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. 15 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 16 |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.
Concorde Financial Corporation Copy to:
(d/b/a Concorde Investment Management) 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.
It is proposed that this filing become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
|X| on November 30, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485
If applicable, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
001.358833.3
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 Information FINANCIAL HIGHLIGHTS; WHAT HAS BEEN THE
FUNDS' PERFORMANCE?
4. General Description of Registrant WHAT IS CONCORDE FUNDS, INC.?; WHAT ARE
THE 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 Discussion of
Fund Performance WHAT HAS BEEN THE FUNDS' PERFORMANCE?
6. Capital Stock and Other
Securities WHAT REPORTS WILL I RECEIVE?; WHAT ABOUT
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS
AND TAXES?; GENERAL INFORMATION ABOUT
THE FUNDS
7. Purchase of Securities Being
Offered HOW IS A FUND'S SHARE PRICE DETERMINED?;
HOW DO I OPEN AN ACCOUNT AND PURCHASE
SHARES?; WHAT RETIREMENT PLANS DO THE
FUNDS OFFER?; MAY SHAREHOLDERS REINVEST
<PAGE>
DIVIDENDS? MAY SHAREHOLDERS EXCHANGE
SHARES?
8. Redemption or Repurchase HOW DO I SELL MY SHARES? MAY SHAREHOLDERS
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 History General Information
13. Investment Objectives and Policies Included in Prospectus under
"WHAT ARE THE 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 Principal Directors and Officers of the Corporation;
Holders of Securities Principal Shareholders
16.Investment Advisory and Other
Services Investment Advisor; Custodian; Independent
Certified Public Accountants
17.Brokerage Allocation and Other Allocation of Portfolio Brokerage
Practices
18.Capital Stock and Other
Securities Included in Prospectus under "GENERAL
INFORMATION ABOUT THE FUNDS"
19.Purchase, Redemption and Pricing Included in Prospectus under "HOW IS A
of Securities Being Offered FUND'S SHARE PRICE DETERMINED?"; "HOW DO
I OPEN AN ACCOUNT AND PURCHASE SHARES?";
"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
<PAGE>
20.Tax Status Taxes
21.Underwriters *
22.Calculation of Performance Data Determination of Net Asset Value and
Performance
23.Financial Statements Financial Statements
- -----------------------
* Answer negative or inapplicable
<PAGE>
<PAGE> 1
LOGO
LOGO
NOVEMBER 30, 1998
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 November 30, 1998, 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 INVESTMENT MANAGEMENT
Concorde Investment Management, 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 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 Investment Management 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 and INCOME FUND are based
on actual expenses incurred for the fiscal year ending September 30, 1998. 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.
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)...................... 0.49% 1.19%**
Total fund operating expenses (net of reimbursements)....... 1.39% 1.89%**
</TABLE>
- ---------------
* A fee of $12.00 is charged for each wire redemption.
** "Other expenses" and "Total fund operating expenses" reflect the
fact that the Advisor has voluntarily agreed to reimburse the
INCOME FUND to the extent necessary to ensure that the "Total fund
operating expenses" do not exceed 2% of the average daily net
assets of the INCOME FUND. Total fund operating expenses and Other
expenses for the Income Fund for the fiscal year ended September
30, 1998, would have been 1.76% and 2.46%, respectively, without
the expense reimbursement.
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............................................. $ 14 $ 19
3 years............................................ $ 44 $ 60
5 years............................................ $ 77 $103
10 years........................................... $168 $223
</TABLE>
1
<PAGE> 4
FINANCIAL HIGHLIGHTS
The financial highlights of the FUNDS should be read in conjunction with the
FUNDS' audited financial statements and notes thereto included in the FUNDS'
annual report to shareholders which contains the auditor's report as to the
financial highlights. The FUNDS' audit financial statements, notes thereto and
auditor's report thereon contained in the FUNDS' annual report to shareholders
are incorporated by reference into the Statement of Additional Information. The
financial highlights of the FUNDS set forth below have been audited.
CONCORDE VALUE FUND
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
-------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year.............................. $19.66 $14.95 $13.33 $12.28 $13.11 $11.13 $10.51
----- ----- ----- ----- ----- ----- -----
Income (loss) from investment
operations:
Net investment income............. 0.02 0.06 0.07 0.06 0.04 0.07 0.16
Net realized and unrealized gain
(loss) on investments........... (2.73) 5.66 1.73 1.47 0.55 2.05 0.71
----- ----- ----- ----- ----- ----- -----
Total income (loss) from
investment operations.......... (2.71) 5.72 1.80 1.53 0.59 2.12 0.87
----- ----- ----- ----- ----- ----- -----
Less distributions:
Distributions from net investment
income.......................... (0.06) (0.09) (0.06) (0.06) (0.03) (0.14) (0.25)
Distributions from net realized
gains........................... (1.53) (0.92) (0.12) (0.42) (1.39) (0.00) (0.00)
----- ----- ----- ----- ----- ----- -----
Total from distributions........ (1.59) (1.01) (0.18) (0.48) (1.42) (0.14) (0.25)
----- ----- ----- ----- ----- ----- -----
Net asset value, end of year........ $15.36 $19.66 $13.33 $12.28 $13.11 $11.13 $10.51
----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- -----
TOTAL RETURN........................... -14.76% 40.58% 13.64% 13.32% 5.04% 19.16% 8.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)..... $14,367 $17,532 $12,580 $12,235 $12,003 $12,630 $12,532
Ratio of expenses to average net
assets................................ 1.39% 1.60% 1.62% 1.74% 1.69% 1.64% 1.68%
Ratio of net investment income to
average net assets.................... 0.12% 0.38% 0.53% 0.52% 0.33% 0.54% 1.50%
Portfolio turnover rate................ 44.62% 30.62% 26.10% 22.42% 75.43% 71.69% 51.69%
Average commission rate paid........... $0.0711 $0.0711 $0.0551
Shares outstanding at end of year
(period).............................. 935,377 891,633 841,293 917,929 977,095 963,554 1,126,309
<CAPTION>
YEAR ENDED SEPTEMBER 30
---------------------------------
1991 1990 1989
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year.............................. $ 8.35 $12.61 $11.29
----- ----- -----
Income (loss) from investment
operations:
Net investment income............. 0.24 0.19 0.16
Net realized and unrealized gain
(loss) on investments........... 2.12 (3.55) 1.32
----- ----- -----
Total income (loss) from
investment operations.......... 2.36 (3.36) 1.48
----- ----- -----
Less distributions:
Distributions from net investment
income.......................... (0.20) (0.38) (0.13)
Distributions from net realized
gains........................... (0.00) (0.52) (0.03)
----- ----- -----
Total from distributions........ (0.20) (0.90) (0.16)
----- ----- -----
Net asset value, end of year........ $ 8.35 $12.61 $11.29
----- ----- -----
----- ----- -----
TOTAL RETURN........................... 28.79% -28.04% 13.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)..... $13,649 $11,735 $12,527
Ratio of expenses to average net
assets................................ 1.78% 1.75% 1.93%
Ratio of net investment income to
average net assets.................... 2.47% 1.88% 1.32%
Portfolio turnover rate................ 25.36% 48.83% 32.34%
Average commission rate paid...........
