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. 6
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 paragraph (a)(1) |_|
75 days after filing pursuant to paragraph (a)(2) |_|
On (date) pursuant to paragraph (a)(2) of rule 485 |_|
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
TEXAS CAPITAL VALUE FUNDS, INC.
CROSS REFERENCE SHEET
PART A
------
FORM N-1A ITEM NO. SECTION IN PROSPECTUS
1. Front and Back Cover Pages.......... Same
2. Risk/Return Summary: Investments,
Risks, and Performance............. What risks are involved?
What can the Funds Invest In?
What else do I need to know before
investing?
How have the Funds performed?
3. Risk/Return Summary: Fee Table..... What Fees and Expenses do I pay?
4. Investment Objectives, Principal
Investment Strategies, and
Related Risks..................... What are the Funds' Investment
Strategy?
What Risks are Involved?
5. Management's Discussion
of Fund Performance............... Not Applicable
6. Management, Organization, and
Capital Structure................. How are the Funds Set Up?
Who Runs the Funds?
7. Shareholder Information............ What Else do I Need to Know Before
Investing?
How Can I Reach the Funds?
8. Distribution Arrangements.......... How are the Funds Set Up?
How do I Purchase Shares?
9. Financial Highlights Information... How Have the Funds Performed?
<PAGE>
USAA MUTUAL FUND, INC.
CROSS REFERENCE SHEET
PART B
------
FORM N-1A ITEM NO. SECTION IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page and Table of Contents.... Same
11. Fund History........................ Fund History
12. Description of the Fund and
Its Investments and Risks.......... Investment Objective and Policies
13. Management of the Fund.............. Investment Advisor
Directors and Officers
14. Control Persons and Principal
Holders of Securities.............. Principal Holders of Securities
15. Investment Advisory and
Other Services..................... Directors and Officers
Investment Advisor
Service Providers
16. Brokerage Allocation and
Other Practices.................... Brokerage
17. Capital Stock and
Other Securities................... Voting
Fund History
18. Purchase, Redemption, and
Pricing of Shares.................. Purchase and Redemption of Shares
Net Asset Value
19. Taxation of the Fund................ Tax Status
20. Underwriters........................ Distribution of the Funds
21. Calculation of Performance Data..... Performance Information
22. Financial Statements................ Cover Page
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
PART A - PROSPECTUS
Texas Capital Value Funds - Prospectus
Table of Contents
What is Each Funds Investment Strategy? 2
What Risks are Involved? 2
What Fees and Expenses Do I Pay? 3
How do I Purchase Shares? 5
How do I Sell Shares? 6
What Can the Funds Invest In? 8
What is the Charitable Giving Program? 9
How are the Funds Set Up? 9
Who Runs the Funds? 9
What are the Funds Brokerage Policies? 11
How are Fund Distributions and Taxes Handled? 12
Do the Funds Offer Retirement Accounts? 12
What Else do I Need to Know Before Investing? 13
How Have the Funds Performed? 13
How Can I Reach the Funds? 16
Phone Numbers
Existing Accounts: 888-839-4769
New Accounts & Information: 888-839-7424
512-458-8165
Ticker Symbols Value & Growth Portfolio TCVGX
Mid-Cap Focus Portfolio Not assigned
This prospectus tells you what you need to know about the Value & Growth
Portfolio and the Mid-Cap Focus Portfolio, before you invest. Each portfolio
is commonly known as a mutual fund and is a separate, non-diversified, open-end
investment series of the Texas Capital Value Funds, Inc., the Fund complex.
First Austin Capital Management, Inc. manages and administers the Funds and will
be referred to as "we" or "us" in this prospectus. You should read this
prospectus carefully before you invest and keep it for future reference.
If you want more detailed information, a Statement of Additional Information
dated January 31, 1999 has been filed with the Securities and Exchange
Commission and referenced in this Prospectus. You may obtain a copy without
charge by downloading it from our website at www.firstaustin.com, by writing the
Fund, or by calling 888-839-7424. The Securities and Exchange Commission
maintains an internet site www.sec.gov that contains the Statement of Additional
Information, other material incorporated by reference, and other information
about companies that file electronically with the Commission.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This Prospectus is not a solicitation by any Fund for the sale of shares in
states in which the offering is not authorized. No one is authorized by the
Funds to give information or make representations that are different from any
material issued by the Funds or its Distributor. No one should rely on any
other information or representation.
WHAT IS EACH FUNDS INVESTMENT STRATEGY?
Objectives
Value & Growth Portfolio
Capital appreciation by investing in equity
securities of small domestic and foreign corporations.
Mid-Cap Focus Portfolio
Capital appreciation and, to a lesser extent,
income by investing in equity securities of
mid-cap domestic and foreign corporations.
How are the Funds similar?
We will seek to achieve our objectives by purchasing and holding stocks. For
both Funds, we practice quantitative techniques in the selection of stocks using
a computer screening process to assist us in finding investment opportunities.
Our screening process concentrates on a few of a company's fundamental ratios
such as market price relative to company earnings (P/E), market price relative
to company cashflow (P/CF), and market price relative to company net worth or
bookvalue (P/B). We consider companies undervalued when these ratios are below
average when compared to the market. These are by no means the only ratios that
are considered, but they weigh heavily in the selection of securities.
Qualitative factors are considered in investment selection, but their influence
is usually minimal.
Academic research and studies have shown that portfolios with low fundamental
ratios described above may be associated with higher long-term investment
results. You should be aware that this strategy may be subject to greater
investment risk.
How are the Funds different?
For the Value & Growth Portfolio, we seek capital appreciation by investing in
smaller capitalization companies that are undervalued. Smaller companies have
historically outperformed large companies over long periods, but also have shown
significantly higher volatility.
For the Mid-Cap Focus Portfolio, we seek capital appreciation by investing in
undervalued mid-cap companies. Mid-Cap companies are relatively well-known
companies whose stocks are listed on one of the major exchanges and trade
relatively frequently. Most Mid-Cap companies have market capitalizations
between $2 billion and $10 billion. Company dividends are more important here.
You should read What Can the Funds Invest In? and What Risks are Involved on
pages 8 and 2 respectively, for more detailed information.
WHAT RISKS ARE INVOLVED?
Market Risk
Market Risk involves the possibility that the Fund's investments in equity
securities will decline because of falls in the stock market, reducing the
value of individual company's stocks regardless of the success or failure of an
individual company's operations.
Small Capitalization Company Risk
Small capitalization company risk involves the greater risk of investing in less
well-known companies that are smaller, especially those that are traded
infrequently, than investing in larger, frequently traded companies with proven
track records. This risk applies primarily to the Value & Growth Portfolio.
Non-diversification Risk
The Funds are non-diversified funds, meaning that they have the ability to
invest a larger percentage of their overall assets in any one stock than do
diversified funds. You should be aware that this ability may pose a greater
than average risk by becoming more sensitive to a single economic, political, or
regulatory occurrence.
Year 2000 Risk
The Funds, the distributor, the transfer agent, the custodian, the stock
exchanges, and we at the Fund's advisor, rely heavily on computers. The year
2000 may have an adverse impact on the Fund and you should be aware that all
parties involved are taking measures to minimize potential problems. The
individual securities held in the Funds are also subject to risk from the turn
of the century. You should be aware that many of the companies we may hold in
the Funds may not be prepared for the year 2000 and as a result could incur
losses that could adversely affect their stock price.
Other Risks
Other risks of investing in the Funds include the risks of foreign investing,
investing in real estate investment trusts (REITs) and cash equivalents. The
individual Funds are not designed to be a complete investment program for
investors. As with all Mutual Funds, losing money is a risk of investing in the
Funds.
As you consider an investment in these Funds, you should also take into account
your tolerance for the daily fluctuations of the financial markets and whether
you can afford to leave your money in the Funds for long periods of time to ride
out down periods.
An investment in this Fund is not a deposit of any bank,
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
The bar chart and table below illustrate the variability of
You should read the following financial table in conjunction with the Fund
company's annual report and Statement of Additional Information which can be
obtained at no cost to you by calling the Fund directly or visiting the Fund's
website at www.firstaustin.com. The Statement of Additional Information and the
Fund company's annual report contain notes and specifics that are helpful in
evaluating each Fund's performance. Tait, Weller & Baker, LLP, the Investment
Company's independent certified public accountant has audited each Funds
financial statements for fiscal year end 1998, and their report is included in
the Fund company's annual report.
The bar chart and table below illustrate the variability of
the Funds returns and the risks of investing. The bar chart shows how
performance has varied from year to year. The table compares the Funds
performance to that of a broad-based market index. This information is based on
past performance. It is not a prediction of future results.
The inception date for Value & Growth was 11/6/95. 1/1/98 to 9/30/98, the
Portfolio is down 19.27%. Sales loads were not reflected in these performance
numbers. If they were reflected, returns would be less than shown.
Mid-Cap Focus has not had a full calendar year of operation. Please refer to
the table below for information on this Portfolios performance.
Best Quarter for above period: 20.46%
Worst Quarter for above period: -1.60%
<TABLE>
Returns compared to Russell 2000
<CAPTION>
Value & Growth Russell 2000
<S> <C> <C>
1997 45.54% 22.36%
1996 26.33% 16.49%
</TABLE>
The returns for the Russell 2000 include dividends reinvested.
WHAT FEES AND EXPENSES DO I PAY?
<TABLE>
When you buy and hold the Funds you are subject to the following fees and
expenses:
<CAPTION>
Value & Mid-Cap
Growth Focus
<S> <C> <C>
Maximum Sales
Load for Purchases: 4.5% 4.5%
Sales Load for
Reinvested Dividends: None None
Deferred Sales Load: None None
Exchange Fees: None None
Redemption Fees: See Below See Below
Management Fees 1.00% 1.00%
12b-1 Fees 0.25% 0.25%
Other Expenses 0.42% 0.70%
Total Operating
Percentage: 1.67% 1.95%
</TABLE>
Example
The following table should help you understand the various costs and expenses
that you would bear as a shareholder in the Funds and compare them to other
Funds. The example assumes that you purchase $1000 and pay the maximum sales
load and earn a 5% annual rate of return and redeem at the end of the periods.
<TABLE>
Value & Growth Mid-Cap Focus
<CAPTION>
<S> <C> <C>
1 year $61 $63
3 years $94 $103
5 years $130 $144
10 years $231 $259
</TABLE>
You should not consider this example to be representative of past or future
expenses or performance. Your actual expenses may be greater or less than shown
above. Our advisory fee is higher than that paid by most funds.
12b-1 Plan
The Investment Company has adopted a plan under rule 12b-1 that allows the Funds
to pay distribution fees for the sale and distribution of its shares.
Specifically agents (brokers) of registered broker-dealers will distribute
shares, and you will be charged, and your broker will collect, .25% of average
daily net assets on the amount invested in the Funds. For investors who invest
directly with the Fund, the Distributor will be the broker on the account. All
12b-1 fees will accrue daily and be paid monthly. According to the 12b-1 Plan,
the services provided by selected broker-dealers are primarily designed to
promote the sale of shares of the Funds and include the furnishing of office
space and equipment, telephone facilities, personnel, and assistance to the Fund
in servicing shareholders.
The fees collected under the 12b-1 plan may be used to pay for Fund supermarket
fees. Supermarket fees are charged by financial institutions so that the Fund
may be available for purchase and sale in a mutual fund marketplace.
Because the fees are ongoing, the distribution expense may increase the cost of
your investment and may cost you more than if such amounts had been paid as an
initial sales charge.
Sales Charges
The Funds are distributed through the broker-dealer community at an offering
price which includes a sales charge. If you wish to purchase shares, the charge
will be levied against the purchase amount, and it will be paid to your broker
and the Distributor unless you meet one of the requirements below.
<TABLE>
Sales charge as a percentage of assets invested
<CAPTION>
amount of dealer discount
transaction price value as a % of price
<S> <C> <C> <C>
less than $50,000 4.5% 4.71% 4.0%
$50,000 but less than $100,000 4.0% 4.17% 3.5%
$100,000 but less than $250,000 3.5% 3.63% 3.0%
$250,000 but less than $500,000 2.5% 2.56% 2.25%
$500,000 but less than $1 million 2.0% 2.04% 1.75%
$1 million * and up 1.0%* 0% 0%
</TABLE>
*for single purchases aggregating $1 million or more, you will not pay an
initial sales charge. The fund's advisor will pay the authorized broker the
lesser of 1% or $15,000. On these purchases, a contingent deferred sales charge
of 1% is levied on redemptions occurring within 1 year of the initial
investment.
Ways to reduce or avoid paying the sales charge
Aggregation of Accounts
If you fit into one of the following categories, then you may aggregate accounts
to qualify for a reduced sales charge:
an individual, his or her spouse, or their
children under 21 purchasing for their own account.
a trustee or other fiduciary purchasing for a
single fiduciary account (including an estate,
pension, profit sharing, or employee benefit
trust qualified under IRS Code Section 401)
employee benefit plans of a single employer
or affiliated employers.
Statement of Intention
You may write a letter of intent to invest $50,000 or more within a 13 month
period and qualify for the reduced sales charge in the table above. Forms for
this may be obtained from the Fund by writing or calling the Transfer Agent at
888-839-4769.
A letter of intent is not an obligation, but if you do not meet the goals
detailed in the letter, you are required to pay the difference between the sales
charge actually paid and the one that would have been required had you not
signed the letter of intent.
Rights of Accumulation
You may get a cumulative discount by adding your current purchase to the net
asset value of all shares (based on prices for the previous day) previously
purchased and still owned in the Fund. To benefit from a right of accumulation,
you must identify and communicate to the Fund shareholder service staff in
writing all links to other accounts.
Sales Charge Exemptions
If you fit into one of the following categories, you are exempt from the sales
charge:
Charter Shareholder (shareholders with at
least $10,000 with the Fund before
December 31, 1995)
Shareholder meeting the requirements of a
Board approved investment program
Qualified pension or profit sharing plans with ten or
more employees
Directors, Officers and Employees of the
Fund, Advisor, and Distributor and their
family members and retirement plans
Registered Representatives of the NASD
buying for their own account
Discretionary accounts of bank trust
departments
Registered Investment Advisors buying for
their clients and themselves
Charities and religious organizations as
defined by IRS Code 501(c)3
Transfers from other mutual funds, excluding
money market funds (funds that value their shares
using Rule 2a-7 of the Investment Company Act
of 1940) when dealing directly with the
Distributor.
Redemption Fee
The Funds can experience substantial price fluctuations and are intended for
long-term investors. Short-term market timers who engage in frequent
purchases and redemptions can disrupt the Funds investment programs and create
additional transaction costs and account setup fees. For these reasons, the
Fund will assess a 2% fee on redemptions (including exchanges) of Fund shares
purchased and held for less than 90 days if the investor did not pay a sales
load on shares purchased. Redemption fees will be paid to the Distributor to
offset account costs. The Fund will use the FIFO (first-in, first-out) method
to determine the 90 day holding period. Under this method, the date of
redemption or exchange will be compared with the earliest purchase date of
shares held in the account. If the holding period is less than 90 days, the fee
will be assessed.
This fee does not apply to shares held as of January 31, 1999. In addition, the
fee does not apply to any shares purchased through reinvested distributions
(including dividends and capital gains). The Fund may waive the redemption fee
at its discretion.
<TABLE>
Other Fees
<CAPTION>
<S> <C>
Traditional and Roth IRA fees $12.50
Education IRA fees $5.00
Refund of excess contributions $15.00
Distribution to participant $15.00
Transfer to successor trustee $15.00
Wire fee $12.00
NSF fee $20.00
</TABLE>
Other fees may be charged by other advisors, broker-dealers, or financial
institutions in connection with purchases or sales of the Funds.
HOW DO I PURCHASE SHARES?
You may obtain copies of our application forms through our web site at
www.firstaustin.com or by calling 800-839-4769.
Purchases through a broker
You may purchase shares in the Fund through any broker-dealer that has signed a
sales agreement with the Fund or its affiliates. Broker-dealers may place Fund
orders on behalf of shareholders by calling the Distributor. Some financial
intermediaries may accept purchase and redemption orders for the Fund and may
have a specialized agreement with the Fund for settlement and payment. The
broker-dealer is responsible for placing purchase orders promptly with the
Distributor and forwarding payment within three business days. Orders will be
processed only after receipt in good order.
