Securities Act File No. 33-96334
Investment Company Act File No. 811-
09088
Securities And Exchange Commission
Washington, DC 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 2
TEXAS CAPITAL VALUE FUNDS, INC
(Exact Name of Registrant as Specified in
Charter)
1600 West 38th Street, Suite 412
Austin, TX 78731
(Address of Principal Executive
Offices)(Zip Code)
Registrant's Telephone Number, including
Area Code:
(512)458-8166
Thomas Roberts
The Company Corporation, Inc.
17521 Shenandoah Court
Ashton, Maryland 20861
(Name and Address of Agent for Service)
____________________________________
It is proposed that this filing will
become effective:
Immediately upon filing pursuant to
paragraph (b) |_|
On ____ pursuant to paragraph (b)
|_|
60 Days after filing pursuant to
paragraph (a)(1) |x|
On (date) pursuant to paraagraph (a) of
rule 485 |_|
Pursuant to Rule 24f-2 under the
Investment Company Act of 1940,
Registrant has elected to register an
indefinite number of shares of
beneficial interest, par value of $.0001
per share.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis Fund
Expenses
Item 3. Condensed Financial
Information Not Applicable
Item 4. General Description of
the Registrant General
Description of the Fund
Item 5. Management of the Fund
Management of the Fund
Item 6. Capital Stock and Other
Securities The Company
Item 7. Purchase of Securities
Being Offered How to Purchase
Shares in the Fund
Item 8. Redemption or
Repurchase How to Redeem
Shares in the Fund
Item 9. Pending Legal
Proceedings Auditors &
Litigation
Part B Information Required in a
Statement of Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of
Contents
Item 12. General Information
and History Not Applicable
Item 13. Investment
Objectives and Policies Investment
Objectives & Policies
Item 14. Management of the Fund
Directors & Officers
Item 15. Control Persons and Control
Persons
Principal Holders of Securities
Item 16. Investment Advisory
and Other Services Investment
Advisor
Item 17. Brokerage Allocation
Portfolio Transactions & Brokerage
Item 18. Capital Stock and
Other Securities Capital
Structure
Item 19. Purchase
Redemption, Pricing Net Asset Value,
How to Redeem Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters
Distribution of the Fund
Item 22. Calculation of
Performance Data Performance
Information
Item 23. Financial Statements Not
Applicable
Part C
Information required to be included in
Part C is set forth under the appropriate
Item,
so numbered, in Part C to this
Registration Statement
<PAGE>
TEXAS CAPITAL VALUE FUNDS, INC.
Post Office Box 141849
Austin, Texas 78714-1849
Existing Accounts: 800-628-4077
New Accounts & Information: 888-TEX-RICH
or 512-457-7678, 512-457-7980
Value & Growth Portfolio
Texas Opportunity Fund
Growth & Income Portfolio
Prospectus
August 1, 1996
This prospectus sets forth concisely
the information about the
Texas Opportunity Fund, the Value &
Growth Portfolio, and the
Growth & Income Portfolio (each
individually a "Fund", or collectively,
the "Funds") that a prospective investor
should know before investing.
Each Fund is a non-diversified, open-end
investment series of the Texas
Capital Value Funds, Inc. (the
"Company") commonly known as a "
mutual fund." This prospectus should be
read and retained for future
reference.
If you require more detailed information,
a Statement of Additional
Information, dated August 1, 1996, which
has been filed with the
Securities and Exchange Commission and
incorporated by reference
into this Prospectus, may be obtained
without charge by writing the
above address.
This Prospectus is not a solicitation by
the Company or any Fund for
the sale of shares in any state in which
the offering is not authorized.
No person is authorized by the Company
to give any information or
make any representation other than those
contained herein or in other
printed or written material issued by
the Company or the Company's
distributor, and no person is entitled to
rely upon any other information
or representation.
Table of Contents
PROSPECTUS SUMMARY 2
TABLE OF FUND EXPENSES 2
GENERAL DESCRIPTION OF THE FUNDS 3
CHARITABLE GIVING 3
INVESTMENT OBJECTIVE 3
RISKS 4
INVESTMENT RESTRICTIONS 5
MANAGEMENT OF THE FUNDS 5
HOW TO PURCHASE SHARES IN THE FUND 8
HOW TO REDEEM (SELL) SHARES 10
DISTRIBUTIONS AND TAXES 12
DISTRIBUTION PLAN 13
RETIREMENT PLANS 13
EXCHANGE PRIVILEGES 13
THE COMPANY 14
SHAREHOLDER REPORTS 14
AUDITORS & LITIGATION 14
DETERMINING NET ASSET VALUE 14
FUND PERFORMANCE 14
INFORMATION FOR SHAREHOLDERS 15
Shares in each Fund are not deposits or
obligations of, or
guaranteed or endorsed by any bank, and
the shares are
not federally insured by the Federal
Deposit Insurance Corporation,
the Federal Reserve Board, or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED
OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Prospectus Summary
The following summary is qualified in its
entirety by the more detailed
information appearing in the body of this
Prospectus.
Investment Objective:
Texas Opportunity Fund: Capital
appreciation in primarily stocks
of Texas based corporations or companies
with significant operations
in Texas.
Value & Growth Portfolio: Capital
appreciation in primarily equity
securities of large and small domestic
and foreign corporations
Growth & Income Portfolio: Capital
appreciation and income in primarily
equity securities of domestic and
foreign corporations paying dividends.
See "Investment Objective" on page 3.
Investment Techniques: The Value &
Growth Portfolio and the Growth
& Income Portfolio use highly
quantitative techniques in the selection
of
stocks. The Texas Opportunity Fund will
invest stocks participating in the
Texas economy. These securities will be
selected based on product or service
potential, management, and technical
characteristics. See "Investment
Objective" and "Risks" on pages 3 and 4,
respectively.
The Advisors: First Austin Capital
Management, Inc.(an "advisor")
manages the Value & Growth and the Growth
& Income Portfolios.
Martin Capital Management (an "Advisor")
manages the Texas
Opportunity Fund. See "Management of the
Funds" on page 5.
Distributions/Dividends: Paid annually
from available capital gains
and income. Distributions may be
reinvested automatically without
a sales charge. See "Distributions and
Taxes" on page 12.
Initial and Subsequent Purchases:
Initially $1,000, subsequently
$100 minimums. For shareholders signed
up for the Autovest Plan,
there is no initial minimum. See "How to
Purchase Shares in the
Fund" and "Autovest Plan" on pages 8
and 10.
Net Asset Value: The net asset value of
the Fund will be available
daily by calling 1-800-TEX-RICH. See
"Determining Net Asset
Value" on page 14.
Risks: There can be no assurance that
any Fund will achieve
its investment objectives. Factors which
should be considered by an
investor include, but are not limited
to, higher than average volatility
, and the Funds' non-diversification
policy. The Funds are not designed
to be a complete investment program for
investors. See "Risks" on page 4.
Charitable Giving: For the Value &
Growth Portfolio and the Growth &
Income Portfolio, the Advisor of these
Funds will donate up to 10% of the
Advisor's earned net proceeds from
advisory fees from the Fund to
various charities each year.
Shareholders with at least $15,000 in
either Fund will have the opportunity to
designate a charity to which
the Adviser will donate. See
"Charitable Giving" on page 3.
<TABLE>
Table of Fund Expenses
The following table illustrates expenses
and fees that a shareholder
of the Fund will incur.
<CAPTION>
Shareholder Transaction Expenses
<S> <C>
Maximum Sales Load Imposed on Purchases
3.0%
Sales Load Imposed on Reinvested
Dividends None
Deferred Sales Load
None
Redemption Fees
(a)
Exchange Fees
None
Annual Fund Operating Expenses
Management Fees
1.00%
12b-1 Fees (b) .
0.25%
Other expenses
0.70%
Total Fund Operating Expenses
1.95%
<FN>
<F1>
(a) Shareholders pay a $10 charge for
redemptions by fed wire and
a $10 charge for redemptions by phone.
There are no other redemption
charges.
<F2>
(b) The level of distribution expenses
is 0.25% per annum of the Fund's
average net assets, of which 0.15% of
the fee should be considered a
service fee received by the selling
broker on an annual basis for providing
the investor with continuing service.
The distribution expense may result
in long-term shareholders paying more
than the maximum sales charge
that would have been permissible if
imposed entirely as an initial sales
charge.
</FN>
</TABLE>
The purpose of this table is to assist
investors in understanding the
various costs and expenses that they will
bear directly or indirectly
as a shareholder in the Fund.
The following examples illustrate the
expenses that an investor would
pay on a $1,000 investment over various
time periods assuming (1) a
5% annual rate of return, and (2)
redemption at the end of each period.
As noted in the table above the Funds
charge no redemption fees.
1 Year: $49 3 Years: $89
These examples should not be considered a
representation of past or
future expenses or performances. Actual
expenses may be greater or
less than those shown.
The advisory fee is higher than that paid
by most mutual funds. Each
Advisor, at its option, may reduce its
fee to the
<PAGE>
extent required to limit total annual
Fund operating expenses to the
maximum allowed by applicable state laws.
General Description of the Funds
Each Fund is an open-ended, non-
diversified series offered by Texas
Capital Value Funds, Inc., a Maryland
corporation incorporated on
June 26, 1995, and registered as an open-
end management investment
company under the Investment Company Act
of 1940 (the "1940 Act").
Charitable Giving
First Austin, the Advisor to the Value &
Growth Portfolio and the
Growth & Income Portfolio will donate up
to 10% of the Advisor's
earned net proceeds from advisory fees
from the Funds to various
charities each year. Shareholders who
have shares in either of these
two Funds worth at least $15,000 will
have the opportunity to
designate a charity for the Advisor to
donate to, although the amount
of any such donation to such designated
charity shall be determined
by the Advisor. Any such charities must
be non-profit groups as
defined by Section 501 ( c )(3) of the
Internal Revenue Code.
Since the Advisor is writing the
check, there will be no impact
on the shareholder's holdings in the
Fund(s), nor will there be
any tax deductions to any such
shareholder.
Investment Objective
Each Fund has a unique investment
objective although there are
some aspects common to all of the Funds.
Common Characteristics: For all the
Funds, purchase of issues
will be primarily, but not exclusively,
listed issues and American
Depository Receipts on the on the New
York, American and NASDAQ
exchanges and may include up to 33%
foreign based companies.
Neither Advisor uses techniques such as
borrowing, hedging, or
short sales in the management of the
Funds. The Funds make no
use of derivatives.
Under normal circumstances, each Fund
will have virtually all of
its assets invested in equity securities.
However, for temporary
defensive purposes, each Fund may hold
cash, money market
instruments, notes or bonds, or enter
into repurchase agreements,
all of which will be of investment grade
as determined by Moody's
Investor's Service, Inc. or Standard &
Poor's Corporation rating agencies.
Unique Characteristics: Value & Growth
Portfolio and Growth & Income
Portfolio. Each Fund's primary
investment objective is capital
appreciation
through the investment in common stocks
and securities convertible into
common stocks. For the Value & Growth
Portfolio no consideration is
given to income of the Fund holdings.
For the Growth & Income Portfolio, the
Advisor does take into
consideration the income of Fund
holdings.
For both Funds, the Advisor will employ
highly structured, computer
driven, quantitative strategies to
endeavor to find companies that are
likely to perform well. Such strategies
are different than the strategies
most advisors use to select stocks in
that the Advisor will give little or
no weight to qualitative factors of
securities considered for purchase.
Fundamental ratios such as the price of a
stocks relative to its earnings
(price-to-earnings), the price of a stock
relative to its cashflow (price-to-
cashflow) and the price of a stock
relative to its bookvalue or net worth
(price-to-book) weigh heavily in the
selection process. For the Growth
& Income Portfolio, the ratio of the
prices of a stocks relative to its
dividend yield is considered.
Most of the securities selected are
likely to have much lower ratios
in at least one of the above categories
than the market in general.
Academic research and studies have shown
that portfolios with
the characteristics of low price-to-
earnings, low price-to-cashflow
and low price-to-book ratios may be
associated with higher investment
rates of return over long periods of
time. Such an investment strategy
may also be subject to greater investment
risk.
While the quantitative strategy the
Advisor plans to use does not
specifically
screen for small companies, test results
have shown a large percentage of
companies selected for the
<PAGE>
Value & Growth Portfolio had market
capitalizations of less than a billion
dollars. Smaller companies have
historically performed better than larger
companies over long periods, but also
have historically shown higher
volatility than larger companies.
Texas Opportunity Fund. This Fund's
investment objective is capital\
appreciation through investment in
common stocks and securities
convertible into common stocks of Texas
Companies or companies
with significant operations in Texas.
Since the Fund is structured
primarily for capital appreciation, any
income should be considered
incidental to the investment
decision.
The Advisor will employ both
qualitative and quantitative
strategies to endeavor to find companies
that are likely to perform
well. The Fund will differ from other
funds in that all stocks selected
for inclusion in the Fund will be Texas
based companies or companies
with a significant percentage of their
business in Texas. Product or
service growth potential, management,
technical, and economic cycle
considerations weigh heavily in the
selection process.
The security selection process
will attempt to reflect the
diversification of the Texas economy;
however the manager will
have the discretion to adjust sector
representation based upon the
sector's performance outlook. An
investment strategy focused on
a single, albeit large economy, may be
subject to greater investment
risk than a more broadly diversified
mutual fund.
Portfolio Turnover Policy. The Advisors
may make changes in the
Funds consistent with each Fund's
policies when each Advisor
believes doing so is in the best interest
of the Fund it manages.
Fund turnover is expected to be less
than 150% per year, which
is higher than average for most funds.
High turnover rates increase
transaction costs and may increase
taxable capital gains. Each Advisor
considers these effects when evaluating
the anticipated benefits of short-
term investing.
Non-diversification Policy. Each Fund is
classified as being non-diversified
which means that it may invest a
relatively high percentage of its assets
in
the obligations of a limited number of
issuers. Each Fund, therefore, may
be more susceptible than a more widely
diversified fund to a single economic,
political or regulatory occurrence.
Each Fund seeks only diversification for
adequate representation among what it
considers to be the best performing
securities and to maintain its federal
non-taxable status under Sub-Chapter
M of the Internal Revenue Code.
Risks
Investment in any mutual fund has
inherent risks. There can be no
assurance that the investment objectives
of each Fund will be realized
or that the Fund will not decline in
value. Economic conditions change
and stock markets are volatile.
Moreover, investors should be aware that
certain investment policies of the
Funds, such as investing in smaller
capitalization companies, and the Funds'
non-diversification policy can
entail greater than average risk.
Additionally, the Texas
Opportunity Fund will concentrate its
investments in companies based or having
significant operations in a
single state which may entail greater
than average risk than more broadly
diversified funds.
Each Fund may invest up to 33% of
its assets in foreign based companies.
Foreign Securities involve certain
inherent risks that are different from
those of domestic issuers, including
political or economic instability of the
issuer or the country of issue,
diplomatic developments which could
affect
U.S. investments in those countries,
changes in foreign currency and
exchange rates and the possibility of
adverse changes in investment or
exchange control regulations. As a
result of these and other factors,
foreign securities purchased by each Fund
may be subject to greater
price fluctuation than securities of U.S.
companies. Investors should
carefully consider such risks and the
Fund characteristics in light of
their own financial circumstances. A
Fund is not designed to be a
complete investment program for
investors. It must be realized, as
is true of almost all securities, there
can be no
<PAGE>
assurance that a Fund will obtain its
ongoing objective of capital
appreciation.
As with any investment strategy,
there can be no guarantee of
success.
Investment Restrictions
The Funds have adopted and will follow
certain investment policies
set forth below, which are fundamental
and may not be changed
without shareholder approval.
(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 U.S. 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 Fund 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 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.
Management of the Funds
The business and affairs of the Funds
are managed under the direction
of the Board of Directors of the
Company. The Company's officers
(the "Officers") conduct and supervise
the daily business operations
of the Funds. Shareholders have one vote
for each share held on
matters on which they are entitled to
vote. The Company is not
required to and has no intention of
holding annual shareholder
meetings, although special meetings may
be called for purposes
such as electing or removing individual
members of the Company's
Board of Directors (each individually, a
"Director", and collectively
the "Directors" or "Board of Directors")
or changing fundamental
investment policies or for any other
matter as required by law.
Directors and Officers. The Directors
and Officers are listed below
, together with their principal
occupations during at least the past
five years.
Mark A. Coffelt, C.F.A., President of the
Texas Capital Value Funds,
Inc. and (Interested) Director, Chief
Investment Officer of the Value
& Growth Portfolio and Growth &
<PAGE>
Income Portfolio and President of First
Austin Capital Management, Inc. Prior to
founding First Austin Capital Management,
Inc., in 1987, Mr. Coffelt was Controller
of Racal-Milgo, a data communications
company. He is a graduate of Occidental
College, B.A. in economics and a graduate
of the Wharton School, University of
Pennsylvania, M.B.A. . Mr. Coffelt is a
Chartered Financial Analyst of the
Association of Investment Management and
Research.
Paul Martin, (Interested) Director, is
Chief Investment Officer of Martin
Capital Management. Prior to founding
Martin Capital Management in November,
1988, Mr. Martin worked four years as a
stockbroker in New York City, managing
investment accounts at Merrill Lynch and
Oppenheimer & Company. Mr. Martin served
seven years active duty with the United
States armed services, and continues to
serve as a U.S. Naval Reserve Officer.
He has a BA degree in liberal arts from
St. John's College in Santa Fe, New
Mexico. Mr. Martin is the Chief
Investment Officer for the Texas
Opportunity Fund.
Louise Epstein, (Interested) Director,
is President of Peleton Capital Group,
Inc. and a broker with Choice
Investments, Inc. the Company's
Distributor. She served on the Austin
City Council; as Director of Public
Finance for the State of Texas Treasury;
Assistant Executive Director of the Texas
Bond Review Board; Director of Funds
Management for the General Land Office;
and as an Investment Banker with Rausher
Pierce Refsnes, Inc. Ms. Epstein
received both her BA in Plan II and her
MBA from the University of Texas at
Austin.
Janis A. Claflin, Director, is President
and owner of Claflin & Associates, a firm
providing business consulting and
counseling services to banks, medical
groups, associations, foundations and
individuals. She also serves as
Chairperson of the Trustee Program
Committee on the Board of Directors of
the Fetzer Institute, a multi-million
dollar foundation which sponsored the
Public Broadcasting Series "Healing and
the Mind" with Bill Moyers. She is a
licensed Marriage and Family Therapist
and holds a B.A. in English from the
George Peabody College for Teachers and a
M.A. from Yale Divinity School in
Religion.
Edward K. Clark, Attorney, CPA, Director,
is a practicing tax attorney with Clark &
Clark of Austin, Texas. He has been a
partner in the law firm of McGinnis,
Lochridge & Kilgore, L.L.P., and has also
been associated with the firms of
Scofield & Clark, P.C., and Ford &
Ferraro, L.L.P., all of Austin. In
addition, he has served as the general
counsel and chief financial officer of
Jefferson Service Company, Inc., of
Shreveport, Louisiana. Mr. Clark is
Board Certified in Tax Law by the Texas
Board of Legal Specialization and is
licensed as a Certified Public Accountant
in Texas. He holds a B.B.A. and a M.P.A.
(Master in Professional Accounting)
degrees from the University of Texas at
Austin, and a J.D. from the University of
Houston College of Law.
John Henry McDonald, CFP, Director, is
President and founder of Austin Asset
Management, a financial planning firm.
He holds a CFP from the College for
Financial Planning and is a member of the
CFP Board of Standards for the CFP item
writing committee. He currently serves
as President of the Austin Society of
Institute of Certified Financial
Planners.
Eric Barden, is the Company's
Secretary. He is currently Compliance
Officer of First Austin Capital
Management, Inc., an Advisor to two of
the Funds, and a registered
representative with Choice Investments,
Inc., the Company's Distributor. He
graduated from the University of Texas,
B.A. in economics and government.
Investment Advisors. There are two
different investment advisors. First
Austin Capital Management, Inc., ("First
Austin") is the investment advisor to the
Value & Growth Portfolio and the Growth &
Income Portfolio. Martin Capital
Management ("Martin Capital") is the
advisor to the Texas Opportunity Fund.
Both Advisors are registered investment
advisors with the Securities and Exchange
Commission and the State of Texas. First
Austin is based in Austin, Texas at the
address of 1600 West 38th Street, Suite
412, Austin, Texas 78731. Martin Capital
is based in Austin, Texas at the address
of 600 W. Tenth Street, #740, Austin,
Texas 78701. First Austin is owned by
Mark A. Coffelt and Guy D. Coffelt. Mark
Coffelt is the Chief Investment Officer
<PAGE>
of First Austin, Chairman of the Board of
Directors and President of the Company,
and the Fund manager for the Value &
Growth Portfolio and the Growth & Income
Portfolio. Martin Capital is owned by
Paul Martin. Paul Martin is the Chief
Investment Officer for Martin Capital and
Fund manager to the Texas Opportunity
Fund. Martin Capital has no prior
experience furnishing investment advice
to an investment company; however, Martin
Capital has been managing portfolios
since 1989.
On October 24, 1995 the shareholders
of the Company approved an investment
advisory and administrative contract with
First Austin which was unanimously
approved by the Board at their first
meeting held on July 25, 1995 to manage
and administer the Value & Growth
Portfolio.
On March 22, 1996, the Board
authorized the creation of a new series
called the Texas Opportunity Fund to be
managed by Martin Capital. Under
separate agreement, First Austin will
provide administrative services to the
Company on behalf of the Texas
Opportunity Fund. On June 28, 1996, the
Board authorized the creation of a new
series called the Growth & Income
Portfolio to be managed and administered
by First Austin.
All agreements are for an original
term of one year. After the original
term expires, each agreement will
continue on a year to year basis provided
that approval is voted at least annually
in advance by either the Board of
Directors or the holders of a majority of
the outstanding voting securities of the
respective Fund, but in either event, the
extension of the term of an agreement
must also be approved in advance by a
majority of the Directors who are neither
parties to the agreement nor interested
persons as defined in the Investment
Company Act of 1940 (the "1940 Act") at a
meeting called for such purpose.
.