Shares outstanding at end of year
(period).............................. 1,298,530 1,405,070 993,752
</TABLE>
CONCORDE INCOME FUND
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30,
--------------------------------------
1998 1997 1996*
------- ------- ----------------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................... $10.41 $9.94 $10.00
----- ----- ----------
Income from investment operations:
Net investment income.................................. 0.49 0.49 0.25
Net realized and unrealized gain (loss) on
investments........................................... (0.39) 0.52 (0.18)
----- ----- ----------
Total income from investment operations.............. 0.10 1.01 0.07
----- ----- ----------
Less distributions:
Dividends from net investment income................... (0.50) (0.54) (0.13)
Distributions from net realized gains.................. 0.00 0.00 0.00
----- ----- ----------
Total from distributions............................. (0.50) (0.54) (0.13)
----- ----- ----------
Net asset value, end of period........................... $10.01 $10.41 $9.94
----- ----- ----------
----- ----- ----------
TOTAL RETURN................................................ 0.92% 10.41% 0.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................... $4,818 $3,920 $ 2,217
Ratio of expenses (net of reimbursement) to average net
assets................................................. 1.89% 1.99% 2.01%
Ratio of net investment income to average net assets..... 4.78% 4.86% 2.51%
Portfolio turnover rate.................................. 18.84% 20.07% 29.77%
Average commission rate paid............................. $0.0675 $0.0794 $0.1403
Shares outstanding at end of period...................... 481,341 376,468 223,052
</TABLE>
- ---------------
* Period from January 22, 1996 (commencement of operations) through September
30, 1996. 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, which does business under the name
Concorde Investment Management (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
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<PAGE> 6
studies the financial statements of the issuer and other issuers in the same
industry. No strict formulas are used in determining whether the characteristics
of an undervalued stock are present.
No minimum or maximum percentage of the VALUE FUND's assets is required to be
invested in common stocks or any other type of security. During times when a
high level of securities prices generally prevails there may be a scarcity of
common stocks available that meet the Advisor's investment criteria. At these
times the VALUE FUND may invest in preferred stocks, particularly those which
are convertible into common stock, fixed-income securities such as U.S. Treasury
Bonds and investment grade, nonconvertible corporate bonds and debentures.
Additionally, investments in nonconvertible preferred stocks and debt securities
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 debt 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 debt
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 Investors Service, Inc. ("Moody's") at
the time of acquisition; and (ii) any type of
4
<PAGE> 7
unrated debt security that the Advisor determines at the time of acquisition to
be of a quality comparable to the foregoing. If a security held by the INCOME
FUND falls below a Baa rating by Moody's and 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 debt securities that are
rated below investment grade. The INCOME FUND, however, will not invest in any
debt securities rated lower than B at the time of purchase by S&P and Moody's.
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
6
<PAGE> 9
that 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 less than 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 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
7
<PAGE> 10
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 and 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 prepayment risks in addition to market risks and financial risks.
Mortgage-backed securities include guaranteed government agency mortgage-
8
<PAGE> 11
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 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
9
<PAGE> 12
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 Mutual Fund
Services, LLC after each purchase, including reinvestment of dividends, or
redemption of shares of a FUND. You will also receive an annual statement after
the end of the calendar year listing all your transactions in FUND shares during
the year.
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<PAGE> 13
If you have questions about your account, you may call Firstar Mutual Fund
Services, LLC 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 Investment Management,
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 John A. Stetter,
co-managers, and Dennis R. Beall, analyst. John A. Stetter has been the FUNDS'
secretary since January 1998 and a Portfolio Manager with the Advisor since
1994. From 1988 until 1994, he was the President of his own investment advisory
firm. 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. 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 Advisor may voluntarily waive all or any portion
of the advisory fees otherwise payable by the INCOME FUND. Such a waiver may be
terminated at any time in the Advisor's discretion.
HOW IS A FUND'S SHARE PRICE
DETERMINED?
The net asset value (or "price") per share of each FUND is determined by
dividing the total value of the FUND's investments and other assets less any
liabilities, by the number of outstanding shares of the FUND. The net asset
value per share is determined once daily on each day that the New York Stock
Exchange is open, as of the close of regular trading on the Exchange (normally
3:00 P.M. Central time). Purchase orders for FUND shares accepted or FUND shares
tendered for redemption prior to the close of regular trading on a day the New
York Stock Exchange is open for trading will be valued as of the close of
trading, and purchase orders accepted and FUND shares tendered for redemption
after that time will be valued as of the close of regular trading on the next
trading day.
Portfolio securities that are listed on a national securities exchange or
quoted on the
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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 Mutual Fund Services, LLC, 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 Mutual Fund Services, LLC 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 Mutual Fund Services, LLC, 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 Mutual
Fund Services, LLC, (800) 294-1699, to obtain a confirmation number. 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, N.A.
ABA Number 075000022
For credit to Firstar Mutual Fund Services, LLC
Account Number 112-952-137
For further credit to Concorde Funds, Inc.
(Your account name and account number)
(Shareholder Account Name)
(Shareholder Account Number)
The FUNDS and Firstar Mutual Fund Services, LLC are not responsible for the
consequences of delays resulting from the banking or Federal Reserve Wire System
or from incomplete wiring instructions.
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 Mutual Fund
Services, LLC 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
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the broker-dealer and not remitted to the FUNDS or the Advisor. The FUNDS may
accept telephone orders from broker-dealers who have been previously approved by
the FUNDS. It is the responsibility of the registered broker-dealer to promptly
remit purchase and redemption orders to Firstar Mutual Fund Services, LLC.
In addition, you may purchase shares of the FUNDS through programs of services
offered or administered by broker-dealers, financial institutions or other
service providers ("Processing Intermediaries") that have entered into
agreements with the FUNDS. Such Processing Intermediaries may become
shareholders of record and may use procedures and impose restrictions in
addition to or different from those applicable to shareholders who invest
directly in the FUNDS. Certain services of the FUNDS may not be available or may
be modified in connection with the programs provided by Processing
Intermediaries. The FUNDS may only accept requests to purchase additional shares
into an account in which the Processing Intermediary is the shareholder of
record from the Processing Intermediary.
The FUNDS may authorize one or more Processing Intermediaries (and other
Processing Intermediaries properly designated thereby) to accept purchase orders
on the FUNDS' behalf. In such event, a FUND will be deemed to have received a
purchase order when the Processing Intermediary accepts the customer order, and
the order will be priced at the FUND'S net asset value next computed after it is
accepted by the Processing Intermediary.
Processing Intermediaries may charge fees or assess other charges for the
services they provide to their customers. Any such fee or charge paid directly
by shareholders is retained by the Processing Intermediary and is not remitted
to the FUNDS or the Advisor. Additionally, the Adviser and/or the FUNDS may pay
fees to Processing Intermediaries to compensate them for the services they
provide. Program materials provided by the Processing Intermediary should be
read in conjunction with the Prospectus before investing in this manner. Shares
of the FUNDS may be purchased through Processing Intermediaries without regard
to a FUND'S minimum purchase requirement.
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 Mutual Fund Services, LLC, 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 Mutual
Fund Services, LLC, but the effective date of redemption will be delayed until
the request is received by Firstar Mutual Fund Services, LLC. 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 Mutual Fund
Services, LLC for the request to be processed.
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"Good Order" means the request for redemption must include:
- - Your letter of instruction specifying the name of the FUND and either the
number of shares or the dollar amount of shares to be redeemed. The letter of
instruction must be signed by all registered shareholders exactly as the
shares are registered and must include your account registration number and
the additional requirements listed below that apply to the particular account.
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
<S> <C>
Individual, Joint Tenants, Redemption request signed
Sole Proprietorship, by all person(s) required
Custodial (Uniform Gift to to sign for the account,
Minors Act), General Partners exactly as it is
registered.
