<PAGE> 1
Concorde Funds Logo
November 17, 1998
Dear Shareholders,
We are pleased to present the Annual Report of Concorde Funds, Inc., for the
fiscal year ended September 30, 1998.
CONCORDE VALUE FUND
The total return for the Concorde Value Fund (the "Value Fund") for the fiscal
year ended September 30, 1998 was -14.76% as the U.S. stock market succumbed to
valuation and economic concerns during the last half of the Value Fund year.
This performance compares with various unmanaged indices and fund groups as
illustrated below.
<TABLE>
<S> <C>
CONCORDE VALUE FUND......................................... -14.76%
S&P 500..................................................... 9.06%
NASDAQ Composite............................................ 0.48%
Russell 2000................................................ -19.04%
Value Line Averages......................................... -17.99%
Morningstar Mid Cap Value Funds............................. -11.71%
Wilshire Mid Cap Value...................................... -7.35%
</TABLE>
The Value Fund experienced negative performance during the April-September
period as the broader market peaked in April and larger cap stocks began a swift
decline during July. Indices representing very large stocks, such as the S&P 500
and NASDAQ Composite, continued to outperform most groups as investors sought
liquidity and "comfort" in very large and well known companies rather than
pursuing the goal of maximizing investment value. This phenomenon has been
persistent during the past two years and has become more pronounced during 1998.
The Value Fund, an investor in stocks of companies of all sizes, shifted some
assets from larger capitalizations to smaller and medium issues during the year,
emphasizing what we believe represents better value.
Performance among sectors within the Value Fund varied widely during the
fiscal year. Market sectors producing positive total returns included
conglomerates, consumer staples, entertainment, health services and utilities.
Sectors with negative returns included consumer durables, energy and natural
resources, finance and insurance, industrial cyclicals, retail trade and
technology. Clearly the areas which are deemed to be more sensitive to slowing
domestic and international economies were affected most during the market
downturn.
Tyco International, Playtex Products and SUPERVALU, Inc., which produced the
most significant positive returns, are involved in less economically sensitive
products and produced consistent corporate results. Fannie Mae was our only
financial issue contributing a significant annual gain as its credit risk and
revenue generating ability are considered quite stable. Health industry issues
Johnson & Johnson and Merck benefited from consistent business results and the
continued institutional investor preference for very large cap stocks in the
marketplace. Vulcan Materials and Spartech produced positive total returns among
the industrial cyclicals as their financial results outweighed other macro
concerns. Tele-Communications, Inc., generated a large gain in the service
sector, as a merger with AT&T was announced later in the year.
Several stocks contributed most significantly to the negative total return for
the fiscal year. Fedders stock price dropped as a result of uncertainty
regarding their international expansion and liquidity in the small cap
marketplace. Perrigo Company, the largest U.S. provider of private label
pharmaceutical and personal care
<PAGE> 2
Concorde Funds Logo
products, struggled with operational problems and the delayed sale of one
business unit. Almost all of our energy and natural resource related holdings,
including Atlantic Richfield, R&B Falcon Drilling, Triton Energy, and
Weatherford International, generated significant unrealized losses. These
stemmed primarily from lower crude oil prices that reduce revenues for
producers, and lower exploration and development activity which reduces business
to the oil service firms such as R&B Falcon and Weatherford. We believe the
market has over discounted the long term prospects for the service firms and we
continue to maintain stock positions in this area.
Bankers Trust, Lehman Brothers Holdings and United Companies Financial stock
prices all dropped significantly over the last half of the Fund's fiscal year as
credit concerns, international financial distress and liquidity constraints
impacted the financial sector. Bankers Trust and Lehman announced depressed
results at year-end related to securities trading and client credit issues.
United Companies was severely impacted by the growing liquidity squeeze on lower
rated securities. Their ability to raise capital to continue growth and their
ability to securitize originated mortgage loans decreased dramatically during
the late summer of 1998. Columbia/HCA Healthcare stock was the sole health issue
with a loss for the year. The Company is continuing to restructure as announced,
and we feel the current valuation represents good value.
The industrial cyclical issues generating the most significant losses were
Republic Group, Superior Industries, and The Timken Company. Republic Group and
Superior stocks dropped over concern about potential economic weakness. Timken
reported operational difficulties and revenue weakness over the past quarter,
and the stock price dropped ahead of the announcements.
VICORP Restaurants stock turned in a moderately negative return despite
significantly improved operating results. This is a good example of the lack of
market liquidity in and broad investor disinterest for small cap stocks. We
believe VICORP's stock currently represents excellent value.
Most of our technology holdings, including Dallas Semiconductor, Electroglas,
FSI International, and Motorola, recorded stock price declines as the effects of
the Asian crisis were felt among most international hardware technology
businesses. These companies have already reported results reflecting these
problems; however, we believe their particular business niches represent good
value at the current discounted prices. Two other technology service businesses,
NCR and Intuit, generated gains as they reported good financial results.
Our management approach of the Value Fund will continue to utilize our low
turnover, value approach and we believe recent market volatility is presenting
investment opportunities which should provide excellent investment performance
over the next several years.
