U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
--
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
--
Pre-Effective Amendment No.
Post-Effective Amendment No. 2
and/or
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
--
Amendment No. 3
(Check appropriate box or boxes)
PRAGMA INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
7150 Greenville Avenue, Suite 101
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
Dallas, Texas 75231
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
Countrywide Fund Services, Inc.
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.
<PAGE>
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
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
PART B
CAPTION IN STATEMENT
OF ADDITIONAL
ITEM NO. REGISTRATION STATEMENT CAPTION INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
<PAGE>
12. General Information and History The Fund
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 Security
of Securities Holders
16. Investment Advisory and Other Services The Investment Adviser;
Custodian; Auditors;
Countrywide Fund Services
Inc.; 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 Annual Report
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)
<PAGE>
The PRAGMA
Providence Fund
===============================================================================
A SEPARATE SERIES OF
PRAGMA INVESTMENT TRUST
Prospectus
August 1, 1997
<PAGE>
PRAGMA INVESTMENT TRUST
===============================================================================
7150 Greenville Avenue
Suite 101
Dallas, Texas 75231
http://www.pragmafunds.com
BOARD OF TRUSTEES
===============================================================================
John H. Alban, Jr.
John H. Alban, III
Ted C. Hager
William L. Hutton
John B. Lamb
William B. Snyder
James C. Tappan
John Robert Thomas
OFFICERS
===============================================================================
John H. Alban, Jr., Chairman of the Board
John H. Alban, III, President
Robert G. Dorsey, Vice President
Tina D. Hosking, Secretary
Mark J. Seger, Treasurer
INVESTMENT ADVISER
===============================================================================
PRAGMA, Inc.
7150 Greenville Avenue
Suite 101
Dallas, Texas 75231
Tel. 214-373-3585
Fax 214-987-1728
TRANSFER AGENT
===============================================================================
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
800-738-2065
RATE LINE
800-852-3809
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.......................................... 8
Operation of the Fund.......................... 9
Calculation of Share Price..................... 10
Performance Information........................ 10
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>
PROSPECTUS
August 1, 1997
PRAGMA INVESTMENT TRUST
7150 Greenville Avenue, Suite 101
Dallas, Texas 75231
Tel (214)373-3585 - Fax (214)987-1728
http://www.pragmafunds.com
===============================================================================
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, Dallas, Texas
75231, manages the Fund's investments. The Adviser analyzes overall economic
conditions, market sectors and individual securities 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 August 1, 1997 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...................................................... 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.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
===============================================================================
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.................................... None
Sales Load Imposed on Reinvested Dividends......................... None
Redemption Fee..................................................... None *
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $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
--------
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 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 amounts incurred during the most recent fiscal year. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
FINANCIAL HIGHLIGHTS
===============================================================================
The following information, which has been audited by Arthur Anderson LLP, is an
integral part of the Fund's audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of March
31, 1997 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained at no charge by calling the
PRAGMA Providence Fund at 800-738-2065 or by writing to the Fund at the address
on the front of this Prospectus.
<TABLE>
<CAPTION>
Per Share Data for a Share Outstanding Throughout the Year
===================================================================================================================
Year
Ended
March 31,
1997
<S> <C>
Net asset value at beginning of year......................................................... $ 10.00
-------------
Income from investment operations:
Net investment loss....................................................................... ( 0.07 )
Net realized and unrealized losses on investments ........................................ ( 0.83 )
-------------
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 year............................................................... $ 9.10
=============
Total return................................................................................. ( 9.00 )%
=============
Net assets at end of period (000's).......................................................... $ 3,782
=============
Ratio of expenses to average net assets...................................................... 1.50%
Ratio of net investment loss to average net assets........................................... (.85)%
Portfolio turnover rate...................................................................... 241%
Average commission rate per share............................................................ $ 0.0486
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</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. 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 the securities which it judges to have potential for significant
price appreciation, the Adviser combines a "top-down" analysis of overall
economic conditions, markets and market sectors with fundamental security
analysis. Its fundamental security analysis focuses on:
1. companies whose products or services give the company
and/or its share price the potential for significant growth;
2. companies, regardless of market capitalization, with
innovative or appealing science, technology,
products, systems or services; and
3. "special situations" that may cause a company and/or its share
price to grow significantly because of changes in products,
services, applicability or strategy.
The Fund may invest in small, unseasoned companies. While smaller companies
generally have potential for rapid growth, they often involve higher risks
because they lack the management experience, financial resources, product
diversification and competitive strengths of larger corporations. In addition,
in many instances, the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
wider price fluctuations. When making large sales, the Fund may have to sell
portfolio holdings at discounts from quoted prices or may have to make a series
of small sales over an extended period of time.
The Fund may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
the Adviser will seek to invest in securities that have investment
characteristics and qualities comparable to the kinds of domestic securities in
which the Fund invests. The Fund does not currently intend to invest more than
15% of its net assets in American Depository Receipts and other foreign
securities. Foreign investments may be subject to special risks, including
future political and economic developments and the possibility of seizure or
nationalization of companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other restrictions, that might
affect an investment adversely.
<PAGE>
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 the securities of any single investment company
and will not purchase more than 3% of the outstanding voting securities of any
investment company.
Repurchase agreements are transactions by which the Fund purchases a security
and simultaneously commits to resell that security to the seller at an agreed
upon time and price, thereby determining the yield during the term of the
agreement. In the event of a bankruptcy or other default of the seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying security and losses. To minimize these possibilities, the Fund
intends to enter into repurchase agreements only with its Custodian, banks
having assets in excess of $10 billion and the largest and, in the Adviser's
judgment, most creditworthy primary U.S. Government securities dealers.
Repurchase agreements entered into by the Fund will be collateralized by
high-grade debt obligations. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. At the time the Fund enters into a repurchase agreement, the value
of the collateral, including accrued interest, will equal or exceed the value of
the repurchase agreement and, in the case of a repurchase agreement exceeding
one day, the seller agrees to maintain sufficient collateral so that the value
of the collateral, including accrued interest, will at all times equal or exceed
the value of the repurchase agreement. The Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result thereof, more than
15% of the value of the net assets of the Fund would be invested in such
securities and other illiquid securities.
