<PAGE> PAGE 1
000 A000000 03/31/98
000 C000000 0001000069
000 D000000 N
000 E000000 NF
000 F000000 Y
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000 J000000 A
001 A000000 TEXAS CAPITAL VALUE FUNDS
001 B000000 811-09088
001 C000000 5124588165
002 A000000 1600 WEST 38TH STREET, SUITE 412
002 B000000 AUSTIN
002 C000000 TX
002 D010000 78731
003 000000 N
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008 A00AA01 FIRST AUSTIN CAPITAL MANAGEMENT, INC.
008 B00AA01 A
008 C00AA01 801-31075
008 D01AA01 AUSTIN
008 D02AA01 TX
008 D03AA01 78731
010 A00AA01 FIRST AUSTIN CAPITAL MANAGEMENT, INC.
010 B00AA01 801-31075
010 C01AA01 AUSTIN
010 C02AA01 TX
010 C03AA01 78731
011 A00AA01 CHOICE INVESTMENTS, INC.
011 B00AA01 8-35503
011 C01AA01 AUSTIN
011 C02AA01 TX
<PAGE> PAGE 2
011 C03AA01 78731
012 A00AA01 FUND SERVICES INC.
012 B00AA01 84-10533
012 C01AA01 RICHMOND
012 C02AA01 VA
012 C03AA01 23229
013 A00AA01 TAIT, WELLER & BAKER
013 B01AA01 PHILADELPHIA
013 B02AA01 PA
013 B03AA01 19108
014 A00AA01 CHOICE INVESTMENTS, INC.
014 B00AA01 8-35503
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020 B000002 62-1269726
020 C000002 2
020 A000003 CAPITAL INSTITUTIONAL SERVICES INC.
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020 C000003 34
020 A000004 DONALDSON, LUFKIN & JENRETTE
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020 C000004 13
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020 A000007 SALOMON SMITH BARNEY
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020 C000008 25
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<PAGE> PAGE 3
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SIGNATURE BRIAN BARES
TITLE SECRETARY
Sub-Item 77C
A Special Meeting of shareholders of the Texas Capital
Value Funds, Inc.
was held on November 24, 1997.
The Secretary reported that on the first matter of business
before the meeting,
the approval of a new investment advisory and
administrative contract with FACM,
749,785.497 shares were voted in favor on the new contract,
1,983.145 shares
voted against it, and 18,740.544 shares abstained. He
announced that approval
of each of the matters voted upon by shareholders at this
meeting required the
affirmative vote of the lesser of (a) 67% or more of the
Fund's voting
securities present at the Meeting if more than 50% of
outstanding voting
securities were present or represented by proxy or (b) by
more than 50% of all
the outstanding voting securities of the Fund. Thus,
shareholders approved the
new Investment Advisory and Administrative Contract to take
effect upon the
purchase of FACM's common stock by Mark Coffelt from his
father.
On the second matter of business before the meeting,
approval of a change in
the Fund's fundamental investment policy to expand the
short term borrowing
ability of the Fund from 10% to 33 1/3% of net assets under
management, the
Secretary reported that 732,608.783 shares were voted in
favor of the new
policy, 22,554.516 shares voted against it, and 17,680.887
shares abstained.
Consequently, shareholders approved the change in the
Fund's fundamental
investment policies to expand short-term borrowing.
On the last matter of business before the meeting, the
approval of a 12b-1 Plan
entitled Distribution Assistance, Promotion, and
Administrative Service Plan to
replace the present 12b-1 Plan of the Fund, the Secretary
reported that
719,478.673 shares were voted in favor on the 12b-1 Plan,
29,915.143 shares
voted against it, and 21,113.370 shares abstained. Thus,
shareholders approved
the Distribution Assistance, Promotion, and Administrative
Service Plan.
Sub-Item 77H
A change in control of the Advisor to the Texas Capital
Value Funds, Inc.
occurred during the period, whereby Mark A. Coffelt bought
the
remaining shares not owned by him in the Advisor from his
dad Guy D. Coffelt.
The change was approved by shareholders on November 24th,
1997 at the
aforementioned special meeting.
