Fellow Shareholders,
The Net Asset Value of the Texas Opportunity Fund on
December 31, 1996 was $10.73. For the fourth quarter, your
fund was up 1.1% compared to a 7.1% total return for the
Martin Capital Management Texas 250 Index and 8.3% for
the S&P 500. Since the fund's inception on August 30,
1996, the Texas Opportunity Fund is ahead 7.3%, while the
MCM Texas 250 and the S&P 500 increased 11.7% and
14.4%, respectively.
Between December 31 and closure of the fund in early
February, the fund was up 3.5%%.
As you are aware, the Texas Opportunity Fund ceased
operations in February 1997. The primary reason for this
decision was the fund's not attracting assets quickly
enough to justify the ongoing operating expenses. Closing
the fund was a disappointment to us, as I'm sure it was to
you as well.
The performance of the fund did not contribute to the
decision to close the fund. Four months is not sufficient
time to judge any investment, investment manager. Our
reason for establishing, and presumably your reason for
investing in, a mutual fund focusing on Texas based
companies was that Texas has a more robust and rapidly
growing economy than the nation at large. As that rapid
growth continues, companies in Texas should perform
better than companies in other parts of the country.
Economic growth, and its translation into superior
investment performance of the companies generating that
growth, is a process measured in years, not months.
We at Martin Capital Management thank you for investing
your money in the Texas Opportunity Fund. We apologize
for the inconvenience of having to close the fund. Please
do not hesitate to contact us if you have any questions or
comments about the Texas Opportunity Fund.
Sincerely,
Paul Martin
Chief Investment Officer
<PAGE>
<TABLE>
short-Term Investments - 8.4%
<C> <C> <C> <C> <C>
Share Amount Issues Value ($) Assets
13,977 Bank of Boston Purchase 13,977 8.4%
Total Cash &
Cash Equivalents 13,977 8.4%
Common Stocks - 99.8%
Building Materials
100 Centex Corp. 3,763 2.3
100 Texas Industries 5,063 3.1
100 US Home* 2,600 1.6
11,426
Computer & Software
100 BMC Software* 4,138 2.5
100 Compaq* 7,425 4.5
100 Dell Computer* 5,313 3.2
200 STB Systems* 4,050 2.4
50 Texas Instr* 3,188 1.9
24,114
Commercial Services
100 Service Cp Int'l 2,800 1.7
100 Sterling Software* 3,163 1.9
400 Thomas Group* 3,600 2.2
9,563
Cosmetics
200 Helen of Troy* 4,400 2.7
Electric
100 Applied Mat* 3,594 2.2
300 Cyrix Corp* 5,325 3.2
200 Dallas Semi* 4,600 2.8
13,519
Financial
100 American Genl 4,088 2.5
200 Coastal Bancorp* 4,575 2.8
200 First USA 6,925 4.2
300 Southwest Sec* 4,500 2.7
300 Westbridge Cap* 2,925 1.8
23,013
Manufacturing
100 Cooper Ind. 4,213 2.5
248 Champion Ent* 4,836 2.9
9,049
Medical
200 Prime Medical* 2,175 1.3
Oil/Gas
100 Andarko Pet 6,475 3.9
100 Baker Hughes 3,450 2.1
100 Enron 4,313 2.6
100 Transocean Offshore 6,263 3.8
100 Southern Union* 2,200 1.3
200 Tesoro Pet* 2,800 1.7
100 Valero Energy 2,863 1.7
28,364
Pipes
1000 Kaneb Services* 3,250 2.0
100 Quanex Corp. 2,738 1.7
5,988
Retail
200 Schlotsky's* 2,000 1.2
200 Comp USA* 4,150 2.5
200 Pier One Imports. 3,525 2.1
200 Whole Foods* 4,500 2.7
14,175
Transportation
50 AMR* 4,406 2.7
200 Southwest Air 4,425 2.7
8,831
Utilities
100 SBC Commun 5,175 3.1
200 TNP Enterp 5,475 3.3
10,650
Total Common Stocks (Cost $159,375) 165,261
Total Investment Portfolio 179,238
Cash and Other Assets Less Liabilities -13,689
Net Assets - 100% 165,549
*Non-income producing security.