The Fund may make short-term loans of its portfolio securities to banks, brokers
and dealers, although the Fund has no present intention to do so.
The Fund may borrow money from banks or as may be necessary for the clearance of
securities transactions but only for emergency or extraordinary purposes in an
amount not exceeding 5% of the Fund's total assets. The Fund's policy on
borrowing is a fundamental policy which may not be changed without the
affirmative vote of a majority of its outstanding shares.
The Fund does not intend to use short-term trading as a primary means of
achieving its investment objective. However, the Fund's rate of portfolio
turnover will depend upon market and other conditions, and it will not be a
limiting factor when portfolio changes are deemed necessary or appropriate by
the Adviser. Although the annual portfolio turnover rate of the Fund cannot be
accurately predicted, it is not expected to exceed 200%, but may be either
higher or lower. High turnover involves correspondingly greater commission
expenses and transaction costs and increases the possibility that the Fund will
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").
<PAGE>
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,
Countrywide Fund Services, Inc. (the "Transfer Agent"), 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 the Transfer Agent by 5:00 p.m., Eastern time. Dealers
may charge a fee for effecting purchase orders. Direct purchase orders received
by the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's
net asset value. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the net asset value next determined on the following
business day.
You may open an account and make an initial investment in the Fund by sending a
check and a completed account application form to Countrywide Fund Services,
Inc., 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 right 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, the Transfer Agent 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 the Transfer Agent in the transaction.
You may also purchase shares of the Fund by wire. Please telephone the Transfer
Agent at 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 the Transfer Agent. 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.
You may purchase and add shares to your account by mail or by bank wire. Checks
should be sent to Countrywide Fund Services, Inc., 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, Dallas,
Texas 75231. Such additional investments will be confirmed at the net asset
value next determined on the business day that the Transfer Agent 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.
<PAGE>
You may also make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The initial and
subsequent investments must be at least $50. The Adviser pays the costs
associated with these transfers, but reserves the right, upon thirty days'
written notice, to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account which would
reduce your return from an investment in the Fund.
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 the Transfer Agent 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 the Transfer
Agent at 800-738-2065. 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 the Transfer Agent
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
the Transfer Agent 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, the Transfer Agent, 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 the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Fund and/or the
Transfer Agent 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 the Transfer Agent. 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.
<PAGE>
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.
At the discretion of the Fund or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Fund reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested, unaffected by
market fluctuations), or $250 in the case of tax-deferred retirement plans, or
such other minimum amount as the Fund may determine from time to time. After
notification to you of the Fund's intention to close your account, you will be
given sixty days to increase the value of your account to the minimum amount.
The Fund reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
DIVIDENDS AND DISTRIBUTIONS
===============================================================================
The Fund expects to distribute substantially all of its net investment income
and net realized capital gains, if any, on an annual basis. Distributions are
paid according to one of the following options:
Share Option -- income distributions and capital gains
distributions reinvested in additional
shares.
Income Option -- income distributions and
short-term capital gains distributions paid
in cash; long-term capital gains
distributions reinvested in additional
shares.
Cash Option -- income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then current net asset
value and your account will be converted to the Share Option.
TAXES
===============================================================================
The Fund has qualified and intends to continue 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.
<PAGE>
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, Dallas, Texas, to manage the Fund's investments. The Adviser, organized in
1981, has been managing stock and bond portfolios for customers for 16 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 16 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 June 30, 1997's $16 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 Countrywide Fund Services, Inc. (the "Transfer Agent"),
P.O. Box 5354, Cincinnati, Ohio 45201-5354, to serve as the Fund's transfer
agent, dividend paying agent and shareholder service agent. The Transfer Agent
is a wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending.
The Transfer Agent also provides accounting and pricing services to the Fund.
For its services to the Fund, the Transfer Agent 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 the Transfer Agent to perform its duties.
The Transfer Agent has also been retained to provide administrative services to
the Fund. In this capacity, the Transfer Agent 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 the Transfer Agent 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.
<PAGE>
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund.
Shares of the Fund have equal voting rights and liquidation rights. When matters
are submitted to shareholders for a vote, each shareholder is entitled to one
vote for each full share owned and fractional votes for fractional shares owned.
The Fund is not required to hold annual meetings of shareholders. The Trustees
shall promptly call and give notice of a meeting of shareholders for the purpose
of voting upon removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Fund's outstanding shares. The Fund will
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 in order to facilitate communications among shareholders.
CALCULATION OF SHARE PRICE
===============================================================================
On each day that the Fund is open for business, the share price (net asset
value) of the Fund's shares is determined as of the close of the regular session
of trading on the New York Stock Exchange, currently 4:00 p.m., Eastern time.
The Fund is open for business on each day the New York Stock Exchange is open
for business and on any other day when there is sufficient trading in the Fund's
investments that its net asset value might be materially affected. The net asset
value per share of the Fund is calculated by dividing the sum of the value of
the securities held by the Fund plus cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of shares outstanding
of the Fund, rounded to the nearest cent.
Portfolio securities are valued as follows: (i) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the closing bid price, (ii) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
===============================================================================
From time to time, the Fund may advertise its "average annual total return."
Average annual total return figures are based on historical earnings and are not
intended to indicate future performance.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions. The Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." A nonstandardized quotation
of total return will always be accompanied by the Fund's "average annual total
return" as described above.
<PAGE>
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 PROVIDENCE FUND
ACCOUNT APPLICATION
Please mail completed account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
ACCOUNT NO. 34 _________________________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:_______________________________________
Home Office Address:_____________________________
Branch Address:__________________________________
Rep Name & No.:__________________________________
Rep. Signature:__________________________________
Initial Investment of $ __________________ ($1,000 minimum)
o Check or draft enclosed payable to the PRAGMA Providence Fund.
o Bank Wire From:_____________________________________________________
ACCOUNT NAME S.S. #/TAX I.D.#
______________________________________________________ _____________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please
list minor's S.S.#)
______________________________________________________ Citizenship:
Name of Joint Tenant, Partner, Custodian o U.S.