Sub Item 77Q1-(e)
A change in control of the Advisor to the Texas Capital
Value Funds occurred
during the period. A copy of the approved Investment
Advisory and
Administrative Contract follows:
Investment Advisory and Administrative Contract
THIS AGREEMENT (this Agreement) is made this day of, 1997,
by and between Texas
Capital Value Fund, Inc., a Maryland corporation (the
Fund), and First Austin
Capital Management, Inc., a Delaware corporation (the
Investment Advisor).
WITNESSETH:
WHEREAS, the Fund engages in the business of investing and
reinvesting its
assets and property in various stocks and securities and
the Investment Advisor
engages in the business of providing investment advisory
services; and
WHEREAS, the Fund has need for investment advisory
services.
NOW THEREFORE, for good and valuable consideration, the
receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Advisory Services. The Investment Advisor shall render
investment advisory
services (the Advisory Services) to the Fund, subject to
the supervision and
direction of the Board of Directors of the Fund, for the
period set forth in
Paragraph 6 below on the terms set forth herein. The
Investment Advisor shall
render such Advisory Services and assume the obligations
herein set forth, for
the compensation provided in Paragraph 3(a) below. The
Investment Advisor
shall, for the purposes herein, be deemed to be an
independent contractor, and
shall, unless otherwise expressly provided and authorized,
have no authority to
act for or represent the Fund in any way, or in any way be
deemed an agent or
employee of the Fund.
2. Administrative Services. In addition to the Advisory
Services, the
Investment Advisor shall provide certain administrative
support services to the
Fund including establishing and maintaining shareholders'
accounts and records,
processing purchase and redemption transactions, answering
routine client
inquiries regarding the Fund, preparing all registration
statements,
prospectuses, tax returns and proxy statements, valuing the
Fund's portfolio
daily and calculating the daily net asset value per share,
and providing such
other administrative services to the Fund as the Fund may
reasonably request
(collectively, the Administrative Services). The
Investment Advisor may
contract with third parties to perform all or part of the
Administrative
Services.Notwithstanding anything contained in this
Agreement to the contrary,
under no circumstances shall the execution of any such
third party contract be
deemed an assignment by the Investment Advisor of interest
in this Agreement.
3.(a) As compensation for the services to be rendered to
the Fund by the
Investment Advisor under the provisions of this Agreement,
the Fund shall pay
the Investment Advisor:
(i) for Advisory Services a flat fee of one percent of the
net assets of the
Fund; plus additional amounts as follows:
(ii)for Administrative Services a fee equal to the sum of
(i) seven-tenths
percent (0.70) of the amount of assets in the Fund between
one dollar ($1.00)
and five million dollars ($5,000,000), inclusive, plus (ii)
five-tenths percent
(0.50) of the amount of assets in the Fund between five
million and one dollars
($5,000,001.00) and thirty million dollars ($30,000,000),
inclusive, plus (c)
twenty-eight hundredths percent (0.28) of the amount of
assets in the Fund
between thirty million and one dollars ($30,000,001) and
one hundred million
dollars ($100,000,000), inclusive, plus (d) twenty-five
hundredths percent
(0.25) of the amount of assets in the Fund between one
hundred million and one
dollars ($100,000,001) and two hundred million dollars
($200,000,000),
inclusive, plus (e) twenty hundredths percent (0.20) of the
amount of assets in
the Fund in excess of two hundred and one million dollars
($200,000,001),
inclusive (all assets in the Fund for the purposes of this
Paragraph to be
rounded to the nearest dollar prior to the computation of
any fee owed).
Such fees shall be accrued daily and be payable monthly in
arrears on the first
day of each calendar month. Accruals of fees to the
Investment Advisor shall
begin on the execution date of this Agreement.
(b) Costs. All Fund costs, with the exception of
extraordinary legal
expenses (as determined by the Board of Directors of the
Fund), brokerage
commissions, custodial charges based upon transactions in
the portfolio of the
Fund and marketing expenses, will be borne by the
Investment Advisor as part of
this Agreement. In addition, the Investment Advisor shall
absorb all the
organization costs for the Fund as determined by the Board
of Directors of the
Fund.
In the conduct of the respective businesses of the
parties hereto and in the
performance of this Agreement, the Fund and the Investment
Advisor may share
common facilities and personnel common to each. The entire
cost to the Fund for
the use of common facilities and personnel will be borne by
the Advisor as part
of this Agreement.
