WEST UNIVERSITY FUND, INC.
3030 University Blvd.
Houston, Texas 77005
December 20, 1995
Richard Pfordte
Senior Counsel
Securities and Exchange Commission
Washington, D.C. 20549
Re: West University Fund, Inc.
(Fund) File Nos. 811-9124
33-98980
Dear Mr. Pfordte:
The registrant hereby incorporates by reference Part C, and all Exhibits
of its registration statement dated November 3, 1995 into this pre-effective
amendment number three. The sole purpose of this amendment is to comply with
Commission comments. The changes made are underlined, and are in parts A, B
and C of the Registration Statement.
It is the Applicants intention to file a fourth pre-effective amendment
to comply with any additional Commission comments, and to furnish a 1995 year
end audited financial statement along with the auditors report and consent.
Sincerely,
Richard P. Cancelmo, Jr.
President
<PAGE>
Registration No . 33-98980
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C . 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 3
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
WEST UNIVERSITY FUND, INC.
(Exact Name as Specified in Charter)
3030 University Boulevard
Houston, Texas 77005
(Address of Principal Executive)
(713) 666-1652
(Registrant's Telephone Number)
Richard Peter Cancelmo, Jr.
3030 University
Houston, Texas 77005.
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering as soon as practicable after the
effective date of the Registration Statement.
Title of Securities Being Registered: Common Stock $1.00 Par value
Amount Being Registered: 500,000 Shares
Proposed Maximum Offering Price Per Unit: $10.10*
Proposed Maximum Aggregate Offering Price: 5,050,000
Amount of Registration Fee: $1,742.00
* Estimated solely for the purpose of determining the amount of the
registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effectie date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission acting pursuant to said section 8(a)
may determine.
Page 1 of 35 pages
<PAGE>
WEST UNIVERSITY FUND, INC.
CROSS REFERENCE SHEET PURSUANT TO RULE 495
Form N1-A Item Page(s)
Part A Prospectus Caption
Item 1. Cover Page 5
Item 2. Synopsis 5
Item 3. Condensed Financial Information 6
Item 4. General Description of Registrant 7,8,9
Item 5. Management of the Fund 10,11
Item 6. Capital Stock and Other Securities 16
Item 7. Purchase of Securities Being Offered 12
Item 8. Redemption or Repurchase 12
Item 9. Legal Proceedings 16
Part B Statement of Additional Information
Item 10. Cover Page 21
Item 11. Table of Contents 21
Item 12. General Information and History 25
Item 13. Investment Objectives and Policies 22,23,24,25
Item 14. Management of the Fund 25
Item 15. Control Persons and Principal Holders of
Securities 30
Item 16. Investment Advisory and Other Services 25,26
Item 17. Brokerage Allocation and Other Practices 26
Item 18. Capital Stock and Other Securities 30
Item 19. Purchase, Redemption and Pricing of Securities 31
Item 20. Tax Status 30,31
Item 21. Underwriters *
Item 22. Calculations of Yield Quotations 28,29
Item 23. Financial Statements
Part C
Item 24. Financial Statements and Exhibits 33
Item 25. Persons Controlled or Under Common Control 33
Item 26. Number of Holders of Securities 33
Item 27. Indemnification 33
Item 28. Business and Other Connections of Adviser 33
Item 29. Principal Underwriters 33
Item 30. Location of Accounts and Records 33
Item 31. Management Services 34
Item 32. Undertakings 34
* Inapplicable
<PAGE>
Other Enclosures
Signature Page 39
Exhibit 1 Articles of Incorporation
Exhibit 2 Bylaws of the Company
Exhibit 4 Specimen of Capital Stock
Exhibit 5 Investment Advisory Contract
Exhibit 8 Custodian Agreement or Depository
Contract
Exhibit 10 Opinion and Consent of Counsel
Exhibit 11 Other Opinions and Consents
Exhibit 13 Initial Capital Agreements
Exhibit 14 Model Retirement Plan
<PAGE>
PROSPECTUS
Page
1. Fund Expense Table 1
2. How Performance is Calculated 2
3. The Fund 2
4. Investment Objective and Policies 2
Investments in Securities of Other Investment Companies 3
Covered Option Writing 4
Covered Call Options 4
Risk of Option Writing 5
Portfolio Turnover 5
Further Information 6
5. Management of the Company 6
Brokerage 7
Net Asset Value 7
6. How to Purchase Shares 8
7. How to Redeem Shares 8
8. Shareholder Accounts 9
9. IRA Plan 10
10. Dividends, Distributions and Taxes 10
11. Description of Common Stock 12
12. Transfer, Dividend Disbursing and Shareholder
Servicing Agent 12
13. Legal Proceedings 12
14. General Information 13
15. Glossary of Investments Terms and Stock Option Terms 13
WEST UNIVERSITY FUND, INC.
3030 UNIVERSITY BOULEVARD
HOUSTON, TEXAS 77005
713-666-1652
PART A
PROSPECTUS
West University Fund, Inc. (the Fund) is a no load, diversified
management investment company or "mutual fund." As a no-load mutual fund,
shares may be purchased directly from and are redeemed by the Fund at net
asset value without any sale or redemption charges. The Fund's investment
adviser is Cancelmo Capital Management, Inc.
The Fund's investment objective is to obtain a greater long-term total
return and smaller fluctuations in quarterly total return from a diversified,
hedged common stock portfolio than would be realized from the same portfolio
unhedged. (See "Glossary" for definitions of "Quarterly Total Return," "Long-
term Total Return" and "Fluctuations in Total Return").
The Fund will attempt to achieve this objective by investing primarily
in dividend paying common stocks on which options are traded on national
securities exchanges by selling covered call options, and by entering into
closing purchase transactions with respect to certain of such call options.
There is no minimum on initial or subsequent purchases of fund shares by
tax deferred retirement plans (including IRA, SEP-IRA and Profit Sharing and
Money Purchase Plans) or Uniform Gifts to Minor Accounts. For other investors
the minimum is $1,000 for an initial purchase and there is no minimum for
subsequent purchases.
This prospectus contains concise information respecting the Fund which a
prospective investor should know before investing. Additional information
concerning the Fund and its investment adviser has been filed with the
Securities and Exchange Commission (The "Statement of Additional
Information"). The Statement of Additional Information is incorporated by
reference into this Prospectus and is available without charge to investors by
writing or telephoning the Fund at the address or the telephone number shown
above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FURTHER REFERENCE.
THE DATE OF THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL
INFORMATION IS NOVEMBER 2, 1995.
FUND EXPENSE TABLE
The following table illustrates the expenses and fees that a shareholder
of the Fund will incur.
Shareholder Transaction Expenses
Salesload Imposed on Purchases None
Salesload Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses
(As a Percentage of Average Net Assets)
Investment Advisory Fees 1.0%
12 B-1 Fees None
Other Expenses 1.0%
Total Fund Operating Expenses 2.0%
Example
1 Year 3 Years
You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period $20.00 $62.00
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN
ABOVE.
HOW PERFORMANCE IS CALCULATED
From time to time the Fund may report its "total return" in
prospectuses, the Fund's annual reports, shareholder communications, and
advertising.
Total return for a performance period is calculated by assuming a
hypothetical initial investment ("p") in the Fund at the beginning of
the period. Then, assuming reinvestment of all distributions into new
Fund shares, a redeemable value at the end of the performance period
("ERV") is calculated based on actual Fund performance. The percentage
change between the ending value and initial investment is the return as
an annual rate, which, if compounded annually over the period ("n" is
the number of years), would increase or decrease the initial investment
to the ending value. (Formula for calculating average annual total
compound return: (ERV/p)1/n-1)). See the "Glossary" for further
discussion and examples of total return and fluctuations in total
return.
THE FUND
The Fund is a Texas corporation incorporated in 1995 and
registered with The Securities and Exchange Commission under the
Investment Company Act of 1940 as an open end diversified, management
investment company. The Fund offers for sale its common stock on a no-
load basis, which means that such shares may be purchased directly from
and redeemed by the Fund at net asset value without any sales or
redemption charge (See "Purchase of Fund Shares" for minimum investment
limitations).
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to obtain a greater long-term
total return and smaller fluctuations in quarterly total return from a
diversified, hedged common stock portfolio than would be realized from
the same portfolio unhedged. This investment objective may not be
changed without a vote of a majority of the Fund s shareholders, in
accordance with applicable requirements of the Investment Company Act of
1940.
The Fund seeks to achieve its investment objective by investing
primarily in dividend paying common stocks on which options are traded
on national securities exchanges by selling covered call options, and by
entering into closing purchase transactions with respect to certain of
such call options. The Fund will invest in both large and small
companies. Extensive study will be made of the balance sheet and
earnings power to appraise the fundamental worth of each investment. A
guiding principle is the consideration of common stocks as units of
ownership of a business and the purchase of them when the price appears
low in relation to the value of the total enterprise. The Fund's
strategy is to create a well diversified and significantly hedged
portfolio using stock and option positions.
Total return defined as income, and capital appreciation will be
obtained from the following sources:
1) premiums from expired options
2) net profits, if any from closing purchase transactions
3) dividends received on the securities in the Fund's portfolio
4) net realized capital gains, if any
5) net changes in unrealized capital appreciation, if any
6) interest income from money market instruments, and U.S.
