect of item
(i), upon receipt of an officers' certificate specifying the securities to
be delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be made;
provided, however, that an officers' certificate need not precede any such
transfer, exchange or delivery of a money market instrument if the
President, a Vice President, the Secretary or the Treasurer of the
Corporation issues appropriate oral instructions to Custodian and an
appropriate officers' certificate is received by Custodian within two
business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Corporation which
call for payment upon presentation and hold the cash received by it upon
such payment for the account of the Corporation; (b) collect interest and
cash dividends received, with notice to the Corporation, for the account
of the Corporation; (c) hold for the account of the Corporation hereunder
all stock dividends, rights and similar securities issued with respect to
any securities held by it hereunder; and (d) execute as agent on behalf of
the Corporation all necessary ownership certificates required by the
Internal Revenue Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state now or hereafter in
effect, inserting the Corporation's name on such certificates as the owner
of the securities covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent Federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Corporation shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Corporation and
which may from time to time be registered in the name of the Corporation.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Corporation,
except in accordance with the instructions contained in an officers'
certificate. Custodian shall deliver, or cause to be executed and
delivered, to the Corporation all notices, proxies and proxy soliciting
materials with relation to such securities, such proxies to be executed by
the registered holder of such securities (if registered otherwise than in
the name of the Corporation), but without indicating the manner in which
such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Corporation shall pay or reimburse Custodian from time to
time for any transfer taxes payable upon transfers of securities made
hereunder, and for all other necessary and proper disbursements and
expenses made or incurred by Custodian in the performance of this
Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in writing
such compensation shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board of Director, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian
and its nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Corporation for such items. In the event of
any advance of cash for any purpose made by Custodian resulting from
orders or instructions of the Corporation, or in the event that Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Corporation shall be
security therefore.
11. Reports by Custodian
Custodian shall furnish the Corporation weekly with a statement
summarizing all transactions and entries for the account of Corporation.
Custodian shall furnish the Corporation at the end of every month with a
list of the portfolio securities showing the aggregate cost of each issue.
Custodian shall furnish the Corporation, at the close of each quarter of
the Corporation's fiscal year, with a list showing the cost of the
securities held by it for the Corporation hereunder, adjusted for all
commitments confirmed by the Corporation as of such close, certified by a
duly authorized officer of Custodian. The books and records of Custodian
pertaining to its actions under this Agreement shall be open to inspection
and audit at reasonable times by officers of, and of auditors employed by,
the Corporation.
12. Termination or Assignment
This Agreement may be terminated by the Corporation, or by
Custodian, on sixty days' notice, given in writing and sent by registered
mail to Custodian at P. O. Box 2054, Milwaukee, Wisconsin 53201, or to the
Corporation at ______________, as the case may be. Upon any termination
of this Agreement, pending appointment of a successor to Custodian or a
vote of the shareholders of the Corporation to dissolve or to function
without a custodian of its cash, securities and other property, Custodian
shall not deliver cash, securities or other property of the Corporation to
the Corporation, but may deliver them to a bank or trust company in the
City of Milwaukee of its own selection, having an aggregate capital,
surplus and undivided profits, as shown by its last published report of
not less than Two Million Dollars ($2,000,000) as a Custodian for the
Corporation to be held under terms similar to those of this Agreement;
provided, however, that Custodian shall not be required to make any such
delivery or payment until full payment shall have been made by the
Corporation of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Corporation, authorized or approved by a resolution of its
Board of Director.
13. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository; provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations and the Board of Director of the Corporation
approves by resolution the use of such central securities clearing agency
or securities depository.
14. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the
Corporation pursuant to the provisions of the Investment Company Act of
1940, as amended, or the rules and regulations promulgated thereunder,
Custodian agrees to make any such records available to the Corporation
upon request and to preserve such records for the periods prescribed in
Rule 31a-2 under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above-written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRST WISCONSIN TRUST COMPANY
By
ASSISTANT SECRETARY VICE PRESIDENT
Attest: Fund, Inc.
By
Exhibit 9
SHAREHOLDER SERVICING AGENT AGREEMENT
THIS AGREEMENT, made and entered into on this _____ day of
__________, 19__, by and between ____________________ (hereinafter
referred to as the "Fund"), and FIRST WISCONSIN TRUST COMPANY, a
corporation organized under the laws of the State of Wisconsin,
(hereinafter referred to as "Agent").
WITNESSETH:
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in
the business of administering transfer and dividend disbursing agent
functions for the benefit of its customers.
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree
as follows:
1. Employment. the Fund hereby employs Agent to act as Shareholder
Servicing Agent for the Fund. Agent shall, at its own expense, render the
services and assume the obligations herein set forth subject to being
compensated therefor as herein provided.
2. Authority of Agent. Agent is hereby authorized by the Fund to
receive all cash which may from time to time be delivered to it by or for
the account of the fund; to issue confirmations and/or certificates for
shares of capital stock of the Fund upon receipt of payment; to redeem or
repurchase on behalf of the fund shares of capital stock of the Fund upon
receipt of certificates properly endorsed or properly executed written
requests as described in the Prospectus of the Fund and to act as dividend
disbursing agent for the Fund.
3. Duties of the Agent: Agent hereby agrees to:
A. Process new accounts.
B. Process purchases, both initial and subsequent in
accordance with conditions set forth in the Fund's
prospectus as mutually agreed by the Fund and the Agent.
C. Transfer shares of capital stock to an existing account or
to a new account upon receipt of required documentation in
good order.
D. Redeem uncertificated and/or certificated shares upon
receipt of required documentation in good order.
E. Issue and/or cancel certificates as instructed; replace
lost, stolen or destroyed certificates upon receipt of
satisfactory indemnification or bond.
F. Distribute dividends and/or capital gain distributions.
this includes disbursement as cash or reinvestment and to
change the disbursement option at the request of
shareholders.
G. Process exchanges between funds, (process and direct
purchase/redemption and initiate new account or process to
existing account).
H. Make miscellaneous changes to records, including, but not
necessarily limited to, address changes and changes in
plans (such as systematic withdrawal, dividend
reinvestment, etc.)
I. Prepare and mail a year-to-date confirmation and statement
as each transaction is recorded in a shareholder account as
follows: original to shareholder. Duplicate confirmations
to be available on request within current year.
J. Handle telephone calls and correspondence in reply to
shareholder requests except those items set forth in
referrals to Fund.
K. Reports to the Fund:
Daily - transaction journal with analysis of accounts.
Monthly - analysis of transactions and accounts by types.
Quarterly - state sales analysis; sales by size; analysis
of systematic withdrawals, Keogh, IRA and 403(b)(7) plans;
printout of shareholder balances.
L. Daily control and reconciliation of Fund shares with
Agent's records and the Fund office records.
M. Prepare address labels or confirmations for four reports to
shareholders per year.
N. Mail and tabulate proxies for one Annual Meeting of
Shareholders, including preparation of certified
shareholder list and daily report to Fund management, if
required.
