U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 1
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
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Amendment No. 2
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(Check appropriate box or boxes)
PRAGMA INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
7150 Greenville Avenue, Suite 101 - Lock Box 340
Dallas, Texas 75231
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (214) 373-3585
John H. Alban, III
PRAGMA, Inc.
7150 Greenville Avenue, Suite 101 - Lock Box 340
Dallas, Texas 75231
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate
box)
/X/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on (date) pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
The Registrant has registered an indefinite number of shares of
beneficial interest under the Securities Act of 1933, as amended, pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended.
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PRAGMA INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
PART A
Item No. Registration Statement Caption Caption In Prospectus
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Financial Highlights;
Performance Information
4. General Description of Registrant Operation of the Fund;
Investment Objective,
Investment Policies and
Risk Considerations
5. Management of the Fund Operation of the Fund
6. Capital Stock and Other Securities Cover Page; Operation of
the Fund; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Calculation of Share
Price; Application
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Inapplicable
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PART B
Caption in Statement
of Additional
Item No. Registration Statement Caption Information
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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12. General Information and History Inapplicable
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Principal Holders of
of Securities of Securities
16. Investment Advisory and Other Services The Investment Adviser;
Custodian; Auditors; MGF
Service Corp.; Securities
Transactions
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Fund
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price; Redemption in Kind
20. Tax Status Taxes
21. Underwriters Inapplicable
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Statement of Assets and
Liabilities, February 20,
1996; Financial
Statements, July 31, 1996
PART C
The information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C to this Registration
Statement.
(ii)
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<PAGE>
The PRAGMA
Providence Fund
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A SEPARATE SERIES OF
PRAGMA INVESTMENT TRUST
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Prospectus
September 16, 1996
PROSPECTUS
September 16, 1996
PRAGMA INVESTMENT TRUST
7150 Greenville Avenue
Suite 101 - Lock Box 340
Dallas, Texas 75231
Tel. (214) 373-3585 - Fax (214) 987-1728
http://www.pragmafunds.com
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==============================================================================
The PRAGMA PROVIDENCE FUND (the "Fund"), a separate series of PRAGMA
Investment Trust, is an aggressive growth 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-Lock Box 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 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 September 16, 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.
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FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free)............................................800-738-2065
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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.
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<PAGE>
EXPENSE INFORMATION
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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
$10. See "How to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees.............................................. 1.50% **
12b-1 Fees................................................... None
Other Expenses............................................... None
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Total Fund Operating Expenses................................ 1.50%
=========
** The Adviser undertakes that the expenses of the Fund will not, in any
event, exceed 1.50% of the Fund's average net assets. The Adviser has
agreed to reduce its management fee in an amount equal to the fees and
expenses of the non-interested Trustees. 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.
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FINANCIAL HIGHLIGHTS
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The following information, which is unaudited, is an integral part of the
Fund's financial statements and should be read in conjunction with the
financial statements. The financial statements as of July 31, 1996 appear in
the Statement of Additional Information of the Fund, which can be obtained at
no charge by calling MGF Service Corp. (Nationwide call toll-free
800-738-2065) or by writing to the Fund at the address on the front of this
Prospectus.
FOR THE PERIOD ENDED JULY 31, 1996(A) (UNAUDITED)
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Net asset value at beginning of period .................................. $ 10.00
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Income from investment operations:
Net investment loss................................................... ( 0.01)
Net realized and unrealized losses on investments..................... ( 0.89)
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Total from investment operations......................................... ( 0.90)
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Less distributions:
Distributions from net investment income ............................. 0.00
Distributions from net realized gains................................. 0.00
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Total distributions...................................................... 0.00
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Net asset value at end of period ........................................ $ 9.10
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Total return (unannualized).............................................. ( 9.00 )%
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Net assets at end of period (000's) ..................................... $ 3,711
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Ratio of expenses to average net assets.................................. 1.50%(B)
Ratio of net investment loss to average net assets....................... (.46)%(B)
Portfolio turnover rate (unannualized)................................... 55%
Average commission rate per share........................................ $ 0.0623
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<FN>
(A)Represents the period from the initial public offering of shares (April 1,
1996) through July 31, 1996.
(B)Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
=============================================================================
The investment objective of the Fund is 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. In
order to provide flexibility, 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 at least one of the
following criteria:
1. companies, regardless of market capitalization, with innovative
or appealing science, technology, products, systems or services;
2. companies whose products or services have the potential for
significant growth; and
3. "special situations" that may cause a company 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.
<PAGE>
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.
<PAGE>
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 100%, 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.
<PAGE>
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 (for example, telephone redemptions) 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 the Fund
reserves the right to charge shareholders for this service upon thirty days'
prior notice to shareholders.
<PAGE>
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 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-Lock
Box 340, Dallas, Texas 75231. Such additional investments will be confirmed at
the net asset value next determined on the business day that MGF Service Corp.
receives the order from the Fund. 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. 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
below. Payment is normally 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.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent by
mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call MGF Service
Corp. (Nationwide call toll-free 800-738-2065; in Cincinnati call 629-2070).
The redemption proceeds will normally be sent by mail or by wire within three
business days after receipt of your telephone instructions. Individual
Retirement Accounts are not redeemable by telephone.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to MGF Service Corp.
with your signature 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) or by completing a supplemental telephone redemption
authorization form. Contact MGF Service Corp. to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
Neither the Fund, MGF Service Corp., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expenses in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss.
The Fund or MGF Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Fund and/or MGF
Service Corp. do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to MGF Service Corp. 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 of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are normally mailed within three business days following receipt of
instructions in proper form.
THROUGH BROKER-DEALERS. You may also redeem shares by placing a wire
redemption request 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 promptly transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption
by wire, you will be charged a $10 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.
<PAGE>
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.
<PAGE>
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.
The Fund retains PRAGMA, Inc. (the "Adviser"), 7150 Greenville Avenue, Suite
101-Lock Box 340, Dallas, Texas, to manage the Fund's investments. The
Adviser, organized in 1981, has been managing stock and bond portfolios for
customers for 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 September 1, 1996's $15 million, most of which was managed in the
stock and bond markets.
Mr. Alban, Jr. and his wife, Joyce T. Alban, are the largest shareholders
of the Fund. In fact, they may be deemed to control the Fund by virtue of the
fact that they collectively own more than 25% of the Fund's shares as of the
date of this Prospectus.
The Fund pays the Adviser a fee at the annual rate of 1.50% of the average
value of its daily net assets. 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 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.
<PAGE>
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.
<PAGE>
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-Lock Box 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-Lock Box 340
Dallas, Texas 75231
Tel. 214-373-3585
Fax 214-987-1728
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............................ 2
Financial Highlights........................... 3
Investment Objective, Investment Policies and
Risk Considerations............................ 4
How to Purchase Shares......................... 6
How to Redeem Shares........................... 7
Dividends and Distributions.................... 8
Taxes.......................................... 9
Operation of the Fund.......................... 9
Calculation of Share Price..................... 10
Performance Information........................ 11
<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
September 16, 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 September 16, 1996. A copy of the Fund's Prospectus can be
obtained by writing the Fund at 7150 Greenville Avenue, Suite 101-Lock Box
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 - Lock Box 340
Dallas, Texas 75231
TABLE OF CONTENTS
PAGE
THE FUND................................................................ 3
DEFINITIONS, POLICIES AND RISK CONSIDERATION............................ 3
INVESTMENT LIMITATIONS.................................................. 8
TRUSTEES AND OFFICERS................................................... 9
THE INVESTMENT ADVISER.................................................. 11
SECURITIES TRANSACTIONS................................................. 12
PORTFOLIO TURNOVER...................................................... 14
CALCULATION OF SHARE PRICE.............................................. 14
TAXES................................................................... 15
REDEMPTION IN KIND...................................................... 16
HISTORICAL PERFORMANCE INFORMATION...................................... 16
PRINCIPAL SECURITY HOLDERS.............................................. 18
CUSTODIAN............................................................... 18
AUDITORS................................................................ 18
MGF SERVICE CORP........................................................ 18
STATEMENT OF ASSETS AND LIABILITIES, FEBRUARY 20, 1996.................. 20
UNAUDITED FINANCIAL STATEMENTS, JULY 31, 1996........................... 24
- 6 -
<PAGE>
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.
- 7 -
<PAGE>
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.
- 8 -
<PAGE>
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
- 9 -
<PAGE>
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
- 10 -
<PAGE>
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.
- 11 -
<PAGE>
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.
- 12 -
<PAGE>
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
- 13 -
<PAGE>
indicated by an asterisk. John H. Alban, Jr. is the father of John
H. Alban, III.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
*John H. Alban, Jr. 61 Chairman of the Board/Trustee
*John H. Alban, III 33 President/Trustee
+William L. Hutton 55 Trustee
+William B. Snyder 64 Trustee
+James C. Tappan 61 Trustee
Robert G. Dorsey 39 Vice President
John F. Splain 40 Secretary
Mark J. Seger 34 Treasurer
<FN>
* 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
</FN>
</TABLE>
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 - Lock Box 340,
Dallas, Texas, is President of PRAGMA, Inc.
JOHN H. ALBAN, III, 7150 Greenville Avenue, Suite 101 - Lock Box
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,
- 14 -
<PAGE>
Leeb Personal Finance(TM)Investment Trust, Markman MultiFund Trust and
Maplewood Investment Trust and Assistant Vice President of Schwartz Investment
Trust, The Tuscarora Investment Trust, Williamsburg Investment Trust and
Fremont Mutual Funds, Inc., (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 Finance(TM)Investment Trust, Markman MultiFund
Trust, The Tuscarora Investment Trust, Williamsburg Investment Trust and
Maplewood 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 Finance(TM)
Investment Trust, Markman MultiFund Trust, Williamsburg Investment Trust and
Maplewood 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. 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 Fund except brokerage commissions, taxes,
interest, fees and expenses of the non-
- 15 -
<PAGE>
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
- 16 -
<PAGE>
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.
- 17 -
<PAGE>
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.
- 18 -
<PAGE>
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.
- 19 -
<PAGE>
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 or demonstrates an
exemption from 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
- 21 -
<PAGE>
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
- 22 -
<PAGE>
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.
PRINCIPAL SECURITY HOLDERS
As of August 26, 1996, John H. Alban, Jr. and Joyce T. Alban, 4224
Belclaire Avenue, Dallas, Texas 75205, owned of record 24.5% of the
outstanding shares of the Fund; Snyder Investments Ltd., William B. Snyder
General Partner, #5 Carmarthen Court, Dallas, Texas 75225, owned of record
9.7% of the outstanding shares of the Fund; Southwest Securities Inc. Profit
Sharing Plan for the benefit of William Felder, 1201 Elm Street, Suite 3500,
Dallas, Texas 75270, owned of record 6.9% of the outstanding shares of the
Fund; Texas Retina Associates Profit Sharing Trust, 7150 Greenville Avenue,
Suite 400, Dallas, Texas 75231, owned of record 7.6% of the outstanding shares
of the Fund; and Joyce T. Alban, 4224 Belclaire Avenue, Dallas, Texas 75225,
owned of record 6.1% of the outstanding shares of the Fund.
As of August 26, 1996, the Trustees and officers of the Fund as a group
owned of record or benefically 52.3% of the outstanding shares of the Fund.
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-
- 23 -
<PAGE>
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.
- 24 -
<PAGE>
THE PRAGMA PROVIDENCE FUND
OF
PRAGMA INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
AS OF
FEBRUARY 20, 1996
TOGETHER WITH
AUDITORS' REPORT
- 25 -
<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
- 26 -
<PAGE>
THE PRAGMA PROVIDENCE FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 20, 1996
<TABLE>
<CAPTION>
<S> <C>
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
========
</TABLE>
The accompanying notes are an integral part of this statement.
- 27 -
<PAGE>
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.
- 28 -
<PAGE>
PRAGMA INVESTMENT TRUST
PRAGMA PROVIDENCE FUND
FINANCIAL STATEMENTS FOR THE PERIOD FROM
INCEPTION
THROUGH JULY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRAGMA Providence Fund
Statement of Assets and Liabilities
July 31, 1996 (Unaudited)
<S> <C>
ASSETS
Investments in securities:
At acquisition cost $ 3,916,657
========================
At value (Note 1) $ 3,602,644
Investment in repurchase agreements 144,000
Cash 374
Dividends receivable 183
------------------------
TOTAL ASSETS 3,747,201
------------------------
LIABILITIES
Payable for securities purchased 32,187
Payable to affiliates (Note 3) 4,415
------------------------
TOTAL LIABILITIES 36,602
------------------------
NET ASSETS $ 3,710,599
========================
Net assets consist of:
Capital shares $ 4,112,669
Accumulated net realized losses from security transactions (84,264)
Accumulated net investment loss (3,793)
Net unrealized depreciation on investments (314,013)
------------------------
Net assets $ 3,710,599
========================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 4) 407,948
========================
Net asset value, redemption price and offering
price per share (Note 1) $ 9.10
========================
See accompanying notes to financial statements.
- 29 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRAGMA Providence Fund
Statement of Operations
For the Period Ended July 31, 1996 * (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest income $ 7,302
Dividend income 1,062
-----------
TOTAL INVESTMENT INCOME 8,364
-----------
EXPENSES
Investment advisory fees 12,157
-----------
NET INVESTMENT LOSS (3,793)
-----------
REALIZED AND UNREALIZED LOSSES
ON INVESTMENTS
Net realized losses from security transactions (84,264)
Net change in unrealized appreciation/depreciation on investments (314,013)
-----------
NET REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS (398,277)
-----------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (402,070)
===========
<FN>
*Represents the period from the initial public offering of shares
(April 1, 1996) through July 31, 1996.
</FN>
</TABLE>
See accompanying notes to financial statements.