Government securities.
In seeking a greater long-term total return, the Fund will equally
emphasize current return and long-term capital gains. (See Dividends,
Distributions and Taxes - Tax Considerations in Portfolio
Transactions"). Since opportunities to realize net gains from covered
call option writing programs and yields on stocks, money market
instruments, and U.S. Government securities vary from time to time
because of general economic and market conditions and many other
factors, it is anticipated that the Fund's total return will fluctuate
and therefore there can be no assurance that the Fund will be able to
achieve its investment objective.
Except as described below, at least 75% of the Fund's total assets
(taken at current value), excluding cash, cash equivalents and U.S.
Government securities, will be invested in dividend paying common stocks
with covered call options written against such stocks . The fund has no
maximum or minimum level that will be dedicated to covered writing, but
under normal market conditions would anticipate being fully invested.
The Fund may invest its cash reserves in securities of the U.S.
Government and its agencies or the following cash equivalents: deposits
in domestic banks, bankers' acceptances, certificates of deposit,
commercial paper. Commercial paper investments will be limited to
investment grade issues, rated A-1 or A-2 by Standard & Poor's
Corporation, or Prime 1 or Prime 2 by Moody's Investors Service, Inc.
Investments in registered investment companies are limited by certain
additional restrictions (see "Investments in Securities of Other
Investment Companies").
In periods of unusual market conditions and for defensive purposes
the Fund may retain all or part of its assets in cash or cash reserves
of the type described above.
INVESTMENTS IN SECURITIES OF OTHER INVESTMENT COMPANIES. Investments in
the securities of other investment companies are intended to (i) provide
an investment vehicle for the fund s cash reserves that the Fund does
not want to commit to riskier investments, and (ii) facilitate
investment strategies by acquiring investments in portfolios of
securities more diversified or with specialized characteristics that
could not be efficiently acquired directly. Accordingly, the Fund may
invest up to 35% of its total assets in such securities. However, the
Fund is restricted to purchasing securities only to the extent that is
permitted under the Investment Company Act of 1940. The 1940 Act
generally permits the Fund to purchase or otherwise acquire securities
issued by another investment company so long as, immediately after such
acquisition, the Fund and all affiliated persons of the Fund do not own
in the aggregate more than 3% of the total outstanding voting stock of
the acquired investment company. the 1940 Act also permits the purchase
of securities of other investment companies in connection with a merger,
reorganization, consolidation or similar transaction.
Such transactions may in some cases raise the Fund s transaction
costs relative to a direct investment in the same securities, but in
some cases the Fund may benefit from being able to acquire a diversified
investment in one purchase that could not be made economically in a
direct fashion. As other investment companies pay management fees to
their investment advisers, shareholders will bear a proportionate share
of such fees as well as the management fees paid by the Fund. In
addition, the 1940 Act provides that no investment company in which the
Fund invests is obligated to redeem shares of such company owned by the
Fund in an amount exceeding 1% of the company s outstanding shares
during any period or less than thirty days.
COVERED OPTION WRITING. Covered call options will be written on the
Fund's portfolio in order (i) to achieve, through the receipt of
premiums, a higher long-term total return than would be received from
the same portfolio unhedged and (ii) to reduce the fluctuation in this
total return. The writing of such options tends to reduce fluctuations
in total return because, in any short period of time the gains or losses
on the sale of options will tend to offset the losses or gains,
respectively, on the underlying securities. Covered option writing
involves risks -- see "Risks of Option Writing" below.
COVERED CALL OPTIONS. A call option gives the purchaser of the
option the right to buy, and the writer has the obligation to sell, the
underlying securities at the exercise price during the option period.
The Fund, as the writer of the option, receives the premium from the
purchaser of the call option. The writer, during the time he is
obligated under the option, may be assigned an exercise notice by the
broker-dealer through whom the call was sold, requiring him to deliver
the underlying security against payment of the exercise price. The
obligation is terminated only upon expiration of the option or at such
earlier times as the writer effects a closing purchase transaction.
Once a writer has been assigned an exercise notice, he will thereafter
be unable to effect a closing purchase transaction in that option. So
long as the Fund is obligated as the writer of a call option, it will
own the underlying securities subject to the option.
To secure this obligation to deliver the underlying security, a
covered call option writer is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the
Clearing Corporation and the exchange on which the covered call option
is traded. To fulfill this obligation, at the time an option is
written, the Fund, in compliance with its custodian agreement, directs
the custodian of its investment securities, or a securities depository
acting for the custodian, to act as the Fund's escrow agent by issuing
an escrow receipt to the Clearing Corporation respecting the option's
underlying securities. The Clearing Corporation will release the
securities from this escrow upon the exercise of the option, its
expiration without being exercised or when the Fund enters into a
closing purchase transaction. Until such release the Fund cannot sell
the underlying securities.
So long as his obligation as a writer continues, the covered call
option writer gives up the opportunity to profit from a price increase
in the underlying security above the sum of the exercise price plus the
premium received in exchange for increasing his return if the underlying
security does not advance to or beyond the sum of the exercise price
plus the premium. Thus, in some periods the Fund will receive less
total return and in other periods greater total return from its call
options than it would have received from its underlying securities
unoptioned. The Fund expects to increase its long-term total return by
writing options which, in its opinion, have sufficiently attractive
premiums to produce greater total return over the long-term.
The Fund will write options from time to time on such portion of
its portfolio as management determines is appropriate in seeking to
attain the Fund's objective. The Fund will write options when
management believes that a liquid secondary market will exist on a
national securities exchange for options of the same series so that the
Fund can effect a closing purchase transaction if it desires to close
out its position. Consistent with the investment policies of the Fund,
a closing purchase transaction will ordinarily be effected to realize a
profit on an outstanding option, to prevent an underlying security from
being called, or to permit the sale of the underlying security.
Effecting a closing purchase transaction will permit the Fund to write
another option on the underlying security with either a different
exercise price or expiration date or both.
The premium the Fund receives for writing an option will reflect,
among other things, the current market price of the underlying security,
the relationship of the exercise price to such market price, the
historical price volatility of the underlying security, the option
period, supply and demand and interest rates. The exercise price of an
option may be below, equal to or above the current market value of the
underlying security at the time the option is written. Options written
by the Fund will normally have expiration dates between one and nine
months from the date written. From time to time, for tax and other
reasons, the Fund may purchase an underlying security for delivery in
accordance with an exercise notice assigned to it, rather than
delivering such security from its portfolio.
RISKS OF OPTION WRITING. In return for the premium received, a covered
call writer during the term of the option is subject to the risk of
losing the potential for capital appreciation above the exercise price
of the underlying security. The writer has no control over the time
when he has to fulfill his obligation as a writer of the option. Once
an option writer has received an exercise notice he cannot effect a
closing purchase transaction. If a call expires unexercised, the
covered writer realizes a gain in the amount of the premium received,
although there may have been a decline (unrealized loss) in the market
value of the underlying security during the option period which may
exceed such gain. If an underlying security should fall by more than
the option premium received there will be a loss on the overall
position. Thus, the downside protection or hedge on any given security
is partial and will not protect the position if the stock falls by a
distance greater than the call option premium that was originally taken
in. If the covered writer has to sell the underlying security because
of the exercise of a call option, the writer will realize a gain or loss
from the sale of the underlying security with the proceeds being
increased by the amount of the premium.
PORTFOLIO TURNOVER. The Fund will not attempt to achieve, nor will it
be limited to, a predetermined rate of portfolio turnover. Turnover
rate is the lesser of purchases or sales of portfolio securities for a
year (excluding all securities and options with maturities of one year
or less) divided by the monthly average of the market value of such
securities. The anticipated turnover rate is not expected to be higher
than 100%; however, a higher turnover rate may occur if the Fund writes
a substantial number of options which are exercised. Higher portfolio
turnover involves correspondingly greater brokerage commissions and
other transaction costs. The Fund will pay brokerage commissions on its
securities transactions and in connection with the purchase and sale of
options as well as for selling a security on exercise of a call option.
FURTHER INFORMATION. The Fund's investment objective and policies are
subject to certain restrictions, including limitations on borrowing,
short sales of securities and investments in real estate companies or
securities secured by real estate, which restrictions may not be changed
without approval of the holders of a majority of the Fund's outstanding
shares. In addition, certain factors may restrict the ability of the
Fund to write options. These restrictions and factors are described in
the Statement of Additional Information.
MANAGEMENT OF THE COMPANY
The overall business and affairs of the Company are the
responsibility of the Company's Board of Directors, the members of which
are elected by the shareholders. The day-to-day operations of the
Company are managed by the Company's President subject to the bylaws of
the Company and review by the Board of Directors. Information relating
to the directors and officers of the Company is provided in the
"Statement of Additional Information."
The Company has entered into an Investment Advisory Contract (the
"Contract") with Cancelmo Capital Management, Inc. (the "Adviser"), 3030
University Boulevard, Houston, Texas 77005. The Adviser, which is
registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940, manages the investment and reinvestment
of the assets of the Company in accordance with the Company's investment
objective, policies, and restrictions. The Adviser has no previous
experience in, or current agreement for, providing investment management
services to any other registered investment company. Richard Peter
Cancelmo, Jr. is the sole shareholder of the Adviser and is responsible
for all its investment decisions, including the day-to-day management of
the Company's portfolio. There can be no assurance that the Adviser
could find a suitable replacement for Mr. Cancelmo in the event of his
death or disability. Mr. Cancelmo also serves as the President and a
Director of the Company. Prior to forming the Adviser in 1995, Mr.
