<PAGE> 1
INVESTMENT ADVISOR
Concorde Financial Corporation [CONCORDE FUNDS LOGO]
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
OFFICERS
Gary B. Wood, Ph.D.
President and Treasurer
Elizabeth L. Foster
Secretary
DIRECTORS
John R. Bradford, Ph.D.
Gilbert F. Hartwell
John H. Wilson
Gary B. Wood, Ph.D.
CUSTODIAN, TRANSFER AGENT AND A FAMILY OF NO-LOAD
DIVIDEND DISBURSING AGENT MUTUAL FUNDS
Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 East Michigan Street
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
TELEPHONE
(972) 387-8258
(Fund information) ANNUAL REPORT
DATED SEPTEMBER 30, 1996
(800) 338-1579
(Shareholder account information)
[CONCORDE FUNDS LOGO]
<PAGE> 2
[CONCORDE FUNDS LOGO]
November 25, 1996
Dear Shareholders:
This annual report for Concorde Funds, Inc., covers the period from October 1,
1995 through September 30, 1996.
CONCORDE VALUE FUND
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. These two indices track the
total return performance of a representative portfolio of "value" stocks. 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),
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.
Fewer attractive buy candidates and our short term view toward the equity
markets led us to maintain an average 20% cash position during the year. This
cash position, combined with a larger concentration in stocks we consider less
vulnerable to a down market, defensively positioned the Value Fund at the end of
the fiscal year.
Caution is the focus of our current approach to the equity markets. Despite
our concern, we will continue to identify undervalued stocks at attractive
prices which should hold up well if a significant market correction occurs.
CONCORDE INCOME FUND
Concorde 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 regular quarterly dividend distributions
anticipated in the future. Total return for the period from inception through
September 30, 1996, was 0.71%. The US Treasury and Agency securities turned in
slightly negative total returns, while the equity-oriented securities recorded
gains resulting in total positive performance for the entire portfolio.
<PAGE> 3
[CONCORDE FUNDS LOGO]
The Income Fund has the flexibility to emphasize various income-oriented asset
classes. After interest rates rose through July 1996, we concluded that the bond
market offered greater value than equity-oriented income securities, and we
adjusted the portfolio 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 our
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
significant gains while Hanson PLC, ARCO Exchangeable Notes and GTE Corporation
incurred losses.
Our approach to the equity markets remains defensive, and we believe the fixed
income market appears more attractive than equities at this time. However, we
continue to identify individual stocks at attractive prices. We will manage our
fixed income positions with an eye towards significant shifts in economic growth
and inflation, and we will adjust these portfolio positions quickly and cost
effectively as conditions warrant.
SUMMARY
We will continue to maintain our guarded approach to the equity and bond
markets, with an emphasis on value investing and an intermediate to long term
investment horizon. A disciplined investment strategy is, as always, paramount
in the current economic environment. Thank you for your continued support and
trust.
Sincerely,
/s/ GARY B. WOOD
Gary B. Wood, Ph.D.