Direct Purchases
All completed applications and checks go to:
Sending via U.S. Mail
Texas Capital Value Funds
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Sending via overnight courrier
Texas Capital Value Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Mutual Fund Services
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Whenever you write a check, make sure you include your account number and the
name on your account. You do not need a certified check, but the check must be
drawn on a U.S. bank in U.S. dollars. Your purchase will be processed at the
public offering price next calculated after the request is received in good
order. A fee may be imposed if your check does not clear.
Include the following information on all wire transfers
Texas Capital Value Funds, Inc.
c/o Firstar Trust Company
ABA# 075000022
DDA# 112952137
Shareholder Name
Social Security Number or Tax ID number
Account Number
Amount of Wire
Indicate intial or subsequent investment
Call 888-938-4769, and notify the transfer agent whenever you are wiring money.
They can give you an account number over the phone if you are a first time
investor.
You cannot redeem your investment if you purchased
by wire until one business day after the completed
account application is received by the Fund.
The Fund reserves the right to reject all or part of any purchase. If your
payment and completed application are received in proper form before the close
of trading on the New York Stock Exchange (currently 4:00 PM EST), Fund shares
will be purchased at the next offering price calculated after trading closes.
Minimums
The minimum you may invest is $2000 unless you are using the Autovest Plan
described below or unless we, at our discretion, waive the minimum. Subsequent
investments are subject to a $100 minimum. The Fund can raise or lower minimums
at its discretion.
Autovest Plan
Under the Autovest Plan, your money will be transferred from your bank account
to your account with Texas Capital Value Funds on or about the 15th of each
month or quarter. You can participate in the Autovest Plan by filling out the
appropriate section of the New Account Forms. You are obligated to contribute
at least $2000 the first year of the plan. You may obtain more information by
calling the Transfer Agent.
HOW DO I SELL SHARES?
You may redeem all or part of your investment at closing net asset value any day
the New York Stock Exchange is open. Redemption price is the next net asset
value per share determined after your request is received in good order.
Things you should know about redeeming your shares:
Checks will be remitted to the address of
record only.
If you request a wire, another $10 will be
charged as a wire fee.
You bear the risk of a loss that may result
from unauthorized or fraudulent transactions that
the Transfer Agent believes to be genuine.
All owners of the account must sign
redemption documents.
The Fund may require additional documents
in the case of shareholder death, corporate
accounts, agent or fiduciary.
Payment of redemption proceeds will be no
later than the 7th day after receipt of signature
guarantees and other necessary documents.
The Fund may suspend the right of redemption
in extraordinary circumstances in accordance with
the rules set by the Securities and
Exchange Commission.
If you redeem shortly after purchase by check,
the Fund will wait for notification that the check
has cleared before processing your request. This
could take up to 15 business days from the
purchase date.
A redemption may result in recognition of a
gain or loss to the shareholder for Federal
Income Tax purposes.
Redemption fees apply if you redeem within 90
days of purchase, see Redemption Fees
Written request for redemption
You may redeem your shares directly through the Fund via written request. For
any amount over $5000 you will need a signature guarantee as discussed below.
Telephone redemptions
You may redeem shares over the telephone only if you requested telephone
redemption privileges on your account application. If you did not request this,
you may do so in writing to the Transfer Agent with an accompanying signature
guarantee.
Things you should know about telephone redemptions:
You cannot redeem over the telephone if
you paid by check and the payment has been
on the books for less than 15 days.
If the transfer agent is handling a large
volume of calls you may have to send a
redemption request via overnight mail.
The Transfer Agent may ask certain
questions that are designed to help confirm
your identity as the shareholder of record.
Situations involving redemptions
If you redeem shares and then within 60 days change your mind, you may reinvest
the redemption amount without paying the sales charge. This may be done once
per shareholder. This one-time exemption is not used up if your intent is to
reinvest the redemption amount in an IRA or Pension. If you realized any
taxable gains on your redemption, this privilege will not alter your
responsibility to the IRS. If you realized a loss, depending on the timing and
amounts of the reinvestment, you may not be allowed to take the loss for tax
purposes. Please consult your personal tax advisor before making these
decisions.
If your account, because of redemptions, falls below $2000 and is not a
retirement account or a UGMA/UTMA account then the Fund may redeem shares in
your account. This does not apply if your account falls below $2000 because of
a drop in Net Asset Value. If the Fund determines to make an involuntary
redemption, you will be notified that your account is less than $2000 and you
will have 30 days to bring your account value up to $2000 by investing more
money before the Fund takes any action.
Signature Guarantees
To protect you and the Fund from fraud, signature guarantees are required for
the following:
All redemptions where the check to payable
to anyone other than the shareholder of
record or address for check remittance is
different than the address of record.
All requests to tranfer the registration of
shares to another person.
All authorizations to establish or change
telephone redemption privileges other than the
original account application.
Whenever you redeem by mail. In this
case the guarantee must be on a written
request or separate stock power assignment
specifying number of shares.
The Fund may waive any of the above
requirements in certain instances.
Where To Get a Signature Guarantee
Participants in good standing of the
Securities Transfer Agents Medallion
Program ("STAMP")
Commercial banks which are members of
the Federal Deposit Insurance
Corporation ("F.D.I.C.")
Trust companies
Firms that are members of a domestic
stock exchange
Eligible guarantor institutions qualifying
under Rule 17Ad-15 of the Securities
Exchange Act of 1934 that are authorized by
charter to provide signature guarantees
Foreign branches of any of the above
The Transfer Agent cannot honor guarantees from notaries public, savings and
loan associations, or savings banks.
WHAT CAN THE FUNDS INVEST IN?
We may make changes in the Funds consistent with the each Fund's policies when
we believe doing so is in the best interest of the Fund. We anticipate Fund
turnover to be higher than average for most Funds, but we do not expect that it
will exceed 150% per year. High turnover may increase transaction costs and
increase taxable gains. We consider these effects when evaluating short-term
investments. We will invest the Funds primarily in common equities listed on
the major U.S. Stock Exchanges, including American Depository Receipts, or
securities convertible into common stocks. Up to 33% of each Fund's investment
portfolio may include foreign based companies.
We do not use hedging techniques or short sales in the portfolios, nor do we use
derivative investments. However, each Fund may hold cash, money market
instruments, notes or bonds, or enter into repurchase agreements, all of which
will be investment grade as determined by Moody's Investor Service Inc., or
Standard & Poor's Corporation rating agencies.
The Funds are non-diversified, which means each Fund must follow these
guidelines:
Neither Fund may invest more than 25% of
its total assets in any one issuer other than U.S.
government securities.
At the close of each quarter of the taxable
year, at least 50% of the value of each Fund
must be represented by:
Cash and cash items, including U.S.
government securities
Other securities of different issuers
in which each Fund cannot invest
more than 5% of its assets, and at
the same time, cannot own more
than 10% of any one issuer.
We seek diversification only to be invested adequately in securities that we
believe have a greater potential to outperform while maintaining our federal
non-taxable status under Sub-Chapter M of the IRS Code.
The Funds may, from time to time, take temporary defensive positions that are
inconsistent with the Funds principal investment strategies in attempting to
respond to adverse market, economic, political, or other conditions. By taking
a temporary defensive position, the Funds may not achieve their investment
objectives.
WHAT IS THE CHARITABLE GIVING PROGRAM?
We (the advisor) will donate up to 10% of our net earned proceeds from the
advisory fees from the two Funds to various charities each year. Shareholders
who have investments in the Funds worth at least $15,000 will have the
opportunity to designate any charity that falls under the non-profit 501(c)3
Section of the IRS Code. Since it is the Advisor (not the Fund) that is writing
the check, there are no tax deductions for shareholders, nor is there any impact
on the value of Fund holdings. The amount to be donated will be decided by us.
Information on how you designate a charity will be in the annual reports.
HOW ARE THE FUNDS SET UP?
Texas Capital Value Funds, Inc. is a series fund incorporated in Maryland. It
is authorized to issue 100 million shares each with $.0001 par value. It has
four series, only two of which are available for purchase, each representing a
separate investment Fund and each allocated 25 million shares. The Board of
Directors can classify or allocate shares to the Fund company or each separate
series at its discretion. Each share represents one vote on matters relating to
that Fund. There will normally be no meetings of the shareholders for the
purpose of electing Directors until and unless less than a majority of the
Directors holding office have been elected by shareholders. Each series
currently has a fiscal year ending September 30th.
WHO RUNS THE FUNDS?
Mark A. Coffelt, CFA
Chaiman of the Board of Directors of the Company and Chief Investment Officer of
the Advisor, manages the investment program of these two Funds and is primarily
responsible for their day-to-day management. He is a Chartered Financial
Analyst of the Association of Investment Management and Research. Prior to
founding the Investment Companys advisor, First Austin Capital Management, Inc.
in 1987, he was Controller of Racal-Milgo, a data communications company. He
received his B.A. in economics from Occidental College and his MBA
from the Wharton School at the University of Pennsylvania.
B. David Flora IV
Co-Portfolio Manager
Mr. Flora attended the University of Texas where he earned a BA in Finance. His
previous investment experience includes serving as Vice-President for Comerica
Securities, Senior Consultant and Assistant Vice-President for Banc One
Securities, and Investment Executive for PaineWebber. Mr. Flora joined First
Austin Capital management, Inc. in January 1997. He is a CFA level III
candidate.
Eric D. Barden
Co-Portfolio Manager
Mr. Barden received a BA in Government and Economics from the University of
Texas. He joined First Austin Capital management in 1995. Previously, Mr.
Barden was employed by Electronic Data Systems as an information systems
associate and by Neosho Basin Development Company as a consultant. Mr. Barden
is a CFA level III candidate.
Investment Advisor
First Austin Capital Management, Inc., is the advisor to the Funds, and a
registered investment advisor with the Securities and Exchange Commission. The
address for First Austin Capital Management, Inc. is:
1600 West 38th Street, Suite 412
Austin, TX 78731
Mark Coffelt is the President and Chief Investment Officer of First Austin, and
Chairman of the Board of Directors and President of the Fund Company. He
founded the company in 1987 and First Austin now manages many other
discretionary accounts other than the Funds, including individuals and
institutions. The Board of Directors approved an Investment Advisory and
Administrative Contract between the Fund Company and First Austin Capital
Management, Inc. on August 13th, 1998. The Advisor provides day-to-day
investment management services to the Funds, and also is responsible for
administration.
Advisory Agreement
Under the advisory agreement, First Austin will furnish investment advice to the
Funds and continuously review and recommend to the Company when and to what
extent securities should be purchased or disposed of. The advisory agreement
can 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 60 days prior written notice to us. In the event of an
assignment by the Advisor of investment advisory services, the advisory
agreement will terminate automatically. Ultimate decisions regarding investment
policy and individual purchases and sales of securities for the Funds are made
not by the Advisor but by the Investment Company's Officers and Directors.
All Fund costs will be borne by us as part of fees charged with the exception of
extraordinary legal expenses as determined by the Board of Directors, brokerage
commissions, and custodial charges based upon transactions in the Funds.
Marketing expenses will be primarily borne by the Distributor. For advisory
services, the Company has agreed to pay us a flat fee of 1.00% per year. The
advisory fee paid is higher than that paid by most investment companies. The
Advisor has also absorbed all of the organizational costs associated with the
Funds.
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 as part of its Advisory and Administrative
Contract with the Fund company.
Transfer Agent and Accounting Services
The Company has contracted with Firstar Trust Company, Inc. for transfer agent
and accounting services. You should call the transfer agent with questions
about setting up or maintaining your account.
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.
Distributor
The Fund's Underwriter and Distibutor is Rafferty Capital Markets, Inc., an NASD
registered broker-dealer.
WHAT ARE THE FUNDS BROKERAGE POLICIES?
Soft-Dollars
The Fund requires all brokers who effect securities transactions to give prompt
execution at favorable prices. Some brokers provide research and trade
execution services to the Fund for commission rates that are higher than the
lowest available rates (soft dollars). We will only use brokers that charge
rates that are reasonable and commensurate with the services they provide. We
will only effect securities transactions at higher than the lowest available
rates if the benefits provided by the broker assist us directly in the
investment decision making process and the commission rates are reasonable. You
should be aware that brokerage is the property of the client, and it is our
responsibility to trade solely for the benefit of the clients of First Austin
and not for the benefit of the Advisor itself. Some Fund transactions that
provide research and trading services benefits some or all of the Advisors
clients. And conversely, research and execution serivices provided through
trading the Advisor's other acounts may benefit the Fund's shareholders. In our
opinion, it is impossible to separately determine the benefits from research
services for each advisory account.
HOW DO FUND DISTRIBUTIONS AND TAXES WORK?
Each Fund will pay out almost all of the investment income and realized capital
gains that it accumulates through its investments. By doing this, each Fund
will be relieved of federal income tax on the amounts distributed to
shareholders under the Internal Revenue Service code Sub-Chapter M. In order to
qualify for relief, at least 90% of each Fund's profits must come from
dividends, interest and gains from securities transactions. Each Fund must also
qualify as a non-diversified mutual Fund.
The portion of the distribution attributed to long-term gains in the Funds'
investments will be passed through and become your responsibility as a
shareholder as long-term capital gains regardless of the amount of time you have
owned the Fund.
All short-term capital gains and income realized by the Fund will also be passed
through and become your responsibility as a shareholder. These gains will be
taxed at your ordinary income tax rate. Investment income received by each Fund
from investments in foreign countries may be subject to foreign income taxes
withheld at the source. We do not anticipate that a Fund will "pass through"
these taxes to shareholders, but instead, it will deduct them.
Distributions will be paid at least annually and if necessary may be authorized
more often by the Board of Directors.
You should realize that purchasing shares shortly before distribution payout may
adversely affect you by reducing the net asset value by the amount of the
distribution and leaving you with a tax liablity.
The distributions that each Fund makes will be automatically reinvested with no
sales charge, unless you specify on your application forms that you wish to be
paid the distribution in cash.
The Fund is required to withhold 31% of reportable payments to shareholders who
have not complied with IRS regulations. To avoid this withholding, you must
provide the following information on or with your application:
Certification on a W-9 tax form
Social Security Number
Attestation that you are not subject to
back-up withholding
Certification that you are exempt from
back-up withholding
DO THE FUNDS OFFER RETIREMENT ACCOUNTS?
IRA's
The company offers the following types of IRA's
Traditional IRAs
Roth IRAs
Roth Conversion IRAs
Education IRAs
SEP IRAs
Rollover IRAs
403(b)7s
The minimum for Retirement Accounts is $2000, and each account may be subject to
a trustee annual charge of $12.50 for Traditional and Roth IRAs and $5.00 for
Education IRAs.
You should discuss each plan listed above with your personal tax advisor, and
you should read the company's Retirement Booklet including important disclosures
before opening an account. The Retirement Booklet is available at no charge by
either calling the Fund at 888-839-7424 or visiting the Fund's website
www.firstaustin.com.
WHAT ELSE DO I NEED TO KNOW BEFORE INVESTING?
Exchanges
You may exchange your shares in one Fund for shares of equal value in another
Fund offered by Texas Capital Value Funds without paying a sales charge. Please
call the Transfer Agent to do this. Once you exchange shares by telephone or in
writing, you cannot modify or cancel your decision. We discourage frequent
exchanges and may restrict them at the Fund's discretion. The exchange will
occur at the Net Asset Value next determined after the request has been received
in good order.
You should note that exchanges may be taxable events. You should consider the
tax consequences before exchanging your shares.
Reports
Each Fund will send annual reports to shareholders containing certified
financial statements and semi-annual reports containing unaudited financial
statements.
Account Statements: Provided Quarterly
Financial Reports: Provided at least semi-annually
Confirmation Reports: Provided after each transaction
that affects the account balance
or registration of shareholder.
To reduce expenses, one copy of each report will be mailed to each Tax ID even
though you may have more than one account with the Funds.
Net Asset Value (Pricing)
The NAV will be determined as of the close of the New York Stock Exchange on
each day the exchange is open. The NAV is determined using the following
formula:
Value of Fund Assets - Fund liabilities
NAV = ---------------------------------------
Number of Outstanding Shares
Fund securities are valued at the latest available market price. If market
quotations are not readily available for some securities held by the Funds, the
officers will value securities at fair market value in accordance with methods
approved by the Board of Directors.
Litigation
As of the date of this Prospectus, there was no pending or threatened litigation
involving either Fund in any capacity.
Auditors
Tait, Weller & Baker, Certified Public Accountants of Philadelphia, PA have been
selected as the independent accountants and auditors of each Fund. Tait, Weller
& Baker certify the financial statements of many mutual funds in the country.