ADDRESS o Other_____________
PHONE
______________________________________________________ ( )_____________
Street or P.O. Box Business Phone
______________________________________________________ ( )_____________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Corporation o Trust o Custodial o Other
Occupation and Employer Name/Address:__________________________________________
Are you an associated person of an NASD member? o Yes o No
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number.
Check box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or
the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short-term capital
gains distributions paid in cash, long-term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
o By Check o By ACH to my bank checking or savings account.
PLEASE ATTACH A VOIDED CHECK.
AUTOMATIC MONTLY INVESTMENTS (Complete for investments into the Fund)
Automatic monthly investments are available for all established accounts of the
Fund. There is no charge for this service, and it offers the convenience of
automatic investing on a regular basis. The minimum investment is $50 per month.
Though a continuous program of 12 monthly investments is recommended, automatic
investments may be discontinued by the shareholder at any time.
Please invest $________ per month in the Fund. ABA Routing Number
of your FI___________________
FI Account Number____________
o Checking Account o Savings
Account
_______________________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
________________________________________ o the last business day of each month
________________________________________ o the 15th day of each month
________________________________________ o both the 15th and last business day
x____________________________________ x______________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
it appears on FI Records)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
PLEASE ATTACH A VOIDED CHECK.
INDEMNIFICATION TO SHAREHOLDER'S FINANICAL INSTITUTION
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("Countrywide") has put into effect, by which amounts, determined
by your depositor, payable to the Fund, for purchase of shares of the Fund, are
collected by Countrywide, Countrywide hereby agrees:
Countrywide will indemnify and hold you harmless from any liability to any
person or persons whatsoever arising out of the payment by you of any amount
drawn by the Fund to its own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such amount.
Countrywide will defend, at its own cost and expense, any action which might be
brought against you by any person or persons whatsoever because of your actions
taken pursuant to the foregoing request or in any manner arising by reason of
your participation in this arrangement. Countrywide will refund to you any
amount erroneously paid by you to the Fund if the claim for the amount of such
erroneous payment is made by you within six (6) months from the date of such
erroneous payment; your participation in this arrangement and that of the Fund
may be terminated by thirty (30) day written notice from either party to the
other.
<PAGE>
REDEMPTION OPTIONS
I (we) authorize the Fund or Countrywide Fund Services, Inc. to act upon
instructions received by telephone to have amounts withdrawn from my (our)
account in the Fund (see prospectus for limitations on this option) and:
o WIRED ($1,000 minimum) OR MAILED to my (our) bank account designated below. I
(we) further authorize the use of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number_____________ Bank Routing Transit Number_________________
Name of Account Holder_________________________________________________________
Bank Name_________________ Bank Address________________________________
City State
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE
FOLLOWING RESOLUTION FORM. UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER
SHALL HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of the
PRAGMA Providence Fund (the Fund) and that
_______________________________________________________ is (are) hereby
authorized to complete and execute the Application on behalf of the corporation
or organization and to take any action for it as may be necessary or appropriate
with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for shares
of the Fund, to establish or acknowledge terms and conditions governing the
redemption of said shares and to otherwise implement the privileges elected on
the Application.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and Bylaws or other empowering documents of the
_______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of_______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on
_______________________________________________________________________________
at which a quorum was present and acting throughout, and that the same are now
in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the foregoing
resolutions.
NAME TITLE
________________________________________ _______________________________
________________________________________ _______________________________
________________________________________ _______________________________
Witness my hand and seal of the corporation or organization this_______day
of______________________________________, 19___________________________
____________________________________ ______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for
shares, to receive dividends and distributions for automatic reinvestment in
additional shares of the Fund for credit to the investor's account and to
surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges
incurred by the investor. The investor further agrees that Countrywide Fund
Services, Inc. can cease to act as such agent upon ten days' notice in writing
to the investor at the address contained in this Application. The investor
hereby ratifies any instructions given pursuant to this Application and for
himself and his successors and assigns does hereby release PRAGMA Investment
Trust, PRAGMA, Inc., Countrywide Fund Services, Inc. and their respective
officers, employees, agents and affiliates from any and all liability in the
performance of the acts instructed herein. Neither the Trust, Countrywide Fund
Services, Inc., 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 expense in acting on such telephone instructions. The
investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund
Services, Inc., or both, will employ reasonable procedures to determine that
telephone instructions are genuine. If the Trust and/or Countrywide Fund
Services, Inc. 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. The Internal Revenue Service does
not require your consent to any provision of this document other than the
certifications required to avoid backup withholding.
By: ________________________________________________ _______________________
Signature & Title Date
By: ________________________________________________ _______________________
Signature & Title Date
<PAGE>
PRAGMA INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1997
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
August 1, 1997. A copy of the Fund's Prospectus can be obtained by writing the
Fund at 7150 Greenville Avenue, Suite 101, Dallas, Texas 75231, or by calling
the Fund at 800-738-2065.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PRAGMA Investment Trust
7150 Greenville Avenue, Suite 101
Dallas, Texas 75231
TABLE OF CONTENTS
PAGE
THE FUND...................................................... 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS ................ 3
INVESTMENT LIMITATIONS........................................ 8
TRUSTEES AND OFFICERS......................................... 10
THE INVESTMENT ADVISER........................................ 12
SECURITIES TRANSACTIONS....................................... 13
PORTFOLIO TURNOVER............................................ 15
CALCULATION OF SHARE PRICE.................................... 15
TAXES......................................................... 15
REDEMPTION IN KIND............................................ 16
HISTORICAL PERFORMANCE INFORMATION............................ 17
PRINCIPAL SECURITY HOLDERS.................................... 19
CUSTODIAN..................................................... 19
AUDITORS...................................................... 19
COUNTRYWIDE FUND SERVICES, INC................................ 19
ANNUAL REPORT................................................. 20
- 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 ("S&P")
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 S&P 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. 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 S&P 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 S&P or Prime-1 by Moody's. 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
- 9 -
<PAGE>
interest or decline in price of the security. If a court characterized the
transaction as a loan and the Fund has not perfected a security interest in the
security, the Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured creditor,
the Fund would be at the risk of losing some or all of the principal and income
involved in the transaction. As with any unsecured debt obligation purchased for
the Fund, the Adviser seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case, the
seller. Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security, in which case
the Fund may incur a loss if the proceeds to the Fund of the sale of the
security to a third party are less than the repurchase price. However, if the
market value of the securities subject to the repurchase agreement becomes less
than the repurchase price (including interest), the Fund will direct the seller
of the security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in seeking
to enforce the seller's contractual obligation to deliver additional securities.