- 30 -
<PAGE>
<TABLE>
<CAPTION>
PRAGMA Providence Fund
Statement of Changes in Net Assets
For the Period Ended July 31, 1996 * (Unaudited)
<S> <C>
FROM OPERATIONS:
Net investment loss $ (3,793)
Net realized losses from security transactions (84,264)
Net change in unrealized appreciation/
depreciation on investments (314,013)
--------------
Net decrease in net assets from operations (402,070)
--------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income -----
Distributions from net realized gains -----
--------------
Decrease in net assets from distributions to shareholders -----
--------------
FROM CAPITAL SHARE TRANSACTIONS (A):
Proceeds from shares sold 3,612,669
Net asset value of shares issued in
reinvestment of distributions to shareholders -----
Payments for shares redeemed -----
--------------
Net increase in net assets from capital share transactions 3,612,669
--------------
TOTAL INCREASE IN NET ASSETS 3,210,599
NET ASSETS:
Beginning of period 500,000
--------------
End of period $ 3,710,599
==============
(A) CAPITAL SHARE ACTIVITY:
Shares sold 357,948
Shares issued in reinvestment of distributions to shareholders 0
Shares redeemed 0
--------------
Net increase in shares outstanding 357,948
Shares outstanding, beginning of period 50,000
--------------
Shares outstanding, end of period 407,948
==============
<FN>
*Represents the period from the initial public offering of shares
(April 1, 1996) through July 31, 1996.
</FN>
</TABLE>
See accompanying notes to financial statements.
- 31 -
<PAGE>
<TABLE>
<CAPTION>
PRAGMA Providence Fund
Financial Highlights
For the Period Ended July 31, 1996 (A) (Unaudited)
<S> <C>
Net asset value at beginning of period $ 10.00
-----------------------
Income from investment operations:
Net investment loss (0.01)
Net realized and unrealized losses on investments (0.89)
-----------------------
Total from investment operations (0.90)
-----------------------
Less distributions:
Dividends from net investment income 0.00
Distributions from net realized gains 0.00
-----------------------
Total distributions 0.00
-----------------------
Net asset value at end of period $ 9.10
=======================
Total return (unannualized) (9.00)%
=======================
Net assets at end of period (000's) $ 3,711
=======================
Ratio of expenses to average net assets 1.50%(B)
Ratio of net investment loss to average net (.46)%(B)
Portfolio turnover rate (unannualized) 55%
Average commission rate per share $ 0.0623
-----------------------
<FN>
(A)Represents the period from the initial public offering of shares
(April 1, 1996) through July 31, 1996.
(B)Annualized.
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRAGMA Providence Fund
Portfolio of Investments
July 31, 1996 (Unaudited)
Market
INVESTMENTS IN COMMON STOCK-97.1% Shares Value
<S> <C> <C>
MEDICAL SCIENCE-35.0%
Agouron Pharmaceuticals, Inc.* 800 $ 24,800
Allergan, Inc. 2,000 81,500
Amgen, Inc.* 1,100 60,088
Ballard Medical Products 2,700 48,600
Biogen, Inc.* 1,100 67,237
Biomatrix, Inc.* 1,700 21,888
Boston Scientific Corp.* 1,700 81,175
Chiron Corp.* 800 70,400
Corvas International, Inc.* 4,000 15,000
CytoTherapeutics, Inc.* 2,000 16,000
Dentsply International, Inc. 1,800 74,700
Elan Corp. plc-ADR* 1,000 58,750
Escalon Medical Corp.* 15,000 20,625
Genome Therapeutics Corp.* 2,000 13,500
Genzyme Corp.-General Division* 2,800 69,650
Gilead Sciences, Inc.* 1,400 26,600
Guidant Corp. 1,000 50,750
IDEC Pharmaceuticals Corp.* 1,200 18,600
IDEXX Laboratories, Inc.* 1,200 46,500
Inhale Therapeutic Systems* 1,200 18,900
Invacare Corp.* 1,400 41,650
Isis Pharmaceuticals, Inc.* 2,200 31,900
Meridian Diagnostics, Inc. 2,000 25,750
Nellcor Puritan Bennett, Inc.* 1,600 37,800
NeoPath, Inc.* 2,200 52,800
NeXstar Pharmaceuticals, Inc.* 1,300 22,425
Pharmacia & Upjohn, Inc. 1,000 41,250
Regeneron Pharmaceuticals, Inc.* 2,200 34,650
Somatogen, Inc.* 1,200 14,400
Spectranetics Corp.* 8,000 35,000
Techne Corp.* 1,900 53,200
Vical, Inc.* 1,500 20,812
---------------
$ 1,296,900
---------------
TECHNOLOGY-35.6%
Andrew Corp.* 1,100 44,962
A.S.V., Inc.* 2,000 31,500
Broderbund Software, Inc.* 1,100 36,162
C-Cube Microsystems, Inc.* 900 22,388
Chart Industries, Inc. 2,600 35,425
Cisco Systems, Inc.* 700 36,225
Compaq Computer Corp.* 900 49,275
Geoworks* 1,100 22,550
Glenayre Technologies, Inc.* 900 33,188
General Motors Corp.-Class H 900 51,300
Informix Corp.* 1,400 30,537
Intel Corp. 1,000 75,125
Iomega Corp. 1,600 26,600
Ionics, Inc.* 1,600 66,800
Linear Technology Corp. 900 28,350
Lucent Technologies, Inc. 1,300 48,263
Microsoft Corp.* 600 70,725
Molten Metal Technology, Inc.* 1,200 33,900
MRV Communications, Inc.* 800 29,300
Netscape Communications Corp.* 800 31,600
Oracle Corp.* 1,300 50,862
PairGain Technologies, Inc* 400 22,200
QUALCOMM, Inc.* 1,200 52,050
Silicon Storage Technology, Inc.* 2,500 18,750
Sun Microsystems, Inc.* 1,000 54,625
Tellabs, Inc.* 1,300 77,675
Texas Instruments, Inc. 1,100 47,575
Thermo Electron Corp.* 1,200 44,850
Uniphase Corp.* 600 15,600
U.S. Filter Corp.* 2,550 55,144
U.S. Robotics Corp.* 800 43,000
Voice Control Systems, Inc.* 1,600 13,000
Zoltek Companies, Inc.* 900 21,375
-----------------
$ 1,320,881
-----------------
SYSTEMS AND/OR SERVICES-26.5%
ADAC Laboratories 1,000 $ 19,375
American HomePatient, Inc.* 2,200 53,350
American Management Systems Inc. 2,700 60,075
ClinTrials Research, Inc.* 1,100 41,250
Computer Learning Centers Inc.* 600 14,850
Cryolife, Inc.* 2,600 34,125
Curative Health Services, Inc.* 1,600 29,200
Fair Isaac & Co., Inc. 1,300 51,512
HEALTHSOUTH Corp.* 1,300 39,488
Health Management Systems, Inc.* 2,400 72,600
Housecall Medical Resources Inc.* 2,000 31,000
Lincare Holdings, Inc.* 1,400 54,600
National Data Corp. 2,000 79,500
Newpark Resources, Inc.* 1,000 32,875
Norrell Corp. 1,600 44,400
OccuSystems, Inc.* 1,200 34,200
Oceaneering International, Inc.* 3,400 54,400
Omnicare, Inc. 3,200 74,800
Physician Reliance Network, Inc.* 2,000 27,000
Shared Medical Systems Corp. 600 33,000
Star Multi Care Services, Inc.* 4,600 32,200
Technology Solutions Co.* 1,650 37,125
Vitalink Pharmacy Services, Inc.* 1,500 33,938
--------------
$ 984,863
--------------
TOTAL COMMON STOCK $ 3,602,644
--------------
(Cost $3,916,657)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Face Market
Amount Value
<S> <C> <C>
REPURCHASE AGREEMENTS(1)-3.9%
Star Bank, N.A., 5.125%,
dated 7/31/96, due 8/1/96,
repurchase proceeds $144,021 $ 144,000 $ 144,000
--------------- ----------
TOTAL REPURCHASE AGREEMENTS $ 144,000 $ 144,000
--------------- ----------
TOTAL INVESTMENTS AND REPURCHASE
AGREEMENTS AT VALUE-101.0% $ 3,746,644
OTHER ASSETS AND LIABILITIES, NET-(1.0)% (36,045)
-----------
NET ASSETS-100.0% $ 3,710,599
============
<FN>
* Non-income producing securities.
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
</FN>
</TABLE>
See accompanying notes to financial statements.
- 32 -
<PAGE>
PRAGMA PROVIDENCE FUND
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The PRAGMA Providence Fund (the Fund) is a diversified series of PRAGMA
Investment Trust (the Trust), which is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management investment
company. The Trust was organized as an Ohio business trust on January 10,
1996. The Fund was capitalized on February 13, 1996, when the Fund's
investment adviser, PRAGMA, Inc. (the Adviser), purchased the initial shares
of the Fund at $10.00 per share. The public offering of shares of the Fund
commenced on April 1, 1996. The Fund had no operations prior to the public
offering of shares except for the initial issuance of shares to the Adviser.
The Fund's investment objective 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 following is a summary of the Fund's significant accounting policies:
Organization Costs -- Subsequent to February 20, 1996, the Fund was informed
by the Adviser that the Adviser would absorb the organization costs for which
the Fund had previously recorded an estimated accrual of $35,000. Accordingly,
in the period ended July 31, 1996, such organization costs and estimated
accrual were eliminated.
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time). Securities which are traded
over-the-counter are valued based on the last sales price, if available,
otherwise, at the last quoted bid price. Securities traded on a national stock
exchange are valued based on upon the closing price on the principal exchange
where the security is traded.
Repurchase agreements -- Repurchase agreements, which are collateralized by
U.S. Government obligations, are valued at cost, which, together with accrued
interest, approximates market. At the time the Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying securities,
including accrued interest, will at all times be equal to or exceed the face
amount of the repurchase agreement.
Share valuation -- The net asset value per share of the Fund is calculated
daily by dividing the total value of the Fund's assets, less liabilities, by
the number of shares outstanding, rounded to the nearest cent. The offering
and redemption price per share of the Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Distributions to shareholders arising from
net investment income and net realized capital gains, if any, are distributed
at least once each year. Income distributions and capital gain distributions
are
- 33 -
<PAGE>
PRAGMA PROVIDENCE FUND
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 (Unaudited)
determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the
Fund so qualifies and distributes at least 90% of its taxable net income, the
Fund (but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years
As of July 31, 1996, net unrealized depreciation of securities was $314,013
for federal income tax purposes, of which $103,372 related to appreciated
securities and $417,385 related to depreciated securities. The aggregate cost
of investments at July 31, 1996 was $3,916,657 for federal income tax
purposes.
2. INVESTMENT TRANSACTIONS
During the period ended July 31, 1996, purchases and proceeds from sales of
portfolio securities, other than short-term investments, amounted to
$5,140,262 and $1,139,341, respectively.
3. TRANSACTIONS WITH AFFILIATES
The Chairman of the Board of the Trust is also the President of the Adviser.
Certain other trustees and officers of the Trust are also officers of the
Adviser or of MGF Service Corp. (MGF), the administrative services agent,
shareholder servicing and transfer agent, and accounting services agent for
the Trust.
- 34 -
<PAGE>
PRAGMA PROVIDENCE FUND
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 (Unaudited)
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Investment Management Agreement. The Fund pays the Adviser an investment
management fee, computed and accrued daily and paid monthly, at an annual rate
of 1.50% of average daily net assets of the Fund. The Adviser pays all
operating expenses of the Fund except brokerage commissions, taxes, interest,
fees and expenses of independent Trustees and any extraordinary expenses.
In addition, the Adviser is contractually obligated to reduce its investment
management fee in an amount equal to the fees and expenses of the Trust's
independent Trustees.
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
Under the terms of the Administration, Accounting, and Transfer Agency
Agreement between the Trust, the Adviser and MGF, MGF supplies non-investment
related statistical and research data, internal regulatory compliance services
and executive and administrative services for the Fund. MGF supervises the
preparation of tax returns for the Fund, 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. In
addition, 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 also calculates
the daily net asset value per share and maintains the financial books and
records of the Fund. For the performance of these services, the Adviser, out
of its investment management fee, pays MGF a monthly base fee, an asset based
fee, and a fee based on the number of shareholder accounts. In addition, the
Adviser reimburses MGF for its out-of-pocket expenses including, but not
limited to, postage, supplies and the costs of pricing the Fund's portfolio
securities.
- 35 -
<PAGE>
PRAGMA INVESTMENT TRUST
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Financial Statements included in Part A:
None
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, February 20,
1996, Notes to Financial Statements and Report of
Independent Accountants
Statement of Assets and Liabilities, July 31, 1996
(Unaudited)
Statement of Operations for the Period Ended
July 31, 1996 (Unaudited)
Statement of Changes in Net Assets for the Period
Ended July 31, 1996 (Unaudited)
Financial Highlights for the Period Ended July 31,
1996 (Unaudited)
Notes to Financial Statements, July 31, 1996
(Unaudited)
Portfolio of Investments, July 31, 1996 (Unaudited)
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Agreement with PRAGMA, Inc.
(6) Inapplicable
(7) Inapplicable
(8) Custody Agreement with Star Bank, N.A.
(9) (i) Administrative Services Agreement with MGF
Service Corp.
(ii) Accounting Services Agreement with MGF Service Corp.
- 36 -
<PAGE>
(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with MGF
Service Corp.
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Public Accountants
(12) Inapplicable
(13) Agreement Relating to Initial Capital
(14) Inapplicable
(15) Inapplicable
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
- --------------------------------------
* Incorporated by reference to the Trust's registration statement
on Form N-1A.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
After commencement of the public offering of the
Registrant's shares, the Registrant expects that no
person will be directly or indirectly controlled by or
under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of August 30, 1996, there are 53 holders of the
shares of beneficial interest of the Registrant.