CONCORDE INCOME FUND
While serving as a defensive investment vehicle, the total return for the
Concorde Income Fund (the "Income Fund") of 0.92% was never the less
disappointing as losses in the equity segments of the portfolios offset the
moderate gains in the more heavily weighted fixed income components. Although
difficult periods, such as the recent volatility in the equity markets, can
produce short term negative results, the Income Fund's strategy and allocation
should generate good and consistent total returns over time.
The fixed income segments of the Income Fund, consisting primarily of U.S.
Treasury and Agency notes, generated significant returns in the second half of
the year as interest rates dropped. The U.S. Agency notes and high quality
corporate preferred stock holdings did not appreciate as much as U.S.
Treasuries, as investors, following a "flight to quality" strategy, moved into
secure government instruments.
The total return for the year for the government and agency bonds was evenly
divided between capital appreciation and interest. Our corporate preferred
stocks generated a small unrealized capital depreciation which was outweighed by
their significant dividend income.
<PAGE> 3
Concorde Funds Logo
Most of the equity oriented income securities generated total return losses
for the year. However, PIMCO Commercial Mortgage Trust, Strategic Global Income
Fund and Bethlehem Steel C.V. Pfd. contributed to overall gains. Bankers Trust,
Capstead Mortgage, and United Companies Financial Convertible Preferred 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 in late summer. Our REIT holdings, including First Industrial Realty,
HRPT Properties, Hospitality Properties and Corporate Office Property, generated
total return losses as the REIT stock group adjusted to lower growth
expectations. Our focused holdings are conservatively managed and financed,
invest in lower risk type properties, and we believe are selling at very
attractive levels. We will continue to maintain a meaningful investment in this
area. Chemed Corp., a new holding, is involved in very recession resistant
businesses but has declined in price during the overall market weakness. ICO
Holdings, Inc. Conv. Pfd. had dropped, along with its related common stock, as
corporate performance has been disappointing along with concerns over the energy
and chemical industry slowdowns. Atlantic Richfield has underperformed with the
energy group, but we continue to hold this quality company which pays a
significant dividend.
We will maintain our focus on generating income in all segments of the
portfolio, while positioning the Income Fund when appropriate for capital gains.
Our long term strategy remains to generate significant income from all sectors
of the fund, while looking to the equity related securities for modest long term
capital appreciation.
SUMMARY
Thank you for your past and future support as we strive to maintain the
highest standards in managing Concorde Funds, Inc.
Sincerely,
GARY B. WOOD SIGNATURE
Gary B. Wood, Ph.D.
President
<PAGE> 4
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL PERCENT OF
AMOUNT VALUE NET ASSETS
--------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCKS
CONGLOMERATES
Seagram Company Ltd...................................... 18,000 $ 516,375 3.59%
Tyco International Ltd.(b)............................... 5,500 303,875 2.12%
----------- ------
820,250 5.71%
----------- ------
CONSUMER DURABLES
Fedders Corporation Class A.............................. 58,500 270,562 1.88%
----------- ------
CONSUMER STAPLES
Perrigo Company(a)....................................... 27,500 250,938 1.75%
Playtex Products, Inc.(a)................................ 32,200 452,812 3.15%
SUPERVALU INC............................................ 30,500 711,031 4.95%
----------- ------
1,414,781 9.85%
----------- ------
ENERGY AND NATURAL RESOURCES
Atlantic Richfield Company............................... 5,000 354,688 2.47%
Maxxam Inc.(a)........................................... 8,550 467,044 3.25%
TOTAL SA ADR(a).......................................... 7,000 439,687 3.06%
Weatherford International, Inc.(a)....................... 15,165 327,943 2.28%
----------- ------
1,589,362 11.06%
----------- ------
ENTERTAINMENT
Hasbro, Inc.............................................. 18,500 545,750 3.80%
----------- ------
FINANCE AND INSURANCE
Bankers Trust Corporation(c)............................. 4,000 236,000 1.64%
Delphi Financial Group, Inc.(a).......................... 12,240 481,950 3.35%
Fannie Mae............................................... 7,300 469,025 3.26%
Lehman Brothers Holdings................................. 9,000 254,250 1.77%
United Companies Financial Corporation................... 24,000 192,000 1.34%
----------- ------
1,633,225 11.36%
----------- ------
HEALTH
Columbia/HCA Healthcare Corporation...................... 12,900 258,806 1.80%
Johnson & Johnson(d)..................................... 8,000 626,000 4.36%
Merck & Co., Inc......................................... 5,000 647,813 4.51%
----------- ------
1,532,619 10.67%
----------- ------
INDUSTRIAL CYCLICALS
Lockheed Martin Corporation.............................. 5,300 534,306 3.72%
Republic Group, Inc...................................... 20,675 275,236 1.92%
Spartech Corporation..................................... 19,800 340,313 2.37%
Superior Industries International, Inc................... 14,500 331,687 2.31%
The Timken Company....................................... 16,800 254,100 1.77%
Vulcan Materials Company................................. 4,900 495,819 3.45%
----------- ------
2,231,461 15.54%
----------- ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
INVESTMENTS IN SECURITIES -- (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL PERCENT OF
AMOUNT VALUE NET ASSETS
--------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCKS (Continued)
RETAIL TRADE
VICORP Restaurants, Inc.(a).............................. 27,200 $ 368,900 2.57%
----------- ------
SERVICES
Chemed Corporation....................................... 14,200 398,488 2.77%