LOANS OF PORTFOLIO SECURITIES. The Fund may make short-term loans of
its portfolio securities to banks, brokers and dealers. Lending portfolio
securities exposes the Fund to the risk that the borrower may fail to return the
loaned securities or may not be able to provide additional collateral or that
the Fund may experience delays in recovery of the loaned securities or loss of
rights in the collateral if the borrower fails financially. To minimize these
risks, the borrower must agree to maintain collateral marked to market daily, in
the form of cash or U.S. Government obligations, with the Fund's Custodian in an
amount at least equal to the market value of the loaned securities. It is the
Fund's policy, which may not be changed without the affirmative vote of a
majority of its outstanding shares, that such loans will not be made if as a
result the aggregate of all outstanding loans exceeds 25% of the value of the
Fund's total assets.
Under applicable regulatory requirements (which are subject to
change), the loan collateral must, on each business day, at least equal the
value of the loaned securities. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. The Fund receives amounts equal to the dividends or
interest on loaned securities and also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, or (c) interest on
short-term debt securities
- 10 -
<PAGE>
purchased with such collateral; either type of interest may be shared with the
borrower. The Fund may also pay fees to placing brokers as well as custodian and
administrative fees in connection with loans. Fees may only be paid to a placing
broker provided that the Trustees determine that the fee paid to the placing
broker is reasonable and based solely upon services rendered, that the Trustees
separately consider the propriety of any fee shared by the placing broker with
the borrower, and that the fees are not used to compensate the Adviser or any
affiliated person of the Fund or an affiliated person of the Adviser or other
affiliated person. The terms of the Fund's loans must meet applicable tests
under the Internal Revenue Code and permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
FOREIGN SECURITIES. Subject to the Fund's investment policies and
quality standards, the Fund may invest in the securities (payable in U.S.
dollars) of foreign issuers. Because the Fund may invest in foreign securities,
investment in the Fund involves risks that are different in some respects from
an investment in a fund which invests only in securities of U.S. domestic
issuers. Foreign investments may be affected favorably or unfavorably by changes
in currency rates and exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of securities markets,
brokers and issuers of securities. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
WARRANTS AND RIGHTS. Warrants are options to purchase equity securities
at a specified price and are valid for a specific time period. Rights are
similar to warrants, but normally have a short duration and are distributed by
the issuer to its shareholders. The Fund may purchase warrants and rights,
provided that the Fund does not invest more than 5% of its net assets at the
time of purchase in warrants and rights other than
- 11 -
<PAGE>
those that have been acquired in units or attached to other securities. Of such
5%, no more than 2% of the Fund's assets at the time of purchase may be invested
in warrants which are not listed on either the New York Stock Exchange or the
American Stock Exchange.
INVESTMENT LIMITATIONS
The Fund has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Fund. These limitations may
not be changed without the affirmative vote of a majority of the outstanding
shares of the Fund. The Fund may not:
1. Invest in securities of any one issuer if immediately after and as a
result of such investment more than 5% of the total assets of the Fund, at
market value, would be invested in the securities of such issuer. This
restriction does not apply to investment in securities of the United States
Government, its agencies or instrumentalities.
2. Purchase more than 10% of the outstanding voting securities, or any
class of securities, of any one issuer. This restriction does not apply to
investment in securities of the United States Government, its agencies or
instrumentalities.
3. Invest more than 25% of its total assets in the securities of
issuers in any particular industry. This restriction does not apply to
investment in securities of the United States Government, its agencies or
instrumentalities.
4. Invest for the purpose of exercising control or management.
5. Purchase or sell commodities or real estate. However, the Fund may
invest in publicly traded securities secured by real estate or issued by
companies which invest in real estate or real estate interests.
6. Purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities. This restriction on short sales does not apply to short sales
"against the box" (i.e., when the Fund owns or is long on the securities sold
short).
7. Lend money, except by engaging in repurchase agreements
or by purchasing publicly distributed or privately placed debt
obligations in which the Fund may invest consistent with its
investment objective and policies. The Fund may make loans of
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<PAGE>
its portfolio securities in an aggregate amount not exceeding 25% of its total
assets, provided that such loans are collateralized by cash or cash equivalents
or U.S. Government obligations in an amount equal to the market value of the
securities loaned, marked to market on a daily basis.
8. Borrow money, except for i) temporary bank borrowings not in excess
of 5% of the value of the Fund's total assets for emergency or extraordinary
purposes or ii) short-term credits not in excess of 5% of the value of the
Fund's total assets as may be necessary for the clearance of securities
transactions.
9. Issue senior securities as defined in the Investment Company Act of
1940, as amended, or mortgage, pledge, hypothecate or in any way transfer as
security for indebtedness any securities owned or held by the Fund except as may
be necessary in connection with borrowings described in (8) above, and then not
exceeding 5% of the Fund's total assets, taken at the lesser of cost or market
value.
10. Underwrite securities of other issuers except to the extent the
Fund may be deemed an underwriter under the Securities Act of 1933, as amended,
in selling portfolio securities.
11. Hold more than 15% of its net assets in securities
which are illiquid.