President
<PAGE> 4
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CONCORDE VALUE FUND, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE PERCENTAGE
---------- ------------ ----------
<S> <C> <C> <C>
COMMON STOCKS
CONGLOMERATES
Tyco International, Ltd....................................................... 9,000 $ 388,125 3.09%
CONSUMER DURABLES
O'Sullivan Industries Holdings, Inc.*......................................... 10,000 88,750 0.71
CONSUMER STAPLES
American Brands............................................................... 5,600 236,600
Pepsico, Inc. ................................................................ 6,000 169,500
Playtex Products, Inc.*....................................................... 5,000 43,750
Tootsie Roll Industries....................................................... 1,700 60,138
-----------
509,988 4.06
ENERGY and NATURAL RESOURCES
Alcan Aluminum, Ltd. ......................................................... 5,000 150,000
Amoco Corporation............................................................. 2,000 141,000
Atlantic Richfield Company.................................................... 2,500 318,750
Total, Class B ADR............................................................ 7,000 273,875
Weatherford Enterra, Inc.*.................................................... 5,000 136,875
-----------
1,020,500 8.12
FINANCE and INSURANCE
Alex Brown, Inc. ............................................................. 2,500 144,687
American Express Company...................................................... 2,800 129,500
American Travellers Corporation*.............................................. 5,000 165,625
Citicorp...................................................................... 2,000 181,250
Delphi Financial Group, Inc., Class A*........................................ 18,000 504,000
Equitable of Iowa Companies................................................... 3,000 124,500
Federal National Mortgage Corporation......................................... 4,800 167,400
Lehman Brothers Holdings...................................................... 10,000 255,000
NationsBank Corporation....................................................... 2,000 173,750
Salomon, Inc. ................................................................ 5,000 228,125
State Street Boston Corporation............................................... 5,000 286,875
United Companies Financial Corporation........................................ 7,000 231,875
-----------
2,592,587 20.62
HEALTH
Bristol-Myers Squibb Company.................................................. 2,500 240,938
Columbia/HCA Healthcare Corporation........................................... 3,000 170,625
Johnson & Johnson Company..................................................... 8,000 410,000
Merck & Company............................................................... 5,000 351,875
St. Jude Medical, Inc.*....................................................... 4,000 161,500
-----------
1,334,938 10.62
INDUSTRIAL CYCLICALS
Goodrich (B.F.) Company....................................................... 7,000 315,875
Magna International, Inc., Class A............................................ 10,000 482,500
Spartech Corporation*......................................................... 10,000 96,250
Superior Industries International............................................. 4,000 96,500
Timken Company (The).......................................................... 4,500 176,625
Vulcan Materials Company...................................................... 2,000 120,000
-----------
1,287,750 10.24
</TABLE>
<PAGE> 5
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CONCORDE VALUE FUND, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES -- (CONTINUED)
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE PERCENTAGE
---------- ------------ ----------
<S> <C> <C> <C>
RETAIL TRADE
Proffitts, Inc.*.............................................................. 7,840 $ 309,680
VICORP Restaurants, Inc.*..................................................... 10,000 145,000
-----------
454,680 3.62%
SERVICES
ADT, Ltd.*.................................................................... 6,000 114,750
Chris-Craft Industries, Inc. ................................................. 4,370 182,447
Tele-Communications, Inc.*.................................................... 10,000 149,375
Topps Company, Inc. (The)*.................................................... 5,000 21,250
-----------
467,822 3.72
TECHNOLOGY
Dallas Semiconductor Corporation.............................................. 5,000 91,250
Intel Corporation............................................................. 4,000 381,750
Motorola, Inc................................................................. 3,000 154,875
Oak Industries*............................................................... 6,000 199,500
Teradyne, Inc.*............................................................... 5,000 83,125
-----------
910,500 7.24
TRANSPORTATION
Southwest Airlines Company.................................................... 9,000 205,875 1.64
UTILITIES
Destec Energy, Inc.*.......................................................... 5,000 59,375
NIPSCO Industries, Inc........................................................ 4,000 143,000
PacifiCorp.................................................................... 5,000 103,125
-----------
305,500 2.43
----------- -----------
TOTAL COMMON STOCKS.............................................................. 9,567,015 76.11
----------- -----------
SHORT TERM DEMAND NOTES
American Family Financial Services (5.1956%).................................. 615,240 615,240 4.89
General Mills, Inc. (5.1900%)................................................. 538,622 538,622 4.28
Johnson Controls, Inc. (5.2160%).............................................. 623,074 623,074 4.96
Pitney Bowes Credit Corporation (5.1946%)..................................... 604,622 604,622 4.81
Wisconsin Electric Power Corporation (5.2356%)................................ 616,236 616,236 4.90
----------- -----------
TOTAL SHORT TERM DEMAND NOTES.................................................... 2,997,794 23.85
----------- -----------
CERTIFICATES OF DEPOSIT
Firstar Trust Company, 4.95%, Due 1-11-97..................................... 5,619 0.04
----------- -----------
TOTAL PORTFOLIO.................................................................. $12,570,428 100.00%
=========== ===========
</TABLE>
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* Non-income producing security
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