Corporations, Associations Redemption request and a
corporate resolution,
signed by person(s)
required to sign for the
account, accompanied by
signature guarantee(s).
</TABLE>
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
<S> <C>
Trusts Redemption request signed
by the trustee(s) with a
signature guarantee. (If
the Trustee's name is not
registered on the
account, a copy of the
trust document certified
within the last 60 days
is also required).
</TABLE>
- - Signature guarantees if proceeds of redemption are to be sent by wire
transfer, to a person other than the registered holder, to an address other
than the address of record, and if a redemption request includes a change of
address 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 withholding. If you are uncertain of the redemption requirements, please
contact, in advance, Firstar Mutual Fund Services, LLC.
The redemption price per share for each FUND is the next determined net asset
value after Firstar Mutual Fund Services, LLC 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 Mutual Fund Services, LLC 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 Mutual Fund Services, LLC who will assess a $12.00
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 Mutual
Fund Services, LLC 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
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<PAGE> 17
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 Mutual Fund Services, LLC. Telephone redemptions must be in amounts
of $1,000 or more. If the proceeds are sent by wire, a $12.00 wire fee will
apply. If the proceeds are sent by Electronic Funds Transfer (EFT), there is no
charge to the shareholder. Transfers via EFT generally take up to three business
days to reach your bank account.
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 Mutual Fund
Services, LLC. 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 they believe
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 Mutual Fund Services, LLC 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.
Shares of the FUNDS purchased through programs of services offered or
administered by Processing Intermediaries that have entered into agreements with
a FUND may be required to be redeemed through such programs. Such Processing
Intermediaries may become shareholders of record and may use procedures and
impose restrictions in addition to or different from those applicable to
shareholders who redeem shares directly through the FUNDS. The FUNDS may only
accept redemption requests from an account in which the Processing Intermediary
is the shareholder of record from the Processing Intermediary. The FUNDS may
authorize one or more Processing Intermediaries (and other Processing
Intermediaries properly designated thereby) to accept redemption requests on the
FUNDS' behalf. In such event, a FUND will be deemed to have received a
redemption request when the Processing Intermediary accepts the customer
request, and the redemption price will be the FUND'S net asset value next
computed after the customer redemption request is accepted by the Processing
Intermediary.
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 Mutual Fund Services, LLC by telephone, you may redeem
shares by delivering the redemption request to Firstar Mutual Fund Services, LLC
by mail as described above.
The FUNDS reserve the right to redeem the shares held in any account if at the
time of any transfer or redemption of shares in the account, the value of the
remaining shares in the account falls below $250. You will be notified in
writing that the value of your account is less than the minimum and allowed at
least 60 days to make an additional 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
15
<PAGE> 18
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. THEREFORE, YOU COULD REALIZE A CAPITAL GAIN OR LOSS ON THE
TRANSACTION. THIS IS NOT A TAX-FREE EXCHANGE. There are no fees charged on
exchange requests. Exchange requests should be directed to Firstar Mutual Fund
Services, LLC. 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 Mutual Fund Services, LLC for the authenticity of telephone exchange
instructions is limited as described under "How Do I Sell My Shares."
WHAT ABOUT DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?
Each FUND intends normally to distribute substantially all of its net
investment income and net realized capital gains to its shareholders so as to
avoid paying income tax on its net investment income and net realized capital
gains or being subject to a federal excise tax on undistributed net investment
income or net realized capital gains. The INCOME FUND will pay dividends
quarterly. The record date for such dividends normally will be in March, June,
September and December. The record date for the VALUE FUND's dividends normally
will be in December.
For federal income tax purposes, distributions by the FUNDS, whether invested
by you in additional shares or received by you in cash, will be taxable to you
as either ordinary income or capital gains. You will be notified annually as to
the federal tax status of dividends and distributions, including the eligibility
of dividends for the dividends received deduction for corporations.
In addition to federal taxes, you may also be subject to state and local
taxes, depending on the laws of your home state and locality.
MAY SHAREHOLDERS REINVEST DIVIDENDS?
You may elect to have all dividends and capital gains distributions reinvested
or paid in cash. Please refer to the share purchase application form
accompanying this Prospectus for further information. If you do not specify an
election, all dividends and capital gains 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
16
<PAGE> 19
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.
If you choose to have distribution checks mailed to you and either the U.S.
Postal Service is unable to deliver the check to you or if the check(s) remain
outstanding for at least six months, the FUNDS reserve the right to reinvest the
check(s) at the then current net asset value until you notify us with different
instructions.
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 ACCOUNTS ("IRA"). Individual shareholders may establish
their own tax-sheltered IRA. The FUNDS offer both a traditional IRA and a Roth
IRA (sometimes known as American Dream IRA).
- - 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.
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
17
<PAGE> 20
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 Bank Milwaukee,
N.A., Milwaukee, Wisconsin, is the custodian for all securities and cash of the
FUNDS and Firstar Mutual Fund Services, LLC serves as the FUNDS' transfer and
dividend disbursing agent.
YEAR 2000
The FUNDS are aware of the "Year 2000" issue. The "Year 2000" issue stems from
the use of a two-digit format to define the year in certain date-sensitive
computer application systems rather than the use of a four-digit format. As a
result, date-sensitive software programs could recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major systems or
process failures or the generation of erroneous data, which would lead to
disruptions in the FUNDS' business operations.
The FUNDS have no application systems of their own and are entirely dependent
on their service providers' systems and software. The FUNDS are working with
their service providers (including their investment advisor, transfer agent and
custodian) to identify and remedy any Year 2000 issues. However, the FUNDS
cannot guarantee that all Year 2000 issues will be identified and remedied, and
the failure to successfully identify and remedy all Year 2000 issues could
result in an adverse impact on the FUNDS.
WHAT HAS BEEN THE FUNDS' PERFORMANCE?
PERFORMANCE INFORMATION.
The FUNDS may provide performance data from time to time in advertisements,
reports to shareholders and other communications with shareholders.
18
<PAGE> 21
FUND performance may be shown by presenting one or more performance
measurements, including "average annual total return", "total return",
"cumulative total return" and "yield."
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a FUND for the
stated period, assuming the reinvestment of all dividends. Thus, these figures
reflect the change in the value of an investment in a FUND during a specified
period. Average annual total return figures are annualized and, therefore,
represent the average annual percentage change over the period in question.
Total return figures are not annualized and represent the aggregate percentage
of dollar value change over the period in question. Cumulative total return
reflects a FUND's performance over a stated period of time.
A FUND's yield is a measure of the net investment income per share earned by
the FUND over a specified one-month period expressed as a percentage of the
maximum offering price of the FUND's shares at the end of the period. Yield is
an annualized figure, which means that it is assumed that the FUND 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 Principia Pro, Money, Forbes,
Business Week and Barron's magazines and The Wall Street Journal. (Lipper
Analytical Services, Inc. and Morningstar Principia Pro 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
Russell 2000 Index, the Wilshire Mid Cap Value Index, the Consumer Price Index
and the Lehman Brothers Intermediate Government/Corporate Index.
MANAGEMENT'S DISCUSSION OF VALUE FUND PERFORMANCE. The total return for the
VALUE FUND for the fiscal year ended September 30, 1998 was -14.76%. This
performance compares to 9.06% for the S&P 500 and .48% for the NASDAQ, both of
which are considered large capitalization stock oriented indices. The VALUE
FUND, which invests in large, medium and small company stocks, compares more
favorably with returns of the Value Line Average of -17.99%, the Morningstar Mid
Cap Value Fund category of -11.71%, the Russell 2000 Index of -19.04%, and the
Wilshire Mid Cap Value Index of -7.35%. These indices are more representative of
the broader U.S. stock market, including smaller and medium size companies.