Chris-Craft Industries, Inc.(a).......................... 10,404 459,726 3.20%
Intuit Inc.(a)........................................... 8,100 377,156 2.63%
NCR Corporation(a)....................................... 17,600 506,000 3.52%
Tele-Communications, Inc.(a)(e).......................... 8,000 313,000 2.18%
----------- ------
2,054,370 14.30%
----------- ------
TECHNOLOGY
Dallas Semiconductor Corporation......................... 15,900 429,300 2.99%
Electroglas Inc.(a)...................................... 17,500 152,031 1.06%
FSI International, Inc.(a)............................... 27,500 144,375 1.00%
Motorola, Inc............................................ 10,200 435,413 3.03%
----------- ------
1,161,119 8.08%
----------- ------
TOTAL COMMON STOCKS (cost $11,947,584)...................... 13,622,399 94.82%
----------- ------
SHORT TERM DEMAND NOTES
American Family Financial Services, 4.9628%.............. 101,259 101,259 0.70%
Pitney Bowes Credit Corp., 4.9487%....................... 109,196 109,196 0.76%
Warner Lambert, 4.9630%.................................. 240,650 240,650 1.68%
Wisconsin Electric Power Corporation, 4.9628%............ 210,000 210,000 1.46%
----------- ------
TOTAL SHORT TERM DEMAND NOTES (cost $661,105)............... 661,105 4.60%
----------- ------
CERTIFICATE OF DEPOSIT
Firstar Bank Milwaukee, 5.21%, due 1-13-99 (cost
$4,828)................................................ 4,828 0.03%
----------- ------
TOTAL INVESTMENTS IN SECURITIES (cost $12,613,517).......... $14,288,332 99.45%
=========== ======
</TABLE>
- ---------------
Notes:
(a) Presently non-income producing
(b) 5,500 shares subject to option
(c) 4,000 shares subject to option
(d) 3,000 shares subject to option
(e) 8,000 shares subject to option
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
COVERED CALL OPTIONS WRITTEN
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
SUBJECT
TO CALL VALUE
-------------- --------
<S> <C> <C>
COMMON STOCKS/EXPIRATION DATE/EXERCISE PRICE
Bankers Trust Corporation/January/85..................... 2,000 $ 1,875
Bankers Trust Corporation/October/60..................... 2,000 5,125
Johnson & Johnson/January/60............................. 3,000 57,375
Tele-Communications, Inc./October/30..................... 8,000 72,000
Tyco International Ltd./October/45....................... 5,500 56,375
--------
TOTAL (premiums received $230,002).......................... $192,750
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $12,613,517)... $14,288,332
Receivables
Securities sold........................................ 270,002
Dividends.............................................. 11,170
Interest............................................... 3,750
Other assets............................................. 3,342
-----------
TOTAL ASSETS................................................ 14,576,596
-----------
LIABILITIES
Covered call options written, at value (premiums received
$230,002).............................................. 192,750
Investment advisory fee payable.......................... 10,992
Accrued expenses......................................... 5,908
-----------
TOTAL LIABILITIES........................................... 209,650
-----------
NET ASSETS
Equivalent to $15.36 per share on 935,377 shares of
capital stock outstanding.............................. $14,366,946
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Investment income
Dividends.............................................. $ 200,859
Interest............................................... 66,082
Other.................................................. 1,320
-----------
Total investment income.................................. 268,261
-----------
Expenses
Investment advisory fee................................ 160,844
Custodian fees......................................... 6,315
Printing, postage and delivery......................... 11,769
Accounting fees........................................ 23,774
Transfer agent fees.................................... 14,979
Legal fees............................................. 8,900
Registration fees...................................... 1,587
Audit fees............................................. 13,419
Other expenses......................................... 6,026
-----------
Total expenses........................................... 247,613
-----------
NET INVESTMENT INCOME.................................... 20,648
-----------
REALIZED GAIN AND UNREALIZED DEPRECIATION ON INVESTMENTS AND
REALIZED
LOSS AND UNREALIZED APPRECIATION ON COVERED CALL OPTIONS
WRITTEN
Net realized gain on investments in securities........... 2,493,423
Net realized loss on covered call options written........ (141,798)
Net change in unrealized appreciation of investments in
securities............................................. (4,912,437)
Net change in unrealized appreciation of covered call
options written........................................ 67,843
-----------
NET LOSS ON INVESTMENTS.................................. (2,492,969)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $(2,472,321)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS
Net investment income.................................... $ 20,648 $ 54,889
Net realized gain on investments......................... 2,351,625 1,403,743
Net change in unrealized appreciation of investments..... (4,844,594) 3,572,829
----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. (2,472,321) 5,031,461
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income.................................... (49,504) (71,773)
Net realized gains on investments........................ (1,385,134) (777,879)
CAPITAL SHARE TRANSACTIONS.................................. 742,239 769,600
----------- -----------
Total increase (decrease) in net assets.................. (3,164,720) 4,951,409
NET ASSETS
Beginning of year........................................ 17,531,666 12,580,257
----------- -----------
End of year (including undistributed net investment
income of $2,126 and $30,982, respectively)............ $14,366,946 $17,531,666
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA(1):