Cancelmo was an investment executive for a securities firm. He held
that position since 1983.
The Adviser is paid a monthly fee computed at an annual rate of 1%
of the average daily net assets of the Company. This fee is higher than
the fee paid to most advisers for similar services.
The Adviser pays all the salaries and related expenses (such as
health insurance premiums and similar benefits) of the officers of the
Company, provides office space for the Company and pays all distribution
expenses of the Company. The Adviser permits, if desired by the
Company, for officers of the Adviser to serve, without compensation from
the Company, as directors, officers or agents of the Company if duly
elected or appointed to such positions.
In addition to the fee of the Adviser, the Company assumes and
pays any expenses for services rendered by any custodian for the
safekeeping of the Company's securities or other property, for keeping
its books of account, for any other charges of a custodian and for
calculating the net asset value of the Company. The Company also
assumes and pays the expenses of its operations, including compensation
of the directors (other than those affiliated with the Adviser),
expenses of independent accounting services and auditors, of legal
counsel, of any transfer or dividend disbursing agent or any registrar
of the company, costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the Company,
costs of share certificates, association membership dues, salaries and
related expenses of administrative and clerical personnel who are not
officers of the Company, costs of reports and notices to shareholders,
other like miscellaneous or related expenses and all taxes and fees
payable to federal, state or other governmental agencies by the Company.
The contract between the Company and its Adviser is effective
through October 24, 1997. Unless earlier terminated as described below,
the contract will remain in effect from year to year thereafter if
approved annually (1) by the Board of Directors of the Company or by the
holders of a majority of the Company's common stock, and (2) by a
majority of the Company's disinterested directors. The contract
terminates on its assignment by either party, and may be terminated
without penalty on sixty days written notice by either party. The
Company may effect termination by action of the Board of Directors or by
vote of the holders of a majority of the Company's common stock.
The Adviser will reduce its fees to limit the total annual
expenses of the Company (including the Adviser's fee, but excluding
interest, taxes, fees incurred in acquiring and disposing of portfolio
securities and certain extraordinary expenses) to 2.0% of the first
$10,000,000 of average daily assets, 1.5% of the next $20,000,000 of
such assets, and 1.0% of such assets over $30,000,000.
BROKERAGE. Under the terms of the Investment Advisory Agreement,
the Adviser is authorized to employ broker-dealers to execute orders for
the purchase and sale of portfolio securities, including options, who in
its best judgment can provide "best execution" (prompt and reliable
execution at a reasonably competitive price). In determining the
abilities of the broker-dealer to provide best execution of a particular
portfolio transaction, the Adviser considers all relevant factors
including the execution capabilities required by the transactions; the
ability and willingness of the broker-dealer to facilitate each
transaction by participation therein for its own account; the importance
to the Fund of speed, efficiency, or confidentiality; the broker-
dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; the quality and continuity of
service rendered by the broker-dealer with regard to the Fund's other
transactions; and any other factors relevant to the selection of a
broker-dealer for particular and related portfolio transactions of the
Fund. Subject to the foregoing obligation to seek best execution, the
Adviser may consider as a factor in the allocation of portfolio
transactions to a broker-dealer the broker dealer's research services to
the Adviser.
NET ASSET VALUE. The net asset value of the Fund is computed once
daily at 4:30 P.M. Eastern Time after the close of trading of the New
York Stock Exchange and the various option exchanges. The net asset
value per share is calculated by taking the total value of the Fund's
assets, deducting total liabilities and dividing the result by the
number of shares outstanding. Securities traded on the New York Stock
Exchange are valued at their price at the close of regular trading on
the New York Stock Exchange. Options traded on one or more exchanges
are valued at their closing prices on whatever exchange the last sale
occurred. All other portfolio securities which are traded on a national
securities exchange are valued at their last sale. In all cases, when
there is no last sale on that day or if the last sale is
unrepresentative, the value is taken to be the mean between the last
current bid and asked prices. All other securities not so traded are
valued at the mean between the last current bid and asked prices if
market quotations are available. Other securities and assets are valued
at fair value in accordance with methods determined in good faith by or
under the direction of the Fund's Board of Directors.
Money market securities are valued at the most recent bid price or
yield equivalent as obtained from dealers that make markets in such
securities. Securities with a remaining maturity of 60 days or less are
valued on an amortized basis. This involves valuing a portfolio
security at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
security.
HOW TO PURCHASE SHARES
Shares of the Fund are purchased directly from the Fund with no
sales charge or commission at net asset value next computed after an
order and payment are received by the Fund. Any order received after
4:30 P.M. Eastern Standard Time will be processed at the next day's
closing net asset value. There is no minimum on initial or subsequent
purchases of Fund shares by tax deferred retirement plans (including
IRA, SEP-IRA and profit sharing and money purchase plans) or Uniform
Gifts to Minors Act accounts. For other investors the minimum is $1,000
for an initial purchase and there is no minimum for subsequent
purchases.
The Fund reserves the right to reject any purchase order or to
suspend or modify the continuous offering of its shares.
PURCHASE BY MAIL. The simplest way to make initial and subsequent
purchases of Fund shares is to mail to the Fund a completed and signed
application to purchase shares with a check payable to the Fund. Shares
will be purchased at the next determined net asset value per share after
an order and payment are received by the Fund.
All shares (including reinvested dividends and capital gain
distributions) are issued or redeemed in full and fractional shares
rounded to the third decimal place, at net asset value, with no fees or
charges. No share certificates will be issued except for investors
whose regulators require them to hold certificates. Instead, an account
will be established for each shareholder and all shares purchased will
be held in book entry form by the Fund. Any transaction respecting an
account, including reinvestment of dividends and distributions, will be
confirmed in writing to the shareholder showing the details of the
transaction. (See "Shareholder Accounts.")
HOW TO REDEEM SHARES
REDUCTIONS BY WRITTEN INSTRUCTIONS: A shareholder may redeem all
or part of his shares by written request to the Fund. The written
request must be endorsed by the registered owner(s) exactly as the
account is registered, including any special capacity of the registered
owner(s). Where the owner or owners have not arranged with the Fund for
redemption proceeds to be remitted to a predesignated bank account, the
Fund requires that the signature(s) be guaranteed. Fiduciaries,
corporations and other entities may also be required to furnish
supporting documents.
SIGNATURE GUARANTEES. To protect the shareholder's account and
the Fund from fraud, signature guarantees are required for certain
redemptions. The purpose of signature guarantees is to verify the
identity of the party who has authorized the redemption. A guarantor
must be a commercial bank or trust company which is a member of the
Federal Deposit Insurance Corporation, a member firm of a national
securities exchange or another eligible guarantor institution. Notaries
public are not acceptable guarantors. Signature guarantees are required
for:
1. any redemption request for an account where the owner(s)
have not arranged with the Fund for redemption proceeds to
be remitted to a predesignated bank account;
2. transfers or exchanges between accounts which are not
identically registered;
3. the addition of or change in the wiring instructions for the
financial institution designated to receive redemption\
proceeds directly into a shareholder's account; and
4. procedures involving disputed or deceased shareholder
accounts.
Shares are redeemed without charge at the net asset value next
computed after instructions and required documents are received in
proper form. Any instructions received after 4:30 P.M. Eastern Standard
Time will be processed at the next day's closing net asset value.
Payment will be made as promptly as possible but in no event later than
3 business days from the day the redemption request is received. Any
letter of instruction must be signed exactly as the account is
registered, including any special capacity of the registered owner.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund may
be required to withhold at a rate of 31% from dividends and capital gain
distributions to shareholders and upon payment of redemptions to
shareholders, if they have not complied with the provisions of the Act
relating to the furnishing of taxpayer identification numbers and
reporting of dividends.
A request for a distribution from an IRA, SEP-IRA or other tax
deferred retirement account for which the Fund acts as sponsor may be
delayed until the Fund has ascertained the withholding requirements
applicable to the distribution. Investors may send withholding
instructions to the Fund on Internal Revenue Service ("IRS") Form W-4P
along with the distribution request. The form is available from the IRS
or by calling the Fund. If an investor does not want tax withholding
from distributions, the investor may state in the distribution request
(instead of using Form W-4P) that no withholding is desired and that the
investor understands that there may be a liability for income tax on the
distribution, including penalties for failure to pay estimated taxes.
In the event that the Fund is requested to redeem shares for which
it has not received good payment (e.g., cash or cashier's check on a
U.S. bank), it will mail the redemption check upon clearance of the
purchase check (which may take up to 10 days or more). In addition, the
Fund reserves the right to defer honoring redemption requests where the
shares to be redeemed have been purchased by check within 15 days prior
to the date the redemption request is received unless the Fund has been
advised that the check used for investment has been cleared for payment
by the shareholder's bank.