The firm has no direct or indirect interest in the Fund or its Advisor.
HOW HAVE THE FUNDS PERFORMED?
The following table relates to one share of capital stock in the Value & Growth
Portfolio and Mid-Cap Focus Portfolio for the entire period. The total returns
in the table represent the rate that an investor would have earned or lost on an
investment in the Fund assuming reinvestment of all dividends and distributions.
<TABLE>
<CAPTION>
Value & Growth Mid-Cap Focus
Year end 9/30/96 to 11/6/95 to 3/18/98 to
9/30/98 9/30/97 9/30/96 9/30/98
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period 17.66 11.13 10.00 10.00
Income from
Investment Operations
net investment loss (.13) (.03) (.03) (.02)
net realized and (3.20) 7.03 1.17 (2.22)
unrealized gain on
investments
Total from Investment 3.33 $7.00 $1.14 $(2.24)
Operations
Less Distributions
net capital gains (.88) (.47) (.01) N/A
Net Asset Value End $13.45 $17.66 $11.13 $7.76
of Period
Total Return for (19.7)% 64.9% 11.4% (22.4)%
Fiscal Year
Ratios/Supplemental
Data
Net Assets-
End of Period($000) $52,461 $27,799 $1,252 $796
Ratios to Average
Net Assets expenses 1.72% 1.83% 2.20% 1.98%
net investment loss (.93)% (.86)% (0.51)% (0.40)%
portfolio turnover rate 223.6% 103.3% 148% 89.1%
average commissions $.03 $.06 $.08 $.06
per share
</TABLE>
Total return figures include reinvestment of all dividends and distributions and
DO NOT reflect the maximum front-end sales charge. Operations commenced 11/6/95
for the Value & Growth and 3/19/98 for the Mid-Cap Focus Funds. All ratios have
been annualized and are for the period shown, except for total return.
HOW DO I REACH THE FUNDS?
Advisor
First Austin Capital Management, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
888-839-4769
Transfer Agent, Accountant, and Custodian
Firstar Trust Company
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
888-839-7424
Call for questions on your account
Distributor
Rafferty Capital Markets, Inc.
550 Mamaroneck Avenue
Harrison, NY 10528
Mailing Address
Texas Capital Value Funds
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Please send all account related correspondence here.
Independent Auditors
Tait, Weller & Baker
8 Penn Center, Suite 800
Philadelphia, PA 19103-2108
Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
SEC file # 801-31075
www.firstaustin.com
More information about the Funds is available in the statement of additional
information and in the Funds annual and semi-annual reports to shareholders.
They are available at no cost to you by calling 800-628-4077. The reports to
shareholders contain management discussions of the market conditions and
investment strategies that significantly affected the Funds performance during
the last fiscal year. You should also obtain and read the Funds Retirement
Booklet that has important disclosures and information relating to IRAs and
other Retirement Accounts.
Information about the Fund, including the SAI, can be reviewed and copied at the
Securities and Exchange Commissions Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room is available by
calling 800-SEC-0330. Reports and other information about the Fund company are
available on the SECs internet site at (http://www.sec.gov), and copies of this
information may be obtained upon payment of a duplicating fee by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-6009.
Texas Capital Value Funds, Inc.
Prospectus January 31, 1999
Value & Growth Portfolio CUSIP #882241102
Mid-Cap Focus Portfolio CUSIP #882241300
PART B - STATEMENT OF ADDITIONAL INFORMATION
Texas Capital Value Funds
Statement of Additional Information
Value & Growth Portfolio
Mid-Cap Focus Portfolio
This document is not a prospectus.
You should read this document in
conjunction with the prospectus
dated January 31, 1999 and the
latest shareholder report, which
contains important financial
information that is incorporated in
this Statement of Additional
Information by reference. You may
obtain these at no charge by visiting
www.firstaustin.com on the internet,
or by calling 800-628-4077.
January 31, 1999
1600 West 38th Street Suite 412, Austin, TX 78731
SAI Prospectus
FUND HISTORY 3 13
VOTING 3 9
INVESTMENT OBJECTIVE AND POLICIES 4 2
FUND TURNOVER 8 2
DIRECTORS AND OFFICERS 9 9
PRINCIPAL HOLDERS OF SECURITES 11 n/a
INVESTMENT ADVISOR 11 9
SERVICE PROVIDERS 13 9
DISTRIBUTION OF THE FUNDS 13 9
BROKERAGE 15 11
PURCHASE AND REDEMPTION OF SHARES 16 5 & 6
NET ASSET VALUE 18 13
TAX DEFERRED RETIREMENT PLANS 18 12
TAX STATUS 19 12
PERFORMANCE INFORMATION 22 13
APPENDIX A 25 n/a
APPENDIX B 29 n/a
No one has been authorized to give any information or to make any
representations, other than those contained in this SAI or in the Prospectus.
You should not rely on any information given or any representation made because
it may not have been authorized by the Investment Company or its affiliates.
This SAI and/or the Prospectus are not offers to sell or a solicitation of an
offer to buy any securities in any jurisdiction where an offer to sell or
solicitation of an offer to buy may not lawfully be made.
Phone Numbers
General Marketing 888-839-4769
Shareholder Information 800-628-4077
This Statement of Additional information is actually Part B of the
Investment Companys registration statement filed with the
Securities and Exchange Commission. The Investment
Companys advisor and administrator, First Austin Capital
Management, Inc. will be referred to as us or we in this
document. Likewise, any shareholder or prospective shareholder
will be referred to as you. Throughout this document, the
phrase Statement of Additional Information will be shortened
to SAI.
The Value & Growth Portfolio, and the Mid-Cap Focus Portfolio
are non-diversified, open-end investment series of Texas Capital
Value Funds, Inc and are commonly known as mutual funds and
will be referred to as Fund or Funds in this SAI.
Fund History
The Investment Company is structured so that:
It is a non-diversified, open-end management investment
company organized as a Maryland corporation on June 26, 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 a Fund 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 of Directors 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.
The Investment Company registered the Growth & Income Portfolio in its original
registration statement and made it available to the public on March 18, 1998.
The name of the Fund was changed shortly thereafter to Blue Chip Value
Portfolio, and then to Mid-Cap Focus Portfolio.
VOTING
Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in
aggregate and not by class or series except as otherwise required
by the 1940 Act or Maryland General Corporation Law.
Rule l8f-2 of the 1940 Act provides that any matter required to be submitted to
the holders of the outstanding voting securities of an investment company such
this one, shall not be deemed to have been effectively acted upon unless
approved by a majority of the outstanding shares of each fund of the Investment
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 a new 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 Directors may be effectively acted upon by shareholders of
the Investment 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 Investment Company outstanding (or of a class or series of the Investment
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
Investment 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
Investment Company outstanding (or of a class or series).
INVESTMENT OBJECTIVE AND POLICIES
The following information is in addition to the information detailed in the
prospectus under the headings What is the Fund Investment Strategy? and What
can the Fund Invest in?
The fundamental investment policies detailed in below may not be changed for any
Fund without the approval of a majority of that Fund's outstanding voting
securities. As used in this SAI, a majority of the Funds' outstanding voting
securities means the lesser of:
more than 50% of its outstanding voting securities; or
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 Funds have adopted the following fundamental investment policies. These
policies may not be changed without shareholder approval:
Neither Fund may 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.
Neither Fund may issue senior securities or
borrow money except for temporary
purposes in amounts up to 33 1/3% 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. Neither
Fund may make any investments while
outstanding borrowings exceed 5% of the
value of its total assets.
Neither Fund may make loans, although they
may invest in debt securities, enter into
repurchase agreements, and lend their
Fund securities.
Neither Fund may 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.
Neither Fund may
purchase or sell commodities
or commodities contracts (including
financial futures and related options)
invest in oil, gas, or mineral
exploration or development
programs or leases
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 33 1/3% of their net assets.
Neither Fund may 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).
Neither Fund may 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.
The Funds 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 Funds objectives. However, the Funds will not change its
investment policies or restrictions without written notice to shareholders.
Further Information on the Nature of the Funds Investments:
General Characteristics of Convertible Securities
The Funds 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, Moody's Investors
Service, Inc., Fitch IBCA, Inc., or Duff & Phelps, Inc. or that are determined
by the Advisor to be of equivalent quality. For a more complete description of
debt ratings, see APPENDIX A. 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.
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.
Investments in Real Estate Investment Trusts (REITs)
Because the Funds may invest their assets in equity securities of REITs, they
may also be subject to certain risks associated with direct investments in
REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants. Furthermore, REITs are
dependent upon specialized management skills of their managers and may have
limited geographic diversification, thereby, subjecting them to risks inherent
in financing a limited number of projects. REITs depend generally on their
ability to generate cash flow to make distributions to shareholders, and certain
REITs have self-liquidation provisions by which mortgages held may be paid in
full and distributions of capital returns may be made at any time.
Temporary Defensive Policy
Each Fund may on a temporary basis because of market, economic, political, or
other conditions, invest up to 100% of its assets in investment-grade, short-
term debt instruments. Such securities may consist of obligations of the U.S.
Government, its agencies or instrumentalities, and repurchase agreements secured
by such instruments; certificates of deposit of domestic banks having capital,
surplus, and undivided profits in excess of $100 million; banker's acceptances
of similar banks; commercial paper and other corporate debt obligations.
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 Funds may be subject to greater price fluctuation than
securities of U.S. companies.
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 Funds are
uninvested and no return is earned. The inability of the Funds to make intended
security purchases due to settlement problems could cause the Funds to miss
attractive investment opportunities. Inability to dispose of Fund securities
due to settlement problems could either result in losses to the Funds due to
subsequent declines in value of the Fund security or, if the Funds have entered
into a contract to sell the security, result in a possible liability to the
purchaser. Payment for securities without delivery may be required in certain
foreign markets. Further, the Funds 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 Funds' agents to keep currently
informed about corporate actions such as stock dividends or other matters which
may affect the prices of Fund 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 Fund transactions or loss of certificates Fund 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 Funds may hold foreign currencies, the value
of the assets of the Funds 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 Funds may incur costs in connection with
conversions between various currencies. Although the Funds value assets daily
in terms of U.S. dollars, the Advisor does not intend to convert Fund holdings
of foreign currencies into U.S. dollars on a daily basis, although they may do
so from time to time, and you 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 between the prices
at which they are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to the Funds at one rate, while offering a
lesser rate of exchange should the Funds desire to resell that currency to the
dealer. The Funds 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.
General Characteristics of Securities Lending
In compliance with Securities and Exchange Commission guidelines, any loans of
securities in Fund portfolios 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 its agencies, or irrevocable letters of
credit or other debt securities issued by entities rated within the two highest
grades assigned by S&P, Moody's, Fitch IBCA, or Duff & Phelps or which are
determined by the 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 Funds 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
Funds will receive all dividends, interest or other distributions on loaned
securities and the Funds must be able to vote loaned securities whenever the
right to vote is material to the Funds performance.
Investment in Unseasoned Issuers
The Funds 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.
FUND TURNOVER
While it is difficult to predict, the Advisor expects that the annual Fund
turnover rate of the Funds will not exceed 150%. A greater rate may be
experienced during periods of marketplace volatility which necessitates more
active trading. A higher Fund turnover rate involves greater transaction costs
to the Funds and may result in the realization of net capital gains which would
be taxable to shareholders when distributed. For the two most recently
completed fiscal years, the turnover rates for the Funds were as follows:
Value & Growth Fund
9/30/97-9/30/98 223.6%
9/30/96-9/30/97 103.3%
Mid-Cap Focus Fund
N/A
Mid-Cap Focus inception date was 3/18/98
DIRECTORS AND OFFICERS
The business and affairs of the Funds are
managed under the direction of the Board of
Directors, while the Fund's 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 or changing
fundamental investment policies or for any
other matter as required by law.
The Directors and Officers of the Funds, their positions held with the Funds and
their principal occupations during the past five years are set forth below.
Mark A. Coffelt, C.F.A*
1600 West 38th Street, Suite 412
Austin, TX 78731
Chairman of the Board of Directors and President of the Texas
Capital Value Funds, Inc., Chief Investment Officer of the
Value & Growth Fund and Mid-Cap Focus Fund.
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.
Janis A. Claflin
1301 Capital of Texas Highway Ste B-127
Austin, Texas 78746
Independent 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
Kelly, Hart, & Hallman
201 Main Street Suite 2500
Ft. Worth, Texas 76102-3194
Independent Director
Principal Occupations During Past Five Years
Member-Kelly, Hart & Hallman (1997- Present)
Partner-Clark & Clark of Austin, Texas (1995-1997)
Sole Practitioner (1994-1995)
Shareholder-Scofield & Clark, P.C. (1993-1994)
Of Counsel-Ford & Ferraro, L.L.P. (1991-1992)
General Counsel/Chief Financial Officer of Jefferson Service
Company, Inc. (1990-1991)
Partner, McGinnis, Lockridge & Kilgore L.L.P. (1982-1990)
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
5511 Parkcrest #210
Austin, TX 78731
Independent 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.
Brian T Bares
1600 West 38th Street Suite 412
Austin, TX 78731
Secretary
Principal Occupations During Past Five Years
Compliance Officer of First Austin Capital
Management, Inc. (1997-Present)
Registered Representative with Rafferty Capital Markets, Inc., the
Funds Distributor
Vice-President & Co-Founder of Convenience Design Inc.
(1995-1997)
Project Manager (1995) and Director (1995-Present) of Bellevue
Optical, Inc.
University of Nebraksa, B.S. in Mathematics
* Denotes a Director of the Company who is an "interested
person" of the Company, as defined in the Investment Company
Act of 1940. The Directors of the Fund who are officers or
employees of the Advisor or the Distributor receive no
remuneration from the Funds. Each of the other Directors is
paid an annual retainer of $5,000 and is reimbursed for expenses
of attending meetings.
<TABLE>
Board of Directors Compensation Table
<CAPTION>
NAME & AGGREGATE PENSION ESTIMATED TOTAL
POSITION COMPENSATION BENEFITS RETIREMENT COMP
BENEFITS
<S> <C> <C> <C> <C>
Mark A. Coffelt* $0 $0 $0 $0
President &
Chief Investment
Officer
Edward D. Clark $5,000* $0 $0 $5,000
Director
John H. McDonald $5,000* $0 $0 $5,000
Director
Janis Claflin $5,000* $0 $0 $5,000
Director
</TABLE>
Such compensation is paid by the Adviser as part of the administrative expense
to the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of the end of the fiscal year, officers and directors of the Texas Capital
Value Funds, Inc., owned .018% of all outstanding securities. To the knowledge
of the Fund's management, as of September 30, 1998, the persons owning
beneficially more than 5% of the outstanding shares of the Fund were as follows:
Value & Growth Portfolio
Charles Schwab & Co. 25.127%
101 Montgomery St.
San Francisco, CA 94104
Mid-Cap Focus Portfolio
Coffelt Family LP 14.624%
1600 West 38th Street Suite 412
Austin, TX 78731
Guy Coffelt 9.749%
HCR-5 Box 574-607
Kerrville, TX 78028
Elaine Davis 8.331%
1852 Clarence Dr.
Hellertown, PA 18055
Dwight & Wanda Look 18.876%
1550 Dann Heim Rd.
Brenham, TX 77833
Johnny Look Trust 9.438%
1550 Dann Heim Rd.
Brenham, TX 77833
Silver Star LP 5.844%
1825 Cedar Court
lake Oswego, OR 97034
INVESTMENT ADVISOR
First Austin Capital Management is controlled by Mark A. Coffelt and his wife,
Jane Coffelt through a partnership which owns 100% 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 Fund
and the Mid-Cap Focus Fund, as well as President and Chief Investment Officer of
First Austin Capital Management, Inc. B. David Flora is a co-Portfolio Manager
and Institutional Marketing Director of the Texas Capital Value Funds and an
Investment Advisor for First Austin Capital Management. Eric Barden is a co-
Portfolio Manager and Institutional Marketing Director of the Texas Capital
Value Funds and an Investment Advisor for First Austin Capital Management.
Brian T. Bares serves as Secretary of Texas Capital Value Funds, Inc., as well
as Compliance Officer for First Austin Capital Management.
The Fund has an investment advisory and administrative contract with First
Austin Capital Management, Inc. (First Austin) where:
First Austin receives a fee, computed daily, at an annual rate of
1.0% of the average daily net assets.
First Austin provides continuous supervision of the investment
portfolio and pays the cost of compensation of the officers of
the Fund, occupancy and certain clerical and administrative costs
involved in the day to day operations of the Fund.