If any Fund costs which the Investment Advisor has
agreed to bear
hereunder are incurred by the Fund pursuant to separate
agreements with third
parties, the Fund shall provide the Investment Advisor with
copies of such
agreements and any amendments thereto and shall either bill
the Investment
Advisor for the costs insured by the Fund thereunder or
direct the Investment
Advisor to pay any such costs incurred directly to the
third parties involved as
provided by the applicable agreements.
4. Non-Exclusive. The services to be rendered by the
Investment Advisor to the
Fund under this Agreement are not to be deemed to be
exclusive, and the
Investment Advisor shall be free to render similar or
different services to
others so long as its ability to render the services
provided for in this
Agreement shall not be impaired thereby. If its ability
becomes so impaired, as
determined by the Fund in its sole and absolute discretion,
the Fund shall
notify the Investment Advisor of same and this Agreement
shall automatically
terminate upon the receipt by the Investment Advisor of
such notice. Such
automatic termination shall be upon the same terms and
conditions as provided
for other terminations pursuant to the last sentence of
Paragraph 7 below.
5. Interested Parties. It is understood and agreed that
directors, officers,
employees, agents and shareholders of the Fund may be
interested in the
Investment Advisor as directors, officers, employees,
agents and shareholders of
the Investment Advisor. Similarly, directors, officers,
employees, agents and
shareholders of the Investment Advisor may be interested in
the Fund as
directors, officers, employees, agents and shareholders of
the Fund.
Furthermore, the Investment Advisor itself may be
interested in the Fund as a
shareholder or otherwise of the Fund. It is understood and
agreed that
directors, officers, employees, agents and shareholders of
the Investment
Advisor may continue as directors, officers, employees,
agents and shareholders
of the Fund and vice versa; that the Investment Advisor,
its directors,
officers, employees, agents and shareholders may engage in
other business, may
render investment advisory services to other investment
companies, or to any
other corporation, association, firm or individual, and may
render underwriting
services to the Fund, or to any other investment company,
corporation,
association, firm or individual, subject to the provisions
of Paragraph 4 above.
The parties agree that the Investment Advisor has a
proprietary interest in the
names "Texas Capital Value Funds, Inc." and "Value and
Growth Portfolio", and
the Fund agrees to promptly take any and all necessary
action to remove the
names "Texas Capital Value Funds, Inc." and "Value and
Growth Portfolio" from
its corporate name and from the name of any of its funds
upon receipt of written
request therefor from the Investment Advisor.
6. Term. Notwithstanding the date of this Agreement first
above written, the
effective date of this Agreement (the "Effective Date")
shall be the effective
date of that certain Registration Statement on Form N-1A of
the Fund, filed by
the Fund with the Securities and Exchange Commission under
the Securities Act of
1933, as amended, and the Investment Company Act of 1940,
as amended.
Thereafter, this Agreement shall continue in effect for one
year from the
Effective Date. Such term may be extended annually for
additional periods of
one year provided that each such extension is approved at
least annually by a
vote of the Fund's Board of Directors. Such vote shall be
cast in person at a
meeting called for the purpose of voting on such approval,
and shall include the
votes of a majority of the Directors who are not parties to
this Agreement or
interested persons of any such party.
7. Termination. This Agreement may be terminated at any
time upon sixty (60)
days prior written notice, without the payment of any
penalty, by the Fund's
Board of Directors or by vote of a majority of the
outstanding voting securities
of the Fund. This Agreement shall automatically terminate
in the event of its
assignment by the Investment Advisor or the Fund (within
the meaning of the
Investment Company Act of 1940 (the 1940 Act)), which shall
be deemed to include
a transfer of control of the Investment Advisor or the
Fund, respectively,
unless an exemption from such automatic termination is
granted by order or rule
of the Securities and Exchange Commission. Upon the
termination of this
Agreement, the obligations of all the parties hereunder
shall cease and
terminate as of the date of such termination, except for
(i) any obligation to
respond to a breach of this Agreement committed prior to
such termination, (ii)
the obligation of the Fund to pay to the Investment Advisor
the fee provided in
Paragraph 3(a) above, prorated to the date of termination,
and (iii) the
obligation of the Investment Advisor to bear the costs
provided for in Paragraph
3(b) above, prorated to the date of termination (if
applicable).
8. Assignment. This Agreement shall terminate
automatically in the event of
its whole or partial assignment by the Investment Advisor
or the Fund as
provided in Paragraph 7 above.