Fund Management. Mark A. Coffelt,
Director of the Company and Chief
Investment Officer of the Value & Growth
Portfolio and the Growth & Income
Portfolio, manages the investment program
of these two Funds and is primarily
responsible for their day-to-day
management. Paul Martin, Chief
Investment Officer of the Texas
Opportunity Fund, manages Fund's
investment program and is primarily
responsible for the Fund's day-to-day
management.
Advisory and Administrative Agreements.
Under the Advisory agreements, each
Advisor will furnish investment advice to
the Fund(s) it manages on the basis of a
continuous review of the portfolio and
recommend to the Company when and to what
extent securities should be purchased or
disposed of. The Advisory agreements may
be terminated at any time, without the
payment of any penalty, by the Board of
Directors or by vote of a majority of the
outstanding voting securities of the
respective Fund on sixty (60) days' prior
written notice to the Advisor. In the
event of an assignment by an Advisor of
the investment advisory services under
the Agreement, as defined in the 1940
Act, the Agreement will terminate
automatically. Ultimate decisions
regarding investment policy and
individual purchases and sales of
securities are made not by Advisory but
by the Company's Officers and Directors.
First Austin will also act as the
administrator to the Funds. The
administrator provides support services
to each Fund including establishing and
maintaining shareholders' accounts and
records, processing purchase and
redemption transactions, answering
routine client inquiries regarding the
Fund, preparing registration statements,
prospectuses, tax returns and proxy
statements, providing daily valuation of
each Fund, calculating the daily net
asset value per share, and providing such
other services to the Fund as the Company
may reasonably request. First Austin may
assign administrative services to other
groups and providers without automatic
termination of the Agreement.
All Fund costs, with the exception
of extraordinary legal expenses as
determined by the Board of Directors,
brokerage commissions, and custodial
charges based upon transactions in the
Fund(s), will be borne by the Advisor to
the Fund(s) as part of fees charged.
Marketing expenses will be primarily
borne by the "Distributor" (as defined
below). For Advisory Services, the
Company has agreed to pay each Advisor a
flat fee of 1.00% per year. The advisory
fee paid to each Advisor is higher than
that paid by most investment companies.
For Administrative Services, the
Company has agreed to pay each Advisor
additional fees of 0.70% per year of the
net assets of the Fund for the first $5
million of net assets, declining to 0.20%
per year of net assets in excess of $200
million, and a 12(b)-1 fee of 0.25% to
the Distributor who passes through 0.15%
to the broker of record. All fees are
computed on the
<PAGE>
average daily closing net asset value of
the Fund and are payable monthly.
On-going legal and auditing
expenses, federal and state registration
fees, printing expenses for shareholder
statements and prospectuses, and the cost
of fidelity bond and other insurance will
be borne by each Advisor as part of its
Agreement with the Company for its
respective Fund(s).
From time to time, each Advisor may
voluntarily waive a portion of its fee
otherwise payable to it to meet Fund
expense limits prescribed by any state in
which the Fund's shares are offered for
sale. Currently, the Company believes
that limit is 2.5% of the first $30
million of the Fund's average net assets,
2.0% of the next $70 million, and 1.5% of
average net assets in excess of $100
million.
Organization Costs. Under the Agreement,
each Advisor has absorbed all of the
organization costs for its respective
Fund(s).
Accounting and Transfer Agent Services.
The Company has contracted with Fund
Services, Inc. (the "Transfer Agent") for
transfer agent services and with
Commonwealth Fund Accounting, Inc. for
fund accounting services. The address of
the accounting and transfer agent is 1500
Forest Ave., Suite 111, Richmond, VA
23229. All shares are held in non-
certificated form registered on the books
of the Fund and the Transfer Agent for
the account of the shareholder.
Company Distributor. Choice Investments,
Inc. is the broker-dealer and the Fund's
underwriter and distributor (the
"Distributor"). The address of the
Distributor is 5900 Balcones, Suite 100,
Austin, Texas 78731. The phone number of
the Distributor is (512) 451-7678 or toll
free (888) TEX-RICH.
Custodian. Bank of Boston, N.A., is
the Fund's custodian.
Brokerage. The Company requires all
brokers to effect transactions in Fund
securities in such a manner as to get
prompt execution of the orders at the
most favorable price. Each Fund will
place orders with brokers who provide
research services to the Advisor at
commission rates considered to be
reasonable, although higher than the
lowest brokerage rates available, or to
brokers who sell shares in the Fund. No
formula for such allocations exists;
thus, the respective Fund bears the cost
of such services.
Each Advisor also places portfolio
transactions for other advisory accounts.
Research services furnished by broker-
dealers which effect securities
transactions for the Fund may be used by
the Advisor in servicing all of its
advisory accounts and not all such
research services may be used by the
Advisor in the management of the Fund's
portfolio. Conversely, research services
furnished by broker-dealers which effect
securities transactions for other
advisory accounts may be used by the
Advisor in the management of a Fund. In
the opinion of the Advisors, it is not
possible to measure separately the
benefits from research services to each
advisory account. Because the volume and
nature of the trading activities of the
advisory accounts are not uniform, the
amount of commissions in excess of the
lowest available rate paid by each
advisory account for brokerage and
research services will vary.
Each Advisor seeks to allocate Fund
transactions equitably whenever
concurrent decisions are made to purchase
or sell securities for a Fund and other
advisory accounts. In some cases, this
procedure could have an adverse effect on
the price or the amount of securities
purchased or sold by the Fund. In making
such allocations, the main factors
considered by the Advisor are the
respective investment objectives, the
relative size of portfolio holdings of
the same or comparable securities, the
availability of cash for investment, the
size of investment commitments generally
held and the opinions of the persons
responsible for recommending the
investment.
How To Purchase Shares in the Fund
Investors may reduce or eliminate sales
charges in various ways as follows: a)
through the aggregation of accounts as
single investors (reduced sales charge);
b) by issuing a statement of intention to
purchase more than $50,000 over a
thirteen month period (reduced sales
charge); or c) by being a charity or
member of a group exempt from the sales
charge. Qualifications for reduced or no
sales charges are described in detail
below.
<PAGE>
The table below shows the sales
charges as a percentage of assets
invested.
<TABLE>
SALES CHARGE AS A PERCENTAGE OF ASSETS
INVESTED
<CAPTION>
AMOUNT DEALER
OF TRANSACTION PRICE VALUE
DISCOUNT AS A %
OF
PRICE
<S> <C> <C> <C>
Less than $50,000 3.0% 3.09%
2.5%
$50,000 but less
than $100,000 2.5% 2.56%
2.0%
$100,00 but less
than $250,000 2.0% 2.04%
1.5%
$250,000 but less
than $1 million 1.5% 1.52%
1.0%
$1 Million + 1.0% 1.01%
0.5%
</TABLE>
Aggregation of Accounts as Single
Investors. Investors in the following
categories may combine their purchases
into a single transaction to qualify for
a reduced sales charge:
1. an individual, his or her spouse and
their children under 21 purchasing for
his, her or their own account;
2. a trustee or other fiduciary
purchasing for a single trust estate or
single fiduciary account (including a
pension, profit-sharing or other employee
benefit trust created pursuant to a plan
qualified under Section 401 of the
Internal Revenue Code);
3. employee benefit plans of a single
employer or of affiliated employers.
Statement of Intention (Letter of
Intent). An investor may also obtain the
reduced sales charges shown above by
expressing in writing to the Fund an
intent to invest $50,000 or more within a
thirteen month period. A form for this
purpose can be obtained by writing or
calling the Fund or an investor can write
their own letter of intent.
While an investor is not obligated
to fulfill a letter of intent, if the
goal is not met, the investor is required
to pay the difference between the sales
charge actually paid and the one that
would otherwise have been due had no
letter of intent been signed.
Rights of Accumulation. An investor may
also obtain a cumulative quantity
discount (known as a right of
accumulation) by adding his or her
current purchase to the net asset value
(at the close of business on the previous
day) of all shares previously purchased
and still owned in the Fund. The
applicable sales charge is then based on
this total. To benefit from any right of
accumulation ("ROA"), an investor must
identify any ROA links to other accounts
and communicate these links in writing to
the Fund's shareholder service staff.
Investors Exempt from Sales Charges.
Certain categories of people may invest
in the Fund without paying a sales
charge. These categories include Charter
Shareholders, qualified pension or profit
sharing plans with ten or more employees,
Directors, Officers and employees of the
Company, officers and employees and
clients of each Advisor, officers and
employees of the Distributor (including
immediate family members of the above
groups and their retirement plans),
representatives registered with the
National Association of Securities
Dealers buying for their own account,
discretionary accounts of bank trust
departments, registered investment
advisors and their clients where the
registered investment advisor is buying
on behalf of the client, and charities
and religious organizations as defined by
Section 501(c)(3) of the Internal Revenue
Code.
The Value & Growth Portfolio
originally opened without a sales charge
for a period set by the Board of
Directors. Applications received in good
order by the Transfer Agent or
Distributor through December 31, 1995
were exempt from the front-end sales
charge. Shareholders buying during that
period and buying at least $10,000 worth
of the Value & Growth Portfolio were
deemed Charter shareholders. Charter
shareholders will never pay a sales load
on any future investments in the Value &
Growth Portfolio, or any other Funds of
the Company .
Other Fees. Investors may be charged a
transaction or other fee by an investment
adviser, a brokerage firm or other
financial institution in connection with
purchases or redemptions of Fund shares
at net asset value (i.e., without a sales
charge).
<PAGE>
Direct Purchase of Shares. To purchase
shares in the Fund an investor should
complete an application form and send it
to the Distributor along with a check
payable to:
Texas Capital Value Funds,
Inc.
P. O. Box 141849
Austin, TX 78714-1849
Minimum Investments. A shareholder's
initial investment must be a minimum of
$1,000, unless he/she is participating in
the Company's Autovest Plan (see below),
where the initial minimum is waived. The
minimum for subsequent investments is at
least $100.
Subsequent Investments. With subsequent
investments, shareholders should write
the name and number of the account on
their check. Checks do not need to be
certified, but are accepted subject to
collection and must be drawn in United
States dollars on United States banks.
The investment will be processed at the
public offering price next calculated
after receipt of purchase request in good
order.
Autovest Plan. Under the Autovest
Plan, there is no initial minimum, but
the shareholder must agree to contribute
a minimum of $1,200 the first year.
On a monthly or quarterly basis, the
shareholder's money will be automatically
transferred from such shareholder's bank
account to the shareholders Fund account
on or about the 15th day of each month.
A shareholder can elect this option by
filling out the Autovest section on the
new account form. For further
information, call the Transfer Agent at
800-628-4077.
Purchases Through a Broker-Dealer.
Shareholders may purchase shares through
their broker-dealer if that broker-dealer
has a signed agreement with the
Distributor. Broker-dealers may place
orders on behalf of shareholders by
calling the Distributor. Orders will be
processed at the net asset value of the
Fund next calculated after receipt in
good order. The broker-dealer is
responsible for placing purchase orders
promptly with the Distributor and for
forwarding payment within three (3)
business days.
By Wire. Before wiring funds, an
investor must call the Transfer Agent at
1-800-628-4077 to advise the Transfer
Agent that such investor intends to make
an initial investment by wire and to
receive an account number. The investor
must then proceed as follows: (i)
provide the Transfer Agent with such
investor's name and the dollar amount to
be invested, (ii) complete the Fund's
account application (included with this
Prospectus), being sure to include the
date of the order and the confirmation
number, (iii) mail or deliver the
completed application to the appropriate
address shown at the top of the
application, and (iv) request his or her
bank to transmit immediately to the
Transfer Agent available funds by wire
for the purchase of shares in the Fund.
Subsequent Investments by Wire. An
existing shareholder may make a
subsequent investment by instructing his
or her bank to wire funds as indicated
above, commencing with contacting the
Transfer Agent to notify the Transfer
Agent of an incoming wire. It is
essential that complete information
regarding the shareholder's account be
included in all wire instructions in
order to facilitate prompt and accurate
handling of investments.
General. Investors will not be permitted
to redeem any shares purchased with an
initial investment made by wire until one
(1) business day after the completed
account application is received by the
Fund. All investments must be made in
U.S. dollars and drawn on U.S. banks.
Third party checks are not accepted. A
charge may be imposed if any check used
for investment does not clear. The Fund
reserves the right to reject any purchase
in whole or in part.
If an order, together with payment
in proper form, is received by the
Transfer Agent by the close of public
trading on the New York Stock Exchange
(currently 4:00 p.m., New York City
time), Fund shares will be purchased at
the offering price next determined after
the close of such trading.
How To Redeem (Sell) Shares
A shareholder has the right to have the
Fund redeem all or any portion of his
outstanding shares at their current net
asset value on each day the New York
Stock Exchange is open for
<PAGE>
trading. The redemption price is the net
asset value per share next determined
after the shares are validly tendered for
redemption. A shareholder may redeem
their shares by offering them for
"repurchase" or "redemption" directly to
the Fund or through their dealer.
Direct Redemption. A written request for
redemption must be received by the Fund's
Transfer Agent in order to constitute a
valid tender for redemption. For amounts
in excess of $5,000, the Fund requires
that the signature(s) on the written
request be guaranteed as specified below.
All owners of the account must sign
unless the account application form
states that only one signature is
necessary for redemptions. All
redemption checks must be sent to the
address-of-record on the account. The
Fund usually requires additional
documents when shares are registered in
the name of a corporation, agent or
fiduciary if the shareholder is a
surviving joint owner. In the case of a
corporation, a corporate resolution
signed by the secretary will be needed.
In the case of an agent or fiduciary, a
copy of the death certificate is usually
required. The Fund's Transfer Agent can
be contacted at (800) 628-4077 with any
questions about requirements for
redeeming shares.
Telephone Redemption. A shareholder may
redeem shares by telephone if such
shareholder requested this service at the
time the initial account application was
completed. If a shareholder did not
request this service at that time, such
shareholder must request approval of
telephone redemption privileges in
writing (sent to the Fund's Transfer
Agent) with signature guarantee before
shares can be redeemed by telephone.
There is no charge for establishing this
service, but the Transfer Agent will
charge such shareholder's account a
$10.00 service fee each time a telephone
redemption is made. Once telephone
authorization is in effect, the
shareholder may redeem shares by calling
the Transfer Agent at 1-800-628-4077. By
establishing this service, the
shareholder authorizes the Transfer Agent
to act upon any telephone instructions it
believes to be genuine to (1) redeem
shares from the shareholder's account and
(2) mail or wire redemption proceeds. If
the shareholder requests that redemption
proceeds be wired to such shareholder,
the Transfer Agent will charge such
shareholder's account with a wire service
charge, currently $10.00. This charge is
in addition to the $10.00 service fee for
making a telephone redemption. The
amount of these service charges may be
changed at any time, without notice, by
the Transfer Agent.
A shareholder cannot redeem shares
by telephone if such shareholder paid for
his or her shares with a personal,
corporate, or government check and the
payment has been on the books of the Fund
for less than fifteen (15) business days.
If it should become difficult to
reach the Transfer Agent by telephone
during periods when market or economic
conditions lead to an unusually large
volume of telephone requests, a
shareholder may send a redemption request
to the Transfer Agent by overnight mail.
The Fund employs reasonable
procedures designed to confirm the
authenticity of the instructions
communicated by telephone for, if it does
not, it may be liable for any losses due
to unauthorized or fraudulent
transactions. As a result of this
policy, a shareholder authorizing
telephone redemption bears the risk of
loss which may result from unauthorized
or fraudulent transactions which the Fund
believes to be genuine. When a
shareholder requests a telephone
redemption or transfer, he or she will be
asked to respond to certain questions
designed to confirm their identity as a
shareholder of record. Cooperation with
these procedures will protect the
shareholder's account and the Fund from
unauthorized transactions.
Signature Guarantees. To protect each
shareholder and the Company from fraud,
signature guarantees are required for:
(1) all redemptions ordered by mail if
the shareholder requires that the check
be payable to another person or that the
check be mailed to an address other than
the one indicated on the account
registration; (2) all requests to
transfer the registration of shares to
another owner; and (3) all authorizations
to establish or change telephone
redemption service, other than through
the shareholder's initial account
application.
In the case of redemption by mail,
signature guarantees must appear either:
(1) on the written request for
redemption; or (2) on a separate
instrument of assignment (usually
referred to as a "stock power")
specifying the total number of shares
being redeemed. The Company may waive
these requirements in certain instances.
<PAGE>
The following institutions are
acceptable signature guarantors: (a)
participants in good standing of the
Securities Transfer Agents Medallion
Program ("STAMP"); (b) commercial banks
which are members of the Federal Deposit
Insurance Corporation ("F.D.I.C."); (c)
trust companies; (d) firms which are
members of a domestic stock exchange; (e)
eligible guarantor institutions
qualifying under Rule 17Ad-15 of the
Securities Exchange Act of 1934 that are
authorized by charter to provide
signature guarantees; (f) foreign
branches of any of the above; (g) the
Distributor for the Fund. The Transfer
Agent cannot honor guarantees from
notaries public, savings and loan
associations, or savings banks.
General. Payment of the redemption
proceeds will be made promptly, but not
later than the seventh (7th) day after
the receipt of all documents in proper
form, including the appropriate signature
guarantee.
The Fund may suspend the right of
redemption under certain extraordinary
circumstances in accordance with the
Rules of the Securities and Exchange
Commission. In the case of shares
purchased by check and redeemed shortly
after purchase, the Fund will not mail
redemption proceeds until it has been
notified that the check used for purchase
has been collected, which may take up to
fifteen (15) business days from the
purchase date. To minimize or avoid such
delay, investors may purchase shares by
certified check or federal funds wire. A
redemption may result in recognition of a
gain or loss to the shareholder for
Federal income tax purposes.
Reinvestment Privileges. If a
shareholder redeems some or all of the
shareholder's shares and then changes his
or her mind, such shareholder may re-
invest them without sales charges at the
net asset value if such shareholder does
so within sixty (60) days of the date of
redemption. This privilege may be
exercised only once by a shareholder.
However, a shareholder has not used up
this one-time privilege if the sole
purpose of a prior redemption was to
invest the proceeds at net asset value in
an Individual Retirement Account or
Simplified Employee Pension Plan. If the
shareholder realized a gain on the
redemption, the transaction is taxable
and reinvestment will not alter any
capital gains tax payable. If there has
been a loss on the redemption, some or
all of the loss may not be allowed as a
tax deduction depending on the amount
reinvested and the timing of
reinvestment.
Redemption at the Option of the Fund.
Due to the relatively high cost of
maintaining smaller accounts, the Fund
reserves the right to redeem shares in
any account, other than retirement plan
or Uniform Gifts/Transfers to Minors Act
accounts, if at any time, due to
redemptions by the shareholder, the total
value of a shareholder's account does not
equal at least $1000. Involuntary
redemption will only result when the
shareholder account drops below the
minimum due to redemptions, rather than
changes in the net asset value of the
Fund. If the Fund determines to make
such an involuntary redemption, the
shareholder will first be notified that
the value of his or her account is less
than $1000 and will be allowed 30 days to
make an additional investment to bring
the value of his or her account to at
least $1000 before the Company takes any
action. The Company reserves the right
to raise minimums at some future date,
although it currently has no plans to do
so.
Distributions and Taxes
Under the provisions of Sub-Chapter M of
the Internal Revenue Code of 1986 as
amended, each Fund, by paying out
substantially all of its investment
income and realized capital gains,
intends to be relieved of federal income
tax on the amounts distributed to
shareholders. In order to qualify as a
"regulated investment company" under Sub-
Chapter M, at least 90% of each Fund's
must be derived from dividends, interest
and gains from security transactions, no
more than 30% of each Fund's profits may
be derived from sales of securities held
less than three months, and no more than
50% of each Fund's assets may be in
securities holdings that exceed 5% of the
total assets of the Fund at the time of
purchase.
Dividends & Distributions. Distribution
of any net long term capital gains
realized by each Fund in the Fund's in
the fiscal year and owned by a
shareholder will be taxable to the
shareholder as long term capital gains,
regardless of the length of time Fund
shares have been held by the shareholder.
All
<PAGE>
income realized by each Fund owned by a
shareholder including short term capital
gains, will be taxable to the shareholder
as ordinary income. Dividends from net
income will be distributed annually or
more frequently at the discretion of the
Company's Board of Directors. Dividends
received shortly after purchase of shares
by a shareholder will have the effect of
reducing the per share net asset value of
such shareholder's shares by the amount
of such dividends or distributions and,
although in effect a return of capital,
are subject to federal income taxes.
Dividend Reinvestment. Since each Fund
is structured for long term shareholders,
all fund distributions will be reinvested
back into the fund rather than paid out,
unless a shareholder requests otherwise.
There is no sales charge for reinvested
dividends.
Backup Withholding. The Company is
required by Federal law to withhold 31%
of reportable payments (which may include
dividends, capital gains, distributions
and redemptions) paid to shareholders who
have not complied with IRS regulations.
In order to avoid this withholding
requirement, a shareholder must certify
on a W-9 tax form or other applicable
documents supplied by the Company that
such shareholder's Social Security Number
is correct and either that such
shareholder is not currently subject to
back-up withholding or that such
shareholder is exempt from back-up
withholding.
Foreign Income Taxes. Investment income
received by each Fund from sources within
foreign countries may be subject to
foreign income taxes withheld at the
source. It is not expected that any Fund
will be able to "pass through" these
taxes to shareholders but such taxes
generally will be deductible by each Fund
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 each Fund.
Registered broker-dealers and
their agents who have previously signed
service agreements with the Distributor
will be paid 0.15% of the average daily
net assets for those shareholders brought
to a Fund for the period of time those
shareholders remain with the Fund. The
Distributor will retain 0.10% of the
total 0.25% Rule 12b-1 fee for such
shareholders.
For accounts that come direct to a
Fund without a broker-dealer, the
Distributor will, by default, be the
shareholder's broker-dealer. Amounts
will be accrued daily and paid monthly.
The services provided by selected broker-
dealers pursuant to the Plan are
primarily designed to promote the sale of
shares of each Fund and include the
furnishing of office space and equipment,
telephone facilities, personnel and
assistance to the Fund in servicing such
shareholders.
Retirement Plans
Individual Retirement Accounts. The
Company's minimum initial investment for
IRA retirement plans is $1000 with
minimum subsequent investments of $100.
