PROSPECTUS
April 1, 1996
PRAGMA INVESTMENT TRUST
7150 Greenville Avenue
Suite 101 - LB 340
Dallas, Texas 75231
(214)373-3585
E-Mail: PRAGMAINC @ AOL.COM
_________________________________________________________________
The PRAGMA Providence Fund (the "Fund"), a separate series of
PRAGMA Investment Trust, is an aggressive equity mutual fund which
seeks long-term capital appreciation through investment in common
stocks. Dividend income is only an incidental consideration to the
Fund's investment objective.
PRAGMA, Inc. (the "Adviser"), 7150 Greenville Avenue, Suite 101-
LB 340, Dallas, Texas 75231, manages the Fund's investments. The
Adviser uses fundamental security analysis to identify and purchase
shares of companies which it believes have the potential for
significant earnings growth.
This Prospectus sets forth concisely the information about the
Fund that you should know before investing. Please retain this
Prospectus for future reference. A Statement of Additional
Information dated April 1, 1996 has been filed with the Securities
and Exchange Commission and is hereby incorporated by reference in
its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling the number listed below.
_________________________________________________________________
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free). . . . . . . . . . . . . . . .800-738-2065
____________________________________________________________________
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.
EXPENSE INFORMATION
Shareholder Transaction Expenses
Sales Load Imposed on Purchases . . . . . . . . . . . . . None
Sales Load Imposed on Reinvested Dividends. . . . . . . . None
Redemption Fee. . . . . . . . . . . . . . . . . . . . . . None*
* A wire transfer fee is charged by the Fund's Custodian in the
case of redemptions made by wire. Such fee is subject to
change and is currently $8. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers . . . . . . . . . 1.42%**
12b-1 Fees. . . . . . . . . . . . . . . . . . . None
Other Expenses. . . . . . . . . . . . . . . . . .08%
Total Fund Operating Expenses After Waivers . . 1.50%
** The Adviser is contractually required to reduce its management
fee in an amount equal to the fees and expenses of the non-
interested Trustees. Absent waivers, management fees and total
fund operating expenses would be 1.50% and 1.58%, respectively,
of the Fund's average net assets. The Adviser undertakes that
the expenses of the Fund will not, in any event, exceed 1.50%
of the Fund's average net assets. See "Operation of the Fund."
Example
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:
1 Year $ 15
3 Years 47
The purpose of this table is to assist the investor in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. The percentages
expressing annual fund operating expenses are based on estimated
amounts for the current fiscal year. The Example should not be
considered a representation of past or future expenses and actual
expenses may be greater or less than those shown.
<PAGE>
INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The investment objective of the Fund is to seek long-term
capital appreciation through investment in common stocks.
Dividend income is only an incidental consideration to the Fund's
investment objective. The Fund is not intended to be a complete
investment program, and there is no assurance that its investment
objective can be achieved. The Fund's investment objective may
be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and
after this Prospectus has been revised accordingly. If there is
a change in the Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in
light of their then current financial position and needs. Unless
otherwise indicated, all investment practices and limitations of
the Fund are nonfundamental policies which may be changed by the
Board of Trustees without shareholder approval. The Adviser has
not previously provided investment advisory services to a
regulated investment company.
Investments in common stocks are subject to inherent market
risks and fluctuations in value due to earnings, economic
conditions and other factors beyond the control of the Adviser.
As a result, the return and net asset value of the Fund will
fluctuate. In selecting securities for the Fund, the Adviser
will generally purchase common stocks of companies which it
believes meet one of the following criteria:
1. companies, often relatively small or new, with new or
appealing products or services;
2. companies whose products or services have the potential
for significant growth in sales; and
3. "special situations" that may cause a company's
earnings to grow significantly because of changes in
products, services, applicability, or strategy.
The Fund may from time to time invest a substantial portion
of its assets in small, unseasoned companies. While smaller
companies generally have potential for rapid growth, they often
involve higher risks because they lack the management experience,
financial resources, product diversification and competitive
strengths of larger corporations. In addition, in many
instances, the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the
frequency and volume of their trading is substantially less than
is typical of larger companies. Therefore, the securities of
smaller companies may be subject to wider price fluctuations.
When making large sales, the Fund may have to sell portfolio
holdings at discounts from quoted prices or may have to make a
series of small sales over an extended period of time.
The Fund may invest in foreign companies through the
purchase of sponsored American Depository Receipts (certificates
of ownership issued by an American bank or trust company as a
convenience to investors in lieu of the underlying shares which
it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign
investments, the Adviser will seek to invest in securities that
have investment characteristics and qualities comparable to the
kinds of domestic securities in which the Fund invests. The Fund
does not currently intend to invest more than 15% of its net
assets in American Depository Receipts and other foreign
securities. Foreign investments may be subject to special risks,
including future political and economic developments and the
possibility of seizure or nationalization of companies,
imposition of withholding taxes on income, establishment of
exchange controls or adoption of other restrictions, that might
affect an investment adversely.
For defensive purposes, the Fund may temporarily hold all or
a portion of its assets in money market instruments. The money
market instruments which the Fund may own from time to time
include U.S. Government obligations having a maturity of less
than one year, shares of money market investment companies,
commercial paper rated A-1 by Standard & Poor's Ratings Group or
Prime-1 by Moody's Investors Service, Inc., repurchase
agreements, bank debt instruments (certificates of deposit, time
deposits and bankers' acceptances) and other short-term
instruments issued by domestic branches of U.S. financial
institutions that are insured by the Federal Deposit Insurance
Corporation and have assets exceeding $10 billion. The Fund may
invest up to 10% of its total assets in shares of money market
investment companies. Investments by the Fund in shares of money
market investment companies may result in duplication of
advisory, administrative and distribution fees. The Fund will
not invest more than 5% of its total assets in securities of any
single investment company and will not purchase more than 3% of
the outstanding voting securities of any investment company.
Repurchase agreements are transactions by which the Fund
purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon time and price, thereby
determining the yield during the term of the agreement. In the
event of a bankruptcy or other default of the seller of a
repurchase agreement, the Fund could experience both delays in
liquidating the underlying security and losses. To minimize
these possibilities, the Fund intends to enter into repurchase
agreements only with its Custodian, banks having assets in excess
of $10 billion and the largest and, in the Adviser's judgment,
most creditworthy primary U.S. Government securities dealers.
Repurchase agreements entered into by the Fund will be
collateralized by high-grade debt obligations. Collateral for
repurchase agreements is held in safekeeping in the customer-only
account of the Fund's Custodian at the Federal Reserve Bank. At
the time the Fund enters into a repurchase agreement, the value
of the collateral, including accrued interest, will equal or
exceed the value of the repurchase agreement and, in the case of
a repurchase agreement exceeding one day, the seller agrees to
maintain sufficient collateral so that the value of the
collateral, including accrued interest, will at all times equal
or exceed the value of the repurchase agreement. The Fund will
not enter into a repurchase agreement not terminable within seven
days if, as a result thereof, more than 15% of the value of the
net assets of the Fund would be invested in such securities and
other illiquid securities.