ITEM 27. INDEMNIFICATION
Article VI of the Registrant's Agreement and
Declaration of Trust provides for indemnification of
officers and Trustees as follows:
"SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS,
ETC. Subject to and except as otherwise provided in
the Securities Act of 1933, as amended, and the 1940
- 37 -
<PAGE>
Act, the Trust shall indemnify each of its
Trustees and officers, including persons who
serve at the Trust's request as directors,
officers or trustees of another organization
in which the Trust has any interest as a
shareholder, creditor or otherwise
(hereinafter referred to as a "Covered
Person") against all liabilities, including
but not limited to amounts paid in
satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including
reasonable accountants' and counsel fees,
incurred by any Covered Person in connection
with the defense or disposition of any action,
suit or other proceeding, whether civil or
criminal, before any court or administrative
or legislative body, in which such Covered
Person may be or may have been involved as a
party or otherwise or with which such person
may be or may have been threatened, while in
office or thereafter, by reason of being or
having been such a Trustee or officer,
director or trustee, and except that no
Covered Person shall be indemnified against
any liability to the Trust or its Shareholders
to which such Covered Person would otherwise
be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless
disregard of the duties involved in the
conduct of such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust
shall advance attorneys' fees or other
expenses incurred by a Covered Person in
defending a proceeding to the full extent
permitted by the Securities Act of 1933, as
amended, the 1940 Act, and Ohio Revised Code
Chapter 1707, as amended. In the event any of
these laws conflict with Ohio Revised Code
Section 1701.13(E), as amended, these laws,
and not Ohio Revised Code Section 1701.13(E),
shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE,
ETC. The right of indemnification provided by
this Article VI shall not be exclusive of or
affect any other rights to which any such
Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall
include such person's heirs, executors and
administrators. Nothing contained in this
article shall affect any rights to
indemnification to which personnel of the
Trust, other than Trustees and officers, and
other persons may be entitled by contract or
otherwise under law, nor the power of the
Trust to purchase and maintain liability
insurance on behalf of any such person."
- 38 -
<PAGE>
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to
Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted
by such Trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant maintains a standard mutual fund and
investment advisory professional and directors and
officers liability policy. The policy will provide
coverage to the Registrant, its Trustees and officers
and PRAGMA, Inc. (the "Adviser"). Coverage under the
policy will include losses by reason of any act, error,
omission, misstatement, misleading statement, neglect
or breach of duty.
The Investment Advisory Agreement with the Adviser
provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss
suffered by the Registrant in connection with any
investment policy or the purchase, sale, or retention
of any investment on the recommendation of the Adviser;
PROVIDED, HOWEVER, that nothing therein contained shall
be construed to protect the Adviser against any
liability to the Registrant by reason of willful
misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless
disregard of its obligations and duties under the
Investment Advisory Agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
(a) The Adviser is a Texas corporation organized in
1981. In addition to its investment advisory
activities the Adviser is also registered as a
- 39 -
<PAGE>
Commodity Trading Advisor (CTA) and a
Commodity Pool Operator (CPO). The Adviser's
CTA registration has been effective since July
1981 while its Commodity Pool Operator
registration has been effective since July
1984. The Adviser is the general partner and
trading advisor for The PRAGMA Beta Futures
Fund I, a limited partnership that speculates
in the futures markets. As an investment
adviser, the Adviser does not provide advice
regarding investment in commodity pools or
commodity limited partnerships.
(b) The directors and officers of the Adviser and
any other business, profession, vocation or
employment of a substantial nature engaged in
at any time during the past two years:
(i) John H. Alban, Jr. - President of the Adviser.
Chairman of the Board of the Registrant.
(ii) B. David Cranfill - Senior Vice President and
Secretary of the Adviser.
(iii) John H. Alban, III - Vice President and
Treasurer of the Adviser.
President of the Registrant.
(iv) Elizabeth A. Dunn - Vice President of the Adviser.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Inapplicable
(b) Inapplicable
(c) Inapplicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder will
be maintained by the Registrant at its offices located
at 7150 Greenville Avenue, Suite 101 - Lock Box 340,
Dallas, Texas 75231 as well as at the offices of the
Registrant's transfer agent located at 312 Walnut
- 40 -
<PAGE>
Street, 21st Floor, Cincinnati, Ohio 45202.
ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
Inapplicable
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes that, if so
requested, it will furnish each person to whom
a prospectus is delivered with a copy of
Registrant's latest annual report without
charge.
(d) The Registrant undertakes to call a meeting of
shareholders, if requested to do so by holders of
at least 10% of the Fund's outstanding shares, for
the purpose of voting upon the question of removal
of a trustee or trustees and to assist in
communications with other shareholders as required
by Section 16(c) of the Investment Company Act of
1940.
- 41 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of the Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas and State of Texas, on the
16th day of September, 1996.
PRAGMA INVESTMENT TRUST
By:/S/ JOHN H. ALBAN, JR.
-------------------------
John H. Alban, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ JOHN H. ALBAN, JR. Chairman September 16, 1996
- ------------------------ of the Board
John H. Alban, Jr. and Trustee
/S/ JOHN H. ALBAN, III President September 16, 1996
- ------------------------ and Trustee
John H. Alban, III
/S/ MARK J. SEGER Treasurer September 16, 1996
- ------------------------
Mark J. Seger
Trustee By:/S/ TINA D. HOSKING
- ------------------------ ------------------------
William L. Hutton * Tina D. Hosking
Attorney-in-Fact*
September 16, 1996
Trustee
- ------------------------
William B. Snyder*
Trustee
- ------------------------
James C. Tappan*
- 42 -
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Agreement
(6) Inapplicable
(7) Inapplicable
(8) Custody Agreement
(9)(i) Administrative Services Agreement
(9)(ii) Accounting Services Agreement
(9)(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Public Accountants
(12) Inapplicable
(13) Agreement Relating to Initial Capital
(14) Inapplicable
(15) Inapplicable
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
- ----------------------------
* Incorporated by reference to the Trust's registration
statement on Form N-1A.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 15th day of March, 1996, by and between PRAGMA
INVESTMENT TRUST (the "Trust"), an unincorporated business trust organized
under the laws of the State of Ohio, and PRAGMA, Inc. (the "Adviser"), a
corporation organized under the laws of the State of Ohio.
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Trust currently consists of one series portfolio, the
PRAGMA Providence Fund (the "Fund"), and the Trustees have the power to create
additional series;
WHEREAS, the Adviser is engaged in the business of rendering
investment advisory and management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish
investment advisory services to the Trust and the Fund and the Adviser is
willing to furnish such services to the Trust and the Fund;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. APPOINTMENT OF ADVISER. The Trust hereby appoints the
Adviser to act as investment manager of the Fund for the period and
on the terms herein set forth. The Adviser accepts such
appointment and agrees to render the services herein set forth, for
the compensation herein provided.
2. INVESTMENT ADVISORY SERVICES. The Adviser shall
supervise the investments of the Fund. In such capacity, the
- 44 -
<PAGE>
Adviser shall maintain a continuous investment program for the Fund, determine
what securities shall be purchased or sold by the fund, secure and evaluate
such information as it deems proper and take whatever action is necessary or
convenient to perform its functions, including the placing of purchase and
sale orders.
The Adviser shall also provide or arrange for and supervise the
provision by third parties to the Funds of custody, transfer agency,
administrative, accounting, legal, audit and similar services.
In executing portfolio transactions and selecting brokers or dealers,
the Adviser will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms available for any
transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of
the commission, if any (for the specific transaction and on a continuing
basis). In evaluating the best overall terms available and in selecting the
broker or dealer to execute a particular transaction, the Adviser may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
such broker or dealer to the Fund or other accounts over which the Adviser or
any affiliate of the Adviser exercised investment discretion. The Adviser may
cause the Fund to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the Adviser
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or in terms of
all of the accounts over which the Adviser or any affiliate of the Adviser
exercises investment discretion.
- 45 -
<PAGE>
3. COMPLIANCE WITH LAWS. All functions undertaken by the Adviser
hereunder shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the 1940 Act, and any rules and regulations
promulgated thereunder; (2) any other applicable provisions of law; (3) the
Declaration of Trust of the Trust as amended from time to time; (4) the Bylaws
of the Trust as amended from time to time; and (5) the registration statements
of the Trust as amended from time to time, filed under the Securities Act of
1933, as amended and the 1940 Act.
4. BOARD SUPERVISION. All of the functions undertaken by
the Adviser hereunder shall at all times be subject to the direc-
tion of the Board of Trustees of the Trust, or any committee
thereof or officers of the Trust acting under the authority of the
Board of Trustees.
5. PAYMENT OF EXPENSES. The Adviser will pay all of the expenses of
the Fund (including the fees and charges of third-party service providers
engaged pursuant to paragraph (2) above) except the following: organizational
expenses; interest; taxes; brokerage commissions; extraordinary expenses; and
the fees and expenses, including ordinary counsel fees, of those Trustees who
are not "interested persons" as defined in the 1940 Act (hereinafter referred
to as the "Independent Trustees"). The Adviser will provide the Trust with
such facilities and personnel as may, from time to time, be required to carry
on the business of the Fund including but not limited to office space, office
furniture, fixtures and equipment, office supplies, computer hardware and
software and salaried and hourly paid personnel. The Adviser may at its
expense employ others to provide all or any part of such facilities and
personnel.
6. ACCOUNT FEES. The Trust, by resolution of the Board of
Trustees, including a majority of the Independent Trustees, may
from time to time authorize the imposition of a fee as a direct
charge against shareholder accounts of the Fund, such fee to be
retained by the Trust or to be paid to the Adviser to defray
expenses which would otherwise be paid by the Adviser in accordance
with the provisions of paragraph 5 of this Agreement. At least
- 46 -
<PAGE>
sixty (60) days' prior written notice of the intent to impose such fee must be
given to the shareholders of the Fund.
7. COMPENSATION OF ADVISER. (a) As full compensation for the services
and such facilities as may from time to time be furnished by the Adviser under
this Agreement, the Fund agrees to pay to the Adviser a fee at the annual rate
of 1.50% of the Fund's average daily net asset value less the accrued fees and
expenses, including ordinary counsel fees, of the Independent Trustees of the
Trust. Such fee shall be accrued daily and payable monthly. For purposes of
calculating such fee, such net asset value shall be determined by taking the
average of all determinations of net asset value made in the manner provided
in the appropriate Fund's current Prospectus and Statement of Additional
Information.
(b) For any period less than a full month during which this Agreement
is in effect the compensation payable to the Adviser hereunder shall be
prorated according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses of the Fund for any
fiscal year exceed the permissible limits applicable to the Fund in any state
in which the Fund's shares are then qualified for sale, the compensation due
the Adviser for such fiscal year shall be reduced by the amount of such excess
by a reduction or refund thereof at the time such compensation is payable
after the end of each calendar month during such fiscal year of the Fund,
subject to readjustment during the Fund's fiscal year.
8. LIMITATION OF LIABILITY OF ADVISER. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with any investment policy or the purchase, sale, or
retention of any investment on the recommendation of the Adviser; PROVIDED,
HOWEVER, that nothing herein contained shall be construed to protect the
Adviser against any liability to the Fund by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason
of reckless disregard of its obligations and duties under this Agreement.
9. TERM AND TERMINATION. (a) This Agreement shall become
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effective on the date hereof. Unless terminated as herein provided, this
Agreement shall remain in full force and effect for two years from the date
hereof and shall continue in full force and effect for successive periods of
one year thereafter, but only so long as each such continuance is approved (i)
by either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Funds, and,
in either event, (ii) by vote of a majority of the Trustees of the Trust who
are not parties to this Agreement or interested persons (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment
of any penalty by vote of the Trustees of the Trust or by vote of the holders
of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Funds or by the Adviser, on sixty days' written notice to the
other party.
(c) This Agreement shall automatically and immediately terminate in
the event of its assignment (as defined in the 1940 Act).
10. LIMITATION OF LIABILITY OF TRUSTEES AND SHAREHOLDERS. A
copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of the State of Ohio and notice is hereby given
that this Agreement is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the obligations of
this instrument are not binding upon the Trustees or holders of
shares of the Trust individually but are binding only upon the
assets and property of the Trust.
11. USE OF NAME. 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 will discontinue
any use of the name "PRAGMA" if the Adviser ceases to be employed as the
Fund's investment manager.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
PRAGMA INVESTMENT TRUST
By:/S/ JOHN H. ALBAN, III
-------------------------------
President
PRAGMA, Inc.
By:/S/ JOHN H. ALBAN, JR.
-------------------------------
President
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CUSTODY AGREEMENT
This AGREEMENT, dated as of March 15, 1996, by and between PRAGMA
INVESTMENT TRUST (the "Trust"), a business trust organized under the laws of
the State of Ohio, acting with respect to the PRAGMA PROVIDENCE FUND (the
"Fund"), a series of the Trust operated and administered by the Trust, PRAGMA,
INC. ("PRAGMA"), a corporation organized under the laws of the State of Texas
and STAR BANK, N.A. (the "Custodian"), a national banking association.
W I T N E S S E T H:
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, PRAGMA is registered as an investment adviser under the
Investment Advisers Act of 1940 and provides advisory services to the Trust
pursuant to an Investment Advisory Agreement; and
WHEREAS, under the Investment Advisory Agreement, PRAGMA is
responsible for retaining and compensating agents to provide nonadvisory
services to the Trust; and
WHEREAS, PRAGMA and the Trust desire that the Fund's Securities and
cash be held and administered by the Custodian pursuant to this Agreement; and
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WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust, PRAGMA and the Custodian hereby agree as follows:
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ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions
and Written Instructions on behalf of the Fund and named in Exhibit A hereto
or in such resolutions of the Board of Trustees, certified by an Officer, as
may be received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, as from time to
time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B
of 31 CFR Part 350, or in such book-entry regulations of federal agencies as
are substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a
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settlement day by The New York Stock Exchange, Inc. and any other
day for which the Trust computes the net asset value of Shares of
the Fund.
