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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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SIGNATURE ERIC BARDEN
TITLE SECRETARY
To the Shareholders and Board of Directors
Texas Capital Value Funds, Inc.
Value & Growth Portfolio
We have audited the accompanying statement of
assets and liabilities of Value
& Growth Portfolio (the "Fund"), a series of shares
of Texas Capital Value
Funds, Inc., including the portfolio of investments,
as of September 30, 1996,
and the related statements of operations and
changes in net assets, and the
financial highlights for the period November 6,
1995 (commencement of
operations) to September 30, 1996. These financial
statements are the
responsibility of the Fund's management. Our
responsibility is to express an
opinion on these financial statements and financial
highlights based on our
audit.
We conducted our audit in accordance with
generally accepted auditing
standards. Those standards require that we plan
and perform the audit to
obtain reasonable assurance about whether the
financial statements and
financial highlights are free of material
misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in
the financial statements. Our procedures included
confirmation of securities
owned as of September 30, 1996, by correspondence
with the custodian and
brokers. An audit also includes assessing the
accounting principles used and
significant estimates made by management, as well
as evaluating the overall
financial statement presentation. We believe that
our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to
above present fairly, in all material respects, the
financial position of Value &
Growth Portfolio of the Texas Capital Value Funds,
Inc. as of September 30,
1996, the results of its operations, the changes in its
net assets and the financial
highlights for the period November 6, 1995 to
September 30, 1996 in
conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 1, 1996
September 30, 1996
PRELIMINARY COPY
Texas Capital Value Funds
Value & Growth Portfolio
1600 West 38th Street, Suite 412
Austin, TX 78731
Notice of Special Meeting
To the Shareholders of the Value & Growth
Portfolio, a portfolio of the Texas Capital Value Funds,
Inc., for a Special Meeting to be held by Proxy:
Notice is hereby given that a Special Meeting (the
"Meeting") of Shareholders of the Value & Growth
Portfolio (the "Fund"), will be held by proxy. You and
other shareholders of the Fund are being asked to consider
and vote:
1. To approve or disapprove an Amendment to the
Investment Advisory and Administrative Contract between
the Fund and First Austin Capital Management, Inc.,
("FACM") pursuant to which FACM will provide
investment advisory and administrative services.
2. To elect a nominee to the Board of Directors of
Texas Capital Value Funds, Inc.
3. To approve or disapprove an amendment to the
distribution agreement between the Fund and Choice
Investments, Inc. ("Choice Investments"), which lowers the
expenses paid to Choice Investments for the distribution of
the Fund shares.
4. To adopt a fundamental investment restriction
that prohibits the Fund from investing in securities of other
open-end investment companies.
Shareholders of record at the close of business on
July 31, 1996, are entitled to notice of, and to vote by
proxy. Your attention is called to the accompanying Proxy
Statement. Please complete, sign and return by August
15th, 1996, the enclosed proxy card so that a quorum will
be present and a maximum number of shares may be voted.
By Order of the Board of Directors
Eric Barden
Acting Secretary
July 31, 1996
1
<PAGE>
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act
of 1934 (Amendment No. )
Filed by the registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for use of
the Commission [ ] Definitive Proxy Statement only (as
permitted by Rule 14a-6(e)(2) [ ] Definitive Additional
Materials [ ] Soliciting Material Pursuant to Sec. 240-14a-
11(c) or 240.14a-12
Texas Capital Value Funds, Inc.
(Name of Registrant as Specified in Its Charter)
Texas Capital Value Funds
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)1(ii), 14a-6(I)(1),
14a-6(I)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(I)(3) [ ] Fee computed on table
below per Exchange Act Rules 14a-6(I)(4) and 0-11.
1) Title of each class of securities to which
transaction applies: Shares of beneficial interest, par value
of $.0001, Value & Growth Portfolio
2) Aggregate number of securities to which
transaction applies: 101,684
3) Per unit price or other underlying value
of transaction computed pursuant to Exchange Act Rule 0-
11; (Set forth the amount on which filing fee is calculated
and state how it was determined): N/A
4) Proposed maximum aggregate value of
transaction: N/A
5) Total Fee Paid: N/A
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
2
<PAGE>
Texas Capital Value Funds, Inc.
Value & Growth Portfolio
1600 West 38th Street, Suite 412
Austin, TX 78731
PROXY STATEMENT
This Proxy Statement is furnished by the Texas
Capital Value Funds, Inc. Value & Growth Portfolio to its
shareholders and on behalf of the Board of Directors of the
Texas Capital Value Funds, Inc. of which the Fund is a
portfolio, in connection with the Fund's solicitation of
voting instructions for use at a Special Meeting of
Shareholders to be held by proxy, for the purposes set forth
below and in the accompanying Notice of Special Meeting.
The approximate mailing date of this Proxy Statement is
August 7th, 1996. At the meeting shareholders of the
Fund will be asked:
1. To approve or disapprove an Amendment to
the Investment Advisory and Administrative Contract
between the Fund and First Austin Capital Management,
Inc., the advisor to the Fund, ("FACM") pursuant to which
FACM will act as administrator and investment adviser
with respect to the assets of the Fund, to become effective
upon shareholder approval.
2. To approve or disapprove a nominee to
the Board of Directors of the Company.
3. To approve or disapprove an amendment
to the distribution agreement between the Fund and Choice
Investments, Inc., which lowers the percentage of assets
paid by the Fund for the distribution of Fund shares.
4. To adopt a fundamental investment
restriction that prohibits the Fund from investing in
securities of other open-end investment companies.
The Fund will request broker-dealer firms,
custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of shares of the Fund
held of record by such persons. The Adviser may reimburse
such broker-dealer firms, custodians, nominees and
fiduciaries for their reasonable expenses incurred in
connection with such proxy solicitation. In addition to the
solicitation of proxies by mail, officers and employees of
the Fund or the Company, without additional
compensation, may solicit proxies in person or by
telephone. The costs associated with this solicitation and
the Meeting will be borne by the Adviser and not by the
Fund or the Company.
Shareholders of the Fund at the close of business
on July 31, 1996, will be entitled to be present and vote at
the Meeting. As of that date, there were 103,191.377
shares of the Fund outstanding and entitled to vote,
representing total net assets of approximately
$1,000,000.00
To the knowledge of the Fund's management, as
of July 31, 1996, the officers and directors of the Company
and the Adviser own, as a group, less than 25% of the
shares of the Fund. Principals of the Adviser, however,
have the ability to direct the voting of their shares in the
Value & Growth Fund, which constitute 22% of the Fund's
outstanding shares as of the record date, and it is expected
that such shares will be voted in favor of the proposal.
To the knowledge of the Fund's management, as
of July 31, 1996, the persons owning beneficially more
than 5% of the outstanding shares of the Fund were as
follows:
Mr. Mark Coffelt 12.8%
Mr. Jim Kaighin, 12.7%
3
<PAGE>
Coffelt Family L.P. 9.7%
Mr. Eddie Harris 5.1%
The Fund is a portfolio or "series" of the
Company, a corporation organized under the laws of the
State of Maryland. The Company is registered, as an
open-end management investment company under the
Investment Company Act of 1940. The Fund's investment
adviser and administrator is FACM, 1600 West 38th
Street, Suite 412, Austin, Texas, 78731. The Fund's
principal underwriter is Choice Investments, Inc. with
offices at 5900 Balcones Drive, Suite 110, Austin, TX
78731.