The Fund may make short-term loans of its portfolio
securities to banks, brokers and dealers, although the Fund has
no present intention to do so.
The Fund may borrow money from banks or as may be necessary
for the clearance of securities transactions but only for
emergency or extraordinary purposes in an amount not exceeding 5%
of the Fund's total assets. The Fund's policy on borrowing is a
fundamental policy which may not be changed without the
affirmative vote of a majority of its outstanding shares.
The Fund does not intend to use short-term trading as a
primary means of achieving its investment objective. However,
the Fund's rate of portfolio turnover will depend upon market and
other conditions, and it will not be a limiting factor when
portfolio changes are deemed necessary or appropriate by the
Adviser. Although the annual portfolio turnover rate of the Fund
cannot be accurately predicted, it is not expected to exceed 50%,
but may be either higher or lower. High turnover involves
correspondingly greater commission expenses and transaction costs
and increases the possibility that the Fund would not qualify as
a regulated investment company under Subchapter M of the Internal
Revenue Code. The Fund will not qualify as a regulated
investment company if it derives more than 30% or more of its
gross income from gains (without offset for losses) from the sale
or other disposition of securities held for less than three
months. High turnover may result in the Fund recognizing greater
amounts of income and capital gains, which would increase the
amount of income and capital gains which the Fund must distribute
to its shareholders in order to maintain its status as a
regulated investment company and to avoid the imposition of
federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
Your initial investment in the Fund must be at least $1,000
($250 for tax-deferred retirement plans). Shares of the Fund are
sold on a continuous basis at the net asset value next determined
after receipt of a purchase order by the Fund. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Fund's transfer agent, MGF
Service Corp., by 5:00 p.m., Eastern time, that day are confirmed
at the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day.
It is the responsibility of dealers to transmit properly completed
orders so that they will be received by MGF Service Corp. by
5:00 p.m., Eastern time. Dealers may charge a fee for effecting
purchase orders. Direct purchase orders received by MGF Service
Corp. by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by MGF Service Corp.
after 4:00 p.m., Eastern time, and orders received from dealers
after 5:00 p.m., Eastern time, are confirmed at the net asset
value next determined on the following business day.
You may open an account and make an initial investment in
the Fund by sending a check and a completed account application
form to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio 45201-
5354. Checks should be made payable to the "PRAGMA Providence
Fund." An account application is included in this Prospectus.
The Fund mails you confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are
not issued. The Fund reserves the rights to limit the amount of
investments and to refuse to sell to any person.
Investors should be aware that the Fund's account
application contains provisions in favor of the Fund, MGF Service
Corp. and certain of their affiliates, excluding such entities
from certain liabilities (including, among others, losses
resulting from unauthorized shareholder transactions) relating to
the various services made available to investors.
Should an order to purchase shares be canceled because your
check does not clear, you will be responsible for any resulting
losses or fees incurred by the Fund or MGF Service Corp. in the
transaction.
You may also purchase shares of the Fund by wire. Please
telephone MGF Service Corp. (Nationwide call toll-free
800-738-2065) for instructions. You should be prepared to give
the name in which the account is to be established, the address,
telephone number and taxpayer identification number for the
account, and the name of the bank which will wire the money.
Your investment will be made at the next determined net
asset value after your wire is received together with the account
information indicated above. If the Fund does not receive timely
and complete account information, there may be a delay in the
investment of your money and any accrual of dividends. To make
your initial wire purchase, you are required to mail a completed
account application to MGF Service Corp. Your bank may impose a
charge for sending your wire. There is presently no fee for
receipt of wired funds, but MGF Service Corp. reserves the right
to charge shareholders for this service upon thirty days' prior
notice to shareholders.
You may purchase and add shares to your account by mail or
by bank wire. Checks should be sent to MGF Service Corp., P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable or endorsed to the "PRAGMA Providence Fund." Bank wires
should be sent as outlined above. You may also make additional
investments at the Fund's offices at 7150 Greenville Avenue,
Suite 101-LB 340, Dallas, Texas 75231. Each additional purchase
request must contain the name of your account and your account
number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the
Fund reserves the right to impose such requirement.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Fund
is open for business by sending a written request to the Fund.
The request must state the number of shares or the dollar amount
to be redeemed and your account number. The request must be
signed exactly as your name appears on the Fund's account
records. If the shares to be redeemed have a value of $25,000 or
more, your signature must be guaranteed by any eligible guarantor
institution, including banks, brokers and dealers, municipal
securities brokers and dealers, government securities brokers and
dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings
associations.
Redemption requests may direct that the proceeds be wired
directly to your existing account in any commercial bank or
brokerage firm in the United States. If your instructions
request a redemption by wire, you will be charged an $8
processing fee by the Fund's Custodian. The Fund reserves the
right, upon thirty days' written notice, to change the processing
fee. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage
firm may also impose a charge for processing the wire. In the
event that wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated
account.
You may also redeem shares by placing a wire redemption
through a securities broker or dealer. Unaffiliated broker-
dealers may impose a fee on the shareholder for this service.
You will receive the net asset value per share next determined
after receipt by the Fund or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
You will receive the net asset value per share next
determined after receipt by MGF Service Corp. of your redemption
request in the form described above. Payment is made within
three business days after tender in such form, provided that
payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check or
wire.
At the discretion of the Fund or MGF Service Corp.,
corporate investors and other associations may be required to
furnish an appropriate certification authorizing redemptions to
ensure proper authorization. The Fund reserves the right to
require you to close your account if at any time the value of
your shares is less than $1,000 (based on actual amounts
invested, unaffected by market fluctuations), or $250 in
the case of tax-deferred retirement plans, or such other
minimum amount as the Fund may determine from time to time.
After notification to you of the Fund's intention to close your
account, you will be given sixty days to increase the value of
your account to the minimum amount.
The Fund reserves the right to suspend the right of
redemption or to postpone the date of payment for more than three
business days under unusual circumstances as determined by the
Securities and Exchange Commission.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to distribute substantially all of its net
investment income and net realized capital gains, if any, on an
annual basis. Distributions are paid according to one of the
following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term
capital gains distributions paid in
cash; long-term capital gains
distributions reinvested in additional
shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your
application. If no option is specified on your application,
distributions will automatically be reinvested in additional
shares. All distributions will be based on the net asset value
in effect on the payable date.
If you select the Income Option or the Cash Option and the
U.S. Postal Service cannot deliver your checks or if your checks
remain uncashed for six months, your dividends may be reinvested
in your account at the then current net asset value and your
account will be converted to the Share Option.
TAXES
The Fund intends to qualify for the special tax treatment
afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The
Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its
shareholders. Distributions of net investment income as well as
net realized short-term capital gains, if any, are taxable to
investors as ordinary income. Dividends distributed by the Fund
from net investment income may be eligible, in whole or in part,
for the dividends received deduction available to corporations.
Distributions of net realized long-term capital gains are taxable
as long-term capital gains regardless of how long you have held
your Fund shares. Redemptions of shares of the Fund are taxable
events on which a shareholder may realize a gain or loss.