O. Prepare and mail annual Form 1099, Form W-2P and 5498 to
shareholders to whom dividends or distributions are paid,
with a copy for the IRS.
P. Provide readily obtainable data which may from time to time
be requested for audit purposes.
Q. Replace lost or destroyed checks.
R. Continuously maintain all records for active and closed
accounts.
S. Furnish shareholder data information for a current calendar
year in connection with IRA and Keogh Plans in a format
suitable for mailing to shareholders.
4. Referrals to Fund. Agent hereby agrees to refer to the Fund for
reply the following:
A. Requests for investment information, including performance
and outlook.
B. Requests for information about specific plans: (i.e., IRA,
KEOGH, Systematic Withdrawal).
C. Requests for information about exchanges between the funds.
D. Requests for historical fund prices.
E. Requests for information about the value and timing of
dividend payments.
F. Questions regarding correspondence from the Fund and the
newspaper articles.
G. Any requests for information from non-shareholders.
H. Any other types of shareholder requests as the fund may
request from Agent in writing.
5. Compensation to Agent. Agent shall be compensated for its
services hereunder as may from time to time be agreed upon in writing
between the two parties. The Fund will reimburse Agent for all out-of-
pocket expenses, including, but not necessarily limited to, postage,
confirmation forms, etc. Special projects, not included in the fee
schedule and requested by proper instructions from the Fund, shall be
completed by Agent and invoiced to the Fund as mutually agreed upon.
6. Rights and Powers of Agent. Agent's rights and powers with
respect to acting for and on behalf of the Fund, including rights and
powers of Agent's officers and directors, shall be as follows:
A. No order direction, approval, contract or obligation on
behalf of the fund with or in any way affecting Agent shall
be deemed binding unless made in writing and signed on
behalf of the Fund by an officer or officers of the Fund
who have been duly authorized to so act on behalf of the
fund by its Board of Directors.
B. Directors, officers, agents and shareholders of the Fund
are or may at any time or times be interested in Agent as
officers, directors, agents, shareholders, or otherwise.
Correspondingly, directors, officers, agents and
shareholders of Agent are or may at any time or times be
interested in the Fund as directors, officers, agents,
shareholders or otherwise. Agent shall, if it so elects,
also have the right to be a shareholder of the Fund.
C. The services of Agent to the Fund are not to be deemed
exclusive and Agent shall be free to render similar
services to others as long as its services for others does
not in any manner or way hinder, preclude or prevent Agent
from performing its duties and obligations under this
Agreement.
D. The Fund will indemnify the Agent and hold it harmless from
and against all costs, losses, and expenses which may be
incurred by it and all claims and liabilities which may be
asserted or assessed against it as a result of any action
taken by it without negligence and in good faith, and for
any act, omission, delay or refusal made by the Agent in
connection with this agency in reliance upon or in
accordance with any instruction or advice of any duly
authorized officer of the Fund.
7. Effective Date. this Agreement shall become effective .
8. Termination of Agreement. This Agreement shall continue in
force and effect until terminated or amended to such an extent that a new
Agreement is deemed advisable by either party. Notwithstanding anything
herein to the contrary, this Agreement may be terminated at any time,
without payment of any penalty, by the fund or Agent upon ninety (90)
days' written notice to the other party.
9. Amendment. This Agreement may be amended by mutual written
consent of the parties. If, at any time during the existence of this
Agreement, the Fund deems it necessary or advisable in the best interests
of Fund that any amendment of this Agreement be made in order to comply
with the recommendations or requirements of the Securities and Exchange
commission or state regulatory agencies or other governmental authority,
or to obtain any advantage under state or federal laws, and shall notify
Agent of the form of amendment which it deems necessary or advisable and
the reasons therefor, and if Agent declines to assent to such amendment,
fund may terminate this Agreement forthwith.
10. Notice. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be in writing,
addressed and delivered, or mailed postpaid to the other party at the
principal place of business of such party.
FIRST WISCONSIN TRUST COMPANY
By: By:
Attest: Attest:
Exhibit 9.1
FUND ACCOUNTING SERVICING AGREEMENT
This contract between Concorde Value Fund, Texas Corporation,
hereinafter called the "Fund," and Firstar Trust Company, a Wisconsin
corporation, hereinafter called "FTC," is entered into on this 3rd day of
June, 1993.
WITNESSETH:
WHEREAS, Concorde Value Fund, is a financial services company
providing investment opportunities through mutual funds to various
investors;
WHEREAS, Firstar Trust Company ("FTC") is in the business of
providing, among other things, mutual fund accounting services to
investment companies;
NOW, THEREFORE, the Fund and FTC do mutually promise and agree as
follows:
1. Services. FTC agrees to provide the following mutual fund
accounting services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis using
security trade information communicated from the investment
manager on a timely basis
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors and apply those prices
to the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors
shall approve, in good faith, the method for determining the
fair value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify
them as to short-short, short- or long-term status; accounting
for periodic distributions of gains or losses to shareholders
and maintain undistributed gain or loss balances as of each
valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or
dollar amount.
(2) Record payments for fund expenses upon receipt of
written authorization from the Fund.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed
upon by FTC and the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Accounting for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity
as reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the
Fund as of each valuation date. Accounting for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each
valuation date.
(4) Maintain a general ledger for the Fund in the form as
agreed upon.
(5) For each day the Fund is open as defined in the
prospectus, determine the net asset value of the Fund according
to the accounting policies and procedures set forth in the
prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund
operation at such time as required by the nature and
characteristics of the fund.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from
time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for the investment
portfolio of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax cost basis defined for the Fund.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting
records available to Concorde Value Fund, the Securities and
Exchange commission, and the outside auditors.
(2) Maintain accounting records according to the
Investment Company Act of 1940 and regulations provided
thereunder.
2. Changes in Accounting Procedures. Any resolution passed by the
Board of Directors that affects accounting practices and procedures under
this agreement shall be effective upon written receipt and acceptance by
the FTC.
3. Changes in Equipment, Systems, Service, Etc. FTC reserves the
right to make changes from time to time, as it deems advisable, relating
to its services, systems, programs, rules, operating schedules and
equipment, so long as such changes do not adversely affect the service
provided to the Fund under this Agreement.
4. Compensation. FTC shall be compensated for providing the
services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from
time to time.
5. Performance of Service. FTC shall exercise reasonable care in
the performance of its duties under the Agreement. The Concorde Value
Fund agrees to reimburse and make FTC whole for any loss or damages
(including reasonable fees and expenses of legal counsel) arising out of
or in connection with its actions under this Agreement so long as FTC acts
in good faith and is not negligent or guilty of any willful misconduct.
FTC shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts o
civil or military authority, natural or state emergencies, fire,
mechanical breakdown, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or power supply.