The persons named in the accompanying proxy
will vote in each case as directed in the proxy, but in the
absence of such direction, they intend to vote FOR the
proposal.
Proposal 1
APPROVAL OR DISAPPROVAL OF THE
AMENDMENT TO THE INVESTMENT ADVISORY
AND ADMINISTRATIVE CONTRACT BETWEEN THE
FUND AND FACM.
Background
The proxy has been solicited for the purpose of
considering an Amendment to the Investment Advisory
and Administrative Contract for the Fund. Shareholders
are being asked to approve an amendment to the Advisory
and Administrative Agreement (the "Amendment") which
embodies a new expense schedule. The Company's Board
of Directors, at an in-person meeting held on March 22,
1996, approved the Amendment, subject to approval by the
shareholders of the Fund, to become effective on the date of
such approval.
Existing Advisory and Administrative Contract
FACM currently serves as adviser and
administrator for the Fund under an Investment Advisory
and Administrative Contract (the "Existing Advisory
Agreement") dated August 15, 1995. Under the Existing
Advisory Agreement, FACM is entitled to receive from the
Fund a monthly advisory fee based upon the average daily
net assets of the Fund at the annual rate of 1.00%.
For administrative services, FACM receives a fee
equal to the sum of (i) nine-tenths percent (0.90%) of the
amount of assets in the Fund between one dollar ($1.00)
and five million dollars ($5,000,000), inclusive plus (ii)
three-tenths percent (0.30%) of the amount of assets in the
Fund between five million and one dollars ($5,000,001.00)
and thirty million dollars ($30,000,000), inclusive, plus
(iii) twenty-eight hundredths percent (0.28%) of the
amount of assets in the Fund between thirty million and
one dollars ($30,000,001) and one-hundred million dollars
($100,000,000), inclusive, plus (iv) twenty-five hundredths
percent (0.25%) of the amount of assets in the Fund
between one-hundred million and one dollars
($100,000,001) and two-hundred million dollars
($200,000,000), inclusive, plus (v) twenty hundredths
percent (0.20%) of the amount of assets in the Fund in
excess of two hundred and one million dollars
($200,000,001), inclusive. Such fees shall be accrued daily
and be payable monthly in arrears on the first day of each
calendar month.
Amendment to the Advisory and Administrative Contract
A form of the Amendment to the Advisory and
Administrative Contract is attached to this Proxy
Statement as Exhibit A, and the description set forth in this
Proxy Statement of the Amendment is qualified in its
entirety by reference to Exhibit A.
As compensation for its advisory services to the
Fund, under the Amendment to the Investment
4
<PAGE>
Advisory and Administrative Contract, FACM will be
entitled to receive from the Fund fees identical to the fees
received currently, in accordance with the terms and
conditions of the existing Advisory and Administrative
Contract.
As compensation for its administrative services to
the Fund, under the Amendment to the Investment
Advisory and Administrative Contract FACM shall receive
a fee equal to the sum of (i) seven-tenths percent (0.70%)
of the amount of assets in the Fund between one dollar
($1.00) and five million dollars ($5,000,000), inclusive
plus (ii) five-tenths percent (0.50%) of the amount of assets
in the Fund between five million and one dollars
($5,000,001.00) and thirty million dollars ($30,000,000),
inclusive, plus (iii) twenty-eight hundredths percent
(0.28%) of the amount of assets in the Fund between thirty
million and one dollars ($30,000,001) and one-hundred
million dollars ($100,000,000), inclusive, plus (iv) twenty-
five hundredths percent (0.25%) of the amount of assets in
the Fund between one-hundred million and one dollars
($100,000,001) and two-hundred million dollars
($200,000,000), inclusive, plus (v) twenty hundredths
percent (0.20%) of the amount of assets in the Fund in
excess of two hundred and one million dollars
($200,000,001), inclusive. Such fees shall be accrued daily
and be payable monthly in arrears on the first day of each
calendar month.
The Amendment to the Investment Advisory and
Administrative Contract will have the net effect of
reducing administrative expenses by two-tenths of a
percent (0.20%)(to 0.70% from 0.90%) on assets between
one dollar ($1.00) and five million dollars ($5,000,000),
inclusive, and raising administrative expenses to
(0.50%)(to 0.50% from 0.30%) for the amount of assets in
the Fund between five million and one dollars ($5,000,001)
and thirty million dollars ($30,000,000), inclusive.
Directors' Considerations
The Board of Directors of the Company believes that the
terms of the Amendment to the Investment Advisory and
Administrative Contract are fair to, and in the best interest
of, the Fund and its shareholders. The Board of Directors,
including all of the non-interested directors, recommend
approval by the shareholders of the Amendment to the
Investment Advisory and Administrative Contract between
FACM and the Fund. In making this recommendation, the
Directors carefully evaluated the quality of services FACM
is expected to provide to the Fund, and have given careful
consideration to all factors deemed to be relevant to the
Fund, including, but not limited to: (1) the nature and
quality of the services expected to be rendered to the Fund
by FACM; (2) that the compensation payable to FACM by
the Fund under the proposed Amendment to the
Investment Advisory and Administrative Contract will
currently be less than the rate of compensation now
payable by the Fund to FACM under the existing Advisory
and Administrative Contract; (3) and other factors deemed
relevant.
FACM has advised the Board of Directors that
there will be no diminution in the scope and quality of
administrative services provided to the Fund as a result of
the Amendment to the Investment Advisory and
Administrative Contract. Accordingly, the Board of
Directors believes that the Fund will receive administrative
services under such Amendment equal or superior to those
it currently receives under the existing Advisory and
Administrative Agreement, at lower current fee levels.
COMPARATIVE FEE TABLE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Existing Fee Proposed Fee
Management Fees 1.00% 1.00%
12b-1 Fees (b) . 0.35% 0.25%
Other expenses 0.90% 0.70%
Total Fund Operating Expenses 2.25% 1.95%
5
<PAGE>
Example
The following table illustrates the expenses on a $1,000
investment under the existing and proposed fees and the
expenses stated above, assuming (1) a 5% annual return
and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
Existing Fee $24 $74 $131 $297
Proposed Fee $20 $65 $113 $258
The purpose of this example and the table is to assist
investors in understanding the various costs and expenses
of investing in shares of the Fund. The example above
should not be considered a representation of past or future
expenses of the Fund. Actual expenses may vary from year
to year and may be higher or lower than those shown
above.
Recommendation and Required Vote
Shareholders of the Fund will vote on the
proposed Amendment to the Investment Advisory and
Administrative Contract. The Board of Directors of the
Fund recommends that the shareholders approve the
Amendment to the Investment Advisory and
Administrative Contract. The affirmative vote of the
holders of a majority of the outstanding shares of the Fund
is required to approve the Amendment to the Investment
Advisory and Administrative Contract. "Majority" for this
purpose, under the Investment Company Act, means more
than 50% of such outstanding shares.
THE BOARD OF TRUSTEES OF THE FUND
RECOMMEND THAT SHAREHOLDERS APPROVE
THE AMENDMENT TO THE ADVISORY AND
ADMINISTRATIVE AGREEMENT.