SHAREHOLDER ACCOUNTS
When an investor makes his initial purchase of shares an account
will be opened for him on the books of the Fund, and he will receive a
confirmation of the opening of his account. Thereafter, whenever a
transaction takes place in the account, such as a purchase, redemption,
transfer, change of address, reinvestment of income or capital gain
distributions, or withdrawal of share certificates, a confirmation will
be sent to the shareholder giving complete details of that transaction.
In addition, shareholders will receive quarterly statements giving
complete details of all transactions during the quarter.
A shareholder may make additional investments in his account by
sending a check, money order or wired funds made payable to the Fund.
Income distributions (including dividends and distributions of net
short-term capital gains) and net long-term capital gains distributions,
if any, will be reinvested in full and fractional shares rounded to the
third decimal place, at the net asset value per share determined on the
payment date.
IRA PLAN
The Fund has a master individual retirement account (IRA) plan
which allows you to invest in the Fund. Income and capital gains earned
by an IRA are sheltered from taxation until withdrawal. There is no
minimum investment. The plan also permits you to "roll over" to a West
University Fund IRA a lump sum distribution from a qualified pension or
profit-sharing plan, including by a direct transfer from the plan
trustee, thereby postponing your federal income tax on the distribution
if rolled over within 60 days. Many distributions from qualified plans
are subject to income tax withholding unless transferred directly from
the plan to an IRA or another plan.
If your employer has a Simplified Employee Pension Plan (SEP), you
may establish an IRA with the Fund to which your employer may contribute
annually up to the lesser of 15% of your earned income or $30,000,
subject to special rules designed to avoid discrimination.
Detailed information about the IRA, including related documents
and charges of Firstar, as custodian, may be obtained from the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
TAX STATUS OF THE FUND. The Fund intends to qualify as a
"regulated investment company" under the Internal Revenue Code. As a
regulated investment company, it will not be liable for federal income
taxes on amounts paid by it as dividends and distributions. The Fund
intends to qualify in current and future years. However, the Code
contains a number of complex tests relating to qualification which the
Fund might not meet in any particular year. For example, if the Fund
derives 30% or more of its gross income from the sale or other
disposition of securities held for less than 3 months, it may fail to
qualify (see, also, "Tax Information and Option Accounting Principles"
in the Statement of Additional Information). If it did not so qualify,
it would be treated for tax purposes as an ordinary corporation and
receive no tax deduction for payments made to shareholders.
DISTRIBUTIONS. The Fund intends to distribute, at least annually,
ordinary dividends and net capital gains substantially equal to the
Fund's net investment income and net capital gains for each year. There
can be no guarantee that the Fund will have such net investment income
or net capital gains for annual distribution. All distributions will be
automatically reinvested in shares of the Fund, unless the shareholder
makes a written request for distributions in cash. Such request must be
sent to the Fund at its current mailing address.
TAXATION OF SHAREHOLDERS. The following is only a brief discussion of
Federal income taxation in effect on the date of this prospectus, and
does not discuss the status of dividends and distributions from the Fund
under state and local tax laws. All applicable tax laws and regulations
are subject to change by legislative and administrative action. Each
shareholder of the Fund is advised to consult his own tax adviser with
respect to applicable Federal, state and local tax laws.
The maximum marginal tax rate for individuals is currently 28% on
net capital gains distributions and 39.60% on ordinary income
distributions. The reduction of certain deductions and phase-out of
exemptions may increase the individuals marginal tax rate to more than
39.60%. For corporations, net capital gains distributions are subject
to the maximum marginal rate of 39%.
Distributions paid from the Fund's dividend and interest income
and from any net realized short-term capital gains are taxable to
shareholder as ordinary income under Federal income tax law, whether
received in cash or in additional shares. Net capital gains
distributions are taxable to shareholders as long-term capital gains,
whether received in cash or additional shares, regardless of how long
such shareholders have held their shares. However, any loss (to the
extent of the distribution of net capital gain received by a
shareholder) will be treated as long-term capital loss upon the
redemption of shares of the Fund held for six months or less.
The sale of shares of the Fund is a taxable event and may result
in a capital gain or loss. A capital gain or loss may be realized from
any ordinary redemption of shares or exchange of shares.
All or part of the Fund's dividends will be eligible for the 70%
deduction for dividends received by corporations. Special provisions
are contained in the Internal Revenue Code as to the eligibility, for
the deduction, of payments made by mutual funds to corporate
shareholders. Net capital gains distributions are not eligible for the
deduction. The Fund will report to its shareholders income dividends
and net capital gains distributed during the calendar year and will
designate that portion which qualifies for the 70% corporate dividends
received deduction. This determination will be based on the ratio
between aggregate dividends received by the Fund on domestic corporate
stock held for at least 46 days (91 days for certain preferred stock)
and the Fund's gross income. Gross income will include dividends,
interest and the excess of net short-term capital gains (which includes
premium from expired options and gains from closing purchase
transactions) over net long-term capital losses. Each year the Fund
will mail you information on the tax status of dividends and
distribution.
Pursuant to the Interest and Dividend Tax Compliance Act of 1983,
shareholders may be subject to backup withholding of federal income tax
at a 31% rate on dividends and other payments made to shareholders if
they have not provided the Fund with their correct social security
number or other taxpayer identification number, or have not made the
certifications required by the Internal Revenue Service.
The foregoing is only a brief discussion of Federal income
taxation in effect on the date of this Prospectus, and does not discuss
the status of dividends and distributions from the Fund under state and
local tax laws. All applicable tax laws and regulations are subject to
change by legislative and administrative action. Each shareholder of
the Fund is advised to consult his own tax adviser with respect to
applicable Federal, state and local tax laws.
Any net capital gain distribution paid by the Fund has the effect
of reducing the net asset value per share on the reinvestment date by
the amount of the distribution. Therefore, a capital gain distribution
paid shortly after a purchase of shares by an investor would represent,
in substance, a partial return of capital to the shareholder (to the
extent it is paid on the shares so purchased), even though it would be
subject to income taxes as discussed above. Accordingly, prior to
purchasing shares of the Fund, an investor should carefully consider the
impact of dividends or capital gains distributions which are expected to
be or have been announced.
TAX CONSIDERATIONS IN PORTFOLIO TRANSACTIONS. As a covered call
writer, the Fund has great flexibility in determining the taxable nature
of its investment results, and it is this flexibility which the Fund
will utilize to attempt to achieve an equal emphasis on current income
and long-term capital gains earned on the Fund's investment portfolio.
There can be no assurance, however, that such equal emphasis can be
achieved over any particular period of time. Moreover, optioning
securities in the Fund's investment portfolio may have the effect of
reducing capital appreciation earned on such securities below that which
could have been earned had no options been written on such securities.
Further, since shareholders of the Fund who are taxable may
receive distributions which are taxed to them as ordinary income in
years when the total return of the Fund is less than its dividend and
interest return, during such years the Fund will attempt, consistent
with its investment objective, to minimize its shareholders' ordinary
taxable income by offsetting, to the extent possible, any net short-term
capital gains that may have been realized from expired options and
profitable closing purchase transactions by selling underlying stocks
with unrealized capital losses. Otherwise, in such years the Fund's
shareholders might have both a negative total return an current taxable
income, thus being subject to the payment of income taxes in a year in
which their real wealth may have declined. Of course, there can be no
assurance that the Fund will have sufficient unrealized losses on its
underlying common stocks to be able to offset these net short-term
capital gains.
DESCRIPTION OF COMMON STOCK
The Company was incorporated in Texas on October 25, 1995 with
10,000,000 authorized shares of common stock, $1.00 par value. There
were 35,400 shares issued and outstanding as of November 2, 1995. All
the outstanding shares are, and the shares to be issued as contemplated
herein will be, duly authorized, fully paid and nonassessable. Each
issued and outstanding share has full voting rights and is entitled to
one vote on all matters submitted to the shareholders, including the
right to vote at the annual meeting of shareholders on the election of
directors and the selection of independent certified public accountants.
No shareholder is entitled to cumulative voting rights or to any
preemptive right to acquire securities of the Company. Each share has
equal dividend, distribution, and liquidation rights.
TRANSFER, DIVIDEND DISBURSING AND
SHAREHOLDER SERVICING AGENT
The Fund serves as its own Transfer, Dividend Disbursing and
Shareholder Service Agent.
LEGAL PROCEEDINGS
As of the date of this Prospectus, there was no pending, or
threatened litigation involving the fund, or the Adviser in any capacity
whatsoever.
GENERAL INFORMATION
Shareholder inquiries should be made in writing to Cancelmo
Capital Management, Inc. at 3030 University Blvd., Houston, Texas
77005; or by telephone to (713) 666-1652.
Each shareholder will receive semi-annual financial statements,
including a list of portfolio securities and outstanding call options.
The annual financial statements of the Fund will be audited by certified
public accountants.
GLOSSARY OF INVESTMENT TERMS AND STOCK OPTION TERMS
INVESTMENT TERMS
QUARTERLY TOTAL RETURNS. The percentage change over a quarter in
the value of a shareholder's investment, assuming immediate reinvestment
of all distributions in additional Fund shares and no adjustment for the
shareholder's income tax consequences. This change derives from:
dividends, interest, realized capital gains or losses, changes in
unrealized capital appreciation or depreciation, premiums received from
expired options and gains or losses on closing purchase transactions,
all less expenses. For example, assume a shareholder's investment in
the Fund has a value of $100 at the start of a three-month period. If
the value of his investment, after immediate reinvestment of all income
and capital gains distributions, is $101 at the end of such period, the
total return for the period would be +1%. If the value at the end of
such period is $99 (again after reinvestment of all income and capital
gains distributions), the total return for the period would be -1%.