In the event of a mechanical breakdown beyond its control, FTC
shall take all reasonable steps to minimize service interruptions for any
period that such interruption continues beyond FTC's control. FTC will
make every reasonable effort to restore any lost or damaged data and the
correcting of any errors resulting from such a breakdown will be at the
expense of FTC. FTC agrees that it shall at all times have reasonable
contingency plans with appropriate parties, making reasonable provision
for emergency use of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of the Fund shall be
entitled to inspect FTC's premises and operating capabilities at any time
during regular business hours of FTC, upon reasonable notice to FTC.
This indemnification includes any act, omission to act, or delay
by FTC in reliance upon, or in accordance with, any written or oral
instruction it receives from any duly authorized officer of the Fund.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
6. No Agency Relationship. Nothing herein contained shall be
deemed to authorize or empower FTC or the Fund to act as agent for any
other party to this Agreement, or to conduct business in the name of, or
for the account of, any other party to this Agreement.
7. Ownership of Records. All records prepared or maintained by FTC
on behalf of the fund remain the property of the Fund and will be
surrendered promptly on the written request of an authorized officer of
the Fund.
8. Confidentiality. FTC shall handle in confidence all information
relating to the Fund's business, which is received by FTC during the
course of rendering any service hereunder.
9. Data necessary to Perform Services. The Fund or its agent,
which may be FTC, shall furnish to FTC the data necessary to perform the
services described herein at times and in such form as mutually agreed
upon.
10. Notification of Error. The Fund will notify FTC of any
balancing or control error caused by FTC within three (3) business days
after receipt of any reports rendered by FTC to the Fund, or within three
(3) business days after discovery of any error or omission not covered in
the balance or control procedure, or within three (3) business days of
receiving notice from any shareholder.
11. Term of Agreement. This Agreement may be terminated by either
party upon giving ninety (90) days prior written notice to the other party
or such shorter period as is mutually agreed upon by the parties.
However, this Agreement may be replaced or modified by a subsequent
agreement between the parties.
12. Duties in the Event of Termination. In the event that in
connection with termination a Successor to any of FTC's duties or
responsibilities hereunder is designated by Concorde Value Fund by written
notice to FTC, FTC will promptly, upon such termination and at the expense
of Concorde Value Fund, transfer to such Successor all relevant books,
records, correspondence and other data established or maintained by FTC
under this Agreement in a form reasonably acceptable to Concorde Value
Fund (if such form differs from the form in which FTC has maintained the
same, Concorde Value Fund shall pay any expenses associated with
transferring the same to such form), and will cooperate in the transfer of
such duties and responsibilities, including provision for assistance from
FTC's personnel in the establishment of books, records and other data by
such successor.
13. Choice of Law. This memorandum of understanding shall be
construed in accordance with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
Firstar Trust Company
ATTEST:
By
Concorde Value Fund
ATTEST:
By
Gary B. Wood, President
<PAGE>
First Trust Company
Mutual Fund Services
Fund Valuation and Accounting
Annual Fee Schedule
For Domestic Portfolios
Portfolio Services - Fixed Income Funds
- Annual fee per fund based on market value of assets:
$22,000 for the first $40,000,000
2/100 of 1% (2 basis points) on the next $200,000,000
1/100 of 1% (1 basis point) on the balance
- Out-of-pocket expenses, including daily pricing service
- Fees are billed monthly
Portfolio Services - Equity/Balanced Funds
- Annual fee per fund based on market value of assets:
$20,000 for the first $40,000,000
1/100 of 1% (1 basis point) on the next $200,000,000
5/1000 of 1% (1/2 basis point) on the balance
- Out-of-pocket expenses, including daily pricing service
- Fees are billed monthly
Portfolio Services - Money Market Funds
- Annual fee per fund based on market value of assets:
$20,000 for the first $40,000,000
5/1000 of 1% (1/2 basis point) on the balance
- Out-of-pocket expenses, including daily pricing service
- Fees are billed monthly
<PAGE>
First Trust Company
Mutual Fund Services
Fund Valuation and Accounting
Asset Pricing Costs
Charge per Item per Valuation
Asset Type (daily, weekly, etc.)
Domestic and Canadian Equities $0.15
Options $0.15
Corporate/Gov't/Agency Bonds $0.50
CMOs $0.60
Municipal Bonds $0.80
Money Market Instruments $0.80
Pricing costs are billed monthly
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
The Boards of Directors
Concorde Funds, Inc.
We consent to the use of our reports included in the Concorde Funds, Inc.
Annual Report to shareholders and 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 Funds, Inc. Form N-1A as of November
27, 1996.
KPMG Peat Marwick LLP
Dallas, Texas
November 27, 1996
Exhibit 14.1
CONCORDE FINANCIAL CORPORATION
INDIVIDUAL RETIREMENT ACCOUNT
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in section 402(a)(5),
402(a)(7), 403(b)(8), 405(d)(3), or 409(b)(3)(C) of the Code or an
employer contribution to a simplified employee pension plan as described
in section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the Custodial Account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of section 408(m) of the Code).
ARTICLE IV
1. The Depositor's entire interest in the Custodial Account
must be, or begin to be, distributed before the end of the tax year in
which the Depositor reaches age 70-1/2. By the end of that tax year, the
Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the Custodial Account distributed in:
(a) A lump-sum payment.
(b) Equal or substantially equal monthly, quarterly, or
annual payments over a specified period that may not be longer
than the Depositor's life expectancy.
(c) Equal or substantially equal monthly, quarterly, or
annual payments over a specified period that may not be longer
than the joint life and last survivor expectancy of the
Depositor and his or her spouse.
Even if distributions have begun to be made under option (b) or
(c), the Depositor may receive a distribution of the balance in the
Custodial Account at any time by giving written notice to the Custodian.
If the Depositor does not choose any of the methods of distribution
described above by the end of the tax year in which he or she reaches age
70-1/2, distribution to the Depositor will be made before the end of that
tax year by a lump-sum payment. If the Depositor elects as a means of
distribution (b) or (c) above, figure the payments made in tax years
beginning in the tax year the Depositor reaches age 70-1/2 as follows:
(i) For the minimum annual payment, divide the
Depositor's entire interest in the Custodial Account at the
beginning of each year by the life expectancy of the Depositor
(or the joint life and last survivor expectancy of the Depositor
and his or her spouse, or the period specified under (b) or (c),
whichever applies). Determine the life expectancy in either
case on the date the Depositor reaches 70-1/2 minus the number
of whole years passed since the Depositor became 70-1/2.
(ii) For the minimum monthly payment, divide the result in
(i) above by 12.
(iii) For the minimum quarterly payment, divide the result
in (i) above by 4.
2. If the Depositor dies before his or her entire interest in
the account is distributed to him or her, or if distribution is being made
as provided in (c) above to his or her surviving spouse, and the surviving
spouse dies before the entire interest is distributed, the entire
remaining undistributed interest will, within 5 years after the
Depositor's death or the death of the surviving spouse, be distributed to
the beneficiary or beneficiaries of the Depositor or the Depositor's
surviving spouse. However, the preceding distribution is not required if
distributions over a specified term began before the death of the
Depositor and the term is for a period permitted under (b) or (c) above
and distributions continue over that period. If the Depositor dies before
his or her entire interest has been distributed and if the beneficiary is
other than the surviving spouse, no additional cash contributions or
rollover contributions may be accepted in the account.