Proposal 2
APPROVAL OR DISAPPROVAL OF THE NOMINEE
TO THE BOARD OF DIRECTORS
The nominee for election to the Board of Directors
of the Company, his age, and a description of his principal
occupation is listed in the table below.
- -----------------------------------------------------------------------
Paul Martin,* Mr. Martin (42) is general director and
chief investment officer of Martin Capital Management
(since November, 1988). Prior to establishing Martin
Capital Management, Mr. Martin worked as a
stockbroker in New York City, managing investment
accounts at Merrill Lynch and Oppenheimer & Company.
Subject to shareholder approval, he will be the investment
advisor of the Texas Opportunity Fund, a series of the
Texas Capital Value Funds, Inc. currently in registration
with the SEC. Mr. Martin served seven years active duty
with the United States armed services, and continues to
serve as a US Naval Reserve Officer. He has a BA degree
in liberal arts from St. John's College in Santa Fe, New
Mexico.
- - ------------
* Indicates "interested person" of the Company as defined
by the 1940 Act, by reason of his position as investment
adviser of the Texas Opportunity Fund
6
<PAGE>
COMPENSATION TABLE
NAME & AGGREGATE PENSION
ESTIMATED ANNUALTOTAL
POSITION COMPENSATION
BENEFITSRETIREMENT BENEFITS COMP.
Mark A. Coffelt $0 $0 $0 $0
President &
Chief Investment
Officer of the Value
& Growth , Portfolio
and the Growth &
Income Portfolio
Paul Martin $0 $0 $0 $0
Director & Chief
Investment Officer of
the Texas Opportunity
Fund
Edward D. Clark $2,000* $0 $0 $2,000
Director
John Henry McDonald $2,000* $0 $0
$2,000
Director
Janis Claflin $2,000* $0 $0 $2,000
Director
*Denotes disinterested director
REQUIRED VOTE. In the election of each director, the
candidate must receive the affirmative vote of a plurality of
the votes cast for the election of the Board. Members will
be elected, provided a quorum is present.
THE BOARD OF DIRECTORS, INCLUDING ITS
INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE NOMINEE
UNDER PROPOSAL 2.
Proposal 3
APPROVAL OR DISAPPROVAL OF THE
AMENDMENT TO THE DISTRIBUTION AGREEMENT
BETWEEN THE FUND AND CHOICE INVESTMENTS,
INC.
Existing Distribution Plan
The Company has adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act (the "Plan") under which
the Company contracts with registered broker-dealers and
their agents to distribute shares of the Fund. Registered
broker-dealers and their agents who have previously signed
service agreements with the distributor are currently paid
0.25% of the average daily net assets for those shareholders
brought to a
7
<PAGE>
Fund for the period of time those shareholders remain with
the Fund. A distributor will retain 0.10% of the total
0.35% Rule 12b-1 fee for such shareholders.
The services provided by selected broker-dealers
pursuant to the Plan are primarily designed to promote the
sale of shares of each Fund, in the interest of reducing the
administrative expense to shareholders, and include the
furnishing of office space and equipment, telephone
facilities, personnel and assistance to the Fund in servicing
such shareholders.
For these services, the Fund currently pays a
distribution fee equal to thirty-five hundredths of a percent
(0.35%) per annum of the Fund's average daily net assets.
Adoption of this proposal reduces the distribution fee to
twenty-five hundredths of a percent (0.25%), thereby
reducing the overall expense of the Fund.
In addition to the compensation set forth above,
for shares sold with a sales charge, a distributor shall keep
the underwriting discount determined in accordance with
the payment schedule contained in the most recent
prospectus of the Fund as effected by the SEC.
New Form of Distribution Plan Pursuant to 12b-1
The Board of Directors has proposed a
Distribution Plan (the "Proposed Plan") pursuant to Section
12(b) of the 1940 Act and Rule 12b-1 after having
concluded that there is a reasonable likelihood that the
Proposed Plan would benefit the Fund and its shareholders.
Pursuant to such Proposed Plan, and as compensation for
the services performed and the expenses incurred by a
distributor under this Agreement (including the
commissions and other fees and expenses paid by a
distributor for the sale of Fund shares), the Fund shall pay
to a distributor on a monthly basis in arrears a distribution
fee, accrued daily, equal to 25/100 of one percent (0.25%)
per annum of the Fund's average daily net assets. The
expenses of the Fund to be paid by a distributor from this
compensation shall include a service fee to each
distributor, which service fee shall equal 15/100 of one
percent (0.15%) of the Fund's shares owned by investors
for whom such distributor is the holder or dealer of record.
In addition to the compensation set forth above,
for shares sold with a sales charge, a distributor shall keep
the underwriting discount determined in accordance with
the payment schedule contained in the most recent
prospectus of the Fund as effected by the SEC.
COMPARATIVE FEE TABLE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Existing Fee Proposed Fee
Management Fees 1.00% 1.00%
12b-1 Fees (b) 0.35% 0.25%
Other expenses 0.90% 0.70%
Total Fund Operating Expenses 2.25% 1.95%
Example
The following table illustrates the expenses on a $1,000
investment under the existing and proposed fees and the
expenses stated above, assuming (1) a 5% annual return
and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
Existing Fee $24 $74 $131 $297
Proposed Fee $20 $65 $113 $258
8
<PAGE>
The purpose of this example and the table is to assist
investors in understanding the various costs and expenses
of investing in shares of the Fund. The example above
should not be considered a representation of past or future
expenses of the Fund. Actual expenses may vary from year
to year and may be higher or lower than those shown
above.
THE BOARD OF DIRECTORS, INCLUDING ITS
INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE
AMENDMENT TO THE DISTRIBUTION AGREEMENT
UNDER PROPOSAL 3.
Proposal 4
APPROVAL OR DISAPPROVAL OF THE
FUNDAMENTAL INVESTMENT RESTRICTION ON
THE PURCHASE OF OTHER OPEN-END
INVESTMENT COMPANIES (MUTUAL FUNDS)
To register shares of the Fund for sale in the state
of California, the Fund had to undertake that it would
adopt a fundamental investment restriction on the purchase
of shares of other open-end investment companies. The
intent of this restriction is to preclude the Fund from
investing in securities that charge a management fee,
effectively twice charging a shareholder of the Fund.
The Fund(s) have adopted and will follow certain
investment policies, which are fundamental and may not be
changed without shareholder approval. The fundamental
investment restrictions, as amended, are set forth below.
(a) Each Fund may not invest more than 25% of its
total assets in the securities of issuers in any one industry.
This restriction does not apply to investments by a Fund in
securities of the US Government or its agencies or
instrumentalities.
(b) Each Fund may not issue senior securities or borrow
money except for temporary purposes in amounts up to
10% of its net assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time
of such borrowing, provided that collateral arrangements
with respect to permitted instruments shall not be deemed
to entail the issuance of senior securities if appropriately
covered. Each Fund will not make any investments while
outstanding borrowings exceed 5% of the value of its total
assets.
(c) Each Fund may not make loans, although it may
invest in debt securities, enter into repurchase agreements
and lend its portfolio securities.