The Company offers an Internal Revenue
Service prototype Individual Retirement
Account ("IRA") plan and information is
available from the Company or from
securities dealers. Investors should
consult a tax advisor before establishing
any retirement plan. The Company's IRA
trustee charges an annual fee of $10 for
IRA accounts.
Simplified Employee Pension Plan
(SEP/IRA). The Company also offers a
simplified employee pension ("SEP") plan
for employers, including self-employed
individuals who wish to purchase Fund
shares with tax-deductible contributions.
Contributions to a SEP are generally
allowed to be much higher than an
ordinary IRA.
Exchange Privileges
Shareholders may generally exchange
shares of one Fund for another offered by
the Company without sales charges. For
information on the availability of any
Fund exchange, call the Transfer Agent at
800-628-4077.
Once an exchange request is made,
either by telephone or in writing, it may
not be modified or canceled. The Company
reserves the right to restrict frequent
exchanges. Investors
<PAGE>
will be notified at least 60 days in
advance of any changes in restrictions on
the frequency of exchanges.
Exchanges will be made at the net
asset value of the shares to be redeemed,
and the per share net asset value of the
shares purchased, in both cases as next
determined after the exchange request is
received.
For federal income tax purposes, an
exchange of Fund shares is a taxable
event (unless the shares are held in a
tax-deferred IRA type account) and
accordingly, the investor may realize a
capital gain or loss. Before making an
exchange request, the investor should
determine the tax consequences of a
particular exchange.
The Company
The Company is organized as a series fund
which permits it to issue its authorized
capital stock in one or more series, each
series representing a separate investment
Fund.
The Company's authorized capital
stock consists of 100,000,000 (one
hundred million) shares of common stock
of the par value of $.0001 each, of which
there have been initially allocated
25,000,000 (twenty five million) shares
to each Fund. The Board of Directors
may, at its discretion, classify and
allocate shares to additional series
within the Company or classify and
allocate additional shares to each Fund
without further action by the
shareholders. Each share outstanding
entitles the holder to one vote on
matters relating to that Fund. There
will normally be no meetings of the
shareholders for the purpose of electing
Directors unless and until such time as
less than a majority of the Directors
holding office have been elected by
shareholders.
The Value & Growth Portfolio's
fiscal year end is September 30th. The
Texas Opportunity Fund's fiscal year end
is June 30th. The Growth & Income
Portfolio's fiscal year is not yet
determined.
Shareholder Reports
The Fund sends all shareholders annual
reports containing certified financial
statements and semiannual reports
containing unaudited financial
statements.
Auditors & Litigation
Tait, Weller & Baker, Certified Public
Accountants of Philadelphia, Pennsylvania
have been selected as the independent
accountants and auditors of each Fund.
Tait, Weller & Baker certify a
significant portion of the mutual funds
in America and the auditing firm has no
direct or indirect interest in any Fund
or the Advisors. As of the date of this
Prospectus, there was no pending or
threatened litigation involving any Fund
in any capacity whatsoever.
Determining Net Asset Value
Pricing of Shares. The net asset value
("NAV") of each Fund's shares is
determined as of the close of business of
the New York Stock Exchange on each
business day of which that Exchange is
open (presently 4:00 p.m. New York time)
Monday through Friday exclusive of
holidays. The price is determined by
dividing the value of its securities,
plus any cash and other assets less all
liabilities, excluding capital and
surplus, by the number of shares
outstanding.
NAV = (Value of Fund Assets)-(Fund
Liabilities)
Number of
Outstanding Shares
Fund securities are valued using
current market values, if available.
Securities for which market quotations
are not readily available are valued at
fair market values as determined in good
faith by or under the supervision of the
Officers in accordance with methods which
are specifically authorized by the Board
of Directors.
Fund Performance
From time to time, each Fund may
advertise its "average annual total
return" over various periods of time.
This total return figure shows the
average percentage change in value of an
investment in each Fund from the
beginning date of the measurement period
to the ending date of the measurement
period. The figure reflects changes in
the price of the Fund's shares including
the payment of the maximum sales load and
assumes that any income dividends and/or
capital gains distributions made by the
Fund during the period are reinvested in
shares of the Fund. Figures will be
given for
<PAGE>
recent one-, five- and ten-year periods
(when applicable), and may well be given
for other periods as well (such as from
commencement of the Fund's operations, or
on a year-by-year basis). When
considering "average" total return
figures for periods longer than one year,
investors should note that each Fund's
annual total return for any one year in
the period might have been greater or
less than the average for the entire
period. Each Fund also may use
"aggregate" total return figures for
various periods, representing the
cumulative change in value of an
investment in the Fund for the specific
period (again reflecting changes in the
Fund's share price and assuming
reinvestment of dividends and
distributions). Aggregate total returns
may be shown by schedules, charts or
graphs, and may be broken down to
indicate subtotals of the various
components of total return (that is, the
change in value of initial investment,
income dividends, and capital gains
distributions).
Each Fund may quote the Fund's
average annual total and/or aggregate
total return for various time periods in
advertisements or communications to
shareholders. The Fund may also compare
its performance to that of other mutual
funds with similar investment objectives
and to stock and other relevant indices
or to rankings prepared by independent
services or industry publications. For
example, a Fund's total return may be
compared to data prepared by Lipper
Analytical Services, Inc., Morningstar,
Value Line Mutual Fund Survey and CDA
Investment Technologies, Inc. Total
return data as reported in such national
financial publications as The Wall Street
Journal, The New York Times, Investor's
Business Daily, USA Today, Barron's,
Money, and Forbes as well as publications
of a local or regional nature, may be
used in comparing Fund performance.
A Fund's total return may also be
compared to such indices as the Dow Jones
Industrial Average, the Standard & Poor's
500 Composite Stock Price Index, the
NASDAQ Composite OTC Index or NASDAQ
Industries Index, the Consumer Price
Index, the Russell 2000 Index, or other
indices as the Advisors deem appropriate.
Further information on performance
measurement may be found in the Statement
of Additional Information which may be
obtained from the Company as described
above.
Information for Shareholders
The Company will provide the following
statements and reports to keep the
investor current regarding the status of
his or her investment account:
Confirmation Statements. Provided after
each transaction that affects the account
balance or account registration of a
shareholder.
Account Statements. Provided quarterly.
Financial Reports. Provided at least
semiannually. Annual reports will
include audited financial statements. To
reduce expenses, one copy of each report
will be mailed to each taxpayer
identification number even though the
investor may have more than one account
in a particular Fund.
<PAGE>
TRANSFER AGENT
Fund Services, Inc.
1500 Forest Ave, Suite 111
Richmond, VA 23229
(800) 628-4077-Call to get a
Prospectus/Application, IRA package, or
for questions regarding purchases,
redemptions, distributions and other
services.
DISTRIBUTOR
Choice Investments, Inc.
5900 Balcones Drive, Suite 100
Austin, Texas 78731
(888) TEX-RICH OR (512) 457-7678 OR (512)
451-7980
Call to get marketing information, dealer
agreements, or Net Asset Value
quotations.
MAILING ADDRESS FOR EACH FUND
Texas Capital Value Funds, Inc.
P.O. Box 141849
Austin, Texas 78714-1849
INVESTMENT MANAGERS
Value & Growth Fund and Growth & Income
Portfolio
First Austin Capital Management, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
Texas Opportunity Fund
Martin Capital Management
600 W. 10th Street, #740
Austin, Texas 78701
INDEPENDENT AUDITORS
Tait, Weller & Baker
2 Penn Center, Suite 700
Philadelphia, PA 19102-1707
COUNSEL
Law Offices of Susan Braun Rice
27 New Haven
Laguna Niguel, California 92677
CUSTODIAN
Bank of Boston, N.A.
FUND IDENTIFICATION
Value & Growth Portfolio CUSIP #882241102
Growth & Income Portfolio CUSIP #
XXXXXX
Texas Opportunity Fund CUSIP # XXXXXX
Value & Growth
Portfolio
Texas Opportunity Fund
Growth & Income
Portfolio
<PAGE>
PART B
TEXAS CAPITAL VALUE FUNDS, INC.
Statement of Additional Information
dated August 1, 1996
1600 W 38th Avenue, Suite 412 Austin, TX
78731
(512) 458-8165
General Marketing: 888-839-7424
Shareholder Information: 800-628-4077
This Part B sets forth additional
information about the Texas Opportunity
Fund, the Value & Growth Portfolio, and
the Growth & Income Portfolio (each
individually a "Fund", or collectively,
the "Funds" or "Fund(s)"). Each Fund is
a non-diversified, open-end investment
series of the Texas Capital Value Funds,
Inc.
This Statement of Additional Information
is not a Prospectus, but should be read
in conjunction with the Prospectus dated
August 1, 1995. To obtain a Prospectus,
please call the Fund(s) at (800) 839-
7924. Capitalized terms used herein but
not defined have the meanings assigned to
them in the Prospectus.
Table of Contents/Cross Reference Page in
Prospectus
INVESTMENT OBJECTIVE AND POLICIES 2/3
DIRECTORS & OFFICERS 8/5
BOARD OF DIRECTORS COMPENSATION TABLE 10
CONTROL PERSONS 11
INVESTMENT ADVISORS 11/5
PORTFOLIO TURNOVER 12/4
PORTFOLIO TRANSACTIONS AND BROKERAGE 12/
DISTRIBUTION OF THE FUND(S) 13/8
PERFORMANCE INFORMATION 13
TAX STATUS 15/12
NET ASSET VALUE 18/14
CAPITAL STRUCTURE 19/14
HOW TO REDEEM SHARES 20/10
RATINGS OF INVESTMENT SECURITIES 21
<PAGE>
No dealer, salesman or other person has
been authorized to give any information
or to make any representations, other
than those contained in this Statement of
Additional Information or in the
Prospectus, and, if given or made, such
other information or representations must
not be relied upon as having been
authorized by the Company, the Fund(s),
the Advisors, or the Distributor. This
Statement of Additional Information and
the Prospectus do not constitute an offer
to sell or a solicitation of an offer to
buy any of the securities offered hereby
in any jurisdiction in which such an
offer to sell or solicitation of an offer
to buy may not lawfully be made.
INVESTMENT OBJECTIVE AND POLICIES
Each Fund has a unique investment
objective although there are some aspects
common to all of the Fund(s).
Common Characteristics: For all the
Fund(s), purchase of issues will be
primarily, but not exclusively, listed
issues and American Depository Receipts
on the on the New York, American and
NASDAQ exchanges and may include up to
33% foreign based companies.
Neither Advisor uses techniques such as
borrowing, hedging, or short sales in the
management of the Fund(s). The Fund(s)
make no use of derivatives.
Under normal circumstances, each Fund
will have virtually all of its assets
invested in equity securities. However,
for temporary defensive purposes, each
Fund may hold cash, money market
instruments, notes or bonds, or enter
into repurchase agreements, all of which
will be of investment grade as determined
by Moody's Investor's Service, Inc. or
Standard & Poor's Corporation rating
agencies.
Unique Characteristics: Value & Growth
Portfolio and Growth & Income Portfolio.
Each Fund's primary investment objective
is capital appreciation through the
investment in common stocks and
securities convertible into common
stocks. For the Value & Growth Portfolio
no consideration is given to income of
the Fund(s) holdings.
For the Growth & Income
Portfolio, the Advisor does take into
consideration the income of Fund
holdings.
For both Funds, the Advisor will
employ highly structured, computer
driven, quantitative strategies to
endeavor to find companies that are
likely to perform well. Such strategies
are different than the strategies most
advisors use to select stocks in that the
Advisor will give little or no weight to
qualitative factors of securities
considered for purchase.
<PAGE>
Fundamental ratios such as the price of
a stocks relative to its earnings (price-
to-earnings), the price of a stock
relative to its cashflow (price-to-
cashflow) and the price of a stock
relative to its bookvalue or net worth
(price-to-book) weigh heavily in the
selection process.
For the Growth & Income Portfolio,
the ratio of the prices of a stocks
relative to its dividend yield is
considered.
Most of the securities selected are
likely to have much lower ratios in at
least one of the above categories than
the market in general. Academic research
and studies have shown that portfolios
with the characteristics of low price-to-
earnings, low price-to-cashflow and low
price-to-book ratios may be associated
with higher investment rates of return
over long periods of time. Such an
investment strategy may also be subject
to greater investment risk.
While the quantitative strategy the
Advisor plans to use does not
specifically screen for small companies,
test results have shown a large
percentage of companies selected for the
Value & Growth Portfolio had market
capitalizations of less than a billion
dollars. Smaller companies have
historically performed better than larger
companies over long periods, but also
have historically shown higher volatility
than larger companies.
For the Texas Opportunity Fund, the
Fund's investment objective is capital
appreciation through investment in common
stocks and securities convertible into
common stocks of Texas Companies or
companies with significant operations in
Texas. Since the Fund is structured
primarily for capital appreciation, any
income should be considered incidental to
the investment decision.
The Advisor will employ both
qualitative and quantitative strategies
to endeavor to find companies that are
likely to perform well. The Fund will
differ from other funds in that all
stocks selected for inclusion in the Fund
will be Texas based companies or
companies with a significant percentage
of their business in Texas. Product or
service growth potential, management,
technical, and economic cycle
considerations weigh heavily in the
selection process.
The security selection process will
attempt to reflect the diversification of
the Texas economy; however the manager
will have the discretion to adjust sector
representation based upon the sector's
performance outlook. An investment
strategy focused on a single, albeit
large economy, may be subject to greater
investment risk than a more broadly
diversified mutual fund.
Non-diversification Policy. Each Fund is
classified as being non-diversified which
means that it may invest a relatively
high percentage of its assets in the
obligations of a limited number of
issuers. Each Fund, therefore, may be
more susceptible than a more widely
diversified fund to a single economic,
political or regulatory occurrence. Each
Fund seeks only diversification for
adequate representation among what it
considers to be the best performing
securities and to maintain its federal
non-taxable status under Sub-Chapter M of
the Internal Revenue Code.
<PAGE>
Investment Restrictions
The Fund(s) have adopted and will follow
certain investment policies set forth
below, which are fundamental and may not
be changed without shareholder approval.
(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 U.S. 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.
<PAGE>
The foregoing restrictions may not be
changed for any Fund without the approval
of a majority of that Fund's outstanding
voting securities. As used in this
Statement of Additional Information, a
majority of the Fund(s)' outstanding
voting securities means the lesser of (a)
more than 50% of its outstanding voting
securities, or (b) 67% or more of the
voting securities present at a meeting at
which more than 50% of the outstanding
voting securities are present or
represented by proxy. The Fund(s)'
investment objectives, as well as those
policies and restrictions which are not
fundamental, may be modified by the Board
of Directors without shareholder approval
if, in the reasonable exercise of the
Board of Director's business judgment,
modification is determined to be
necessary or appropriate to carry out
the Fund(s)' objectives. However, the
Fund(s) will not change its investment
policies or restrictions without written
notice to shareholders.
In order to permit the sale of the
Fund(s)' shares in certain states, the
Fund(s) may make commitments with respect
to the Fund(s) which are more restrictive
than the investment policies listed above
and in the Prospectus. Should the
Fund(s) determine that any commitment
made to permit the sale of the Fund(s)'
shares in any state is no longer in the
best interests of the Fund(s), it will
revoke the commitment by terminating
sales of the Fund(s)' shares in the state
involved.
In order to meet the requirements of
the State of California, the Board has
adopted the following additional
restriction, which shall be deemed
fundamental from the date of this Part B,
for all the Fund(s).
Each Fund shall not invest in other
open ended management investment
companies.
Further Information on the Nature of the
Fund(s)s' Investments
General Characteristics of Convertible
Securities The Fund(s) may invest only
in high grade convertible securities,
that is, bonds, notes, debentures,
preferred stocks and other securities
which are convertible into common stocks.
"High grade" securities are those rated
within the three highest ratings
categories of Standard & Poor's
Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's") or that are
determined by the investment advisor to
be of equivalent quality. Investments
in convertible securities may provide
incidental income through interest and
dividend payments and/or an opportunity
for capital appreciation by virtue of
their conversion or exchange features.
<PAGE>
Convertible debt securities and
convertible preferred stocks, until
converted, have general characteristics
similar to both debt and equity
securities. Although to a lesser extent
than with debt securities generally, the
market value of convertible securities
tends to decline as interest rates
increase and, conversely, tends to
increase as interest rates decline. In
addition, because of the conversion or
exchange feature, the market value of
convertible securities typically changes
as the market value of the underlying
common stocks changes, and, therefore,
also tends to follow movements in the
general market for equity securities. As
the market price of the underlying common
stock declines, convertible securities
tend to trade increasingly on a yield
basis and so may not experience market
value declines to the same extent as the
underlying common stock. When the market
price of the underlying common stock
increases, the prices of the convertible
securities tend to rise as a reflection
of the value of the underlying common
stock, although typically not as much as
the underlying common stock. While no
securities investments are without risk,
investments in convertible securities
generally entail less risk than
investments in common stock of the same
issuer.
As debt securities, convertible
securities are investments which provide
for a stream of income (or in the case of
zero coupon securities, accretion of
income) with generally higher yields than
common stocks. Convertible securities
generally offer lower yields than non-
convertible securities of similar quality
because of their conversion or exchange
features.
Convertible securities are generally
subordinated to other similar but non-
convertible securities of the same
issuer, although convertible bonds, as
corporate debt obligations, enjoy
seniority in right of payment to all
equity securities, and convertible
preferred stock is senior to common stock
of the same issuer. However, because of
the subordination feature, convertible
bonds and convertible preferred stock
typically have lower ratings than similar
non-convertible securities.
General Characteristics of Foreign
Securities. Foreign securities involve
certain inherent risks that are different
from those of domestic issuers, including
political or economic instability of the
issuer or the country of issue,
diplomatic developments which could
affect U.S. investments in those
countries, changes in foreign currency
and exchange rates and the possibility of
adverse changes in investment or exchange
control regulations. As a result of
these and other factors, foreign
securities purchased by the Fund(s)s may
be subject to greater price fluctuation
than securities of U.S. companies.
<PAGE>
Most foreign stock markets are not as
large or liquid as in the United States.
Furthermore, the fixed commissions on
foreign stock exchanges are generally
higher than the negotiated commissions on
U.S. exchanges and there is generally
less government supervision and
regulation of foreign stock exchanges,
brokers and companies than in the United
States.
Investors should recognize that foreign
markets have different clearance and
settlement procedures and in certain
markets there have been times when
settlements have been unable to keep pace
with the volume of securities
transactions, making it difficult to
conduct such transactions. Delays in
settlement could result in temporary
periods when assets of the Fund(s) are
uninvested and no return is earned
thereon. The inability of the Fund(s) to
make intended security purchases due to
settlement problems could cause the
Fund(s) to miss attractive investment
opportunities. Inability to dispose of
portfolio securities due to settlement
problems either could result in losses to
the Fund(s) due to subsequent declines in
value of the portfolio security or, if
the Fund(s) have entered into a contract
to sell the security, could result in a
possible liability to the purchaser.
Payment for securities without delivery
may be required in certain foreign
markets. Further, the Fund(s) may
encounter difficulties or be unable to
pursue legal remedies and obtain
judgments in foreign courts. Foreign
governments can also levy confiscatory
taxes, expropriate assets, and limit
repatriations of assets. Typically,
there is less publicly available
information about a foreign company than
about a U.S. company, and foreign
companies may be subject to less
stringent reserve, auditing and reporting
requirements. It may be more difficult
for the Fund(s)' agents to keep currently
informed about corporate actions such as
stock dividends or other matters which
may affect the prices of portfolio
securities. Communications between the
United States and foreign countries may
be less reliable than within the United
States thus increasing the risk of
delayed settlements of portfolio
transactions or loss of certificates
portfolio securities. Individual foreign
economies may differ favorably or
unfavorably from the U.S. economy in such
respects as growth of gross national
product, rate of inflation, capital
reinvestment, resource self-sufficiency
and balance of payments position.
Because investments in foreign securities
will usually involve currencies of
foreign countries and because the Fund(s)
may hold foreign currencies, the value of
the assets of the Fund(s) as measured in
U.S. dollars may be affected favorably or
unfavorably by changes in foreign
currency exchange rates and exchange
control regulations, and the Fund(s) may
incur costs in connection with
conversions between various currencies.
Although the Fund(s) values its assets
daily in terms of U.S. dollars, the
Fund(s) do not intend to convert its
holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so
from time to time, and investors should
be aware of the costs of currency
conversion. Although foreign exchange
dealers do not charge a fee for
conversion, they do realize a profit
based on the difference (the "spread")
between the prices at which they are
buying and selling various currencies.
Thus, a dealer may offer to sell a
foreign currency to the Fund(s) at one
rate, while offering a lesser rate of
exchange should the Fund(s) desire to
resell that currency to the dealer. The
Fund(s) will conduct its foreign currency
exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing
in the foreign currency exchange market.
<PAGE>
General Characteristics of Securities
Lending. In compliance with Securities
and Exchange Commission guidelines, any
loans by the Fund(s) of securities in its
portfolio would be required to be secured
with collateral (consisting of any
combination of U.S. currency, securities
issued or guaranteed by the United States
Government or any agency thereof, or
irrevocable letters of credit or other
debt securities issued by entities rated
within the two highest grades assigned by
S&P or Moody's or which are determined by
the investment advisor to be of
equivalent quality).
The borrower must agree to add to such
collateral to cover increases in the
market value of the loaned securities and
the Fund(s) must be entitled to terminate
any loan at any time, with the borrower
obligated to redeliver borrowed
securities within five trading days. The
borrower must agree that the Fund(s) will
receive all dividends, interest or other
distributions on loaned securities and
the Fund(s) must be able to vote loaned
securities whenever the right to vote is
material to the Fund(s)'s performance.
Investment in Unseasoned Issuers. The
Fund(s) may invest in securities of
issuers which have a record of less than
three (3) years of continuous operation,
including the operation of any
predecessor business of a company which
came into existence as a result of a
merger, consolidation, reorganization or
purchase of substantially all of the
assets of such predecessor business, if
such purchase would not cause the value
of the Fund(s)'s investments in all such
companies to exceed 5% of the value of
its net assets.
DIRECTORS AND OFFICERS
The Directors and Officers of the
Fund(s), their positions held with the
Fund(s) and their principal occupations
during the past five years are set forth
below.
Mark A. Coffelt, C.F.A.