ARTICLE V
Unless the Depositor dies, is disabled (as defined in section
72(m) of the Code), or reaches age 59-1/2 before any amount is distributed
from the account, the Custodian must receive from the Depositor a
statement explaining how he or she intends to dispose of the amount
distributed.
ARTICLE VI
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under section 408(i) of the Code and the related regulations.
2. The Custodian agrees to submit to the Internal Revenue
Service and the Depositor such reports as the Internal Revenue Service
shall prescribe.
ARTICLE VII
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
section 408(a) of the Code and related regulations will be invalid.
ARTICLE VIII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE IX
1. Definitions. "Investment Company" shall mean the Concorde
Value Fund, Inc. and/or such other investment company as defined in
Internal Revenue Code Section 851(a) for which Concorde Financial
Corporation serves as investment advisor and which has agreed to offer
shares for an IRA. "Investment Company Shares" or "Shares" shall mean
shares of capital stock of the Investment Company.
2. Investment of Account Assets.
(a) Each contribution forwarded by the Depositor to the
Custodian shall identify the Depositor's account number and be accompanied
by a statement signed by the Depositor directing the Custodian as to which
Investment Company shares that contribution is to be invested in. The
Custodian may return to the Depositor, without liability for interest
thereon, any contributions which are not accompanied by adequate account
identification or an appropriate signed statement directing investment of
those contributions.
(b) Contributions shall be invested in whole and
fractional Investment Company Shares at the price and in the manner in
which such shares are then being publicly offered by the Investment
Company. All distributions received on Investment Company Shares held in
the Custodial Account shall be reinvested in like Shares and credited to
such Account. If any distribution of Investment Company Shares may be
received at the election of the shareholder in additional like Shares or
in cash or other property, the Custodian shall elect to receive such
distribution in additional like Investment Company Shares.
(c) All Investment Company Shares acquired by the
Custodian shall be registered in the name of the Custodian or its
registered nominee. The Depositor shall be the beneficial owner of all
Investment Company Shares held in the Custodial Account and the Custodian
shall not vote any of such shares, except upon written direction of the
Depositor. The Custodian agrees to forward to every Depositor a then
current Prospectus, reports, notices, proxies and related proxy soliciting
materials applicable to Investment Company Shares received by the
Custodian.
(d) The Depositor may at any time, by a manually signed
direction delivered to the Custodian, redeem any number of shares held for
his account in any Investment Company and reinvest the proceeds in the
shares of any other Investment Company. Telephone redemptions and
reinvestments will not be accepted. Such redemptions and reinvestments
shall be done at the price and in the manner in which such shares are then
being redeemed or offered by the respective Investment Companies.
3. Amendment and Termination.
(a) The Custodian may, with the written approval of each
Investment Company, amend the Custodial Account in whole or in part
(including retroactive amendments) by delivering to the Depositor written
notice of such amendment setting forth the substance and effective date of
the amendment. The Depositor shall be deemed to have consented to any
such amendments not objected to in writing by the Depositor within thirty
(30) days of receipt of the notice, provided that no amendment shall cause
or permit any part of the assets of the Custodial Account to be diverted
to purposes other than for the exclusive benefit of the Depositor or his
beneficiaries, nor shall any amendment be made except in accordance with
the applicable law and regulations affecting this Custodial Account.
(b) The Depositor may at any time terminate the Custodial
Account by delivering to the Custodian a written notice of such
termination setting forth the effective date thereof.
(c) The Custodial Account created by this Agreement shall
automatically terminate upon distribution to the Depositor or any
beneficiary designated under Paragraph 6 of Article IX hereof of the
entire balance in the Custodial Account.
(d) The Custodian may be removed by the Depositor at any
time upon thirty (30) days written notice to the Custodian. The Custodian
may elect to terminate the Custodial Account upon thirty (30) days written
notice to the Depositor.
4. Taxes and Custodial Fees. Any income taxes or other taxes
of any kind whatsoever that may be levied or assessed upon or in respect
of the assets of the Custodial Account, or the income arising therefrom,
any transfer taxes incurred, all other administrative expenses incurred by
the Custodian in the performance of its duties, including fees for legal
services rendered to the Custodian, and the Custodian's compensation,
shall be paid from the Custodial Account. The Custodian's fees are:
(a) Opening Account fee - $______
(b) Annual maintenance fee - $______
(c) Refund of excess contribution - $______
The annual maintenance fee will not be charged the first year, if the
Depositor opens the account between October 1 and December 31 of such
year.
Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to such
additional charges as will reasonably compensate the Custodian for the
services performed.
The Opening Account Fee shall accompany the application to
establish the account.
Fees for refund of excess contributions or Investment Company
share redemption/reinvestment will be deducted from the refund or
redemption proceeds at the time of refund or redemption and the remaining
balance will be remitted to the Depositor in the case of refund, or will
be reinvested in accordance with the Depositor's instructions.
5. Reports and Notices.
(a) The Custodian shall keep adequate records of
transactions it is required to perform hereunder. Not later than sixty
(60) days after the close of each calendar year, or after the Custodian's
resignation or removal pursuant to Article IX, Paragraph 3, the Custodian
shall render to Depositor or Depositor's legal representative a written
report or reports reflecting the transactions effected by it during such
period and the assets and liabilities of the Custodial Account at the
close of the period.
(b) All communications or notices required or permitted
to be given herein shall be deemed to be given upon receipt by the
Custodian at the Investment Company and/or the Depositor at his most
recent address shown in the Custodian's records. The Depositor agrees to
advise the Custodian promptly, in writing, of any change of address.
6. Designation of Beneficiary. The Depositor shall have the
right, by written notice to the Custodian, to designate a beneficiary or
beneficiaries, primary and contingent, to receive any benefit to which
such Depositor may be entitled in the event of his death prior to the
complete distribution of such benefit. In the event the Depositor has not
designated any beneficiaries, or if all beneficiaries shall predecease the
Depositor, the following persons shall take in the order named:
(a) Spouse of the Depositor;
(b) If the spouse shall predecease the Depositor, then in
equal shares to any children surviving the Depositor and to the
descendants then living of a deceased child, by the right of
representation; or
(c) If the Depositor shall leave neither spouse nor
descendants surviving, then to the personal representative of the
Depositor's estate.
7. Inalienability of Benefits. The benefits provided
hereunder shall not be subject to alienation, assignment, garnishment,
attachment, execution or levy of any kind and any attempt to cause such
benefits to be so subjected shall not be recognized except to the extent
as may be required by law.
8. Rollover Contributions. The Custodian shall have the right
to receive rollover contributions as described in Section 408(d)(3) of the
Code. If any property is transferred to the Custodian as a rollover
contribution, such property shall be sold by the Custodian and the
proceeds reinvested as provided in Section 2 of this Article IX. The
Custodian reserves the right to refuse to accept any contributions which
are not in the form of cash.