(d) Each Fund may not invest in securities or other
assets that the Board of Directors determines to be illiquid
if more than 15% of the Fund(s)'s net assets would be
invested in such securities.
(e) Each Fund may not (i) purchase or sell commodities
or commodities contracts (including financial futures and
related options), (ii) invest in oil, gas, or mineral
exploration or development programs or leases, or (iii)
purchase securities on margin, except for such short-term
credit as may be necessary for the clearance of transactions
and except for borrowings in amounts not exceeding 10%
of its net assets.
(f) Each Fund may not purchase or sell real estate or
make real estate mortgage loans or invest in real estate
limited partnerships, except that each Fund may purchase
or sell securities issued by entities in the real estate
industry or instruments backed by real estate such as, but
not limited to, Real Estate Investment Trusts (R.E.I.T's).
(g) Each Fund may not act as an underwriter of
securities issued by others, except to the extent it may be
deemed to be an underwriter in connection with the
disposition of Fund securities of each Fund.
(h) The investment in warrants, valued at the lower of
cost or market, may not exceed 5.0% of the value of each
Fund's net assets. Included within that amount, but not to
exceed 2.0% of the value of each Fund's net assets, may be
warrants which are not listed on the New York or
American Stock Exchange. Warrants acquired by each
Fund in units or attached to securities may be deemed to be
without value.
(i) Each Fund shall not invest in other open ended
management investment companies.
9
<PAGE>
THE BOARD OF DIRECTORS, INCLUDING ITS
INDEPENDENT BOARD MEMBERS RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE
AMENDMENT TO THE FUNDAMENTAL
INVESTMENT RESTRICTIONS.
General Information
Recommendation and Required Vote
Shareholders of the Fund will vote on the above
proposals. The Board of Directors of the Fund
recommend that the shareholders approve the proposals.
The affirmative vote of the holders of a majority of the
outstanding shares of the Fund is required to approve the
proposals. "Majority" for this purpose under the
Investment Company Act means the lesser of (i) 67% of
the shares represented at the meeting if more than 50% of
such outstanding shares are represented, or (ii) more than
50% of such outstanding shares. Abstentions and broker
non-votes will not count as votes present at the Meeting.
Shareholder Proposals
The Meeting is a special meeting of shareholders.
The Fund is not required to, nor does it intend to, hold
regular annual meetings of its shareholders. If such a
meeting is called, any shareholder who wishes to submit a
proposal for consideration at the meeting should submit the
proposal promptly to the Fund.
Reports to Shareholders
The Fund will furnish, without charge, a copy of the
most recent Semi-Annual Report on request. Requests for
such reports should be directed to the Fund at the address
and telephone shown on the first page of this proxy
statement or to FACM at (800) 880-0324.
A SIGNED PROXY WILL BE VOTED IN FAVOR OF
THE PROPOSAL LISTED BELOW UNLESS YOU
HAVE SPECIFIED OTHERWISE. PLEASE SIGN,
DATE AND RETURN THIS PROXY PROMPTLY. YOU
MAY VOTE ONLY IF YOU HELD SHARES IN THE
FUND AT THE CLOSE OF
BUSINESS ON JULY 31, 1996.
IN ORDER THAT THE PRESENCE OF A
QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE
ENCLOSED PROXY IS REQUESTED. A SELF-
ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
10
<PAGE>
THE BOARD OF DIRECTORS, INCLUDING ITS
INDEPENDENT BOARD MEMBERS RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE
FOLLOWING PROPOSALS:
1. Approval of an Amendment to the Investment Advisory
Contract between the Fund and First Austin Capital
Management, Inc., ("FACM") pursuant to which FACM
will provide investment advisory and administrative
services.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Approval of the nomination of Paul Martin to the Board
of Directors of Texas Capital Value Funds, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of an Amendment to the Distribution
Agreement between the Fund and Choice Investments,
Inc., ("Choice Investments") which lowers the expenses
paid to Choice Investments for the distribution of the Fund
shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of the adoption of a fundamental investment
restriction that prohibits the Fund from investing in
securities of other open-end investment companies.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated: __________________ , 1996
_____________________
Signature
____________________
Signature (if held jointly)
___________________
Title (if applicable)
___________________
Title (if applicable)
Please sign exactly as name or names appear on your
shareholder account statement. When signing as attorney,
trustee, executor, adminisrator, custodian, guardian or
corporate officer, please give full title. If shares are held
jointly, each shareholder should sign.
Results for Proposals
Yes No Abstain
Amendment to Invest
Advisory Contract 62,939 60.99% 0 0% 0 0%
Paul Martin Nomin. 62,401 60.47% 537.634 .52% 0 0%
Amendment to Distrib.
Contract 62,939 60.99% 0 0% 0 0%
Adoption of Investment
Restriction 62,378 60.80% 201.410 .20% 0 0%
Investment Advisory and Administrative Contract
THIS AGREEMENT (this "Agreement") is made this ___day of___, 1995,
by and between Texas Capital Value Fund, Inc., a Maryland corporation
(the "Fund"), and First Austin Capital Management, Inc., a Delaware
corporation (the "Investment Advisor").
WITNESSETH:
WHEREAS, the Fund engages in the business of investing and
reinvesting its assets and property in various stocks and securities and
the Investment Advisor engages in the business of providing investment
advisory services; and
WHEREAS, the Fund has need for investment advisory services.
NOW THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Advisory Services. The Investment Advisor shall render investment
advisory services (the "Advisory Services") to the Fund, subject to the
supervision and direction of the Board of Directors of the Fund, for the
period set forth in Paragraph 6 below on the terms set forth herein. The
Investment Advisor shall render such Advisory Services and assume
the obligations herein set forth, for the compensation provided in
Paragraph 3(a) below. The Investment Advisor shall, for the purposes
herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized, have no authority to act
for or represent the Fund in any way, or in any way be deemed an agent
or employee of the Fund.
2. Administrative Services. In addition to the Advisory Services, the
Investment Advisor shall provide certain administrative support
services to the Fund including establishing and maintaining
shareholders' accounts and records, processing purchase and
redemption transactions, answering routine client inquiries regarding
the Fund, preparing all registration statements, prospectuses, tax
returns and proxy statements, valuing the Fund's portfolio daily and
calculating the daily net asset value per share, and providing such other
administrative services to the Fund as the Fund may reasonably request
(collectively, the "Administrative Services"). The Investment Advisor
may contract with third parties to perform all or part of the
Administrative Services. Notwithstanding anything contained in this
Agreement to the contrary, under no circumstances shall the execution
of any such third party contract be deemed an assignment by the
Investment Advisor of an interest in this Agreement.
3.(a) Compensation. As a compensation for the services to be rendered
to the Fund by the Investment Advisor under the provisions of this
Agreement, the Fund shall pay to the Investment Advisor a fee equal to
1
<PAGE>
the sum of (i) one and nine-tenths percent (1.90%) of the amount of
assets in the Fund between one dollar ($1.00) and five million dollars
($5,000,000), inclusive, plus (ii) one and three-tenths percent (1.30%) of
the amount of assets in the Fund between five million and one dollars
($5,000,001.00) and thirty million dollars ($30,000,000), inclusive, plus (c)
one and twenty-eight hundredths percent (1.28%) of the amount of
assets in the Fund between thirty million and one dollars ($30,000,001)
and one hundred million dollars ($100,000,000), inclusive, plus (d) one
and twenty-five hundredths percent (1.25%) of the amount of assets in
the Fund between one hundred million and one dollars ($100,000,001)
and two hundred million dollars ($200,000,000), inclusive, plus (e) one
and twenty hundredths percent (1.20%) of the amount of assets in the
Fund in excess of two hundred and one million dollars ($200,000,001),
inclusive (all assets in the Fund for the purposes of this Paragraph to be
rounded to the nearest dollar prior to the computation of any fee owed).