4201 Long Champ Drive
Austin, Texas 78746
Chairman and President of the Texas
Capital Value Funds, Inc. and
(Interested) Director, Chief Investment
Officer of the Value & Growth Portfolio
and Growth & Income Portfolio.
Principal Occupations During Past Five
Years
President of First Austin Capital
Management, Inc. (1988-Present)
Occidental College, B.A. economics
Wharton School, University of
Pennsylvania, MBA
Chartered Financial Analyst of the
Association of Investment Management and
Research.
<PAGE>
Paul Martin
600 W. 10th Street, #740
Austin, Texas 78701
(Interested) Director, and Chief
Investment Officer of the Texas
Opportunity Fund.
Principal Occupations During Past Five
Years
Chief Investment Officer of Martin
Capital Management (1988-Present)
U.S. Naval Reserve Officer.
St. John's College in Santa Fe, New
Mexico, BA liberal arts.
Louise Epstein,
5811 Mesa Drive, # 125
Austin, Texas 78731
(Interested) Director,. and a broker with
Choice Investments, Inc. the Company's
Distributor.
Principal Occupations During Past Five
Years
Best Line Company (1995-Present)
President of Peleton Capital Group, Inc.
(1990-Present)
Austin City Council (1990-1993)
Janis A. Claflin,
2508 Timberline
Austin, Texas 78746
Director
Principal Occupations During Past Five
Years
President and owner of Claflin &
Associates (1985-Present)
Chairperson of the Trustee Program
Committee on the Board of Directors of
the Fetzer Institute (1987-Present)
Licensed Marriage and Family Therapist
George Peabody College for Teachers, B.A.
in English
Yale Divinity School in Religion, M.A. in
Religion.
Edward K. Clark, Attorney, CPA
605 Coquina Lane
Austin, Texas 78746
Director
<PAGE>
Principal Occupations During Past Five
Years
Clark & Clark of Austin, Texas (1995-
Present)
Sole Practitioner (1994-1995)
Partner, McGinnis, Lockridge & Kilgore
L.L.P. (1993-1994)
Scofield & Clark, P.C. (1991-1992)
Ford & Ferraro, L.L.P. (1991-1992)
General Counsel/Chief Financial Officer
of Jefferson Service Company, Inc. Board
Certified in Tax Law by the Texas Board
of Legal Specialization
Certified Public Accountant
University of Texas, B.B.A. and M.P.A.
(Master in Professional Accounting)
University of Houston College of Law,
J.D.
John Henry McDonald, CFP
4411 Spicewood, #603
Austin, TX 78759
Director
Principal Occupations During Past Five
Years
President and founder of Austin Asset
Management( 1990-Present)
CFP from the College for Financial
Planning
Member of the CFP Board of Standards
President of the Austin Society of
Institute of Certified Financial
Planners.
Eric Barden
4605 Ave. A, Apt 111
Austin, TX 78751
Secretary, Texas Capital Value Funds,
Inc. (1996-Present)
Principal Occupations During Past Five
Years
Compliance Officer of First Austin
Capital Management, Inc. (1995-Present)
University of Texas, B.A.
Note: "Director (Interested)" denotes a
Director of the Company who is
"interested person" of the Company, as
defined in the Investment Company Act of
1940 (the "1940 Act"). The Directors of
the Fund who are officers or employees of
the investment advisors or the
Distributor receive no remuneration from
the Fund(s). Each of the other Directors
is paid an annual retainer of $2,000 and
is reimbursed for expenses of attending
meetings.
BOARD OF DIRECTORS COMPENSATION TABLE
Mark A. Coffelt, (Interested Director)
Chairman & President Texas Capital Value
Funds, Inc.
Chief Investment Officer of the Value &
Growth Portfolio and the Growth & Income
Portfolio
<PAGE>
Aggregate Compensation-NONE
Pension Benefits-NONE
Estimated Annual Retirement Benefits-NONE
Paul Martin (Interested Director)
Chief Investment Officer of the Texas
Opportunity Fund
Aggregate Compensation-NONE
Pension Benefits-NONE
Estimated Annual Retirement Benefits-NONE
Louise Epstein (Interested Director)
Aggregate Compensation-NONE
Pension Benefits-NONE
Estimated Annual Retirement Benefits-NONE
Janis Claflin (Director)
Aggregate Compensation-$2,000
Pension Benefits-NONE
Estimated Annual Retirement Benefits-NONE
Edward D. Clark (Director)
Aggregate Compensation-$2,000
Pension Benefits-NONE
Estimated Annual Retirement Benefits-NONE
John Henry McDonald (Director)
Aggregate Compensation-$2,000
Pension Benefits-NONE
Estimated Annual Retirement Benefits-NONE
CONTROL PERSONS
As of August 1, 1996, the Texas
Opportunity Fund is controlled by Paul
Martin. Prior to the public offering of
the shares of the Fund, Mr. Paul Martin
retains all voting rights.
Control Person: Paul Martin
Address: 600 W. 10th Street, #740
Austin, Texas 78701
Percent of Voting Shares: 100%
<PAGE>
INVESTMENT ADVISORS
First Austin Capital Management is
controlled by Mark A. Coffelt and Guy D.
Coffelt who each own 50% of the
outstanding shares of First Austin
Capital Management. Mark A. Coffelt is
the President of Texas Capital Value
Funds, Inc., Chief Investment Officer of
the Value & Growth Portfolio and the
Growth & Income Portfolio, as well as
President of First Austin Capital
Management, Inc. Guy D. Coffelt is
retired from First Austin Capital
Management, Inc.
Martin Capital Management is
controlled by Paul Martin who owns 100%
of the company. Mr. Martin is the Chief
Investment Officer of the Texas
Opportunity Fund, as well as General
Director of Martin Capital
Management.
PORTFOLIO TURNOVER
While it is difficult to predict, the
Advisor expect that the annual portfolio
turnover rate of the Fund(s) will not
exceed 150%. A greater rate may be
experienced during periods of marketplace
volatility which necessitates more active
trading. A higher portfolio turnover
rate involves greater transaction costs
to the Fund(s) and may result in the
realization of net capital gains which
would be taxable to shareholders when
distributed.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the
Directors, decisions to buy and sell
securities for the Fund(s) and
negotiation of its brokerage commission
rates are made by the investment advisor.
Transactions on United States stock
exchanges involve the payment by the
Fund(s) of negotiated brokerage
commissions. There is generally no
stated commission in the case of
securities traded in the over-the-counter
market but the price paid by the Fund(s)
usually includes an undisclosed dealer
commission or mark-up. In certain
instances, the Fund(s) may make purchases
of underwritten issues at prices which
include underwriting fees.
In selecting a broker to execute each
particular transaction, the investment
advisor will take the following into
consideration: the best net price
available; the reliability, integrity and
financial condition of the broker; the
size of and difficulty in executing the
order; the value of the expected
contribution of the broker to the
investment performance of the Fund(s) on
a continuing basis as well as the
expected contribution of the broker in
selling shares of the Fund(s).
Accordingly, the cost of the brokerage
commissions to the Fund(s) in any
transaction may be greater than that
available from other brokers if the
difference is reasonably justified by
other aspects of the portfolio execution
services offered. For example, the
investment advisor will consider the
research and investment services provided
by brokers or dealers who effect or are
parties to portfolio transactions of the
Fund(s) or the investment advisor's other
clients.
<PAGE>
Such research and investment services
include statistical and economic data and
research reports on particular companies
and industries as well as research
software. Subject to such policies and
procedures as the Directors may
determine, the investment advisor shall
not be deemed to have acted unlawfully or
to have breached any duty solely by
reason of its having caused the Fund(s)
to pay a broker that provides research
services to the investment advisor an
amount of commission for effecting a
portfolio investment transaction in
excess of the amount another broker would
have charged for effecting that
transaction, if the investment advisor
determines in good faith that such amount
of commission was reasonable in relation
to the value of the research services
provided by such broker viewed in terms
of either that particular transaction or
the investment advisor's ongoing
responsibilities with respect to the
Fund(s).
Research and investment information is
provided by these and other brokers at no
cost to the investment advisor and is
available for the benefit of other
accounts advised by the investment
advisor and its affiliates, and not all
of the information will be used in
connection with the Fund(s). While this
information may be useful in varying
degrees and may tend to reduce the
investment advisor's expenses, it is not
possible to estimate its value and, in
the opinion of the investment advisor, it
does not reduce the investment advisor's
expenses in a determinable amount. The
extent to which the investment advisor
makes use of statistical, research and
other services furnished by brokers is
considered by the investment advisor in
the allocation of brokerage business but
there is no formula by which such
business is allocated. The investment
advisor does so in accordance with its
judgment of the best interests of the
Fund and its shareholders.
DISTRIBUTION OF THE FUND(S)
The Company has entered into a
distribution agreement with Choice
Investments, Inc., to act as the
principal underwriter of the shares of
the Fund(s). The Distributor agrees to
use its best efforts to promote, offer
for sale and sell the shares of the
Fund(s) to the public on a continuous
basis whenever and wherever it is legally
authorized to do so.
PERFORMANCE INFORMATION
From time to time, quotations of the
Fund(s)'s performance may be included in
advertisements, sales literature or
reports to shareholders or prospective
investors. These performance figures are
calculated in the following manner.
Average Annual Total Return
Average annual total return is the
average annual compound rate of return
for periods of one year, five years and
ten years, all ending on the last day of
a recent calendar quarter. Average
annual total return quotations reflect
changes in the price of the Fund(s)'s
shares and assume that all dividends and
capital gains distributions during the
respective
<PAGE>
periods were reinvested in Fund shares.
Average annual total return is calculated
by computing the average annual compound
rates of return of a hypothetical
investment over such periods, according
to the following formula (average annual
total return is then expressed as a
percentage):
T = (ERV/P)1/n - 1
T = average annual total return
P = a hypothetical initial
investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is
the value, at the end of the applicable
period, of a hypothetical $1,000
investment made at the beginning of the
applicable period.
It should be noted that average annual
total return is based on historical
earnings and is not intended to indicate
future performance. Average annual total
return for the Fund(s) will vary based on
changes in market conditions and the
level of the Fund(s)'s expenses.
In connection with communicating its
average annual total return to current or
prospective shareholders, the Fund(s) may
also compare these figures to the
performance of other mutual funds tracked
by mutual fund rating services or to
unmanaged indices which may assume
reinvestment of dividends but generally
do not reflect deductions for
administrative and management costs.
Comparison of Portfolio Performance
Comparison of the quoted non-standardized
performance of various investments is
valid only if performance is calculated
in the same manner. Since there are
different methods of calculating
performance, investors should consider
the effect of the methods used to
calculate performance when comparing
performance of the Fund(s) with
performance quoted with respect to other
investment companies or types of
investments.
In connection with communicating its
performance to current or prospective
shareholders, the Fund(s) may compare its
performance to the performance of
unmanaged indices which may assume
reinvestment of dividends or interest but
generally do not reflect deductions for
administrative and management costs.
Examples include, but are not limited to
the Dow Jones Industrial Average, the
Consumer Price Index, Standard & Poor's
500 Composite Stock Price Index (S&P
500), the NASDAQ OTC Composite Index, the
NASDAQ Industrials Index, and the Russell
2000 Index.
<PAGE>
From time to time, in advertising,
marketing and other Fund literature, the
performance of the Fund(s) may be
compared to the performance of broad
groups of mutual funds with similar
goals, as tracked by independent
organizations such as Investment Company
Data, Inc., Lipper Analytical Services,
Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., Value Line Mutual Fund
Survey and other independent
organizations. When these organizations'
tracking results are used, the Fund(s)
will be compared to the appropriate fund
category, that is, by fund objective and
portfolio holdings or the appropriate
volatility grouping, where volatility is
a measure of the Fund(s)'s risk. From
time to time, the average price-earnings
ratio and other attributes of the
Fund(s)'s or the model portfolio's
securities may be compared to the average
price-earnings ratio and other attributes
of the securities that comprise the S&P
500.
Statistical and other information, as
provided by the Social Security
Administration, may be used in marketing
materials pertaining to retirement
planning in order to estimate future
payouts of social security benefits.
Estimates may be used of demographic and
economic data.
Marketing and other Fund literature may
include a description of the potential
risks and rewards associated with an
investment in the Fund(s). The
description may include a "risk/return
spectrum" which compares the Fund(s) to
broad categories of funds, such as money
market, bond or equity funds, in terms of
potential risks and returns. Money
Market funds are designed to maintain a
constant $1.00 share price and have a
fluctuating yield. Share price, yield
and total return of a bond fund will
fluctuate. The share price and return of
an equity fund also will fluctuate. The
description may also compare the Fund(s)
to bank products, such as certificates of
deposit. Unlike mutual funds,
certificates of deposit are insured up to
$100,000 by the U.S. government and offer
a fixed rate of return.
Risk/return spectrums also may depict
funds that invest in both domestic and
foreign securities or a combination of
bond and equity securities.
TAX STATUS
The Fund(s) intends to be taxed as a
regulated investment company under
Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code").
Accordingly, the Fund(s) generally must,
among other things, (a) derive in each
taxable year at least 90% of its gross
income from dividends, interest, payments
with respect to certain securities loans,
gains from the sale or other disposition
of stock, securities or foreign
currencies, and other income derived from
its business of investing in such stock,
securities or currencies; (b) derive in
each taxable year less than 30% of its
gross income from the sale or other
disposition of certain assets held less
than three months, namely: (i) stock or
securities; (ii) options, futures, or
forward contracts (other than those on
foreign currencies); or (iii) foreign
currencies (or options, futures, or
forward contracts on foreign currencies)
that are not directly related to the
Fund(s)'s principal business of investing
in
<PAGE>
stock or securities (or options and
futures with respect to stock or
securities) (the "30% Limitation"); and
(c) diversify its holdings so that, at
the end of each fiscal quarter, (i) at
least 50% of the market value of the
Fund(s)'s assets is represented by cash,
U.S. Government securities, the
securities of other regulated investment
companies and other securities, with such
other securities limited, in respect of
any one issuer, to an amount not greater
than 5% of the value of the Fund(s)'s
total assets and 10% of the outstanding
voting securities of such issuer, and
(ii) not more than 25% of the value of
its total assets is invested in the
securities of any one issuer (other than
U.S. Government securities and the
securities of other regulated investment
companies).
As a regulated investment company, the
Fund(s) generally will not be subject to
U.S. federal income tax on income and
gains that it distributes to
shareholders, if at least 90% of the
Fund(s)'s investment company taxable
income (which includes, among other
items, dividends, interest and the excess
of any net short-term capital gains over
net long-term capital losses) for the
taxable year is distributed. The Fund(s)
intends to distribute substantially all
of such income.
Amounts not distributed on a timely basis
in accordance with a calendar year
distribution requirement are subject to
a nondeductible 4% excise tax at the
Fund(s) level. To avoid the tax, the
Fund(s) must distribute during each
calendar year an amount equal to the sum
of (1) at least 98% of its ordinary
income (not taking into account any
capital gains or losses) for the calendar
year, (2) at least 98% of its capital
gains in excess of its capital losses
(adjusted for certain ordinary losses)
for a one-year period generally ending on
October 31 of the calendar year, and (3)
all ordinary income and capital gains for
previous years that were not distributed
during such years. To avoid application
of the excise tax, the Fund(s) intends to
make distributions in accordance with
the calendar year distribution
requirement. A distribution will be
treated as paid on December 31 of the
current calendar year if it is declared
by the Fund(s) in October, November or
December of that year with a record date
in such a month, and paid by the Fund(s)
during January of the following year.
Such distributions will be taxable to
shareholders in the calendar year in
which the distributions are declared
rather than the calendar year in which
the distributions are received.
Currency Fluctuations -- "Section 988"
Gains or Losses
Gains or losses attributable to
fluctuations in exchange rates which
occur between the time the Fund(s)
accrues income or other receivables or
accrues expenses or other liabilities
denominated in a foreign currency and the
time the Fund(s) actually collects such
receivables or pays such liabilities
generally are treated as ordinary income
or ordinary loss. Similarly, on
disposition of some investments,
including debt securities, gains or
losses attributable to fluctuations in
the
<PAGE>
value of the foreign currency between
the acquisition and disposition of the
position also are treated as ordinary
gain or loss. These gains and losses,
referred to under the Code as "section
988" gains or losses, increase or
decrease the amount of the Fund(s)'s
investment company taxable income
available to be distributed to its
shareholders as ordinary income. If
section 988 losses exceed other
investment company taxable income during
a taxable year, the Fund(s) would not be
able to make any ordinary dividend
distributions, or distributions made
before the losses were realized would be
recharacterized as a return of capital to
shareholders, rather than as an ordinary
dividend, reducing each shareholder's
basis in his or her Fund shares.
Distributions
Distributions of investment company
taxable income are taxable to a U.S.
shareholder as ordinary income, whether
paid in cash or shares. Dividends paid
by the Fund(s) to a corporate
shareholder, to the extent such dividends
are attributable to dividends received
from U.S. corporations by the Fund(s),
may qualify for the dividends received
deduction. However, the revised
alternative minimum tax applicable to
corporations may reduce the value of the
dividends received deduction.
Distributions of net capital gains (the
excess of net long-term capital gains
over net short-term capital losses), if
any, designated by the Fund(s) as capital
gain dividends, are taxable as long-term
capital gains, whether paid in cash or in
shares, regardless of how long the
shareholder has held the Fund(s)'s
shares, and are not eligible for the
dividends received deduction.
Shareholders will be notified annually as
to the U.S. federal tax status of
distributions, and shareholders receiving
distributions in the form of newly issued
shares will receive a report as to the
net asset value of the shares received.
If the net asset value of shares is
reduced below a shareholder's cost as a
result of a distribution by the Fund(s),
such distribution generally will be
taxable even though it represents a
return of invested capital. Investors
should be careful to consider the tax
implications of buying shares of the
Fund(s) just prior to a distribution.
The price of shares purchased at this
time may reflect the amount of the
forthcoming distribution. Those
purchasing just prior to a distribution
will receive a distribution which
generally will be taxable to them.
Disposition of Shares
Upon a redemption, sale or exchange of a
shareholder's shares of the Fund(s), such
shareholder will realize a taxable gain
or loss depending upon his or her basis
in the shares. A gain or loss will be
treated as capital gain or loss if the
shares are capital assets in the
shareholder's hands, and generally will
be long-term or short-term depending upon
the
<PAGE>
shareholder's holding period for the
shares. Any loss realized on a
redemption, sale or exchange will be
disallowed to the extent the shares
disposed of are replaced (including
through reinvestment of dividends) within
a period of 61 days, beginning 30 days
before and ending 30 days after the day
the shares are disposed of. In such a
case, the basis of the shares acquired
will be adjusted to reflect the
disallowed loss. Any loss realized by a
shareholder on the disposition of the
Fund(s)'s shares held by the shareholder
for six months or less will be treated
for tax purposes as a long-term capital
loss to the extent of any distributions
of capital gain dividends received or
treated as having been received by the
shareholder with respect to such shares.
Backup Withholding
The Fund(s) will be required to report to
the Internal Revenue Service (the "IRS")
all distributions and gross proceeds from
the redemption of the Fund(s)' shares,
except in the case of certain exempt
shareholders. All distributions and
proceeds from the redemption of Fund
shares will be subject to withholding of
federal income tax at a rate of 31%
("backup withholding") in the case of non-
exempt shareholders if (1) the
shareholder fails to furnish the Fund(s)
with the shareholder's correct taxpayer
identification number or social security
number and to certify the same as
correct, (2) the IRS notifies the
shareholder or the Fund(s) that the
shareholder has failed to report properly
certain interest and dividend income to
the IRS and to respond to notices to that
effect, or (3) when required to do so,
the shareholder fails to certify that he
or she is not subject to backup
withholding. If the withholding
provisions are applicable, any such
distributions or proceeds, whether
reinvested in additional shares or taken
in cash, will be reduced by the amounts
required to be withheld.
Other Taxation
Distributions may also be subject to
additional state, local and foreign taxes
depending on each shareholder's
particular situation. Non-U.S.
shareholders may be subject to U.S. tax
rules that differ significantly from
those summarized above. This discussion
does not purport to deal with all of the
tax consequences applicable to the
Fund(s) or shareholders. Shareholders
are advised to consult their own tax
advisors with respect to the particular
tax consequences to them of an investment
in a Fund.
NET ASSET VALUE
The Fund(s)' net asset value per share
will be calculated separately from the
per share net asset value of any other
fund of the Company. "Assets belonging
to" a fund consist of the consideration
received upon the issuance of shares of
the particular fund together with all net
investment income, earnings, profits,
realized gains/losses and proceeds
derived from the investment thereof,
including any proceeds from the sale of
such investments, any funds or payments
derived
<PAGE>
from any reinvestment of such proceeds,
and a portion of any general assets of
the Company not belonging to a particular
series. Each fund of the Company will be
charged with the direct liabilities of
that fund and with a share of the general
liabilities of the Company's funds.
Subject to the provisions of the Articles
of Incorporation and the Bylaws of the
Company, determinations by the Directors
as to the direct and allocable expenses
and the allocable portion of any general
assets with respect to a particular fund
are conclusive.
CAPITAL STRUCTURE
Description of Shares
The Company is an open-end management
investment company organized as a
Maryland corporation on June 26th, 1995.
The Company's Articles of Incorporation
authorize the Board of Directors to issue
shares of common stock, par value $.0001
per share. Twenty-Five million shares of
the Company's authorized common stock
have been initially allocated to each
Fund. Each share of the Fund(s) has
equal voting, dividend, distribution and
liquidation rights.
Shares of the Company have no preemptive
rights and only such conversion or
exchange rights as the Board may grant in
its discretion. When issued for payment
as described in the Prospectus, the
Company's shares will be fully paid and
non-assessable.
Shareholders are entitled to one vote for
each full share held, and fractional
votes for fractional shares held, and
will vote in the aggregate and not by
class or series except as otherwise
required by the 1940 Act or the Maryland
General Corporation Law.