Net asset value, beginning of year....................... $ 19.66 $ 14.95 $ 13.33 $ 12.28 $ 13.11
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income.................................. 0.02 0.06 0.07 0.06 0.04
Net realized and unrealized gain (loss) on
investments.......................................... (2.73) 5.66 1.73 1.47 0.55
------- ------- ------- ------- -------
Total income (loss) from investment operations......... (2.71) 5.72 1.80 1.53 0.59
------- ------- ------- ------- -------
Less distributions:
Distributions from net investment income............... (0.06) (0.09) (0.06) (0.06) (0.03)
Distributions from net realized gains.................. (1.53) (0.92) (0.12) (0.42) (1.39)
------- ------- ------- ------- -------
Total from distributions............................... (1.59) (1.01) (0.18) (0.48) (1.42)
------- ------- ------- ------- -------
Net asset value, end of year............................. $ 15.36 $ 19.66 $ 14.95 $ 13.33 $ 12.28
======= ======= ======= ======= =======
TOTAL RETURN................................................ (14.76)% 40.53% 13.64% 13.32% 5.04%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)................... $14,367 $17,532 $12,580 $12,235 $12,003
Ratio of expenses to average net assets.................. 1.39% 1.60% 1.62% 1.74% 1.69%
Ratio of net investment income to average net assets..... 0.12% 0.38% 0.53% 0.52% 0.33%
Portfolio turnover rate.................................. 44.62% 30.62% 26.10% 22.42% 75.43%
Average brokerage commission rate paid(2)................ $0.0711 $0.0711 $0.0551
Shares outstanding at end of year........................ 935,377 891,633 841,293 917,929 977,095
</TABLE>
- ---------------
(1) Per share information has been calculated using the average number of shares
outstanding.
(2) Brokerage commissions paid on securities transactions increase the cost of
securities purchased or reduce the proceeds of securities sold, and are not
separately reflected in the Fund's Statement of Operations. The rate is
calculated by dividing the total brokerage commissions paid on applicable
purchases and sales of securities for the year by the total number of
related shares purchased and sold.
The accompanying notes are an integral part of these financial highlights.
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Concorde Value Fund (Fund) is a separate series of shares of common stock
of Concorde Funds, Inc. (Company). The Company was incorporated in the state of
Texas in September of 1987, and is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Fund is
subject to various investment restrictions as set forth in the Statement of
Additional Information. The effective date of the Fund's Registration Statement
under the Securities Act of 1933 was December 4, 1987. The primary investment
objective of the Fund is to produce long-term growth of capital, without
exposing capital to undue risks. The Company may designate one or more series of
common stock. Presently, the Company has designated only one additional series,
Concorde Income Fund. Each capital share in the Fund represents an equal
proportionate interest in the net assets of the Fund with each other capital
share in such series and no interest in any other series.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of the assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE> 9
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Valuation of Securities
Securities are valued at the close of each business day. Securities traded
on national securities exchanges or on the national market systems are valued at
the last reported sales price on the day of valuation, except for call options
written for which the last quoted bid price is used. Short-term demand notes and
certificates of deposit are stated at amortized cost, which is equivalent to
value. Securities for which representative market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Directors.
Security Transactions and Investment Income
Security transactions are accounted for on the date the securities are
purchased or sold, plus one day. Realized gains and losses from securities
transactions are reported on an identified cost basis. Dividend income is
recognized on the ex-dividend date, and interest income is recognized on the
accrual basis. Discounts and premiums on securities purchased are amortized over
the life of the respective securities.
Income Taxes
The Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income or excise tax
provision is required.
There are no material differences between the cost of investments in
securities for financial statement and income tax purposes. Also, due to the
timing of distributions to shareholders, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains were
recorded by the Fund.
Distributions to Shareholders
Dividends declared and paid from net investment income or net realized
gains are recorded on the ex-dividend date.
NOTE 2 -- COVERED CALL OPTIONS WRITTEN
As of September 30, 1998, investment securities valued at $1,087,625 were
held by the custodian in connection with covered call options written by the
Fund.
Transactions in covered call options written for the year ended September
30, 1998 were as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS AMOUNTS
--------- -----------
<S> <C> <C>
Beginning................................................... 95 $ 88,472
Written..................................................... 1,585 1,346,033
Expired..................................................... (200) (45,836)
Exercised................................................... (35) (22,628)
Closed...................................................... (1,240) (1,136,039)
------ -----------
Ending...................................................... 205 $ 230,002
====== ===========
</TABLE>
NOTE 3 -- DISTRIBUTION TO SHAREHOLDERS
A distribution to shareholders of $1.59 per share aggregating $1,434,638
was declared on December 11, 1997 from net investment income and net realized
gains from investment transactions. The distribution was paid on December 18,
1997 to shareholders of record on December 16, 1997.