12. Invest in oil, gas or other mineral leases, or purchase
or sell real property, including real estate limited partnership
interests.
13. Invest more than 5% of its net assets in warrants and will not
invest more than 2% of its net assets in warrants which are not listed on the
New York or American Stock Exchange. This restriction does not apply to
investment in warrants acquired in units or attached to securities.
With respect to the percentages adopted by the Fund as maximum
limitations on the Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
The Fund does not intend to pledge, mortgage or hypothecate the assets
of the Fund. The Fund does not intend to make short sales of securities "against
the box" as described in investment limitation 6. The Fund does not intend to
make loans of its portfolio securities. The statements of intention in this
paragraph reflect nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
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<PAGE>
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive
officers of the Fund. Each Trustee who is an "interested person"
of the Fund, as defined by the Investment Company Act of 1940, is
indicated by an asterisk. John H. Alban, Jr. is the father of
John H. Alban, III.
NAME AGE POSITION HELD
- ---- --- -------------
*John H. Alban, Jr. 62 Chairman of the Board/Trustee
*John H. Alban, III 33 President/Trustee
+Ted C. Hager 63 Trustee
+William L. Hutton 56 Trustee
+John B. Lamb 36 Trustee
+William B. Snyder 65 Trustee
+James C. Tappan 62 Trustee
+John Robert Thomas 32 Trustee
Robert G. Dorsey 40 Vice President
Tina D. Hosking 28 Secretary
Mark J. Seger 35 Treasurer
* John H. Alban, Jr. and John H. Alban, III, as affiliated
persons of PRAGMA, Inc., the Fund's investment adviser, are
"interested persons" of the Fund within the meaning of Section
2(a)(19) of the Investment Company Act of 1940.
+ Member of Audit Committee
The principal occupations of the Trustees and executive officers of the
Fund during the past five years are set forth below:
JOHN H. ALBAN, JR., 7150 Greenville Avenue, Suite 101, Dallas, Texas,
is Chairman of PRAGMA, Inc.
JOHN H. ALBAN, III, 7150 Greenville Avenue, Suite 101, Dallas, Texas,
is President of PRAGMA, Inc.
TED C. HAGER, 1015 Hayden Drive, Carrollton, Texas, is President of
Hager Containers, Inc. (a shipping container and point-of-purchase display
manufacturing company).
WILLIAM L. HUTTON, M.D., 7150 Greenville Avenue, Suite 500, Dallas,
Texas, is Vice President of Texas Retina Associates (a medical association). He
is also Chairman and Chief Executive Officer of Medsynergies (a practice
management company) and President of Quality Vision Care Network.
JOHN B. LAMB, 901 Main Street, 51st Floor, Dallas, Texas, is a Senior
Vice President of NationsBank of Texas, N.A.
WILLIAM B. SNYDER, M.D., 7150 Greenville Avenue, Suite 400, Dallas,
Texas, is a partner of Texas Retina Associates.
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<PAGE>
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), A.T. Cross (a
writing instruments company) and Edwards Baking Company (a baking company). He
formerly was Chairman of the Board of Bentley Mills (a fine carpet company).
JOHN ROBERT THOMAS, 7150 Greenville Avenue, Suite 114, Dallas, Texas,
is Vice President of Medsynergies, Inc. He formerly was Vice President of Bank
One Texas, N.A. (a commercial bank).
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is President and
Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent) and
Treasurer of Countrywide Investments, Inc. (a registered broker-dealer and
investment adviser) and Countrywide Financial Services, Inc. (a financial
services company and parent of Countrywide Fund Services, Inc. and Countrywide
Investments, Inc. and a wholly-owned subsidiary of Countrywide Credit
Industries, Inc.). He is also Vice President of Capitol Square Funds, Dean
Family of Funds, The New York State Opportunity Funds, Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust and Maplewood Investment Trust and
Assistant Vice President of Interactive Investments, Fremont Mutual Funds, Inc.,
Schwartz Investment Trust, The Tuscarora Investment Trust, Williamsburg
Investment Trust and The Gannett Welsh & Kotler Funds (all of which are
registered investment companies).
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Assistant Vice
President and Counsel of Countrywide Fund Services, Inc. She is also Secretary
of Dean Family of Funds, The New York State Opportunity Funds and Capitol Square
Funds and Assistant Secretary of The Gannett Welsh & Kotler Funds.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio, is Vice
President of Countrywide Financial Services, Inc. and Countrywide Fund Services,
Inc. He is also Treasurer of Countrywide Investment Trust, Countrywide Tax-Free
Trust, Countrywide Strategic Trust, Capitol Square Funds, Dean Family of Funds,
The New York State Opportunity Funds, Brundage, Story and Rose Investment Trust,
Markman MultiFund Trust, Williamsburg Investment Trust and Maplewood Investment
Trust, Assistant Treasurer of Interactive Investments, Schwartz Investment
Trust, The Tuscarora Investment Trust and The Gannett Welsh & Kotler Funds 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.
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<PAGE>
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 84% 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. For the fiscal year ended March
31, 1997, the Fund paid advisory fees of $52,490.
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-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
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<PAGE>
million of average daily net assets and 1.5% of average daily net assets in
excess of $100 million. If any such reimbursement is required, the payment of
the advisory fee at the end of any month will be reduced or postponed or, if
necessary, a refund will be made to the Fund at the end of such month. Certain
expenses such as brokerage commissions, if any, taxes, interest, extraordinary
items and other expenses subject to approval of state securities administrators
are excluded from such limitations. If the expenses of the Fund approach the
applicable limitation in any state, the Fund will consider the various actions
that are available to it, including suspension of sales to residents of that
state.
The name "PRAGMA" is a property right of the Adviser and may be used by
the Adviser in other connections and for other purposes, including in the name
of other investment companies. The Fund has agreed to discontinue any use of the
name "PRAGMA" if the Adviser ceases to be employed as the Fund's investment
manager.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Fund and the placing of
the Fund's securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Fund. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Fund, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received. For the fiscal year ended
March 31, 1997, the Fund paid brokerage commissions of $35,917.