1.5 "FUND CUSTODY ACCOUNT" shall mean the account in the name of the
Trust, which is provided for in Section 3.2 below.
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1.6 "NASD" shall mean The National Association of
Securities Dealers, Inc.
1.7 "OFFICER" shall mean the Chairman of the Board, the President,
any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or
any Assistant Treasurer of the Trust.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary
course of business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written Instructions
prior to the end of the next Business Day. If such Written Instructions
confirming Oral Instructions are not received by the Custodian prior to a
transaction, it shall in no way affect the validity of the transaction or the
authorization thereof by the Trust. If Oral Instructions vary from the Written
Instructions which purport to confirm them, the Custodian shall notify the
Trust of such variance but such Oral Instructions will govern unless the
Custodian has not yet acted.
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1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy of a resolution of the
Board of Trustees, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities and Exchange Act of 1934, as amended (the "1934 Act"), which
acts as a system for the central handling of Securities where all Securities
of any particular class or series of an issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other
instruments or documents repre-
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senting rights to receive, purchase or subscribe for the same, or evidencing
or representing any other rights or interests therein, or any similar property
or assets that the Custodian has the facilities to clear and to service.
1.12 "SHARES" shall mean the units of beneficial interest
issued by the Trust on account of the Fund.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified
by an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 APPOINTMENT. The Trust and PRAGMA hereby constitute and appoint
the Custodian as custodian of all Securi-
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ties and cash owned by or in the possession of the Fund at any time during the
period of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as herein-
after set forth.
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of
the Agreement to the Custodian by the Trust:
a. A copy of the Agreement and Declaration of Trust of
the Trust certified by the Secretary;
b. A copy of the Bylaws of the Trust certified by the
Secretary;
c. A copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian, certified by
the Secretary;
d. A copy of the then current Prospectus of the Fund;
and
e. A certification of the President and Secretary of
the Trust setting forth the names and signatures of
the current Officers of the Trust and other Autho-
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rized Persons.
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT.
The Trust and PRAGMA agree to notify the Custodian in writing of
the appointment, termination or change in appointment of any
Dividend and Transfer Agent of the Fund.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated
from other Securities and non-cash property in the possession of the Custodian
and shall be identified as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNT. The Custodian shall open and maintain in
its trust department a custody account in the name of the Trust coupled with
the name of the Fund, subject only to draft or order of the Custodian, in
which the Custodian shall enter and carry all Securities, cash and other
assets of the Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian
may appoint, and at any time remove, any domestic bank or trust
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company, which has been approved by the Board of Trustees and is qualified to
act as a custodian under the 1940 Act, as sub-custodian to hold Securities and
cash of the Fund and to carry out such other provisions of this Agreement as
it may determine, provided, however, that the appointment of any such agents
and maintenance of any Securities and cash of the Fund shall be at the
Custodian's expense and shall not relieve the Custodian of any of its
obligations or liabilities under this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or
cause to be delivered, to the Custodian all of the Fund's Securities, cash and
other assets, including (a) all payments of income, payments of principal and
capital distributions received by the Fund with respect to such Securities,
cash or other assets owned by the Fund at any time during the period of this
Agreement, and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The
Custodian may deposit and/or maintain Securities of the Fund in a
Securities Depository or in a Book-Entry System, subject to the
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following provisions:
(a) Prior to a deposit of Securities of the Fund in any
Securities Depository or Book-Entry System, the Trust
shall deliver to the Custodian a resolution of the Board
of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to
deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry
System to the extent possible and practical in connec-
tion with its performance hereunder, including, without
limitation, in connection with settlements of purchases
and sales of Securities, loans of Securities, and deliv-
eries and returns of collateral consisting of Securi-
ties.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-Entry
System or Securities Depository which includes only assets
held by the Custodian as a fiduciary, custodian
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or otherwise for customers.
(c) The records of the Custodian with respect to Securities of
the Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry, identify such Securities as
belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a
Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i) receipt
of advice from the Book-Entry System or Securities
Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment
and transfer for the account of the Fund. If Securities
sold by the Fund are held in a Book-Entry System or
Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-
Entry System or Securities Depository that payment for
such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer and payment
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for the account of the Fund.
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System
or Securities Depository in which Securities of the Fund are
kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System
or Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Fund resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above or any of its or
their employees, or (ii) from failure of Custodian or
any such Sub-Custodian to enforce effectively such
rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Trust shall
be subrogated to the rights of the Custodian with re-
spect to any claim against a Book-Entry System or Secu-
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rities Depository or any other person from any loss or
damage to the Fund arising from the use of such BookEntry
System or Securities Depository, if and to the extent that
the Fund has not been made whole for any such loss or
damage.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNT. Upon
receipt of Proper Instructions, the Custodian shall disburse
moneys from the Fund Custody Account but only in the following
cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or
any Sub-Custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in
Section 3.9 below or in proper form for transfer, or if
the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in accor-
dance with the conditions set forth in Section 3.5
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above; (ii) in the case of options on Securities, against
delivery to the Custodian (or such SubCustodian) of such
receipts as are required by the customs prevailing among
dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery
to the Custodian (or such Sub-Custodian) of evidence of
title thereto in favor of the Fund or any nominee referred
to in Section 3.9 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the
Trust and a bank which is a member of the Federal Reserve
System or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System or
Securities Depository with such Securities;
(b) In connection with the conversion, exchange or
surrender, as set forth in Section 3.7(f) below, of
Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distri-
butions declared by the Fund;
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(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: interest; taxes; investment
advisory fees; trustee fees and expenses; and other
operating expenses of the Fund; in all cases, whether or not
such expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Ex-
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change Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations)
regarding account deposits in connection with transactions
by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a
term of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution
of the Board of Trustees, certified by an Officer,
specifying the amount and purpose of such payment, declaring
such purpose to be a proper corporate purpose, and naming
the person or persons to whom such payment is to be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNT. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from the Fund Custody Account but only in the
following cases:
(a) Upon the sale of Securities for the account of the Fund
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but only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with tender
or other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is
to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Fund, the Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above, or of any nomi-
nee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the
new Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or
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merger, consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or pursuant
to provisions for conversion contained in such Securities,
or pursuant to any deposit agreement, including surrender or
receipt of underlying Securities in connection with the
issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any,
are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by the Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the
new Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of
the Fund, but only against receipt of such collateral as the
Trust shall have specified to the Custodian in Proper
Instructions;
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(j) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Trust, but
only against receipt by the Custodian of the amounts
borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the
Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of
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the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations)
regarding account deposits in connection with transactions
by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Board of Trustees, certified by
an Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless
otherwise instructed by the Trust, the Custodian shall with
respect to all Securities held for the Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled
either by law or pursuant to custom in the securities
business;
(b) Present for payment and, subject to Section 7.4 below,
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collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws
or the laws or regulations of any other taxing authority now
or hereafter in effect, and prepare and submit reports to
the Internal Revenue Service ("IRS") and to the Trust at
such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
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connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of
the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for
the Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund, the Custodian, or any SubCustodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any
of them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of the Fund.
3.10 RECORDS. (a) The Custodian shall maintain complete and
accurate records with respect to Securities, cash or other
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property held for the Fund, including (i) journals or other records of
original entry containing an itemized daily record in detail of all receipts
and deliveries of Securities and all receipts and disbursements of cash; (ii)
ledgers (or other records) reflecting (A) Securities in transfer, (B)
Securities in physical possession, (C) monies and Securities borrowed and
monies and Securities loaned (together with a record of the collateral
therefor and substitutions of such collateral), (D) dividends and interest
received, and (E) dividends receivable and interest receivable; and (iii)
canceled checks and bank records related thereto. The Custodian shall keep
such other books and records of the Fund as the Trust shall reasonably
request, or as may be required by the 1940 Act, including, but not limited to,
Section 31 of the 1940 Act and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i)
be maintained in a form acceptable to the Trust and in compliance with rules
and regulations of the Securities and Exchange Commission, (ii) be the
property of the Trust and at all times during the regular business hours of
the Custodian be made available upon request for inspection by duly authorized
officers,
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employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1
under the 1940 Act, be preserved for the periods prescribed in Rule 31a-2
under the 1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust
with a daily activity statement and a summary of all transfers to or from the
Fund Custody Account on the day following such transfers. At least monthly and
from time to time, the Custodian shall furnish the Trust with a detailed
statement of the Securities and moneys held by the Custodian and the
Sub-Custodians for the Fund under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the
Trust with such reports, as the Trust may reasonably request from time to
time, on the internal accounting controls and procedures for safeguarding
Securities, which are employed by the Custodian or any Sub-Custodian appointed
pursuant to Section 3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause
all proxies relating to Securities which are not registered in the
name of the Fund, to be promptly executed by the registered holder
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of such Securities, without indication of the manner in which such proxies are
to be voted, and shall promptly deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall promptly
deliver to the Trust all information received by the Custodian and pertaining
to Securities being held by the Fund with respect to optional tender or
exchange offers, calls for redemption or purchase, or expiration of rights as
described in the Standards of Service Guide attached as Exhibit B. If the
Trust desires to take action with respect to any tender offer, exchange offer
or other similar transaction, the Trust shall notify the Custodian at least
five Business Days prior to the date on which the Custodian is to take such
action. The Trust will provide or cause to be provided to the Custodian all
relevant information for any Security which has unique put/option provisions
at least five Business Days prior to the beginning date of the tender period.
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ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities
for the Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by
the Fund pay out of the moneys held for the account of the Fund the total
amount specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the
cost of a purchase of Securities for the Fund, if in the Fund Custody Account
there is insufficient cash available to the Fund for which such purchase was
made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF
SECURITIES PURCHASED. In any and every case where payment for the
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purchase of Securities for the Fund is made by the Custodian in advance of
receipt of the Securities purchased but in the absence of specified Written
Instructions to so pay in advance, the Custodian shall be liable to the Fund
for such Securities to the same extent as if the Securities had been received
by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by the
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement,
(d) the sale price per unit, (e) the total amount payable upon such sale, and
(f) the person to whom such Securities are to be delivered. Upon receipt of
the total amount payable to the Fund as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the
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customs prevailing among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to
deliver Securities against payment, shall be entitled, if in accordance with
generally accepted market practice, to deliver such Securities prior to actual
receipt of final payment therefor. In any such case, the Fund shall bear the
risk that final payment for such Securities may not be made or that such
Securities may be returned or otherwise held or disposed of by or through the
person to whom they were delivered, and the Custodian shall have no liability
for any for the foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from
time to time, the Custodian may credit the Fund Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund. Any such
credit shall be conditional upon actual receipt by Custodian of final payment
and may be reversed if final payment is
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<PAGE>
not actually received in full. The Custodian may, in its sole discretion and
from time to time, permit the Fund to use funds so credited to the Fund
Custody Account in anticipation of actual receipt of final payment. Any such
funds shall be repayable immediately upon demand made by the Custodian at any
time prior to the actual receipt of all final payments in anticipation of
which funds were credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to
facilitate the settlement of the Fund's transactions in the Fund Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 TRANSFER OF FUNDS. From such funds as may be available for the
purpose in the Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of the Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Trust may designate with respect to such amount in
such Proper
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Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish
and maintain a segregated account or accounts for and on behalf of the Fund,
into which account or accounts may be transferred cash and/or Securities,
including Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
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<PAGE>
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by the Fund or
in connection with financial futures contracts (or options
thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities made
by the Fund,
(d) for purposes of compliance by the Fund with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection
with reverse repurchase agreements and when- issued, delayed
delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt
of, in addition to Proper Instructions, a certified copy of
a resolution of the Board of Trustees, certified by an
Officer, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper
corporate purposes.
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<PAGE>
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and
shall be without liability to the Trust or the Fund for any loss, damage,
cost, expense (including attorneys' fees and disbursements), liability or
claim unless such loss, damage, cost, expense, liability or claim arises from
negligence, bad faith or willful misconduct on its part or on the part of any
Sub-Custodian appointed pursuant to Section 3.3 above. The Custodian shall be
entitled to rely on and may act upon advice of counsel on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice. The Custodian shall promptly notify the Trust of any action
taken or omitted by the Custodian pursuant to advice of counsel. The Custodian
shall not be under any obligation at any time to ascertain whether the Trust
or the Fund is in compliance with the 1940 Act, the regulations thereunder,
the provisions of the Trust's charter documents or by-laws, or its investment
objectives and policies as then in effect.
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<PAGE>
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable
for, or considered to be the custodian of, any cash belonging to the Fund or
any money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any property or evidence
of title thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities
are in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it
to be genuine. The Custodian shall be entitled to rely upon any
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<PAGE>
Oral Instructions and any Written Instructions actually received by it
pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Trust to keep
the books of account of the Fund and/or compute the value of the assets of the
Fund. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to
the Custodian's activities hereunder in connection with (a) the preparation of
the Trust's reports on Form N-1A and Form N-SAR and any other reports required
by the Securities and Exchange Commission, and (b) the fulfillment by the
Trust of any other requirements of the Securities and Exchange Commission.