The Fund will mail to each of its shareholders a statement
indicating the amount and federal income tax status of all
distributions made during the year. In addition to federal
taxes, shareholders of the Fund may be subject to state and local
taxes on distributions. Shareholders should consult their tax
advisors about the tax effect of distributions and withdrawals
from the Fund. The tax consequences described in this section
apply whether distributions are taken in cash or reinvested in
additional shares.
OPERATION OF THE FUND
The Fund is a diversified series of PRAGMA Investment Trust,
an open-end management investment company organized as an Ohio
business trust on January 10, 1996. The Board of Trustees
supervises the business activities of the Fund. Like other
mutual funds, various organizations are retained to perform
specialized services for the Fund.
<PAGE>
The Fund retains PRAGMA, Inc. (the "Adviser"), 7150
Greenville Avenue, Suite 101-LB 340, Dallas, Texas, to manage the
Fund's investments. The Adviser, organized in 1981, has been
managing stock and bond portfolios for customers for nearly 15
years. John H. Alban, Jr., who is primarily responsible for
overseeing the management of the Fund's portfolio, began
investing on behalf of customers in 1964 and founded PRAGMA, Inc.
in 1981. Since its inception, PRAGMA, Inc. has been especially
active managing the global futures and foreign exchange
portfolios of its institutional and select individual customers.
The Adviser has been recognized as a pioneer in the area of
managed futures and has, over its 15 year history, been ranked
among the leading managers in the area of futures and foreign
exchange investments. Assets under management have grown from
the initial customers' capital of less than $400,000 to December
31, 1995's $25 million, approximately half of which was managed
in the stock and bond markets.
The Fund pays the Adviser a fee at the annual rate of 1.50%
of the average value of its daily net assets. The rate of the
advisory fee paid by the Fund is higher than that paid by most
other mutual funds; however, unlike most mutual funds, the
advisory fee paid by the Fund includes transfer agency, pricing,
custodial, auditing and legal services, and general
administrative and other operating expenses of the Fund except
brokerage commissions, taxes, interest, fees and expenses of non-
interested Trustees and extraordinary expenses.
As of the date of this Prospectus, John H. Alban, Jr. is the
sole shareholder of the Fund.
The Adviser has retained MGF Service Corp., P.O. Box 5354,
Cincinnati, Ohio 45201-5354, to serve as the Fund's transfer
agent, dividend paying agent and shareholder service agent. MGF
Service Corp. is a subsidiary of Leshner Financial, Inc., of
which Robert H. Leshner is the controlling shareholder. Certain
of the Fund's officers are also officers of MGF Service Corp.
MGF Service Corp. also provides accounting and pricing
services to the Fund. For its services to the Fund, MGF Service
Corp. receives a monthly fee from the Adviser, out of the
investment advisory fee paid by the Fund to the Adviser, for
calculating daily net asset value per share and maintaining such
books and records as are necessary to enable MGF Service Corp. to
perform its duties.
MGF Service Corp. has also been retained to provide
administrative services to the Fund. In this capacity, MGF
Service Corp. supplies executive, administrative and regulatory
services, supervises the preparation of the Fund's tax returns,
and coordinates the preparation of reports to shareholders and
reports to and filings with the Securities and Exchange
Commission and state securities authorities. The Adviser pays
MGF Service Corp. monthly, out of the investment advisory fee the
Adviser receives from the Fund, a fee for these administrative
services at the annual rate of 0.15% of the average value of the
Fund's daily net assets up to $25 million, 0.125% of such assets
between $25 million and $50 million and 0.10% of such assets in
excess of $50 million.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to its
objective of seeking best execution of portfolio transactions,
the Adviser may give consideration to sales of shares of the Fund
as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund.
Shares of the Fund have equal voting rights and liquidation
rights. When matters are submitted to shareholders for a vote,
each shareholder is entitled to one vote for each full share
owned and fractional votes for fractional shares owned. The Fund
is not required to hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon removal of any
Trustee when requested to do so in writing by shareholders
holding 10% or more of the Fund's outstanding shares. The Fund
will comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 in order to facilitate
communications among shareholders.
CALCULATION OF SHARE PRICE
On each day that the Fund is open for business, the share
price (net asset value) of the Fund's shares is determined as of
the close of the regular session of trading on the New York Stock
Exchange, currently 4:00 p.m., Eastern time. The Fund is open
for business on each day the New York Stock Exchange is open for
business and on any other day when there is sufficient trading in
the Fund's investments that its net asset value might be
materially affected. The net asset value per share of the Fund
is calculated by dividing the sum of the value of the securities
held by the Fund plus cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of
shares outstanding of the Fund, rounded to the nearest cent.
Portfolio securities are valued as follows: (i) securities
which are traded on stock exchanges or are quoted by NASDAQ are
valued at the last reported sale price as of the close of the
regular session of trading on the New York Stock Exchange on the
day the securities are being valued, or, if not traded on a
particular day, at the closing bid price, (ii) securities traded
in the over-the-counter market, and which are not quoted by
NASDAQ, are valued at the last sale price (or, if the last sale
price is not readily available, at the last bid price as quoted
by brokers that make markets in the securities) as of the close
of the regular session of trading on the New York Stock Exchange
on the day the securities are being valued, (iii) securities
which are traded both in the over-the-counter market and on a
stock exchange are valued according to the broadest and most
representative market, and (iv) securities (and other assets) for
which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the
general supervision of the Board of Trustees. The net asset
value per share of the Fund will fluctuate with the value of the
securities it holds.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average
annual total return." Average annual total return figures are
based on historical earnings and are not intended to indicate
future performance.
The "average annual total return" of the Fund refers to the
average annual compounded rates of return over the most recent 1,
5 and 10 year periods or, where the Fund has not been in
operation for such period, over the life of the Fund (which
periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation
of "average annual total return" assumes the reinvestment of all
dividends and distributions. The Fund may also advertise total
return (a "nonstandardized quotation") which is calculated
differently from "average annual total return." A
nonstandardized quotation of total return may be a cumulative
return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and
capital gains distributions. A nonstandardized quotation of
total return may also indicate average annual compounded rates of
return over periods other than those specified for "average
annual total return." A nonstandardized quotation of total
return will always be accompanied by the Fund's "average annual
total return" as described above.
From time to time, the Fund may advertise its performance
rankings as published by recognized independent mutual fund
statistical services such as Lipper Analytical Services, Inc.
("Lipper"), or by publications of general interest such as
Forbes, Money, The Wall Street Journal, Business Week, Barron's,
Fortune or Morningstar Mutual Fund Values. The Fund may also
compare its performance to that of other selected mutual funds,
averages of the other mutual funds within its category as
determined by Lipper, or recognized indicators such as the Dow
Jones Industrial Average, the Standard & Poor's 500 Stock Index,
the Value Line Composite Index, the NASDAQ Composite Index and
the Russell 2000 Index. In connection with a ranking, the Fund
may provide additional information, such as the particular
category of funds to which the ranking relates, the number of
funds in the category, the criteria upon which the ranking is
based, and the effect of fee waivers and/or expense
reimbursements, if any. The Fund may also present its
performance and other investment characteristics, such as
volatility or a temporary defensive posture, in light of the
Adviser's view of current or past market conditions or historical
trends.