9. Conflict in Provisions. To the extent that any provisions
of Article IX shall conflict with the provisions of Articles IV-VIII, the
provisions of Article IX shall prevail.
10. Applicable State Law. This Custodial Account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
Exhibit 14.2
CONCORDE FINANCIAL CORPORATION
SIMPLIFIED EMPLOYEE PENSION PLAN
_____________________ (hereinafter the "Employer") makes the
following agreement under the terms of Section 408(k) of the Internal
Revenue Code and the instructions to this form.
The Employer agrees to provide for discretionary contributions
in each calendar year to the Individual Retirement Accounts or Individual
Retirement Annuities (IRA's) of all eligible employees who are at least
_______ years old (not over 21 years old) [see instruction "Who May
Participate"] and worked in at least _____ years (not over 3 years) of the
immediately preceding 5 years [see instruction "Who May Participate"].
This [ ] includes [ ] does not include (check one) employees covered under
a collective bargaining agreement and [ ] includes [ ] does not include
(check one) employees whose total compensation during the year is less
than $300.
The Employer agrees that contributions made on behalf of each
eligible employee will:
- Be made only on the first $200,000 of compensation (as adjusted
per Code Section 408(k)(3)(C)).
- Be made in an amount that is the same percentage of total
compensation for every employee.
- Be limited to the smaller of $30,000 (or if greater, 1/4 of the
dollar limitation in effect under Section 415(b)(1)(A)) or 15%
of compensation.
- Be paid to the IRA Custodian, First Wisconsin Trust Company.
Signature of Employer Date
By
<PAGE>
CONCORDE FINANCIAL CORPORATION
SIMPLIFIED EMPLOYEE PENSION PLAN
INSTRUCTIONS
This form is to be used by an employer to provide benefits to
all employees under a Simplified Employee Pension plan (SEP) described in
Section 408(k) of the Internal Revenue Code ("Code"). This form is NOT to
be filed with the IRS.
A SEP provides an employer with a simplified way to make
contributions toward an employee's retirement income. Under a SEP, the
employer is permitted to contribute a certain amount (see below) to an
employee's Individual Retirement Account or Individual Retirement Annuity
(IRA's). The employer makes contributions directly to an IRA set up by an
employee. Making the agreement on this form does not establish an
employer IRA as described under Section 408(c).
1. Use of This Form
This form may not be used by an employer who:
- Currently maintains any other qualified retirement plan;
- Has maintained in the past a defined benefit plan, even if now
terminated.
- Has any eligible employees for whom IRA's have not been
established.
- Uses the services of leased employees (as described in Section
414(n)).
- Is a member of an affiliated service group (as described in
Section 414(m)), a controlled group of corporations (as
described in Section 414(b)), or trades or businesses under
common control (as described in Section 414(c)), UNLESS all
eligible employees of all the members of such groups, trades, or
businesses, participate under the SEP.
This form should only be used if the employer will pay the cost
of the SEP contributions. This form is not suitable for a SEP that
provides for contributions at the election of the employee whether or not
made pursuant to a salary reduction agreement.
2. Who May Participate
Any employee who is at least 21 years old and has performed
"service" for the employer in at least 3 years of the immediately
preceding 5 years must be permitted to participate in the SEP. However,
the employer may establish less restrictive eligibility requirements if it
chooses. "Service" is any work performed for the employer for any period
of time, however short. Further, if the employer is a member of an
affiliated service group, a controlled group of corporations, or trades or
businesses under common control, "service" includes any work performed for
any period of time for any other member of such group, trades, or
businesses. Generally, to make the agreement, all eligible employees
(including all eligible employees, if any, of other members of an
affiliated service group, a controlled group of corporations, or trades or
businesses under common control) must participate in the plan. However,
employees covered under a collective bargaining agreement and certain
nonresident aliens may be excluded if Section 410(b)(3)(A) or 410(b)(3)(C)
applies to them. Employees whose total compensation for the year is less
than $300 may be excluded.
3. Amount of Contributions
An employer is not required to make any contributions to an
employee's SEP-IRA in a given year. However, if the employer does make
contributions, it must make them to the IRA's of all eligible employees,
whether or not they are still employed at the time contributions are made.
The contributions made must be the same percentage of each employee's
total compensation (up to a maximum compensation base of $200,000 as
adjusted per Section 408(k)(3)(C) for cost of living changes). The
contributions you make in a year for any one employee may not be more than
the smaller of $30,000 or 15% of that employee's total compensation
(figured without considering the SEP-IRA contributions).
For this purpose, compensation includes:
- Amounts received for personal services actually performed (see
Section 1.219-1(c) of the Income Tax Regulations); and
- Earned income defined under Section 401(c)(2).
In making contributions, you may not discriminate in favor of
any employee who is highly compensated.
Under this form you may not integrate your SEP contributions
with, or offset them by, contributions made under the Federal Insurance
Contributions Act (FICA).
4. Annual Reporting
Currently, employers who have established a SEP using this
agreement and have provided each participant with a copy of this form,
including the questions and answers, are not required to file the annual
information returns, Forms 5500, 5500-C, 5500-R, or 5500EZ for the SEP.
5. Deductibility of Contributions
An employer may deduct all contributions to a SEP subject to the
limitations of Section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your taxable year
with or within which the calendar year ends. Contributions made for a
particular taxable year and contributed by the due date of your income tax
return (including extensions) shall be deemed made in that taxable year.
6. Making the Agreement
This agreement is considered made when (1) IRA's have been
established for all of the employer's eligible employees, (2) the employer
has completed all blanks on the agreement form without modification, and
(3) the employer gives all eligible employees copies of the agreement
form, instructions, and questions and answers.
The employer should keep the agreement form with its records; do
not file it with the IRS.
7. Questions and Answers
The information provided explains what a Simplified Employee
Pension plan is, how contributions are made, and how to treat your
employer's contributions for tax purposes.
Please read the questions and answers carefully. For more
specific information, also see the agreement form and instructions to your
employer on this form.
1. Q. What is a Simplified Employee Pension, or SEP?
A. A SEP is a retirement income arrangement under which
your employer may contribute any amount each year up to the smaller of
$30,000 or 15% of your compensation into your own Individual Retirement
Account/Annuity (IRA).
Your employer will provide you with a copy of the agreement
containing participation requirements and a description of the basis upon
which employer contributions may be made to your IRA.
All amounts contributed to your IRA by your employer belong to
you, even after you separate from service with that employer.
The $30,000 limitation referred to above may be increased by 1/4
of the dollar limitation in effect under Section 415(b)(l)(A).
2. Q. Must my employer contribute to my IRA under the SEP?
A. Whether or not your employer makes a contribution to
the SEP is entirely within the employer's discretion. If a contribution
is made under the SEP, it must be allocated to all the eligible employees
according to the SEP agreement. The SEP specifies that the contribution
on behalf of each eligible employee will be the same percentage of
compensation (excluding compensation higher than $200,000) for all
employees.