At September 30, 1998, the Fund had undistributed net realized gains of
$2,320,022.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
As of September 30, 1998, there were 30,000,000 shares of $1 par value
capital stock authorized of which 9,841,293 shares are classified as the Fund's
series (Series A), 10,000,000 shares are classified as Concorde Income Fund
series (Series B), and the remaining balance is unallocated for future use. As
of September 30, 1998, capital paid-in aggregated $10,332,731.
<PAGE> 10
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Transactions in shares of capital stock for the years ended September 30,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Shares sold................................................. 98,762 $1,761,328 37,485 $ 633,173
Shares issued in reinvestment of dividends.................. 81,667 1,424,268 56,714 833,699
------- ---------- ------ ----------
180,429 3,185,596 94,199 1,466,872
Shares redeemed............................................. 136,685 2,443,357 43,859 697,272
------- ---------- ------ ----------
Net increase................................................ 43,744 $ 742,239 50,340 $ 769,600
======= ========== ====== ==========
</TABLE>
NOTE 5 -- INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities
(excluding short-term securities) aggregated $7,688,113 and $7,404,082,
respectively, for the year ended September 30, 1998. Net loss on investments for
the year ended September 30, 1998 was $2,492,969. That amount represents the net
decrease in value of investment securities held during the year. As of September
30, 1998, the aggregate unrealized appreciation and depreciation of investment
securities and covered call options written was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 3,377,288
Unrealized depreciation..................................... (1,665,221)
-----------
Net unrealized appreciation................................. $ 1,712,067
===========
</TABLE>
NOTE 6 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (Advisory Agreement) with
Concorde Financial Corporation dba Concorde Investment Management (Advisor) to
act as the Fund's investment advisor. The Advisor provides the Fund with
investment advice and recommendations consistent with the Fund's investment
objectives, policies and restrictions, and supervises the purchase and sale of
investment transactions on behalf of the Fund. For such services, the Advisor
receives an annual fee of 0.9% of the Fund's average daily net assets, computed
daily and paid on a monthly basis. The investment advisory fee was $160,844 for
the year ended September 30, 1998, of which $10,992 was payable at year end.
Certain directors and officers of the Fund are also directors, officers
and/or employees of the Advisor.
<PAGE> 11
- --------------------------------------------------------------------------------
CONCORDE VALUE FUND
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Concorde Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Concorde Value Fund portfolio of Concorde Funds, Inc., including the schedules
of investments in securities and covered call options written, as of September
30, 1998, and the related statement of operations for the year then ended, the
statements of changes in net assets and the financial highlights for each of the
two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the three years in the
period ended September 30, 1996 of Concorde Value Fund were audited by other
auditors whose report dated November 4, 1996, expressed an unqualified opinion
on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Concorde Value Fund portfolio of Concorde Funds, Inc. as of September 30, 1998,
the results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for each of the two years in the period
then ended in conformity with generally accepted accounting principles.
KINDER & WYMAN, P.C.
Irving, Texas
October 22, 1998
<PAGE> 12
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL PERCENT OF
AMOUNT VALUE NET ASSETS
--------- ---------- ----------
<S> <C> <C> <C>
BONDS AND NOTES
FEDERAL AGENCY OBLIGATIONS
Federal Farm Credit Bank, 5.92%, due 2/24/2003, callable
2/24/2000.............................................. 100,000 $ 101,770 2.11%
Federal Farm Credit Bank, 6.2%, due 11/26/2003........... 100,000 106,409 2.21%
Federal Home Loan Bank, 6.03%, due 10/13/2000............ 200,000 205,235 4.26%
Federal Home Loan Bank, 7.02%, due 5/24/2001, callable
11/24/1998............................................. 100,000 100,241 2.08%
Federal Home Loan Bank, 6.31%, due 4/07/2003, callable
4/7/1999............................................... 100,000 100,688 2.09%
Federal Home Loan Mortgage Corporation, 6.783%, due
8/18/2005.............................................. 100,000 110,556 2.29%
Federal Home Loan Mortgage Corporation, 5.9%, due
2/14/2006.............................................. 150,000 158,380 3.29%
Federal Home Loan Mortgage Corporation, 6.99%, due
7/26/2006.............................................. 200,000 225,573 4.68%
Federal Home Loan Mortgage Corporation, 6.943%, due
3/21/2007.............................................. 100,000 113,353 2.35%
Federal National Mortgage Association, 6.85%, due
8/22/2005.............................................. 200,000 221,943 4.61%
Federal National Mortgage Association, 5.8%, due
2/22/2006.............................................. 100,000 105,014 2.18%
Federal National Mortgage Association, 6.41%, due
3/08/2006.............................................. 200,000 217,617 4.52%
Federal National Mortgage Association, 6.7%, due
6/19/2007.............................................. 200,000 223,920 4.65%
Student Loan Marketing Association, 5.875%, due
3/17/2000.............................................. 100,000 101,609 2.11%
---------- -----
2,092,308 43.43%
---------- -----
U.S. TREASURY OBLIGATIONS
U.S. Treasury Note, 6.25%, due 2/15/2003................. 200,000 215,000 4.46%
U.S. Treasury Note, 5.75%, due 8/15/2003................. 200,000 212,250 4.41%