Rule l8f-2 under the 1940 Act provides
that any matter required to be submitted
to the holders of the outstanding voting
securities of an investment company such
as the Company shall not be deemed to
have been effectively acted upon unless
approved by a majority of the outstanding
shares of each fund of the Company
affected by the matter. A fund is
affected by a matter unless it is clear
that the interests of each fund in the
matter are substantially identical or
that the matter does not affect any
interest of such fund. Under Rule l8f-2,
the approval of an investment advisory
agreement or 12b-1 distribution plan or
any change in a fundamental investment
policy would be effectively acted upon
with respect to a fund only if approved
by a majority of the outstanding shares
of such fund. However, the Rule also
provides that the ratification of
independent public accountants, the
approval of principal underwriting
contracts and the election of
<PAGE>
Directors may be effectively acted upon
by shareholders of the Company voting
without regard to particular funds.
Notwithstanding any provision of the
Maryland General Corporation Law
requiring for any purpose the concurrence
of a proportion greater than a majority
of all votes entitled to be cast at a
meeting at which a quorum is present, the
affirmative vote of the holders of a
majority of the total number of shares of
the Company outstanding (or of a class or
series of the Company, as applicable)
will be effective, except to the extent
otherwise required by the 1940 Act and
rules thereunder. In addition, the
Articles of Incorporation provide that,
to the extent consistent with the General
Corporation Law of Maryland and other
applicable law, the Bylaws of the Company
may provide for authorization to be given
by the affirmative vote of the holders of
less than a majority of the total number
of shares of the Company outstanding (or
of a class or series).
HOW TO REDEEM SHARES
The right of redemption may be suspended
by the Fund(s), or the date of payment
postponed by the Fund(s), beyond the
normal seven-day period, under the
following conditions authorized by the
1940 Act: (1) for any period (a) during
which the New York Stock Exchange is
closed, other than customary weekend or
holiday closings, or (b) during which
trading on the New York Stock Exchange is
restricted; (2) for any period during
which an emergency exists as a result of
which (a) disposal by the Fund(s) of
securities owned by it is not reasonably
practical, or (b) it is not reasonably
practical for the Fund(s) to determine
the fair value of its net assets; and (3)
for such other periods as the Securities
and Exchange Commission may by order
permit for the protection of the Fund(s)'
shareholders.
The value of shares of the Fund(s) on
redemption may be more or less than the
shareholder's cost, depending upon the
market value of the Fund(s)' assets at
the time. Shareholders should note that
if a loss has been realized on the sale
of shares of the Fund(s), the loss may be
disallowed for tax purposes if shares of
the same Fund are purchased within
(before or after) 30 days of the sale.
It is possible that conditions may exist
in the future which would, in the opinion
of the Board of Directors, make it
undesirable for the Fund(s) to pay for
redemptions in cash. In such cases the
Board may authorize payment to be made in
portfolio securities of the Fund(s).
However, the Fund(s) has obligated itself
under the 1940 Act to redeem for cash all
shares presented for redemption by any
one shareholder up to $250,000 (or 1% of
the Fund(s)'s net assets if that is less)
in any 90-day period. Securities
delivered in payment of redemptions are
valued at the same value assigned to them
in computing the net asset value per
share. Shareholders receiving such
securities generally will incur brokerage
costs on their sales.
<PAGE>
RATINGS OF INVESTMENT SECURITIES
A rating of a rating service represents
the service's opinion as to the credit
quality of the security being rated.
However, the ratings are general and are
not absolute standards of quality or
guarantees as to the creditworthiness of
an issuer. Consequently, the Fund(s)'
investment advisor believes that the
quality of debt securities in which the
Fund(s) invests should be continuously
reviewed. A rating is not a
recommendation to purchase, sell or hold
a security, because it does not take into
account market value or suitability for a
particular investor. When a security has
received a rating from more than one
service, each rating should be evaluated
independently. Ratings are based on
current information furnished by the
issuer or obtained by the ratings
services from other sources which they
consider reliable. Ratings may be
changed, suspended or withdrawn as a
result of changes in or unavailability of
such information, or for other reasons.
The following is a description of the
characteristics of ratings used by
Moody's Investors Service, Inc. and
Standard & Poor's Corporation.
Moody's Investors Service, Inc. Ratings
Aaa: Bonds rated Aaa are judged to be
the best quality. They carry the
smallest degree of investment risk and
are generally referred to as "gilt-edge".
Interest payments are protected by a
large or by an exceptionally stable
margin and principal is secure. Although
the various protective elements are
likely to change, such changes as can be
visualized are most unlikely to impair
the Fund(s)amentally strong position of
such bonds.
Aa: Bonds rated Aa are judged to be high
quality by all standards. Together with
the Aaa group they comprise what are
generally known as high grade bonds.
They are rated lower than the best bonds
because margins of protection may not be
as large as in Aaa bonds or fluctuation
of protective elements may be of greater
amplitude or there may be other elements
present which make the long term risk
appear somewhat larger than in Aaa bonds.
A: Bonds rated A possess many
favorable investment attributes and are
to be considered as upper medium grade
obligations. Factors giving security to
principal and interest are considered
adequate but elements may be present
which suggest a susceptibility to
impairment sometime in the future.
Baa: Bonds rated Baa are considered
as medium grade obligations, i.e.,
they are neither highly protected nor
poorly secured. Interest payments and
principal security appear adequate for
the present but
<PAGE>
certain protective elements may be
lacking or may be uncharacteristically
unreliable over any great length of time.
Such bonds lack outstanding investment
characteristics and in fact have
speculative characteristics as well.
Ba: Bonds rated Ba are judged to have
speculative elements; their future cannot
be considered as well assured. Often the
protection of interest and principal
payments may be very moderate and thereby
not well safeguarded during both good and
bad times over the future. Uncertainty
of position characterizes bonds in this
class.
B: Bonds rated B generally lack
characteristics of the desirable
investment. Assurance of interest and
principal payments or of maintenance of
other terms of the contract over any long
period of time may be small.
Caa: Bonds rated Caa are of poor
standing. Such bonds may be in default
or there may be present elements of
danger with respect to principal or
interest.
Ca: Bonds rated Ca represent obligations
which are speculative in a high degree.
Such bonds are often in default or have
other marked shortcomings.
Standard & Poor's Corporation Rating
AAA: Bonds rated AAA have the highest
rating. Capacity to pay principal and
interest is extremely strong.
AA: Bonds rated AA have a very strong
capacity to pay principal and interest
and differ from AAA bonds only in small
degree.
A: Bonds rated A have a strong capacity
to pay principal and interest, although
they are somewhat more susceptible to the
adverse effects of changes in
circumstances and economic conditions
than bonds in higher rated categories.
BBB: Bonds rated BBB are regarded as
having an adequate capacity to pay
principal and interest. Whereas they
normally exhibit protection parameters,
adverse economic conditions or changing
circumstances are more likely to lead to
a weakened capacity to pay principal and
interest for bonds in this capacity than
for bonds in higher rated categories.
BB-B-CCC-CC: Bonds rated BB, B, CCC and
CC are regarded on balance, as
predominantly speculative with respect to
the issuer's capacity to pay interest and
repay principal in accordance with the
terms of the obligation. BB indicates
the lowest degree of speculation among
such bonds and CC the highest degree of
speculation. Although such bonds
will likely have some quality and
protective characteristics, these are
outweighed by large uncertainties or
major risk exposures to adverse
conditions.
<PAGE>
Texas Capital Value Funds, Inc.
Form N-1A
Part C
Item 24. Financial Statements and
Exhibits.
(a) Financial Statements: Not
Applicable
(b) Exhibits:
(1) Agreement and Declaration of Trust -
1
(2) By-Laws - 1
(3) Voting Trust Agreement - Not
Applicable
(4) Specimen Share Certificate - Not
Applicable
(5) Form of Investment Advisory
Agreement - 2
(6) Form of Distribution and Sales
Agreement - 1
(7) Benefit Plan - Not Applicable
(8) Form of Custodian Agreement -
Included
(9) Form of Administration Agreement -
Included
(10) Other material contracts; Transfer
Agent Agreement and Accounting Services
Agreement - 1
(11) Consent and Opinion of Counsel as
to legality of shares - Included
(12) Consent of Accountants - 1
(13) All Financial Statements omitted
from Item 23 -- Not Applicable
(14) Letter of Understatnding relating to
initial capital - 1
(15) Model retirement Plan Documents -
Included
(16) Form of Plan pursuant to Rule 12b-1
- - Included
(17) Schedule for Computation of
Performance Quotations - Not Applicable
<PAGE>
1. Incorporated by reference from Pre-
Effective Amendment No. 1 to the
Registration Statement on Form N-1A,
filed on August 22nd, 1995.
2. Incorporated by reference from Pre-
Effective Amendment No. 1 to the
Registration Statement on Form N-1A,
filed on August 22nd, 1995 Amendment
thereto is included.
Item 25. Persons Controlled by or under
Common Control with Registrant.
As of the date of this Amendment to
the Registration Statement, there are no
persons controlled or under common
control with the Registrant.
Item 26. Number of Holders of
Securities.
Shares of Beneficial Interest, par
value: $.0001
Value & Growth Portfolio 70
Item 27. Indemnification
The information on indemnification
is incorporated by reference to Pre-
Effective Amendment No. 1 to the
Registrant's Registration Statement.
Item 28. Business and Other Connections
of Investment Adviser.
With respect to Investment Advisors,
the response to this item is incorporated
by reference to their Form ADV's as
amended:
First Austin Capital Management,
Inc. File No. 801-31075
Martin Capital Management
File No. 801-34371
Item 29. Principal Underwriters
The information on the Registrant's
Principal Underwriters is incorporated by
reference to Pre-Effective Amendment No.
1 to the Registrant's Registration
Statement.
Item 30. Location of Accounts and Records
The information on the location of
accounts and records is incorporated by
referenvce to Pre-Effective Amendment No.
1 to the Registrant's Registration
Statement.
Item 31. Management Services: Discussed
in Part A and B
Item 32. Undertakings
The registrant undertakes to file a
post-effective amendment using financial
statements which need not be certified,
within four to six months from the
effective date of this amendment.
Exhibit 5
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 supercedes 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.
Texas Capital Value Fund, Inc.,
a Maryland corporation
By: Mark A. Coffelt
Mark A. Coffelt, President
First Austin Capital Management, Inc.,
a Delaware corporation
By: Mark A Coffelt
Mark A. Coffelt, President
<PAGE>
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>
Exhibit 8
CUSTODIAN AGREEMENT
THIS AGREEMENT made as of this
________ day of _____________, 19__,
between
Texas Capital Value Funds, Inc., a
Maryland corporation, (hereinafter called
the "Fund"), and
The First National Bank of Boston, a
national banking association having its
principal office in
Boston, Massachusetts (hereinafter called
the "Custodian").
WHEREAS, the Fund desires that its
Securities and cash in its Value & Growth
Portfolio, Growth and Income Portfolio, &
Texas Opportunity Fund (a series of the
Fund) shall be hereafter held and
administered by Custodian as the Fund's
agent pursuant to the terms of this
Agreement; and
WHEREAS, the Custodian provides
services in the ordinary course of its
business which will meet the Fund's needs
as provided for hereinafter;
NOW, THEREFORE, in consideration of
the mutual promises herein made, the Fund
and the Custodian agree as follows:
Section 1. Definitions.
"Bank" shall mean a bank as defined in
Sec. 2(a)5 of the Investment Company Act
of 1940.
"Securities" shall mean and include
stocks, shares, bonds, debentures, notes,
money market instruments or other
obligations and any certificates,
receipts, warrants or other instruments
representing rights to receive, purchase,
or subscribe for the same, or evidencing
or representing any other rights or
interests therein, or in any property or
assets. Unless otherwise indicated
herein, "Securities" shall mean both U.
S. and "foreign securities", as that term
is defined in Sec. 17(f) of the
Investment Company Act of 1940.
"Officers' Certificate" shall mean a
request or directions in writing or
confirmation of oral requests or
directions in writing signed in the name
of the Fund by any two of the Chairman of
the Board of Directors, the President, a
Vice President, the Secretary, the Clerk
or the Treasurer of the Fund or any other
persons duly authorized to sign by the
Board of Directors of the Fund.
Section 2. Custodian as Agent.
The Custodian is authorized to act under
the terms of this Agreement as the Fund's
agent and shall be representing the Fund
whenever acting within the scope of the
Agreement.
Section 3. Names, Titles and Signatures
of Fund's Officers.
An Officer of the Fund will certify to
the Custodian the names, titles, and
signatures of those persons authorized to
sign the Officers' Certificates, as well
as names of the Board of Directors. Said
Officer, or his or her successor, will
provide the Custodian with any changes
which may occur from time to time.
The Custodian is authorized to rely and
act upon written and manually signed
instructions of any person or persons (if
more than one, so indicated) named in a
separate list listing separately those
persons who may authorize the withdrawal
of any portion of the cash or Securities
which will be furnished from time to time
signed by Officers of The Fund and
certified by its Secretary or an
Assistant Secretary ("Authorized
Persons"). The Fund will provide the
Custodian with authenticated specimen
signatures of Authorized Persons.
The Custodian is further authorized to
rely upon any instructions received by
any other means and identified as having
been given or authorized by any
Authorized Person; regardless of whether
such instructions shall in fact have been
authorized or given by any such persons;
provided, that,
(a) the Custodian and the Fund shall
have previously agreed in writing upon
the means of transmission and the method
of identification for such instructions;
(b) the Custodian has not been notified
by the Fund to cease to recognize such
means and methods, and
(c) such means and methods have in fact
been used.
If the Fund should so choose to have dial-
up or other means of direct access to the
Custodian's accounting system for
Securities in custodial accounts, the
Custodian is also authorized to rely and
act upon any instructions received by the
Custodian through the terminal device,
regardless of whether such instructions
shall in fact have been given or
authorized by the Fund provided that such
instructions are accompanied by passwords
which have been mutually agreed to in
writing by the Custodian and the Fund and
the Custodian has not been notified by
the Fund to cease recognizing such
passwords.
Where dial-up or other direct means of
access to the Custodian's accounting
system for cash or Securities is
utilized, the Fund agrees to indemnify
the Custodian and hold it harmless from
and against any and all liabilities,
losses, damages, costs, reasonable
counsel fees, and other reasonable
expenses of every nature suffered or
incurred by the Custodian by reason of or
in connection with the improper use,
unauthorized use and misuse by the Fund
or its employees of any terminal device
with access to the Custodian's accounting
system for Securities in custodial
accounts, unless such losses, damages,
etc., result from negligent or wrongful
acts of the Custodian, its employees or
agents.
Section 4. Receipt and Disbursement of
Money.
1. The Custodian shall open and
maintain a custodial account for the Fund
(the "Account"), subject to debit only by
a draft or order by the Custodian acting
pursuant to the terms of this Agreement.
The Custodian shall hold in the Account,
subject to the provisions hereof, all
cash received by it from or for the
account of the Fund.
The Custodian shall make payment of
cash to the Account or shall debit the
Account only:
(a) for the purchase of Securities for
the portfolio of the Fund upon the
delivery of such Securities to the
Custodian, registered in the name of the
Fund or of the nominee of the Custodian
referred to in Section 9 below;
(b) for payments in connection with the
conversion, exchange or surrender of
Securities owned or subscribed to by the
Fund held by or to be delivered to the
Custodian;
(c) for payments in connection with the
return of the cash collateral received in
connection with Securities loaned by the
Fund;
(d) for payments in connection with
futures contracts positions held by the
Fund;
(e) for payments of interest, dividends,
taxes and in connection with rights
offerings; or
(f) for other proper Fund purposes.
All Securities accepted in
connection with the purchase of such
Securities, if (a) usual in the course of
local market practice or (b) specifically
required in instructions from the Fund,
shall be accompanied by payment of, or a
"due bill" for, any dividends, interest
or other distributions of the issue due
the purchaser.
2. Except as hereinafter provided, the
Custodian shall make any payment for
which it receives direction from an
Authorized Person so long as such
direction (i) is (a) in writing (or is a
facsimile transmission of a written
direction), (b) electronically
transmitted to the Custodian as provided
in Section 3 or (c) when written or
electronic directions cannot reasonably
be given within the relevant time period,
orally when the person giving such
direction assures the Custodian that the
directions will be confirmed in writing
by an Authorized Person within twenty-
four (24) hours and (ii) states that such
payment is for a purpose permitted under
the terms of this subsection.
3. All funds received by the Custodian
in connection with the sale, transfer,
exchange or loan of Securities will be
credited to the Account in immediately
available funds as soon as reasonably
possible on the date such received funds
are immediately available. Payments for
purchase of Securities for the Account
made in immediately available funds will
be charged against the Account on the day
of delivery of such Securities and all
other payments will be charged on the
business day after the day of delivery.
a. The Custodian is hereby authorized
and required to (a) collect on a timely
basis all income and other payments with
respect to Securities held hereunder to
which the Fund shall be entitled either
by law or pursuant to custom in the
securities business, and to credit such
income to the Account, (b) detach and
present for payment all coupons and other
income items requiring presentation as
and when they become due, (c) collect
interest when due on Securities held
hereunder, and (d) endorse and collect
all checks, drafts or other orders for
the payment of money received by the
Custodian for the account of the Fund.
b. If the Custodian agrees to advance
cash or Securities of the Custodian for
delivery on behalf of the Fund to a third
party, any property received by the
Custodian on behalf of the Fund in
respect of such delivery shall serve as
security for the Fund's obligation to
repay such advance until such time as
such advance is repaid, and, in the case
where such advance is extended for the
purchase of Securities which constitute
"margin stock" under Regulation U of the
Board of Governors of the Federal Reserve
System, such additional Securities of the
Fund, as shall be necessary for the
Custodian, in the Custodian's reasonable
determination, to be in compliance with
such Regulation U also shall constitute
security for the Fund's obligation to
repay such advance. The Fund hereby
grants the Custodian a security interest
in such property of the Fund to secure
such advance and agrees to repay such
advance promptly without demand from the
Custodian (and in any event, as soon as
reasonably practicable following any
demand by the Custodian), unless
otherwise agreed by both parties. Should
the Fund fail to repay such advance as
required, the Custodian shall be entitled
immediately to apply such security to the
extent necessary to obtain repayment of
the advance, subject, in the case of Fund
failure to make prompt repayment without
demand, to prior notice to the Fund.
Section 5. Receipt of Securities.
The Custodian shall hold in the Account,
segregated at all times from those of any
other persons, firms or corporations,
pursuant to the provisions hereof, all
Securities received by it from or for the
account of the Fund. All such Securities
are to be held or disposed of by the
Custodian for, and subject at all times
to the instructions of, the Fund pursuant
to the terms of this Agreement. The
Custodian shall have no power or
authority to assign, hypothecate, pledge
or otherwise dispose of any of the
Securities and cash, except pursuant to
the directive of the Fund and only for
the account of the Fund as set forth in
Section 7 of this Agreement.
The Custodian and its agents (including
foreign subcustodians) may make
arrangements with Depository Trust Fund
("DTC") and other foreign or domestic
depositories or clearing agencies,
including the Federal Reserve Bank and
any foreign depository or clearing
agency, whereby certain Securities may be
deposited for the purpose of allowing
transactions to be made by bookkeeping
entry without physical delivery of such
Securities, subject to such restrictions
as may be agreed upon by the Custodian
and the Fund. The Custodian shall
immediately commence procedures to
replace Securities lost due to robbery,
burglary or theft while such Securities
are within its control or that of its
agents or employees upon discovery of
such loss. The Custodian shall comply
with any and all laws, rules and
regulations of each and every
governmental authority applicable to the
performance of its covenants and
obligations hereunder, including without
limitation, any and all Rules and
Regulations of the Securities and
Exchange Commission or the DTC regarding
the custody of assets.
Section 6. Foreign Subcustodians and
Other Agents.
(a) In the event the Custodian places
Securities, pursuant to this Agreement,
with any foreign subcustodian, the
Custodian agrees that it shall place such
Securities only with those foreign
subcustodians which either satisfy the
requirements of "eligible foreign
custodian" under Section 17(f) of the U.
S. Investment Company Act of 1940, or
with respect to which exemptive relief
has been granted by the U. S. Securities
and Exchange Commission from the
requirements of Section 17(f).
The Custodian agrees further that in
placing Securities with any such foreign
subcustodian, it will enter into a
written subcustodian agreement which
shall provide that: (i) the Custodian
will be adequately indemnified and the
Securities so placed adequately insured
in the event of loss, as provided in part
(b) of this section; (ii) the
Securities will not be subject to any
right, charge, security interest, lien or
claim of any kind in favor of the foreign
subcustodian or its creditors (except any
claim for payment for the services
provided by such subcustodian and any
related expenses; provided, however that
the Custodian shall use its best efforts
promptly to release any such right,
charge, security interest, lien or claim
on the assets, except to the extent such
right, charge, security interest, lien or
claim arises with respect to a special
request or requirement by the Fund for
services the cost of which and the
expenses incurred in connection with
which the Fund has not paid or has
declined to pay, it being agreed and
understood that, in the ordinary course,
all payments for usual and routine
services rendered and expenses incurred
by a subcustodian shall be the obligation
of the Custodian); (iii) beneficial
ownership of the Securities will be
freely transferable without payment of
money or value other than for safe
custody or administration; (iv)
adequate records will be maintained
identifying the Securities as belonging
to the Fund; (v) the Custodian's
independent public accountants will be
given access to those records or the
confirmation of the contents of those
records; and (vi) the Custodian will
receive periodic reports with respect to
the safekeeping of the Securities,
including, but not necessarily limited
to, notification of any transfer to or
from the Account.
(b) In addition to the indemnities
included in Section 13 hereof, the
Custodian agrees to indemnify and hold
harmless the Fund from any and all loss
or damage incurred or suffered by the
Fund as a result of placement by the
Custodian of Securities with a foreign
subcustodian hereunder, to the extent the
Custodian receives (i) indemnification
from such foreign subcustodian pursuant
to part (a)(i) of this section and (ii)
insurance proceeds covering such loss or
damage.
(c) With respect to any Securities to be
placed with foreign subcustodians
pursuant to this section, the Custodian
represents and warrants that during the
term of this Agreement it will carry
Bankers Blanket Bond or similar insurance
for losses incurred as a result of such
sub-custodial arrangements.
(d) The Fund authorizes the Custodian to
release any and all information regarding
Securities placed with foreign
subcustodians hereunder as may be
required by court order of a court of
competent jurisdiction.
Section 7. Transfer, Exchange and
Redelivery of Securities.