Such fees shall be accrued daily and be payable monthly in arrears on
the first day of each calendar month. Accruals of fees to the Investment
Advisor shall begin on the execution date of this Agreement.
(b) Costs. All Fund costs, with the exception of extraordinary
legal expenses (as determined by the Board of Directors of the Fund),
brokerage commissions, custodial charges based upon transactions in
the portfolio of the Fund and marketing expenses, will be borne by the
Investment Advisor as part of this Agreement. In addition, the
Investment Advisor shall absorb all the organization costs for the Fund
as determined by the Board of Directors of the Fund.
In the conduct of the respective businesses of the parties hereto and in
the performance of this Agreement, the Fund and the Investment
Advisor may share common facilities and personnel common to each.
The entire cost to the Fund for the use of common facilities and
personnel will be borne by the Advisor as part of this Agreement.
If any Fund costs which the Investment Advisor has agreed to
bear hereunder are incurred by the Fund pursuant to separate
agreements with third parties, the Fund shall provide the Investment
Advisor with copies of such agreements and any amendments thereto
and shall either bill the Investment Advisor for the costs insured by the
Fund thereunder or direct the Investment Advisor to pay any such costs
incurred directly to the third parties involved as provided by the
applicable agreements.
4. Non-Exclusive. The services to be rendered by the Investment
Advisor to the Fund under this Agreement are not to be deemed to
be exclusive, and the Investment Advisor shall be free to render
similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired
thereby. If its ability becomes so impaired, as determined by the
Fund in its sole and absolute discretion, the Fund shall notify the
Investment Advisor of same and this Agreement shall automatically
2
<PAGE>
terminate upon the receipt by the Investment Advisor of such notice.
Such automatic termination shall be upon the same terms and
conditions as provided for other terminations pursuant to the last
sentence of Paragraph 7 below.
5. Interested Parties. It is understood and agreed that directors,
officers, employees, agents and shareholders of the Fund may be
interested in the Investment Advisor as directors, officers, employees,
agents and shareholders of the Investment Advisor. Similarly,
directors, officers, employees, agents and shareholders of the
Investment Advisor may be interested in the Fund as directors, officers,
employees, agents and shareholders of the Fund. Furthermore, the
Investment Advisor itself may be interested in the Fund as a
shareholder or otherwise of the Fund. It is understood and agreed that
directors, officers, employees, agents and shareholders of the
Investment Advisor may continue as directors, officers, employees,
agents and shareholders of the Fund and vice versa; that the Investment
Advisor, its directors, officers, employees, agents and shareholders may
engage in other business, may render investment advisory services to
other investment companies, or to any other corporation, association,
firm or individual, and may render underwriting services to the Fund,
or to any other investment company, corporation, association, firm or
individual, subject to the provisions of Paragraph 4 above. The parties
agree that the Investment Advisor has a proprietary interest in the
names "Texas Capital Value Funds, Inc." and "Value and Growth
Portfolio", and the Fund agrees to promptly take any and all necessary
action to remove the names "Texas Capital Value Funds, Inc." and
"Value and Growth Portfolio" from its corporate name and from the
name of any of its funds upon receipt of written request therefor from
the Investment Advisor.
6. Term. Notwithstanding the date of this Agreement first above
written, the effective date of this Agreement (the "Effective Date") shall
be the effective date of that certain Registration Statement on Form N-
1A of the Fund, filed by the Fund with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended. Thereafter, this
Agreement shall continue in effect for one year from the Effective Date.
Such term may be extended annually for additional periods of one year
provided that each such extension is approved at least annually by a
vote of the Fund's Board of Directors. Such vote shall be cast in person
at a meeting called for the purpose of voting on such approval, and
shall include the votes of a majority of the Directors who are not parties
to this Agreement or interested persons of any such party.
7. Termination. This Agreement may be terminated at any time upon
sixty (60) days prior written notice, without the payment of any
penalty, by the Fund's Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund. This Agreement shall
3
<PAGE>
automatically terminate in the event of its assignment by the Investment
Advisor or the Fund (within the meaning of the Investment Company
Act of 1940 (the "1940 Act")), which shall be deemed to include a
transfer of control of the Investment Advisor or the Fund, respectively,
unless an exemption from such automatic termination is granted by
order or rule of the Securities and Exchange Commission. Upon the
termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination,
except for (i) any obligation to respond to a breach of this Agreement
committed prior to such termination, (ii) the obligation of the Fund to
pay to the Investment Advisor the fee provided in Paragraph 3(a)
above, prorated to the date of termination, and (iii) the obligation of the
Investment Advisor to bear the costs provided for in Paragraph 3(b)
above, prorated to the date of termination (if applicable).
8. Assignment. This Agreement shall terminate automatically in the
event of its whole or partial assignment by the Investment Advisor or
the Fund as provided in Paragraph 7 above.
9. Fidelity Bond. As part of this Agreement, the Investment Advisor
shall bear the cost of the fidelity bond required to be maintained by the
Fund for employees, officers, or directors of the Investment Advisor
who have access to the Fund's securities or cash. Such bond must
protect the Fund against loss from larceny and embezzlement under the
Act, and, in compliance with Rule 17g-1 under the 1940 Act, must be
approved both in form and amount by a majority of the independent
directors of the Fund at least annually with due consideration given to
(a) the value of the Investment Advisor's aggregate assets, (b) the type
of custody arrangements employed, and (c) the nature of the securities
owned. Additionally, the Investment Advisor shall bear the cost, if any,
for Employee and Officer/Director and Officer (E&O/D&O) liability
insurance covering the Investment Advisor in favor of the Fund. Under
the terms of this Agreement, there is no initial requirement that
E&O/D&O insurance be purchased, but if the Board of Directors of the
Fund ever requires in its sole and absolute discretion that it be carried,
or if the Investment Advisor decides, unilaterally, to carry it, then such
cost shall be borne by the Investment Advisor and such insurance, if
required to be carried by the Fund's Board of Directors, shall be in such
amount and for such a term as the Board may reasonably require. The
Investment Advisor shall not be liable for any error of judgment or of
law or for any loss suffered by the Fund in connection with the matters
to which this Agreement relates, except loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Investment
Advisor in the performance of its obligations and duties or by reason of
its reckless disregard of its obligations and duties under this
Agreement.
4
<PAGE>
10. Notices. Any notice required or permitted to be given hereunder
must be in writing and may be given by personal delivery or by mail,
and if given by mail shall be deemed sufficiently given if sent by
registered or certified mail addressed to the party to be notified at the
following applicable address:
The Fund:
Texas Capital Value Funds, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
The Investment Advisor:
First Austin Capital Management, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
Either party may specify a different address for notice purposes
by written notice to the other.