3. Q. How much may my employer contribute to my SEP-IRA in
any year?
A. Under the SEP that your employer has adopted, your
employer will determine the amount of contribution to be made to your IRA
each year. However, the contribution for any year is limited to the
smaller of $30,000 or 15% of your compensation for that year. The
compensation used to determine this limit does not include any amount
which is contributed by your employer to your IRA under the SEP. The
agreement does not require an employer to maintain a particular level of
contributions. It is possible that for a given year no employer
contribution will be made on an employee's behalf.
Also see Question 5.
4. Q. How do I treat my employer's SEP contributions for my
taxes?
A. The amount your employer contributes for years
beginning after 1986 is excludable from your gross income subject to
certain limitations including the lesser of $30,000 or 15% of compensation
mentioned in 1A above and is not includable as taxable wages on your Form
W-2.
5. Q. May I also contribute to my IRA if I am a participant
in a SEP?
A. Yes. You may still contribute the lesser of $2,000 or
100% of your compensation to an IRA. However, the amount which is
deductible is subject to various limitations.
See also Question 11.
6. Q. Are there any restrictions on the IRA I select to
deposit my SEP contributions in?
A. Under the SEP that is approved by IRS, contributions
must be made to either a Model IRA which is executed on an IRS form or a
master or prototype IRA for which IRS has issued a favorable opinion
letter.
7. Q. What if I don't want a SEP-IRA?
A. Your employer may require that you become a participant
in such an arrangement as a condition of employment. However, if the
employer does not require all eligible employees to become participants
and an eligible employee elects not to participate, all other employees of
the same employer may be prohibited from entering into a SEP-IRA
arrangement with that employer. If one or more eligible employees do not
participate and the employer attempts to establish a SEP-IRA agreement
with the remaining employees, the resulting arrangement may result in
adverse tax consequences to the participating employees.
8. Q. Can I move funds from my SEP-IRA to another tax-
sheltered IRA?
A. Yes, it is permissible for you to withdraw, or receive,
funds from your SEP-IRA, and no more than 60 days later, place such funds
in another IRA, or SEP-IRA. This is called a "rollover" and may not be
done without penalty more frequently than at one-year intervals. However,
there are no restrictions on the number of times you may make "transfers"
if you arrange to have such funds transferred between the trustees, so
that you never have possession.
9. Q. What happens if I withdraw my employer's contribution
from my IRA?
A. If you don't want to leave the employer's contribution
in your IRA, you may withdraw it at any time, but any amount withdrawn is
includable in your income. Also, if withdrawals occur before attainment
of age 59-1/2 and not on account of death or disability, you may be
subject to a penalty tax.
10. Q. May I participate in a SEP even though I'm covered by
another plan?
A. An employer may not adopt this SEP form if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. However, if you work for several
employers you may be covered by a SEP of one employer and a different SEP
or pension or profit-sharing plan of another employer.
Also see Questions 11 and 12.
11. Q. What happens if too much is contributed to my SEP-IRA
in one year?
A. Any contribution that is more than the yearly
limitations may be withdrawn without penalty by the due date (plus
extensions) for filing your tax return (normally April 15th), but is
includable in your gross income. Excess contributions left in your SEP-
IRA account after that time are subject to a 6% excise tax. Withdrawals
of those contributions may be taxed as premature withdrawals.
Also see Question 10.
12. Q. Do I need to file any additional forms with the IRS
because I participate in a SEP?
A. No.
13. Q. Is my employer required to provide me with information
about SEP-IRA's and the SEP agreement?
A. Yes, your employer must provide you with a copy of the
executed SEP agreement, these questions and answers, and provide a
statement each year showing any contribution to your IRA.
Also see Question 4.
14. Q. Is the financial institution where I establish my IRA
also required to provide me with information?
A. Yes, it must provide you with a disclosure statement
which contains the following items of information in plain, nontechnical
language:
(1) the statutory requirements which relate to your IRA;
(2) the tax consequences which follow the exercise of
various options and what those options are;
(3) participation eligibility rules and rules on the
deductibility and nondeductibility of retirement savings;
(4) the circumstances and procedures under which you may
revoke your IRA, including the name, address, and telephone number of
the person designated to receive notice of revocation (this
explanation must be prominently displayed at the beginning of the
disclosure statement;
(5) explanations of when penalties may be assessed against
you because of specified prohibited or penalized activities
concerning your IRA; and
(6) financial disclosure information which:
(a) either projects value growth of your IRA under
various contribution and retirement schedules, or describes
the method of computing and allocating annual earnings and
charges which may be assessed;
(b) describes whether, and for what period, the
growth projections for the plan are guaranteed, or a
statement of the earnings rate and terms on which the
projection is based;
(c) states the sales commission to be charged in each
year expressed as a percentage of $1,000; and
(d) states the proportional amount of any
nondeductible life insurance which may be a feature of your
IRA.
See Publication 590, Individual Retirement Arrangements (IRA's)
available at most IRS offices, for a more complete explanation of the
disclosure requirements.
In addition to this disclosure statement, the financial
institution is required to provide you with a financial statement each
year. It may be necessary to retain and refer to statements for more than
one year in order to evaluate the investment performance of the IRA and in
order that you will know how to report IRA distributions for tax purposes.
Exhibit 14.4
CONCORDE FINANCIAL CORPORATION
SECTION 403(b)(7) RETIREMENT PLAN
The Concorde Financial Corporation Section 403(b)(7) Retirement Plan
("Plan") is designed to allow eligible employees or employers described in
Article I to have Employer Contributions invested in the shares of the
Concorde Value Fund, Inc., a regulated investment company managed by
Concorde Financial Corporation ("Investment Advisor"). This Plan is
intended to comply with the provisions of the Employee Retirement Income
Security Act of 1974 ("Act") and the Internal Revenue Code of 1986, as
amended ("Code").
ARTICLE I
ELIGIBILITY
A. Any person who performs services as an employee for an employer
which is an organization described in Section 501(c)(3) of the Code and is
exempt from tax under Section 501(a) of the Code, or who performs services
for an educational institution (as defined in Section 170(b)(1)(A)(ii) of
the Code) or for an employer which is a State or a political subdivision
of a State or an agency or instrumentality of either, and who obtains the
consent of such employer (the "Employer") to participate herein, is
eligible to adopt this Plan.
B. Any Employer which is an organization described in Section
501(c)(3) of the Code and is exempt from tax under Section 501(a) of the
Code, or is an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) or a State or a political subdivision of a
State or an agency or instrumentality of either, may adopt this plan for
any or all of its eligible employees.
ARTICLE II
PARTICIPATION
An eligible person who wishes to adopt this Plan (the "Individual")
may do so by signing and mailing to the bank named in the Account
Application, as Custodian (the "Custodian") a counterpart copy of the
Account Application that will be found at the end of this Plan Document.
An eligible Employer may adopt this plan by either having the Individual
follow the procedure described in the preceding sentence or by obtaining
the Individual's signature on the application and following the procedure
itself thereafter.