<PAGE>
PRAGMA INVESTMENT TRUST
7150 Greenville Avenue
Suite 101-LB 340
Dallas, Texas 75231
Board of Trustees
John H. Alban, Jr.
John H. Alban, III
William L. Hutton
William B. Snyder
James C. Tappan
Officers
John H. Alban, Jr., Chairman of the Board
John H. Alban, III, President
Robert G. Dorsey, Vice President
John F. Splain, Secretary
Mark J. Seger, Treasurer
Investment Adviser
PRAGMA, INC.
7150 Greenville Avenue
Suite 101-LB 340
Dallas, Texas 75231
214-373-3585
Transfer Agent
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-738-2065
Cincinnati: 513-629-2070
Rate Line
Nationwide: (Toll-Free) 800-852-4052
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . . .
Investment Objective, Investment Policies and
Risk Considerations. . . . . . . . . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund. . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price . . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . . .
_________________________________________________________________<PAGE>
No person has been authorized to give any information or to
make any representations, other than those contained in this
Prospectus, in connection with the offering contained in this
Prospectus, and if given or made, such information or
representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the
Fund to sell shares in any State to any person to whom it is
unlawful for the Fund to make such offer in such State.
<PAGE>
PRAGMA INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
April 1, 1996
The PRAGMA Providence Fund
This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Prospectus
of The PRAGMA Providence Fund dated April 1, 1996. A copy of the
Fund's Prospectus can be obtained by writing the Fund at 7150
Greenville Avenue, Suite 101-LB 340, Dallas, Texas 75231, or by
calling the Fund nationwide toll-free 800-738-2065.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PRAGMA Investment Trust
7150 Greenville Avenue, Suite 101 - LB 340
Dallas, Texas 75231
TABLE OF CONTENTS
PAGE
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DEFINITIONS, POLICIES AND RISK CONSIDERATION . . . . . . . . 3
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . 8
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . 10
THE INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . 11
SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . . . . 13
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . 14
CALCULATION OF SHARE PRICE . . . . . . . . . . . . . . . . . 14
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
REDEMPTION IN KIND . . . . . . . . . . . . . . . . . . . . . 16
HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . . 16
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . 18
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MGF SERVICE CORP . . . . . . . . . . . . . . . . . . . . . . 18
STATEMENT OF ASSETS AND LIABILITIES. . . . . . . . . . . . . 19
THE FUND
PRAGMA Investment Trust (the "Trust") was organized as an
Ohio business trust on January 10, 1996. The Trust currently
offers one series of shares to investors, the PRAGMA Providence
Fund (the "Fund").
Each share of the Fund represents an equal proportionate
interest in the assets and liabilities belonging to the Fund with
each other share of the Fund and is entitled to such dividends
and distributions out of the income belonging to the Fund as are
declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or
combine the shares of the Fund into a greater or lesser number of
shares of the Fund so long as the proportionate beneficial
interest in the assets belonging to the Fund are in no way
affected. In case of any liquidation of the Fund, the holders of
shares of the Fund will be entitled to receive as a class a
distribution out of the assets, net of the liabilities, belonging
to the Fund. No shareholder is liable to further calls or to
assessment by the Fund without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and
investment policies described in the Prospectus (see "Investment
Objective, Investment Policies and Risk Considerations") appears
below:
Majority. As used in the Prospectus and this Statement of
Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund
are present or represented at such meeting or (2) more than 50%
of the outstanding shares of the Fund.
Commercial Paper. Commercial paper consists of short-term
(usually from one to two hundred seventy days) unsecured
promissory notes issued by corporations in order to finance their
current operations. The Fund will only invest in commercial
paper rated A-1 by Standard & Poor's Ratings Group ("Standard &
Poor's") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") or unrated paper of issuers who have outstanding
unsecured debt rated AA or better by Standard & Poor's or Aa or
better by Moody's. Certain notes may have floating or variable
rates. Variable and floating rate notes with a demand notice
period exceeding seven days will be subject to the Fund's
restriction on illiquid investments (see "Investment
Limitations") unless, in the judgment of the Adviser, such note
is liquid.
The rating of Prime-1 is the highest commercial paper rating
assigned by Moody's Investors Service, Inc. Among the factors
considered by Moody's in assigning ratings are the following:
valuation of the management of the issuer; economic evaluation of
the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas;
evaluation of the issuer's products in relation to competition
and customer acceptance; liquidity; amount and quality of long-
term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist
with the issuer; and recognition by the management of obligations
which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial
paper is rated Prime-1. Commercial paper rated A-1 (highest
quality) by Standard & Poor's Ratings Group has the following
characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A" or better,
although in some cases "BBB" credits may be allowed; the issuer
has access to at least two additional channels of borrowing;
basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances; typically, the issuer's industry
is well established and the issuer has a strong position within
the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above
factors determines whether the issuer's commercial paper is rated
A-1.
Bank Debt Instruments. Bank debt instruments in which the
Fund may invest consist of certificates of deposit, bankers'
acceptances and time deposits issued by national banks and state
banks, by trust companies and mutual savings banks, or by banks
or institutions the accounts of which are insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable
certificates evidencing the indebtedness of a commercial bank to
repay funds deposited with it for a definite period of time
(usually from fourteen days to one year) at a stated or variable
interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been
drawn on it by a customer, which instruments reflect the
obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. The Fund will only
invest in bankers' acceptances of banks having a short-term
rating of A-1 by Standard & Poor's Ratings Group or Prime-1 by
Moody's Investors Service, Inc. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified
period of time at a stated interest rate. The Fund will not
invest in time deposits maturing in more than seven days if, as a
result thereof, more than 15% of the value of its net assets
would be invested in such securities and other illiquid
securities.
Repurchase Agreements. Repurchase agreements are
transactions by which the Fund purchases a security and
simultaneously commits to resell that security to the seller at
an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy
or other default by the seller of a repurchase agreement, the
Fund could experience both delays in liquidating the underlying
security and losses. To minimize these possibilities, the Fund
intends to enter into repurchase agreements only with its
Custodian, with banks having assets in excess of $10 billion and
with broker-dealers who are recognized as primary dealers in U.S.
Government obligations by the Federal Reserve Bank of New York.
Collateral for repurchase agreements is held in safekeeping in
the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. The Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result
thereof, more than 15% of the value of its net assets would be
invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement
might bear maturities exceeding one year, settlement for the
repurchase would never be more than one year after the Fund's
acquisition of the securities and normally would be within a
shorter period of time. The resale price will be in excess of
the purchase price, reflecting an agreed upon market rate
effective for the period of time the Fund's money will be
invested in the securities, and will not be related to the coupon
rate of the purchased security. At the time the Fund enters into
a repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the
repurchase agreement, and, in the case of a repurchase agreement
exceeding one day, the seller will agree that the value of the
underlying security, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit
quality at least equal to the Fund's investment criteria for
portfolio securities and will be held by the Custodian or in the
Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a
repurchase agreement is deemed to be a loan from the Fund to the
seller subject to the repurchase agreement and is therefore
subject to the Fund's investment restriction applicable to loans.