11. Governing Law. This Agreement is executed and delivered in the
State of Texas and shall be governed by the laws of Texas and the 1940
Act.
12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and terminates and supersedes all prior
understandings or agreements on the subject matter hereof. No
conditions or warranties shall be implied herefrom unless expressly set
forth herein. The Fund and the Investment Advisor each acknowledge
that the terms and conditions of this Agreement, and each of them, are
reasonable and fair and equitable. This Agreement may be modified
only by a future writing that is duly executed by both parties.
13. Severability. If any term of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, then this
Agreement, including all of the remaining terms, will remain in full
force and effect as if such invalid or unenforceable term had never been
included.
14. Waiver. Waiver by either party of any breach of any term, covenant
or condition in this Agreement shall not be deemed to be a waiver of
any subsequent breach of the same or any other term, covenant or
condition herein contained, nor shall any custom or practice which may
grow up between the parties in the administration of the terms hereof
be deemed a waiver of or in any way affect the right of each party to
insist on the performance of the other party in strict accordance with
said terms.
15. Time Is of the Essence. Time is of the essence of this Agreement.
5
<PAGE>
16. Attorneys' Fees. In the event of any litigation or arbitration
between the parties with respect to this Agreement, all costs and
expenses, including, without limitation, actual professional fees such as
accountants' and attorneys' fees, incurred by the prevailing party, shall
be paid by the other party, which obligation on the part of the other
party shall be deemed to have accrued on the date of the
commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.
17. Mandatory Arbitration. All disputes arising under this Agreement
shall be arbitrated pursuant to the Commercial Arbitration Rules of the
American Arbitration Association.
18. Independent Counsel. The parties acknowledge that they have had
the opportunity to consult with independent counsel of their own
choosing in the negotiation and execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date and year first above written.
Texas Capital Value Fund, Inc.,
a Maryland corporation
By______________________________
Mark A. Coffelt, President
First Austin Capital Management, Inc.,
a Delaware corporation
By_____________________________
Mark A. Coffelt, President
AMENDMENT TO THE
INVESTMENT ADVISORY AND ADMINISTRATIVE CONTRACT
DATED AUGUST 15, 1995
October 9, 1995
The state of Texas has requested in its comments to the Fund for
registration in Texas that the fees paid to the Advisor for Advisory
Services and Administrative Services be split. The amendment below in
6
<PAGE>
no way changes total fees agreed to by the Board of Directors, but
rather changes the labeling of the fees.
The Investment Advisory and Administrative Contract, section 3.(a), is
replaced by the following amendment:
3.(a) As compensation for the services to be rendered to the Fund by the
Investment Advisor under the provisions of this Agreement, the Fund
shall pay to the Investment Advisor:
(i) for Advisory Services a flat fee of one percent (1%) of the net assets of
the Fund; plus additional amounts as follows: (ii)for Administrative
Services a fee equal to the sum of (i) nine-tenths percent (0.90%) of the
amount of assets in the Fund between one dollar ($1.00) and five million
dollars ($5,000,000), inclusive, plus (ii) three-tenths percent (0.30%) of
the amount of assets in the Fund between five million and one dollars
($5,000,001.00) and thirty million dollars ($30,000,000), inclusive, plus (c)
twenty-eight hundredths percent (0.28%) of the amount of assets in the
Fund between thirty million and one dollars ($30,000,001) and one
hundred million dollars ($100,000,000), inclusive, plus (d) twenty-five
hundredths percent (0.25%) of the amount of assets in the Fund between
one hundred million and one dollars ($100,000,001) and two hundred
million dollars ($200,000,000), inclusive, plus (e) twenty hundredths
percent (0.20%) of the amount of assets in the Fund in excess of two
hundred and one million dollars ($200,000,001), inclusive (all assets in
the Fund for the purposes of this Paragraph to be rounded to the
nearest dollar prior to the computation of any fee owed).
Such fees shall be accrued daily and be payable monthly in arrears on
the first day of each calendar month. Accruals of fees to the Investment
Advisor shall begin on the execution date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date and year first above written.
Texas Capital Value Fund, Inc.,
a Maryland corporation
By______________________________
Mark A. Coffelt, President
First Austin Capital Management, Inc.,
a Delaware corporation
7
<PAGE>
By_____________________________
Mark A. Coffelt, President
SECOND AMENDMENT TO THE
INVESTMENT ADVISORY AND ADMINISTRATIVE CONTRACT
DATED AUGUST 15, 1995
March 20, 1996
The following amends the Investment Advisory and Administrative
Contract between First Austin Capital Management, Inc. and Texas
Capital Value Funds, Inc. dated August 15, 1995 and supersedes the
Amendment to that Agreement dated October 20, 1995.
The Investment Advisory and Administrative Contract, section 3.(a), is
replaced by the following amendment:
3.(a) As compensation for the services to be rendered to the Fund by the
Investment Advisor under the provisions of this Agreement, the Fund
shall pay to the Investment Advisor:
(i) for Advisory Services a flat fee of one percent (1%) of the net assets of
the Fund; plus additional amounts as follows:
(ii)for Administrative Services a fee equal to the sum of (i) seven-tenths
percent (0.70%) of the amount of assets in the Fund between one dollar
($1.00) and five million dollars ($5,000,000), inclusive, plus (ii) five-
tenths percent (0.50%) of the amount of assets in the Fund between five
million and one dollars ($5,000,001.00) and thirty million dollars
($30,000,000), inclusive, plus (c) twenty-eight hundredths percent
(0.28%) of the amount of assets in the Fund between thirty million and
one dollars ($30,000,001) and one hundred million dollars
($100,000,000), inclusive, plus (d) twenty-five hundredths percent
(0.25%) of the amount of assets in the Fund between one hundred
million and one dollars ($100,000,001) and two hundred million dollars
($200,000,000), inclusive, plus (e) twenty hundredths percent (0.20%) of
the amount of assets in the Fund in excess of two hundred and one
million dollars ($200,000,001), inclusive (all assets in the Fund for the
purposes of this Paragraph to be rounded to the nearest dollar prior to
the computation of any fee owed).
Such fees shall be accrued daily and be payable monthly in arrears on
the first day of each calendar month. Accruals of fees to the Investment
Advisor shall begin on the execution date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date and year first above written.
8
<PAGE>
Texas Capital Value Fund, Inc.,
a Maryland corporation
By______________________________
Mark A. Coffelt, President
First Austin Capital Management, Inc.,
a Delaware corporation
By_____________________________
Mark A. Coffelt, President
Investment Advisory Contract
THIS AGREEMENT (this "Agreement") is made
this ___day of___, 1996, by and between
Texas Capital Value Funds, Inc., a
Maryland corporation (the "Corporation"),
and Paul Bryce Martin, Jr., an
individual, dba Martin Capital Management
(the "Investment Advisor").
WITNESSETH:
WHEREAS, the Corporation is an open-ended
"series" investment company registered
with the Securities and Exchange
Commission under the Investment Company
Act of 1940; and
WHEREAS, the Board of Directors of the
Corporation (the "Board") has authorized
the establishment of a new series or
portfolio of securities and assets (the
"Fund"); and
WHEREAS, the Corporation has need of
investment advisory services for the Fund
and the Investment Advisor is in the
business of providing such services.