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CONCORDE VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at market value (cost $9,588,575) (Note 4)............................................. $12,570,428
Receivables
Dividends...................................................................................................... 9,728
Interest....................................................................................................... 12,432
Other assets..................................................................................................... 4,080
-----------
TOTAL ASSETS........................................................................................................ 12,596,668
-----------
LIABILITIES
Accrued expenses................................................................................................. 16,411
-----------
TOTAL LIABILITIES................................................................................................... 16,411
-----------
NET ASSETS (equivalent to $14.95 per share based on 841,293 shares outstanding) (Notes 2 and 3)..................... $12,580,257
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividend income (net of withholding tax).......................................................................... $ 137,727
Interest income................................................................................................... 130,384
----------
Total income.................................................................................................. 268,111
----------
EXPENSES
Investment advisory fees (Note 5)................................................................................. 112,373
Shareholder service costs......................................................................................... 13,161
Custodian fees.................................................................................................... 4,271
Printing, postage and delivery.................................................................................... 10,024
Registration fees................................................................................................. 2,240
Accounting fees................................................................................................... 25,054
Audit fees........................................................................................................ 13,699
Legal fees........................................................................................................ 15,940
Other expenses.................................................................................................... 5,026
----------
Total expenses................................................................................................ 201,788
----------
NET INVESTMENT INCOME................................................................................................ 66,323
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.................................................................................. 718,702
Change in unrealized appreciation of investments.................................................................. 803,824
----------
NET GAIN ON INVESTMENTS.............................................................................................. 1,522,526
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................................................... $1,588,849
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
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CONCORDE VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
NET INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................................................................ $ 66,323 $ 60,727
Net realized gain on investments................................................................. 718,702 132,132
Change in unrealized appreciation of investments................................................. 803,824 1,263,058
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................................................... 1,588,849 1,455,917
Distributions to shareholders from net investment income (Note 2)................................ (59,981) (55,987)
Distributions to shareholders from net realized gains (Note 2)................................... (108,007) (409,905)
Capital share transactions (Note 3).............................................................. (1,075,860) (758,026)
----------- -----------
NET INCREASE IN NET ASSETS.......................................................................... 345,001 231,999
NET ASSETS
Beginning of year................................................................................ 12,235,256 12,003,257
----------- -----------
End of year...................................................................................... $12,580,257 $12,235,256
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 1, OCTOBER 1, OCTOBER 1, OCTOBER 1, OCTOBER 1,
1995 1994 1993 1992 1991
THROUGH THROUGH THROUGH THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<S> <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
--------- -------- -------- -------- ----------
Income from investment operations:
Net investment income....................... 0.07 0.06 0.04 0.07 0.16
Net realized and unrealized gains on
investments............................... 1.73 1.47 0.55 2.05 0.71
--------- -------- -------- -------- ----------
Total from investment operations.......... 1.80 1.53 0.59 2.12 0.87
--------- -------- -------- -------- ----------
Less distributions:
Dividends from net investment income........ (0.06) (0.06) (0.03) (0.14) (0.25)
Distributions from net realized gains....... (0.12) (0.42) (1.39) (0.00) (0.00)
--------- -------- -------- -------- ----------
Total from distributions.................. (0.18) (0.48) (1.42) (0.14) (0.25)
--------- -------- -------- -------- ----------
Net asset value, end of year.................. $ 14.95 $ 13.33 $ 12.28 $ 13.11 $ 11.13
========= ======== ======== ======== ==========
TOTAL INVESTMENT RETURN.......................... 13.64% 13.32% 5.04% 19.16% 8.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)............ $ 12,580 $ 12,235 $ 12,003 $ 12,630 $ 12,532
Ratio of expenses to average net assets....... 1.62% 1.74% 1.69% 1.64% 1.68%
Ratio of net investment income to average net
assets...................................... 0.53% 0.52% 0.33% 0.54% 1.50%
Portfolio turnover rate....................... 26.10% 22.42% 75.43% 71.69% 51.69%
Average commission rate paid.................. $ 0.0551
Shares outstanding at end of year............. 841,293 917,929 977,095 963,554 1,126,309
</TABLE>
- ---------------
NOTE: Average number of shares outstanding and average net assets represent the
calculation of the arithmetical average of each day's value for each year.