It is not clear whether a court would consider the securities
purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund
to the seller. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the
securities before repurchase of the security under a repurchase
agreement, the Fund may encounter delay and incur costs before
being able to sell the security. Delays may involve loss of
interest or decline in price of the security. If a court
characterized the transaction as a loan and the Fund has not
perfected a security interest in the security, the Fund may be
required to return the security to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured
creditor, the Fund would be at the risk of losing some or all of
the principal and income involved in the transaction. As with
any unsecured debt obligation purchased for the Fund, the Adviser
seeks to minimize the risk of loss through repurchase agreements
by analyzing the creditworthiness of the obligor, in this case,
the seller. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to
repurchase the security, in which case the Fund may incur a loss
if the proceeds to the Fund of the sale of the security to a
third party are less than the repurchase price. However, if the
market value of the securities subject to the repurchase
agreement becomes less than the repurchase price (including
interest), the Fund will direct the seller of the security to
deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that the Fund will
be unsuccessful in seeking to enforce the seller's contractual
obligation to deliver additional securities.
Loans of Portfolio Securities. The Fund may make short-term
loans of its portfolio securities to banks, brokers and dealers.
Lending portfolio securities exposes the Fund to the risk that
the borrower may fail to return the loaned securities or may not
be able to provide additional collateral or that the Fund may
experience delays in recovery of the loaned securities or loss of
rights in the collateral if the borrower fails financially. To
minimize these risks, the borrower must agree to maintain
collateral marked to market daily, in the form of cash or U.S.
Government obligations, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. It is
the Fund's policy, which may not be changed without the
affirmative vote of a majority of its outstanding shares, that
such loans will not be made if as a result the aggregate of all
outstanding loans exceeds 25% of the value of the Fund's total
assets.
Under applicable regulatory requirements (which are subject
to change), the loan collateral must, on each business day, at
least equal the value of the loaned securities. To be acceptable
as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to
the Fund. The Fund receives amounts equal to the dividends or
interest on loaned securities and also receives one or more of
(a) negotiated loan fees, (b) interest on securities used as
collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be
shared with the borrower. The Fund may also pay fees to placing
brokers as well as custodian and administrative fees in
connection with loans. Fees may only be paid to a placing broker
provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services
rendered, that the Trustees separately consider the propriety of
any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated
person of the Fund or an affiliated person of the Adviser or
other affiliated person. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and permit the
Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter.
Foreign Securities. Subject to the Fund's investment
policies and quality standards, the Fund may invest in the
securities (payable in U.S. dollars) of foreign issuers. Because
the Fund may invest in foreign securities, investment in the Fund
involves risks that are different in some respects from an
investment in a fund which invests only in securities of U.S.
domestic issuers. Foreign investments may be affected favorably
or unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information
about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to
those applicable to U.S. companies. There may be less
governmental supervision of securities markets, brokers and
issuers of securities. Securities of some foreign companies are
less liquid or more volatile than securities of U.S. companies,
and foreign brokerage commissions and custodian fees are
generally higher than in the United States. Settlement practices
may include delays and may differ from those customary in United
States markets. Investments in foreign securities may also be
subject to other risks different from those affecting U.S.
investments, including local political or economic developments,
expropriation or nationalization of assets, restrictions on
foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency
blockage (which would prevent cash from being brought back to the
United States), and difficulty in enforcing legal rights outside
the United States.
Warrants and Rights. Warrants are options to purchase
equity securities at a specified price and are valid for a
specific time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer
to its shareholders. The Fund may purchase warrants and rights,
provided that the Fund does not invest more than 5% of its net
assets at the time of purchase in warrants and rights other than
those that have been acquired in units or attached to other
securities. Of such 5%, no more than 2% of the Fund's assets at
the time of purchase may be invested in warrants which are not
listed on either the New York Stock Exchange or the American
Stock Exchange.
INVESTMENT LIMITATIONS
The Fund has adopted certain fundamental investment
limitations designed to reduce the risk of an investment in the
Fund. These limitations may not be changed without the
affirmative vote of a majority of the outstanding shares of the
Fund. The Fund may not:
1. Invest in securities of any one issuer if immediately
after and as a result of such investment more than 5% of the
total assets of the Fund, at market value, would be invested in
the securities of such issuer. This restriction does not apply
to investment in securities of the United States Government, its
agencies or instrumentalities.
2. Purchase more than 10% of the outstanding voting
securities, or any class of securities, of any one issuer. This
restriction does not apply to investment in securities of the
United States Government, its agencies or instrumentalities.
3. Invest more than 25% of its total assets in the
securities of issuers in any particular industry. This
restriction does not apply to investment in securities of the
United States Government, its agencies or instrumentalities.
4. Invest for the purpose of exercising control or
management.
5. Purchase or sell commodities or real estate. However,
the Fund may invest in publicly traded securities secured by real
estate or issued by companies which invest in real estate or real
estate interests.
6. Purchase securities on margin, make short sales of
securities or maintain a short position, except that the Fund may
obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. This
restriction on short sales does not apply to short sales "against
the box" (i.e., when the Fund owns or is long on the securities
sold short).
7. Lend money, except by engaging in repurchase agreements
or by purchasing publicly distributed or privately placed debt
obligations in which the Fund may invest consistent with its
investment objective and policies. The Fund may make loans of
its portfolio securities in an aggregate amount not exceeding 25%
of its total assets, provided that such loans are collateralized
by cash or cash equivalents or U.S. Government obligations in an
amount equal to the market value of the securities loaned, marked
to market on a daily basis.
8. Borrow money, except for i) temporary bank borrowings
not in excess of 5% of the value of the Fund's total assets for
emergency or extraordinary purposes or ii) short-term credits not
in excess of 5% of the value of the Fund's total assets as may be
necessary for the clearance of securities transactions.
9. Issue senior securities as defined in the Investment
Company Act of 1940, as amended, or mortgage, pledge, hypothecate
or in any way transfer as security for indebtedness any
securities owned or held by the Fund except as may be necessary
in connection with borrowings described in (8) above, and then
not exceeding 5% of the Fund's total assets, taken at the lesser
of cost or market value.
10. Underwrite securities of other issuers except to the
extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, in selling portfolio securities.
11. Hold more than 15% of its net assets in securities
which are illiquid.
12. Invest in oil, gas or other mineral leases, or purchase
or sell real property, including real estate limited partnership
interests.
13. Invest more than 5% of its net assets in warrants and
will not invest more than 2% of its net assets in warrants which
are not listed on the New York or American Stock Exchange. This
restriction does not apply to investment in warrants acquired in
units or attached to securities.
With respect to the percentages adopted by the Fund as
maximum limitations on the Fund's investment policies and
restrictions, an excess above the fixed percentage (except for
the percentage limitations relative to the borrowing of money and
the holding of illiquid securities) will not be a violation of
the policy or restriction unless the excess results immediately
and directly from the acquisition of any security or the action
taken.