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<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY TRUST. The Trust and PRAGMA shall indemnify
and hold harmless the Custodian and any Sub-Custodian appointed pursuant to
Section 3.3 above, and any nominee of the Custodian or of such Sub-Custodian,
from and against any loss, damage, cost, expense (including attorneys' fees
and disbursements), liability (including, without limitation, liability
arising under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any
state or foreign securities and/or banking laws) or claim arising directly or
indirectly (a) from the fact that Securities are registered in the name of any
such nominee, or (b) from any action or inaction by the Custodian or such Sub-
Custodian (i) at the request or direction of or in reliance on the advice of
the Trust, or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-custody
agreement with a Sub-Custodian appointed pursuant to Section 3.3 above,
provided that neither the Custodian nor any such Sub-Custodian shall be
indemnified and held harmless from and against any such loss, damage, cost,
expense,
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<PAGE>
liability or claim arising from the Custodian's or such Sub- Custodian's
negligence, bad faith or willful misconduct.
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and
hold harmless the Trust and PRAGMA from and against any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability (including
without limitation, liability arising under the Securities Act of 1933, the
1934 Act, the 1940 Act, and any state or foreign securities and/or banking
laws) or claim arising from the negligence, bad faith or willful misconduct of
the Custodian or any Sub-Custodian appointed pursuant to Section 3.3 above, or
any nominee of the Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian
shall not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
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<PAGE>
8.4 SECURITY. If the Custodian advances cash or Securities to the
Fund for any purpose, either at the Trust's request or as otherwise
contemplated in this Agreement, or in the event that the Custodian or its
nominee incurs, in connection with its performance under this Agreement, any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability or claim (except such as may arise from its or its nominee's
negligence, bad faith or willful misconduct), then, in any such event, any
property at any time held for the account of the Fund shall be security
therefor, and should the Trust or PRAGMA fail promptly to repay or indemnify
the Custodian, the Custodian shall be entitled to utilize available cash of
the Fund and to dispose of other assets of the Fund to the extent necessary to
obtain reimbursement or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian, the Trust nor PRAGMA shall be liable for any
failure or delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including, without
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<PAGE>
limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; strikes; epidemics; riots; power failures; computer
failure and any such circumstances beyond its reasonable control as may cause
interruption, loss or malfunction of utility, transportation, computer
(hardware or software) or telephone communication service; accidents; labor
disputes; acts of civil or military authority; governmental actions; or
inability to obtain labor, material, equipment or transportation; provided,
however, that the Custodian in the event of a failure or delay (i) shall not
discriminate against the Fund in favor of any other customer of the Custodian
in making computer time and personnel available to input or process the
transactions contemplated by this Agreement and (ii) shall use its best
efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 EFFECTIVE PERIOD. This Agreement shall become
effective as of its execution and shall continue in full force and
effect until terminated as hereinafter provided.
10.2 TERMINATION. Any party hereto may terminate this
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Agreement by giving to the other parties a notice in writing specifying the
date of such termination, which shall be not less than sixty (60) days after
the date of the giving of such notice. If a successor custodian shall have
been appointed by the Board of Trustees, the Custodian shall, upon receipt of
a notice of acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all Securities
(other than Securities held in a Book-Entry System or Securities Depository)
and cash then owned by the Fund and held by the Custodian as custodian, and
(b) transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the benefit of the Fund at the successor
custodian, provided that PRAGMA shall have paid to the Custodian, on behalf of
the Trust, all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at
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<PAGE>
the direction of an appropriate regulatory agency or court of
competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which (a) is a "bank"
as defined in the 1940 Act and (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not
less than $25 million, all Securities, cash and other property held by
Custodian under this Agreement and to transfer to an account of or for the
Fund at such bank or trust company all Securities of the Fund held in a
Book-Entry System or Securities Depository. Upon such delivery and transfer,
such bank or trust company shall be the successor custodian under this
Agreement and the Custodian shall be relieved of all obligations under this
Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
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<PAGE>
PRAGMA shall compensate the Custodian as agreed upon from time to
time by the parties. The fees and other charges in effect on the date hereof
and applicable to the Fund are set forth in Exhibit C attached hereto.
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<PAGE>
ARTICLE XII
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust as provided in the Trust's Agreement and
Declaration of Trust, as from time to time amended. The execution and delivery
of this Agreement have been authorized by the Trustees, and this Agreement has
been signed and delivered by an authorized officer of the Trust, acting as
such, and neither such authorization by the Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust as provided in the above-mentioned
Agreement and Declaration of Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given hereunder shall be in
writing and shall be sent or delivered to the recipient at
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<PAGE>
the address set forth after its name hereinbelow:
TO THE TRUST OR TO PRAGMA:
PRAGMA Investment Trust
7150 Greenville Avenue, Suite 101 - LB 340
Dallas, Texas 75231
Telephone: (214) 373-3585
Facsimile: (214) 987-1728
TO CUSTODIAN:
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Mutual Fund-Operations
Telephone: (513) 632-4199
Facsimile: (513) 632-4448
or at such other address as any party shall have provided to any other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate
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<PAGE>
any printed matter which contains any reference to Custodian without the prior
written approval of Custodian, excepting printed matter contained in the
prospectus or statement of additional information for the Fund and such other
printed matter as merely identifies Custodian as custodian for the Fund. The
Trust shall submit printed matter requiring approval to Custodian in draft
form, allowing sufficient time for review by Custodian and its counsel prior
to any deadline for printing.
14.3 NO WAIVER. No failure by any party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by any party hereto of any right hereunder shall
not preclude the exercise of any other right, and the remedies provided herein
are cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an
instrument in writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
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counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that this Agreement shall not be
assignable by any party hereto without the written consent of the other
parties hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: PRAGMA INVESTMENT TRUST
/S/ JOHN F. SPLAIN By:/S/ JOHN H. ALBAN, III
President
ATTEST: PRAGMA, INC.
/S/ TINA D. HOSKING By:/S/ JOHN H. ALBAN, JR.
President
ATTEST: STAR BANK, N.A.
/S/ MARK J. DOWLING By:/S/ MARSHA A. CROXTON
Vice President
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<PAGE>
EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Account.
NAME SIGNATURE
John H. Alban, Jr. /S/ JOHN H. ALBAN, JR.
John H. Alban, III /S/ JOHN H. ALBAN, III
John F. Splain /S/ JOHN F. SPLAIN
Robert G. Dorsey /S/ ROBERT G. DORSEY
Mark J. Seger /S/ MARK J. SEGER
M. Kathleen Leugers /S/ M. K. LEUGERS
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<PAGE>
EXHIBIT B
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A., is committed to providing superior quality service
to all customers and their agents at all times. We have compiled this guide as
a tool for our clients to determine our standards for the processing of
security settlements, payment collection, and capital change transactions.
Deadlines recited in this guide represent the times required for Star Bank to
guarantee processing. Failure to meet these deadlines will result in
settlement at our client's risk. In all cases, Star Bank will make every
effort to complete all processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a
direct member of the Federal Reserve Bank of Cleveland, and utilizes the
Bankers Trust Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg
Source, Financial Information, Inc., XCITEK, DTC Important
Notices, and the WALL STREET JOURNAL,
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond
Source, Kenny Information Systems, Standard & Poor's Corporation, and DTC
Important Notices. Star Bank will not notify
clients of optional put opportunities.
Any securities delivered free to Star Bank or its agents must be
received three (3) business days prior to any payment or settlement in order
for the Star Bank standards of service to apply.
Should you have any questions regarding the information contained in
this guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide is
subject to change. Should any changes be made Star Bank will provide
you with an updated copy of its Standards of Service Guide.
<PAGE>
<TABLE>
STAR BANK SECURITY SETTLEMENT STANDARDS
<CAPTION>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
<S> <C> <C>
DTC - Clearing House Funds 11:00 A.M. on Settlement Date DTC Participant #2219
For Account # ____________
DTC - Same Day Funds Settlement 12:30 P.M. on Settlement Date DTC Participant #2219
For Account # ____________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
Cinti/Trust for Star
Bank, N.A.
ABA# 042000013
For Account # ____________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
(Repurchase Agreement Cinti/Spec for Star
Collateral Only) Bank, N.A.
ABA# 042000013
For Account # ____________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) (for Deliveries by 5:00 P.M. on Sub Account: Star Bank, N.A. #090334
Settlement Date minus 1)
Physical Securities 10:00 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334
<PAGE>
CEDEL/EURO-CLEAR 4:00 P.M. on Settlement Date Euroclear Via Cedel Bridge
minus 3 In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354
Cash Wire Transfer 3:00 P.M. Star Bank, N.A.
Cinti/Trust ABA# 042000013
Credit Account #9901877
Further Credit to __________
Account # ____________
<FN>
*All times listed are Cincinnati time.
</FN>
</TABLE>
<PAGE>
STAR BANK PAYMENT STANDARDS
SECURITY TYPE INCOME PRINCIPAL
Equities Payable Date + 1
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date + 1 Payable Date
Federal Reserve Bank
Book Entry* Payable Date Payable Date
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 2 Payable Date + 2
SBA Loan Certificates When Received When Received
Unit Investment Trust Payable Date + 1 Payable Date + 1
Certificates*
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank
Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 2 Payable Date + 2
NOTE: If a payable date falls on a weekend or bank holiday, payment will
be made on the immediately following business day.
<PAGE>
<TABLE>
STAR BANK CORPORATE REORGANIZATION STANDARDS
<CAPTION>
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior 5 business days prior to expiration Upon receipt
and Optional Mergers to expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior 5 business days prior to expiration Upon receipt
Option to Retain to expiration or receipt of notice
Class Actions 10 business days prior to 5 business days prior to expiration Upon receipt
expiration date
Voluntary Tenders, Later of 10 business days prior 5 business days prior to expiration Upon receipt
Exchanges, to expiration or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or securities None Upon receipt
Liquidations, Bankruptcies, received
Stock Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days prior None Upon receipt
to expiration or receipt of notice
NOTE: Fractional shares/par amounts resulting from any of the above will
be sold.
</TABLE>
<PAGE>
APPENDIX C
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $ 9.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $ 6.00
(f) For each option/future contract written,
exercised or expired $25.00
(g) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. MARKET VALUE FEE
Based upon an annual rate of: MILLION
.0001 (1.0 Basis Points) on First $20
.00005 (.5 Basis Points) on Next $50
.000075 (.75 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $200.00
IV. OUT-OF-POCKET EXPENSES
The only out-of-pocket expenses charged to your account
<PAGE>
will be shipping fees or transfer fees.
V. IRA PROCESSING
Per Shareholder/year $12.00
If Trust Financial Services provides a cash management administrative service
to keep your income and principal cash balances fully invested, for which we
can charge up to .0036 of the average daily cash balance. The yield for your
cash management fund shown on your statement is net of this fee.
<PAGE>
STAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE
SERVICES UNIT COST MONTHLY COST
BUSINESS CHECKING FEES
D.D.A. Account Maintenance $12.00
Deposits .37
Deposited Items .10
Checks Paid .155
Deposited Items Returned 5.00
International Returned Items 10.00
NSF Returned Check 20.00
Stop Payments 20.00
CASH MANAGEMENT FEES
Account Reconcilement
DEBIT RECONCILEMENT SERVICES:
Set-Up Fee $100.00 for Full Reconciliation
$25.00 all other services
Fine Sort .025 per debit ($25.00 Minimum)
Paid .040 per debit ($40.00 Minimum)
Full .050 per debit ($50.00 Minimum)
CREDIT RECONCILEMENT SERVICES:
Deposit .040 per credit ($50.00 Minimum)
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add
ACH Transaction .08
ACH Maintenance 40.00
ACH Additions, Deletions,
Changes 3.50
Controlled Disbursement 110.00 1st Acct
25.00 each add
Data Transmission per
application 110.00
Data Capture (varies depending upon what
information needs to be captured)
Drafts Cleared .179
Lockbox Maintenance 55.00
<PAGE>
Lockbox items Processed
(with copy of check) .30
(without copy of check) .24
<PAGE>
STAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE CONTINUED
SERVICES UNIT COST MONTHLY COST
Wires Incoming
Domestic: 10.00
International: 10.00
Wires Outgoing
Domestic:
Repetitive 10.00
Non Repetitive 10.00
International:
Repetitive 35.00
Non Repetitive 40.00
PC - Initiated Wires:
Domestic:
Repetitive 9.00
Non Repetitive 9.00
International:
Repetitive 25.00
Non Repetitive 25.00
EARNINGS CREDITS
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees generated.
Earnings credits are based on the average yield on the 91 day U.S. Treasury
Bill for the preceding thirteen weeks less the 10% reserve.
UNCOLLECTED CHARGE
Star Bank assesses a penalty of prime rate plus 4% on any combined
relationship with average uncollected balances for the month.
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated as of March 15, 1996 between PRAGMA INVESTMENT TRUST
(the "Trust"), an Ohio business trust, PRAGMA, INC. ("PRAGMA"), a Texas
corporation, and MGF SERVICE CORP. ("MGF"), an Ohio corporation.
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940; and
WHEREAS, PRAGMA is registered as an investment adviser under the
Investment Advisers Act of 1940 and provides advisory services to the Trust
pursuant to an Investment Advisory Agreement; and
WHEREAS, under the Investment Advisory Agreement, PRAGMA is
responsible for retaining and compensating agents to provide non- advisory
services to the Trust; and
WHEREAS, PRAGMA wishes to avail itself of the information, advice,
assistance and facilities of MGF to perform on behalf of the Trust the
services as hereinafter described; and
WHEREAS, MGF wishes to provide such services to the Trust under
the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust, PRAGMA and MGF agree as follows:
1. EMPLOYMENT. PRAGMA, being duly authorized, hereby employs
MGF to perform those services described in this Agreement. MGF shall
perform the obligations thereof upon the terms and conditions
hereinafter set forth.