The fund had no senior securities or outstanding debt during the years
ended September 30, 1996, 1995, 1994, 1993, or 1992.
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
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CONCORDE VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Concorde Value Fund, Inc. ("Fund"), is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund was initially capitalized on November 19, 1987, with the sale of 10,000
shares of capital stock for $100,000. The Fund's initial registration statement
became effective on December 4, 1987.
Security valuation. Investments in securities traded on a national
securities exchange (or reported on the NASDAQ national market) are stated at
the last reported sales price on the day of valuation; other securities traded
in the over-the-counter market and listed securities for which no sale was
reported on that date are stated at the last quoted bid price. Short-term demand
notes and certificates of deposit are stated at amortized cost, which
approximates market value.
Federal income taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all its taxable income to its shareholders. Therefore, a provision
for Federal income tax is not required.
Distributions to shareholders. Dividends to shareholders are recorded on the
ex-dividend date.
Other. The Fund follows industry practice and records security transactions
on trade date plus one. Dividend income is recognized on the ex-dividend date,
and interest income is recognized on an accrual basis. Discounts and premiums on
securities purchased are amortized over the life of the respective securities.
2. DISTRIBUTIONS TO SHAREHOLDERS
On December 14, 1995, a distribution of $0.184171 per share aggregating
$167,988 was declared from net investment income and net realized gains from
investment transactions. The dividend was paid on December 14, 1995 to
shareholders of record on December 12, 1995.
On December 15, 1994, a distribution of $0.478504 per share aggregating
$465,892 was declared from net investment income and net realized gains from
investment transactions. The dividend was paid on December 15, 1994 to
shareholders of record on December 13, 1994.
The Fund intends normally to distribute all of its net investment income and
net realized gains to its shareholders in order to avoid paying income tax on
its net investment income and net realized gains and to avoid being subject to a
Federal excise tax on undistributed net investment income or net realized gains.
3. CAPITAL SHARE TRANSACTIONS
As of September 30, 1996, there were 841,293 shares of $1 par value capital
stock issued and 9,841,293 shares of capital stock authorized; capital paid-in
aggregated $8,851,929. Net assets at September 30, 1996 included undistributed
net investment income of $66,323 and undistributed net realized investment gains
of $2,983,853.
Transactions in capital stock for the years ended September 30, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold................................................... 23,510 $ 339,285 45,065 $ 537,308
Shares redeemed............................................... (112,534) (1,583,133) (147,013) (1,761,226)
Dividends reinvested.......................................... 12,388 167,988 42,782 465,892
-------- ----------- -------- -----------
Net decrease.................................................. (76,636) $(1,075,860) (59,166) $ (758,026)
======== =========== ======== ===========
</TABLE>
During 1996, the Board of Directors approved the name change of Concorde
Value Fund, Inc., to Concorde Funds, Inc., and the series of shares of common
stock of Concorde Funds, Inc., were formed: Concorde Value Fund, Inc. (Series A)
and Concorde Income Fund, Inc. (Series B). The authorized and unissued shares of
Concorde Funds, Inc., were allocated as follows: 9,000,000 shares to Concorde
Value Fund, Inc. (in addition to current outstanding shares), 10,000,000 shares
to Concorde Income Fund, Inc., and the remaining balance unallocated for future
use.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) were $2,595,149 and $4,042,173, respectively, for the year ended
September 30, 1996, and $2,166,888 and $4,307,893, respectively, for the year
ended September 30, 1995.