After producing a positive total return during the first half of the fiscal
year, the VALUE FUND experienced a significant decline in the second half as the
broader U.S. market peaked in April and the larger capitalization stocks began a
major decline in July.
Sectors within the VALUE FUND generating positive total returns for the year
include conglomerates, consumer staples, entertainment, health, services and
utilities. Sectors with annual negative returns include consumer durables,
energy and natural resources, finance and insurance, industrial cyclicals,
retail trade and technology.
Stocks contributing positive returns for the year include Tyco Intl., Playtex
Products, SUPERVALU, Inc., Fannie Mae, Johnson & Johnson, Inc., Merck, Vulcan
Materials, Spartech and Tele-Communications, Inc. All of these issues continued
to report very good corporate performance and many are also seen
19
<PAGE> 22
as operating businesses which should be resistant to possible economic weakness.
Some individual stocks with negative returns for the year dropped as they
incurred either company or industry specific weakness in business conditions.
Most prominent of this group include Atlantic Richfield, R&B Falcon Drilling,
Triton Energy and Weatherford International in the energy industry; Bankers
Trust, Lehman Brothers Holdings and United Companies Financial in the financial
area; Fedders Corp. and The Timken Company in the industrial sector; and Dallas
Semiconductor, Electroglas, FSI International and Motorola in the technology
group. Republic Group, Superior Industries and VICORP Restaurants stock
performances were negative despite reporting financial results equal to or in
excess of expectations. NCR Corp. and Intuit are holdings in the technology and
services area which recorded good business progress and had positive stock
returns.
The graph displayed below shows that the VALUE FUND'S performance since
December 4, 1987 (inception) has lagged the performance of the S&P 500 Index, a
broad-based market index. The S&P 500 Index is a capitalization weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange and tend to be large-
capitalization stocks. The stocks in the VALUE FUND'S portfolio are small,
medium and large-capitalization issues and the VALUE FUND is classified as a
medium capitalization fund. As a result, its stocks more closely match the
stocks in other indices discussed above, such as the Value Line Average, Russell
2000 Index and Wilshire Mid Cap Value Index.
The calculations in the graphs below assume reinvestment of all dividends and
reflect the effect of all recurring fees.
CONCORDE VALUE FUND
PERFORMANCE COMPARISON
9/30/98 VALUE OF $10,000 INVESTED ON 12/4/87 (INCEPTION)
<TABLE>
<CAPTION>
Concorde
S&P 500 Value Fund
----------------------
<S> <C> <C>
12/4/87 $10,000 $10,000
Dec-87 $10,761 $ 9,800
$11,214 $10,540
$11,737 $11,290
Mar-88 $11,374 $11,600
$11,500 $11,370
$11,600 $11,080
Jun-88 $12,133 $12,170
$12,087 $12,190
$11,676 $11,110
Sep-88 $12,173 $11,290
$12,511 $11,080
$12,333 $10,790
Dec-88 $12,548 $11,173
$13,467 $11,670
$13,132 $11,934
Mar-89 $13,438 $12,288
$14,135 $12,572
$14,707 $13,130
Jun-89 $14,624 $12,603
$15,944 $13,049
$16,257 $13,211
Sep-89 $16,190 $12,785
$15,814 $11,700
$16,137 $11,589
Dec-89 $16,524 $11,652
$15,415 $10,904
$15,614 $11,069
Mar-90 $16,028 $11,410
$15,627 $10,992
$17,151 $11,498
Jun-90 $17,034 $11,586
$16,980 $11,289
$15,445 $10,002
Sep-90 $14,693 $ 9,188
$14,630 $ 8,593
$15,575 $ 9,177
Dec-90 $16,009 $ 9,706
$16,707 $10,618
$17,902 $11,417
Mar-91 $18,335 $11,586
$18,379 $11,496
$19,173 $11,811
Jun-91 $18,295 $11,788
$19,147 $12,014
$19,601 $12,047
Sep-91 $19,274 $11,834
$19,532 $12,036
$18,745 $11,665
Dec-91 $20,889 $12,367
$20,501 $12,690
$20,767 $13,232
Mar-92 $20,362 $13,255
$20,961 $13,393
$21,064 $13,474
Jun-92 $20,750 $12,978
$21,599 $13,289
$21,156 $13,024
Sep-92 $21,405 $12,828
$21,478 $13,013
$22,208 $13,508
Dec-92 $22,482 $14,176
$22,670 $14,444
$22,979 $14,432
Mar-93 $23,464 $14,805
$22,896 $14,665
$23,507 $14,898
Jun-93 $23,575 $14,898
$23,481 $14,910
$24,371 $15,248
Sep-93 $24,183 $15,283
$24,684 $15,481
$24,449 $15,330
Dec-93 $24,745 $15,614
$25,587 $15,940
$24,893 $15,888
Mar-94 $23,810 $15,523
$24,115 $15,379
$24,508 $15,536
Jun-94 $23,908 $15,418
$24,692 $15,692
$25,702 $16,279
Sep-94 $25,075 $16,005
$25,636 $15,966
$24,703 $15,379
Dec-94 $25,069 $14,986
$25,718 $14,959
$26,718 $15,150
Mar-95 $27,507 $15,544
$28,315 $15,966
$29,445 $16,373
Jun-95 $30,128 $16,972
$31,126 $17,761
$31,203 $17,774
Sep-95 $32,520 $18,128
$32,403 $17,815
$33,822 $18,495
Dec-95 $34,475 $18,596
$35,647 $19,023
$35,979 $19,202
Mar-96 $36,324 $19,588
$36,858 $19,961
$37,805 $20,415
Jun-96 $37,949 $20,181
$36,272 $19,313
$37,037 $19,961
Sep-96 $39,119 $20,608
$40,198 $21,063
$43,233 $22,056
Dec-96 $42,377 $21,930
$45,021 $23,225
$45,377 $23,092
Mar-97 $43,517 $22,268
$46,110 $23,622
$48,914 $24,829
Jun-97 $51,105 $25,903
$55,168 $27,787
$52,079 $27,169
Sep-97 $54,927 $28,935
$53,093 $27,949
$55,551 $28,037
Dec-97 $56,506 $28,283
$57,134 $28,347
$61,253 $30,497
Mar-98 $64,389 $31,876
$65,039 $32,646
$63,921 $31,652
Jun-98 $66,516 $31,106
$65,811 $29,229
$56,308 $24,384
Sep-98 $59,917 $24,641
</TABLE>
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<PAGE> 23
CONCORDE INCOME FUND
PERFORMANCE COMPARISON
9/30/98 VALUE OF $10,000 INVESTED ON 1/22/96 (INCEPTION)
<TABLE>
<CAPTION>
Income
Index Fund
-------------------------
<C> <C> <C>
1/22/96 $10,000 $10,000
$10,112 $10,020
$ 9,994 $ 9,900
Mar 96 $ 9,943 $ 9,900
$ 9,908 $ 9,840
$ 9,900 $ 9,770
Jun 96 $10,005 $ 9,880
$10,035 $ 9,790
$10,043 $ 9,890
Sep 96 $10,183 $10,070
$10,363 $10,192
$10,500 $10,475
Dec 96 $10,432 $10,400
$10,473 $10,442
$10,493 $10,462
Mar 97 $10,421 $10,266
$10,544 $10,350
$10,631 $10,486
Jun 97 $10,728 $10,621
$10,946 $10,938
$10,891 $10,833
Sep 97 $11,017 $11,118
$11,177 $11,107
$11,228 $11,118
Dec 97 $11,344 $11,113
$11,491 $11,221
$11,479 $11,242
Mar 98 $11,514 $11,286
$11,570 $11,264
$11,654 $11,253
Jun 98 $11,732 $11,231
$11,777 $11,054
$11,999 $10,932
Sep 98 $12,279 $11,220
</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. The
calculations in the graph above assume reinvestment of all dividends and reflect
the effect of all recurring fees.