The Custodian (or a subcustodian or any
other agent of the Custodian) shall have
sole power to release or deliver any
Securities of the Fund held by the
Custodian (or such subcustodian or agent)
pursuant to this Agreement. The
Custodian agrees (and will obtain an
undertaking from each subcustodian or
other agent) that Securities held by the
Custodian (or by a subcustodian or other
agent of the Custodian) will be
transferred, exchanged or delivered only:
(a) for sales of Securities for the
account of the Fund in accordance with
(i) "New York Street Practice", (ii)
predominant established practice in the
relevant local market, or (iii)
specific instructions from the Fund; or
(b) when Securities are called, redeemed
or retired or otherwise become payable;
(c) for examination by any broker
selling any such Securities in accordance
with "street delivery" custom or other
relevant local market practice;
(d) in exchange for or upon conversion
into other Securities whether pursuant to
any plan of merger, consolidation,
reorganization, recapitalization or
readjustment, or otherwise;
(e) upon conversion of such Securities
pursuant to their terms into other
Securities;
(f) upon exercise of subscription,
purchase or other similar rights
represented by such Securities pursuant
to their terms;
(g) for the purpose of exchanging
interim receipts or temporary Securities
for definitive Securities;
(h) for the purpose of tendering
Securities;
(i) for the purpose of delivering
Securities lent by the Fund;
(j) for purposes of delivering
collateral upon redelivery of Securities
lent or for purposes of delivering excess
collateral; or
(k) for other proper Fund purposes.
As to any deliveries made by Custodian
pursuant to items (b), (d), (e), (f),
(g), (i), (j) and (k), Securities in
exchange therefor shall be deliverable to
the Custodian (or a subcustodian or other
agent of the Custodian). The Custodian
may rely upon any written, electronic or
oral instructions or an Officers'
Certificate relating thereto as provided
for in Sections 3 and 4 above.
Section 8. The Custodian's Acts Without
Instructions.
Unless and until the Custodian receives
instructions to the contrary, the
Custodian (or a subcustodian or other
agent of the Custodian) shall:
(a) present for payment all coupons and
other income items held by it for the
account of the Fund which call for
payment upon presentation and hold the
cash received by it upon such payment in
the Account;
(b) collect interest and cash dividends
and other distributions, provide notice
to the Fund of receipts, and deposit them
to the Account;
(c) hold for the account of the Fund all
stock dividends, rights and similar
Securities issued with respect to any
Securities held by the Custodian under
the terms of this Agreement;
(d) execute as agent on behalf of the
Fund all necessary ownership certificates
required by the Internal Revenue Code or
the Income Tax Regulations of the United
States Treasury Department, the laws of
any State or territory of the United
States, or, in the case of Securities
held through foreign subcustodians, the
laws of the jurisdiction in which such
Securities are held, now or hereafter in
effect, inserting the Fund's name on such
certificates as the owner of the
Securities covered thereby, to the extent
it may lawfully do so;
(e) use its best efforts, in cooperation
with the Fund, to file such forms,
certificates and other documents as may
be required to comply with all applicable
laws and regulations relating to
withholding taxation applicable to the
Securities; and
(f) use its best efforts to assist the
Fund in obtaining any refund of local
taxes to which the Fund may have a
reasonable claim.
The Fund agrees to furnish to the
Custodian such information and to execute
such forms and other documents as the
Custodian may reasonably request or as
otherwise may be reasonably necessary in
connection with the Custodian's
performance of its obligations under
clauses (e) and (f).
Section 9. Registration of Securities.
Except as otherwise directed by an
Officers' Certificate, the Custodian
shall register all Securities, except
such as are in bearer form, in the name
of the Fund or a registered nominee of
the Fund or a registered nominee of the
Custodian or a subcustodian. Securities
deposited with DTC or a foreign
securities depository permitted under
Section 5 may be registered in the
nominee name of DTC or such foreign
securities depository. The Custodian
shall execute and deliver all such
certificates in connection therewith as
may be required by the applicable
provisions of the Internal Revenue Code,
the laws of any State or territory of the
United States, or, in the case of
Securities placed with foreign
subcustodians, the laws of the
jurisdiction in which such Securities are
held. The Custodian shall maintain such
books and records as may be necessary to
identify the specific Securities held by
it hereunder at all times.
The Fund shall from time to time furnish
the Custodian appropriate instruments to
enable the Custodian to hold or deliver
in proper form for transfer, or to
register in the name of its registered
nominee, any Securities which it may hold
for the account of the Fund and which may
from time to time be registered in the
name of the Fund.
Section 10. Voting and Other Action.
Neither the Custodian nor any nominee of
the Custodian or of DTC shall vote any of
the Securities held hereunder by or for
the account of the Fund except in
accordance with the instructions
contained in an Officers' Certificate.
The Custodian shall deliver or have
delivered to the Fund all notices,
proxies and proxy soliciting materials
with relation to such Securities, such
proxies to be executed by the registered
holder of such Securities (if registered
otherwise than in the name of the Fund),
but without indicating the manner in
which such proxies are to be voted.
With respect to Securities deposited with
DTC or any other depository, including a
foreign subcustodian, as provided for in
Section 6 hereof, where such Securities
may be registered in the nominee name of
DTC, or other such depository the
Custodian shall request that the nominee
shall not vote any of such deposited
Securities or execute any proxy to vote
thereon or give any consent or take any
other action with respect thereto unless
instructed to do so by the Custodian
following receipt by the Custodian of an
Officers' Certificate.
Section 11. Transfer Tax and Other
Disbursements.
The Fund shall pay or reimburse the
Custodian from time to time for any
transfer taxes payable upon transfers of
Securities made hereunder and for all
other necessary and proper disbursements
and expenses made or incurred by the
Custodian in the performance of this
Agreement, as required by U.S. law or the
laws of the jurisdiction in which the
Securities are held, as the case may be.
The Custodian shall execute and deliver
such certificates in connection with
Securities delivered to it or by it under
this Agreement as may be required under
the laws of any jurisdiction to exempt
from taxation any exemptible transfers
and/or deliveries of any such Securities.
Section 12. Compensation and the
Custodian's Expenses.
The Custodian shall be paid as
compensation for its services pursuant to
this Agreement such compensation as may
from time to time be agreed upon in
writing between the two parties.
Section 13. Indemnification.
The Fund agrees to indemnify and hold
harmless the Custodian and its employees,
agents and nominee from all taxes,
charges, expenses, assessments, claims
and liabilities (including reasonable
attorneys' fees) incurred or assessed
against them in connection with the
performance of the Agreement, except such
as may arise from their own negligent
action, negligent failure to act or
willful misconduct. The Custodian agrees
to indemnify and hold harmless the Fund
and its trustees, officers, employees,
and agents from all taxes, charges,
expenses, assessments, claims and
liabilities (including attorneys' fees)
incurred or assessed against the Fund in
connection with the performance of the
Agreement, which may arise from negligent
action, negligent failure to act or
willful misconduct on the part of the
Custodian. In the event of any advance
of cash for any purpose made by the
Custodian resulting from orders or
instructions of the Fund, or in the event
that the Custodian or its nominee shall
incur or be assessed any taxes, charges,
expenses, assessments, claims or
liabilities in connection with the
performance of this Agreement, except
such as may arise from its or its
nominee's own negligent action, negligent
failure to act or willful misconduct, any
property at any time held for the account
of the Fund shall be security therefor.
Within a reasonable time after receipt by
an indemnified party of notice of the
commencement of any action, such
indemnified party will, if a claim in
respect thereof is to be made against any
indemnifying party, notify in writing the
indemnifying party of the commencement
thereof; and the omission so to notify
the indemnifying party will not relieve
it from any liability hereunder as to the
particular item for which indemnification
is then being sought, unless such
omission is a result of the failure to
exercise reasonable care on the part of
the indemnified party. In case any such
action is brought against an indemnified
party, and it notifies an indemnifying
party of the commencement thereof, the
indemnifying party will be entitled to
participate therein, and to assume the
defense thereof, with counsel who shall
be to the reasonable satisfaction of such
indemnified party, and after notice from
the indemnifying party to such
indemnified party of its election so to
assume the defense thereof, the
indemnifying party will not be liable to
such indemnified party for any legal or
other expenses subsequently incurred by
such indemnified party in connection with
the defense thereof other than reasonable
costs of investigation. Any such
indemnifying party shall not be liable to
any such indemnified party on account of
any settlement of any claim or action
effected without the consent of such
indemnifying party.
Section 14. Reports by the Custodian.
The Custodian shall furnish the Fund
daily with a statement of all
transactions and entries for the Account
of the Fund. The Custodian shall furnish
the Fund with such reports covering
Securities held by it or under its
control as may be agreed upon from time
to time. The books and records of the
Custodian pertaining to its actions under
this Agreement shall be open to
inspection and audit at reasonable times
and upon reasonable notice from the Fund.
All such books and records shall be the
property of the Fund (and such other
persons as the Fund may designate from
time to time) and the Custodian shall
forthwith upon the Fund's request, turn
over to the Fund and cease to retain in
its files, records and documents created
and maintained by the Custodian pursuant
to this Agreement, which are no longer
needed by the Custodian in performance of
its services or for its protection.
Section 15. Termination and Assignment.
This Agreement may be terminated by the
Fund or the Custodian, immediately upon
written notice from the Fund or the
Custodian, as applicable, to the other
party, if the other party fails
materially to perform its obligations
hereunder, and may otherwise be
terminated by the Fund or by the
Custodian on ninety (90) days' notice,
given in writing and sent by registered
mail to the Custodian or the Fund as the
case may be. Upon termination of this
Agreement, the Custodian shall deliver
the Securities and cash in the Account of
the Fund to such entity as is designated
in writing by the Fund and in the absence
of such a designation may, but shall not
be obligated to, deliver them to a bank
or trust company of the Custodian's own
selection having an aggregate capital,
surplus and undivided profits as shown by
its last published report of not less
than 50 million dollars ($50,000,000),
the Securities and cash to be held by
such bank or trust company for the
benefit of the Fund under terms similar
to those of this Agreement and the Fund
to be obligated to pay to such transferee
the then current rates of such transferee
for services rendered by it; provided,
however, that the Custodian may decline
to transfer such amount of such
Securities equivalent to all fees and
other sums owing by the Fund to the
Custodian, and the Custodian shall have a
charge against and security interest in
such amount until all monies owing to it
have been paid, or escrowed to its
satisfaction.
This Agreement may not be assigned by the
Custodian without the consent of the
Fund, authorized or approved by a
resolution of the Fund's Board of
Directors.
Section 16. Force Majeure.
The Custodian shall not be liable or
accountable for any loss or damage
resulting from any condition or event
beyond its reasonable control; provided,
however, that the Custodian shall
promptly use its best efforts to mitigate
any such loss or damage to the Fund as a
result of any such condition or event.
For the purposes of the foregoing, the
actions or inactions of the Custodian's
subcustodians and other agents shall not
be deemed to be beyond the reasonable
control of the Custodian. In connection
with the foregoing, the Custodian agrees
(and agrees that it will use its best
efforts to obtain the undertaking of its
subcustodians and other agents to the
effect) that the Custodian (and/or such
subcustodian or agent) shall maintain
such alternate power sources for computer
and related systems and alternate
channels for electronic communication
with such computers and related systems
that the failure of the primary power
source and/or communications channel of
the Custodian (and/or its subcustodians
or other agents) will not foreseeable
result in any loss or damage to the Fund.
Section 17. Third Parties.
This Agreement shall be binding upon and
the benefits hereof shall inure to the
parties hereto and their respective
successors and assigns. However, nothing
in this Agreement shall give or be
construed to give or confer upon any
third party any rights hereunder.
Section 18. Amendments.
The terms of this Agreement shall not be
waived, altered, modified, amended,
supplemented or terminated in any manner
whatsoever, except by written instrument
signed by both of the parties hereto.
Section 19. Governing Law.
This Agreement shall be governed and
construed in accordance with the laws of
The Commonwealth of Massachusetts.
Section 20. Counterparts.
This agreement may be executed in several
counterparts, each of which is an
original.
Section 21. Notices.
All notices provided for herein shall be
in writing and shall become effective
when deposited in the United States mail,
postage prepaid and certified, addressed
(a) if to the Custodian, at 150 Royall
Street
Canton, MA 02021
Attention: Worldwide Custody -
MS: 45-02-90
(b) if to the Fund, at
Attention:
or to such other address as either party
may notify the other in writing.
Section 22. Mandatory Arbitration.
Notice is hereby given that this
instrument is executed on behalf of the
Directors of the Fund, and the
obligations of this instrument are not
binding upon any of the Directors,
officers, or shareholders of the Fund
individually but binding only upon assets
and property of the Fund.
All disputes under this Agreement shall
be arbitrated pursuant to the Commercial
Arbitration Rules of the American
Arbitration Association.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed
by their respective officers thereunto
duly authorized as of the date first
written above.
TEXAS CAPITAL VALUE FUNDS, INC.,
a Maryland corporation
By Mark A. Coffelt
Name: Mark A Coffelt
Title: President
THE FIRST NATIONAL BANK OF
BOSTON
By
Name:
Title:
<PAGE>
EXHIBIT A: PRICING
Bank of Boston
Fee Schedule
TEXAS CAPITAL VALUE FUNDS
Asset Custody-Domestic
The fee for Domestic Custody is composed
of asset and transaction charges based
upon fund complex as follows:
Asset Charges
Annual Fee
The first $50 million in assets.00015The
second $50 million in assets.0001Net
assets over $100 million.00005Transaction
Charges
Automated Non-
AutomatedDTC$8.00$12.00Fed Book-
Entry$8.00$12.00Physical
Settlements$20.00$20.00PTC$20.00$12.00Pay
downs$3.50$3.50Options/Futures$25.00$25.0
0Passive TrusteeThe fee is $1.00 per
IRA/Keough account with a minimum of $200
annually for the Texas Capital Value
Funds relationship.Balanced CreditBased
on 75% of the 90-day U.S. Treasury Bill
rate, less Federal Reserve requirements
and F.D.I.C. assessments, determined
monthly. No credit carried forward.
Out-of Pocket Expenses
Out-of-pocket expenses consist of
telephone line and usage, postage,
insurance, courier, and forms. Legal
fees billed only by mutual agreement.
Note: All expenses are to be billed to
the Advisor managing the Fund, rather
than directly to the account or Fund.
<PAGE>
Exhibit 9
ADMINISTRATIVE AGREEMENT
This AGREEMENT is made as of this
_______________day of ________________,
1996, by and between Texas Capital Value
Funds, Inc., a Maryland corporation (the
"Company"), and First Austin Capital
Management, Inc. a Delaware corporation
(the "Administrator").
WITNESSETH:
WHEREAS, the Company is an open-ended
"series" investment company registered
with the Securities and Exchange
Commission under the Investment Company
Act of 1940 (the "1940 Act"); and
WHEREAS, the Board of Directors of the
Company (the "Board") has authorized the
establishment of a new series or
portfolio of securities and assets (the
"Fund") to be managed by Paul Bryce
Martin, Jr., an individual, dba Martin
Capital Management; and
WHEREAS, the Company wishes to retain the
Administrator to provide certain
administrative services in connection
with the management of the Fund's
operations and the Administrator is
willing to furnish 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. Appointment. The Administrator shall
provide certain administrative services,
hereafter enumerated, in connection with
the management of the Fund's operations
for the period and on the terms set forth
in this Agreement (the "Administrative
Services"). The Administrator shall
comply with all relevant provisions of
the 1940 Act, applicable rules and
regulations thereunder, and other
applicable law.
2. Services on a Continuing Basis. The
Administrator shall perform the following
services on a regular basis which would
be daily, weekly or as otherwise
appropriate:
(a) prepare and coordinate reports and
other materials to be supplied to the
Board on behalf of the Fund;
(b) prepare and/or supervise the
preparation and filing of all securities
filings, periodic financial reports,
prospectuses, statements of additional
information, marketing materials, tax
returns, shareholder reports and other
regulatory reports or filings required of
the Fund;
(c) prepare all required filings
necessary to maintain the Fund's
qualification and/or registration to sell
shares in all states where the Fund
currently does, or intends to do
business, provided, however, the
provisions of this Subparagraph 2(c)
shall in no way be deemed to limit or
modify any other agreement between the
Advisor and the Administrator, or the
Fund and the Advisor, regarding the
responsibility for any such filings;
(d) coordinate the preparation, printing
and mailing of all materials (e.g.,
Annual Reports) required to be sent to
shareholders;
(e) coordinate the preparation and
payment of Fund related expenses;
(f) monitor and oversee the activities of
the Fund's servicing agents (i.e.,
transfer agent, custodian, fund
accountants, etc.); and
(h) perform such additional services as
may be agreed upon by the Company and the
Administrator.
The Administrator may contract with third
parties to perform all or part of the
Administrative Services.
3. Responsibility of the Administrator.
The Administrator shall be under no duty
to take any action on behalf of the Fund
except as set forth herein or as may be
agreed to by the Administrator in
writing. In the performance of its
duties hereunder, the Administrator shall
be obligated to exercise reasonable care
and to act in good faith. Without
limiting the generality of the foregoing
or any other provision of this Agreement,
the Administrator shall not be liable for
delays or errors or loss of data occuring
by reason of circumstances beyond the
Administrator's control.
4. Reliance Upon Instructions. The
Administrator shall be entitled to rely
upon any instructions, oral or written,
actually received by the Administrator
from the Board and shall incur no
liability to the Company or Advisor in
acting upon such oral or written
instructions, provided such instructions
reasonably appear to have been received
from a person duly authorized by the
Board to give oral or written
instructions on behalf of the Company or
the Fund.
5. Confidentiality. The Administrator,
on behalf of itself and its employees,
shall treat confidentially all records
and other information relative to the
Company and/or the Fund and all prior,
present or potential shareholders of the
Company and/or the Fund, except after
prior notification to, and approval of
release of information in writing by, the
Company and/or the Fund, which approval
shall not be unreasonably withheld where
the Administrator may be exposed to civil
or criminal contempt proceedings for
failure to comply, when requested to
divulge such information by duly
constituted authorities, or when so
requested by the Company and/or the Fund.
6. Equipment Failures. In the event of
equipment failures or the occurrence of
events beyond the Administrator's control
which render the performance of the
Administrator's functions under this
Agreement impossible, the Administrator
shall take reasonable steps to minimize
service interruptions and is authorized
to engage the services of third parties
to prevent or remedy such service
interruptions.
7. Compensation. As compensation for
the Administrative Services, the Company
shall pay to the Administrator a monthly
fee equal to the greater of (a) one-
twelveth (1/12th) the annual rate of .15%
(15% of 1%) of the Fund's average daily
net assets or (b) Two Thousand Dollars
($2,000). Such compensation shall begin
to accrue on the first day of the first
calender month following the "Effective
Date" (as defined in Paragraph 9 below),
and each month thereafter during the term
of this Agreement, with such compensation
to be paid in arrears on the first day of
each calender month. The Administrator
understands and acknowledges that (i) the
Company has entered into an agreement for
advisory services for the Fund with the
Advisor, and (ii) pursuant to the terms
of such agreement, the compensation to be
paid the Administrator hereunder shall be
paid by the Advisor directly to the
Administrator. This arrangement has been
made by the Company for its convenience
only and shall not be deemed to limit the
Company's liability for the payment of
compensation to the Administrator
hereunder.
8. Indemnification. The Company agrees
to indemnify and hold harmless the
Administrator from all taxes, filing
fees, charges, expenses, assessments,
claims and liabilities (including without
limitation, liabilities arising under the
Securities Act of 1933, the Securities
Exchange Act of 1934, the 1940 Act, and
any state and foreign securities laws,
all as amended from time to time) and
expenses, including (without limitation)
reasonable attorneys' fees and
disbursements, arising directly or
indirectly from any action or thing which
the Administrator takes or does or omits
to take or do at the request of or in
reliance upon the advice of the Board,
provided that the Administrator will not
be indemnified against any liability to
the Company or to shareholders (or any
expenses incident to such liability)
arising out of the Administrators own
willful misfeasance, bad faith,
negligence or reckless disregard of its
duties and obligations under this
Agreement. The Administrator agrees to
indemnify and hold harmless the Company
and each of its Directors on the Board
from all claims and liabilities
(including without limitation,
liabilities under the Securities Act of
1933, the Security Exchange Act of 1934,
the 1940 Act, and any state and foreign
securities laws, all as amended from time
to time) and expenses, including (without
limitation) reasonable attorneys' fees
and disbursements, arising directly or
indirectly from any action or thing which
the Administrator takes or does or omits
to take or do which is in violation of
this Agreement or not in accordance with
the instructions properly given to the
Administrator, or arising out of the
Administrator's own willful misfeasance,
bad faith, negligence or reckless
disregard of its duties and obligations
under this Agreement.
9. Duration and termination.
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 Company with the Securities and
Exchange Commission under the Securities
Act of 1933, as amended, and the 1940
Act, as amended. This Agreement shall
continue until termination by either (i)
the Fund (through the Board of Directors)
or (ii) the Administrator, on 60 day's
written notice to the other party. Upon
any termination of this Agreement, the
obligations of all 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, and (ii) the obligation of
the Company to pay the compensation
provided for herein, prorated to the date
of such termination.
10. Amendments. This Agreement or any
part hereof may be changed or waived only
by instrument in writing signed by the
party against which enforcement of such
change or waiver is sought.
11. 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 Company:
Texas Capital Value Funds, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
The Administrator:
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.
12. 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.
13. 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 Administrator 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.
14. 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.
15. 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.
16. Time Is of the Essence. Time is of
the essence of this Agreement.
17. 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.
18. Mandatory Arbitration. All disputes
arising under this Agreement shall be
arbitrated pursuant to the Commercial
Arbitration Rules of the American
Arbitration Association.
19. 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.
20. Clarification. That certain
Investment Advisory and Administrative
Contract dated August 15, 1995, executed
by the parties hereto, was intended and
shall be deemed to apply only to the
Value and Growth Portfolio of the Company
and not to any other series or portfolio
authorized or to be authorized by the
Company.
21. Non-Exclusive. The services to be
rendered by the Administrator to the Fund
hereunder are not to be deemed exclusive,
and the Administrator 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
as determined by the Company in its sole
and absolute discretion.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed
on the date and year first above written.