First Austin acts as the administrator to the Fund, and receives a
fee, for administrative services a fee equal to the sum of:
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
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
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
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
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 Funds for the purposes of the administration fee calculation
are to be rounded to the nearest dollar prior to the computation of any fee
owed.
The total amount of fees for the last three years are as follows:
<TABLE>
<CAPTION>
Value & Mid-Cap
Growth Focus
<S> <C> <C>
Advisory Fees
9/30/97-9/30/98 $525,085 $4,130*
9/30/96-9/30/97 $59,431 N/A
11/6/95-9/30/96 $7,588 N/A
Administrative Fees
9/30/97-9/30/98 $220,640 2,891*
9/30/96-9/30/97 $35,970 N/A
11/6/95-9/30/96 $6,606 N/A
</TABLE>
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 which
was opened to the public in March 18 of 1998. Shortly after its launch, the
name of the Growth & Income Portfolio was changed to the Blue Chip Value
Portfolio, and subsequently to Mid-Cap Focus Portfolio.
All advisory agreements are for an original term of one year. After the
original term expires, each advisory agreement will continue on a year to year
basis pending approval 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
advisory 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 at a meeting called for such
purpose.
First Austin will also act as the administrator to the Funds. The administrator
provides the following support services to each Fund:
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. For such administrative
services, the Company has agreed to pay the Advisor additional fees of 0.70% per
year of the net assets of each Fund for the first $5 million of net assets,
declining to 0.20% per year of net assets in excess of $200 million. Each Fund
also pays a 12(b)-1 fee of 0.25% to the Distributor, who passes through the
entire amount to the broker of record. All fees are computed on the average
daily closing net asset value of each Fund and are payable monthly.
SERVICE PROVIDERS
The Fund has contracted with the Firstar Trust Company for its transfer agent
and custodial services. Under the contracts, Firstar will process purchase and
redemption requests, generate shareholder statements and confirmations, and keep
track of shareholder records. Firstar will also handle the daily NAV
computation, fund accounting, and custody of the Investment Companys assets.
For transfer agent services that Firstar provides, compensation is based on
number of shareholder accounts. For custodial services, compensation is based
on asset size and transactions according to a sliding schedule.
Firstar Trust Company
615 E. Michigan Street, 3rd Floor
Miwaukee, WI 53202-5207
DISTRIBUTION OF THE FUNDS
The following information is in addition to the Investment Companys
relationship with the Distributor outlined in the prospectus.
On 11/1/98, the Investment Company terminated its Distribution Agreement with
Choice Investments, Inc. Rafferty Capital Markets, Inc. is now the Investment
Companys Distributor, and acts as the principal underwriter of the shares of
the Funds. The Distributor agrees to use its best efforts to promote, offer for
sale, and sell the shares of the Funds to the public on a continuous basis
whenever and wherever it is legally authorized to do so. For the period ending
(9/30/98), Choice Investments, Inc. was paid $551,119. Of this, $29,769 was
retained as a distributor commission.
Net Discounts Repurchase Brokerage Other
Underwriter and comm. Compensation Commission Comp.
Choice
Invmts* $29,769 N/A $33,348 N/A
The Fund has adopted a Distribution Assistance, Promotion, and Adminisrative
Service Plan pursuant to Rule 12b-1 under the 1940 Act under which the Company
contracts with registered broker-dealers and their agents to distribute shares
of the Fund. For the period ending September 30, 1998, the amount paid to the
Distributor under that plan was $131,271.43. David Flora, Eric Barden and Brian
Bares, the Secretary of the Company, all acting as registered representatives of
Choice Investments, Inc, and now as registered representatives of Rafferty
Capital Markets, Inc. received a portion of the distribution fee as result of
their distribution of shares of the Fund.
<TABLE>
The following table details payments made under the Investment Companys 12b-1
Plan:
<CAPTION>
<S> <C>
Advertising $0
Printing/Mailing of Prospectuses $0
to other than current shareholders
Broker-dealer compensation $131,271
Compensation to sales personneL $0
Interest, carrying, or other
finance charges $0
</TABLE>
The plan compensates the Distributor regardless of the expenses it actually
incurs. For fiscal 1998 there were no unreimbursed expenses carried over from
previous years.
Brian T. Bares, B. David Flora, Eric Barden, and Ryan Barden are all registered
representatives with the Investment Companys Distributor and may receive 12b-1
fees in connection with the sale of Fund shares.
The Fund may benefit from its adopted 12b-1 plan by increased distribution and
sales of Fund shares through the broker-dealer community. As Fund assets grow,
the administrative costs of the Fund decline.
All series of the Investment Company share the same 12b-1 plan. Any fees paid
under the plan may be used to finance distribution for any series of the
Investment Company.
BROKERAGE
The following information is in addition to the details provided in the
prospectus under the heading What are the Funds Brokerage Policies?
Subject to the supervision of the Directors, decisions to buy and sell
securities for the Funds and negotiation of its brokerage commission rates are
made by the investment advisor. Transactions on United States stock exchanges
involve the payment by the Funds 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 Funds usually includes an undisclosed
dealer commission or mark-up. In certain instances, the Funds 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 Funds on a continuing basis as
well as the expected contribution of the broker in selling shares of
the Funds.
Accordingly, the cost of the brokerage commissions to the Funds 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 execution services provided by brokers or dealers who effect or are
parties to portfolio transactions of the Funds or the investment advisor's other
clients. Such research and investment services include statistical and economic
data and research reports on particular companies and industries as well as
research and execution systems and 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 Funds 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 Funds. Research and investment information and execution
services provided by these and other brokers at no cost to the investment
advisor 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 Funds. 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.
For the period from inception to the end of the fiscal year (9/30/98), the Fund
paid Choice Investments, the Distributor of the Fund during that period, $33,348
in brokerage commissions for securities bought and sold by the Fund. These
commissions comprise 4.37% of the aggregate brokerage commissions paid by the
Fund over this period. These commissions purchased 2.7% of the aggregate dollar
amount of transactions involving the payment of commissions by the Fund.
Purchase and Redemption of Shares
The following information is in addition to the details in the prospectus under
the heading, How do I Purchase Shares?, and How do I Sell Shares? and What
Else do I Need to Know Before Investing?
Nonpayment
If any order to purchase shares is cancelled due to nonpayment or if the
Investment Company does not receive good funds either by check or electronic
funds transfer, the Transfer Agent will treat the cancellation as a redemption
of shares purchased, and you will be responsible for any resulting loss incurred
by the Investment Company. If you are a shareholder, the Transfer Agent can
redeem shares from any of your account(s) as reimbursement for all losses. In
addition, you may be prohibited or restricted from making future purchases in
any of the Texas Capital Value Funds. A $20 fee is charged for all returned
items, including checks and electronic funds transfers.
Transfer of Shares
You may transfer Fund shares to another person by sending written instructions
to the Transfer Agent. The account must be clearly identified, and you must
include the number of shares to be transferred, and the signatures of all
registered owners, which are the subject of transfer. You also need to send
written instructions signed by all registered owners and supporting documents to
change an account registration due to events such as divorce, marriage, or
death. If a new account needs to be established, you must complete and return an
application to the Transfer Agent.
Transfers Directly with the Distributor
When transfering directly to the Distributor from another mutual fund (excluding
funds that value their shares according to Rule 2a-7 of the
Investment Company Act of 1940), the transfer will occur at Net Asset Value.
Additional Information on Redeeming Shares
The right of redemption may be suspended by the Funds, or the date of payment
postponed by the Funds, beyond the normal seven-day period, under the following
conditions authorized by the 1940 Act:
For any period during which the New York Stock Exchange is
closed, other than customary weekend or holiday closings, or
during which trading on the New York Stock Exchange
is restricted;
For any period during which an emergency exists as a result
of which disposal by the Funds of securities owned by it is
not reasonably practical, or it is not reasonably practical
for the Funds to determine the fair value of its net assets; and
For such other periods as the Securities and Exchange
Commission may by order permit for the protection of the
Funds' shareholders.
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 Funds 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 Funds 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 Funds 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.
Autovest Plan
The Funds offer the Autovest Plan. The Autovest Plan is an automatic investment
plan detailed in the Investment Companys prospectus under the heading How do I
Purchase Shares? that allows shareholders automatic periodic investment in the
Funds. Engaging in this type of investment plan allows you to dollar cost
average your purchases. Details on the benefits of dollar cost averaging are in
APPENDIX B.
NET ASSET VALUE
Each Funds' net asset value per share will be calculated separately from the per
share net asset value of any other Fund of the Investment 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 from any reinvestment of such proceeds, and a portion of any general
assets of the Investment Company not belonging to a particular series. Each
Fund of the Investment Company will be charged with the direct liabilities of
that Fund and with a share of the Investment Company's general liabilities.
Subject to the provisions of the Articles of Incorporation and the Bylaws of the
Investment 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.
TAX-DEFERRED RETIREMENT PLANS
Federal taxes on current income may be deferred if you qualify for certain types
of retirement programs. For your convenience, the Funds offer 403(b)(7)
accounts and various forms of IRAs. The minimum initial investment in each of
these plans is $2000, or a yearly $2000 minimum is required with a minimum $100
monthly electronic investment. You may make subsequent investments of $100 or
more per account at any time. You may make investments in one or any
combination of the Funds described in the Prospectus.
Retirement plan applications for the IRA and 403(b)(7) programs should be sent
directly to Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, WI
53201-0701. Firstar Trust Company serves as Custodian for these tax-deferred
retirement plans under the programs made available by the Investment Company.
Applications for these retirement plans received by the Fund will be forwarded
to the Custodian for acceptance.
An administrative fee of $15 is deducted from the money sent to you after
closing an account. This charge is subject to change as provided in the
various agreements. There may be additional charges, as mutually agreed upon
between you and the Custodian, for further services requested of the Custodian.
Each employer or individual establishing a tax-deferred retirement plan is
advised to consult with a tax advisor before establishing the plan.
TAX STATUS
Each Fund intends to be taxed as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986. Accordingly, the Funds generally must:
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;
and diversify its holdings so that, at the end of each fiscal quarter,
at least 50% of the market value of the Funds 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 Funds total
assets and 10% of the outstanding voting securities of such
issuer, and;
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, each Fund 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 Funds 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 Funds intend
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 level. To avoid the tax, each Fund must distribute during each calendar
year an amount equal to the sum of
at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year,
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 September 30 of the calendar year, and
all ordinary income and capital gains for previous years that were
not distributed during such years.
To avoid application of the excise tax, the Funds intend 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 Funds in October, November or December of that year with a
record date in such a month, and paid by the Funds 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 Funds accrue income or other receivables or accrue expenses
or other liabilities denominated in a foreign currency and the time the Funds
actually collect such receivables or pay 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 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 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 Funds 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 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 Funds to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by the Funds, 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 Funds 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 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.
Upon a redemption, sale or exchange of a shareholder's shares of the Funds, 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 shareholder's holding period for the
shares.
PERFORMANCE INFORMATION
Performance Presentation
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 the value of your investment in each Fund from the beginning date to
the ending date of the measurement period. The figure reflects changes in the
price of your shares including the payment of the maximum sales load (except
where noted) and assumes that any income dividends and/or capital gains
distributions made by the Fund during the period are reinvested. When
applicable, figures will be given for recent one, five, and ten year periods,
and may 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, you 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 your investment in the Fund for
the specific period. Aggregate total returns may be shown by schedules, charts,
or graphs, and may be broken down to indicate subtotals of the components of
total return (the change in value of initial investment, income dividends, and
capital gains distributions).
Each Fund may quote average annual total and/or aggregate total return for
various time periods in advertisements or communications to shareholders. The
Fund may also compare performance to:
Other mutual funds with similar
investment objectives
Stock and other relevant indices
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.
<TABLE>
Value & Growth Fund Returns
<CAPTION>
Total Return* Annual Return*
<S> <C> <C>
Inception to 9-30-98 47.47% 14.3%
Mid-Cap Focus N/A N/A
</TABLE>
Inception date for the Mid-Cap Focus was 3/18/98
*Returns assume the reinvestment of all distributions. Including the cost of
the maximum sales charge of 4.5%, the total return would have been 40.84% and
annual return would have been 12.53%. Inception was 11-06-95.
From time to time, quotations of the Funds 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 Funds shares and assume that all dividends and capital
gains distributions during the respective 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):
P(1 + T)^n = ERV
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.
Performance, assuming the maximum sales load of 4.5% is computed as follows:
Value & Growth
$1,000(1+.1253)^2.9 = $1408.24
Mid-Cap Focus
N/A
Inception date for Mid-Cap Focus was 3/18/98
Where $1,000 is the initial amount invested, .1253 is the average annual total
return since inception, after deducting a front-end sales charge of 4.5%, and
2.9 is the number of years for which the return is calculated. $1,408.24 is the
Period Ending Redeemable Value at the end of the fiscal year. The Fund went
effective on November 6, 1995, and the period for which the return has been
calculated ended on September 30, 1998.
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 Funds will vary based on changes in market conditions and
the level of the Funds expenses.
In connection with communicating its average annual total return to current or
prospective shareholders, the Funds 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 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 Funds 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 Funds 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.
From time to time, in advertising, marketing and other Fund literature, the
performance of the Funds 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 Funds will be compared to the appropriate fund category, that is, by fund
objective and Fund holdings or the appropriate volatility grouping, where
volatility is a measure of the Funds risk. From time to time, the average
price-earnings ratio and other attributes of the Funds 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 Funds. The description
may include a "risk/return comparison" which compares the Funds 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 Funds 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 comparisons also may depict funds
that invest in both domestic and foreign securities or a combination of bond and
equity securities.
APPENDIX A
LONG-TERM AND SHORT-TERM DEBT RATINGS
A rating issued by 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 Funds' investment advisor
believes that the quality of debt securities in which the Funds invest 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., Standard & Poor's Corporation, Fitch IBCA, Inc., and
Duff & Phelps, Inc.
MOODY'S INVESTOR SERVICES, INC.
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
NOTE: MOODY'S APPLIES NUMERICAL MODIFIERS 1, 2, AND 3 IN EACH GENERIC RATING
CLASSIFICATION. THE MODIFIER 1 INDICATES THAT THE OBLIGATION RANKS IN THE
HIGHER END OF ITS GENERIC RATING CATEGORY, THE MODIFIER 2 INDICATES A MID-RANGE
RANKING, AND THE MODIFIER 3 INDICATES A RANKING IN THE LOWER END OF THAT
GENERIC RATING CATEGORY.
STANDARD & POOR'S RATINGS GROUP
AAA An obligation rated "AAA" has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated "AA" differs from the highest rated issues only in
small degree. The obligor's capacity to meet its financial commitment on
the obligation is VERY STRONG.
A An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still STRONG.
BBB An obligation rated "BBB" exhibits adequate capacity to pay interest and
repay principal. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
Obligations rated "BB," "B," "CCC," "CC," and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated "BB" is LESS VULNERABLE to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated "B" is MORE VULNERABLE to nonpayment than obligations
rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation.
CCC An obligation rated "CCC" is CURRENTLY VULNERABLE to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commi
Part C - OTHER INFORMATION
ITEM 23 - EXHIBITS
(a) Agreement and Declaration of Trust -1
(b) By-laws -1
(c) Instruments Defining Rights of Securities Holders
(1)Articles of Incorporation -1
(d) Investment Advisory Contracts -5
(e) Underwriting Contract
(1)Distribution Agreement -Included
(f) Bonus or Profit Sharing Contracts -N/A
(g) Custodian Agreements -Included
(h) Other Material Contracts
(1)Transfer Agency Agreement -Included
(2)Fund Accounting Agreement -Included
(i) Legal Opinion -Included
(j) Other Opinions
Consent of Accountants -Included
(k) Omitted Financial Statements -N/A
(l) Initial Capital Agreements
(1)Articles of Incorporation -1
(m) Rule 12b-1 Plan -Included
(n) Financial Data Schedule
(1)Value & Growth Portfolio Financial Statements -Included
(2)Mid-Cap Focus Portfolio -Included
(o) Rule 18f-3 Plan -N/A
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 Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A, filed on
May 28th, 1996.
3. Incorporated by reference from Post-Effective Amendment
No. 3 to the Registration Statement on Form N-1A, filed on
August 13th, 1996.
4. Incorporated by reference from Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A, filed on
February 5th, 1997.
5. Incorporated by reference from Post-Effective Amendment
No. 5 to the Registration Statement on Form N-1A, filed on
November 26th, 1997.