There are no differences between the cost bases of securities for Federal
income tax and financial statement purposes. The aggregate unrealized
appreciation and depreciation for all securities as of September 30, 1996 were
$3,121,393 and $137,540, respectively.
5. INVESTMENT ADVISORY FEES
The Fund paid advisory fees to Concorde Financial Corporation (Advisor) for
investment management and advisory services under a management agreement that
provides for fees to be computed at an annual rate of .9% of the Fund's average
daily net assets.
6. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the Fund to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
<PAGE> 9
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CONCORDE VALUE FUND, INC.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Concorde Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Concorde
Value Fund, Inc., including the portfolio of investments in securities as of
September 30, 1996, and the related statement of operations for the year then
ended, and the statements of changes in net assets for each of the years in the
two-year period ended September 30, 1996, and the financial highlights for each
of the years in the five-year period ended September 30, 1996. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Concorde Value Fund, Inc. as of September 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period ended September 30, 1996, and the financial
highlights for each of the years in the five-year period ended September 30,
1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
November 4, 1996
<PAGE> 10
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CONCORDE INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE PERCENTAGE
--------- ------------ ----------
<S> <C> <C> <C>
GOVERNMENT AGENCY NOTES
FHLB 6.03% 10-03-2000............................................. 200,000 $ 196,565
FNMA 7.36% 09-19-2001............................................. 100,000 100,614
FHLMC 6.99% 07-26-2006............................................ 200,000 201,415
SLMA 5.875% 03-17-2000............................................ 100,000 98,188
----------
596,782 27.07%
---------- ------
GOVERNMENT BONDS
US Treasury Note 7.50% 11-15-2001................................. 200,000 208,687
US Treasury Note 6.25% 02-15-2003................................. 100,000 98,406
US Treasury Note 5.75% 08-15-2003................................. 200,000 190,625
US Treasury Note 5.875% 11-15-2005................................ 100,000 94,438
----------
592,156 26.86
---------- ------
COMMON STOCKS
CONGLOMERATES
Hanson PLC ADR.................................................... 4,000 49,500 2.25
FINANCE and INSURANCE
Bankers Trust New York............................................ 700 55,038
Capstead Mortgage Corporation..................................... 2,600 53,625
Pimco Commercial Mortgage Securities Trust, Inc................... 3,800 47,975
Strategic Global Income Fund, Inc. ............................... 4,200 50,400
----------
207,038 9.39
INDUSTRIAL CYCLICALS
ARCO 9.01% Exch Notes for Lyondell Petrochemical Co. ............. 1,300 30,550 1.39
REAL ESTATE
First Industrial Realty Trust, Inc. .............................. 1,800 46,575
Health and Retirement Property Trust ............................. 2,000 35,500
Hospitality Properties Trust...................................... 2,000 53,500
Meditrust......................................................... 1,000 34,625
----------
170,200 7.72
UTILITIES
GTE Corporation................................................... 600 23,100 1.05
---------- ------
TOTAL COMMON STOCKS................................................... 480,388 21.80
---------- ------
PREFERRED STOCKS
Bear Stearns Financial LLC, 8.0% Preferred Series A............... 1,200 29,400
First Industrial Realty Trust, Inc., 9.50% Preferred Series A..... 1,000 25,250
Public Storage, Inc., 8.45%, Preferred Series H................... 1,200 29,550
Santander Finance, Ltd., 7.9% Non Cum Preferred Series B.......... 1,500 35,625
----------
TOTAL PREFERRED STOCKS................................................ 119,825 5.43
---------- ------
CONVERTIBLE PREFERRED STOCKS
Ashland, Inc., $3.125 Cumulative Conv Preferred................... 800 50,300
ICO, Inc., $1.6875 Conv Preferred................................. 2,200 50,050
United Companies Financial Corp., 6.75% Conv Preferred............ 1,200 69,900
----------
TOTAL CONVERTIBLE PREFERRED STOCKS.................................... 170,250 7.72
SHORT TERM DEMAND NOTES
American Family Financial Services (5.1149%)...................... 46,104 46,104 2.10
Johnson Controls, Inc. (5.0937%).................................. 98,023 98,023 4.45
Wisconsin Electric Power Corporation (5.1549%).................... 100,501 100,501 4.57
---------- ------
TOTAL SHORT TERM DEMAND NOTES......................................... 244,628 11.12
---------- ------
TOTAL PORTFOLIO....................................................... $2,204,029 100.00%
========== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 11
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CONCORDE INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at market value (cost $2,208,004) (Note 4)............................................... $2,204,029
Cash............................................................................................................... 586
Receivables
Dividends........................................................................................................ 5,023
Interest......................................................................................................... 20,213
Expense reimbursements by Advisor (Note 5)....................................................................... 9,712
Other assets (Note 6).............................................................................................. 21,915
----------
TOTAL ASSETS.......................................................................................................... 2,261,478
----------
LIABILITIES
Accrued expenses................................................................................................... 44,527
----------
TOTAL LIABILITIES..................................................................................................... 44,527
----------
NET ASSETS (equivalent to $9.94 per share based on 223,052 shares outstanding) (Notes 2 and 3)........................ $2,216,951
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND, INC.