The Application and the Salary Reduction Agreement are incorporated
herein by reference as part of the Plan. The Plan will be deemed to be
adopted when the Custodian shall have indicated its written acceptance on
the Application.
ARTICLE III
CONTRIBUTIONS
An Employer may contribute cash to the Individual's account (the
"Custodial Account") in any taxable year in any amount which (i) is not an
"excess contribution" as that expression is defined in Section 4973(c) of
the Code and (ii) if such Employer's contribution is made as a result of a
Salary Reduction Agreement between the Employer and the Individual, does
not exceed the limitation on "elective deferrals" contained in Section
402(g) of the Code. In addition, the Employer may transfer or cause to be
transferred to the Custodial Account the cash surrender or redemption
value of an annuity or variable annuity for which the Employer previously
made contributions on the Individual's behalf.
Neither the Investment Advisor nor the Custodian shall be responsible
for determining the amount an Employer may contribute on behalf of the
Individual, nor shall either be responsible to recommend or compel
Employer contributions to the Custodial Account. If during any taxable
year the Employer contributes an amount which is an "excess contribution",
such excess contribution and any income attributable thereto shall, upon
the written request of the Individual, be paid to him by the Custodian,
or, at the Individual's election, be applied toward a contribution for the
current or the next subsequent year. If, however, during any taxable year
the Employer contributes an amount which is an excess "elective deferral"
(or if excess "elective deferrals" are allocated to the Individual's
Custodial Account pursuant to Section 402(g) (2) of the Internal Revenue
Code), such excess amount and any income attributable thereto may, upon
the written request of the Individual no later than March I following the
close of such taxable year, be distributed to the Individual by the
following April 1.
The interest of the Individual in the Custodial Account shall be non-
forfeitable at all times, may not be assigned, and shall not be subject to
alienation, assignment, garnishment, attachment, execution or levy of any
kind, except with regard to payment of the expenses of the Custodian as
authorized by the provisions of this Plan.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
All contributions made by or at the instigation of the Employer shall
be used by the Custodian to purchase shares of the common stock of the
Concorde Value Fund, Inc. This company is a regulated investment company
managed by the Investment Advisor. This regulated investment company will
be referred to as an "Investment Company", and the shares of the
Investment Company will be referred to as "Investment Company Shares".
All income, dividends and where applicable, capital gain distributions
shall be reinvested in additional Investment Company Shares designated by
the Individual.
ARTICLE V
DISTRIBUTIONS
A. The Individual may receive distribution of the assets in his
Custodial Account upon any of the following events:
1. Attainment of age 59-1/2;
2. Termination of his employment;
3. Disability; or
4. Retirement.
B. For the purposes of this Plan the Individual shall be considered
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long continued and
indefinite duration.
C. The Individual shall be eligible to receive a distribution from
his Custodial Account after the Custodian's receipt of written
notification from the Hardship Adjudicator indicating:
(1) that the Individual has incurred a substantial financial
hardship; and
(2) the specific amount needed to meet the substantial
financial hardship.
The amount distributed from the Custodial Account shall not exceed the
amount specified in the notification.
For purposes of this Plan, a substantial financial hardship shall
mean serious illness, disability or death of the Individual or a
dependent, job layoff or discharge of the Individual or spouse, financing
of a primary residence or educational expenses, or other similar
circumstances creating an immediate and heavy financial need which cannot
be met by other reasonably available resources of the Individual.
A Hardship Adjudicator shall be designated by the Employer prior to
any determination of financial hardship and shall be responsible for:
(1) determining that a substantial financial hardship exists;
(2) designating the amount necessary to meet such a substantial
financial hardship; and
(3) notifying the Custodian in writing of its decision.
Any determination under this Paragraph is to be made in accordance
with uniform and nondiscriminatory standards established at the time of
the designation of the Hardship Adjudicator. The Individual has the
responsibility of providing the Hardship Adjudicator with any and all
documents, financial data or other information which the Hardship
Adjudicator deems necessary in order to make its determination. No
distribution based on financial hardship shall be made except following
written notification from the Hardship Adjudicator. The Hardship
Adjudicator must be an independent person (or persons) other than the
Individual, the Custodian, the Investment Advisor or any employee thereof,
or any other person who would be a disqualified person within the meaning
of Section 4975 of the Internal Revenue Code if the Custodial Account were
a qualified plan under Section 401 of the Code.
The Employer need not designate a Hardship Adjudicator, and in the
event the Employer declines to do so, distributions on account of
substantial financial hardship will not be permitted under this Plan.
D. Benefits accruing after December 31, 1986 shall be distributed
in accordance with regulations prescribed by the Secretary of the Treasury
pursuant to Section 403(b)(10) of the Code, or in the absence of such
regulations, in accordance with Section 401(a)(9) of the Code and the
regulations thereunder. Benefits accrued prior to January 1, 1987, if
any, shall be distributed in accordance with applicable distribution
requirements in effect at the time of such distribution.
E. The Individual may elect a form of distribution from among the
following alternatives:
1. A single sum payment in cash or Investment Company Shares;
or
2. Equal or substantially equal monthly, quarterly, or annual
payments over a period certain not extending beyond the life expectancy of
the Individual; or
3. Equal or substantially equal monthly, quarterly or annual
payments over a period certain not extending beyond the joint life and
last survivor expectancy of the Individual and his spouse.
Such election shall be made at least sixty (60) days prior to the
date on which distribution is expected to be made or to begin. Such
election shall be irrevocable and shall be made in writing in such form as
shall be acceptable to the Custodian. In no event shall the Custodian
have any responsibility for determining or giving advice with respect to
life expectancies.
F. If the Individual fails to elect any of the methods of
distribution described above within the time specified for such election,
then distribution shall be made in the form of a single sum cash payment.
If the Individual elects a mode of distribution under subparagraphs 2 or 3
of Paragraph E above, the amount of the monthly, quarterly or annual
payments shall be determined by dividing the entire interest of the
Individual in the Custodial Account at the beginning of each year by the
number of years remaining in the period specified by the Individual's said
election.
G. If the Individual dies before his entire interest in the
Custodial Account is distributed to him, the remaining undistributed
balance of such interest shall be distributed in the form of a single sum
cash payment to the beneficiary or beneficiaries, if any, designated by
the Individual, or if no such beneficiary has been designated, then to the
Individual's estate.
H. The Individual may designate a beneficiary or beneficiaries of
his or her own choosing, and may, in addition, name a contingent
beneficiary. Such designation shall be made in writing in a form
acceptable to the Custodian. The Individual may at any time revoke his or
her designation of a beneficiary or change the beneficiary by filing
notice of such revocation or change with the Custodian. If no designation
of a beneficiary shall have been made, distribution shall be made to the
estate of the Individual.