Item 24. Persons Controlled by or Under Common Control with the Fund
None
Item 25. Indemnification
The information on indemnification is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement.
Item 26. Business and Other Connections of the Investment Adviser
Information regarding the business, profession, vocation or employment of a
substantial nature that each director, officer, and partner of the
Registrant and Advisor is involved with or has been involved in over the
last two years is listed in the Prospectus under the heading, "Who Runs
the Funds?" and in the Statement of Additional Information under the
headings, "Directors and Officers", and "Investment Advisor."
All other information regarding the Advisor is incorporated
by reference to its Form ADV as amended:
First Austin Capital Management, Inc. File No. 801-31075
Item 27. Principal Underwriters
Other than the Registrant, the Principal Underwriter for the Fund also
is the Principal Underwriter for the following investment companies:
Homestate Funds
Potomac Funds
Badgley Funds
Brazos Funds
Golf Associated Funds
Information regarding the Principal Underwriter, including compensation is
included under the heading, "Distribution of the Funds" in the Statement of
Additional Information.
Note: On 11/1/98, the Registrant changed distributors to Rafferty Capital
Markets.
Rafferty Capital Markets, Inc.
550 Mamaroneck Avenue
Harrison, NY 10528
Item 28. Location of Accounts and Records
The following entities prepare, maintain and preserve the records
required by Section 31(a) of the Investment Company Act of 1940
(the "1940 Act") for the Registrant. These services are provided to
the Registrant through written agreements between the parties to
the effect that such services will be provided to the Registrant
for such periods prescribed by the Rules and Regulations of the
Securities and Exchange Commission under the 1940 Act and such
records are the property of the entity required to maintain and
preserve such records and will be surrendered promptly on request:
Transfer Agent, Fund Accountant, and Custodian
Firstar Trust Company
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
Distributor
Rafferty Capital Markets, Inc.
550 Mamaroneck Avenue
Harrison, NY 10528
Item 29. Management Services
Not Applicable
Item 30. Undertakings
None
Exhibit 1
Opinion and Consent of Counsel:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, DC 20036-1800
(202) 778-9000
November 30, 1998
Texas Capital Value Funds, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
Ladies and Gentlemen:
Texas Capital Value Funds, Inc. (the "Company") is a corporation organized under
the laws of the State of Maryland. We understand that the Company is about to
file Post-Effective Amendment No. 6 to its Registration Statement on Form N-1A
for the purpose of updating the Company's financial statements, making certain
editorial changes and conforming to the revised Form N-1A.
We have, as counsel, participated in various corporate and other proceedings
relating to the Company. We have examined copies, either certified or otherwise
proved to be genuine, of its Articles of Incorporation and By-Laws, as now in
effect, the minutes of meetings of its board of directors and other documents
relating to its organization and operation, and we are generally familiar with
its corporate affairs. Based on the foregoing, it is our opinion that the
issuance of shares of common stock of the Company ("Shares") has been duly
authorized by the Company and that, when sold in accordance with the terms
contemplated by the Registration Statement, the Shares will be legally issued,
fully paid and nonassessable by the Company.
We hereby consent to the filing of this opinion in connection with Post-
Effective Amendment No. 6 to the Company's Registration Statement on Form N-1A
(File No. 33-96334) being filed with the Securities and Exchange Commission.
Sincerely,
/s/ Kirkpatrick & Lockhart LLP
KIRKPATRICK & LOCKHART LLP
Exhibit 2 - Letter from Certified Public Accountant:
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
SEE NOTES TO FINANCIAL STATEMENTS
To the Shareholders and Board of Directors
Texas Capital Value Funds, Inc.
We have audited the accompanying statements of assets and liabilities of
the Value & Growth Portfolio and the Mid-Cap Focus Portfolio (formerly
the BlueChip Value Portfolio, the Funds), each a series of shares of
the Texas Capital Value Funds, Inc., including the portfolio of
investments, as of September 30, 1998, and the related statements of
operations, changes in net assets, and the financial highlights for the
periods indicated thereon.
These financial statements are the responsibility of the Funds
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1998, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion. In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material respects,
the financial position of the Texas Capital Value & Growth Portfolio and
the Texas Capital Mid-Cap Focus Portfolio as of September 30, 1998, the
results of their operations, the changes in their net assets and the
financial highlights for each of the periods indicated thereon,
in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 6, 1998
SEE NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Texas Capital Value Funds, Inc. was incorporated on June 26, 1995 as a
Maryland Corporation and is registered under the Investment Company
Act of 1940 as a non-diversified, open-end management investment
company. The Value & Growth Portfolio (the V&G) and the Mid-Cap Focus
Portfolio (the Mid-Cap Focus and formerly BlueChip Value Portfolio)
are series of the Texas Capital Value Funds, Inc, collectively
(the Funds). V&G began investment operations on November 6, 1995,
while Mid-Cap Focus began investment operations on March 18, 1998. V&Gs
investment objective is capital appreciation. Mid-Cap Focuss investment
objective is growth, with income a secondary consideration. The following is a
summary of significant accounting policies followed by
the Funds in the preparation of the financial statements. The policies
are in conformity with generally accepted accounting principles.
A. Security Valuation - Portfolio securities that are listed on
national securities exchanges or the NASDAQ National Market System are
valued as of the close of business of the exchange on each business day
which that exchange is open (presently 4:00pm Eastern time). Unlisted
securities that are not included in such System are valued at the mean
of the quoted bid and asked prices in the over-the-counter-market.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by the
Advisor under procedures established by and under the general
supervision and responsibility of the Funds Board of Directors. Short
- -term investments are valued at amortized cost, if their original
maturity was 60 days or less, or by amortizing the values as of the 61
st day prior to maturity, if their original term to maturity exceeded 60
days.
B. Federal Income Taxes It is the Funds policy to meet the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable net income to
its shareholders. In addition, the Funds intend to pay distributions as
required to avoid imposition of excise tax. No federal income
tax provision is required.
C. Securities Transactions, Investment Income and Other - Securities
transactions are recorded on the next business date after trade date.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis.
D. Distributions to Shareholders. Distributions from investment income
and realized gains, if any, are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due
to net operating losses and post-October capital losses.
E. Accounting Estimates - The preparation of financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the amounts of income and expense during the
reporting period. Actual results could differ from those estimates.
SEE NOTES TO FINANCIAL STATEMENTS
2. TRANSACTIONS WITH AFFILIATES
Investment Advisory and Administrative Agreements
The Funds have investment advisory agreements with the Advisor, First
Austin Capital Management, Inc., pursuant to which the Advisor receives
a fee, computed daily, at an annual rate of 1.0% of the average daily
net assets. The Advisor provides continuous supervision of the
investment portfolios and pays the cost of compensation of the officers
of the Funds, occupancy and certain clerical and administrative costs
involved in the day to day operations of the Funds. The Advisor
bears most of the operating expenses of the Funds including legal,
audit, printing, and insurance. In addition, the Advisor is acting as
the administrator to the Funds. For these services, the Advisor receives
a fee, computed daily based on the average daily net assets at an
annual rate of .70% on the 1 st $5 million, .50% on the next $25
million, .28% on the next $70 million, .25% on the next $100 million,
and .20% for over $200 million of each series. Transactions with the
Distributor Choice Investments, Inc., the Companys Distributor and
clearing through Southwest Securities, was paid $31,230 in commissions
for executing portfolio transactions for the Value & Growth Portfolio.
Distribution Agreement and Plan
The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act under which the Funds contract with registered broker
dealers and their agents to distribute shares of the Funds. The
Distributor received a fee, computed daily at an annual rate of .25% of
the average daily net assets. For the period ending September 30,
1998, the amounts paid to the Distributor were $131,271 and $1,033, for
V&G and Mid-Cap Focus, respectively, plus charges for sales of the
Funds shares in the amount $23,497.
3. PURCHASES AND SALES OF SECURITIES--
For the period ended September 30, 1998 the cost of purchases and the
proceeds from sales of securities, excluding short-term securities,
were $156,300,017 and $111,248,941, respectively, for the Value & Growth
Portfolio and $1,635,836 and $658,892 for Mid-Cap Focus Portfolio,
respectively.
4. LINE OF CREDIT
The Funds have a $9 million secured line of credit with Bank of Boston.
Borrowings under this arrangement bear interest at the banks prime
rate. At September 30, 1998, the Funds had no borrowings outstanding.
Based upon balances outstanding during the year, the weighted average
interest rate was 8.6% and the weighted average amount outstanding was
$344,509 for the Value & Growth Portfolio and $3,613 for the Mid-
Cap Focus Portfolio.
Exhibit 3 - DISTRIBUTION AGREEMENT
FORM OF
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of November 1, 1998, between Texas Capital
Value Funds, Inc. ("Fund"), a corporation, and Rafferty Capital Markets, Inc.
("RCM"), a corporation organized and existing under the laws of the State of New
York.
WHEREAS the Fund is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and has
registered one or more distinct series of shares of beneficial interest
("Shares") for sale to the public under the Securities Act of 1933, as amended
("1933 Act"), and has qualified its shares for sale to the public under various
state securities laws; and
WHEREAS the Fund desires to retain RCM as principal underwriter in
connection with the offering and sale of the Shares of each series listed on
Schedule A (as amended from time to time) to this Agreement; and
WHEREAS this Agreement has been approved by a vote of the Fund's board of
trustees or directors ("Board") and its distinterested trustees/directors in
conformity with Section 15(c) under the 1940 Act; and
WHEREAS RCM is willing to act as principal underwriter for the Fund on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints RCM as its agent to be the principal
underwriter so as to hold itself out as available to receive and accept orders
for the purchase and redemption of the Shares and redemption of Shares on behalf
of the Fund, subject to the terms and for the period set forth in this in this
Agreement. RCM hereby accepts such appointment and agrees to act hereunder.
The Fund understands that any solicitation activities conducted on behalf of the
Fund will be conducted primarily, if not exclusively, by employees of the Fund's
sponsor who shall become registered representatives of RCM.
2. Services and Duties of RCM.
(a) RCM agrees to sell Shares on a best effort basis from time to time during
the term of this Agreement as agent for the Fund and upon the terms described in
the Registration Statement. As used in this Agreement, the term "Registration
Statement" shall mean the currently effective registration statement of the
Fund, and any supplements thereto, under the 1933 Act and the 1940 Act.
(b) RCM will hold itself available to receive purchase and redemption orders
satisfactory to RCM for Shares and will accept such orders on behalf of the
Fund. Such purchase orders shall be deemed effective at the time and in the
manner set forth in the Registration Statement.
(c) RCM, with the operational assistance of the Fund's transfer agent, shall
make Shares available through the National Securities Clearing Corporation's
Fund/SERV System.
(d) RCM shall provide to investors and potential investors only such information
regarding the Fund as the Fund shall provide or approve. RCM shall review and
file all proposed advertisements and sales literature with appropriate
regulators and consult with the Fund regarding any comments provided by
regulators with respect to such materials.
(e) The offering price of the Shares shall be the price determined in accordance
with, and in the manner set forth in, the most-current Prospectus. The Fund
shall make available to RCM a statement of each computation of net asset value
and the details of entering in such computation.
(f) RCM at is sole discretion may repurchase Shares offered for sale by the
shareholders. Repurchase of Shares by RCM shall be at the price determined in
accordance with, and in the manner set forth in, the most-current Prospectus.
At the end of each business day, RCM shall notify, by any appropriate means, the
Fund and its transfer agent of the orders for repurchase of Shares received by
RCM since the last report, the amount to be paid for such Shares, and the
identity of the shareholders offering Shares for repurchase. The Fund reserves
the right to suspend such repurchase right upon written notice to RCM. RCM
further agrees to act as agent for the Fund to receive and transmit promptly to
the Fund's transfer agent shareholder requests for redemption of Shares.
(g) RCM shall not be obligated to sell any certain number of Shares.
(h) RCM shall prepare reports for the Board regarding its activities under this
Agreement as from time to time shall be reasonably requested by the Board.
3. Duties of the Fund.
(a) The Fund shall keep RCM fully informed of its affairs and shall provide to
RCM from time to time copies of all information, financial statements, and other
papers that RCM may reasonably request for use in connection with the
distribution of Shares, including, without limitation, certified copies of any
financial statements prepared for the Fund by its independent public accountant
and such reasonable number of copies of the most current Prospectus, Statement
of Additional Information ("SAI"), and annual and interim reports as RCM may
request, and the Fund shall fully cooperate in the efforts of RCM to sell and
arrange for the sale of Shares.
(b) The Fund shall maintain a currently effective Registration Statement on Form
N-1A with the Securities and Exchange Commission (the "SEC"), maintain
qualification with applicable states and file such reports and other documents
as may be required under applicable federal and state laws. The Fund shall
notify RCM in writing of the states in which the Shares may be sold and shall
notify RCM in writing of any changes to such information. The Fund shall bear
all expenses related to preparing and typesetting such Prospectuses, SAI and
other material required by law and such other expenses, including printing and
mailing expenses, related to the Fund's communication with persons who are
shareholders.
(c) The Fund shall not use any advertisements or other sales materials that have
not been (i.) submitted to RCM for its review and approval, and (ii.) filed with
the appropriate regulators.
(d) The Fund represents and warrants that its Registration Statement and any
advertisements and sales literature (excluding statements relating to RCM and
the services it provided that are based upon written information furnished by
RCM expressly for inclusion therein) of the Fund shall not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein no misleading, and
that all statements or information furnished to RCM, pursuant to Section 3(a)
hereof, shall be true and correct in all material respects.
4. Other Broker-Dealers. RCM in its discretion may enter into agreements to
sell Shares to such registered and qualified retail dealers, as reasonably
requested by the Fund. In making agreements with such dealers, RCM shall act
only as principal and not as agent for the Fund. The form of any such dealer
agreement shall be mutually agreed upon and approved by the Fund and RCM.
5. Withdrawal of Offering. The Fund reserves the right at any time to withdraw
all offerings of any Shares by written notice to RCM at its principal office.
No Shares shall be offered by either RCM or the Fund under any provisions of
this Agreement and no orders for the purchase or sale of Shares hereunder shall
be accepted by the Fund if and so long as effectiveness of the Registration
Statement then in effect or any necessary amendments thereto shall be suspended
under any of the provisions of the 1933 Act, or if and so long as a current
prospectus as required by Section 3(b)(2) of the 1933 Act is not on file with
the SEC.
6. Services Not Exclusive. The services furnished by RCM hereunder are not to
be deemed exclusive and RCM shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the SEC and state and other regulatory bodies, and
shall assume expenses related to communications with shareholders of the Fund
including, but not limited to, (i.) fees and disbursements of its counsel and
independent public accountant; (ii) the preparation, filing, and printing of
Registration Statements and/or Prospectuses or SAI's; (iii) the preparation and
mailing of annual and interim reports, Prospectuses, SAI's and proxy materials
to shareholders; (iv) such other expenses related to communications with persons
who are shareholders of the Fund; and (v) the qualifications of Shares for sale
under the securities laws of such jurisdictions as shall be selected by the Fund
pursuant to Paragraph 3(b) hereof, and the costs and expenses payable to each
such jurisdiction for continuing qualification herein. In addition, the Fund
shall bear all costs of preparing, printing, mailing and filing any
advertisements and sales literature. RCM does not assume responsibility for any
expenses not assumed hereunder.
8. Compensation. As compensation for the services performed and the expenses
assumed by RCM under this Agreement including, but not limited to, any
commissions paid for sales of Shares, the Fund shall pay RCM, as promptly as
possible after the last day of each month, a fee as set forth in Schedule B to
this Agreement.
9. Share Certification. The Fund shall not issue certificates representing
Shares unless requested to do so by a shareholder. If such request is
transmitted through RCM, the Fund will cause certificates evidencing the Shares
owned to be issued in such names and denominations as RCM shall from time to
time direct.
10. Status of RCM. RCM is an independent contractor and shall be agent of the
Fund only with respect to the sale and redemption of Shares.
11. Indemnification.
(a) The Fund agrees to indemnify, defend, and hold RCM, its officers and
directors, and any person who controls RCM within the meaning of Section 15 of
the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands, or liabilities and any counsel fees incurred in connection
therewith) that RCM, its officers, directors, or any such controlling person may
incur under the 1933 Act, or under common law or otherwise, arising out of or
based upon any (i.) alleged untrue statement of material fact contained in the
Registration Statement, Prospectus, SAI or sales literature, (ii) alleged
omission to state a material fact required to be stated in the either thereof or
necessary to make the statements therein not misleading, or (iii) failure by the
Fund to comply with the terms of the Agreement; provided that in no event shall
anything contained herein by so construed as to protect RCM against any
liability to the Fund or its shareholders to which RCM would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations under this Agreement.