Company:
Texas Capital Value Funds, Inc.,
a Maryland corporation
By: Mark A Coffelt
Mark A. Coffelt, President
Administrator:
First Austin Capital Management, Inc.,
a Delaware corporation
By: Mark A Coffelt
Mark A. Coffelt, President
<PAGE>
Exhibit 11
Opinion and Consent of Counsel:
Susan Braun Rice
Attorney at Law
27 New Haven
Laguna Niguel, California 92677
712-661-8399
May 31, 1996
Texas Capital Value Funds, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
Gentlemen:
I have been asked to provide this
opinion in connection with the
registration under the Securities Act of
1933 of 50,000,000 shares of the comon
capital stock (par value .0001 per share)
of Texas Capital Value Funds, Inc., a
Maryland corporation (the "Company").
I have examined the Articles of
Incorportation of the Company; the Bylaws
of the Company, as amended; various
pertinent corporate proceedings; and such
other items considered to be material to
determine the legality of the sale of the
authorized but unissued shares of the
Company's common capital stock. With
respect to the good standing of the
Company, I am advised that the Company is
in good standing with the State of
Maryland, its state of incorporation, and
that all taxes due have been paid.
Based upon the foregoing, it is my
opinion that upon the effectiveness of
the Post-Effective Amendment to the
Securities Act Registration Statement of
the Company filed pursuant to the
provisions of Section 24(e) of the
Investment Company Act of 1940 to
register 50,000,000 shares of the
Company's common capital stock (.0001 par
value per share) and during such time as
such Registration Statemtne is in effect,
the Company will be authorized to solicit
and cause to be solicited share purchase
orders and to issue its shares for a cash
consideration, as described in the
Company's Registration Statement, which
shares so issued will be validly issued,
fully paid and non-assessable shares.
I offer no opinion with respect to
the offer and sale of the Company's
securities under the securities laws of
the several states, the District of
Columbia, any territory of the United
States or of any foreign country.
I consent to the inclusion of this
opinion as an exhibit to the Registration
Statement of the Company and to the
reference in the Company's Prospectus
and/or Statement of Additional
Information to the fact that this opinion
concerning the legality of the issue on
behalf of the Company, as issuer, has
been rendered by me.
Very Truly Yours,
Susan Braun Rice
Susan Braun Rice
<PAGE>
Exhibit 15
INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL AGREEMENT
Introduction
This Agreement is made between the
individual who signs the Texas Capital
Value Funds IRA Application (the
"Depositor") and the First National Bank
of Boston (the Custodian) Boston,
Massachusetts 02106. Texas Capital Value
Funds, Inc. (the "Sponsor") is the
sponsor of this Agreement. Articles I -
VII are from the Internal Revenue
Service's model custodial account (Form
5305-A) for establishing tax-qualified
IRA's. By executing the application, the
Depositor hereby establishes an
Individual Retirement Account as
described in section 408(a) of the
Internal Revenue Code of 1986, in order
to provide for his or her retirement or
to provide for income for his or her
beneficiary after death.
The Depositor has been given the
disclosure statement required under
Regulations under Section 408(I) of the
Code. The Depositor has deposited with
the Custodian the amount shown on the
Application.
Article I
The Custodian may accept additional cash
contributions on behalf of the Depositor
for a tax year of the Depositor. The
total cash contributions are limited to
$2,000 for the tax year unless the
contribution is a rollover contribution
described in section 402(c) (but only
after December 31, 1992), 403(a)(4),
403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee
pension plan as described in section
408(k). Rollover contributions before
January 1, 1993, include rollovers
described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 403(d)(3), or an employer
contribution to a simplified employee
pension plan as described in section
408(k).
Article II
The Depositor's interest in the balance
in the custodial account is
nonforfeitable.
Article III
1. No part of the custodial funds may be
invested in life insurance contracts, nor
may the assets of the custodial account
be commingled with other property except
in a common investment fund (within the
meaning of section 408(a)(5) of the
Code).
2. No part of the custodial funds may be
invested in collectibles (within the
meaning of section 408(m)) except as
otherwise permitted by section 408(m)(3)
which provides an exception for certain
gold and silver coins and coins issued
under the laws of any state.
Article IV
1. Notwithstanding any provision of this
agreement to the contrary, the
distribution of the Depositor's interest
in the custodial account shall be made in
accordance with the following
requirements and shall otherwise comply
with section 408(a)(6) and Proposed
Regulations section 1.408-8, including
the incidental death benefit provisions
of Proposed Regulations section
1.401(a)(9)-2, the provisions of which
are incorporated by reference.
2. Unless otherwise elected by the time
distributions are required to begin to
the Depositor under paragraph 3, or to
the surviving spouse under paragraph 4,
other than in the case of a life annuity,
life expectancies shall be recalculated
annually. Such election shall be
irrevocable as to the Depositor and the
surviving spouse and shall apply to all
subsequent years. The life expectancy of
a nonspouse beneficiary may not be
recalculated.
3. The Depositor's entire interest in
the custodial account must be, or begin
to be, distributed by the Depositor's
required beginning date, (April 1
following the calendar year end in which
the Depositor reaches age 70 1/2). By
that date, the Depositor may elect, in a
manner acceptable to the Custodian, to
have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides
equal or substantially equal monthly,
quarterly, or annual payments over the
life of the Depositor.
(c) An annuity contract that provides
equal or substantially equal monthly,
quarterly, or annual payments over the
joint and last survivor lives of the
Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual
payments over a specified period that
may not be longer than the Depositor's
life expectancy.
(e) Equal or substantially equal annual
payments over a specified period that
may not be longer than the joint life and
last survivor expectancy of the
Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or
her entire interest is distributed to him
or her, the entire remaining interest
will be distributed as follows:
(a) If the Depositor dies on or after
distribution of his or her interest has
begun, distribution must continue to be
made in accordance with paragraph 3.
(b) If the Depositor dies before
distribution of his or her interest has
begun, the entire remaining interest
will, at the election of the Depositor
or, if the Depositor has not so elected,
at the election of the beneficiary or
beneficiaries, either (i) be distributed
by the December 31 of the year containing
the fifth anniversary of the Depositor's
death, or (ii) be distributed in equal or
substantially equal payments over the
life or life expectancy of the designated
beneficiary or beneficiaries starting by
December 31 of the year following the
year of the Depositor's death. If,
however, the beneficiary is the
Depositor's surviving spouse, then this
distribution is not required to begin
before December 31 of the year in which
the Depositor would have turned age 70
1/2.
(c) Except where distribution in the
form of an annuity meeting the
requirements of section 408(b)(3) and its
related regulations has revocably
commenced, distributions are treated as
having begun on the Depositor's required
beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or
her entire interest has been distributed
and if the beneficiary is other than the
surviving spouse, no additional cash
contributions or rollover contributions
may be accepted in the account.
5. In the case of a distribution over
life expectancy in equal or substantially
equal annual payments, to determine the
minimum annual payment for each year,
divide the Depositor's entire interest in
the Custodial account as of the close of
business on December 31 of the preceding
year by the life expectancy of the
Depositor (or the joint life and last
survivor expectancy of the Depositor and
the Depositor's designated beneficiary,
or the life expectancy of the designated
beneficiary, whichever applies). In the
case of distributions under paragraph 3,
determine the initial life expectancy (or
joint life and last survivor expectancy)
using the attained ages of the Depositor
and designated beneficiary as of their
birthdays in the year the Depositor
reaches age 70 1/2. In the case of a
distribution in accordance with paragraph
4(b)(ii), determine life expectancy using
the attained age of the designated
beneficiary as to the beneficiary's
birthday in the year distributions are
required to commence.
6. The owner of two or more individual
retirement accounts may use the
"alternative method" described in Notice
88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements
described above. This method permits an
individual to satisfy these requirements
by taking from one individual retirement
account the amount required to satisfy
the requirement for another.
Article V
1. The Depositor agrees to provide the
Custodian with information necessary for
the Custodian to prepare any reports
required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit
reports to the Internal Revenue Service
and the Depositor as prescribed by the
Internal Revenue Service.
Article VI
Notwithstanding any other articles
which may be added or incorporated, the
provisions of Articles I through III and
this sentence will be controlling. Any
additional articles that are not
consistent with section 408(a) and
related regulations will be invalid.
Article VII
This Agreement will be amended from
time to time to comply with the
provisions of the Code and related
regulations. Other amendments may be
made with the consent of the persons
whose signatures appear.
Article VIII
1. The Custodian shall invest the amount
of each contribution in shares of one or
more of the Texas Capital Value Funds
(the "Mutual Funds") designated in the
application filed by the Depositor with
the Custodian (and amendments thereto) at
the price and in the manner in which such
shares are then being publicly offered in
accordance with the Mutual Funds' then
current prospectus (subject to any
minimum initial investment applicable to
any Mutual Fund as described in such
prospectus), and shall credit such shares
to the custodial account. All dividends
and capital gains distributions received
on the shares of any Mutual Fund then
held in the custodial account shall
(unless received in additional shares
thereof) be reinvested in such shares in
accordance with the Mutual Fund's then
current prospectus, which shall be
credited to the custodial account. If
any distribution of a Mutual Fund may be
received at the election of the
stockholder in additional shares or in
cash or other property, the Custodian
shall elect to receive it in additional
shares. A receipt for each contribution
received and each reinvestment showing
the investment or reinvestment and
current status of the custodial account
immediately thereafter shall be prepared
by the Custodian and promptly delivered
to the Depositor. The Custodian shall
not be liable for interest on any cash
balance in the custodial account. Any
charges attributable to the acquisition
of shares shall be charged to the
custodial account. With respect to a
rollover contribution described in
Article I of the Agreement, the Custodian
shall not accept any such contribution
unless it is made (i) in cash, or (ii) in
shares of a Mutual Fund maintained as an
investment hereunder.
If any investment instructions from the
Depositor with respect to the selection
of one or more Mutual Fund (s) for the
Depositor's custodial account (whether
relating the initial contribution, or to
any subsequent contribution, or to any
change in the Depositor's selection of
Mutual Fund (s) for the Custodial
account) are, in the opinion of the
Custodian, ambiguous or incomplete, the
Custodian may refrain from acting on such
instructions until they have been
clarified or completed to the Custodian's
satisfaction, and the Custodian will have
no liability for any reduction in value
or loss of appreciation during such
period.
2. The Custodian shall forward to the
Depositor all notices, prospectuses,
financial statements, reports to
shareholders, proxies and proxy
soliciting material relating to the
shares of any Mutual Fund held in the
custodial account. The Custodian shall
not vote any of the shares of any Mutual
Fund held in the custodial account except
in accordance with the written
instructions of the Depositor.
3. The Custodian shall, from time to
time, on the instructions in writing of
the Depositor, make distributions out of
the custodial account, in such manner and
amounts as may be specified in such
instructions, and the custodian will be
fully protected in following such
instructions. All such instructions
shall be deemed to constitute a
certification by the Depositor that the
distribution so directed is one that is
permitted.
4. Distributions may be made in a single
sum or as periodic payments.
Distribution must be made (if in a single
sum) or must begin (if by periodic
payment) no later than April 1 of the
taxable year following the taxable year
in which the Depositor reaches age 70
1/2. A Depositor may elect distribution
in substantially equal payments over a
period that does not exceed his or her
life expectancy or the joint and last
survivor life expectancy of the Depositor
and his or her designated beneficiary.
The Depositor is responsible for
reviewing his distribution option in the
year the Depositor reaches age 70 1/2 to
make sure the requirements of Code
section 408(a)(6) have been met. For
this purpose, life expectancies must be
determined by using applicable Internal
Revenue Service tables. Life
expectancies of the Depositor and his or
her spouse may be recalculated annually,
but such recalculation will be made only
at the written election of the Depositor
(or if applicable spouse). By
establishing this custodial account, the
Depositor (for himself and his or her
surviving spouse, if any) elects not to
recalculate life expectancies unless the
Depositor (or surviving spouse)
specifically elects the recalculation of
life expectancies approach in accordance
with the following sentence. Any such
election may be made in such form as the
Depositor (or surviving spouse) provides
for (including instructions to such
effect to the Custodian, or the
determination of minimum distribution
amounts in accordance with a method that
provides for recalculation of life
expectancy and instructions to the
Custodian to make distributions in
accordance with such method). In the
case of any other designated beneficiary,
life expectancy will be calculated at the
time payment commences. The balance in
the account as of the beginning of each
year beginning on or after the Depositor
reaches age 70 1/2 will be used in
computing the required minimum payments
described in this section. Any method of
distribution may be used by the Depositor
prior to April 1 of the taxable year in
which he or she reaches age 70 1/2.
Notwithstanding any other provision of
this Agreement, it shall be the sole
responsibility of the Depositor (or the
Depositor's surviving spouse or other
beneficiary) to give written instructions
to the Custodian concerning any
distribution from the custodial account.
If the Depositor (or surviving spouse or
beneficiary) does not instruct the
Custodian to make distributions from the
custodial account by the time that
distributions are required to commence in
accordance with the preceding Articles of
this Agreement, the Custodian shall
assume that the Depositor (or surviving
spouse or other beneficiary) is meeting
the minimum distribution requirements
from another individual retirement
arrangement maintained by the Depositor
(or surviving spouse or other
beneficiary), and the Custodian shall be
fully protected in so doing.
5. By written notice to the Custodian,
the Depositor may designate or change the
beneficiary or beneficiaries to receive
any benefit payable by reason of the
Depositor's death or the death of his or
her surviving spouse before the
Depositor's entire interest in the
custodial account has been distributed.
Any such designation or change of
designation shall be effective upon
receipt by the Custodian. If any portion
of the custodial account is not disposed
of by a valid designation of beneficiary,
for any reason whatsoever, such amount
shall be paid in a single sum, as soon as
is practicable, to the Depositor's
estate.
6. The Depositor shall be charged by the
Custodian for its services under this
Agreement in accordance with its current
fee schedule. The Custodian may
substitute a different fee schedule at
any time upon 30 days written notice to
the Depositor.
7. Any income or other taxes of any kind
whatsoever that may be levied or assessed
upon or in respect of the custodial
account or the income thereof, any
transfer taxes incurred in connection
with the investment and reinvestment of
the assets of the custodial account, all
other reasonable administrative expenses
incurred by the Custodian in the
performance of its duties hereunder,
including fees for legal services
rendered to the Custodian, and such fees
for acting in that capacity as are
charged by the Custodian from time to
time, shall, unless paid by the Depositor
in a timely manner, be charged against
and paid from the assets of the custodial
account. Sufficient Mutual Fund shares
may be liquidated from the custodial
account to pay any such taxes, expenses
and compensation; unless the Depositor
has designated the Mutual Fund(s) to be
liquidated, the Custodian may determine
the Mutual Fund(s) to be liquidated to
pay such amounts, and the Custodian will
have no liability for its choice.
8. The Depositor at any time may remove
the Custodian upon 30 days written notice
to that effect delivered to the
Custodian, which notice shall also
designate a successor custodian. The
successor custodian must satisfy the
requirements of section 408(n) of the
Code, in that it shall be a bank (as
defined in section 401(d)(1) of the Code)
or other person who demonstrates, to the
satisfaction of the Secretary of the
Treasury or his delegate, that the manner
in which he or she will hold the assets
of the custodial account will be
consistent with the requirements of
section 408 of the Code. Upon receipt by
the Custodian of written acceptance of
such appointment by the successor
custodian, the removal of the Custodian
shall be effective, and the Custodian
shall forthwith transfer and pay over to
such successor custodian the assets of
the custodial account and copies of all
necessary records pertaining thereto.
The Custodian may, however, reserve such
assets of the custodian account as it may
deem advisable for the payment of all its
fees, compensation, costs and expenses,
and for the payment of all other
liabilities which are a charge on or
against the assets of the custodial
account or on or against the Custodian,
and where necessary may liquidate such
reserved Mutual Fund shares. Any balance
of such reserve remaining after the
payment of all such items shall be paid
over to the successor custodian.
9. The Custodian may at any time resign
as Custodian under this Agreement, upon
30 days written notice to that effect to
the Depositor. Upon receiving such
notice of resignation, the Depositor
shall forthwith appoint a successor
custodian which satisfies the
requirements of Section 409(n) of the
Code. Upon receipt by the Custodian of
written acceptance by the successor
custodian of such appointment, the
Custodian is authorized to act in the
same manner as provided for in paragraph
8 of this Article as regards the transfer
of assets to the successor custodian and
the payment of the items referred to
therein. In the event the Depositor
fails to appoint a successor custodian
which has accepted its appointment within
30 days after the Custodian's notice of
resignation, the Custodian shall
terminate the custodial account and
distribute its assets to the Depositor in
accordance with paragraph 12 of this
Article.
The Depositor and Custodian agree that
the Sponsor of this Agreement may at any
time remove the Custodian and appoint a
successor custodian. The effective date
of the removal and appointment shall be
determined by the Custodian and the
successor custodian. On or after such
date the Custodian shall deliver the
assets of the custodian account to the
successor custodian.
The Sponsor will appoint another
custodian upon notification from the
Commissioner of the Internal Revenue
Service that such substitution is
required because the Custodian has failed
to comply with the requirements of
Section 1.401 - 12(n) of the regulations
or is not keeping such records, or making
such returns or rendering sych statements
as are required by forms or regulations.
Notwithstanding the foregoing, the
Custodian may reserve such assets of the
custodial account as it may deem
necessary for the payment of all other
liabilities which are a charge on or
against the assets of the custodial
account or on or against the Custodian,
and where necessary for this purpose may
liquidate reserved Fund Shares. Any
balance of such reserve remaining after
the payment of all such items shall be
paid over to the successor custodian, or,
if the Depositor has failed to appoint a
successor custodian as provided in
Paragraph 12 of this article, to the
Depositor.
10. The provisions of this Agreement
shall apply to any successor custodian
from the effective date of its
appointment as such with the same force
and effect as if such successor was the
initial custodian hereunder.
11. The Custodian may at any time and
from time to time modify or amend this
Agreement in whole or in part (including
retroactive amendments) by sending the
Depositor a copy of such modification or
amendment in accordance with paragraph 17
below. The Depositor delegates to the
Custodian any right of the Depositor to
amend (or participate in the amendment
of) the Agreement, and the Depositor
hereby consents to any such amendment.
No amendment shall cause or permit any
part of the assets of the custodial
account to be diverted to purposes other
than for the exclusive benefit of the
Depositor or his or her beneficiaries,
and no such amendment shall be made which
would disqualify this Agreement from
complying with section 408.
12. The Depositor may terminate the
custodial account at any time, by
delivering to the Custodian a signed
notice of termination. Upon such
termination, and subject to a reservation
of assets in the same manner as provided
for in paragraph 8 of this Article, the
assets remaining in the custodial account
shall be distributed to the Depositor, in
cash or in kind as directed by the
Depositor. This Agreement shall
terminate upon the complete distribution
of the custodial account.
13. If, because of an erroneous
assumption as to earned income or for any
other reason, a contribution which is an
excess contribution within the meaning of
section 408(d)(4) of the Code is made on
behalf of the Depositor for any year,
adjustment of such excess contribution
shall be made by the distribution in cash
or in kind to the Depositor, upon written
notice to the Custodian from the
Depositor which states the amount of such
excess contribution and any net income
attributable thereto. The Custodian will
carry out the distribution instructions
in the Depositor's written notice, and
will have no liability for so doing.
14. The Depositor shall be solely
responsible for determining the time and
amount of all contributions to the
custodial account and the tax
deductibility of any contributions.
Also, the Depositor (or his surviving
spouse of other beneficiary) shall be
solely responsible for the time, amount
and manner of payment of all
distributions from the account and the
taxability of any such distributions.
The Custodian shall not be responsible
for the purpose or propriety of any
contribution or distribution made
pursuant hereto. The Custodian will have
no liability for any income or other
taxes, penalties, liabilities or other
costs incurred by the Depositor or any
other person resulting from contributions
to or distributions from the Depositor's
custodial account. The Custodian may
conclusively rely upon, be entitled to
assume the truth of and be protected in
acting upon any written statement, order,
direction, notice, instruction or other
written instrument of or received from
the Depositor in connection with this
Agreement and believed by the Custodian
to be genuine and to have been properly
executed, and shall, so long as it acts
in good faith, have no liability in
taking or omitting to take any action
based thereon. The Custodian shall be
under no duty or inquiry with respect to
any such writing, but in its discretion
may request any tax waivers, proof of
signatures or other evidence which it
reasonably deems necessary for its
protection. The Depositor and the
successors of the Depositor, as
appropriate, including any executor or
administrator of the Depositor shall, to
the extent permitted by law, indemnify
against and save harmless the Custodian
and its successors and assigns from any
and all claims, actions or liabilities of
the Custodian to the Depositor or the
successors of the Depositor whatsoever
(including all reasonable expenses
incurred in defending against any of the
foregoing which may arise in connection
herewith, except such as arise from the
Custodian's own bad faith, gross
negligence or willful misconduct. The
Custodian shall not be under any duty to
take any action other than as herein
specified with respect hereto, unless the
Depositor shall furnish it with
instructions in proper form and such
instructions shall have been specifically
agreed to by the Custodian, or to defend
or engage in any suit with respect hereto
unless it shall have first agreed in
writing to do so and shall have been
fully indemnified to its satisfaction.
The custodian shall have no
responsibility for any loss or diminution
in the value of the Depositor's custodial
account as a result of the Depositor's
establishment of the custodial account or
arising out of the Depositor's (or
beneficiary's) investment decisions with
respect to the custodial account,
including the initial selection of one or
more Mutual Funds or any subsequent
investment decision with respect to the
Mutual Fund(s) from time to time held in
the custodial account.
15. No interest, right or claim in or to
any part of the custodial account, nor
any assets held therein or benefits
provided thereunder shall be subject to
alienation, assignment, transfer, sale,
mortgage, pledge, hypothecation,
commutation, anticipation, garnishment
attachment, execution or levy of any
kind, and any attempt to cause any such
interest right claim, assets or benefit
to be so subjected shall not be
recognized, except to such extent as may
be required by law.
16. The Custodian is authorized to hire
agents, experts and attorneys to perform
certain of its duties hereunder and to
delegate any of its powers and duties
hereunder to an agent., which agent may
be the transfer agent for Mutual Fund
shares authorized to be held hereunder.