LONG TERM TOTAL RETURNS. The percentage change in the value of a
shareholder's initial investment after a full market cycle (usually 3 or
more years), expressed as a constant annual compound rate of total
return, assuming the reinvestment of all subsequent income and capital
gain distributions in additional Fund shares. For example, suppose a
shareholder's initial investment is $100 (one share whose net asset
value is $100) and that all subsequent income and capital gain
distributions are reinvested in additional Fund shares on the
distribution date. If after three years the initial one share has
become 1.2 shares and the net asset value per share is $104.98, then the
initial $100 investment is worth $125.98 (1.2 x $104.98) and has grown
at 8% per annum compounded. Compounded means that at the end of each
compounding interval, in this example one year, the total return is
computed and reinvested in additional fund shares at the end of each
compounding interval. Thus, at the end of the first year the initial
$100 investment is worth $108, and at the end of the second year it is
worth $116.64, and at the end of the third year it is worth $125.98.
Similarly, if after three years the net asset value per share is $64.89
then the initial $100 investment is worth $77.87 (1.2 x $64.89) and has
had a negative return of 8% per annum compounded. Also if after three
years the net asset value per share is $83.33 then the initial $100
investment is worth $100 (1.2 x $83.33) and has had a net return of zero
per cent per annum. As these examples show, the basic components on
total return, income and the change in value of the portfolio securities
will vary and there can be no assurance that the Fund's total return
will be positive of that it will accrue at a constant rate.
FLUCTUATIONS IN TOTAL RETURN. Fluctuations in the Fund's total
return will be measured by the standard deviation of the Fund's
quarterly total returns. The standard deviation of returns measures the
extent to which the individual returns deviate from their arithmetic
average. The standard deviation is used extensively as a measure of
dispersion (risk) and provides a good historical measure of the
variability of returns from an investment portfolio. For example, the
following table shows the 100 quarterly total returns (assuming
reinvestment of all dividends at the end of each calendar quarter with
no transaction costs) for a Standard & Poor's 500 Stock Index over the
twenty-five year period ended December 31, 1994. The arithmetic average
of these quarterly returns is 2.99% and their standard deviation is
8.30%. In 31 of these 100 quarters the total return was negative.
PERCENT QUARTERLY TOTAL RETURN, S&P 500 STOCK INDEX, 1970-1994
Year Qtr% Return Year Qtr% Return Year Qtr% Return
1970 1 -1.77 1971 1 9.69 1972 1 5.75
2 -18.03 2 0.16 2 .67
3 16.92 3 -0.58 3 3.92
4 10.41 4 4.64 4 7.56
1973 1 -4.89 1974 1 -2.82 1975 1 22.95
2 -5.77 2 -7.56 2 15.36
3 4.81 3 -25.16 3 -10.95
4 -9.18 4 9.37 4 8.65
1976 1 14.98 1977 1 -7.45 1978 1 -4.94
2 2.47 2 3.31 2 8.51
3 1.91 3 -2.83 3 8.67
4 3.22 4 -0.11 4 -4.93
1979 1 7.10 1980 1 -4.12 1981 1 1.38
2 2.73 2 13.49 2 -2.30
3 7.65 3 11.22 3 -10.23
4 0.14 4 9.49 4 6.93
1982 1 -7.31 1983 1 10.12 1984 1 -2.40
2 -0.56 2 11.10 2 -2.57
3 11.52 3 -0.13 3 9.70
4 18.25 4 0.40 4 1.89
1985 1 9.19 1986 1 14.11 1987 1 21.36
2 7.34 2 5.89 2 5.02
3 -4.10 3 -6.97 3 6.60
4 17.21 4 5.58 4 -22.53
1988 1 5.70 1989 1 8.83 1990 1 -3.00
2 6.67 2 7.09 2 6.28
3 0.33 3 10.71 3 13.75
4 3.08 4 2.07 4 8.96
1991 1 14.53 1992 1 2.53 1993 1 4.37
2 -0.22 2 1.90 2 .49
3 5.35 3 3.16 3 2.58
4 8.38 4 5.04 4 2.32
1994 1 -3.79%
2 0.42%
3 4.89%
4 -0.02%
The arithmetic average of these quarterly returns is 2.99% and their
standard deviation is 8.30%. In 31 of the 100 quarters, the total
return was negative. Source: Standard & Poor's.
STOCK OPTION TERMS
OPTION. An option is either a call or put option issued by the
Options Clearing Corporation (the "Clearing Corporation") on a stock and
traded on one or more Exchanges, as defined below. Such options give a
holder the right to sell (in the case of a put option) or to buy (in the
case of a call option) the number of shares or other units of the
underlying security covered by the option at a fixed or determinable
exercise price. The rights represented by an option may be exercised by
the proper filing of an exercise notice prior to the fixed expiration
time of the option.
CLASS OF OPTIONS. Options covering the same underlying security.
CLEARING CORPORATION. The Option Clearing Corporation.
CLOSING PURCHASE TRANSACTION. A transaction in which an investor
who is obligated as a writer (seller) of an option terminates his
obligation as a writer by purchasing on an exchange, in a closing
purchase transaction, an option of the same series as the option
previously written. Such a transaction has the effect of canceling the
option writer's position as a writer and does not result in the
ownership of a new option.
COVERED CALL OPTION WRITER. A writer of a call option who, so
long as he remains obligated as a writer, owns the underlying security.
EXCHANGE. A national securities exchange on which options are
traded: currently the Chicago Board Options Exchange ("CBOE"), American
Stock Exchange ("AMEX"), Pacific Stock Exchange ("PSE"), Philadelphia
Stock Exchange ("PHLX") and New York Stock Exchange ("NYSE").
EXERCISE PRICE. The price per unit at which the holder of a call
option may purchase (and the holder of a put option may sell) the
underlying security upon exercise of the option, sometimes referred to
as the striking price.
EXPIRATION DATE. The latest date when an option may be exercised.
NASDAQ OPTIONS. Standardized options on unlisted securities which
are displayed on the National Association of Securities Dealers
Automated Quotations System.
OPTION PERIOD. The time during which an option may be exercised,
generally from the date the option is written through its expiration
date.
PREMIUM. The price of an option agreed upon between the buyer and
writer (seller) or their agents in a transaction on an Exchange.
PUT OPTION. Any option issued by the Clearing Corporation and
traded on one or more of the Exchanges referred to above which gives the
holder the right to sell to the Clearing Corporation the underlying
security at the stated exercise price by filing an exercise notice prior
to the expiration date.
SERIES OF OPTIONS. Options covering the same underlying security
and having the same exercise prices and expiration dates.
STANDARD & POOR S 500 STOCK INDEX. An unmanaged index composed of
400 industrial stocks, 40 financial stocks, 40 utilities stocks, and 20
transportation stocks. Comparisons of performance assume investment of
dividends.
UNDERLYING SECURITIES. The securities subject to purchase upon
the exercise of a call option or subject to sale upon the exercise of a
put option.
INVESTMENT ADVISER
Cancelmo Capital Management, Inc.
3030 University Boulevard
Houston, Texas 77005
(713) 666-1652
CUSTODIAN
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201
(414) 765-4124
INDEPENDENT AUDITORS
Simonton, Kutac & Barnidge, L.L.P.
Certified Public Accountants
Two Houston Center
909 Fannin, Suite 2050
Houston, Texas 77010-1007
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized by the Fund or the
Adviser. This Prospectus does not constitute any offer to sell or a
solicitation of any offer to buy any of the securities offered hereby in
any jurisdiction to any person to whom it is unlawful to make such offer
in such jurisdiction.
<PAGE>
PART B
WEST UNIVERSITY FUND, INC.
3030 UNIVERSITY BOULEVARD
HOUSTON, TEXAS 77005
713-666-1652
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus but
should be read in conjunction with the Prospectus for West University
Fund, Inc. (the "Fund") dated November 2, 1995 A copy of the Prospectus
may be obtained by writing or telephoning the Fund at the address or
telephone number shown above.
TABLE OF CONTENTS
Page
1. Investment Objective and Policies 18
Covered Option Writing 18
Factors Which May Adversely Affect
Transactions in Options 18
Position Limitations 19
2. Investment Restrictions and Other Investment Policies20
3. Management of the Fund 21
4. Brokerage 22
5. Tax Information and Option Accounting Principles 23
6. Calculation of Performance Data and Other Performance
Comparisons and Statistics 24
7. Description of Common Stock 26
8. Principal Shareholders 26
9. Tax Status 26
10. Pricing and Redemption of Fund Shares 27
11. Custodian 28
12. Transfer, Dividend Disbursing and Shareholder
Servicing Agent 28
13. Independent Auditors 28
14. Balance Sheet
INVESTMENT OBJECTIVE AND POLICIES
The Prospectus discusses the Fund's investment objective and the
policies it employs to achieve this objective. The following
information supplements the discussion in the Prospectus.