(b) The Fund shall not be liable to RCM under this Agreement with respect to any
claim made against RCM on any person indemnified unless RCM or other person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon RCM or such other person (or
after RCM or the person shall have received notice of service on any designated
agent). However, failure to notify the Fund of any claim shall not relieve the
Fund from any liability that it may have to RCM or any person against whom such
action is brought otherwise than on account of this Agreement.
(c) The Fund shall be entitled to participate at its own expense in the defense
or, if it so elects, to assume the defense of any suit brought to enforce any
claims subject to this Agreement. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to indemnified defendants in the suit whose approval shall not be
unreasonably withheld. In the event that the Fund elects to assume the defense
of any suit and retain counsel, the indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Fund does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Fund agrees to promptly notify RCM of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of any of its Shares.
(d) RCM agrees to indemnify, defend, and hold the Fund, its officers and
directors, and any person who controls the Fund within the meaning of Section 15
of the 1933 Act, fee and harmless from and against any and all claims, demands,
liabilities, and expenses ( including the cost of investigating or defending
against such claims, demands, or liabilities and any counsel fees incurred in
connection therewith) that the Fund, its directors or officers, or any such
controlling person may incur under the 1933 Act, or under common law or
otherwise, resulting from RCM's willful misfeasance, bad faith or gross
negligence in the performance of its obligations and duties under this
Agreement, or arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by RCM to the Fund
for use in the Registration Statement, Prospectus or SAI arising out of or based
upon any alleged omission to state a material fact in connection with ushc
information required to be stated in either thereof or necessary to make such
information not misleading.
(e) RCM shall be entitled to participate, at its own expense, in the defense or,
if it so elects, to assume the defense of any suit brought to enforce the claim,
but if RCM elects to assume the defense, the defense shall be conducted by
counsel chosen by RCM and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event that RCM elects to
assume the defense of any suit and retain counsel, the defendants in the suit
shall bear the fees and expenses of any additional counsel retained by them. If
RCM does not elect to assume the defense of any suit, it will reimburse the
indemnified defendants in the suit for the reasonable fees and expenses of any
counsel retained by them.
12. DURATION AND TERMINATION
(a) This agreement shall become effective on the date first written above or
such later date as indicated in Schedule A and, unless sooner terminated as
provided herein, will continue in effect for two years from the above written
date. Thereafter, if not terminated this Agreement shall continue in effect for
successive annual periods, provided that such continuance is specifically
approved at least annually
(i)by a vote of a majority of the Fund's Board of Directors who are neither
interested persons (as defined in the 1940 Act) of the Fund ("Independent
trustees/directors") or RCM, cast in person at a meeting called for the purpose
of voting on such approval, and
(ii)by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund.
(b) Notwithstanding the foregoing, this Agreement may be terminated in its
entirety at any time, without payment of any penalty, by vote of the Board, by
vote of a majority of the Independent trustees/directors, or by vote of a
majority of the outstanding voting securities of the Fund on sixty days written
notice to RCM or by RCM at any time, without the payment of any penalty, on
sixty days written notice to the Fund. This Agreement will automatically
terminate in the event of its assignment.
13. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge, or termination is sought. This
Agreement may be amended with the approval of the Board or of a majority of the
outstanding voting securities of the Fund; provided, that in either case, such
amendment also shall be approved by a majority of the Independent Directors.
14. LIMITATION OF LIABILITY
The Board and shareholders of the Fund shall not be personally liable for
obligations of the Fund in connection with any matter arising from or in
connection with this Agreement. If the Fund is a Massachusetts business trust,
this Agreement is not binding upon any trustees, officer or shareholder of the
Fund individually, and no such person shall be individually liable with respect
to any action or inaction resulting from this Agreement.
15. NOTICE
Any notice required or permitted to be given by either party to the other shall
be deemed sufficient upon receipt in writing at the other party's principal
offices.
16. MISCELLANEOUS
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule, or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors. As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person," and "assignment" shall have
the same meaning as such terms have in the 1940 Act.
17. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State of
New York and the 1940 Act. To the extent that the applicable laws of the State
of New York conflict with the applicable provisions of the 1940 Act, the latter
shall control.
IIN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
ATTEST:
BY:
Texas Capital Value Funds, Inc.
ATTEST:
BY:
Rafferty Capital Markets, Inc.
SCHEDULE A
Pursuant to section 1 of the Distribution Agreement among the Texas Capital
Value Funds, Inc. ("Fund") and Rafferty Capital Markets, Inc. ("RCM"), the Fund
hereby appoints RCM as its agent to be the principal underwriter of the Fund
with respect to its following series:
TEXAS CAPITAL VALUE & GROWTH
TEXAS CAPITAL MID-CAP FOCUS
Dated: 11/1/98
SCHEDULE B
To the
DISTRIBUTION AGREEMENT
Between
Texas Capital Value Funds, Inc.
And
RAFFERTY CAPITAL MARKETS, INC.
As compensation pursuant to section 8 of the Distribution Agreement
between Texas Capital Value Funds, Inc. (the "Fund") and Rafferty Capital
Markets, Inc. ("RCM"), the Fund shall pay to RCM the sum of:
1. an annual fee of $15,000 for the first series of the Fund and $3,000 for
each series thereafter excluding different classes of a series or .01% of the
average daily net assets of each series, computed daily and paid quarterly,
whichever is greater;
2. the ongoing licensing fees and incidental costs of those wholesalers of First
Austin Capital Management, Inc. who are designated by Mark A. Coffelt to become
registered representatives of RCM;
3. the compensation paid by RCM to such registered representatives in accordance
with compensation schedules, as agreed upon by RCM and the Fund from time to
time;
4. the reasonable fees associated with listing and maintaining shares on the
National Securities Clearing Corporation's Fund/SERV System, as agreed upon by
RCM and Fund;
5. incidental expenses associated with printing and distributing advertising and
sales literature, such as filings with the National Association of Securities
Dealers, Inc.;
6. Not-withstanding the above, the compensation payable to RCM pursuant to
paragraphs 1 through 5 hereof shall be reduced by any amounts received by RCM,
as broker of record for Fund investors not purchasing through another broker-
dealer. Such amounts shall include the sum of the following:
a. Rule 12b-1 fees payable to RCM as broker of record;
b. Sales commissions payable to RCM as broker of record; and
c. The differential between Sales commissions charged to investors by other
broker-dealers and the amounts paid to other broker-dealers for selling such
shares.
In the event that the amounts available under paragraph 6 to reduce payments to
RCM exceed costs payable to RCM as enumerated in paragraphs 1 through 5 above
plus any additional costs related to distribution of Fund shares as determined
by the Fund, the Fund may designate an additional broker of record with respect
to Fund investors not purchasing through another broker-dealer. Such additional
broker shall be added by RCM as a registered representative and shall receive
all amounts payable under paragraph 6 hereof in excess of RCM's costs hereunder.
Additionally, the pricing in this Distribution Agreement shall not be
increased by RCM before two years from the date of this agreement; and RCM shall
maintain the appropriate registrations at its own cost to sell Fund shares in
all 50 states of the United States.
All transactions and money transfers between RCM and the Fund shall be
handled by the Fund's Transfer Agent.
Exhibit 4 - CUSTODIAL AGREEMENT
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of January, 1999, by
and between Texas Capital Value Funds, Inc., a Maryland corporation
(hereinafter referred to as the "Company"), and Firstar Bank Milwaukee, N.A., a
corporation organized under the laws of the State of Wisconsin (hereinafter
referred to as the "Custodian").
WHEREAS, the Company is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create separate series, each with its own
separate investment portfolio; and
WHEREAS, the Company desires that the securities and cash of the Value & Growth
Portfolio (the "Fund") and each additional series of the Company listed on
Exhibit A attached hereto, as may be amended from time to time, shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares, bonds, debentures,
notes, mortgages 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.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Company by any two of the
President, a Vice President, the Secretary and the Treasurer of the Company, or
any other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of the Texas Capital Value Funds,
Inc.
2. Names, Titles, and Signatures of the Company's Officers
An officer of the Company will certify to Custodian the names and signatures of
those persons authorized to sign the officers' certificates described in Section
1 hereof, and the names of the members of the Board of Directors, together with
any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or accounts in the
name of the Company, subject only to draft or order by Custodian acting pursuant
to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Company. Custodian shall make payments of cash to, or for
the account of, the Company from such cash only:
(a) for the purchase of securities for the portfolio of the Fund
upon the delivery of such securities to Custodian, registered in the name of the
Company or of the nominee of Custodian referred to in Section 7 or in proper
form for transfer;
(b) for the purchase or redemption of shares of the common stock of the Fund
upon delivery thereof to Custodian, or upon proper instructions from the
Company;
(c) for the payment of interest, dividends, taxes, investment adviser's fees
or operating expenses (including, without limitation thereto, fees for legal,
accounting, auditing and custodian services and expenses for printing and
postage);
(d) 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
Custodian; or
(e) for other proper corporate purposes certified by resolution of the Board
of Directors of the Company.
Before making any such payment, Custodian shall receive (and may rely upon) an
officers' certificate requesting such payment and stating that it is for a
purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Company issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received by Custodian for the account of
the Company.
C. Custodian shall, upon receipt of proper instructions, make federal funds
available to the Company as of specified times agreed upon from time to time by
the Company and the Custodian in the amount of checks received in payment for
shares of the Fund which are deposited into the Fund's account.
D. If so directed by the Company, Custodian will invest any and all available
cash in overnight cash-equivalent investments as specified by the investment
manager.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall establish
and maintain a segregated account(s) for and on behalf of the Fund, into which
account(s) may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any securities of the
Company held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon receipt by
Custodian of payment therefore;
(b) when such 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;
(d) in exchange for, or upon conversion into, other securities alone or other
securities and cash 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;
(g) for the purpose of exchanging interim receipts or temporary securities for
definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the Fund
upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b), (d), (e),
(f), and (g), securities or cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall receive
(and may rely upon) an officers' certificate requesting such transfer, exchange
or delivery, and stating that it is for a purpose permitted under the terms of
items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and also, in
respect of item (i), upon receipt of an officers' certificate specifying the
securities to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be made,
provided, however, that an officers' certificate need not precede any such
transfer, exchange or delivery of a money market instrument, or any other
security with same or next-day settlement, if the President, a Vice President,
the Secretary or the Treasurer of the Company issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to the contrary,
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 for the account of the Fund;
(b) collect interest and cash dividends received, with notice to the Company,
for the account of the Fund; (c) hold for the account of the Fund hereunder all
stock dividends, rights and similar securities issued with respect to any
securities held by it hereunder; and (d) execute, as agent on behalf of the
Company, all necessary ownership certificates required by the Internal Revenue
Code of 1986, as amended (the "Code") or the Income Tax Regulations (the
"Regulations") of the United States Treasury Department (the "Treasury
Department") or under the laws of any state now or hereafter in effect,
inserting the Company's name on such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate, Custodian shall
register all securities, except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder or in any provision of
any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. All securities held by Custodian hereunder shall be at all
times identifiable in its records held in an account or accounts of Custodian
containing only the assets of the Company.
The Company shall from time to time furnish to Custodian appropriate instruments
to enable 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
Company and which may from time to time be registered in the name of the
Company.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian 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. Custodian shall deliver, or
cause to be executed and delivered, to the Company all notices, proxies and
proxy soliciting materials with respect to such securities, such proxies to be
executed by the registered holder of such securities (if registered otherwise
than in the name of the Company), but without indicating the manner in which
such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Company shall pay or reimburse 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 Custodian in
the performance of this Agreement.
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 provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to exempt
from taxation any exempt transfers and/or deliveries of any such securities.
10. Concerning Custodian
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. Until modified in writing, such compensation shall be
as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon any
certificate herein described or certified copy of any resolution of the Board,
and may rely on the genuineness of any such document which it may in good faith
believe to have been validly executed.
The Company agrees to indemnify and hold harmless Custodian and its nominee from
all taxes, charges, expenses, assessments, claims and liabilities (including
reasonable counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own bad faith, negligent action, negligent failure to act
or willful misconduct. Custodian is authorized to
charge any account of the Fund for such items. In the event of any advance of
cash for any purpose made by Custodian resulting from orders or instructions of
the Company, or in the event that 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 bad faith, negligent action, negligent failure to act
or willful misconduct, any property at any time held for the account of the
Company shall be security therefor.
Custodian agrees to indemnify and hold harmless the Company from all charges,
expenses, assessments, and claims/liabilities (including reasonable counsel
fees) incurred or assessed against it in connection with the performance of this
Agreement, except such as may arise from the Fund's own bad faith, negligent
action, negligent failure to act, or willful misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust company as a
subcustodian for all or any part of the Company's assets, so long as any such
bank or trust company is itself qualified under the 1940 Act and the rules and
regulations thereunder and provided further that, if the Custodian utilizes the
services of a subcustodian, the Custodian shall remain fully liable and
responsible for any losses caused to the Company by the subcustodian as fully as
if the Custodian was directly responsible for any such losses under the terms of
this Agreement.
Notwithstanding anything contained herein, if the Company requires the Custodian
to engage specific subcustodians for the safekeeping and/or clearing of assets,
the Company agrees to indemnify and hold harmless Custodian from all claims,
expenses and liabilities incurred or assessed against it in connection with the
use of such subcustodian in regard to the Company's assets, except as may arise
from Custodian's own bad faith, negligent action, negligent failure to act or
willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Company periodically as agreed upon with a statement
summarizing all transactions and entries for the account of Company. Custodian
shall furnish to the Company, at the end of every month, a list of the portfolio
securities for the Fund showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and by auditors
employed by, the Company.
13. Term of Agreement
This Agreement shall become effective as of the date hereof and, unless sooner
terminated as provided herein, shall continue for a period of two years, and
thereafter shall continue automatically in effect for successive annual periods.
This Agreement may be terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter period as is mutually
agreed upon by the parties. However, this Agreement may be replaced or modified
by a subsequent agreement between the parties.
14. Notices
Notices of any kind to be given by either party to the other party shall be in
writing and shall be duly given if mailed or delivered as follows: Notice to
Custodian shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Texas Capital Value Funds
1600 West 38th Street, Suite 412
Austin, TX 78731
15. Duties in the Event of Termination
Upon any termination of this Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Fund to dissolve or to function
without a custodian of its cash, securities and other property, Custodian shall
not deliver cash, securities or other property of the Fund to the Company, but
may deliver them to a bank or trust company of its own selection that meets the
requirements of the 1940 Act as a Custodian for the Company to be held under
terms similar to those of this Agreement, provided, however, that Custodian
shall not be required to make any such delivery or payment until full payment
shall have been made by the Company of all liabilities constituting a charge on
or against the properties then held by Custodian or on or against Custodian, and
until full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10 of
this Agreement.
This Agreement may not be assigned by Custodian without the consent of the
Company, authorized or approved by a resolution of its Board of Directors.
16. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the use by Custodian
of a central securities clearing agency or securities depository, provided,
however, that Custodian and the central securities clearing agency or securities
depository meet all applicable federal and state laws and regulations, and the
Board of Directors of the Company approves by resolution the use of such central
securities clearing agency or securities depository.
17. Records
Custodian shall keep records relating to its services to be performed hereunder,
in the form and manner, and for such period, as it may deem advisable and is
agreeable to the Company but not inconsistent with the rules and regulations of
appropriate government authorities, in particular Section 31 of the 1940 Act and
the rules thereunder. Custodian agrees that all such records prepared or
maintained by the Custodian relating to the services performed by Custodian
hereunder are the property of the Company and will be preserved, maintained, and
made available in accordance with such section and rules of the 1940 Act and
will be promptly surrendered to the Company on and in accordance with its
request.
18. Governing Law
This Agreement shall be governed by Wisconsin law. However, nothing herein
shall be construed in a manner inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer or one or more counterparts as of the day and year
first written above.
texas capital value funds, Inc. FIRSTAR BANK MILWAUKEE, N.A.
By:______________________________ By: ________________________________
Attest: __________________________
Attest:______________________________
Custody Services
Annual Fee Schedule - Domestic Funds
Exhibit A
Separate Series of Texas Capital Value Funds, Inc.