MANAGEMENT'S DISCUSSION OF INCOME FUND PERFORMANCE. In pursuing its primary
investment objective of current income and secondary objective of capital
appreciation, the INCOME FUND generated a total return of .92% for the fiscal
year ending September 30, 1998. Investment income (interest and dividends)
modestly exceeded net capital depreciation for the year as losses on equity
oriented securities in the portfolio were balanced by income and modest gains in
the fixed income segment of the INCOME FUND.
The average maturity of the fixed income holdings was increased during the
year from between 6 and 7 years to around 8 years which increased the positive
total return during the second half of the year as interest rates fell. The
primarily high quality bond holding performed well as investors shunned lower
quality securities. The Federal Agency obligations and corporate preferred
stocks lagged the U.S. Treasury holdings as yield spreads widened during the
flight to quality in the markets during the late summer of 1998.
Most of the equity related issues in the INCOME FUND generated total return
losses for the year, following the stock market decline in 1998. The significant
dividends that
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<PAGE> 24
all of these securities distribute helped to offset the capital losses.
Individually, PIMCO Commercial Mortgage Trust, Strategic Global Income Fund and
Bethlehem Steel C.V. Pfd. produced total return gains. Bankers Trust, Capstead
Mortgage and United Companies Financial Corp. C.V. Pfd. all had significant
losses as a result of company specific results and concerns, primarily related
to the credit market turmoil and liquidity constraints that emerged late in the
year.
The INCOME FUND'S Real Estate Investment Trust (REIT) holdings, including
First Industrial Realty, HRPT Properties, Hospitality Properties and Corporate
Office Property, generated total return losses as REIT's adjusted to lower
growth expectations. Chemed Corp. common stock declined in price from initial
purchases during the year despite excellent corporate results and solid
prospects for the future. ICO Holdings, Inc. C.V. Pfd. and Atlantic Richfield
common both dropped as concerns in the energy and chemical businesses weighed on
those industry stocks.
The INCOME FUND'S performance compares unfavorably with the Lehman Brothers
Gov./Corp. Index for the fiscal year ending September 30, 1998 as a result of
the negative performance of the equity related securities in the INCOME FUND.
The Lehman Index contains a group of bonds with maturities between 1.00 and 9.99
years only. The performance of only the bond and note holdings in the INCOME
FUND would compare favorably with the Lehman Brothers Intermediate Government
Corporate Index.
22
<PAGE> 25
[CONCORDE FUNDS LOGO] NEW ACCOUNT APPLICATION
PLEASE MAIL IN THE ENCLOSED RETURN ENVELOPE TO:
CONCORDE FUNDS, C/O FIRSTAR MUTUAL FUND SERVICES, LLC
POST OFFICE BOX 701, MILWAUKEE, WISCONSIN 53201-0701
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
1-972-387-8258 for the appropriate application.
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
Owner (individual, Corporation, Partnership, Trust) Social Security/Taxpayer I.D. Number
- -------------------------------------------------------------------------------------------------------------
Co-Owner* (if any) Social Security/Taxpayer I.D. Number
- -------------------------------------------------------------------------------------------------------------
Mailing Address (Individuals should provide their residence address)
( )
- -------------------------------------------------------------------------------------------------------------
City State Zip Code Daytime Phone
*Indicate nature of co-ownership:
[ ] Community Property (No Right of Survivorship)
[ ] Joint Tenants with Rights of Survivorship
[ ] Tenants in Common
[ ] Other (Please specify):
-----------------------------------------------------------------------------
Any registration in the names of two or more co-owners will be without right of survivorship, unless
otherwise specified. Shares may be registered in the name of a custodian for a minor under applicable state
law. In such cases, the name of the state should be indicated, and the taxpayer identification or social
security number should be that of the minor. Shares registered in the name of a trust should also identify
the name(s) of Trustee(s) and Trust date.
INITIAL INVESTMENT (MINIMUM $500)
Please establish my account in [ ] Concorde Value Fund [ ] Concorde Income Fund. (Share certificates will
not be issued.)
[ ] By Check: I have enclosed a check made payable to Concorde Value Fund or Concorde Income Fund for $
-----------
[ ] By Wire: $
---------------------------------------------- ----------------------------------------------
Amount Date of Wire
A. Call 1-800-294-1699 to insure proper credit
B. Complete and return this application
C. Wire your investment through any Federal Reserve bank, as follows:
Firstar Bank Milwaukee, N.A. ABA Number 075000022
For credit to Firstar Mutual Fund Services, LLC 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.
[ ] Via Wire* [ ] Electronic Funds Transfer
- -------------------------------------------------------------------------------------------------------------
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 $12.00 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 or Others Date
</TABLE>
<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 Century Business Machines
JOHN H. WILSON
President of U.S. Equity Corporation
GARY B. WOOD, Ph.D.
President, Treasurer and a director of Concorde Investment Management and
Concorde Capital Corporation; Chairman of the Board and a director of OmniMed
Corporation, International Hospital Corporation and Alpha Holdings, Inc.
OFFICERS OF THE FUND
GARY B. WOOD, Ph.D.
President and Treasurer
JOHN A. STETTER
Secretary
CUSTODIAN
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
Mutual Fund Services, 3rd Floor
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Kinder & Wyman, P.C.
511 E. John Carpenter Freeway
Suite 200
Irving, Texas 75062
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
- --------------------------------------------------------------------------------
SPECIAL SERVICES AVAILABLE
Individual Retirement Accounts ("IRA"), including Traditional IRA and Roth 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 of Contents
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
A MESSAGE FROM THE PRESIDENT
OF CONCORDE INVESTMENT MANAGEMENT.... 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?...... 16
WHAT ABOUT DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES?............. 16
MAY SHAREHOLDERS REINVEST DIVIDENDS?... 16
WHAT RETIREMENT PLANS DO THE FUNDS
OFFER?............................... 17
WHAT ABOUT BROKERAGE TRANSACTIONS?..... 17
GENERAL INFORMATION ABOUT THE FUNDS.... 17
YEAR 2000.............................. 18
WHAT HAS BEEN THE FUNDS'
PERFORMANCE?......................... 18
No person has been authorized to give any
information or to make any representations other
than those contained in this Prospectus and the
Statement of Additional Information dated
November 30, 1998, 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.
</TABLE>
LOGO
APPLICATION AND PROSPECTUS
Dallas, Texas
November 30, 1998
STATEMENT OF ADDITIONAL INFORMATION November 30, 1998
- -----------------------------------
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
November 30, 1998. 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.
<PAGE>
CONCORDE FUNDS, INC.
Table of Contents
Page No.