9. Fidelity Bond. As part of this Agreement, the
Investment Advisor shall bear
the cost of the fidelity bond required to be maintained by
the Fund for
employees, officers, or directors of the Investment Advisor
who have access to
the Fund's securities or cash. Such bond must protect the
Fund against loss
from larceny and embezzlement under the Act, and, in
compliance with Rule 17g-1
under the 1940 Act, must be approved both in form and
amount by a majority of
the independent directors of the Fund at least annually
with due consideration
given to (a) the value of the Investment Advisor's
aggregate assets, (b) the
type of custody arrangements employed, and (c) the nature
of the securities
owned. Additionally, the Investment Advisor shall bear the
cost, if any, for
Employee and Officer/Director and Officer (E&O/D&O)
liability insurance covering
the Investment Advisor in favor of the Fund. Under the
terms of this Agreement,
there is no initial requirement that E&O/D&O insurance be
purchased, but if the
Board of Directors of the Fund ever requires in its sole
and absolute discretion
that it be carried, or if the Investment Advisor decides,
unilaterally, to carry
it, then such cost shall be borne by the Investment Advisor
and such insurance,
if required to be carried by the Fund's Board of Directors,
shall be in such
amount and for such a term as the Board may reasonably
require. The Investment
Advisor shall not be liable for any error of judgement or
of law or for any loss
suffered by the Fund in connection with the matters to
which this Agreement
relates, except loss resulting from willful misfeasance,
bad faith or gross
negligence on the part of the Investment Advisor in the
performance of its
obligations and duties or by reason of its reckless
disregard of its obligations
and duties under this Agreement.
10. Notices. Any notice required or permitted to be given
hereunder must be in
writing and may be given by personal delivery or by mail,
and if given by mail
shall be deemed sufficiently given if sent by registered or
certified mail
addressed to the party to be notified at the following
applicable address:
The Fund:
Texas Capital Value Funds, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
The Investment Advisor:
First Austin Capital Management, Inc.
1600 West 38th Street, Suite 412
Austin, Texas 78731
Either party may specify a different address for
notice purposes by
written notice to the other.
11. Governing Law. This Agreement is executed and
delivered in the State of
Texas and shall be governed by the laws of Texas and the
1940 Act.
12. Entire Agreement. This Agreement constitutes the
entire agreement between
the parties and terminates and supersedes all prior
understandings or agreements
on the subject matter hereof. No conditions or warranties
shall be implied
herefrom unless expressly set forth herein. The Fund and
the Investment Advisor
each acknowledge that the terms and conditions of this
Agreement, and each of
them, are reasonable and fair and equitable. This
Agreement may be modified
only by a future writing that is duly executed by both
parties.
13. Severability. If any term of this Agreement is held
by a court of
competent jurisdiction to be invalid or unenforceable, then
this Agreement,
including all of the remaining terms, will remain in full
force and effect as if
such invalid or unenforceable term had never been included.
14. Waiver. Waiver by either party of any breach of any
term, covenant or
condition in this Agreement shall not be deemed to be a
waiver of any subsequent
breach of the same or any other term, covenant or condition
herein contained,
nor shall any custom or practice which may grow up between
the parties in the
administration of the terms hereof be deemed a waiver of or
in any way affect
the right of each party to insist on the performance of the
other party in
strict accordance with said terms.
15. Time Is of the Essence. Time is of the essence of
this Agreement.
16. Attorneys' Fees. In the event of any litigation or
arbitration between the
parties with respect to this Agreement, all costs and
expenses, including,
without limitation, actual professional fees such as
accountants' and attorneys'
fees, incurred by the prevailing party, shall be paid by
the other party, which
obligation on the part of the other party shall be deemed
to have accrued on the
date of the commencement of such action and shall be
enforceable whether or not
the action is prosecuted to judgement.
17. Mandatory Arbitration. All disputes arising under
this Agreement shall be
arbitrated pursuant to the Commercial Arbitration Rules of
the American
Arbitration Association.
18. Independent Counsel. The parties acknowledge that
they have had the
opportunity to consult with independent counsel of their
own choosing in the
negotiation and execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed
on the date and year first above written.
Texas Capital Value Fund, Inc.,
a Maryland corporation
By MARK A COFFELT
Mark A. Coffelt, President
First Austin Capital Management, Inc.,
a Delaware corporation
By MARK A COFFELT
Mark A. Coffelt, President