U.S. Treasury Bond, 7.25%, due 5/15/2016................. 400,000 497,375 10.32%
---------- -----
924,625 19.19%
---------- -----
TOTAL BONDS AND NOTES (cost $2,809,447)..................... 3,016,933 62.62%
---------- -----
CLOSED-END FIXED INCOME FUNDS
PIMCo Commercial Mortgage Securities Trust Inc........... 9,200 123,625 2.57%
Strategic Global Income Fund Inc......................... 11,300 130,656 2.71%
---------- -----
TOTAL CLOSED-END FIXED INCOME FUNDS (cost $257,428)......... 254,281 5.28%
---------- -----
COMMON STOCKS
ENERGY AND NATURAL RESOURCES
Atlantic Richfield Company............................... 1,200 85,125 1.77%
---------- -----
FINANCE AND INSURANCE
Bankers Trust Corporation(a)............................. 900 53,100 1.10%
---------- -----
REAL ESTATE
Corporate Office Properties Trust, Inc................... 10,000 79,375 1.65%
First Industrial Realty Trust, Inc....................... 5,500 140,250 2.91%
HRPT Property Trust...................................... 5,600 90,300 1.87%
Hospitality Properties Trust............................. 4,100 121,975 2.53%
---------- -----
431,900 8.96%
---------- -----
SERVICES
Chemed Corporation......................................... 4,000 112,250 2.33%
---------- -----
TOTAL COMMON STOCKS (cost $758,891)......................... 682,375 14.16%
---------- -----
</TABLE>
The accompanying notes are an integral part of these financial statements keys.
<PAGE> 13
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
INVESTMENTS IN SECURITIES -- (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL PERCENT OF
AMOUNT VALUE NET ASSETS
--------- ---------- ----------
<S> <C> <C> <C>
PREFERRED STOCKS
Bear Stearns, 8% Series A Preferred...................... 2,500 $ 61,875 1.28%
Conseco Finance, 9.16% Preferred......................... 2,500 64,062 1.33%
First Industrial Realty Trust, 8.75% Series A
Preferred.............................................. 2,100 49,350 1.02%
Merrill Lynch Capital Trust, 8% Class C Preferred........ 2,200 57,750 1.20%
Phillips 66 Capital, 8.24% Preferred..................... 2,000 51,375 1.07%
Public Storage, Inc., 8.45% Series H Preferred........... 2,400 60,300 1.25%
Santander Finance, 7.9% Non-Cum Series B Preferred....... 2,300 56,925 1.18%
Time Warner Capital, 8.87% Preferred..................... 3,000 77,812 1.62%
---------- -----
TOTAL PREFERRED STOCKS (cost $484,869)...................... 479,449 9.95%
---------- -----
CONVERTIBLE PREFERRED STOCKS
Bethlehem Steel Corp., $5 Cum Preferred.................. 1,500 79,125 1.64%
ICO, Inc. Preferred...................................... 3,400 58,225 1.21%
United Companies Financial Corporation Preferred......... 3,000 47,625 0.99%
---------- -----
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $291,682).......... 184,975 3.84%
---------- -----
SHORT TERM DEMAND NOTES
American Family, 4.9628%................................. 111,387 111,387 2.31%
Warner Lambert, 4.963%................................... 44,103 44,103 0.92%
---------- -----
TOTAL SHORT TERM DEMAND NOTES (cost $155,490)............... 155,490 3.23%
---------- -----
TOTAL INVESTMENTS IN SECURITIES (cost $4,757,807)........ $4,773,503 99.08%
========== =====
</TABLE>
- ---------------
Notes: (a) 900 shares subject to option
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
COVERED CALL OPTIONS WRITTEN
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
SUBJECT
TO CALL VALUE
-------------- ------
<S> <C> <C>
COMMON STOCKS/EXPIRATION DATE/EXERCISE PRICE
Bankers Trust Corporation/October/60..................... 900 $2,306
------
TOTAL (premiums received $8,337)............................ $2,306
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 14
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $4,757,807).... $4,773,503
Receivables
Dividends.............................................. 8,705
Interest............................................... 40,236
Expense reimbursement due from Advisor................. 1,776
Organization costs, net.................................. 14,057
----------
TOTAL ASSETS................................................ 4,838,277
----------
LIABILITIES
Covered call options written, at value (premiums received
$8,337)................................................ 2,306
Investment advisory fee payable.......................... 2,766
Accrued expenses......................................... 15,625
----------
TOTAL LIABILITIES........................................... 20,697
----------
NET ASSETS
Equivalent to $10.01 per share on 481,341 shares of
capital stock outstanding.............................. $4,817,580
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Investment income
Dividends.............................................. $ 120,718
Interest............................................... 177,339
---------
Total investment income.................................. 298,057
---------
Expenses
Investment advisory fee................................ 31,277
Custodian fees......................................... 2,179
Printing, postage and delivery......................... 14,160
Accounting fees........................................ 27,895
Transfer agent fees.................................... 9,659
Legal fees............................................. 10,204
Registration fees...................................... 2,330
Audit fees............................................. 6,446
Amortization........................................... 2,682
Other expenses......................................... 3,055
---------
Total expenses........................................... 109,887
Expense reimbursement by Advisor......................... (25,222)
---------
Expenses, net of reimbursement by Advisor................ 84,665
---------
NET INVESTMENT INCOME.................................... 213,392
---------
REALIZED LOSS AND UNREALIZED DEPRECIATION ON INVESTMENTS AND
REALIZED GAIN AND UNREALIZED APPRECIATION ON COVERED CALL
OPTIONS WRITTEN
Net realized loss on investments in securities........... (30,319)
Net realized gain on covered call options written........ 22,622