GENERAL INFORMATION .................................................. 1
INVESTMENT RESTRICTIONS .............................................. 1
INVESTMENT POLICIES AND PRACTICES .................................... 4
DIRECTORS AND OFFICERS OF THE CORPORATION ............................ 14
PRINCIPAL SHAREHOLDERS ............................................... 17
INVESTMENT ADVISOR ................................................... 18
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE ..................... 20
REDEMPTION OF FUND SHARES ............................................ 22
ALLOCATION OF PORTFOLIO BROKERAGE .................................... 22
CUSTODIAN ............................................................ 23
TAXES ................................................................ 24
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ............................. 25
FINANCIAL STATEMENTS ................................................. 25
SHAREHOLDER MEETINGS ................................................. 25
DESCRIPTION OF BOND RATINGS .......................................... 27
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 November 30, 1998 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.
-i-
<PAGE>
GENERAL INFORMATION
Concorde Funds, Inc. (the "Corporation") was incorporated under the
laws of Texas on September 21, 1987. The Corporation was called "Concorde Value
Fund, Inc." from September 21, 1987 until 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 November 30, 1998 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 producing 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
B-1
<PAGE>
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.
B-2
<PAGE>
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.
B-3
<PAGE>
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 (which does business under the name Concorde
Investment Management), 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-
B-4
<PAGE>
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.
B-5
<PAGE>
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,
B-6
<PAGE>
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.
B-7
<PAGE>
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
B-8
<PAGE>
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
B-9
<PAGE>
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.
B-10
<PAGE>
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 or 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
B-11
<PAGE>
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.
B-12
<PAGE>
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
B-13
<PAGE>
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 as of November 1, 1998 with respect to each
of the directors and officers of the Corporation are as follows:
JOHN R. BRADFORD, Ph.D., 76
3112 - 42nd Street
Lubbock, Texas 79413
(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, 74
5442 Darnell Street
Houston, Texas 77096
(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.
B-14
<PAGE>
JOHN H. WILSON, 56
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. Prior to July 1998, Mr. Wilson was President and a Director of Whitehall
Corporation, which rebuilds, modifies and maintains commercial and military
aircraft. He currently serves on the Board of Directors of Capital Southwest
Corporation, a venture capital firm, 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.*, 48
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, and its Mexican
subsidiary, Consorcio International Hospital, S.A. de C.V., hospital
construction and management firms; Document Authentication Systems, Inc., an
electronic commerce company; and Alpha Holdings, Inc., a plastics manufacturing
company. 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 each FUND as that term
is defined in the Investment Company Act of 1940.
B-15
<PAGE>
JOHN A. STETTER, 43
1500 Three Lincoln Centre 5430 LBJ Freeway Dallas, Texas 75240 (SECRETARY OF THE
CORPORATION)
Mr. Stetter has been a Portfolio Manager for the Advisor since 1994.
From 1988 until 1994, he was the President of his own investment advisory firm.
During the fiscal year ended September 30, 1998 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, 1998:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Aggregate Pension or Retirement Estimated Annual Total Compensation from
Compensation from Benefits Accrued as Benefits Upon Corporation and Fund
Name of Person Corporation Part of Fund Expenses Retirement Complex 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>
B-16
<PAGE>
PRINCIPAL SHAREHOLDERS
Set forth below are the names and addresses of all holders of each
FUND's shares who as of November 1, 1998 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.
VALUE FUND
Name and Address Number of Shares Percent
of Beneficial Owner of VALUE FUND of Class
------------------ ------------- --------
Mr. and Mrs. I.D. Bufkin 151,201 16.3%
R.R. 5, Box 390
Brenham, TX 77833
William E. Watson 72,598 7.8%
MDPA Pension Plan
#3 Bent Tree Court
Lufkin, TX 75901
Mr. and Mrs. C.W. Nance 100,750 10.8%
214 North Bay EB
Bullard, TX 75757
Mr. and Mrs. R.S. Cunningham 50,869 5.5%
#2 Saddlewood Estates
Houston, TX 77024
Mr. and Mrs. Donald S. Taylor 51,427 5.5%
3803 Pleasant Valley Drive
Missouri City, TX 77459
Mr. and Mrs. Stephen D. Chesebro 52,203 5.6%
5473 Sugar Hill Drive
Houston, TX 77056
Charles Schwab & Co. 678,240 73.0%
101 Montgomery Street
San Francisco, CA 94104
Officers and Directors 11,307 1.2%
as a group (5 persons)
- ---------------
* At November 1, 1998, Charles Schwab & Co. owned of record 678,240 shares of
the VALUE FUND or 73.0% 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 Mr. and Mrs. I.D. Bufkin, Mr. and Mrs. C.W. Nance , Mr. and Mrs. R.S.
Cunningham, Mr. and Mrs. Donald S. Taylor and Mr. and Mrs. Stephen D. Chesebro.
B-17
<PAGE>
INCOME FUND
Name and Address of Number of Shares Percent
Beneficial Owner Of INCOME FUND of Class
-------------------- --------------- -----------
Mr. and Mrs. I.D. Bufkin 81,501 17.0%
R.R. 5, Box 390
Brenham, TX 44833
William E. Watson MDPA 70,486 14.7%
Pension Plan
#3 Bent Tree Court
Lufkin, TX 75901
Mr. and Mrs. W.J. Stetter 28,842 6.0%
4322 Melissa Lane
Dallas, TX 75229
Mr. and Mrs. Edgar J. Milan 33,284 6.9%
3350 McCue Road
Unit 2203
Houston, TX 77056
Dr. and Mrs. Jerry M. Lewis 25,826 5.4%
6705 Meadow Lake Avenue
Dallas, TX 75214
J.A. Watson IRA Rollover 25,519 5.3%
7235 Lakewood Boulevard
Dallas, TX 75214
Charles Schwab & Co. 343,236 71.7%
101 Montgomery Street
San Francisco, CA 94104
Officers and Directors as a 3,021 .6%
group (5 persons)
- -----------------------
* At November 1, 1998, Charles Schwab & Co. owned of record 343,236 shares of
the INCOME FUND or 71.7% of the then outstanding shares. All of the shares owned
by Charles Schwab & Co. were owned of record only and included shares held by
Mr. and Mrs. I.D. Bufkin, Mr. and Mrs. W. J. Stetter, J.A. Watson IRA Rollover,
Mr. and Mrs. Edgar J. Milan and Dr. and Mrs. Jerry M. Lewis.
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,
which
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<PAGE>
does business under the name Concorde Investment Management (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, 1998, September 30, 1997 and
September 30, 1996 the VALUE FUND paid the Advisor advisory fees of $160,844,
$131,036 and $112,373 , respectively. During the fiscal year ended September 30,
1998, September 30, 1997 and the period from January 22, 1996 (commencement of
operations) through September 30, 1996, the INCOME FUND paid the Advisor
advisory fees of $31,277, $21,235 and $9,440, respectively.
Each FUND pays all of its expenses not assumed by the Advisor
including, but not limited to: the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto; the expense of
registering its shares with the Securities and Exchange Commission and in the
various states; the printing and distribution cost of prospectuses mailed to
existing shareholders; the cost of director and officer liability insurance,
reports to shareholders, reports to government authorities and proxy statements;
interest charges; brokerage commissions and expenses incurred in connection with
portfolio transactions. The FUND also pays: the fees of directors who are not
interested persons of the Corporation; compensation of administrative and
clerical personnel; association membership dues; auditing and accounting
services; legal fees and expenses; fees and expenses of any custodian or
trustees having custody of a FUND's assets; expenses of calculating the net
asset value and repurchasing and redeeming shares; charges and expenses of
dividend disbursing agents; registrars and stock transfer agents, including the
cost of keeping all necessary shareholder records and accounts and handling any
problems related thereto.