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
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<PAGE>
determination may be viewed in terms of a particular transaction or the
Adviser's overall responsibilities with respect to the Fund and to accounts over
which it exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Fund and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Fund and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Fund effects securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Fund.
The Fund has no obligation to deal with any broker or dealer in the
execution of securities transactions. Over-the-counter transactions will be
placed either directly with principal market makers or with broker-dealers.
Although the Fund does not anticipate any ongoing arrangements with other
brokerage firms, brokerage business may be transacted from time to time with
other firms. Neither the Adviser, nor affiliates of the Fund or the Adviser,
will receive reciprocal brokerage business as a result of the brokerage business
transacted by the Fund with other brokers.
CODE OF ETHICS. The Fund and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of 1940. The code significantly
restricts the personal investing activities of all employees of the Adviser and,
as described below, imposes additional, more onerous, restrictions on investment
personnel of the Adviser. The Code requires that all employees of the Adviser
preclear any personal securities investment (with limited exceptions, such as
U.S. Government obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition or limitation
applicable to the proposed investment. In addition, no employee may purchase or
sell any security which, at that time, is being purchased or sold (as the case
may be), or to the knowledge of the employee is being considered for purchase or
sale, by the Fund. The substantive restrictions applicable to investment
personnel of the Adviser include a ban on acquiring any securities in an initial
public offering. Furthermore, the Code provides for trading "blackout periods"
which prohibit trading by investment personnel of the Adviser within periods of
trading by the Fund in the same (or equivalent) security.
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<PAGE>
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. For the fiscal year ended March 31, 1997, the Fund's
portfolio turnover rate was 241%.
CALCULATION OF SHARE PRICE
The share price (net asset value) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) on each day the Fund is open
for business. The Fund is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund may also be open for business on other days in which there is
sufficient trading in the Fund's portfolio securities that its net asset value
might be materially affected. For a description of the methods used to determine
the share price, see "Calculation of Share Price" in the Prospectus.
TAXES
The Prospectus describes generally the tax treatment of distributions
by the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund has qualified and 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
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<PAGE>
forward contracts) derived with respect to its business of investing in stock,
securities or currencies; (ii) derive less than 30% of its gross income in each
taxable year from the sale or other disposition of the following assets held for
less than three months: (a) stock or securities, (b) options, futures or forward
contracts not directly related to its principal business of investing in stock
or securities; and (iii) diversify its holdings so that at the end of each
quarter of its taxable year the following two conditions are met: (a) at least
50% of the value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment companies and
other securities (for this purpose such other securities will qualify only if
the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
The Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of the Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax.
The Fund is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding 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%
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<PAGE>
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's average annual
total return for the fiscal year ended March 31, 1997 was -9.00%.
The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation may
also indicate average annual compounded rates of return over periods other than
those specified for average annual total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's average annual total
return as described above.
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance.
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<PAGE>
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Fund may use the following
publications or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Fund may provide comparative
performance information appearing in the Growth Funds category. In addition, the
Fund may use comparative performance information of relevant indices, including
the S&P 500 Index, the Dow Jones Industrial Average, the Russell 2000 Index, the
NASDAQ Composite Index and the Value Line Composite Index. The S&P 500 Index is
an unmanaged index of 500 stocks, the purpose of which is to portray the pattern
of common stock price movement. The Dow Jones Industrial Average is a
measurement of general market price movement for 30 widely held stocks listed on
the New York Stock Exchange. The Russell 2000 Index, representing approximately
11% of the U.S. equity market, is an unmanaged index comprised of the 2,000
smallest U.S. domiciled publicly-traded common stocks in the Russell 3000 Index
(an unmanaged index of the 3,000 largest U.S. domiciled publicly-traded common
stocks by market capitalization representing approximately 98% of the U.S.
publicly-traded equity market). The NASDAQ Composite Index is an unmanaged index
which averages the trading prices of more than 3,000 domestic over-the-counter
companies. The Value Line Composite Index is an unmanaged index comprised of
approximately 1,700 stocks, the purpose of which is to portray the pattern of
common stock price movement.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.
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<PAGE>
PRINCIPAL SECURITY HOLDERS
As of July 7, 1997, John H. Alban, Jr. and Joyce T. Alban, 4224
Belclaire Avenue, Dallas, Texas 75205, owned of record 26.3% of the outstanding
shares of the Fund; Joyce T. Alban, 4224 Belclaire Avenue, Dallas, Texas 75225,
owned of record 6.6% of the outstanding shares of the Fund; Snyder Investments
Ltd., William B. Snyder General Partner, #5 Carmarthen Court, Dallas, Texas
75225, owned of record 10.4% of the outstanding shares of the Fund; and G & T
Co. Southwest Securities Inc. Profit Sharing Plan for the benefit of William
Felder, 1201 Elm Street, Suite 3500, Dallas, Texas 75270, owned of record 7.9%
of the outstanding shares of the Fund.
As of July 7, 1997, the Trustees and officers of the Fund as a group
owned of record or beneficially 50.4% 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, 1998. 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.
COUNTRYWIDE FUND SERVICES, INC.
The Fund's transfer agent, Countrywide Fund Services, Inc. (the
"Transfer Agent"), 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. The Transfer Agent
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 the Transfer
Agent for its out-of-pocket expenses, including but not limited to, postage,
envelopes, checks, drafts, forms, reports, record storage and communication
lines.
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<PAGE>
The Transfer Agent 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 the Transfer Agent to perform its duties,
the Transfer Agent 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, the Transfer Agent is retained to provide administrative
services to the Fund. In this capacity, the Transfer Agent supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. The Transfer
Agent 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 the Transfer Agent 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.
The Transfer Agent is a wholly-owned subsidiary of Countrywide
Financial Services, Inc., which in turn is a wholly-owned subsidiary of
Countrywide Credit Industries, Inc., a New York Stock Exchange listed company
principally engaged in the business of residential mortgage lending.