2. TRUST ADMINISTRATION. Subject to the direction and control of
PRAGMA and the Trust, MGF shall supervise the Trust's business affairs not
otherwise supervised by other agents of the Trust. To the extent not otherwise
the primary responsibility of, or provided by, other agents of PRAGMA or the
Trust, MGF shall supply (i) non-investment related statistical and research
data, (ii) internal regulatory compliance services, and (iii) executive and
administrative
<PAGE>
services. MGF shall supervise the preparation of (i) tax returns, (ii) reports
to shareholders of the Trust, (iii) reports to and filings with the Securities
and Exchange Commission, state securities commissions and Blue Sky authorities
including preliminary and definitive proxy materials and post-effective
amendments to the Trust's registration statement, and (iv) necessary materials
for meetings of the Trust's Board of Trustees unless prepared by other parties
under agreement with PRAGMA or the Trust. MGF shall provide personnel to serve
as officers of the Trust if so elected by the Board of Trustees; provided,
however, that PRAGMA shall reimburse MGF for the expenses incurred by such
personnel in attending Board of Trustees' meetings and shareholders' meetings
of the Trust.
3. RECORD KEEPING AND OTHER INFORMATION. MGF shall create and
maintain all necessary records in accordance with all applicable laws, rules
and regulations, including but not limited to records required by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder, as the
same may be amended from time to time, pertaining to the various functions
performed by it and not otherwise created and maintained by another party
pursuant to contract with PRAGMA or the Trust. Where applicable, such records
shall be maintained by MGF for the periods and in the places required by Rule
31a-2 under the Investment Company Act of 1940.
4. AUDIT, INSPECTION AND VISITATION. MGF shall make available to
PRAGMA and the Trust during regular business hours all records and other data
created and maintained pursuant to the foregoing provisions of this Agreement
for reasonable audit and inspection by PRAGMA and the Trust or their agents,
or any regulatory agency having authority over the Trust.
5. COMPENSATION. For the performance of MGF's obligations
under this Agreement, PRAGMA shall pay MGF, on the first business day
following the end of each month, a fee with respect to each series of
the Trust equal to the annual rate of .15% of the average value during
such month of 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 shall be $1,000
per month for each series. MGF shall not be required to reimburse the
Trust or PRAGMA for (or have deducted from its fees) any expenses in
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excess of expense limitations imposed by certain state securities commissions
having jurisdiction over the Trust.
6. INDEMNIFICATION OF MGF. MGF may rely on information reasonably
believed by it to be accurate and reliable. Except as may otherwise be
required by the 1940 Act and the rules thereunder, neither MGF nor its
shareholders, officers, directors, employees, agents, control persons or
affiliates of any thereof shall be subject to any liability for, or any
damages, expenses or losses incurred by the Trust or PRAGMA in connection
with, any error of judgment, mistake of law, any act or omission connected
with or arising out of any services rendered under or payments made pursuant
to this Agreement or any other matter to which this Agreement relates, except
by reason of willful misfeasance, bad faith or gross negligence on the part of
any such persons in the performance of the duties of MGF under this Agreement
or by reason of reckless disregard by any of such persons of the obligations
and duties of MGF under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, who may be or become an
officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of MGF or any of its
affiliates, even though paid by one of those entities.
Notwithstanding any other provision of this Agreement, the
Trust and PRAGMA shall each indemnify and hold harmless MGF, its directors,
officers, employees, shareholders, agents, control persons and affiliates,
from and against any and all claims, demands, expenses and liabilities
(whether with or without basis in fact or law) of any and every nature which
MGF may sustain or incur or which may be asserted against MGF by any person,
by reason of, or as a result of: (i) any action taken or omitted to be taken
by MGF in good faith in reliance upon any certificate, instrument, order or
stock certificate believed by it to be genuine and to be signed, countersigned
or executed by any duly authorized person, upon the oral instructions or
written instructions of an authorized person of the Trust or upon the opinion
of legal counsel for the Trust or its own counsel; or (ii) any action taken or
omitted to be taken by MGF in connection with its
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<PAGE>
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of MGF or its directors,
officers, employees, shareholders or agents in cases of its or their own gross
negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
7. SERVICES FOR OTHERS. Nothing in this Agreement shall prevent MGF
or any affiliated person of MGF from providing services for any other person,
firm or corporation, including other investment companies; provided, however,
that MGF expressly represents that it will undertake no activities which, in
its judgment, will adversely affect the performance of its obligations under
this Agreement.
8. COMPLIANCE WITH GOVERNMENT RULES AND REGULATIONS. The parties
hereto acknowledge and agree that nothing contained herein shall be construed
to require MGF to perform any services for PRAGMA or the Trust which services
could cause MGF to be deemed an "investment adviser" of the Trust within the
meaning of Section 2(a)(20) of the Investment Company Act of 1940 or to
supersede or contravene the Prospectus or Statement of Additional Information
of the Trust or any provisions of the Investment Company Act of 1940 and the
rules thereunder.
9. RENEWAL AND TERMINATION. This Agreement shall become effective on
the date first above written and shall remain in force for a period of two (2)
years from such date, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Trustees who are not interested persons of the Trust or MGF,
cast in person at a meeting called for the purpose of voting on such approval
and by a vote of the Board of Trustees or of a majority of the Trust's
outstanding voting securities. This Agreement may be terminated without the
payment of any penalty by any party upon sixty (60) days' written notice to
the other parties. Upon the termination of this Agreement, PRAGMA shall pay
MGF such compensation as may be payable for the period prior to the effective
date of such termination.
10. LIMITATION OF LIABILITY. The term "PRAGMA Investment Trust"
means and refers to the trustees from time to time serving under the
Trust's Agreement and Declaration of Trust as the same may
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<PAGE>
subsequently thereto have been, or subsequently hereto may be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust property of the
Trust. The execution and delivery of this Agreement have been authorized by
the trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
11. SEVERABILITY. In the event any provision of this Agreement
is determined to be void or unenforceable, such determination shall
not affect the remainder of this Agreement, which shall continue to be
in force.
12. QUESTIONS OF INTERPRETATION. This Agreement shall be governed by
the laws of the State of Ohio. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said 1940 Act. In addition, where the effect of
a requirement of the 1940 Act, reflected in any provision of this Agreement,
is revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. REPRESENTATIONS OF MGF. MGF represents and warrants that no legal
proceedings or regulatory investigations are pending against MGF which could
have a material impact on the operations or financial condition of MGF. MGF
also represents and warrants that it currently maintains all registrations and
meets all capital requirements under applicable laws in order to provide the
services contemplated herein, and will continue to do so for the duration of
this Agreement. MGF agrees that it will notify PRAGMA and the Trust
immediately should it
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<PAGE>
become a party to any legal proceeding, regulatory investigation or
enforcement action that could have a material impact on the operations or
financial condition of MGF. MGF further agrees that it will immediately notify
PRAGMA and the Trust of any material change in the ownership or control of
MGF.
14. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Trust and of PRAGMA for this purpose shall be 7150 Greenville Avenue, Suite
101, Dallas, Texas 75231 and that the address of MGF for this purpose shall be
312 Walnut Street, Cincinnati, Ohio 45202.
15. BINDING EFFECT. Each of the undersigned expressly warrants
and represents that he has the full power and authority to sign this
Agreement on behalf of the party indicated, and that his signature
will operate to bind the party indicated to the foregoing terms.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
PRAGMA INVESTMENT TRUST
By:/S/ JOHN H. ALBAN, III
Its: President
PRAGMA, INC.
By:/S/ JOHN H. ALBAN, JR.
Its: President
MGF SERVICE CORP.
By:/S/ ROBERT G. DORSEY
Its: President
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ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT effective as of March 15, 1996 by and between PRAGMA
INVESTMENT TRUST (the "Trust"), an Ohio business trust, PRAGMA, INC.
("PRAGMA"), a Texas corporation, and MGF SERVICE CORP. ("MGF"), an Ohio
corporation.
WITNESSETH THAT:
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, PRAGMA is registered as an investment adviser under the
Investment Advisers Act of 1940 and provides advisory services to the Trust
pursuant to an Investment Advisory Agreement; and
WHEREAS, under the Investment Advisory Agreement, PRAGMA is
responsible for retaining and compensating agents to provide non- advisory
services to the Trust; and
WHEREAS, PRAGMA desires to hire MGF to provide the Trust with certain
accounting and pricing services, and MGF is willing to provide such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT.
MGF is hereby appointed to provide the Trust with certain
accounting and pricing services, and MGF accepts such appointment and agrees
to provide such services under the terms and conditions set forth herein.
2. CALCULATION OF NET ASSET VALUE.
MGF will calculate the net asset value of each series of the
Trust and the per share net asset value of each series of
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<PAGE>
the Trust, in accordance with the Trust's current prospectus and statement of
additional information, once daily as of the time selected by the Trust's
Board of Trustees. MGF will prepare and maintain a daily valuation of all
securities and other assets of the Trust in accordance with instructions from
a designated officer of the Trust or PRAGMA and in the manner set forth in the
current prospectus and statement of additional information. In valuing
securities of the Trust, MGF may contract with, and rely upon market
quotations provided by, outside services.
3. BOOKS AND RECORDS.
MGF will maintain and keep current the general ledger for
each series of the Trust, recording all income and expenses, capital share
activity and security transactions of the Trust. MGF will maintain such
further books and records as are necessary to enable it to perform its duties
under this Agreement, and will periodically provide reports to the Trust and
its authorized agents regarding share purchases and redemptions and trial
balances of each series of the Trust. MGF will prepare and maintain complete,
accurate and current all records with respect to the Trust required to be
maintained by the Trust under the Internal Revenue Code of 1986, as amended
(the "Code"), and under the rules and regulations of the 1940 Act, and will
preserve said records in the manner and for the periods prescribed in the Code
and the 1940 Act. The retention of such records shall be at the expense of
PRAGMA.
All of the records prepared and maintained by MGF pursuant
to this Section 3 which are required to be maintained by the Trust under the
Code and the 1940 Act will be the property of the Trust. In the event this
Agreement is terminated, all such records shall be delivered to the Trust or
to PRAGMA at PRAGMA's expense, and MGF shall be relieved of responsibility for
the preparation and maintenance of any such records delivered to the Trust or
PRAGMA.
4. PAYMENT OF TRUST EXPENSES.
MGF shall process each request received from the Trust or
its authorized agents for payment of the Trust's expenses. Upon receipt of
written instructions signed by an officer or other authorized agent of the
Trust, MGF shall prepare checks in
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<PAGE>
the appropriate amounts which shall be signed by an authorized officer of MGF
and mailed to the appropriate party.
5. FORM N-SAR.
MGF shall maintain such records within its control and as
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
MGF shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
8. FEES.
For performing its services under this Agreement, PRAGMA
shall pay MGF a monthly fee with respect to each series of the Trust in
accordance with the schedule attached hereto as Schedule A. The fees with
respect to any month shall be paid to MGF on the last business day of such
month. PRAGMA shall also promptly reimburse MGF for the cost of external
pricing services utilized by MGF.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any services for
PRAGMA or the Trust which services could cause MGF
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<PAGE>
to be deemed an "investment adviser" of the Trust within the meaning of
Section 2(a)(20) of the 1940 Act or to supersede or contravene the prospectus
or statement of additional information of the Trust or any provisions of the
1940 Act and the rules thereunder. Except as otherwise provided in this
Agreement and except for the accuracy of information furnished to it by MGF,
the Trust assumes full responsibility for complying with all applicable
requirements of the 1940 Act, the Securities Act of 1933, as amended, and any
laws, rules and regulations of governmental authorities having jurisdiction,
it being acknowledged that the Trust is relying on the best efforts of MGF.
10. REFERENCES TO MGF, PRAGMA AND THE TRUST.
The Trust or PRAGMA shall not circulate any printed matter
which contains any reference to MGF without the prior written approval of MGF,
excepting solely such printed matter as merely identifies MGF as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust or PRAGMA will
submit printed matter requiring approval to MGF in draft form, allowing
sufficient time for review by MGF and its counsel prior to any deadline for
printing.
MGF shall not circulate any printed matter which contains
any reference to the Trust or PRAGMA without the prior written approval of the
Trust or PRAGMA, excepting solely such printed matter as merely identifies
PRAGMA and the Trust as clients of MGF. MGF will submit printed matter
requiring approval to PRAGMA and/or the Trust in draft form, allowing
sufficient time for review by PRAGMA and/or the Trust and its counsel prior to
any deadline for printing.
11. EQUIPMENT FAILURES.
In the event of equipment failures beyond MGF's control, MGF
shall take all steps necessary to minimize service interruptions but shall
have no liability with respect thereto. MGF shall endeavor to enter into one
or more agreements making provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
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<PAGE>
12. INDEMNIFICATION OF MGF.
MGF may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither MGF nor its shareholders, officers, directors,
employees, agents, control persons or affiliates of any thereof shall be
subject to any liability for, or any damages, expenses or losses incurred by
the Trust or PRAGMA in connection with, any error of judgment, mistake of law,
any act or omission connected with or arising out of any services rendered
under or payments made pursuant to this Agreement or any other matter to which
this Agreement relates, except by reason of willful misfeasance, bad faith or
gross negligence on the part of any such persons in the performance of the
duties of MGF under this Agreement or by reason of reckless disregard by any
of such persons of the obligations and duties of MGF under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, who may be or become an
officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of MGF or any of its
affiliates, even though paid by one of those entities.
Notwithstanding any other provision of this Agreement, the
Trust and PRAGMA shall each indemnify and hold harmless MGF, its directors,
officers, employees, shareholders, agents, control persons and affiliates,
from and against any and all claims, demands, expenses and liabilities
(whether with or without basis in fact or law) of any and every nature which
MGF may sustain or incur or which may be asserted against MGF by any person,
by reason of, or as a result of: (i) any action taken or omitted to be taken
by MGF in good faith in reliance upon any certificate, instrument, order or
stock certificate believed by it to be genuine and to be signed, countersigned
or executed by any duly authorized person, upon the oral instructions or
written instructions of an authorized person of the Trust or upon the
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<PAGE>
opinion of legal counsel for the Trust or its own counsel; or (ii) any action
taken or omitted to be taken by MGF in connection with its appointment in good
faith in reliance upon any law, act, regulation or interpretation of the same
even though the same may thereafter have been altered, changed, amended or
repealed. However, indemnification under this subparagraph shall not apply to
actions or omissions of MGF or its directors, officers, employees,
shareholders or agents in cases of its or their own gross negligence, willful
misconduct, bad faith, or reckless disregard of its or their own duties
hereunder.