The Advisor has undertaken to reimburse each FUND to the extent that
the aggregate annual operating expenses, including the investment advisory fee
but excluding interest, taxes, brokerage commissions and extraordinary items,
exceed that percentage of the average net assets of the FUND for such year, as
determined by valuations made as of the close of each business day of the year,
which is the most restrictive percentage provided by the state laws of the
various states in which the shares of the FUND are qualified for sale. If the
states in which the shares of the FUND are qualified for sale impose no such
restrictions, the Advisor will not be obligated to reimburse the FUND. As of the
date of this Statement of Additional Information the shares of the FUNDS are not
qualified for sale in any state which imposes an expense limitation. Each FUND
monitors its expense ratio on a monthly basis. If the accrued amount of the
expenses of the FUND exceeds an applicable expense limitation, the FUND will
create an account receivable from the Advisor for the amount of such excess. In
such a situation, the monthly payment of the Advisor's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the FUND's fiscal year if accrued expenses thereafter fall below this
limit. The adjustment will be reconciled at the end of the fiscal year and not
carried forward. During the fiscal year ended September 30, 1998, September 30,
1997 and the period from January 22, 1996 (commencement of operations) through
September 30, 1996, the Adviser reimbursed the INCOME FUND $25,222, $38,502 and
$22,663, respectively, for excess expenses during such periods.
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<PAGE>
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, Dr. Martin Luther King, Jr. Day, President's Day, 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
B-20
<PAGE>
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:
P(1+T)n = 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.
a-b 6
Yield = 2[(----- + 1) - 1]
cd
This calculation can be expressed as follows:
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, 1998 was
148.28%. An initial investment of $1,000 in the VALUE FUND at December 4, 1987
would have been worth $2,482.79 as of September 30, 1998. The average annual
compounded rate of return of
B-21
<PAGE>
the VALUE FUND over this period was 8.76%. The average annual compounded rate of
return of the VALUE FUND for the 5-year period ended September 30, 1998 was
10.13%. The VALUE FUND's compounded rate of return for the 1-year period ended
September 30, 1998 was - 14.76%.
The INCOME FUND'S total return for the period from January 22, 1996,
the day the INCOME FUND commenced operations, through September 30, 1998 was
12.22%. An initial investment of $1,000 in the INCOME FUND at January 22, 1996
would have been worth $1,122.22 as of September 30, 1998. The average annual
compounded rate of return of the INCOME FUND over this period was 4.84%. The
INCOME FUND's compounded rate of return for the 1-year period ended September
30, 1998 was .92%.
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. Such performance results for the INCOME FUND also reflect
reimbursements made by the Advisor during the period from January 22, 1996
(commencement of operations) through September 30, 1998 to keep aggregate annual
operating expenses at or below 2% of daily net assets. For example, the INCOME
FUND's ratio of total expenses to average net assets for the year ended
September 30, 1998 was 1.89% and, absent reimbursements, 2.46%. 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
B-22
<PAGE>
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, 1998, September 30, 1997 and September 30, 1996 to brokers totaled
$56,006 on transactions involving securities having a total market value of
$17,845,529, $28,624 on transactions involving securities having a total market
value of $8,983,205 and $14,755 on transactions involving securities having a
total market value of $6,955,104, respectively. Brokerage commissions paid by
the INCOME FUND during the fiscal year ended September 30, 1998, September 30,
1997 and the period from January 22, 1996 (commencement of operations) through
September 30, 1996 to brokers totaled $4,492 on transactions involving
securities having a total market value of $1,365,885, $4,210 on transactions
involving securities having a total market value of $1,019,905 and $4,548 on
transactions involving securities having a total market value of $2,761,110,
respectively. All of such brokers provided research services to the Advisor.
CUSTODIAN
Firstar Bank Milwaukee, N.A., 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, acts as custodian for the FUNDS. As such, Firstar Bank
Milwaukee, N.A. 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 Bank Milwaukee, N.A. does not
exercise any supervisory function over the management of the FUNDS, the purchase
B-23
<PAGE>
and sale of securities or the payment of distributions to stockholders. Firstar
Mutual Fund Services, LLC, an affiliate of Firstar Bank Milwaukee, N.A., acts as
the FUNDS' fund accountant, transfer agent and dividend disbursing agent.
Firstar Mutual Fund Services, LLC has entered into a fund accounting services
agreement with the FUNDS pursuant to which it acts as fund accountant. As fund
accountant Firstar Mutual Fund Services, LLC 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 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,
1998, September 30, 1997 and September 30, 1996 , the VALUE FUND paid $23,774,
$23,890 and $25,054 , respectively, pursuant to the fund accounting services
agreement. During the fiscal year ended September 30, 1998, September 30, 1997
and the period from January 22, 1996 (commencement of operations) through
September 30, 1996, the INCOME FUND paid $27,895, $24,385 and $12,641,
respectively, pursuant to the fund accounting services agreement.
TAXES
As set forth in the Prospectus under the caption "WHAT ABOUT
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?" the FUNDS will endeavor to
qualify annually for and elect tax treatment applicable to a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code").
Dividends from a FUND's net investment income and distributions from a
FUND's net long-term 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 will apply only to dividends from
a FUND's net investment income, subject to proportionate reductions if the
aggregate dividends received by the FUND from domestic corporations in any year
are less than 100% of the distributions of net investment company taxable income
made by the FUND.
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
B-24
<PAGE>
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., Irving, Texas, has been selected as the
independent certified public accountants for the FUNDS.
FINANCIAL STATEMENTS
The following audited financial statements are incorporated by
reference to the Concorde Funds, Inc. Annual Report dated September 30, 1998
(File No. 811-5339), as filed with the Securities and Exchange Commission on
November 20, 1998:
Concorde Value Fund
Financial Highlights
Investments in Securities
Covered Call Options Written
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
Investments in Securities
Covered Call Options Written
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
SHAREHOLDER MEETINGS
The Texas Business Corporation Act permits registered investment
companies, such as the Corporation, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the Investment Company Act of 1940. The Corporation has adopted the
appropriate provisions in its Bylaws and may, at its discretion, not hold an
annual meeting in any year in which the election of directors is not required to
be acted on by shareholders under said Act.
The Corporation's Bylaws also contain procedures for the removal of
directors by its shareholders. At any meeting of shareholders duly called and
held at which a quorum is
B-25
<PAGE>
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.
B-26
<PAGE>
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 debt 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
B-27
<PAGE>
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.
B-28
<PAGE>
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.
B-29
<PAGE>
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, 1998 (File No.
811-5339) (as filed with the Securities and Exchange
Commission on November 20, 1998) in Part B
Concorde Value Fund
Financial Highlights
Investments in Securities
Covered Call Options Written
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
Investments in Securities
Covered Call Options Written
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
(b.) Exhibits
(1) Registrant's Articles of Incorporation, as amended
(4).
(2) Registrant's Amended and Restated By-Laws(1).
(3) None
(4) None
(5.1) Investment Advisory Agreement for the VALUE FUND
(3).
(5.2) Investment Advisory Agreement for the INCOME FUND
(1).
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company
(predecessor to Firstar Bank Milwaukee, N.A.)(3).
C-1
<PAGE>
(9) Shareholder Servicing Agent Agreement with Firstar
Trust Company (predecessor to Firstar Mutual Fund
Services, LLC)(3).