Net change in unrealized appreciation of investments in
securities............................................. (176,822)
Net change in unrealized appreciation of covered call
options written........................................ 6,031
---------
NET LOSS ON INVESTMENTS.................................. (178,488)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 34,904
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 15
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS
Net investment income...................................... $ 213,392 $ 146,941
Net realized loss on investments........................... (7,697) (20,770)
Net change in unrealized appreciation of investments....... (170,791) 196,669
---------- ----------
Net increase in net assets resulting from operations....... 34,904 322,840
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income...................................... (215,820) (164,612)
CAPITAL SHARE TRANSACTIONS.................................. 1,078,529 1,544,788
---------- ----------
Total increase in net assets............................... 897,613 1,703,016
NET ASSETS
Beginning of year.......................................... 3,919,967 2,216,951
---------- ----------
End of the year (including undistributed net investment
income of $218 and $2,646, respectively)................. $4,817,580 $3,919,967
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30,
---------------------------
1998 1997 1996(3)
------- ------- -------
<S> <C> <C> <C>
PER SHARE DATA (1):
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:
Distributions from net investment income............... (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 thousands)................. $ 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 brokerage commission rate paid(2)................ $0.0675 $0.0794 $0.1403
Shares outstanding at end of period...................... 481,341 376,468 223,052
</TABLE>
- ---------------
(1) Per share information has been calculated using the average number of shares
outstanding.
(2) Brokerage commissions paid on securities transactions increase the cost of
securities purchased or reduce the proceeds of securities sold, and are not
separately reflected in the Fund's Statement of Operations. The rate is
calculated by dividing the total brokerage commissions paid on applicable
purchases and sales of securities for the period by the total number of
related shares purchased and sold.
(3) Period from January 22,1996 (commencement of operations) through September
30, 1996. Total return and other ratios are not annualized.
The accompanying notes are an integral part of these financial highlights.
<PAGE> 16
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Concorde Income Fund (Fund) is a separate series of shares of common stock
of Concorde Funds, Inc. (Company). The Company was incorporated in the state of
Texas in September of 1987, and is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Fund is
subject to various investment restrictions as set forth in the Statement of
Additional Information. The effective date of the Fund's Registration Statement
under the Securities Act of 1933 was December 4, 1995. The primary investment
objective of the Fund is to produce current income. The Company may designate
one or more series of common stock. Presently, the Company has designated only
one additional series, Concorde Value Fund. Each capital share in the Fund
represents an equal, proportionate interest in the net assets of the Fund with
each other capital share in such series and no interest in any other series.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of the assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Valuation of Securities
Securities are valued at the close of each business day. Bonds and notes
are valued at the last quoted bid price obtained from independent pricing
services. Securities traded on national securities exchanges or on the national
market systems are valued at the last reported sales price on the day of
valuation, except for call options written for which the last quoted bid price
is used. Short-term demand notes are stated at amortized cost, which is
equivalent to value. Securities for which representative market quotations are
not readily available are valued at fair value as determined in good faith by
the Board of Directors.
Security Transactions and Investment Income
Security transactions are accounted for on the date the securities are
purchased or sold, plus one day. Realized gains and losses from securities
transactions are reported on an identified cost basis. Dividend income is
recognized on the ex-dividend date, and interest income is recognized on the
accrual basis. Discounts and premiums on securities purchased are amortized over
the life of the respective securities.
Organization Costs
Organization costs of $25,426 have been capitalized and are being amortized
on a straight-line basis over a period of sixty months from commencement of
operations. If any of the initial shares are redeemed before all the
organization costs have been amortized, the proceeds will be reduced by the
redeemed share's prorata share of the then-unamortized organization costs, in
the same proportion as the number of shares redeemed bears to the total number
of initial shares outstanding.
Income Taxes
The Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income or excise tax
provision is required.
There are no material differences between the cost of investments in
securities for financial statement and income tax purposes. Also, due to the
timing of distributions to shareholders, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains were
recorded by the Fund.
Distributions to Shareholders
Dividends declared and paid from net investment income or net realized
gains are recorded on the ex-dividend date.
NOTE 2 -- COVERED CALL OPTIONS WRITTEN
As of September 30, 1998, investment securities valued at $53,100 were held
by the custodian in connection with covered call options written by the Fund.