COVERED OPTION WRITING. In return for the premium received, a
covered call option writer during the term of the option is subject to
the risk of losing the potential for capital appreciation above the
exercise price. The writer has no control over the time when he has to
fulfill his obligation as a writer of the option. Once an option writer
has received an exercise notice he cannot effect a closing purchase
transaction.
If a call option expires unexercised, the covered option writer
realizes a gain in the amount of the premium received although there may
have been a decline (unrealized loss) in the market value of the
underlying security during the option period which may exceed such gain.
If the covered option writer has to sell the underlying security because
of the exercise of a call option, the writer will realize a gain or loss
from the sale of the underlying security with the proceeds being
increased by the amount of the premium.
A call option gives the purchaser of the option the right to buy,
and the writer the obligation to sell, the underlying security at the
exercise price during the option period. So long as the obligation of
the writer continues, he may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring him to
deliver the underlying security against payment of the exercise price.
This obligation terminates upon expiration of the option, or such
earlier time at which the writer effects a closing purchase transaction
by purchasing an option of the same series as he previously sold. Once
a writer has been assigned an exercise notice in respect of an option,
he is thereafter not allowed to effect a closing purchase transaction.
To secure his obligation to deliver the underlying security in the case
of a call option, a covered writer is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the
Options Clearing Corporation (the "Clearing Corporation") and of the
Exchanges.
The principal reason for writing options on a securities portfolio
is to attempt to realize, through the receipt of premiums, a greater
long term total return and smaller fluctuations in quarterly return than
would be realized on the securities alone. The covered call option
writer has, in return for the premium, given up the opportunity for
profit from a price increase in the underlying security above the
exercise price so long as his obligation as a writer continues, but has
retained the risk of loss should the price of the security decline. The
call option writer has no control over when he may be required to sell
his securities since he may be assigned an exercise notice at any time
prior to the termination of his obligation as writer. If an option
expires unexercised, the writer realizes a gain in the amount of the
premium. Such a gain, of course, may, in the case of a covered call
option, be offset by a decline the market value of the underlying
security during the option period. If a call option is exercised, the
writer realizes a gain or loss from the sale of the underlying security.
Options written by the Fund will normally have expiration dates not more
than nine months from the date written. The exercise price of the
options may be below, equal to, or above the current market prices of
the underlying securities at the times the options are written.
FACTORS WHICH MAY ADVERSELY AFFECT TRANSACTIONS IN OPTIONS. An
option position may be closed out only on an Exchange which provides a
secondary market for an option of the same series. Although the Fund
will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a
liquid secondary market on an Exchange will exist for any particular
option, or at any particular time, and for some options no secondary
market on an Exchange may exist. In such event, it might not be
possible to effect closing transactions in particular options. If as a
covered call option writer the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or it delivers the
underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an
Exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an
Exchange on opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt
normal operations on an Exchange; (v) the facilities of an Exchange or
the Clearing Corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more Exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market thereon would cease to
exist, although outstanding options on that Exchange which have been
issued by the Clearing Corporation as a result of trades on that
Exchange would continue to be exercisable in accordance with their
terms.
There can be no assurance that higher than anticipated trading
activity or order flow or other unforeseen events might not, at time,
render certain of the facilities of the Clearing Corporation and the
Exchanges inadequate. Such events have in the past resulted, and may
again result, in the institution by an Exchange of special procedures,
such as trading rotations, restrictions on certain types of orders, or
trading halts or suspensions, with respect to one or more options, or
may otherwise interfere with the timely execution of customers orders.
In the event that NASDAQ options are traded, it is anticipated
that many of the factors which may adversely affect transactions in
Exchange listed options may also adversely affect NASDAQ options.
The size of the premiums which the Fund may receive may be
adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option writing
activities.
POSITION LIMITATIONS. Each of the Exchanges has established
limitations governing the maximum number of calls (whether or not
covered) which may be written by a single investor, or group of
investors acting in concert, (regardless of whether the options are
written on the same or different Exchanges or are held or written in one
or more accounts or through one or more brokers). An Exchange may order
the liquidation of positions found to be in violation of these limits,
and it may impose certain other sanctions. At the date of this
Prospectus, the only such limits which may affect the operations of the
Fund are those which limit the writing of call options on the same
underlying security by an investor or such group to 4,500 options
(450,000 shares), 7,500 options (750,000 shares) or 10,500 options
(1,050,000 shares) in each class regardless of expiration date. Whether
the applicable limit is 4,500, 7,500, or 10,500 options is determined by
the most recent six-month trading volume of the underlying security.
Every six months each Exchange reviews the status of underlying
securities to determine which limit should apply. These position limits
may limit the number of options which the Fund can write on a particular
security.
INVESTMENT RESTRICTIONS AND OTHER INVESTMENT POLICIES
The following restrictions are fundamental policies for the
protection of the Fund's shareholders and cannot be changed without the
approval of the holders representing a majority of the Fund's
outstanding voting securities, which for purposes of such approval shall
be the lesser of (i) 67% or more of the shares present at a meeting of
shareholders if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy or (ii) more
than 50% of the outstanding voting securities of the Fund. The Fund may
not:
(1) With respect to 75 percent of its total assets, invest in
securities of any one issuer if immediately after and as a result of
such investment more than 5 percent of the total assets of the Company,
taken at market value, would be invested in the securities of such
issuer. This restriction does not apply to investments in obligations
of, or guaranteed by, the United States Government, its agencies or
instrumentalities (U.S. Government Securities).
(2) Invest more than 25 percent of its total assets in
securities or issuers in any one particular industry. This restriction
does not apply to investments in U.S. Government Securities.
(3) Purchase more than 10 percent of the outstanding voting
securities, or any class of securities, of any one issuer.
(4) Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities). (The deposit or payment by the Fund of
initial or variation margin in connection with related options is not
considered the purchase of a security on margin.)
(5) Engage in any option strategy except that the Fund may write
covered call options with respect to all of its portfolio securities,
and enter into closing purchase transactions with respect to such
options.
(6) Make short sales of securities, maintain a short position,
or participate in a joint or a joint and several basis in any trading
account in securities.
(7) Invest in real estate, or real estate limited partnerships,
although the Fund may invest in marketable securities which are secured
by real estate and securities of companies which invest in or deal in
real estate. The Fund will not invest more than 15% of the value of its
total net assets in illiquid securities, including real estate
interests.
(8) Borrow money, except that the Company may borrow money on a
secured or unsecured basis from banks as a temporary measure for
extraordinary or emergency purposes including, but not limited to, the
purchase of its own common stock. Such temporary borrowings may not
exceed 5 percent of the value of the Company's total assets at the time
any loan is made. No more than 10 percent of the value of the Company's
total assets at the time any loan is made may be pledged as collateral
for such temporary borrowings.
(9) Buy or sell commodities, commodities futures contracts or
commodities options contracts.
(10) Make loan of money, except by the purchase of debt
obligations in which the Company may invest consistent with its
investment objective and policies.
(11) Issue senior securities, as defined in the Investment
Company Act of 1940, or mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or held by
the Company except as may be necessary in connection with borrowings
mentioned in number 8 above, and then only to the extent there
mentioned.
(12) Invest more than 5 percent of the value of the Company's
total assets in securities of issuers which have been in continuous
operation less than three years.
(13) Purchase or retain the securities of any issuer if, to the
knowledge of the Fund, any of the officers or directors of the Fund or
its investment adviser owns individually more than one-half of one
percent of the securities of such issuer and together own more than 5%
of the securities of such issuer.
(14) Underwrite securities of others except to the extent the
Fund may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities.
(15) Purchase securities of other investment companies, except as
permitted under the Investment Company Act of 1940.
(16) Invest for the purpose of exercising control or management
of another company.
(17) Invest in interests in oil, gas or other mineral exploration
or development programs, although the Fund may invest in the common
stock of companies which invest in or sponsor such programs.
(18) Invest in securities restricted as to disposition under the
Federal securities laws.
(19) Invest in warrants.
MANAGEMENT OF THE COMPANY
The overall business and affairs of the Company are the
responsibility of the Company's Board of Directors, the members of which
are elected by the shareholders. The day-to-day operations of the
Company are managed by the Company's President subject to the bylaws of
the Company and review by the Board of Directors. The following persons
are directors and/or officers of the Company.
Name, Age, Company, Address, Principal Occupation
Position with Company For Last Five Years
Richard Peter Cancelmo, Jr.* (37) Founder of the Adviser.
3030 University Boulevard Former Investment
Houston, Texas 77005 Executive, Paine Webber,
President, Treasurer & Director Inc. He earned a B.A.
from Washington and Lee
University.
<PAGE>
James Barry Kendrick (34) Project Manager, Brown
3513 Dumbarton St. and Root, Inc.
Houston, Texas 77025 Former Project Manager,
Director and Secretary American Airlines. He
earned a B.S. from
Texas A & M University.
Samuel Lee Moreland (35) Manager, Real Estate,
2311 Briar Park American General Corp.
Houston, Texas 77042 Former Vice President,
Director Asset Management,
Bonnet Resources Corp.
He earned a B.A. from
the University of Texas.