STATEMENT OF OPERATIONS
JANUARY 22, 1996 (INCEPTION) THROUGH SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividend income (net of withholding tax).............................................................................. $ 31,209
Interest income....................................................................................................... 59,875
Net accretion/amortization............................................................................................ (2,902)
--------
Total Income............................................................................................................. 88,182
--------
EXPENSES
Investment advisory fees (Note 5)..................................................................................... 9,440
Shareholder service costs............................................................................................. 5,955
Custodian fees........................................................................................................ 590
Printing, postage and delivery........................................................................................ 5,423
Registration fees..................................................................................................... 1,260
Accounting fees....................................................................................................... 12,641
Audit fees............................................................................................................ 16,647
Legal fees............................................................................................................ 5,430
Other expenses........................................................................................................ 4,523
--------
Total expenses.................................................................................................... 61,909
Expense reimbursement by Advisor (Notes 5 and 6)...................................................................... (22,663)
--------
Total expenses net of reimbursement............................................................................... 39,246
--------
NET INVESTMENT INCOME.................................................................................................... 48,936
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments...................................................................................... (25,959)
Change in unrealized depreciation of investments...................................................................... (3,975)
--------
NET LOSS ON INVESTMENTS.................................................................................................. (29,934)
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................................................................... $ 19,002
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 12
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
JANUARY 22, 1996 (INCEPTION) THROUGH SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income........................................................................................ $ 48,936
Net realized loss on investments............................................................................. (25,959)
Change in unrealized depreciation of investments............................................................. (3,975)
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................................... 19,002
Distributions to shareholders from net investment income (Note 2)............................................ (28,619)
Capital share transactions (Note 3).......................................................................... 2,226,568
----------
NET INCREASE IN NET ASSETS.................................................................................... 2,216,951
NET ASSETS
Beginning of period.......................................................................................... --
----------
End of period................................................................................................ $2,216,951
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<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 loss on investments.......................................................... (0.18)
--------
Total from investment operations....................................................................... 0.07
--------
Less distributions:
Dividends from net investment income..................................................................... (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>
- ---------------
NOTE: Average number of shares outstanding and average net assets represent the
calculation of the arithmetical average of each day's value for the
period.
The fund had no senior securities or outstanding debt during the period
January 22, 1996 through September 30, 1996.
Total investment return and other ratios are not annualized.
The accompanying notes are an integral part of these financial statements.
<PAGE> 13
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Concorde Income Fund, Inc. ("Fund"), is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund was initially capitalized on January 22, 1996, with the sale of 2,700
shares of capital stock for $27,000. The Fund's initial registration statement
became effective on December 4, 1995.
Security valuation. Investments in securities traded on a national
securities exchange (or reported on the NASDAQ national market) are stated at
the last reported sales price on the day of valuation; other securities traded
in the over-the-counter market and listed securities for which no sale was
reported on that date are stated at the last quoted bid price. Short-term demand
notes are stated at amortized cost, which approximates market value.