NOW THEREFORE, for good and valuable
consideration, the receipt and adequacy
of which are hereby acknowledged, the
parties hereto hereby agree as follows:
AGREEMENT
1. Advisory Services. The Investment
Advisor shall render investment advisory
services (the "Advisory Services") to the
Fund, subject to the supervision and
direction of the Board, for the period
set forth in Paragraph 6 below on the
terms set forth herein. The Investment
Advisor shall render such Advisory
Services and assume the obligations
herein set forth, for the compensation
provided in Paragraph 3(a) below. The
Investment Advisor shall, for the
purposes herein, be deemed to be an
independent contractor, and shall, unless
otherwise expressly provided and
authorized, have no authority to act for
or represent the Fund or Corporation in
any way, or in any way be deemed an agent
or employee of the Fund or the
Corporation.
2. All Other Services. (a) All other
services necessary to the operation of
the Fund shall be provided to the Fund
pursuant to written agreements (the
"Contracts") between the Corporation and
various third parties (the "Third
Parties"). Such services shall include,
without limitation, distribution
services, administrative services,
custodial services, transfer agent
services, accounting services, audit
services, and any other services the
Corporation deems necessary in its sole
and absolute discretion. The Investment
Advisor understands and acknowledges that
arranging for the provision of such
services shall be the sole right and
responsibility of the Corporation. Under
no circumstances shall the Investment
Advisor enter into any contracts or
agreements for the provision of same.
(b) The Investment Advisor shall pay all
compensation, costs and other monies owed
by the Corporation under any of the
Contracts, as provided in each such
Contract, directly to the applicable
Third Party. Upon execution of an
Agreement or any amendment thereto, the
Corporation shall promptly deliver a copy
of same to the Investment Advisor and the
Investment Advisor shall immediately
commence making any an all payments
required of the Corporation thereunder.
Such payments by the Investment Advisor
shall continue under each Contract until
the earlier to occur of (i) the date of
termination of this Agreement or (ii) the
date specified in such Contract for the
termination of payments.
(c) The Investment Advisor shall deliver
or cause to be delivered to any Third
Party any and all documents, records and
other information requested by such Third
Party for the performance of its
obligations under the applicable
Contract. Such documents, records and
other information shall be in a form and
delivered in a manner and within a time
frame that is acceptable to such Third
Party in its sole and absolute
discretion.
3.(a) Compensation. As compensation for
the Advisory Services, the Fund shall pay
to the Investment Advisor a flat fee of
one percent (1%) per annum of the net
assets of the Fund. In consideration of
the payments made by the Investment
Advisor pursuant to the provisions of
Paragraph 2 above, the Fund shall pay the
Investment Advisor a per annum fee equal
to the sum of (i) seven-tenths percent
(0.70%) of the amount of assets in the
Corporation between one dollar ($1.00)
and five million dollars ($5,000,000),
inclusive, plus (ii) five-tenths percent
(0.50%) of the amount of assets in the
Corporation between five million and one
dollars ($5,000,001) and thirty million
dollars ($30,000,000), inclusive, plus
(iii) twenty-eight hundredths percent
(0.28%) of the amount of assets in the
Corporation between thirty million and
one dollars ($30,000,001) and one hundred
million dollars ($100,000,000),
inclusive, plus (iv) twenty-five
hundredths percent (0.25%) of the amount
of assets in the Corporation between one
hundred million and one dollars
($100,000,001) and two hundred million
dollars ($200,000,000), inclusive, plus
(v) twenty hundredths percent (0.20%) of
the amount of assets in the Corporation
in excess of two hundred and one million
dollars ($200,000,001), inclusive (all
assets in the Corporation for the
purposes of this Paragraph to be rounded
to the nearest dollar prior to the
computation of any fee owed). Such fees
shall be accrued daily and be payable
monthly in arrears on the first day of
each calendar month. Accruals of fees to
the Investment Advisor shall begin on the
Effective Date.
(b) Costs. It is the intention of the
parties hereto that all Fund costs will
be borne by the Investment Advisor under
this Agreement with the exception of
brokerage commissions and custodial
charges based upon transactions in the
portfolio of the Fund. In addition, the
Investment Advisor shall absorb all the
organizational costs for the Fund as
determined by the Board.
In the conduct of the respective
businesses of the parties hereto and in
the performance of this Agreement, the
Fund and the Investment Advisor may share
common facilities and personnel common to
each. The entire cost to the Fund for
the use of common facilities and
personnel will be borne by the Investment
Advisor as part of this Agreement.
4. Non-Exclusive. The services to be
rendered by the Investment Advisor to the
Fund under this Agreement are not to be
deemed to be exclusive, and the
Investment Advisor shall be free to
render similar or different services to
others so long as its ability to render
the services provided for in this
Agreement shall not be impaired thereby.
If its ability becomes so impaired, as
determined by the Corporation in its sole
and absolute discretion, the Corporation
shall notify the Investment Advisor of
same and this Agreement shall
automatically terminate upon the receipt
by the Investment Advisor of such notice.
Such automatic termination shall be upon
the same terms and conditions as provided
for other terminations pursuant to the
last sentence of Paragraph 7 below.
5. Interested Parties. It is understood
and agreed that directors, officers,
employees, agents and shareholders of the
Fund may be interested in the Investment
Advisor as directors, officers,
employees, agents and shareholders of the
Investment Advisor. Similarly,
directors, officers, employees, agents
and shareholders of the Investment
Advisor may be interested in the Fund or
the Corporation as directors, officers,
employees, agents and shareholders of the
Fund. Furthermore, the Investment Advisor
itself may be interested in the Fund as a
shareholder or otherwise of the Fund. It
is understood and agreed that directors,
officers, employees, agents and
shareholders of the Investment Advisor
may continue as directors, officers,
employees, agents and shareholders of the
Fund or Corporation and vice versa; that
the Investment Advisor, its directors,
officers, employees, agents and
shareholders may engage in other
business, may render investment advisory
services to other investment companies,
or to any other corporation, association,
firm or individual, and may render
underwriting services to the Fund, or to
any other investment company,
corporation, association, firm or
individual, subject to the provisions of
Paragraph 4 above. The parties agree
that the Investment Advisor has a
proprietary interest in the name , and
the Corporation agrees to promptly take
any and all necessary action to remove
the name, from the name of any of its
funds upon receipt of written request
therefor from the Investment Advisor.
6. Term. Notwithstanding the date of
this Agreement first above written, the
effective date of this Agreement (the
"Effective Date") shall be the effective
date of that certain Registration
Statement on Form N-1A of the Fund, filed
by the Fund with the Securities and
Exchange Commission under the Securities
Act of 1933, as amended, and the
Investment Company Act of 1940, as
amended. Thereafter, this Agreement
shall continue in effect for one year
from the Effective Date. Such term may
be extended annually for additional
periods of one year provided that each
such extension is approved at least
annually by a vote of the Board. Such
vote shall be cast in person at a meeting
called for the purpose of voting on such
approval, and shall include the votes of
a majority of the Directors on the Board
who are not parties to this Agreement or
interested persons of any such party.