*Indicates an "interested person" as defined in the Investment
Company Act of 1940.
The Company has entered into an Investment Advisory Contract (the
"Contract") with Cancelmo Capital Management, Inc., 3030 University
Blvd., Houston, Texas 77005. The Adviser, which is registered with the
Securities and Exchange Commission under the Investment Advisers Act of
1940, manages the investment and reinvestment of the assets of the
Company in accordance with the Company's investment objective, policies,
and restrictions. The Adviser has no previous experience in, or current
agreement for, providing investment management services to any other
registered investment company. Richard P. Cancelmo, Jr. is the sole
shareholder of the Adviser and is responsible for all its investment
decisions, including the day-to-day management of the Company's
portfolio. There can be no assurance that the Adviser could find a
suitable replacement for Mr. Cancelmo in the event of his death or
disability. Mr. Cancelmo also serves as the President and a Director of
the Company. Prior to forming the Adviser in 1991, Mr. Cancelmo was
affiliated from 1982 with a securities firm. The "Management of the
Company" section of the Prospectus contains further information about
the Adviser.
Under the Management Agreement, any liability of the Adviser to
the Fund and its shareholders is limited to situations involving its own
willful misfeasance, bad faith, gross negligence or reckless disregard
of its duties and obligations under the Management Agreement.
The Management Agreement may not be assigned by the Adviser and
will terminate automatically upon assignment. It may be terminated
without penalty upon 60-days' written notice by either party or by a
vote of a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act). The Management Agreement may be amended by a
vote of a majority of the Directors of the Fund, including a majority of
the disinterested directors, cast in person at a meeting called for that
purpose, subject to approval by the vote of a majority of the Fund's
outstanding voting securities. "A majority of the Fund's outstanding
voting securities" as used herein, is defined in the first paragraph of
"Investment Restrictions and Other Investment Policies."
BROKERAGE
Under the terms of the Advisory Agreement, the Adviser is
authorized to employ brokers and dealers to execute orders for the
purchase and sale of the Fund's portfolio securities, including the
writing of option contracts, who, in its best judgment, can provide
"best execution" (prompt and reliable execution at a reasonably
competitive price).
In determining the abilities of the broker-dealer to provide best
execution of a particular portfolio transaction, the Adviser considers
all relevant factors including the execution capabilities required by
the transaction or transactions; the ability and willingness of the
broker-dealer to facilitate each transaction by participation therein
for its own account; the importance to the Fund of speed, efficiency, or
confidentiality; the broker-dealer's apparent familiarity with sources
from or to whom particular securities might be purchased or sold; and
the quality and continuity of service rendered by the broker-dealer with
regard to the Fund's other transactions; and any other factors relevant
to the selection of a broker-dealer for particular and related portfolio
transactions of the Fund. Subject to the foregoing obligation to seek
best execution, the Adviser may consider as a factor in the allocation
of portfolio transactions to a broker-dealer the broker-dealer's
provision of research services to the Adviser.
If the Fund effects a closing purchase transaction with respect to
an option written by it, normally such transaction will be executed by
the same broker-dealer who executed the sale of the option, except where
the Fund utilizes a clearing agent with respect to certain call options.
Likewise, if an option written by the Fund is exercised, normally the
sale of the underlying securities will be executed by the same broker-
dealer or clearing agent who executed the sale of the option.
The Fund may purchase or sell listed securities in the over-the-
counter market ("the third market"). Where transactions are executed in
the third market, the Fund generally will deal with the primary market
makers; however, if it is to the advantage of the Fund, the services of
other brokers may be utilized.
TAX INFORMATION AND OPTION ACCOUNTING PRINCIPLES
When the Fund writes an option, an amount equal to the premium
received is recorded by the Fund as an asset and an equivalent
liability. The liability is thereafter valued to reflect the current
value of the option which is either the last sale price, or, in the
absence of a sale, the mean between the last current bid and asking
price. If the option is not exercised and expires, or if the Fund
effects a closing purchase transaction, the Fund will realize a gain (or
a loss in the case of a closing purchase transaction where the cost
exceeds the original premium received) and the liability related to the
option will be extinguished. Any such gain or loss is a short-term
capital gain or loss for Federal income tax purposes, except that a
short-term loss realized when the Fund closes certain in-the-money
covered call options involving portfolio equity securities will be
converted to a long-term capital loss if the hypothetical sale of the
underlying security on the date of such transaction would have given
rise to a long-term capital gain. If a call option which the Fund has
written on any equity security is exercised, the Fund realizes a capital
gain or loss (long-term or short-term, depending on the holding period
of the underlying security) from the sale of the underlying security and
the proceeds from such sale are increased by the premium originally
received.
SPECIAL TAX RULES APPLICABLE TO "STRADDLES" - Section 1092 of the
Code may affect the taxation of options on equity securities. Section
1092 defines a "straddle" as offsetting positions with respect to
personal property. A position in personal property is generally defined
as any interest, including an option, in personal property. A position
in personal property includes certain options written thereon and also
includes a stock position and "deep-in-the-money" options (as defined in
the Code) written thereon.
Section 1092 generally provides that in the case of a straddle,
any loss from the disposition of a position in the straddle can only be
deducted to the extent that the loss exceeds the unrealized gains on all
offsetting straddle positions. Section 1092 also provides that "wash
sale" rules are applicable to transactions where a position is sold at a
loss and a new offsetting position is acquired within a prescribed
period. These rules are applicable to the Fund's "deep-in-the-money"
stock option positions. In addition, Section 1092 will suspend or
terminate the Fund holding period in certain stocks with respect to
which the Fund writes options, including non-"deep-in-the money" options
which are "qualified covered call options," and subject stocks to
restrictions comparable to the "wash sale rules" of Code Section 1091.
Losses which the Fund realizes on certain transactions involving certain
in-the-money covered call options may be converted from short-term to
long-term capital loss. Management will manage the Fund to take into
account Section 1092 and such Regulations.
CALCULATION OF PERFORMANCE DATA AND OTHER
PERFORMANCE COMPARISONS AND STATISTICS
From time to time the Fund may report its "total return" in
prospectuses, the Fund's annual reports, shareholder communications, and
advertising.
Total return for a performance period is calculated by assuming a
hypothetical initial investment ("p") in the Fund at the beginning of
the period. Then, assuming reinvestment of all distributions into new
Fund shares, a redeemable value at the end of the performance period
("ERV") is calculated based on actual Fund performance. The percentage
change between the ending value and initial investment is the
"cumulative total return." The "average annual total compound return"
(growth rate) expresses the total return as an annual rate, which if
compounded annually over the period ("n" is the number of years), would
increase or decrease the initial investment to the ending value (Formula
for calculating average annual total compound return: (ERV/p)1/n-1)).
See the "Glossary" in the Prospectus for further discussion and examples
of total return and fluctuations in total return.
VOLATILITY. Occasionally statistics may be used to specify the
Fund's volatility or risk. Measures of volatility or risk are generally
used to compare the Fund's net asset value or performance relative to a
market index. One measure of volatility is beta. Beta is the
volatility of the Fund relative to the total market as represented by
the Standard & Poor's 500 Stock Index. A beta of more than 1.00
indicates volatility greater than the market, and a beta of less than
1.00 indicates volatility less than the market. Sometimes beta may be
calculated relative to a different market index. Another measure of
volatility or risk is standard deviation. Standard deviation is used to
measure variability of net asset value or total return around an
average, over a specified period of time. The premise is that greater
volatility connotes greater risk undertaken in achieving performance.
OTHER PERFORMANCE QUOTATIONS. One measure of performance that
adjusts for risk is alpha. Alpha is a measure of the difference between
the Fund's performance and a market index portfolio with the same beta.
For example, suppose the Fund's beta is approximately 0.5 over a
historical period. Then, a similar risk market index portfolio can be
constructed with a beta of 0.5 by creating an index with a weight of 50%
in the S & P 500 Index and 50% in U.S. Treasury Bills. The Fund's
return is then compared to the return of the market index.
Sales literature referring to the use of the Fund as a potential
investment for Individual Retirement Accounts (IRAs), Business
Retirement Plans, and other tax-advantaged retirement plans may quote a
total return based upon compounding of dividends on which it is presumed
no federal income tax applies.
Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to
shareholders only for the limited historical period used.
COMPARISONS. To help investors better evaluate how an investment
in the Fund might satisfy their investment objective, advertisements and
other materials regarding the Fund may discuss various measures of the
Fund's performance as reported by various financial publications.
Materials may also compare performance (as calculated above) to
performance as reported by other investments, indices, and averages.
The following publications, indices, and averages, among others, may be
used:
a) The Dow Jones Composite Average or its component averages -
an unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company stocks (Dow
Jones Utilities Average), and 20 transportation company stocks.