The Fund does not intend to pledge, mortgage or hypothecate
the assets of the Fund. The Fund does not intend to make short
sales of securities "against the box" as described in investment
limitation 6. The Fund does not intend to make loans of its
portfolio securities. The statements of intention in this
paragraph reflect nonfundamental policies which may be changed by
the Board of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive
officers of the Fund. Each Trustee who is an "interested person"
of the Fund, as defined by the Investment Company Act of 1940, is
indicated by an asterisk. John H. Alban, Jr. is the father of
John H. Alban, III.
NAME AGE POSITION HELD
*John H. Alban, Jr. 61 Chairman of the Board/ Trustee
*John H. Alban, III 32 President/Trustee
+William L. Hutton 55 Trustee
+William B. Snyder 64 Trustee
+James C. Tappan 60 Trustee
Robert G. Dorsey 38 Vice President
John F. Splain 39 Secretary
Mark J. Seger 34 Treasurer
* John H. Alban, Jr. and John H. Alban, III, as affiliated
persons of PRAGMA, Inc., the Fund's investment adviser, are
"interested persons" of the Fund within the meaning of Section
2(a)(19) of the Investment Company Act of 1940.
+ Member of Audit Committee
The principal occupations of the Trustees and executive
officers of the Fund during the past five years are set forth
below:
JOHN H. ALBAN, JR., 7150 Greenville Avenue, Suite 101 - LB
340, Dallas, Texas, is President of PRAGMA, Inc.
JOHN H. ALBAN, III, 7150 Greenville Avenue, Suite 101 - LB
340, Dallas, Texas, is Treasurer and Vice President of PRAGMA,
Inc.
WILLIAM L. HUTTON, 7150 Greenville Avenue, Suite 500,
Dallas, Texas, is Vice President of Texas Retina Associates (a
medical association). He is also Chief Executive Officer of
Medsynergies (a management company) and President of Quality
Vision Network.
WILLIAM B. SNYDER, 7150 Greenville Avenue, Suite 400,
Dallas, Texas, is a partner of Texas Retina Associates.
JAMES C. TAPPAN, 6952 S.E. Golfhouse Drive, Hobe Sound,
Florida, is Chairman of the Board of Milnot Company (a food
manufacturing company) and President of Tappan Capital Partners
(an equity investment partnership). He is also a director of
Columbia Mutual Life (an insurance company) and A.T. Cross (a
writing instruments company). He formerly was Chairman of the
Board of Bentley Mills (a fine carpet company).
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is
President and Treasurer of MGF Service Corp. (a registered
transfer agent) and Treasurer of Midwest Group Financial
Services, Inc. (a registered broker-dealer and investment
adviser) and Leshner Financial, Inc. (a financial services
company and parent of MGF Service Corp. and Midwest Group
Financial Services, Inc.). He is also Vice President of
Brundage, Story and Rose Investment Trust, Leeb Personal
FinanceTM Investment Trust and Markman MultiFund Trust and
Assistant Vice President of Fremont Mutual Funds, Inc., Schwartz
Investment Trust, The Tuscarora Investment Trust and Williamsburg
Investment Trust (all of which are registered investment
companies).
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio, is
Secretary and General Counsel of MGF Service Corp., Midwest Group
Financial Services, Inc. and Leshner Financial, Inc. He is also
Secretary of Midwest Trust, Midwest Group Tax Free Trust, Midwest
Strategic Trust, Brundage, Story and Rose Investment Trust, Leeb
Personal FinanceTM Investment Trust, Markman MultiFund Trust, The
Tuscarora Investment Trust and Williamsburg Investment Trust and
Assistant Secretary of Schwartz Investment Trust and Fremont
Mutual Funds, Inc. (all of which are registered investment
companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio,
is Vice President of Leshner Financial, Inc. and MGF Service
Corp. He is also Treasurer of Midwest Trust, Midwest Group Tax
Free Trust, Midwest Strategic Trust, Brundage, Story and Rose
Investment Trust, Leeb Personal FinanceTM Investment Trust,
Markman MultiFund Trust and Williamsburg Investment Trust,
Assistant Treasurer of Schwartz Investment Trust and The
Tuscarora Investment Trust and Assistant Secretary of Fremont
Mutual Funds, Inc.
The Trust will reimburse the non-interested Trustees for
travel and other expenses incurred in the performance of their
duties.
THE INVESTMENT ADVISER
PRAGMA, Inc. (the "Adviser") is the Fund's investment
manager. John H. Alban, Jr. and John H. Alban, III, as employees
of the Adviser, may directly or indirectly receive benefits from
the advisory fees paid to the Adviser. John H. Alban, Jr. is the
controlling shareholder of the Adviser by virtue of his ownership
of 81% of its outstanding shares.
Under the terms of the investment advisory agreement between
the Fund and the Adviser, the Adviser manages the Fund's
investments. The Fund pays the Adviser a fee computed and
accrued daily and paid monthly at an annual rate of 1.50% of its
average daily net assets. The rate of this fee is higher than
that paid by most mutual funds; however, unlike most mutual
funds, the advisory fee paid by the Fund includes transfer
agency, pricing, custodial, auditing and legal services, and
general administrative and other operating expenses of the Fund
except brokerage commissions, taxes, interest, fees and expenses
of non-interested Trustees and extraordinary expenses.
The Adviser pays, out of the investment advisory fees it
receives from the Fund, all the expenses of the Funds except
brokerage commissions, taxes, interest, fees and expenses of the
non-interested Trustees of the Trust and extraordinary expenses.
The Fund may have an obligation to indemnify the Fund's officers
and Trustees with respect to litigation to which the Fund may be
a party, except in instances of willful misfeasance, bad faith,
gross negligence or reckless disregard by such officers and
Trustees in the performance of their duties.
By its terms, the Fund's investment advisory agreement will
remain in force until March 15, 1998 and from year to year
thereafter, subject to annual approval by (a) the Board of
Trustees or (b) a vote of the majority of the Fund's outstanding
voting securities; provided that in either event continuance is
also approved by a majority of the Trustees who are not
interested persons of the Fund, by a vote cast in person at a
meeting called for the purpose of voting such approval. The
Fund's investment advisory agreement may be terminated at any
time, on sixty days' written notice, without the payment of any
penalty, by the Board of Trustees, by a vote of the majority of
the Fund's outstanding voting securities, or by the Adviser. The
investment advisory agreement automatically terminates in the
event of its assignment, as defined by the Investment Company Act
of 1940 and the rules thereunder.
The Adviser will reimburse the Fund to the extent that the
expenses of the Fund for any fiscal year exceed the applicable
expense limitations imposed by state securities administrators,
as such limitations may be lowered or raised from time to time.
The most restrictive limitation is presently 2.5% of the first
$30 million of average daily net assets, 2% of the next $70
million of average daily net assets and 1.5% of average daily net
assets in excess of $100 million. If any such reimbursement is
required, the payment of the advisory fee at the end of any month
will be reduced or postponed or, if necessary, a refund will be
made to the Fund at the end of such month. Certain expenses such
as brokerage commissions, if any, taxes, interest, extraordinary
items and other expenses subject to approval of state securities
administrators are excluded from such limitations. If the
expenses of the Fund approach the applicable limitation in any
state, the Fund will consider the various actions that are
available to it, including suspension of sales to residents of
that state.