13. TERMINATION.
The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that
date and shall continue in force from year to year thereafter, but only so
long as such continuance is approved (1) by MGF, (2) by PRAGMA, (3) by vote,
cast in person at a meeting called for the purpose, of a majority of the
Trust's trustees who are not parties to this Agreement or interested persons
(as defined in the 1940 Act) of any such party, and (4) by vote of a majority
of the Trust's Board of Trustees or a majority of the Trust's outstanding
voting securities.
Any party may terminate this Agreement on any date by giving
the other parties at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, PRAGMA shall pay to MGF such compensation as may be due as of the
date of such termination.
In the event that in connection with the termination of this
Agreement a successor to any of MGF's duties or responsibilities under this
Agreement is designated by the Trust or by PRAGMA by written notice to MGF,
MGF shall, promptly upon such termination and at the expense of PRAGMA,
transfer all records maintained by MGF under this Agreement and shall
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from MGF's cognizant personnel in the establishment
of books, records and other data by such successor.
14. SERVICES FOR OTHERS.
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Nothing in this Agreement shall prevent MGF or any
affiliated person (as defined in the 1940 Act) of MGF from providing services
for any other person, firm or corporation (including other investment
companies); provided, however, that MGF expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
15. REPRESENTATIONS OF MGF
MGF represents and warrants that no legal proceedings or
regulatory investigations are pending against MGF which could have a material
impact on the operations or financial condition of MGF. MGF also represents
and warrants that it currently maintains all registrations and meets all
capital requirements under applicable laws in order to provide the services
contemplated herein, and will continue to do so for the duration of this
Agreement. MGF agrees that it will notify PRAGMA and the Trust immediately
should it become a party to any legal proceeding, regulatory investigation or
enforcement action that could have a material impact on the operations or
financial condition of MGF. MGF further agrees that it will immediately notify
PRAGMA and the Trust of any material change in the ownership or control of
MGF.
16. MISCELLANEOUS.
The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof
or otherwise affect their construction or effect.
17. LIMITATION OF LIABILITY.
The term "PRAGMA Investment Trust" means and refers to the
trustees from time to time serving under the Trust's Agreement and Declaration
of Trust as the same may subsequently thereto have been, or subsequently
hereto may be, amended. It is expressly agreed that the obligations of the
Trust hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind
only the trust property of the Trust. The execution and
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<PAGE>
delivery of this Agreement has been authorized by the trustees of the Trust
and signed by an officer of the Trust acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.
18. SEVERABILITY.
In the event any provision of this Agreement is determined
to be void or unenforceable, such determination shall not affect the remainder
of this Agreement, which shall continue to be in force.
19. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said 1940 Act. In addition, where the effect of
a requirement of the 1940 Act, reflected in any provision of this Agreement,
is revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
20. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Trust and of PRAGMA for this
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purpose shall be 7150 Greenville Avenue, Suite 101, Dallas, Texas 75231 and
that the address of MGF for this purpose shall be 312 Walnut Street,
Cincinnati, Ohio 45202.
21. BINDING EFFECT.
Each of the undersigned expressly warrants and represents
that he has the full power and authority to sign this Agreement on behalf of
the party indicated, and that his signature will operate to bind the party
indicated to the foregoing terms.
22. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
23. FORCE MAJEURE.
If MGF shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national
emergencies, explosion, flood, accident, earthquake or other catastrophe,
fire, strike or other labor problems, legal action, present or future law,
governmental order, rule or regulation, or shortages of suitable parts,
materials, labor or transportation, such delay or non-performance shall be
excused and a reasonable time for performance in connection with this
Agreement shall be extended to include the period of such delay or
non-performance.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PRAGMA INVESTMENT TRUST
By:/S/ JOHN H. ALBAN, III
Its: President
PRAGMA, INC.
By:/S/ JOHN H. ALBAN, JR.
Its: President
MGF SERVICE CORP.
By:/S/ ROBERT G. DORSEY
Its: President
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SCHEDULE A
COMPENSATION
FOR FUND ACCOUNTING AND PORTFOLIO PRICING:
PRAGMA will pay MGF a monthly fee with respect to each series of the
Trust, according to the average net assets of such series during such month,
as follows:
MONTHLY FEES AVERAGE NET ASSETS
$2,000 $0 - $ 50,000,000
$2,500 $50,000,000 - $100,000,000
$3,000 $100,000,000 - $200,000,000
$4,000 $Over $200,000,000
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TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of March 15, 1996 by and between
PRAGMA INVESTMENT TRUST (the "Trust"), an Ohio business trust, PRAGMA, INC.
("PRAGMA"), a Texas corporation, and MGF SERVICE CORP. (the "T/A"), an Ohio
corporation.
WITNESSETH THAT:
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, PRAGMA is registered as an investment adviser under the
Investment Advisers Act of 1940 and provides advisory services to the Trust
pursuant to an Investment Advisory Agreement; and
WHEREAS, under the Investment Advisory Agreement, PRAGMA is
responsible for retaining and compensating agents to provide non- advisory
services to the Trust; and
WHEREAS, PRAGMA desires to appoint the T/A as the Trust's transfer
agent, dividend disbursing agent, shareholder service agent, plan agent and
shareholder purchase and redemption agent, and the T/A is willing to act in
such capacities upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT OF TRANSFER AGENT.
The T/A is hereby appointed transfer agent for the shares
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of the Trust and dividend disbursing agent for the Trust and shall also act as
plan agent, shareholder service agent and purchase and redemption agent for
shareholders of the Trust, and the T/A accepts such appointment and agrees to
act in such capacities under the terms and conditions set forth herein.
2. DOCUMENTATION.
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission and amendments thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
the T/A;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
F. Such other certificates, documents or opinions which
the T/A may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
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in the future by the Trust and for which the T/A is to
act as plan agent.
3. T/A TO RECORD SHARES.
The T/A shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the Securities and Exchange
Commission a record of the total number of shares of the Trust which are
authorized, issued and outstanding, based upon data provided to it by the
Trust. The T/A shall also provide the Trust on a regular basis or upon
reasonable request the total number of shares which are authorized, issued and
outstanding, based upon data provided to it by the Trust. The T/A shall also
provide the Trust on a regular basis or upon reasonable request the total
number of shares which are authorized, issued and outstanding, but shall have
no obligation when recording the issuance of the Trust's shares, except as
otherwise set forth herein, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of such shares, which
functions shall be the sole responsibility of the Trust.
4. T/A TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon surrender
to the T/A of certificates, if any, in proper form for transfer, the T/A shall
approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
the T/A shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by the T/A.
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, the T/A will countersign and mail, by
insured first class mail, a share certificate to the investor at his address
as set forth on the
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transfer books of the Trust, subject to any other instructions for delivery of
certificates representing newly purchased shares and subject to the limitation
that no certificates representing newly purchased shares shall be mailed to
the investor until the cash purchase price of such shares has been collected
and credited to the account of the Trust maintained by the Custodian. The
Trust shall supply the T/A with a sufficient supply of blank share
certificates and from time to time shall renew such supply upon request of the
T/A. Such blank share certificates shall be properly signed, manually or, if
authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, the T/A may continue to countersign certificates which bear the
manual or facsimile signature of such officer until otherwise directed by the
Trust. In case of the alleged loss or destruction of any share certificate, no
new certificate shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to the T/A and the Trust, and
issued by a surety company satisfactory to the T/A and the Trust.
6. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or endorsed
to it as agent for, or identified as being for the account of, the Trust, the
T/A shall stamp the check or instrument with the date of receipt and shall
forthwith process the same for collection. Upon receipt of notification of
receipt of funds eligible for share purchases in accordance with the Trust's
then current prospectus and statement of additional information, the T/A shall
notify the Trust, at the close of each business day, in writing of the amount
of said funds credited to the Trust and deposited in its account with the
Custodian.
7. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of shares
of the Trust, accompanied by sufficient information to enable the T/A to
establish a shareholder account, the T/A shall,
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as of the next determination of net asset value after receipt of such order in
accordance with the Trust's then current prospectus and statement of
additional information, compute the number of shares due to the shareholder,
credit the share account of the shareholder, subject to collection of the
funds, with the number of shares so purchased, shall notify the Trust in
writing or by computer report at the close of each business day of such
transactions and shall mail to the shareholder and/or dealer of record a
notice of such credit when required by applicable securities laws or
regulations.
8. RETURNED CHECKS.
In the event that the T/A is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, the T/A will:
A. Give prompt notification to the Trust of the non-
payment of said check;
B. In the absence of other instructions from the Trust,
take such steps as may be necessary to redeem any
shares purchased on the basis of such returned check
and cause the proceeds of such redemption plus any
dividends declared with respect to such shares to be
credited to the account of the Trust and to request the
Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the
Trust's records maintained by the T/A pursuant to this
Agreement.
9. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish the T/A with appropriate evidence of
trustee action authorizing the declaration of dividends and other
distributions. The T/A shall establish procedures in accordance with the
Trust's then current prospectus and statement
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of additional information and with other authorized actions of the Trust's
Board of Trustees under which it will have available from the Custodian of the
Trust or the Trust any required information for each dividend and other
distribution. After deducting any amount required to be withheld by any
applicable laws, the T/A shall, as agent for each shareholder who so requests,
invest the dividends and other distributions in full and fractional shares in
accordance with the Trust's then current prospectus and statement of
additional information. If a shareholder has elected to receive dividends or
other distributions in cash, then the T/A shall disburse dividends to
shareholders of record in accordance with the Trust's then current prospectus
and statement of additional information. The T/A shall, before the mailing
date of such checks, notify the Trust and the Custodian of the estimated
amount of cash required to pay such dividend or distribution, and the Trust
shall instruct the Custodian to make available sufficient funds therefor in
the appropriate account of the Trust. The T/A shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited. The
T/A shall prepare and file with the Internal Revenue Service, and when
required, shall address and mail to shareholders, such returns and information
relating to dividends and distributions paid by the Trust as are required to
be so prepared, filed and mailed by applicable laws, rules and regulations.
10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
The T/A shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by
the T/A, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which
checks or share certificates mailed in payment of distributions have been
returned. The T/A shall use its best efforts to contact the shareholders
affected and to follow any other written instructions received from the Trust
concerning the disposition of any such unclaimed dividends, distributions or
redemption proceeds.
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11. REDEMPTIONS AND EXCHANGES.
A. The T/A shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by the T/A. Upon its approval of such redemption
transactions, the T/A, when required by applicable securities laws or
regulations, shall mail to the shareholder and/or dealer of record a
confirmation showing trade date, number of full and fractional shares
redeemed, the price per share and the total redemption proceeds. For such
redemption, the T/A shall either: (a) prepare checks in the appropriate
amounts for approval and verification by the Trust and signature by an
authorized officer of the T/A and mail the checks to the appropriate person,
or (b) in the event redemption proceeds are to be wired through the Federal
Reserve Wire system or by bank wire, cause such proceeds to be wired in
federal funds to the bank account designated by the shareholder, or (c)
effectuate such other redemption procedures which are authorized by the
Trust's Board of Trustees or its then current prospectus and statement of
additional information. The requirements as to instruments of transfer and
other documentation, the applicable redemption price and the time of payment
shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by the T/A. If the T/A or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, the T/A shall promptly notify the shareholder and/or dealer
of record indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with shares
of any other investment company, the T/A, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved
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exchange requests.
C. The T/A shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph 11, and, on the basis of such notice, the
Trust shall instruct the Custodian to make available from time to time
sufficient funds therefor in the appropriate account of the Trust. Procedures
for effecting redemption orders accepted from shareholders or dealers of
record by telephone or other methods shall be established by mutual agreement
between the T/A and the Trust consistent with the then current prospectus and
statement of additional information.
D. The authority of the T/A to perform its responsibilities under
Paragraph 7, Paragraph 9 and this Paragraph 11 shall be suspended upon receipt
of notification by it of the suspension of the determination of the Trust's
net asset value.
12. AUTOMATIC WITHDRAWAL PLANS.
The T/A will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Trust.
Payments upon such withdrawal order shall be made by the T/A from the
appropriate account maintained by the Trust with the Custodian on
approximately the last business day of each month in which a payment has been
requested, and the T/A will withdraw from a shareholder's account and present
for repurchase or redemption as many shares as shall be sufficient to make
such withdrawal payment pursuant to the provisions of the shareholder's
withdrawal plan and the current prospectus and statement of additional
information of the Trust. From time to time on new automatic withdrawal plans
a check for payment date already past may be issued upon request by the
shareholder.
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13. WIRE-ORDER PURCHASES.
The T/A will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer
by the close of business on the business day following receipt of such orders
by the T/A. Upon receipt of any check drawn or endorsed to the Trust (or the
T/A, as agent) or otherwise identified as being payment of an outstanding
wire- order, the T/A will stamp said check with the date of its receipt and
deposit the amount represented by such check to the T/A's deposit accounts
maintained with the Custodian. The T/A will cause the Custodian to transfer
federal funds in an amount equal to the net asset value of the shares so
purchased to the Trust's account with the Custodian, and will notify the Trust
before noon of each business day of the total amount deposited in the Trust's
deposit accounts, and in the event that payment for a purchase order is not
received by the T/A or the Custodian on the tenth business day following
receipt of the order, prepare an NASD "notice of failure of dealer to make
payment."