7. Termination. This Agreement may be
terminated at any time upon sixty (60)
days' prior written notice, without the
payment of any penalty, by the
Corporation's Board of Directors or by
vote of a majority of the outstanding
voting securities of the Fund. This
Agreement shall automatically terminate
in the event of its assignment by the
Investment Advisor or the Fund (within
the meaning of the Investment Company Act
of 1940 (the "1940 Act")), which shall be
deemed to include a transfer of control
of the Investment Advisor or the Fund,
respectively, unless an exemption from
such automatic termination is granted by
order or rule of the Securities and
Exchange Commission. Upon the
termination of this Agreement, the
obligations of all the parties hereunder
shall cease and terminate as of the date
of such termination, except for (i) any
obligation to respond to a breach of this
Agreement committed prior to such
termination, (ii) the obligation of the
Fund to pay to the Investment Advisor the
fee provided in Paragraph 3(a) above,
prorated to the date of termination, and
(iii) the obligation of the Investment
Advisor to bear the costs provided for in
Paragraph 3(b) above, prorated to the
date of termination (if applicable).
8. Assignment. This Agreement shall
terminate automatically in the event of
its whole or partial assignment by the
Investment Advisor or the Fund as
provided in Paragraph 7 above.
9. Fidelity Bond. As part of this
Agreement, the Investment Advisor shall
bear the cost of the fidelity bond
required to be maintained by the
Corporation for employees, officers, or
directors of the Investment Advisor who
have access to the Fund's securities or
cash. Such bond must protect the Fund
against loss from larceny and
embezzlement under the Act, and, in
compliance with Rule 17g-1 under the 1940
Act, must be approved both in form and
amount by a majority of the independent
directors of the Corporation at least
annually with due consideration given to
(a) the value of the Investment Advisor's
aggregate assets, (b) the type of custody
arrangements employed, and (c) the nature
of the securities owned. Additionally,
the Investment Advisor shall bear the
cost, if any, for Employee and
Officer/Director and Officer (E&O/D&O)
liability insurance covering the
Investment Advisor in favor of the
Corporation. Under the terms of this
Agreement, there is no initial
requirement that E&O/D&O insurance be
purchased, but if the Board ever requires
in its sole and absolute discretion that
it be carried, or if the Investment
Advisor decides, unilaterally, to carry
it, then such cost shall be borne by the
Investment Advisor and such insurance, if
required to be carried by the Board,
shall be in such amount and for such a
term as the Board may reasonably require.
The Investment Advisor shall not be
liable for any error of judgement or of
law or for any loss suffered by the Fund
or the Corporation in connection with the
matters to which this Agreement relates,
except loss resulting from willful
misfeasance, bad faith or gross
negligence on the part of the Investment
Advisor in the performance of its
obligations and duties or by reason of
its reckless disregard of its obligations
and duties under this Agreement.
10. Notices. Any notice required or
permitted to be given hereunder must be
in writing and may be given by personal
delivery or by mail, and if given by mail
shall be deemed sufficiently given if
sent by registered or certified mail
addressed to the party to be notified at
the following applicable address:
The Corporation:
Texas Capital Value Funds, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
The Investment Advisor:
Mr. Paul Martin
Martin Capital Management
600 West Tenth Street, #740
Austin, Texas 78701
Either party may specify a different
address for notice purposes by written
notice to the other.
11. Governing Law. This Agreement is
executed and delivered in the State of
Texas and shall be governed by the laws
of Texas and the 1940 Act.
12. Entire Agreement. This Agreement
constitutes the entire agreement between
the parties and terminates and supersedes
all prior understandings or agreements on
the subject matter hereof. No conditions
or warranties shall be implied here from
unless expressly set forth herein. The
Corporation and the Investment Advisor
each acknowledge that the terms and
conditions of this Agreement, and each of
them, are reasonable and fair and
equitable. This Agreement may be
modified only by a future writing that is
duly executed by both parties.
13. Severability. If any term of this
Agreement is held by a court of competent
jurisdiction to be invalid or
unenforceable, then this Agreement,
including all of the remaining terms,
will remain in full force and effect as
if such invalid or unenforceable term had
never been included.
14. Waiver. Waiver by either party of
any breach of any term, covenant or
condition in this Agreement shall not be
deemed to be a waiver of any subsequent
breach of the same or any other term,
covenant or condition herein contained,
nor shall any custom or practice which
may grow up between the parties in the
administration of the terms hereof be
deemed a waiver of or in any way affect
the right of each party to insist on the
performance of the other party in strict
accordance with said terms.
15. Time Is of the Essence. Time is of
the essence of this Agreement.
16. Attorneys' Fees. In the event of
any litigation or arbitration between the
parties with respect to this Agreement,
all costs and expenses, including,
without limitation, actual professional
fees such as accountants' and attorneys'
fees, incurred by the prevailing party,
shall be paid by the other party, which
obligation on the part of the other party
shall be deemed to have accrued on the
date of the commencement of such action
and shall be enforceable whether or not
the action is prosecuted to judgement.
17. Mandatory Arbitration. All disputes
arising under this Agreement shall be
arbitrated pursuant to the Commercial
Arbitration Rules of the American
Arbitration Association.
18. Independent Counsel. The parties
acknowledge that they have had the
opportunity to consult with independent
counsel of their own choosing in the
negotiation and execution of this
Agreement.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed
on the date and year first above written.
Corporation:
Texas Capital Value Funds, Inc.,
a Maryland corporation
By: Mark A. Coffelt
Mark A. Coffelt, President
Investment Advisor:
By: Paul Bryce Martin
Paul Bryce Martin Jr., an individual,
dba Martin Capital Management
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> VALUE & GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> NOV-06-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 1126288<F1>
<INVESTMENTS-AT-VALUE> 1246396
<RECEIVABLES> 851
<ASSETS-OTHER> 15854
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1263101
<PAYABLE-FOR-SECURITIES> 9808
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 912
<TOTAL-LIABILITIES> 10720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1107396
<SHARES-COMMON-STOCK> 112528
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24877
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1252381
<DIVIDEND-INCOME> 10957
<INTEREST-INCOME> 1891
<OTHER-INCOME> 0
<EXPENSES-NET> 16738
<NET-INVESTMENT-INCOME> (3890)
<REALIZED-GAINS-CURRENT> 28969
<APPREC-INCREASE-CURRENT> 120108
<NET-CHANGE-FROM-OPS> 145187
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 202
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 115274
<NUMBER-OF-SHARES-REDEEMED> 12766
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 1152381
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7588
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16738
<AVERAGE-NET-ASSETS> 838226
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 1.17
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.13
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Portfolio securities that are listed on national securities exchanges
or the NASDAQ National Market System are valued as of the close of
business of the exchange on each business day which that exchange
is open (presently 4:00pm Eastern time). Unlisted securities that
are not included in such system are valued at the mean of the
quoted bid and asked prices in the over-the-counter market.
Securities and other assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by the Advisor under procedures established by and under
the general supervision and responsibility of the Fund's Board
of Directors. Short-term investments are valued at amortized cost,
if their original maturity was 60 days or less, or by amortizing
the values as of the 61st day prior to maturity, if their
original tern to maturity exceeded 60 days.
</FN>
</TABLE>