The name "PRAGMA" is a property right of the Adviser and may
be used by the Adviser in other connections and for other
purposes, including in the name of other investment companies.
The Fund has agreed to discontinue any use of the name "PRAGMA"
if the Adviser ceases to be employed as the Fund's investment
manager.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Fund and the
placing of the Fund's securities transactions and negotiation of
commission rates where applicable are made by the Adviser and are
subject to review by the Board of Trustees of the Fund. In the
purchase and sale of portfolio securities, the Adviser seeks best
execution for the Fund, taking into account such factors as price
(including the applicable brokerage commission or dealer spread),
the execution capability, financial responsibility and
responsiveness of the broker or dealer and the brokerage and
research services provided by the broker or dealer. The Adviser
generally seeks favorable prices and commission rates that are
reasonable in relation to the benefits received.
Generally, the Fund attempts to deal directly with the
dealers who make a market in the securities involved unless
better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account. On
occasion, portfolio securities for the Fund may be purchased
directly from the issuer.
The Adviser is specifically authorized to select brokers who
also provide brokerage and research services to the Fund and/or
other accounts over which the Adviser exercises investment
discretion and to pay such brokers a commission in excess of the
commission another broker would charge if the Adviser determines
in good faith that the commission is reasonable in relation to
the value of the brokerage and research services provided. The
determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the
Fund and to accounts over which it exercises investment
discretion.
Research services include securities and economic analyses,
reports on issuers' financial conditions and future business
prospects, newsletters and opinions relating to interest trends,
general advice on the relative merits of possible investment
securities for the Fund and statistical services and information
with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to
the Fund and the Adviser, it is not possible to place a dollar
value on it. Research services furnished by brokers through whom
the Fund effects securities transactions may be used by the
Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Fund.
The Fund has no obligation to deal with any broker or dealer
in the execution of securities transactions. Over-the-counter
transactions will be placed either directly with principal market
makers or with broker-dealers. Although the Fund does not
anticipate any ongoing arrangements with other brokerage firms,
brokerage business may be transacted from time to time with other
firms. Neither the Adviser, nor affiliates of the Fund or the
Adviser, will receive reciprocal brokerage business as a result
of the brokerage business transacted by the Fund with other
brokers.
Code of Ethics. The Fund and the Adviser have each adopted a
Code of Ethics under Rule 17j-1 of the Investment Company Act of
1940. The code significantly restricts the personal investing
activities of all employees of the Adviser and, as described
below, imposes additional, more onerous, restrictions on
investment personnel of the Adviser. The Code requires that all
employees of the Adviser preclear any personal securities
investment (with limited exceptions, such as U.S. Government
obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition
or limitation applicable to the proposed investment. In
addition, no employee may purchase or sell any security which, at
that time, is being purchased or sold (as the case may be), or to
the knowledge of the employee is being considered for purchase or
sale, by the Fund. The substantive restrictions applicable to
investment personnel of the Adviser include a ban on acquiring
any securities in an initial public offering. Furthermore, the
Code provides for trading "blackout periods" which prohibit
trading by investment personnel of the Adviser within periods of
trading by the Fund in the same (or equivalent) security.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities for the
fiscal year by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year. High
portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne
directly by the Fund. A 100% turnover rate would occur if all of
the Fund's portfolio securities were replaced once within a one
year period.
Generally, the Fund intends to invest for long-term
purposes. However, the rate of portfolio turnover will depend
upon market and other conditions, and it will not be a limiting
factor when the Adviser believes that portfolio changes are
appropriate.
CALCULATION OF SHARE PRICE
The share price (net asset value) of the shares of the Fund
is determined as of the close of the regular session of trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern
time) on each day the Fund is open for business. The Fund is
open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas. The Fund may also be open for business on other
days in which there is sufficient trading in the Fund's portfolio
securities that its net asset value might be materially affected.
For a description of the methods used to determine the share
price, see "Calculation of Share Price" in the Prospectus.
TAXES
The Prospectus describes generally the tax treatment of
distributions by the Fund. This section of the Statement of
Additional Information includes additional information concerning
federal taxes.
The Fund intends to qualify annually for the special tax
treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay
federal taxes on income and capital gains distributed to
shareholders. To so qualify the Fund must, among other things,
(i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock,
securities or foreign currency, or certain other income
(including but not limited to gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currencies; (ii) derive less
than 30% of its gross income in each taxable year from the sale
or other disposition of the following assets held for less than
three months: (a) stock or securities, (b) options, futures or
forward contracts not directly related to its principal business
of investing in stock or securities; and (iii) diversify its
holdings so that at the end of each quarter of its taxable year
the following two conditions are met: (a) at least 50% of the
value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment
companies and other securities (for this purpose such other
securities will qualify only if the Fund's investment is limited
in respect to any issuer to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government securities or securities of other regulated
investment companies).
The Fund's net realized capital gains from securities
transactions will be distributed only after reducing such gains
by the amount of any available capital loss carryforwards.
Capital losses may be carried forward to offset any capital gains
for eight years, after which any undeducted capital loss
remaining is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on
the excess, if any, of the Fund's "required distribution" over
actual distributions in any calendar year. Generally, the
"required distribution" is 98% of the Fund's ordinary income for
the calendar year plus 98% of its net capital gains recognized
during the one year period ending on October 31 of the calendar
year plus undistributed amounts from prior years. The Fund
intends to make distributions sufficient to avoid imposition of
the excise tax.
The Fund is required to withhold and remit to the U.S.
Treasury a portion (31%) of dividend income on any account unless
the shareholder provides a taxpayer identification number and
certifies that such number is correct and that the shareholder is
not subject to backup withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees
deems it in the best interests of the Fund's shareholders, the
Fund may make payment for shares repurchased or redeemed in whole
or in part in securities of the Fund taken at current value. If
any such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the Investment
Company Act of 1940. This election will require the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1%
of the net asset value of the Fund during any 90 day period for
any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in
converting such securities to cash. Portfolio securities which
are issued in an in-kind redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
From time to time, the Fund may advertise average annual
total return. Average annual total return quotations will be
computed by finding the average annual compounded rates of return
over 1, 5 and 10 year periods that would equate the initial
amount invested to the ending redeemable value, according to the
following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year
periods at the end of the 1, 5 or 10 year periods (or
fractional portion thereof)
The calculation of average annual total return assumes the
reinvestment of all dividends and distributions. If the Fund has
been in existence less than one, five or ten years, the time
period since the date of the initial public offering of shares
will be substituted for the periods stated.
The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from average annual
total return. A nonstandardized quotation of total return may be
a cumulative return which measures the percentage change in the
value of an account between the beginning and end of a period,
assuming no activity in the account other than reinvestment of
dividends and capital gains distributions. A nonstandardized
quotation may also indicate average annual compounded rates of
return over periods other than those specified for average annual
total return. A nonstandardized quotation of total return will
always be accompanied by the Fund's average annual total return
as described above.