ANNUAL REPORT
The Fund's financial statements as of March 31, 1997 appear in the
Fund's annual report which is attached to this Statement of Additional
Information.
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<PAGE>
The PRAGMA Providence Fund_________________________________
24-Hour NAV Updates Shareholder Services Investment Adviser
(800)852-4052 MGF Service Corp. PRAGMA, Inc.
312 Walnut Street, 21st Floor 7150 Greenville Ave, Suite 101
Cincinnati, Ohio 45202-3874 Dallas, Texas 75231
(800)738-2065 Telephone (214)373-3585
Fax (214)987-1728
E-mail [email protected]
May 19, 1997
Dear Fellow Investor:
This letter is written to report on the results of the PRAGMA Providence Fund,
which are as follows:
Fund S&P 500
PERIOD Dates Results Results
------ ----- ------- -------
Fund's first fiscal year 4/1/96 - 3/31/97 -9.00% +19.83%
First calendar quarter of 1997 12/31/96 - 3/31/97 -8.17% +2.68%
Year to date 12/31/96 - 5/12/97 -0.81% +13.83%
We are not satisfied with the results. You shouldn't be either.
The reason for the difference between the fund' s performance and its benchmark
is clear. The fund was initially structured to include science, technology,
business system and service stocks with a significant representation of smaller
companies. The past year has proven that we were correct in the industry groups
we chose. Please note the NASDAQ 100 Index, widely regarded as a benchmark for
large scientific and technological companies, was up 30% during the first year
of the fund.
MOUNTAIN CHART SHOWING PERFORMANCE OF NASDAQ 100
NASDAQ 100
April 1, 1996 612.99
May 7, 1996 660.82
June 12, 1996 697.04
July 18, 1996 643.74
August 22, 1996 681.63
September 27, 1996 744.73
November 1, 1996 755.51
December 9, 1996 856.64
January 15, 1997 864.02
February 20, 1997 880.25
March 27, 1997 818.74
May 2, 1997 909.49
The performance data quoted represent past performance. The
investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Past performance is no guarantee of future results.
<PAGE>
We were incorrect, however, in focusing on smaller companies. Please note the
difference in results of the S&P 500, a benchmark for large companies, and the
Russell 2000, an index of 2000 small companies. The S&P 500 outperformed the
Russell 2000 by more than 21%.
BIGGER HAS BEEN BETTER
S&P 500 Total Return Index vs. Russell 2000 Index
MOUNTAIN CHART COMPARING RETURNS OF S&P 500 AND RUSSELL 2000 INDICES
S&P 500 Russell 2000
------- ------------
April 1, 1996 845.198 332.44
May 21, 1996 872.846 363.04
July 11, 1996 840.335 324.58
August 29, 1996 858.097 334.51
October 18, 1996 930.545 347.85
December 9, 1996 984.626 360.49
January 29, 1997 1,016.629 366.25
March 20, 1997 1,033.335 352.31
May 9, 1997 1,091.492 361.42
Going forward, we will keep our focus on aggressive growth companies with
strengths in technology, science and business systems and services but will
redirect our attention to larger companies because we believe the larger ones
will continue to outperform in the future. Despite the attractiveness of the
notion that on Wall Street whatever was in a down cycle during the last period
must be due for an up cycle, we think the flow of funds into larger rather than
smaller stocks is the result of a systematic change in our financial system and
not a cyclical anomaly.
Realigning the fund builds on it's strengths and positions it well for the
future. We are highly confident that the fund will be successful.
We remain happy to answer any questions you might have and look forward to your
continued participation in the PRAGMA Providence Fund and its goal of long term
aggressive growth for its investors.
Sincerely,
/s/John H. Alban, jr. /s/John H. Alban, III
John H. Alban, jr. John H. Alban, III
Chairman President
The performance data quoted represent past performance. The
investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Past performance is no guarantee of future results.
<PAGE>
The PRAGMA Providence Fund
Comparison of the Change in Value of a $10,000 Investment in the
PRAGMA Providence Fund and the S&P 500 Index
MOUNTAIN CHART
PRAGMA
Providence S&P
Fund 500
---------- -------
March 31, 1996 $10,000 $10,000
April 30, 1996 10,320 10,147
May 31, 1996 10,720 10,409
June 30, 1996 10,180 10,449
July 31, 1996 9,100 9,987
August 31, 1996 9,410 10,198
September 30, 1996 9,870 10,772
October 31, 1996 9,410 11,069
November 30, 1996 9,870 11,906
December 31, 1996 9,910 11,670
January 31, 1997 10,520 12,399
February 28, 1997 10,110 12,496
March 31, 1997 9,100 11,983
The PRAGMA Providence Fund
Average Annual Total Return
1 Year*
(9.00)%
* Initial public offering of shares was April 1, 1996.
<PAGE>
The PRAGMA
Providence Fund
a separate series of
PRAGMA INVESTMENT TRUST
Annual Report
March 31, 1997
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To Shareholders and Board of Trustees
of the PRAGMA Investment Trust:
We have audited the accompanying statement of assets and liabilities of
the PRAGMA Providence Fund of the PRAGMA Investment Trust (an Ohio business
trust), including the portfolio of investments, as of March 31, 1997, and the
related statement of operations, changes in net assets, and the financial
highlights for the year then ended. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our 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
April 16, 1997
<PAGE>
PRAGMA Providence Fund
Statement of Assets and Liabilities
March 31, 1997
ASSETS
Investments in securities:
At acquisition cost $ 3,753,296
===========
At value (Note 1) $ 3,633,200
Cash 132,805
Receivable for capital shares sold 50
Dividends receivable 1,654
Receivable for securities sold 162,193
-----------
TOTAL ASSETS 3,929,902
-----------
LIABILITIES
Payable to affiliates (Note 3) 5,181
Payable for securities purchased 142,745
-----------
TOTAL LIABILITIES 147,926
-----------
NET ASSETS $ 3,781,976
===========
Net assets consist of:
Paid-in capital (Note 1) $ 4,160,200
Accumulated net realized losses from security transactions (258,128)
Net unrealized depreciation on investments (120,096)
-----------
Net assets $ 3,781,976
===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 415,677
===========
Net asset value, offering price and redemption price per share $ 9.10
===========
See accompanying notes to financial statements.