(9.1) Fund Accounting Services Agreement with Firstar
Trust Company (predecessor to Firstar Mutual Fund
Services, LLC)(3).
(10) Opinion of Foley & Lardner, counsel for Registrant.
(11) Consent of Kinder & Wyman, P.C.
(12) None.
(13) Subscription Agreement(4).
(14.1) Individual Retirement Account(4).
(14.2) Simplified Employee Pension Plan(4).
(14.3) Defined Contribution Retirement Plan(4).
(14.4) Prototype 403(b)(7) plan(4).
(15) None.
(16) Schedule for computation of performance quotation(2).
(17) Financial Data Schedule.
(18) None.
- ---------------
(1) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed
on September 18, 1995 and its accession number is 0000897069-95-000126.
(2) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed
on December 4, 1995 and its accession number is 0000950134-95-003200.
(3) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed
on December 2, 1996 and its accession number is 0000897069-96-000421.
(4) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed
on January 30, 1998 and its accession number is 0000897069-98-000023.
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.
C-2
<PAGE>
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of October 31, 1998
-------------- -------------------------
Series A Common Stock (VALUE FUND) 64
Series B Common Stock (INCOME FUND) 15
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.
C-3
<PAGE>
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, Firstar Bank
Milwaukee, N.A., or at Registrant's fund accountant, transfer agent and dividend
disbursing agent, Firstar Mutual Fund Services, LLC, 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.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amended Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas and State of Texas
on the 19th day of November, 1998.
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 19, 1998
- ---------------------------
Gary B. Wood, Ph.D. Financial and
Accounting Officer
and Director
/s/ Gilbert F. Hartwell Director November 16, 1998
- ----------------------------
Gilbert F. Hartwell
/s/ John H. Wilson Director November 19, 1998
- ----------------------------
John H. Wilson
/s/ John R. Bradford, Ph.D. Director November 16, 1998
- -------------------------------
John R. Bradford, Ph.D.
S-1
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit
---------- -------
(1) Registrant's Articles of Incorporation, as amended*
(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
(predecessor to Firstar Bank Milwaukee, N.A.)*
(9) Shareholder Servicing Agent Agreement with First
Wisconsin Trust Company (predecessor to Firstar Mutual
Fund Services, LLC)*
(9.1) Fund Accounting Services Agreement with Firstar Trust
Company (predecessor to Firstar Mutual Fund Services,
LLC)*
(10) Opinion of Foley & Lardner, Counsel for Registrant
(11) Consent of Kinder & Wyman, P.C.
(12) None
- -----------------------------
*Incorporated by reference
Exhibit Index - Page 1
<PAGE>
(13) Subscription Agreement*
(14.1) Individual Retirement Account*
(14.2) Simplified Employee Pension Plan*
(14.3) Defined Contribution Retirement Plan*
(14.4) Prototype 403(b)(7) plan*
(15) None
(16) Schedule for computation of performance quotation*
(17) Financial Data Schedule
(18) None
- ----------------
* Incorporated by reference
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WEST PALM BEACH
November 24, 1998
Concorde Funds, Inc.
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, TX 75240
Ladies & Gentlemen:
We have acted as counsel for Concorde Funds, Inc. in connection with
the preparation of an amendment to your Registration Statement on Form N-1A
relating to the sale by you of an indefinite amount of Concorde Funds, Inc.
Common Stock (such Common Stock being hereinafter referred to as the "Stock") in
the manner set forth in the Amended Registration Statement to which reference is
made. In this connection we have examined: (a) the Amended Registration
Statement on Form N-1A; (b) your Articles of Incorporation and Bylaws, as
amended to date; (c) corporate proceedings relative to the authorization for
issuance of the Stock; and (d) such other proceedings, documents and records as
we have deemed necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares of
Stock when sold as contemplated in the Amended Registration Statement will be
legally issued, fully paid and nonassessable
We hereby consent to the use of this opinion as an exhibit to the Form
N-1A Registration Statement. In giving this consent, we do not admit that we are
experts within the meaning of Section 11 of the Securities Act of 1933, as
amended, or within the category of persons whose consent is required by Section
7 of said Act.
Very truly yours,
Foley & Lardner
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Concorde Funds, Inc.:
We consent to the use of our report incorporated by reference in the Statement
of Additional Information and to the reference to our firm under the heading
"Independent Certified Public Accountants" in the Statement of Additional
Information, included in the Concorde Funds, Inc. Form N-1A as of November 16,
1998.
Kinder & Wyman, P.C.
Dallas, Texas
November 16, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
condensed financial statements of Concorde Funds, Inc. as of and for
the Year ended September 30, 1998 and is qualified in its entirity by
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> Concorde Value Fund
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 12,614
<INVESTMENTS-AT-VALUE> 14,288
<RECEIVABLES> 286
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,577
<PAYABLE-FOR-SECURITIES> 193
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17
<TOTAL-LIABILITIES> 210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,333
<SHARES-COMMON-STOCK> 935
<SHARES-COMMON-PRIOR> 892
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,320
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,712
<NET-ASSETS> 14,367
<DIVIDEND-INCOME> 201
<INTEREST-INCOME> 66
<OTHER-INCOME> 1
<EXPENSES-NET> 247
<NET-INVESTMENT-INCOME> 21
<REALIZED-GAINS-CURRENT> 2,352
<APPREC-INCREASE-CURRENT> (4,845)
<NET-CHANGE-FROM-OPS> (2,472)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 50
<DISTRIBUTIONS-OF-GAINS> 1,385
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99
<NUMBER-OF-SHARES-REDEEMED> 137
<SHARES-REINVESTED> 82
<NET-CHANGE-IN-ASSETS> 44
<ACCUMULATED-NII-PRIOR> 31
<ACCUMULATED-GAINS-PRIOR> 1,354
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 161
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 247
<AVERAGE-NET-ASSETS> 17,870
<PER-SHARE-NAV-BEGIN> 19.66
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (2.370)
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 1.53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.36
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
condensed financial statements of Concorde Funds, Inc. as of and for
the Year ended September 30, 1998 and is qualified in its entirity by
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> Concorde Income Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4,758
<INVESTMENTS-AT-VALUE> 4,773
<RECEIVABLES> 51
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,838
<PAYABLE-FOR-SECURITIES> 2
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19
<TOTAL-LIABILITIES> 21
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,850
<SHARES-COMMON-STOCK> 481
<SHARES-COMMON-PRIOR> 377
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (54)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22
<NET-ASSETS> 4,817
<DIVIDEND-INCOME> 121
<INTEREST-INCOME> 177
<OTHER-INCOME> 0
<EXPENSES-NET> 85
<NET-INVESTMENT-INCOME> 213
<REALIZED-GAINS-CURRENT> (7)
<APPREC-INCREASE-CURRENT> (171)
<NET-CHANGE-FROM-OPS> 35
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 216
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 143
<NUMBER-OF-SHARES-REDEEMED> 59
<SHARES-REINVESTED> 21
<NET-CHANGE-IN-ASSETS> 105
<ACCUMULATED-NII-PRIOR> 3
<ACCUMULATED-GAINS-PRIOR> (47)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110
<AVERAGE-NET-ASSETS> 4,468
<PER-SHARE-NAV-BEGIN> 10.41
<PER-SHARE-NII> .49
<PER-SHARE-GAIN-APPREC> (.39)
<PER-SHARE-DIVIDEND> .50
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.01
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