The performance quotations described above are based on
historical earnings and are not intended to indicate future
performance.
To help investors better evaluate how an investment in the
Fund might satisfy their investment objective, advertisements
regarding the Fund may discuss various measures of Fund
performance, including current performance ratings and/or
rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements
may also compare performance (using the calculation methods set
forth in the Prospectus) to performance as reported by other
investments, indices and averages. When advertising current
ratings or rankings, the Fund may use the following publications
or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis measures total
return and average current yield for the mutual fund industry and
ranks individual mutual fund performance over specified time
periods assuming reinvestment of all distributions, exclusive of
sales loads. The Fund may provide comparative performance
information appearing in the Growth Funds category. In addition,
the Fund may use comparative performance information of relevant
indices, including the S&P 500 Index, the Dow Jones Industrial
Average, the Russell 2000 Index, the NASDAQ Composite Index and
the Value Line Composite Index. The S&P 500 Index is an
unmanaged index of 500 stocks, the purpose of which is to portray
the pattern of common stock price movement. The Dow Jones
Industrial Average is a measurement of general market price
movement for 30 widely held stocks listed on the New York Stock
Exchange. The Russell 2000 Index, representing approximately 11%
of the U.S. equity market, is an unmanaged index comprised of the
2,000 smallest U.S. domiciled publicly-traded common stocks in
the Russell 3000 Index (an unmanaged index of the 3,000 largest
U.S. domiciled publicly-traded common stocks by market
capitalization representing approximately 98% of the U.S.
publicly-traded equity market). The NASDAQ Composite Index is an
unmanaged index which averages the trading prices of more than
3,000 domestic over-the-counter companies. The Value Line
Composite Index is an unmanaged index comprised of approximately
1,700 stocks, the purpose of which is to portray the pattern of
common stock price movement.
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's
portfolio, that the averages are generally unmanaged and that the
items included in the calculations of such averages may not be
identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the
Fund will continue this performance as compared to such other
averages.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, has
been retained to act as Custodian for the Fund's investments.
Star Bank, N.A. acts as the Fund's depository, safekeeps its
portfolio securities, collects all income and other payments with
respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
AUDITORS
The firm of Arthur Andersen LLP has been selected as
independent auditors for the Fund for the fiscal year ending
March 31, 1997. Arthur Andersen LLP, 425 Walnut Street,
Cincinnati, Ohio, performs an annual audit of the Fund's
financial statements and advises the Fund as to certain
accounting matters.
MGF SERVICE CORP.
The Fund's transfer agent, MGF Service Corp. ("MGF"),
maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend
and distribution disbursing agent and performs other shareholder
service functions. MGF receives for its services as transfer
agent a fee payable monthly at an annual rate of $17 per account,
provided, however, that the minimum fee is $1,000 per month.
This fee is paid by the Adviser out of the investment advisory
fee paid to the Adviser by the Fund. In addition, the Adviser
reimburses MGF for its out-of-pocket expenses, including but not
limited to, postage, envelopes, checks, drafts, forms, reports,
record storage and communication lines.
MGF also provides accounting and pricing services to the
Fund. For calculating daily net asset value per share and
maintaining such books and records as are necessary to enable MGF
to perform its duties, MGF receives from the Adviser (not the
Fund) $2,000 per month when the Fund's average daily net assets
are less than $50 million, $2,500 per month when the Fund's
average daily net assets are between $50 million and $100
million, $3,000 per month when such assets are between $100
million and $200 million and $4,000 per month when the Fund's
average daily net assets are $200 million or more.
In addition, MGF is retained to provide administrative
services to the Fund. In this capacity, MGF supplies non-
investment related statistical and research data, internal
regulatory compliance services and executive and administrative
services. MGF supervises the preparation of tax returns, reports
to shareholders of the Fund, reports to and filings with the
Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees.
For the performance of these administrative services, the Adviser
(not the Fund) pays MGF a fee at the annual rate of .15% of the
average value of its daily net assets up to $25,000,000, .125% of
such assets from $25,000,000 to $50,000,000 and .10% of such
assets in excess of $50,000,000; provided, however, that the
minimum fee is $1,000 per month.
STATEMENT OF ASSETS AND LIABILITIES
The Fund's Statement of Assets and Liabilities as of
February 20, 1996 is attached to this Statement of Additional
Information.
<PAGE>
THE PRAGMA PROVIDENCE FUND
OF
PRAGMA INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
AS OF
FEBRUARY 20, 1996
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Trustees and Shareholder of
Pragma Providence Fund:
We have audited the accompanying statement of assets and
liabilities of the Pragma Providence Fund as of February 20,
1996. This financial statement is the responsibility of the
Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the statement of assets and liabilities is free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the statement of assets and liabilities. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statement of assets and liabilities
referred to above presents fairly, in all material respects,
the financial position of the Pragma Providence Fund as of
February 20, 1996 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
February 20, 1996
<PAGE>
THE PRAGMA PROVIDENCE FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 20, 1996
ASSETS:
Cash $500,000
Organization costs (Note 2) 35,000
Total assets 535,000
LIABILITIES:
Accrued expenses (Note 2) 35,000
Total liabilities 35,000
Net assets for shares of
beneficial interest outstanding $500,000
Shares outstanding 50,000
Net asset value, offering price
and redemption price per share $ 10.00
The accompanying notes are an integral
part of this statement.
THE PRAGMA PROVIDENCE FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 20, 1996
(1) PRAGMA Investment Trust (the Trust) is a diversified open-end
investment company established as an Ohio business trust
under a Declaration of Trust dated January 4, 1996. The
Trust has established one fund series to date, The PRAGMA
Providence Fund (the Fund). The Trust has had no
operations except for the initial issuance of shares. On
February 13, 1996, 50,000 shares of the Fund were issued
for cash at $10.00 per share.
(2) Expenses incurred in connection with the organization of the
Fund and the initial offering of shares are estimated to
be $35,000, which includes $30,000 paid to MGF Service
Corp., the Fund's administrator. These expenses have
been paid by PRAGMA, Inc. (the Adviser). Upon
commencement of the public offering of shares of the
Fund, the Fund will reimburse the Adviser for such
expenses, with that amount being capitalized and
amortized on a straight-line basis over five years. As
of February 20, 1996, all outstanding shares of the Fund
were held by an affiliate of the Adviser, who purchased
these original shares in order to provide the Trust with
its required capital. If any of these original shares
are redeemed by their holder prior to the end of the
amortization period, the redemption proceeds should be
reduced by the pro rata share of the unamortized expenses
as of the date of redemption. The pro rata share by
which the proceeds are reduced is derived by dividing the
number of original shares redeemed by the total number of
original shares outstanding at the time of redemption.
(3) Reference is made to the Prospectus and this Statement of
Additional Information for a description of the
Management Agreement, the Administration Agreement, tax
aspects of the Fund and the calculation of the net asset
value of shares of the Fund.