17. Any notice herein required or
permitted to be given to the Custodian
shall be effective if mailed to its Agent
by registered or certified mail at Fund
Services, Inc., 1500 Forest Ave, Suite
111, Richmond, VA 23229 or such other
address as the Custodian shall provide to
the Depositor from time to time. Any
notice herein required or permitted to be
given by the Custodian to the Depositor
shall be effective if mailed to the
Depositor at the Depositor's last address
of record provided to the Custodian.
18. Words in the masculine include
feminine, the singular includes the
plural, and vice versa, unless qualified
by the context.
19. This Agreement and the custodial
account shall be governed by and
construed, administered and enforced
according to the laws of the State of
Massachusetts.
20. Articles I through VII of the
Agreement are in the form promulgated by
the Internal Revenue Service as Form 5305-
A. It is anticipated that, if and when
the Internal Revenue Service promulgates
changes to Form 5305-A, such changes will
be adopted as an amendment to this
agreement. Pending the adoption of any
amendment necessary or desirable to
conform this agreement to the
requirements of any amendment to the
Internal Revenue Code or regulations or
rulings thereunder, the Custodian may
operate the Depositor's custodial account
in accordance with such requirements to
the extent that the Custodian deems
necessary to preserve the tax benefits of
the custodial account.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
The First National Bank of Boston,
as the custodian for each Individual
Retirement Account (IRA), is required by
the Internal Revenue Code and regulations
promulgated thereunder to provide you
with certain information concerning the
requirements for establishing an
individual retirement account. Please
read this statement together with the
other IRA plan documents and the
prospectus for the mutual funds that are
allowable investments for your IRA. The
provisions of the IRA, plan documents and
the prospectus must prevail over this
statement in any instance where the
statement is incomplete or appears to
conflict. For special rules applicable
to an IRA maintained pursuant to a
Simplified Employee Pension Plan
arrangement see Article VI, "Simplified
Employee Pension," below. Inquiries
about this IRA plan should be directed to
the Texas Capital Value Funds, Inc., (the
"Sponsor") 1500 Forest Ave, Suite 111,
Richmond, VA 23229, (800) 628-4077.
What follows below is a brief summary of
the financial and tax consequences of
establishing this IRA.
I. Statutory Requirements
An IRA is a trust or custodian
account established for the exclusive
benefit of you and your beneficiaries.
Current law requires that your IRA
agreement be in writing and that it meet
the following requirements.
1. All contributions must be in cash
and, for any taxable year, cannot exceed
100% of your compensation or $2,000,
whichever is less, unless the
contribution is a rollover contribution
or an employer contribution to a
simplified employee pension plan (SEP).
2. The Custodian or trustee must be a
bank or other institution or person that
is approved by the Internal Revenue
Service to administer your IRA in
accordance with current tax laws.
3. None of your IRA assets may be
invested in life insurance contracts or
commingled with the assets of other
people except in a common trust fund or
common investment fund such as a mutual
fund.
4. Your interest in your IRA account is
fully vested and nonforfeitable at all
times.
5. Distribution from your IRA must be in
accordance with certain minimum
distribution rules, which are explained
in detail in Article III.
II. Eligibility and Contributions to the
IRA
A. Contributory IRA. If you earn
salaries or other compensation, or earned
income from self-employment, that is
taxable during the year for which the IRA
is being adopted and you have not yet
reached age 70 1/2, you are eligible for
an IRA. You may open an IRA for any year
at any time before the due date, without
extensions, for filing your Federal
income tax return for that year.
The Custodian will report the gross
amount contributed to your IRA during a
calendar year. You as the Depositor
should maintain a record of the year for
which each contribution is made and for
each tax deduction taken.
Annual contributions to an IRA may not
exceed 100% of your compensation or
earned income or $2,000, whichever is
less. Your contribution will be tax
deductible in full if you are not an
active participant in an employer
maintained retirement plan. If you are
an active participant in an employer
maintained retirement plan your deduction
for IRA contributions is reduced or
eliminated if your adjusted gross income
exceeds certain levels. If you are
married and either spouse files a joint
income tax return, or if you live
together with your spouse at any time
during the year, the active participant
rules apply if either spouse is an active
participant in an employer maintained
retirement plan. Your W-2 Form should
indicate whether you were an active
participant during the year. If you are
an active participant, the IRA deduction
will be reduced proportionately for an
adjusted gross income between $25,000 and
$35,000 (or $40,000 and $50,000) in the
case of married couples filing a joint
return, and $0 to $10,000 for a married
person filing a separate return). No
deduction will be allowed if your
adjusted gross income exceeds the phase-
out level. You may, however, make non-
deductible IRA contributions to the
extent that you are not eligible to make
deductible contributions. In addition,
even though a portion of your
contribution may be non-deductible, the
earnings in the IRA account will remain
tax-free until you withdraw them.
Your IRA plan can include your spouse if
you elect to treat him or her as a non-
employed spouse. The contributions could
then be increased to $2,250. In that
case, your spouse must be furnished a
disclosure statement and must sign a
separate IRA application. The
contribution(s) would be divided between
two separate accounts as you determine,
as long as no more than $2,000 is
contributed to either account.
If you are divorced, any taxable alimony
you receive under a divorce or separation
order or agreement counts as
"compensation" for purposes of
eligibility to establish an IRA.
B. Rollover IRA. If you received an
eligible rollover distribution (or a
distribution of accumulated qualified
voluntary employee contributions) from a
tax-qualified retirement plan as a result
of termination of employment, retirement,
disability, plan discontinuance, or a
distribution as a beneficiary of your
deceased spouse or pursuant to a
qualified domestic relations order, you
are eligible for a Rollover IRA.
Eligible distributions must be "rolled
over" within 60 days of receipt in order
to continue their tax-deferred status.
Rollover contributions are not deductible
on your Federal income tax return.
Any eligible rollover distribution to you
from a tax-qualified retirement plan
(including a 403(b) arrangement) is
subject to mandatory Federal income tax
withholding equal to 20% of the
distribution. You can avoid the
mandatory withholding by directing the
plan to send the distribution directly to
your IRA Custodian (this is called a
"direct rollover"). Your plan or 403(b)
sponsor will provide you with a notice
about direct rollovers, regular rollovers
and withholding taxes before you receive
an eligible rollover distribution.
You should maintain a separate IRA
account for your rollover contributions
(regular rollover or direct rollover) or
transfers of funds from another IRA to
avoid adverse tax consequences.
Additionally, you may open an IRA by
transferring funds from either (i)
another IRA that consists solely of
rollover contributions and any related
earnings or (ii) a tax-qualified
retirement plan, to an IRA.
There is no limitation on the amount of
contributions that may be made to an IRA
either as a rollover or as a transfer of
funds from another IRA Under current law,
you may make a rollover from another IRA
only once a year.
C. Deductibility of Contributions. As
explained in paragraph A, contributions
may be deductible from gross income on
your Federal income tax return depending
on whether you or your spouse is an
active participant in an employer-
maintained retirement plan and depending
on the amount of your gross income.
No deduction will be allowed for the
taxable year in which you reach age 70
1/2 or any year thereafter.
Rollover contributions, if properly made,
are not included in your gross income and
therefore are not deductible on your
Federal income tax return. You may make
a rollover contribution even if you are
age 70 1/2 or over.
D. Additional Tax on Excess
Contributions. Any amounts contributed
to an IRA in excess of the maximum
allowable contribution will be considered
"excess contributions," and are subject
to a nondeductible 6% penalty tax for
each year the excess remains in the IRA
Excess contributions may be corrected and
the 6% penalty tax avoided by withdrawal
of the excess and any earnings thereon
before the due date including extensions)
of the tax return for the tax year for
which the excess contribution was made.
No deduction should be taken for the
excess amount and the earnings will be
included in taxable income when the tax
return is filed for the taxable year of
the excess contribution. If this is
done, the returned contribution will not
be includable in your gross income, and
the contribution will not be subject to
the 6% penalty tax on excess
contributions (assuming the contribution
is not deducted on your return). The
earnings portion of such withdrawal may
be subject to a 10% additional premature
distribution tax if you are under age 59
1/2.
An excess contribution may be withdrawn
after the due date of the tax return
(including extensions) with the following
consequences:
(a) Any excess amount (but not including
earnings thereon) that does not exceed
$2,250 in one taxable year may be
withdrawn without being included in
income or being subject to a 10%
additional premature distribution tax.
No deduction should be taken for the
excess and an amended return should be
filed if one has already been taken.
(b) Any excess amount that exceeds $2,250
in one taxable year and any earnings on
an excess contribution withdrawn after
the due date for tax filing (including
extensions) will be includable in income
in the year received and will be subject
to any 10% additional premature
distribution tax that may apply.
Additionally, no deduction will be
allowed for the excess contribution for
the year in which it is made. If a
deduction has been taken, you must file
an amended return.
(c) Any excess contribution withdrawn
after the due date for the tax filing
(including extensions) for the year for
which the contribution was made is
subject to the 6% penalty tax on the
amount of the excess contribution for the
taxable year in which made and each tax
year that it is still in your IRA at the
end of the year.
You may also correct an excess
contribution to your IRA by treating the
excess amount as contributed to your IRA
in a subsequent year and by not
contributing the maximum amount for the
later year. You may be entitled to a
deduction for the amount of the excess
contribution that is applied in the
subsequent year, provided you did not
previously deduct the excess contribution
or, if you claimed a deduction, it was
disallowed by the Internal Revenue
Service).
E. Investment of Contributions. Under
the terms of your IRA, your contributions
will be invested by the First National
Bank of Boston in accordance with your
instructions. These investment
instructions may direct the Custodian to
invest your contributions to your IRA in
the Texas Capital Value Funds, (the
"Mutual Funds") that are allowable
investments under Article VIII, paragraph
1 of the Custodial Agreement. Your IRA
account documents provide that your
entire interest in any assets held in
your IRA is nonforfeitable at all times.
Since you are responsible for choosing
the Texas Capital Value Fund(s) in which
your IRA is invested, you are responsible
for the investment results achieved.
Ill. Distributions from the Custodial
Account
A. IRA Withdrawals and Distributions.
You may withdraw the assets in your IRA
in accordance with the terms of the
Custodial Agreement. In the event of
your death, a distribution will be made
in accordance with your instructions if a
valid designation of beneficiary form is
on file with the Custodian. If a valid
designation of beneficiary form is not on
file with the Custodian (or if there is a
designation but it does not completely
dispose of your IRA), the distribution
(or the portion not disposed of) will be
made to your estate.
B. Distributions Taxed as Ordinary
Income. In general, you are taxed on
distributions from your IRA as ordinary
income in the taxable year in which you
receive them. Exceptions to this rule
include any distribution that is properly
rolled over into another IRA or employer
tax-qualified plan as described in
Article 11.
If, however, you have made nondeductible
contributions to your IRA, a portion of
any distribution that you receive from
this or any other IRA will be treated as
a return of nondeductible contributions
not subject to tax. The special
provisions for 5-year or 10-year income-
averaging and capital gain treatment are
not available for "lump-sum
distributions" made from your IRA, even
though these provisions are available for
some distributions from certain employee
retirement plans.
C. 10% Additional Tax on Premature
Distributions. Your IRA is intended to
provide income for your retirement. For
this reason, except in case of your death
or disability, any distribution made
before you reach age 59 1/2 generally
will be subject to an additional tax (in
addition to ordinary income tax) of 10%
of the taxable amount of distribution.
The 10% additional tax will also apply if
you are deemed to receive a distribution
before age 59 1/2 because you either
borrow from your IRA or pledge your IRA
as security for a loan. The 10%
additional tax will not apply to any
distribution that is part of a series of
substantially equal periodic payments
made at least annually for your life or
life expectancy or the joint lives or
life expectancies of you and your
beneficiary. You should be aware,
however, that the 10% premature
distribution tax will be applied
retroactively (with interest) to all
prior periodic payments if you change to
a method of distribution that does not
qualify for the exception either before
you attain age 59 1/2 or during the first
five years of distribution.
D. Required Distributions.
Distributions must be made or begin no
later than April 1 of the calendar year
following the taxable year in which you
reach age 70 1/2. Distributions made in
the form of periodic installments or by
the purchase of an annuity contract must
be based on life expectancy. This means
that your entire interest must be
distributed, beginning no later than
April 1 of the year following the year in
which you reach age 70 1/2, over a period
not exceeding your life expectancy or the
joint life expectancies of you and your
designated beneficiary.
E. 50% Penalty Tax for Insufficient
Distributions. If distributions from
your IRA are less than the minimum
required to be distributed after you
reach age 70 1/2, a 50% penalty tax is
imposed on the difference between the
amount required to be distributed and the
amount actually distributed in that year.
F. 15% Additional Tax on Large
Distributions. Distributions from your
IRA may also be subject to a 15%
additional tax, if the amount of the
distribution received in any one year
(when combined with distributions
received by you from any other IRA and
any tax-qualified retirement plans or
403(b) arrangements) exceeds $150,000.
If you had account balances or accrued
benefits equal to at least $562,500 as of
August 1, 1986, you may have made an
election to "grandfather" the August 1,
1986 amount so that it is exempted from
the 15% additional tax. Other special
rules apply in certain circumstances and
you should consult your tax advisor if
you have questions regarding the tax.
G. Distribution Upon Your or Your
Spouse's Death. If you die before the
entire interest in your IRA has been
distributed, or if you have elected to
have your IRA distributed over a period
of time to you and your spouse, and your
spouse also dies before the entire
interest has been distributed, the
remaining interest must, within five
years after your death (or your spouse's
death), be distributed to your (or your
spouse's) beneficiary or beneficiaries
over the life of your (or your spouse's)
beneficiary or beneficiaries or for a
term not extending beyond the life
expectancy of your (or your spouse's)
beneficiary or beneficiaries, with
payments beginning no later than one year
after the date of your (or your spouse's)
death. If your beneficiary is your
surviving spouse, however, the required
beginning date may be delayed until the
year you would have reached age 70 1/2.
If no beneficiary has been named, or all
beneficiaries have predeceased you, the
distribution will be made to your (or
your spouse's) estate. The above rule
does not apply if at the time of your
death you were receiving payments for a
fixed term not to exceed your life
expectancy or the joint life expectancies
of you and your spouse. In this case,
the scheduled payments may continue to be
made to your beneficiary without regard
to these rules. Your spouse, as
beneficiary, may also elect to continue
your IRA as his or her own IRA by
executing a new Form 5305-A.
H. Rollovers. The proceeds of your IRA
may be used as a rollover contribution to
another IRA. Rollovers between IRAs may
occur no more than once a year. Amounts
that had originally been rolled over into
your IRA from an employer's or self-
employed tax qualified plan can be rolled
over again into another employees or self-
employed tax qualified plan if the IRA
has been a separate account to which no
annual IRA contributions are made.
IV. Tax Status of Custodial Account
A. IRS Approval. The IRA has not been
submitted to the IRS for approval because
the use of Form 5305-A, makes such
submission unnecessary.
B. Tax Exempt Status. Any funds or
earnings on any funds held in your IRA
are generally exempt from federal income
taxes and will not be taxed until
distributed to you, unless the tax-exempt
status of the IRA is revoked.
C. Loss of Exemption. The tax-exempt
status of your IRA will be revoked if you
engage in any of the prohibited
transactions listed in section 4975 of
the Internal Revenue Code, such as
borrowing money from the account. The
fair market value of your IRA will be
includable in your taxable income in the
year in which such prohibited transaction
takes place. If you have not reached age
59 1/2, the fair market value of your IRA
may also be subject to the 10% additional
tax as a premature distribution even
though no actual distribution has taken
place.
In addition, your IRA will lose its tax-
exempt status if you use it as security
for a loan. Any portion of your IRA used
as security for a loan will be taxed as
ordinary income in the year in which the
money is borrowed. If you are under age
59 1/2, the amount of the loan will also
be subject to the 10% additional tax as a
premature distribution, again, even
though no actual distribution has taken
place.
V. Additional Tax Information
A. Income Tax Returns. If you are
eligible to make deductible contributions
to your IRA, you may claim the amount of
your contributions as a deduction on your
Federal income tax return, even if you do
not itemize deductions. If you make
designated nondeductible contributions to
your IRA, you will be required to specify
these contributions on your income tax
return.
(a) Deductible and non-deductible IRA
contributions are reported on IRS Form
1040 or Form 1040A. You may choose to
file your Federal income tax return
before it is due (without extensions) and
report your IRA contributions before they
are made. You must, however, make the
contributions by the due date (without
extensions) of such return. To the
extent your contribution is deductible,
you can claim a deduction on your tax
return. To the extent your contribution
is not deductible, you must designate it
on Form 8606. There is a $100 penalty
each time you overstate the amount of
your non-deductible contributions unless
you can prove that the overstatement was
due to reasonable cause. You will also
be required to give additional
information on Form 8606 in years you
make a withdrawal from your IRA if you
fail to file a required Form 8606, there
is a $50 penalty for each such failure
unless you can prove that the failure was
due to reasonable cause.
1B. Penalty Taxes. In the event of one
or more of the following situations, you
will be required to file Form 5329,
"Return for Individual Retirement
Arrangement, at the time you file your
Federal income tax return: (1) you make
an excess contribution that is subject to
a 6% penalty tax, (2) you receive a
premature distribution before age 59 1/2
and must pay the 10% additional premature
distribution tax, or (3) you are subject
to the payment of a 50% penalty tax
because of an insufficient distribution
after age 70 1/2.
C. Distributions. When you receive
taxable distributions from your IRA, the
Custodian will send you the necessary tax
form, Form 1099-R to report the
distribution.
D. Federal Income Tax Withholding.
Federal law requires the withholding of
Federal income tax on amounts distributed
from an IRA, unless the individual
receiving the distribution elects not to
have withholding apply. Generally, the
amount of tax to be withheld for Federal
income taxes will be equal to 10% of the
amount of the payment. At the time Texas
Capital Value Funds receives a request
for a distribution from your IRA, the
Custodian will notify you of your right
to elect not to have withholding apply
and will provide you with the appropriate
election form.
Distributions from an IRA are not subject
to the requirement for 20% Federal income
tax withholding that applies to most
distributions from tax qualified
retirement plans and 403(b) arrangements.
Further information about your IRA can be
obtained from any district office of the
Internal Revenue Service.
VI. Simplified Employee Pension
A. Simplified Employee Pension or "SEP"
is a type of IRA plan that permits
employers to make deductible
contributions to the separate IRAs
established by their employees. Under a
SEP, an employer may make a deductible
SEP contribution directly to your IRA in
an amount up to the lesser of $30,000 or
15% of your compensation for the year.
In addition, certain SEPs may include a
salary reduction arrangement, under which
an employee may elect to have the
employer make contributions to the SEP or
make payment directly to the employee in
cash. Elective contributions pursuant to
a salary reduction arrangement are
subject to certain IRS rules and limits
and may generally not exceed $8,994 per
year. (This amount is for 1993 and is
indexed for future inflation.)
Effective for tax years beginning after
December 31, 1986, amounts you and your
employer contribute to a SEP are not
includable in your taxable income
regardless of whether you are an active
participant in a qualified retirement
plan. In addition, you may make
contributions to your own individual IRA
each year up to the lesser of $2,000 or
100% of your compensation (although these
additional contributions may not be
deductible)
To qualify as a SEP, the plan maintained
by your employer must meet specific
statutory employee participation and non-
discrimination requirements. If these
requirements are not met, employer
contributions to your IRA may be treated
as taxable compensation paid to you by
your employer and also as a personal
contribution of the amount to your IRA.
Such personal contributions would be
subject to the rules described above in
Article 11 regarding the limitations on
and deductibility of contributions to an
IRA.
VII. Financial Information
A. Distribution Statement. Growth in the
value of your IRA cannot be guaranteed or
projected. However, the income and
operating expenses of each allowable
investment that you select for your IRA
will affect the value of its shares and,
therefore, the value of your IRA. The
prospectuses of the Mutual Funds that are
allowable investments for your Texas
Capital Value Funds IRA contain
information regarding current income and
expenses of each of these investments.
Fees and other expenses of maintaining
your IRA may be charged to you or your
IRA. The Custodian's fee schedule is set
forth in Section B.
B. Fees and Charges. The First National
Bank of Boston, as the Custodian of your
IRA, currently charges an annual
maintenance fee of $10 per account. An
additional $_____ fee is charged for each
disbursement, other than an automatic
installment payout. The Custodian may
change any of its fees from time to time
and may pay all or any portion of the
fees to the Fund's Transfer Agent or
other agents or subcontractors performing
services with respect to your IRA.
Further information regarding charges in
connection with the administration of
your IRA is contained in the IRA
Application and the Fund's prospectus.
<PAGE>
Exhibit 16
Form of Plan Pursuant to 12b-1
The Board of Directors has adopted a
Distribution Plan (the "Distribution
Plan") pursuant to Section 12(b) of the
1940 Act and Rule 12b-1 (the "Rule")
thereunder after having concluded that
there is a reasonable likelihood that the
Distribution Plan would benefit the Fund
and its shareholders. Pursuant to such
Distribution Plan, and as compensation
for the services performed and the
expenses incurred by the Distributor
under this Agreement (including the
commissions and other fees and expenses
paid by the Distributor for the sale of
Fund shares), the Fund shall pay to the
Distributor on a monthly basis in arrears
a sistribution 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 the Distributor from this
compensation shall include a service fee
to each dealer, which service fee shall
equal 15/100 of one percent (0.15%) of
the Fund's shares owned by investors for
whom such dealer is the holder or dealer
of record.
In addition to the compensation set
forth above, for shares sold with a sales
charge, the 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.
Signatures
Pursuant to the requirements of the
Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has
duly caused this amendment to this
Registration Statement to be signed on
its behalf by the undersigned, thereto
duly authorized, in the City of Austin
the in State of Texas on June 7, 1996.
TEXAS CAPITAL VALUE FUNDS, INC.
by: Mark A.
Coffelt
Mark A Coffelt
President
Pursuant to the requirements of the
Securities Act of 1933, this amendment to
this Registration Statement has been
signed below by the following persons in
the capacities and on the date indicated.
Mark A. Coffelt President, Chief
Investment Officer and Director June
7, 1996
Mark A Coffelt
Edward Clark Director
June 7, 1996
Edward D. Clark
John Henry McDonald Director
June 7, 1996
John Henry McDonald
Janis Claflin Director
June 11, 1996
Janis Claflin
Eric Barden Acting Secretary
June 7, 1996
Eric Barden