Name of Series Date Added
Value & Growth Portfolio January 1, 1999
Mid-Cap Focus _
Annual fee based upon market value of the fund group
First $50 Million @ 1.5 basis points per year
Next $50 Million @ 1 basis points per year
Balance @ .5 Basis Point
Investment transactions (purchase, sale, exchange, tender, redemption, maturity,
receipt, delivery):
$8.00 per book entry security (depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$35.00 per option/futures contract
$15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal
Variable Amount Demand Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge, which is 1/4
of 1%, is deducted from the variable amount note income at the time it is
credited to your account.
Plus out-of-pocket expenses, and extraordinary expenses based upon complexity
Fees and out-of-pocket expenses are billed to the fund monthly, based upon
market value at the beginning of the month
Exhibit 5 - TRANSFER AGENCY AGREEMENT
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of January, 1999, by
and between Texas Capital Value Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company") and Firstar Mutual Fund Services, LLC, a
corporation organized under the laws of the State of Wisconsin (hereinafter
referred to as the "FMFS").
WHEREAS, the Company is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create separate series, each with its own
separate investment portfolio;
WHEREAS, FMFS is a trust company and, among other things, is in the business of
administering transfer and dividend disbursing agent functions for the benefit
of its customers; and
WHEREAS, the Company desires to retain FMFS to provide transfer and dividend
disbursing agent services to the Value & Growth Portfolio (the "Fund") and each
additional series of the Company listed on Exhibit A attached hereto, as may be
amended from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and FMFS agree as follows:
1. Appointment of Transfer Agent
The Company hereby appoints FMFS as Transfer Agent of the Company on the terms
and conditions set forth in this Agreement, and FMFS hereby accepts such
appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein
2. Duties and Responsibilities of FMFS
FMFS shall perform all of the customary services of a transfer agent and
dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders with prompt delivery, where appropriate, of
payment and supporting documentation to the Company's custodian, and issue the
appropriate number of uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where relevant,
deliver appropriate documentation to the Company's custodian;
D. Pay monies upon receipt from the Company's custodian, where relevant, in
accordance with the instructions of redeeming shareholders;
E. Process transfers of shares in accordance with the shareholder's
instructions;
F. Process exchanges between funds and/or classes of shares of funds
both within the same family of funds and with the Portico Money Market Fund, if
applicable;
G. Prepare and transmit payments for dividends and distributions declared by
the Company with respect to the Fund;
H. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic investment,
dividend reinvestment, etc.);
I. Record the issuance of shares of the Fund and maintain, pursuant to Rule
17ad-10(e) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), a record of the total number of shares of the Fund which
are authorized, issued and outstanding;
J. Prepare shareholder meeting lists and, if applicable, mail, receive and
tabulate proxies;
K. Mail shareholder reports and prospectuses to current shareholders;
L. Prepare and file U.S. Treasury Department Forms 1099 and other appropriate
information returns required with respect to dividends and distributions for all
shareholders;
M. Provide shareholder account information upon request and prepare and mail
confirmations and statements of account to shareholders for all purchases,
redemptions and other confirmable transactions as agreed upon with the Company;
N. Provide a Blue Sky System which will enable the Company to monitor the
total number of shares of the Fund sold in each state. In addition, the Company
or its agent, including FMFS, shall identify to FMFS in writing those
transactions and assets to be treated as exempt from the Blue Sky reporting for
each state. The responsibility of FMFS for the Company's Blue Sky state
registration status is solely limited to the initial compliance by the Company
and the reporting of such transactions to the Company or its agent;
3. Compensation
The Company agrees to pay FMFS for the performance of the duties listed in this
agreement as set forth on Exhibit A attached hereto; the fees and out-of-pocket
expenses include, but are not limited to the following: printing, postage,
forms, stationery, record retention (if requested by the Company), mailing,
insertion, programming (if requested by the Company), labels, shareholder lists
and proxy expenses.
These fees and reimbursable expenses may be changed from time to time subject to
mutual written agreement between the Company and FMFS.
The Company agrees to pay all fees and reimbursable expenses within ten (10)
business days following the receipt of the billing notice.
4. Representations of FMFS
FMFS represents and warrants to the Company that:
A. It is a trust company duly organized, existing and in good standing under
the laws of Wisconsin;
B. It is a registered transfer agent under the Exchange Act.
C. It is duly qualified to carry on its business in the State of Wisconsin;
D. It is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement;
F. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement; and
G. It will comply with all applicable requirements of the Securities Act of
1933, as amended, and the Exchange Act, the 1940 Act, and any laws, rules, and
regulations of governmental authorities having jurisdiction.
5. Representations of the Company
The Company represents and warrants to FMFS that:
A. The Company is an open-ended non diversified investment company under the
1940 Act;
B. The Company is a corporation organized, existing, and in good standing
under the laws of Maryland;
C. The Company is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Articles of Incorporation have
been taken to authorize it to enter into and perform this Agreement;
E. The Company will comply with all applicable requirements of the Securities
Act, the Exchange Act, the 1940 Act, and any laws, rules and regulations of
governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act will be made effective
and will remain effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all shares of the
Company being offered for sale.
6. Covenants of the Company and FMFS
The Company shall furnish the Agent a certified copy of the resolution of the
Board of Directors of the Fund authorizing the appointment of FMFS and the
execution of this Agreement. The Company shall provide to the Agent a copy of
its Articles of Incorporation and Bylaws, and all amendments thereto.
FMFS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act, and the rules thereunder, FMFS agrees
that all such records prepared or maintained by FMFS relating to the services to
be performed by FMFS hereunder are the property of the Company and will be
preserved, maintained and made available in accordance with such section and
rules and will be surrendered to the Company on and in accordance with its
request.
7. Performance of Service; Limitation of Liability
FMFS shall exercise reasonable care in the performance of its duties under this
Agreement. FMFS shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Company in connection with matters to which this
Agreement relates, including losses resulting from mechanical breakdowns or the
failure of communication or power supplies beyond FTC_s control, except a loss
resulting from the Agent's refusal or failure to comply with the terms of this
Agreement or from bad faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Company shall indemnify and hold harmless FMFS
from and against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FMFS may sustain or incur or which
may be asserted against FMFS by any person arising out of any action taken or
omitted to be taken by it in performing the services hereunder (i) in accordance
with the foregoing standards, or (ii) in reliance upon any written or oral
instruction provided to FMFS by any duly authorized officer of the Company, such
duly authorized officer to be included in a list of authorized officers
furnished to FMFS and as amended from time to time in writing by resolution of
the Board of Directors of the Company.
FMFS shall indemnify and hold the Company harmless from and against any and all
claims, demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable attorneys'
fees) which the Company may sustain or incur or which may be asserted against
the Company by any person arising out of any action taken or omitted to be taken
by FMFS as a result of FTC_s refusal or failure to comply with the terms of this
Agreement, its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of communication or power
supplies beyond its control, FMFS shall take all reasonable steps to minimize
service interruptions for any period that such interruption continues beyond
FTC_s control. FMFS will make every reasonable effort to restore any lost or
damaged data and correct any errors resulting from such a breakdown at the
expense of FMFS. FMFS agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Company shall be entitled to
inspect FTC_s premises and operating capabilities at any time during regular
business hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to reprocess and correct
administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the indemnitor shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will use all reasonable care to
notify the indemnitor promptly concerning any situation which presents or
appears likely to present the probability of a claim for indemnification. The
indemnitor shall have the option to defend the indemnitee against any claim
which may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or other expenses for which it
shall seek indemnification under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in which the indemnitor
will be asked to indemnify the indemnitee except with the indemnitor_s prior
written consent.
8. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors, officers, and employees to
treat confidentially and as proprietary information of the Company all records
and other information relative to the Company and prior, present, or potential
shareholders (and clients of said shareholders) and not to use such records and
information for any purpose other than the performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Company, which approval shall not be unreasonably withheld and may not be
withheld where FMFS may be exposed to civil or criminal contempt proceedings for
failure to comply after being requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
9. Term of Agreement
This Agreement shall become effective as of the date hereof and, unless sooner
terminated as provided herein, shall continue for a period of two years, and
thereafter shall continue automatically in effect for successive annual periods.
This Agreement may be terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter period as is mutually
agreed upon by the parties. However, this Agreement may be replaced or modified
by a subsequent agreement between the parties.
10. Notices
Notices of any kind to be given by either party to the other party shall be in
writing and shall be duly given if mailed or delivered as follows: Notice to
FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Texas Capital Value Funds
1600 West 38th Street, Suite 412
Austin, TX 78731
11. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any of FTC's
duties or responsibilities hereunder is designated by the Company by written
notice to FMFS, FMFS will promptly, upon such termination and at the expense of
the Company, transfer to such successor all relevant books, records,
correspondence, and other data established or maintained by FMFS under this
Agreement in a form reasonably acceptable to the Company (if such form differs
from the form in which FMFS has maintained, the Company shall pay any expenses
associated with transferring the data to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from FTC's personnel in the establishment of books, records, and other data by
such successor.
12. Governing Law
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of the State of Wisconsin. However, nothing
herein shall be construed in a manner inconsistent with the 1940 Act or any rule
or regulation promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer or one or more counterparts as of the day
and year first written above.
TEXAS CAPITAL VALUE funds, Inc. FIRSTAR MUTUAL FUND SERVICES,
LLC
By:______________________________ By: ________________________________
Attest: __________________________
Attest:______________________________
Transfer Agent and Shareholder Servicing
Annual Fee Schedule
Exhibit A
Separate Series of Texas Capital Value Funds, Inc.
Name of Series Date Added
Value & Growth Portfolio January 1, 1999
Mid-Cap Focus Portfolio _
Annual Fee
$16.00 per shareholder account
Minimum annual fees of $25,500 first fund
Minimum annual fees of $10,000 for each additional fund or class
Plus Out-of-Pocket Expenses, including but not limited to:
Telephone - toll-free lines Proxies
Postage Retention of records (with prior approval)
Programming (with prior approval) Microfilm/fiche of records
Stationery/envelopes Special reports
Mailing ACH fees
Insurance NSCC charges
ACH Shareholder Services
$125.00 per month per fund group
$ .50 per account setup and/or change
$ .50 per ACH item
$3.50 per correction, reversal, return item
Qualified Plan Fees (Billed to Investors)
Annual maintenance fee per account $12.50 / acct. (Cap at $25.00 per SSN)
Transfer to successor trustee $15.00 / trans.
Distribution to participant $15.00 / trans. (Exclusive of SWP)
Refund of excess contribution $15.00 / trans.
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00 / wire
Telephone Exchange $ 5.00 / exchange transaction
Return check fee $20.00 / item
Stop payment $20.00 / stop
(Liquidation, dividend, draft check)
Research fee $ 5.00 / item
(For requested items of the second calendar year [or previous] to the
request)(Cap at $25.00)
File Transfer $160/month
$.01 /record
NSCC and DAZL
Out-of-Pocket Charges
NSCC Interfaces
Setup
Fund/SERV, Networking ACATS, Exchanges $5,000 setup (one time)
Commissions $5,000 setup (one time)
Processing
Fund/SERV $ 50 / month
Networking $ 250 / month
CPU Access $ 40 / month
Fund/SERV Transactions $ .35 / trade
Networking - per item $ .025/monthly dividend fund
Networking - per item $ .015/non-mo. dividend fund
First Data $ .10 / next-day Fund/SERV trade
First Data $ .15 / same-day Fund/SERV trade
NSCC Implementation
8 to 10 weeks lead time (target availability 12/1/98)
DAZL (Direct Access Zip Link - Electronic mail interface to financial advisor
network)
Setup $5,000 / fund group-Waived for FIRSTAR
Monthly Usage $1,000 / month
Transmission $ .015 / price record
$ .025 / other record
Enhancement $ 125 / hour
Fees and out-of-pocket expenses are billed to the fund monthly
Exhibit 6 - FUND ACCOUNTING AGREEMENT
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of January, 1999, by
and between Texas Capital Value Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company") and Firstar Mutual Fund Services, LLC, a
corporation organized under the laws of the State of Wisconsin (hereinafter
referred to as "FMFS").
WHEREAS, the Company is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to create separate series, each with its own
separate investment portfolio;
WHEREAS, FMFS is in the business of providing, among other things, mutual fund
accounting services to investment companies; and
WHEREAS, the Company desires to retain FMFS to provide accounting services to
the Value & Growth Portfolio (the "Fund") and each additional series of the
Company listed on Exhibit A attached hereto, as it may be amended from time to
time.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and FMFS agree as follows:
1. Appointment of Fund Accountant
The Company hereby appoints FMFS as Fund Accountant of the Company on the terms
and conditions set forth in this Agreement, and FMFS hereby accepts such
appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein.
2. Duties and Responsibilities of FMFS
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date+1 basis using security trade
information communicated from the investment manager.
(2) For each valuation date, obtain prices from a pricing source approved by
the Board of Directors of the Company and apply those prices to the portfolio
positions. For those securities where market quotations are not readily
available, the Board of Directors of the Company shall approve, in good faith,
the method for determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of each valuation date
and calculate gross earnings on investments for the accounting period.
(4) Determine gain/loss on security sales and identify them as, short-term or
long-term; account for periodic distributions of gains or losses to shareholders
and maintain undistributed gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual amounts as directed
by the Company as to methodology, rate or dollar amount.
(2) Record payments for Fund expenses upon receipt of written authorization
from the Company.
(3) Account for Fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed upon by FMFS and
the Company.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales, exchanges, transfers, dividend
reinvestments, and other Fund share activity as reported by the transfer agent
on a timely basis.
(2) Apply equalization accounting as directed by the Company.
(3) Determine net investment income (earnings) for the Fund as of each
valuation date. Account for periodic distributions of earnings to shareholders
and maintain undistributed net investment income balances as of each valuation
date.
(4) Maintain a general ledger and other accounts, books, and financial records
for the Fund in the form as agreed upon.
(5) Determine the net asset value of the Fund according to the accounting
policies and procedures set forth in the Fund's Prospectus.
(6) Calculate per share net asset value, per share net earnings, and other per
share amounts reflective of Fund operations at such time as required by the
nature and characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share price for each valuation
date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of accounting detail to
support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment portfolio of the Fund to
support the tax reporting required for IRS-defined regulated investment
companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the tax lot relief
method designated by the Company.
(4) Provide the necessary financial information to support the taxable
components of income and capital gains distributions to the transfer agent to
support tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support financial statement
preparation by making the Fund's accounting records available to the Company,
the Securities and Exchange Commission, and the outside auditors.
(2) Maintain accounting records according to the 1940 Act and regulations
provided thereunder.
3. Pricing of Securities
For each valuation date, obtain prices from a pricing source selected by FMFS
but approved by the Company's Board of Directors and apply those prices to the
portfolio positions of the Fund. For those securities where market quotations
are not readily available, the Company's Board of Directors shall approve, in
good faith, the method for determining the fair value for such securities.
If the Company desires to provide a price which varies from the pricing source,
the Company shall promptly notify and supply FMFS with the valuation of any such
security on each valuation date. All pricing changes made by the Company will
be in writing and must specifically identify the securities to be changed by
CUSIP, name of security, new price or rate to be applied, and, if applicable,
the time period for which the new price(s) is/are effective.
4. Changes in Accounting Procedures
Any resolution passed by the Board of Directors of the Company that affects
accounting practices and procedures under this Agreement shall be effective upon
written receipt and acceptance by the FMFS.
5. Changes in Equipment, Systems, Service, Etc.
FMFS reserves the right to make changes from time to time, as it deems
advisable, relating to its services, systems, programs, rules, operating
schedules and equipment, so long as such changes do not adversely affect the
service provided to the Company under this Agreement.
6. Compensation
FMFS shall be compensated for providing the services set forth in this Agreement
in accordance with the Fee Schedule attached hereto as Exhibit A and as mutually
agreed upon and amended from time to time. The Company agrees to pay all fees
and reimbursable expenses within ten (10) business days following the receipt of
the billing notice.
7. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care in the performance of its duties under
this Agreement. FMFS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Company in connection with matters to
which this Agreement relates, including losses resulting from mechanical
breakdowns or the failure of communication or power supplies beyond FTC's
control, except a loss resulting from FTC's refusal or failure to comply with
the terms of this Agreement or from bad faith, negligence, or willful misconduct
on its part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Company shall
indemnify and hold harmless FMFS from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or without basis in fact or law)
of any and every nature (including reasonable attorneys' fees) which FMFS may
sustain or incur or which may be asserted against FMFS by any person arising out
of any action taken or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing standards, or (ii) in reliance
upon any written or oral instruction provided to FMFS by any duly authorized
officer of the Company, such duly authorized officer to be included in a list of
authorized officers furnished to FMFS and as amended from time to time in
writing by resolution of the Board of Directors of the Company.