Comparisons of performance assume reinvestment of dividends.
b) Standard & Poor's 500 Stock Index or its component indices -
an unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividends.
c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation, and
finance stocks listed on the New York Stock Exchange.
d) Wilshire 5000 Equity Index - represents the return on the
market value of all common equity securities for which daily pricing is
available. Comparisons of performance assume reinvestment of dividends.
e) Mixtures of indexes and U.S. Treasury Bills which
approximate the historical risk level of the Fund. In particular:
mixtures of the S & P 500 Stock Index and U.S. Treasury Bills such as
the 50%/50% mixture discussed under "Other Performance Quotations."
f) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed
Income Fund Performance Analysis - measure total return and average
current yield for the mutual fund industry, and rank individual mutual
fund performance over specified time periods, assuming reinvestment of
all distributions, exclusive of any applicable sales charges.
g) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk, total return,
and average rate of return (average annual compounded growth rate) over
specified time periods for the mutual fund industry.
h) Financial publications: The Wall Street Journal and
Business Week, Changing Times, Financial World, Forbes, Fortune, and
Money magazines - provide performance statistics over specified time
periods.
i) Consumer Price Index (or Cost of Living Index), published by
the U.S. Bureau of Labor Statistics - a statistical measure of change,
over time, in the price of goods and services, in major expenditure
groups.
j) Stocks, Bonds Bills, and Inflation, published by Ibbotson
Associates - historical measure of yield, price, and total return for
common and small company stock, long-term government bonds, Treasury
bills, and inflation.
k) Savings and Loan Historical Interest Rates - as published in
the U.S. Savings & Loan League Fact Book.
l) Historical data supplied by the research departments of
major brokerage firms.
m) Standard & Poor's 100 Stock Index - an unmanaged index based
on the prices of 100 blue-chip stocks, including 92 industrials, one
utility, two transportation companies, and five financial institutions.
The S & P 100 Stock Index is a smaller more flexible index for options
trading.
In assessing such comparisons of performance an investor should
keep in mind that the composition of the investments in the reported
indices and averages is not identical to the Fund, and that the averages
are generally unmanaged. In addition there can be no assurance that the
Fund will continue this performance as compared to such other averages.
DESCRIPTION OF COMMON STOCK
The Company was incorporated in Texas on October 25, 1995 with
10,000,000 authorized shares of common stock, $1.00 par value. There
were 35,400 shares issued and outstanding as of November 2, 1995. All
the outstanding shares are, and the shares to be issued as contemplated
herein will be, duly authorized, fully paid and nonassessable. Each
issued and outstanding share has full voting rights and is entitled to
one vote on all matters submitted to the shareholders, including the
right to vote at the annual meeting of shareholders on the election of
directors and the selection of independent certified public accountants.
No shareholder is entitled to cumulative voting rights or to any
preemptive right to acquire securities of the Company. Each share has
equal dividend, distribution, and liquidation rights.
PRINCIPAL SHAREHOLDERS
The following table shows as of November 2, 1995 the beneficial
ownership of shares of the Fund's common stock by all officers and
directors of the Fund as a group and the record ownership of shares by
each person known to the fund to be a record owner of more than 5% of
its issued and outstanding common stock (35,400 shares). Except for
the shares held by officers and directors, the Fund has no information
regarding beneficial ownership of such shares.
Name and Address Number of Shares Percentage of Class
Mary Foley Murphy * 35,400 100%
9133 Collins Ave.
Surfside, Florida 33154
* Mrs. Murphy is Mr. Cancelmo s grandmother.
TAX STATUS
As of the date of this Prospectus, the Fund intends to qualify as
a regulated investment company under Subchapter M of the internal
Revenue Code of 1986, as amended, and the Fund intends to continue to
qualify under said Subchapter M. As a result of such qualification the
Fund will not be subject to Federal income taxes to the extent that it
distributes not less than 98% of its investment company taxable income
and its capital gains net income. Investment company taxable income
includes net income from dividends, interest and net short-term capital
gain. Premiums from expired options written by the Fund and net gains,
if any, from closing purchase transactions are treated as short-term
capital gains for Federal income tax purposes. In order to qualify
under Subchapter M, the Fund, among other things must derive less than
30% of its gross income from the sale or other disposition of securities
held less than three months; as a result the Fund may be restricted in
the writing of options which expire in less than three months or in
effecting closing purchase transactions in options written less than
three months before such transactions.
PRICING AND REDEMPTION OF FUND SHARES
The Fund's net asset value per share is calculated by taking the
total value of the Fund's assets, deducting total liabilities and
dividing the result by the number of shares outstanding. Portfolio
securities which are traded on a national securities exchange are valued
at the last sale price or if there is no recent sale, at the mean
between the last current bid and asked prices. All other securities not
so traded are valued at the mean between the last current bid and asked
prices if market quotations are available. Other securities and assets
are valued at fair value in accordance with methods determined in good
faith by the Fund's Board of Directors.
The Fund may suspend the right of redemption or delay payment more
than three (3) business days: (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings); (b) when trading on the New York Stock Exchange is
restricted; (c) when an emergency exists as determined by the Securities
and Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable; or
(d) for such other periods as the Securities and Exchange Commission by
order may permit for protection of the Fund's shareholders. The amount
received by a shareholder upon redemption may be more or less than he
paid for his shares depending on the market value of the Fund's
portfolio securities at the time.
Shares of the Fund may be transferred upon delivery to the Fund of
(1) a letter of instructions, signed by each registered owner exactly as
the shares are registered, which clearly identifies the exact names in
which the account is presently registered, the account number, the
number of shares to be transferred, and the names, addresses and social
security or tax identification number of the account to which the shares
are to be transferred, (2) stock certificates, if any, which are the
subject of the transfer, and (3) an instrument of assignment ("stock
power"), which should specify the total number of shares to be
transferred and on which the signature(s) of the registered owner(s)
have been guaranteed by a commercial bank or trust company which is a
member of the Federal Deposit Insurance Corporation, or by a member firm
of a national securities exchange. Additional documents are required for
transfers by corporation, executors, administrators, trustees and
guardians; if a shareholder is in doubt as to what documents are
required, he should contact the Fund. The Fund is not bound to record
any transfer on the stock transfer books until the Fund has received all
required documents.
CUSTODIAN
The Fund's custodian is Firstar Trust Company. Pursuant to the terms of
the Custodian Agreement the Fund will forward to the Custodian the
proceeds of each purchase of Fund shares. The Custodian will hold such
proceeds and make disbursements therefrom in accordance with the terms
of the Custodian Agreement. It will retain possession of the securities
purchased with such proceeds and maintain appropriate records with
respect to receipt and disbursements of money, receipt and release of
securities, and all other transactions of the Custodian with respect to
the securities and other assets of the Fund.
TRANSFER, DIVIDEND DISBURSING AND
SHAREHOLDER SERVICING AGENT
The Fund serves as its own Transfer, Dividend Disbursing and
Shareholder Service Agenting.
INDEPENDENT AUDITORS
Simonton, Kutac & Barnidge, L.L.P., Certified Public Accountants,
Two Houston Center, 909 Fannin, Suite 2050, Houston, Texas 77010-1007
serves as independent auditors to the Fund. The services provided by
the firm include the audit of the financial statements of the Fund
included in the Statement of Additional Information and services related
to other filings made with the Securities and Exchange Commission.
<PAGE>
WEST UNIVERSITY FUND, INC.
3030 UNIVERSITY BOULEVARD
HOUSTON, TEXAS 77005
713-666-1652
PART C
Item 24. (a) Financial Statements
(1) Balance Sheet - Part B
(b) Exhibits
(1) Articles of Incorporation
(2) Bylaws of the Company
(3) Voting Trust Agreement - Not Applicable
(4) Specimen of Capital Stock
(5) Investment Advisory Contract
(6) Underwriting or Distribution Contract -
Not Applicable
(7) Pension, Bonus or Similar Contracts -
Not Applicable
(8) Custodian Agreement or Depository
Contract
(9) Other Material Contracts - Not
Applicable
(10) Opinion and Consent of Counsel
(11) Other Opinions and Consents
(12) Other Financial Statements - Not
Applicable
(13) Initial Capital Agreements
(14) Model Retirement Plan
(15) Rule 12b-1 Plan - Not Applicable
Item 25. No Person is directly or indirectly controlled by, or under
common control with, the Company.
Item 26. Title of Class Number of Record Holders
Capital Stock 1 (as of
November 2, 1995)
Item 27. The Bylaws of the Company deny indemnification to
any Officer or director for "reason of willful
misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in
the conduct of his office."
Item 28. The President and sole shareholder of the Adviser
was an Investment Executive with Paine Webber,
Inc. from 1982 to 1995. There have been no other
"business or other connections of a substantial
nature" in which the Adviser has been involved
during the last two fiscal years.
Item 29. The Company is the sole underwriter of its shares.
No commissions are charged by the Company, or paid
to another party.
Item 30. The accounts, books and other documents required
by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained at the
office of the Company, 3030 University Blvd.,
Houston, Texas 77005.
Item 31. Except as discussed in Part A and Part B of this
Form, the Company has no management-related
service contracts.
Item 32. Undertaking. The registrant will file a post
effective amendment using financial statements
which need not be certified, within four to six
months from the effective date of the registration
statement.
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
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and) has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Houston and state of Texas on the
20th day of December , 1995.
West University Fund, Inc.
BY
RICHARD PETER CANCELMO, JR.
President
Pursuant to the requirements of (the Securities Act of 1933 and) this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Director, Secretary December 20, 1995
JAMES BARRY KENDRICK (Title) (Date)
Director December 20, 1995
SAMUEL LEE MORELAND (Title) (Date)