14. OTHER PLANS.
The T/A will process such group programs and other plans or
programs for investing in shares of the Trust as are now provided for in the
Trust's current prospectus and statement of additional information and will
act as plan agent for shareholders pursuant to the terms of such plans and
programs duly executed by such shareholders.
15. RECORDKEEPING AND OTHER INFORMATION.
The T/A shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the
same may be amended from time to time, pertaining to the various functions
performed by it and not otherwise created and maintained by another party
pursuant to contract with PRAGMA or the Trust. All such records shall be the
property of the Trust at all times and shall be available for inspection and
use by the Trust. Where applicable, such records shall be maintained by the
T/A for the periods and in the places
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required by Rule 31a-2 under the 1940 Act. The retention of such records shall
be at the expense of PRAGMA. The T/A shall make available during regular
business hours all records and other data created for inspection by the Trust
and PRAGMA or their agents, or any regulatory agency having authority over the
Trust.
16. BOOKS AND RECORDS.
The T/A shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder with
respect to (i) dividend or distribution elections and (ii)
elections with respect to payment options in connection with
the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
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J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for the T/A to
perform the calculations contemplated under this
Agreement.
17. TAX RETURNS AND REPORTS.
The T/A will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and mail to
shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
18. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable
law, the T/A will also maintain such records as shall be necessary to furnish
to the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
19. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, the T/A shall arrange for the Trust's investment
adviser to have direct access to shareholder information contained in the
T/A's computer system, including account balances, performance information and
such other information which is available to the T/A with respect to
shareholder accounts.
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20. COOPERATION WITH ACCOUNTANTS.
The T/A shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
21. SHAREHOLDER SERVICE AND CORRESPONDENCE.
The T/A will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating
to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders. The T/A will answer written
correspondence from shareholders relating to their share accounts and such
other written or oral inquiries as may from time to time be mutually agreed
upon, and the T/A will notify the Trust of any correspondence or inquiries
which may require an answer from the Trust.
22. PROXIES.
The T/A shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
23. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
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24. FEES AND CHARGES.
For performing its services under this Agreement, PRAGMA shall
pay the T/A with respect to each series of the Trust in accordance with the
schedule attached hereto as Schedule A. Fees shall be paid monthly. PRAGMA
shall promptly reimburse the T/A for any out of pocket expenses and advances
which are to be paid by PRAGMA in accordance with Paragraph 25.
25. EXPENSES.
The T/A shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of
data processing equipment. All costs and expenses not expressly assumed by the
T/A under this Paragraph 25 shall be paid by PRAGMA, including, but not
limited to costs and expenses for postage, envelopes, checks, drafts,
continuous forms, reports, communications, statements and other materials,
telephone, telegraph and remote transmission lines, use of outside mailing
firms, necessary outside record storage, media for storage of records (e.g.,
microfilm, microfiche, computer tapes), printing, confirmations and any other
shareholder correspondence and any and all assessments, taxes or levies
assessed on the T/A for services provided under this Agreement. Postage for
mailings of dividends, proxies, reports and other mailings to all shareholders
shall be advanced to the T/A three business days prior to the mailing date of
such materials.
26. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require the T/A to perform any services for the
Trust or PRAGMA which services could cause MGF to be deemed an "investment
adviser" of the Trust within the meaning of Section 2(a)(20) of the 1940 Act
or to supersede or contravene the prospectus or statement of additional
information of the Trust or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by the T/A, the Trust assumes full
responsibility for complying with all
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applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
27. REFERENCES TO THE T/A, PRAGMA AND THE TRUST.
A. The Trust or PRAGMA shall not circulate any printed matter
which contains any reference to the T/A without the prior written approval of
the T/A, excepting solely such printed matter as merely identifies the T/A as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust or PRAGMA will
submit printed matter requiring approval to the T/A in draft form, allowing
sufficient time for review by the T/A and its counsel prior to any deadline
for printing.
B. MGF shall not circulate any printed matter which contains any
reference to the Trust or PRAGMA without the prior written approval of the
Trust or PRAGMA, excepting solely such printed matter as merely identifies
PRAGMA and the Trust as clients of MGF. MGF will submit printed matter
requiring approval to PRAGMA and/or the Trust in draft form, allowing
sufficient time for review by PRAGMA and/or the Trust and its counsel prior to
any deadline for printing.
28. EQUIPMENT FAILURES.
In the event of equipment failures beyond the T/A's control, the
T/A shall take all steps necessary to minimize service interruptions but shall
have no liability with respect thereto. The T/A shall endeavor to enter into
one or more agreements making provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
29. INDEMNIFICATION OF THE T/A.
A. The T/A may rely on information reasonably believed by
it to be accurate and reliable. Except as may otherwise be
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required by the 1940 Act and the rules thereunder, neither the T/A nor its
shareholders, officers, directors, employees, agents, control persons or
affiliates of any thereof shall be subject to any liability for, or any
damages, expenses or losses incurred by the Trust or PRAGMA in connection
with, any error of judgment, mistake of law, any act or omission connected
with or arising out of any services rendered under or payments made pursuant
to this Agreement or any other matter to which this Agreement relates, except
by reason of willful misfeasance, bad faith or gross negligence on the part of
any such persons in the performance of the duties of the T/A under this
Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of the T/A under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of the T/A, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust,
to be rendering such services to or acting solely as an officer, trustee,
employee or agent of the Trust and not as a director, officer, employee,
shareholder or agent of or one under the control or direction of the T/A or
any of its affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the
Trust and PRAGMA shall each indemnify and hold harmless the T/A, its
directors, officers, employees, shareholders and agents from and against any
and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which the T/A may sustain or
incur or which may be asserted against the T/A by any person by reason of, or
as a result of: (i) any action taken or omitted to be taken by the T/A in good
faith in reliance upon any certificate, instrument, order or share certificate
believed by it to be genuine and to be signed, countersigned or executed by
any duly authorized person, upon the oral instructions or written instructions
of an authorized person of the Trust or upon the opinion of legal counsel for
the Trust or its own counsel; or (ii) any action taken or
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omitted to be taken by the T/A in connection with its appointment in good
faith in reliance upon any law, act, regulation or interpretation of the same
even though the same may thereafter have been altered, changed, amended or
repealed. However, indemnification under this subparagraph shall not apply to
actions or omissions of the T/A or its directors, officers, employees,
shareholders or agents in cases of its or their own gross negligence, willful
misconduct, bad faith, or reckless disregard of its or their own duties
hereunder.
30. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that
date and shall continue in force from year to year thereafter, but only so
long as such continuance is approved (1) by the T/A, (2) by PRAGMA, (3) by
vote, cast in person at a meeting called for the purpose, of a majority of the
Trust's trustees who are not parties to this Agreement or interested persons
(as defined in the 1940 Act) of any such party, and (4) by vote of a majority
of the Trust's Board of Trustees or a majority of the Trust's outstanding
voting securities.
B. Any party may terminate this Agreement on any date by giving
the other parties at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, PRAGMA shall pay to the T/A such compensation as may be due as of
the date of such termination, and shall likewise reimburse the T/A for any
out-of-pocket expenses and disbursements reasonably incurred by the T/A to
such date.
C. In the event that in connection with the termination of this
Agreement a successor to any of the T/A's duties or responsibilities under
this Agreement is designated by the Trust or by PRAGMA by written notice to
the T/A, the T/A shall, promptly upon such termination and at the expense of
PRAGMA, transfer all records and unused statement stationery and similar
materials maintained by the T/A under this Agreement and shall cooperate in
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the transfer of such duties and responsibilities, including provision for
assistance from the T/A's cognizant personnel in the establishment of books,
records and other data by such successor.
31. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent the T/A or any affiliated
person (as defined in the 1940 Act) of the T/A from providing services for any
other person, firm or corporation (including other investment companies);
provided, however, that the T/A expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the performance of
its obligations under this Agreement.
32. REPRESENTATIONS OF MGF
MGF represents and warrants that no legal proceedings or
regulatory investigations are pending against MGF which could have a material
impact on the operations or financial condition of MGF. MGF also represents
and warrants that it currently maintains all registrations and meets all
capital requirements under applicable laws in order to provide the services
contemplated herein, and will continue to do so for the duration of this
Agreement. MGF agrees that it will notify PRAGMA and the Trust immediately
should it become a party to any legal proceeding, regulatory investigation or
enforcement action that could have a material impact on the operations or
financial condition of MGF. MGF further agrees that it will immediately notify
PRAGMA and the Trust of any material change in the ownership or control of
MGF.
33. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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34. LIMITATION OF LIABILITY.
The term "PRAGMA Investment Trust" means and refers to the
trustees from time to time serving under the Trust's Agreement and Declaration
of Trust as the same may subsequently thereto have been, or subsequently
hereto may be, amended. It is expressly agreed that the obligations of the
Trust hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind
only the trust property of the Trust. The execution and delivery of this
Agreement have been authorized by the trustees of the Trust and signed by an
officer of the Trust, acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Trust.
35. SEVERABILITY.
In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said 1940 Act. In addition, where the effect of
a requirement of the 1940 Act, reflected in any provision of this Agreement,
is revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
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37. NOTICES.
Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as
such other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Trust and of
PRAGMA for this purpose shall be 7150 Greenville Avenue, Suite 101, Dallas,
Texas 75231 and that the address of the T/A for this purpose shall be 312
Walnut Street, Cincinnati, Ohio 45202.
38. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that he
has the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
39. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
40. FORCE MAJEURE.
If the T/A shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national
emergencies, explosion, flood, accident, earthquake or other catastrophe,
fire, strike or other labor problems, legal action, present or future law,
governmental order, rule or regulation, or shortages of suitable parts,
materials, labor or transportation, such delay or non-performance shall be
excused and a reasonable time for performance in connection with this
Agreement shall be extended to include the period of such delay or
non-performance.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PRAGMA INVESTMENT TRUST
By:/S/ JOHN H. ALBAN, III
Its: President
PRAGMA, INC.
By:/S/ JOHN H. ALBAN, JR.
Its: President
MGF SERVICE CORP.
By:/S/ ROBERT G. DORSEY
Its: President
- 146 -
<PAGE>
SCHEDULE A
COMPENSATION
AS TRANSFER, DIVIDEND DISBURSING AND
SHAREHOLDER SERVICE AGENT
Payable monthly at
PRAGMA Providence Fund: rate of $17/account per
year; subject to minimum
of $1,000 per month
- 147 -
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
this Post-Effective Amendment No. 1 of our report dated February 20, 1996 and
to all references to our Firm included in or made as part of this
Post-Effective Amendment.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
September 11, 1996
- 148 -
SUBSCRIPTION AGREEMENT
February 13, 1996
PRAGMA INVESTMENT TRUST
7150 Greenville Avenue
Suite 101 - LB 340
Dallas, Texas
Ladies and Gentlemen:
PRAGMA Investment Trust (the "Trust") proposes to issue and sell to
the public its shares of beneficial interest without par value (the "Shares")
pursuant to a registration statement on Form N-1A (the "Registration
Statement") filed with the Securities and Exchange Commission. The Trust
currently issues a single series of shares, the PRAGMA Providence Fund (the
"Fund"). In order to provide the Trust with a net worth of at least $100,000
as required by Section 14 of the Investment Company Act of 1940, as amended, I
hereby offer to purchase 50,000 Shares of the Fund at a price of $10.00 per
Share prior to the effective date of the Registration Statement (on such date
as may be mutually agreed upon).
I will make payment for the Shares by delivery of a certified or
official bank check in the amount of $500,000 payable to the order of the
Trust or by wire transfer.
I represent and warrant to the Trust that the Shares are being
acquired by me for investment and not with a view to the resale or further
distribution thereof and that I have no present intention to redeem the
Shares.
I hereby agree that, in the event that any of the Shares referred to
above are redeemed prior to the amortization in full of the Trust's
organizational expenses, the proceeds of such redemption will be reduced by
the PRO RATA portion of any unamortized organizational expenses in the same
proportion as the number of such Shares redeemed bears to the number of such
Shares held at the time of redemption and that, to the extent that the
proceeds of any such redemption are less
- 149 -
<PAGE>
than such PRO RATA portion of any then-unamortized organizational expenses, I
will reimburse the Trust promptly for such unamortized organizational
expenses.
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
/S/ JOHN H. ALBAN, JR.
John H. Alban, Jr.
Confirmed, as of the date first above written.
PRAGMA INVESTMENT TRUST
By/S/ JOHN H. ALBAN, III
President
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001005706
<NAME> PRAGMA INVESTMENT TRUST - PRAGMA PROVIDENCE FUND
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 4,060,657
<INVESTMENTS-AT-VALUE> 3,746,644
<RECEIVABLES> 183
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 374
<TOTAL-ASSETS> 3,747,201
<PAYABLE-FOR-SECURITIES> 32,187
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,415
<TOTAL-LIABILITIES> 36,602
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,112,669
<SHARES-COMMON-STOCK> 407,948
<SHARES-COMMON-PRIOR> 50,000
<ACCUMULATED-NII-CURRENT> (3,793)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (84,264)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (314,013)
<NET-ASSETS> 3,710,599
<DIVIDEND-INCOME> 1,062
<INTEREST-INCOME> 7,302
<OTHER-INCOME> 0
<EXPENSES-NET> 12,157
<NET-INVESTMENT-INCOME> (3,793)
<REALIZED-GAINS-CURRENT> (84,264)
<APPREC-INCREASE-CURRENT> (314,013)
<NET-CHANGE-FROM-OPS> (402,070)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 357,948
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,210,599
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,157
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,157
<AVERAGE-NET-ASSETS> 2,461,797
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> (.89)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.10
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