FMFS shall indemnify and hold the Company harmless from and against any and all
claims, demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable attorneys'
fees) which the Company may sustain or incur or which may be asserted against
the Company by any person arising out of any action taken or omitted to be taken
by FMFS as a result of FTC's refusal or failure to comply with the terms of this
Agreement, its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of communication or power
supplies beyond its control, FMFS shall take all reasonable steps to minimize
service interruptions for any period that such interruption continues beyond
FTC's control. FMFS will make every reasonable effort to restore any lost or
damaged data and correct any errors resulting from such a breakdown at the
expense of FMFS. FMFS agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Company shall be entitled to
inspect FTC's premises and operating capabilities at any time during regular
business hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to reprocess and correct
administrative errors at its own expense.
B. In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the indemnitor shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will use all reasonable care to
notify the indemnitor promptly concerning any situation which presents or
appears likely to present the probability of a claim for indemnification. The
indemnitor shall have the option to defend the indemnitee against any claim
which may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or other expenses for which it
shall seek indemnification under this section. Indemnitee shall in no case
confess any claim or make any compromise in any case in which the indemnitor
will be asked to indemnify the indemnitee except with the indemnitor_s prior
written consent.
8. No Agency Relationship
Nothing herein contained shall be deemed to authorize or empower FMFS to act as
agent for the other party to this Agreement, or to conduct business in the name
of, or for the account of the other party to this Agreement.
9. Records
FMFS shall keep records relating to the services to be performed hereunder, in
the form and manner, and for such period as it may deem advisable and is
agreeable to the Company but not inconsistent with the rules and regulations of
appropriate government authorities, in particular, Section 31 of the 1940 Act,
and the rules thereunder. FMFS agrees that all such records prepared or
maintained by FMFS relating to the services to be performed by FMFS hereunder
are the property of the Company and will be preserved, maintained, and made
available in accordance with such section and rules of the 1940 Act and will be
promptly surrendered to the Company on and in accordance with its request.
10. Data Necessary to Perform Services
The Company or its agent, which may be FMFS, shall furnish to FMFS the data
necessary to perform the services described herein at such times and in such
form as mutually agreed upon. If FMFS is also acting as the transfer agent for
the Company, nothing herein shall be deemed to relieve FMFS of any of its
obligations under the Transfer Agent Servicing Agreement.
11. Notification of Error
The Company will notify FMFS of any balancing or control error caused by FMFS
within three (3) business days after receipt of any reports rendered by FMFS to
the Company, or within three (3) business days after discovery of any error or
omission not covered in the balancing or control procedure, or within three (3)
business days of receiving notice from any shareholder.
12. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors, officers, and employees to
treat confidentially and as proprietary information of the Company all records
and other information relative to the Company and prior, present, or potential
shareholders of the Company (and clients of said shareholders), and not to use
such records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where FMFS 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.
13. Term of Agreement
This Agreement shall become effective as of the date hereof and, unless sooner
terminated as provided herein, shall continue for a period of two years, and
thereafter shall continue automatically in effect for successive annual periods.
This Agreement may be terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter period as is mutually
agreed upon by the parties. However, this Agreement may be replaced or modified
by a subsequent agreement between the parties.
14. Notices
Notices of any kind to be given by either party to the other party shall be in
writing and shall be duly given if mailed or delivered as follows: Notice to
FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Texas Capital Value Funds
1600 West 38th Street, Suite 412
Austin, TX 78731
15. Duties in the Event of Termination
In the event that in connection with termination, a successor to any of FTC's
duties or responsibilities hereunder is designated by the Company by written
notice to FMFS, FMFS will promptly, upon such termination and at the expense of
the Company transfer to such successor all relevant books, records,
correspondence and other data established or maintained by FMFS under this
Agreement in a form reasonably acceptable to the Company (if such form differs
from the form in which FMFS has maintained the same, the Company shall pay any
expenses associated with transferring the same to such form), and will cooperate
in the transfer of such duties and responsibilities, including provision for
assistance from FTC's personnel in the establishment of books, records and other
data by such successor.
16. Governing Law
This Agreement shall be construed in accordance with the laws of the State of
Wisconsin. However, nothing herein shall be construed in a manner inconsistent
with the 1940 Act or any rule or regulation promulgated by the SEC thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer on one or more counterparts as of the day and year
first written above.
texas capital value funds, Inc. FIRSTAR MUTUAL FUND SERVICES,
LLC
By:______________________________ By: ________________________________
Attest: __________________________
Attest:_____________________________
Fund Accounting Services
Annual Fee Schedule
Exhibit A
Separate Series of Texas Capital Value Funds, Inc.
Name of Series Date Added
Value & Growth Portfolio January 1, 1999
Mid-Cap Focus Portfolio -
Domestic Equity Funds (per fund, one class each fund)
$22,000 for the first $40 million
1 basis point on the next $200 million
.5 basis point on the balance
Plus out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $.15
Options $.15
Corp/Gov/Agency Bonds $.50
CMO's $.80
International Equities and Bonds $.50
Municipal Bonds $.80
Money Market Instruments $.80
Fees and out-of-pocket expenses are billed to the fund monthly
Exhibit 7 - 12B-1 PLAN
Texas Capital Value Funds, Inc
Distribution Assistance, Promotion, and Administrative Service Plan
Pursuant to Rule 12b-1 Under the Investment Company Act of 1940
This Distribution Assistance, Promotion, and Administrative Service Plan (the
"Plan") is designed to conform to the requirements of Rules 12b-1 under
Investment Company Act of 1940 (the "Act") and has been adopted by Texas Capital
Value Funds, Inc. (the "Fund"), Rafferty Capital Markets, Inc., the
Fund's Distributor (the "Distributor") and by First Austin Capital Management,
Inc., the Fund's Investment Adviser (the "Adviser").
The Fund, the Distributor, and the Adviser, all desire to substantially increase
the sale of the Fund's shares in order to (a) spread the cost of the Fund's
operation over a larger shareholder base and (b) permit the Fund to take
advantage of certain economies of scale that are available to a funds with a
larger asset base. The Directors of both the Fund and the Distributor believe
that the best way to achieve this goal is for the Fund to adopt a Distribution
Agreement with the Distributor and utilize a portion of its assets to pay for
(1) advertising and promotion expenses of all kinds (including cooperative ads
placed by brokers and dealers who have entered into written agreements with the
Distributor in the future), (2) fulfillment expenses which include the cost of
printing and mailing prospectuses and sales literature to prospective
shareholders of the Fund, (3) sales assistance payments to brokers and dealers
who already have entered or may enter into written agreements with the Fund in
the future relating to the sale of Fund shares, and (4) for reimbursement and/or
compensation to brokers, dealers, and other financial intermediaries such as
banks and other institutions, for administrative and accounting services
rendered for the accounts of Fund stockholders who purchase and redeem their
shares through such banks or other institutions.
Pursuant to this Plan, the Fund will contribute a sum of money to the
Distributor for the purposes set forth above, which will equal .25% of average
daily net assets of the Fund during its fiscal year. These payments will be
made by the Fund from time to time, but not more often than once a month. The
Adviser will be responsible for administering this Plan, providing reports on
its income and disbursements to the Directors of the Fund on a continuing basis.
The Distributor will be responsible for entering into written Sales Agreements
with brokers and dealers as contemplated by this Plan.
The level of Sales Assistance payments to be made to each broker or dealer
entering into a written Sales Agreement will be set forth in the Fund's
prospectus. It is contemplated that Sales Assistance payments will be made
quarterly and will vary directly with the average level of Fund assets
comprising the accounts of Fund shareholders who are customers of that broker or
dealer.
It is understood by the Directors of the Fund and by the Distributor that all
Fund payments made to the Distributor in accordance with this Plan will not
exceed (when added to other Fund operating expenses) the permissible level of
Fund operating expense that is permitted pursuant to the terms of any expense
limitation arrangement or undertaking in effect from time to time between the
Fund and the Adviser.
The Adviser will prepare and furnish to the Fund's Board of Directors at least
quarterly a written report complying with the requirements of Rule 12b-1 which
sets forth all amounts expended under the Plan and the purposes for which such
expenditures were made.
It is also understood by the Fund and the Distributor that the Distributor may
incur additional expenses in carrying out its duties pursuant to the
Distribution Agreement between the Fund and the Distributor that will be over
and above the amount that the Fund will contribute to the Distributor as
described in this Plan.
In addition, the Adviser to the Fund may at its option, and only out of the net
capital or net profits of the Adviser (not out of the Fund's management fee),
reimburse the Fund or the Distributor for any such additional expenses used to
promote, advertise, or take any other action intended to increase the assets of
the Fund. The Board, in its annual review of the Advisory and Administrative
Agreement, shall disregard any such marketing costs incurred by the Advisor to
the Fund or the Distributor in the evaluation of the reasonableness of advisory
and administrative fees incurred by the Fund.
The Plan will become effective immediately upon approval by a majority of the
Board of Directors of the Fund including a majority of the directors who are not
"interested persons" (as defined in the Act) of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan, pursuant to a vote cast at a meeting
called for the purposes of voting on the approval of the Plan.
The Plan will remain in effect for one year from the date it is approved by the
Board of Directors of the Fund, unless earlier terminated in accordance with its
terms, and thereafter may continue for successive annual periods if the Plan is
approved at least annually by a majority of the Board of Directors of the Fund,
including a majority of the Directors who are not "interested persons" (as
defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, pursuant to a vote cast at a meeting called for the
purpose of voting on the approval of the Plan.
The Plan may be amended at any time with the approval of the Board of Directors
of the Fund, provided that (a) any material amendments of the terms of the Plan
will become effective only if approved by a majority of the Board of Directors
of the Fund including a majority of the Board of Directors who are not
"interested persons" (as defined in the Act) of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan and (b) any amendment to increase
materially the amount to be expended for distribution assistance, administrative
services, and advertising and other expenses designed to promote the sale of
shares of the Fund pursuant to the Plan will be effective only upon the
additional approval by a vote of a majority of the outstanding voting securities
of the Fund.
The Plan is terminable without penalty at any time by (a) a vote of the majority
of the Directors of the Fund who are not "interested persons" (as defined in the
Act) of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan, (b) a vote of a majority of the outstanding voting securities of the Fund,
or (c) by the Adviser.
All agreements with any persons relating to the implementation of the plan will
be subject to termination without penalty, pursuant to the provisions of the
paragraph above, and will automatically terminate in the event of their
assignment.
The Distributor is not obligated by the Plan to execute agreements with any
qualified broker or dealer or financial intermediary and any termination of an
agreement with broker or dealer or financial intermediary under the Plan will
have no effect on similar agreements between the fund and other participating
brokers or dealers or financial intermediaries pursuant to the Plan.
While the Plan is in effect, the selection and nomination of the Directors who
are not "interested persons" of the funds (as defined in the Act) will be
committed to the discretion of such "disinterested" Directors.
Exhibit 8 - FULFILLMENT SERVICES AGREEMENT
FULFILLMENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of January, 1999, by
and between Texas Capital Value Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company"), Firstar Mutual Fund Services, LLC, a corporation
organized under the laws of the State of Wisconsin (hereinafter referred to as
"FMFS"), First Austin Capital Management, Inc., a corporation organized under
the laws of the State of Texas (hereinafter referred to as the "Adviser"), and
Rafferty Capital Markets, Inc., a corporation organized under the laws of the
State of New York (hereinafter referred to as the "Distributor").
WHEREAS, the Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended;
WHEREAS, the Adviser serves as investment adviser to the Company, a registered
investment company under the Investment Company Act of 1940, as amended, which
is authorized to create separate series of funds;
WHEREAS, the Distributor is a registered broker-dealer under the Securities
Exchange Act of 1934, as amended, and serves as principal distributor of Company
shares;
WHEREAS, FMFS provides fulfillment services to mutual funds;
WHEREAS, the Adviser, the Distributor, and the Company desire to retain FMFS to
provide fulfillment services for the Value & Growth Portfolio (the "Fund") and
each additional series of the Company listed on Exhibit A attached hereto, as
may be amended from time to time.
NOW, THEREFORE, the parties agree as follows:
1. Duties and Responsibilities of FMFS
1. Answer all prospective shareholder calls concerning the Fund.
2. Send all available Fund material requested by the prospect within 24 hours
from time of call.
3. Receive and update all Fund fulfillment literature so that the most
current information is sent and quoted.
4. Provide 24 hour answering service to record prospect calls made after
hours (7 p.m. to 8 a.m. CT).
5. Maintain and store Fund fulfillment inventory.
6. Send periodic fulfillment reports to the Company as agreed upon between
the parties.
2. Duties and Responsibilities of the Company
1. Provide Fund fulfillment literature updates to FMFS as necessary.
2. File with the NASD, SEC and State Regulatory Agencies, as appropriate, all
fulfillment literature that the Fund requests FMFS send to
prospective shareholders.
3. Supply FMFS with sufficient inventory of fulfillment materials as
requested from time to time by FMFS.
4. Provide FMFS with any sundry information about the Fund in order to answer
prospect questions.
3. Indemnification
The Company agrees to indemnify FMFS from any liability arising out of the
distribution of fulfillment literature which has not been approved by the
appropriate Federal and State Regulatory Agencies. FMFS agrees to indemnify the
Company from any liability arising from the improper use of fulfillment
literature during the performance of duties and responsibilities identified in
this agreement.
4. Compensation
The Company, if permissible under any Rule 12b-1 plan in effect from time to
time for the benefit of the Fund and only to the extent consistent with the
terms of such plan, or the Adviser, or the Distributor, agrees to compensate
FMFS for the services performed under this Agreement in accordance with the
attached Exhibit A. All invoices shall be paid within ten days of receipt.
5. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors, officers, and employees to
treat confidentially and as proprietary information of the Company all records
and other information relative to the Company and prior, present, or potential
shareholders of the Company (and clients of said shareholders), and not to use
such records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where FMFS 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.
6. Term of Agreement
This Agreement shall become effective as of the date hereof and, unless sooner
terminated as provided herein, shall continue for a period of two years, and
thereafter shall continue automatically in effect for successive annual periods.
This Agreement may be terminated by either party upon giving thirty (30) days
prior written notice to the other party or such shorter period as is mutually
agreed upon by the parties. However, this Agreement may be replaced or modified
by a subsequent agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer or one or more counterparts as of the day
and year first written above.
texas capital value funds, Inc. FIRSTAR MUTUAL FUND SERVICES,
LLC
By:______________________________ By: ________________________________
Attest: __________________________
Attest:______________________________
first austin capital management, rafferty capital markets,
inc. inc.
By:______________________________ By: ________________________________
Attest: __________________________
Attest:______________________________
Literature Fulfillment Services
Annual Fee Schedule
Exhibit A
Separate Series of Texas Capital Value Funds, Inc.
Name of Series Date Added
Value & Growth Portfolio January 1, 1999
Blue Chip Value Portfolio _
Base Fee: $250 / month
Customer Service
State registration compliance edits
Literature database
Record prospect request and profile
Prospect servicing 8:00 am to 7:00 pm CT
Recording and transcription of requests received off-hours
Periodic reporting of leads to client
Service Fee: $.99 / minute
Assembly and Distribution of Literature Requests
Generate customized prospect letters
Assembly and insertion of literature items
Inventory tracking
Inventory storage, reporting
Periodic reporting of leads by state, items requested, market source
Service Fee: $.45 / lead - insertion of up to 4 items/lead
$.15 / additional inserts
Fees and out-of-pocket expenses are billed to the fund monthly
Signatures
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 the Registrant (certifies that
it meets all of the requirements for effectiveness of this registration
statement under rule 485(b) under the Securities Act and) 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 December 1, 1998.
TEXAS CAPITAL VALUE FUNDS, INC.
by: /s/Mark A. Coffelt
Mark A Coffelt
President
/s/Mark A. Coffelt President, Chief Investment Officer and Director
Mark A Coffelt Dec 1, 1998
/s/Edward Clark Director Dec 1, 1998
Edward D. Clark
/s/John Henry McDonald Director Dec 1, 1998
John Henry McDonald
/s/Janis Claflin Director Dec 1, 1998
Janis Claflin
/s/Brian T. Bares Secretary Dec 1, 1998
Brian T. Bares
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