Transactions in covered call options written for the year ended September
30, 1998 were as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS AMOUNTS
--------- --------
<S> <C> <C>
Beginning................................................... 0 $ 0
Written..................................................... 116 57,567
Expired..................................................... -- --
Exercised................................................... (10) (2,618)
Closed...................................................... (97) (46,612)
--- --------
Ending...................................................... 9 $ 8,337
=== ========
</TABLE>
<PAGE> 17
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3 -- DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income were as follows:
<TABLE>
<CAPTION>
PER
RECORD PAID SHARE AMOUNT
------ ---- ----- --------
<S> <C> <C> <C>
December 16, 1997 December 18, 1997........................................... $0.13 $ 49,974
March 24, 1998 March 26, 1998.............................................. 0.12 51,435
June 23, 1998 June 25, 1998............................................... 0.12 53,869
September 22, 1998 September 24, 1998.......................................... 0.13 60,542
----- --------
$0.50 $215,820
===== ========
</TABLE>
At September 30, 1998, the Fund had available for federal income tax
purposes a capital loss carryforward of $54,426 of which $25,959 expires in
2004, $20,770 expires in 2005 and $7,697 expires in 2006.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
As of September 30, 1998, there were 30,000,000 shares of $1 par value
capital stock authorized of which 10,000,000 shares are classified as the Fund's
series (Series B), 9,841,293 shares are classified as Concorde Value Fund series
(Series A), and the remaining balance is unallocated for future use. As of
September 30, 1998, capital paid-in aggregated $4,849,885.
Transactions in shares of capital stock for the years ended September 30,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold................................................. 142,648 $1,464,701 140,977 $1,419,062
Shares issued in reinvestment of dividends.................. 21,177 215,276 16,240 164,005
------- ---------- ------- ----------
163,825 1,679,977 157,217 1,583,067
Shares redeemed............................................. 58,952 601,448 3,801 38,279
------- ---------- ------- ----------
Net increase................................................ 104,873 $1,078,529 153,416 $1,544,788
======= ========== ======= ==========
</TABLE>
NOTE 5 -- INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities
(excluding short-term securities) were $771,438 and $169,000, respectively, for
fixed income funds, common stocks, preferred stocks and convertible preferred
stocks, and $1,104,962 and $616,406, respectively, for U.S. government
obligations for the year ended September 30, 1998. Net loss on investments for
the year ended September 30, 1998 was $178,448. That amount represents the net
decrease in value of investment securities held during the year. As of September
30, 1998, the aggregate unrealized appreciation and depreciation of investment
securities and covered call options written was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 230,341
Unrealized depreciation..................................... (208,614)
---------
Net unrealized appreciation................................. $ 21,727
=========
</TABLE>
NOTE 6 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (Advisory Agreement) with
Concorde Financial Corporation dba Concorde Investment Management (Advisor) to
act as the Fund's investment advisor. The Advisor provides the Fund with
investment advice and recommendations consistent with the Fund's investment
objectives, policies and restrictions, and supervises the purchase and sale of
investment transactions on behalf of the Fund. For such services, the Advisor
receives an annual fee of 0.7% of the Fund's average daily net assets, computed
daily and paid on a monthly basis. The investment advisory fee was $31,277 for
the year ended September 30, 1998, of which $2,766 was payable at year end.
Under an expense reimbursement agreement the Advisor is required to reimburse
the Fund for expenses in excess of 2% of average daily net assets, computed
daily and reimbursed monthly. The expense reimbursement under this agreement for
the year ended September 30, 1998 was $25,222, of which $1,776 was due from
advisor at year end.
Certain directors and officers of the Company are also directors, officers
and/or employees of the Advisor.
<PAGE> 18
- --------------------------------------------------------------------------------
CONCORDE INCOME FUND
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Concorde Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Concorde Income Fund portfolio of Concorde Funds, Inc., including the schedules
of investments in securities and covered call options written, as of September
30, 1998, and the related statement of operations for the year then ended, the
statements of changes in net assets and the financial highlights for each of the
two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights of Concorde Income Fund for the
period ended September 30, 1996, were audited by other auditors whose report
dated November 4, 1996, expressed an unqualified opinion on the financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Concorde Income Fund portfolio of Concorde Funds, Inc. as of September 30, 1998,
the results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
KINDER & WYMAN, P.C.
Irving, Texas
October 22, 1998
<PAGE> 19
INVESTMENT ADVISOR
Concorde Investment Management
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
OFFICERS
Gary B. Wood, Ph.D.
President and Treasurer
John A. Stetter
Secretary
DIRECTORS
John R. Bradford, Ph.D.
Gilbert F. Hartwell
John H. Wilson
Gary B. Wood, Ph.D.
CUSTODIAN
Firstar Bank Milwaukee
777 E. 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
TELEPHONE
(972) 387-8258
(Fund information)
(800) 294-1699
(Shareholder account information)
LOGO
A FAMILY OF NO-LOAD
MUTUAL FUNDS
ANNUAL REPORT
DATED SEPTEMBER 30, 1998
LOGO