ARTICLE VI
ADMINISTRATION
Except as otherwise provided in this Plan, the Custodian shall
perform solely the duties assigned to the Custodian hereunder as agent on
behalf of the Individual and any beneficiary. The Custodian shall not be
deemed to be a fiduciary in carrying out the following duties:
(1) Receiving contributions pursuant to the provisions of this
Plan;
(2) Holding, investing and reinvesting the contributions in
Investment Company Shares;
(3) Registering any property held by the Custodian in its own
name, or in nominee or bearer form that will pass delivery;
and
(4) Making distributions from the Custodial Account in cash or
in Investment Company Shares.
The Custodian shall mail to the Individual all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Individual shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Act or the Code, the Custodian
shall file with the Individual a written report of the Custodian's
transactions relating to the Custodial Account during the period from the
last previous accounting, and shall file such other reports with the
Internal Revenue Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Individual shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Individual.
All written notices or communications to the Individual or the
Employer shall be effective when sent by first class mail to the last
known address of the Individual or the Employer on the Custodian's
records. All written notices or communications to the Custodian shall be
mailed or delivered to the Custodian at its designated mailing address,
and no such written notice of communications shall be effective until the
Custodian's actual receipt thereof. The Custodian shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken
by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives
and which appear to have been sent by the Individual, the Employer, or any
other person.
The Custodian shall make payments from the Custodial Account in
accordance with written directions received from the Individual, and it
need not make inquiry as to the rightfulness of such distribution. If the
Custodian has reason to believe that a distribution may be due, it may,
but shall not be required to make the distribution at the request of any
beneficiary who appears to be entitled thereto.
The Custodian shall use ordinary care and reasonable diligence in the
performance of its duties as Custodian. The Custodian shall have no
responsibilities other than those provided for herein or in the Act or
Code and shall not be liable for a mistake in judgment, for any action
taken in good faith, or for any loss that is not a result of its gross
negligence, except as required by the Act or regulations promulgated
thereunder.
The Individual agrees to indemnify and hold the Custodian harmless
from and against any liability that the Custodian may incur in the
administration of the Custodial Account, unless arising from the
Custodian's own negligence or willful misconduct or from a violation of
the provisions of the Act or regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction of the
Individual in respect to the investment of contributions, or to make
suggestions to the Individual with respect to the investment, retention or
disposition of any contributions or assets held in the Custodial Account.
The Custodian shall pay out of the Custodial Account expenses of
administration, including the fees of counsel employed by the Custodian,
taxes, and its fees for maintaining the Custodial Account which are set
forth in the Application or in accordance with any schedule of fees
subsequently adopted by the Custodian. The Custodian may sell Fund shares
and use the proceeds of sale to pay the foregoing expenses.
The Custodian may resign as Custodian of any Individual's Custodial
Account upon sixty (60) days' prior notice to the Investment Advisor and
thirty (30) days' prior notice to each Individual who will be affected by
such resignation.
ARTICLE VII
THE INVESTMENT ADVISOR
The Individual delegates to the Investment Advisor the following
powers with respect to the Plan: (a) to remove the Custodian and select a
successor Custodian; and (b) to amend this Plan as provided in Article
VIII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time, and shall be exercised only when similarly exercised
with respect to all other Individuals adopting the Plan.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of the Plan except as provided in this
Article VII of the Plan, and none of them shall incur any liability of any
nature to the Individual or beneficiary or other person in connection with
any act done or omitted to be done in good faith in the exercise of any
power or authority herein delegated to the Investment Advisor.
The Individual agrees to indemnify and hold the Investment Companies
and the Investment Advisor harmless from and against any and all
liabilities and expenses, including attorney's and accountant's fees,
incurred in connection with the exercise of, or omission to exercise, any
of the powers delegated to it under this Section, except such liabilities
and expenses as may arise from the Investment Advisor's and or Investment
Company's willful misconduct.
If the Investment Advisor shall hereafter determine that it is no
longer desirable for it to continue to exercise any of the powers hereby
delegated to it, it may relieve itself of any further responsibilities
hereunder by notice in writing to the Individual at least sixty (60) days
prior to the date on which it proposes to discontinue the exercise of the
powers delegated to it.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Individual delegates to the Investment Advisor the power to amend
this Plan (including retroactive amendment).
The Individual may amend his Application (including retroactive
amendment) by submitting to the Custodian (1) a copy of such amended
Application, and (2) evidence satisfactory to the Custodian that the Plan
as amended by such amended Application will continue to qualify under the
provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit: (a) any
part of Custodial Account to be diverted to any purpose that is not for
the exclusive benefit of the Individual and his beneficiaries; (b) the
Individual to be deprived of any portion of his interest in the Custodial
Account; or (c) the imposition of an additional duty on the Custodian
without its consent.
The Individual reserves the right to terminate further contributions
to this Plan by agreement with the Employer provided that the Individual
shall file with the Custodian an executed copy of such agreement. The
Individual also reserves the right to terminate his adoption of the Plan
in the event that he shall be unable to secure a favorable ruling from the
Internal Revenue Service with respect to this Plan. In the event of such
termination, the Custodian shall distribute the Custodial Account to the
Individual. The Individual also reserves the right to transfer the assets
of his Custodial Account to such other form of 403(b) (7) Retirement Plan
as he may determine, upon written instructions to the Custodian in such
form as the Custodian may reasonably require.
ARTICLE IX
PROHIBITED TRANSACTIONS
Except as provided in Section 408 of the Act or Section 4975 of the
Code, the Custodian:
(a) Shall not cause the Plan to engage in a transaction if it
knows or should know that such transaction constitutes a direct or
indirect --
(A) sale or exchange, or leasing of any property between
the Plan and a party in interest;
(B) lending of money or other extension of credit between
the Plan and a party in interest;
(C) furnishing of goods, services, or facilities between
the Plan and a party in interest;
(D) transfer to, or use by or for the benefit of, a party
in interest, of any assets of the plan; or
(E) acquisition, on behalf of the Plan, of any employer
security or employer real property in violation of
Section 407(a) of the Act;
(b) Shall not permit the Plan to hold any employer security or
employer real property if it knows or should know that holding such
security or real property violates Section 407(a) of the Act;
(c) shall not deal with the assets of the Plan in its own
interest or for its own account;
(d) shall not in any capacity act in any transaction involving
the Plan on behalf of a party (or represent a party) whose interests are
adverse to the interests of the Plan or the interests of its participants
or beneficiaries; and
(e) shall not receive any consideration for its own account
from any party dealing with the Plan in connection with a transaction
involving the assets of the Plan; provided that nothing in this Article IX
shall be construed to prohibit the payment to the Custodian of any fees
otherwise authorized under the terms of this Plan.
ARTICLE X
CHANGES IN APPLICABLE LAW
The foregoing Plan provisions are intended to comply with currently
applicable legal requirements. Certain provisions of the Tax Reform Act
of 1986, generally effective January 1, 1989, will affect the operation
and administration of the Plan and will accordingly require future
amendment to the Plan.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH NSAR FILING DATED SEPTEMBER 30, 1996.
</LEGEND>
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<NAME> CONCORDE VALUE FUND
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
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</LEGEND>
<SERIES>
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<NAME> CONCORDE INCOME FUND
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