</TABLE>
1
<PAGE>
<TABLE>
Assets:
<C> <C>
Investments at Market Value $165,261
Cash & Equivalent 13,977
Dividends Receivable 35
Interest Receivable 178
Total Assets $179,451
Liabilities:
Operating Expenses 256
Management Fee 366
12b-1 Fee 66
Securities for Securities Purchased 12,910
Custodian Fees 304
Total Liabilities 13,902
Net Assets $165,549
Summary of Net Assets
Par Value @ .001 $15
Capital in Excess of Par 159,890
Accumulated Undistributed Net Income (249)
Accumulated Undistributed Realized Gain/Loss 0
Net Unrealized Appreciation 5893
Distribution Paid 0
Net assets applicable to outstanding shares $165,549
Shares Outstanding 15,431.677
Net asset value and redemption
price per share $10.72
</TABLE>
<TABLE>
Statement of Operations for the six months ended 12/31/96
<C> <C>
Investment Income
Dividends $286
Interest 178
Total Investment Income 464
Expenses
Operating Expense 256
Management Fee 366
12B-1 Fee 91
Total Expenses 713
Net Investment Loss (249)
Realized and Unrealized Gain (Loss) on Investments
Net Realized Gain (Loss) 0
Unrealized Gain (Loss) 5,893
Net Gain on Investments 5,893
Operations:
Net Investment Income (249)
Net Realized gain (Loss) 0
Unrealized Gain (Loss) 5,893
Increase (Decrease)
In Net Assets from
Operations 5,644
</TABLE>
3
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<C> <C>
Operations
Net Investment Income (249)
Net Realized Gain (Loss) 0
Unrealized Gain (Loss) 5,893
Increase (Decrease) in
Assets from Operations 5,644
Decrease in Net Assets from OperationsDistributions to Shareholders
Net Investment Income 0
Net Realized Gain on
Investments 0
Return of Capital 0
Decrease in Net Assets
from Distributions 0
Capital Share Transactions
Shares Sold 159,905
Shares Redeemed 0
Distributions Reinvested 0
159,905
Total Increase in
Net Assets 165,549
Net Assets
Beginning of Period 0
End of Period 165,549
Capital Share Transactions (Shares)
Shares Sold 6,631.677
Shares Redeemed 0
Distributions Reinvested 0
Increase (Decrease)
in Shares 6,631.677
</TABLE>
<TABLE>
Financial Highlights
For a Fund share outstanding throughout each period
<C> <C>
Period
Ended
12/31/96
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income (loss) (0.04)
Net Realized and unrealized gain 0.76
(loss) on investments
Total from investment income .72
Less Distributions 0
Distributions from net 0
Investment income
NAV end of period 10.72
Total Return 7.20%
Ratios/ Supplemental Data
Net Assets -- End of Period 165,549
Ratios to average net assets
Expenses* 1.95%
Net investment income (loss) (0.04)
Portfolio Turnover 0
</TABLE>
*Annualized
4
<PAGE>
1. Summary of Organization and Significant Accounting
Policies
Organization:
Texas Capital Value Funds, Inc. (the "Company") is registered
under the Investment Company Act of 1940, as amended, as an
open-end investment company. The Texas Opportunity Fund
(the "Fund") is a non-diversified series of the Company. The
Fund's investment operations commenced on August 30, 1996
and ceased operations February 5, 1997
Accounting Policies:
The policies described below are followed consistently by the
Fund in preparation of its financial statements in conformity
with generally accepted accounting principles.
Security Valuation:
Securities traded on a principal stock exchange or the National
Association of Securities Dealers' Automated Quotation System
("NASDAQ") are valued at the last quoted sales price or, in the
absence of closing sales prices on that day, securities are valued
at the mean between the closing bid and asked price.
Temporary cash investments are valued at cost plus accrued
interest which approximates market.
Security transactions and investment income:
Security transactions are accounted for on a trade date plus one
day basis, as is industry practice. Dividend income is recorded
on the ex-dividend date and interest income, including, where
applicable, amortization of premium and accretion of discount
on investments, is accrued daily, except when collection is not
expected. Realized gains and losses from securities transactions
are reported on an identified cost basis.
Distributions to shareholders:
Dividends from net investment income to shareholders and
distributions from realized gains on sales of securities are
recorded on the ex-dividend date. The amount of dividends and
distributions from net investment income and net realized
capital gains are determined in accordance with Federal income
tax regulations which may differ with generally accepted
accounting principles. These "book/tax" differences are
permanent in nature, such amounts are reclassified within the
capital accounts based on their tax-basis treatment. Temporary
differences do not require a reclassification.
Federal income taxes:
The Fund has complied and intends to continue to comply with
the requirements of the Internal Revenue Code applicable to
regulated investment companies. Therefore, no federal income
tax provision is required.
Cash & cash equivalents:
The Fund has defined cash and cash equivalents as cash in
interest bearing and non-interest bearing accounts.
2. Securities Transactions
Purchases and sales:
The aggregate cost of purchases of unaffiliated and affiliated
issuers (as defined in the Investment Company Act of 1940,
ownership of 5% or more of the outstanding common stock of
the issuer) for the period ended December 31, 1996, was
$165,267 and $0, respectively. The portfolio of stocks was
completely liquidated by February 5, 1997. All the companies
were unaffiliated.
3. Investment Advisory Services and Distribution Agreement
The Fund has an Investment Advisory Agreement with Martin
Capital Management (the "Adviser") for investment advice and
certain management functions. From the inception of the Fund
through February 5, 1997, the cessation of Fund operations, the
terms of the Investment Advisory Agreement provided for a
monthly fee of 1/12 of 1.7% (an annual fee rate of 1.7%) on the
first five million dollars ($5,000,000) of the average daily net
assets of the Fund payable each month. Such fees shall be
accrued daily and payable monthly in arrears on the first day of
each calendar month. Additionally, under the terms of the
Investment Advisory Agreement, the Advisor pays
administrative expenses on behalf of the Fund.
Pursuant to a distribution agreement, which was executed on
October 12, 1995, Choice Investments, Inc., a registered broker-
dealer and an affiliate of the Fund, receives and retains the
portion of the sales load which is imposed on sales of shares and
not reallowed to other dealers. For the semi-annual period
ended December 31, 1996, Choice Investments, Inc. has advised
the Fund that as underwriter and distributor it retained sales
charges of $124.
4. Related Party Transactions
Choice Investments, Inc., the Company's Distributor, was paid
no commissions for executing Fund transactions.
5. Transaction Related Custodial Expenses
Bank of Boston, N.A. serves as custodian for the Fund. For
these services Bank of Boston, transaction related fees of $664
were accrued from Fund inception to Fund closure, February 5,
1997
For Questions Regarding:
Management of Portfolio
(512) 477-5855
Shareholder Accounts/Account Set-Up
(800) 628-4077
5
<PAGE>
Texas Opportunity Fund
Semi-Annual Report
December 31, 1996
This report is for the shareholders of the Texas Opportunity Fund.
Its use in connection with any offering of the Company's shares is
authorized only in case of a concurrent or prior delivery of the Company's
current prospectus. Choice Investments, Inc. is the Distributor of
the Company.
The Fund commenced operations on August 30, 1996
6
<PAGE>