Federal income taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all its taxable income to its shareholders. Therefore, a provision
for Federal income tax is not required.
Distributions to shareholders. Dividends to shareholders are recorded on the
ex-dividend date.
Other. The Fund follows industry practice and records security transactions
on trade date plus one. Dividend income is recognized on the ex-dividend date,
and interest income is recognized on an accrual basis. Discounts and premiums on
securities purchased are amortized over the life of the respective securities.
2. DISTRIBUTIONS TO SHAREHOLDERS
On September 24, 1996, a distribution of $0.13 per share aggregating $28,619
was declared from net investment income. The dividend was paid on September 26,
1996 to shareholders of record on September 24, 1996.
The Fund intends normally to distribute all of its net investment income and
net realized gains to its shareholders in order to avoid paying income tax on
its net investment income and net realized gains and to avoid being subject to a
Federal excise tax on undistributed net investment income or net realized gains.
3. CAPITAL SHARE TRANSACTIONS
As of September 30, 1996 there were 223,052 shares of $1 par value capital
stock issued and 10,000,000 shares of capital stock authorized; capital paid-in
aggregated $2,197,992. Net assets at September 30, 1996 included undistributed
net investment income of $48,936.
Transactions in capital stock for the period January 22, 1996 (inception)
through September 30, 1996, were as follows:
<TABLE>
<CAPTION>
1996
----------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Shares sold................................................................ 220,151 $2,197,992
Shares redeemed............................................................ (4) (43)
Dividends reinvested....................................................... 2,905 28,619
------- ----------
Net increase............................................................... 223,052 $2,226,568
======= ==========
</TABLE>
During 1996, the Board of Directors approved the name change of Concorde
Value Fund, Inc., to Concorde Funds, Inc., and the series of shares of common
stock of Concorde Funds, Inc., were formed: Concorde Value Fund, Inc. (Series A)
and Concorde Income Fund, Inc. (Series B). The authorized and unissued shares of
Concorde Funds, Inc., were allocated as follows: 9,000,000 shares to Concorde
Value Fund, Inc. (in addition to current outstanding shares), 10,000,000 shares
to Concorde Income Fund, Inc., and the remaining balance unallocated for future
use.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) were $2,376,674 and $384,438 for the period January 22, 1996 through
September 30, 1996.
There are no differences between the cost bases of securities for Federal
income tax and financial statement purposes. The aggregate unrealized
appreciation and depreciation for all securities as of September 30, 1996 were
$34,355 and $38,330, respectively.
5. INVESTMENT ADVISORY FEES
The Fund accrued advisory fees to Concorde Financial Corporation (Advisor)
for investment management and advisory services under a management agreement
that provides for fees to be computed at an annual rate of .70% of the Fund's
average daily net assets. As of September 30, 1996, the Advisor's reimbursement
to the Fund totaled $22,663 and consisted of investment advisory fees, amortized
organization costs, and a receivable determined by an expense cap established by
the Advisor.
6. ORGANIZATION COSTS
Organization costs of $25,426 are being amortized over a period of sixty
months from commencement of operations. These expenses were advanced by the
Advisor, which will be reimbursed by the Fund over a period of not more than
sixty months from commencement of operations. The proceeds of any redemption of
the initial shares by the original shareholders or any transferee will be
reduced by a pro rata portion of any then unamortized organization expenses in
the same proportion as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of such redemption.
7. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the Fund to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
<PAGE> 14
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND, INC.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Concorde Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Concorde
Income Fund, Inc., including the portfolio of investments in securities as of
September 30, 1996, and the related statement of operations, the statement of
changes in net assets, and the financial highlights for the period January 22,
1996 (inception) through September 30, 1996. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1996,
by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Concorde Income Fund, Inc. as of September 30, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for the
period January 22, 1996 (inception) through September 30, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
November 4, 1996