<PAGE>
PRAGMA Providence Fund
Statement of Operations
For the Year Ended March 31 , 1997
INVESTMENT INCOME
Dividend income $ 11,627
Interest income 10,837
------------
TOTAL INVESTMENT INCOME 22,464
------------
EXPENSES
Investment management fees (Note 3) 52,490
------------
NET INVESTMENT LOSS (30,026)
------------
REALIZED AND UNREALIZED LOSSES
ON INVESTMENTS
Net realized losses from security transactions (258,128)
Net change in unrealized appreciation/depreciation
on investments (120,096)
------------
NET REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS (378,224)
------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (408,250)
============
See accompanying notes to financial statements.
<PAGE>
PRAGMA Providence Fund
Statement of Changes in Net Assets
For the Year Ended March 31, 1997
FROM OPERATIONS:
Net investment loss $ (30,026)
Net realized losses from security transactions (258,128)
Net change in unrealized appreciation/
depreciation on investments (120,096)
------------
Net decrease in net assets from operations (408,250)
------------
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 3,699,846
Net asset value of shares issued in
reinvestment of distributions to shareholders --
Payments for shares redeemed (9,620)
------------
Net increase in net assets from capital share transactions 3,690,226
------------
TOTAL INCREASE IN NET ASSETS 3,281,976
NET ASSETS:
Beginning of year (Note 1) 500,000
------------
End of year $ 3,781,976
============
(a)CAPITAL SHARE ACTIVITY:
Shares sold 366,602
Shares issued in reinvestment of distributions
to shareholders --
Shares redeemed (925)
------------
Net increase in shares outstanding 365,677
Shares outstanding, beginning of year (Note 1) 50,000
------------
Shares outstanding, end of year 415,677
============
See accompanying notes to financial statements.
<PAGE>
PRAGMA Providence Fund
Financial Highlights
For the Year Ended March 31, 1997
Per share data for a share outstanding throughout the year:
Net asset value at beginning of year $ 10.00
-----------
Income from investment operations:
Net investment loss (0.07)
Net realized and unrealized losses on investments (0.83)
-----------
Total from investment operations (0.90)
-----------
Less distributions:
Dividends from net investment income --
Distributions from net realized gains --
-----------
Total distributions --
-----------
Net asset value at end of year $ 9.10
===========
Ratios and supplemental data:
Total return (9.00)%
===========
Net assets at end of period (000's) $ 3,782
===========
Ratio of expenses to average net assets 1.50%
Ratio of net investment loss to average net assets (.85)%
Portfolio turnover rate 241%
Average commission rate per share $ 0.0486
See accompanying notes to financial statements.
<PAGE>
PRAGMA PROVIDENCE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
The PRAGMA Providence Fund (the Fund) is a diversified series of PRAGMA
Investment Trust (the Trust), an open-end management investment company
registered under the Investment Company Act of 1940. The Trust was organized as
an Ohio business trust on January 10, 1996. The Fund was capitalized on February
13, 1996, when John H. Alban, Jr., the President of 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.
The Fund 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.
The following is a summary of the Fund's significant accounting policies:
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 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. Dividends from net investment income and capital gain
distributions are 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.
<PAGE>
PRAGMA PROVIDENCE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
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 March 31, 1997, net unrealized depreciation on investments was $121,957
for federal income tax purposes, of which $221,506 related to appreciated
securities and $343,463 related to depreciated securities based on a federal
income tax cost basis of $3,755,157.
As of March 31, 1997, the Fund had a capital loss carryforward for federal
income tax purposes of $171,721, which expires on March 31, 2005. In addition,
the Fund elected to treat $84,546 of net realized losses from security
transactions, which occurred after October 31, 1996, as having been incurred in
the Fund's tax year ending March 31, 1998.
On March 31, 1997, as a result of the permanent difference between book and tax
reporting, the Fund reclassified its current year net investment loss of $30,026
against paid-in capital on the Statement of Assets and Liabilities.
2. INVESTMENT TRANSACTIONS
During the year ended March 31, 1997, purchases and proceeds from sales of
portfolio securities, other than short-term investments, amounted to $11,624,652
and $7,613,228, respectively.
<PAGE>
PRAGMA PROVIDENCE FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
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 Countrywide Fund Services, Inc. (CFS), the administrative services
agent, shareholder servicing and transfer agent, and accounting services agent
for the Trust. Approximately 58% of the Fund was directly or indirectly owned by
officers and Trustees of the Trust as of March 31, 1997.
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Investment Advisory 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. There were no fees paid or expenses reimbursed to the
Trustees for the current year.
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENTS
Under the terms of the Administration, Accounting and Transfer Agency Agreements
between the Trust, the Adviser and CFS, CFS supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services for the Fund. CFS 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, CFS 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. CFS 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 CFS a monthly base fee, an asset-based fee and a
fee based on the number of shareholder accounts. In addition, the Adviser
reimburses CFS for its out-of-pocket expenses including, but not limited to,
postage, supplies and the costs of pricing the Fund's portfolio securities.
<PAGE>
PRAGMA Providence Fund
Portfolio of Investments
March 31, 1997
Market
INVESTMENTS IN COMMON STOCK - 96.1% Shares Value
MEDICAL SCIENCE - 23.7%
MEDICAL - BIOGENETICS - 9.8%
Amgen, Inc.* 1,600 $ 89,400
Biogen, Inc.* 2,900 108,388
Chiron Corp.* 4,400 81,950
Genzyme Corp.-General Division* 4,000 90,000
-----------
369,738
-----------
MEDICAL - PRODUCTS/DRUG DELIVERY - 9.7%
Boston Scientific Corp.* 2,000 123,500
Guidant Corp. 2,000 123,000
Invacare Corp. 1,300 30,550
Sybron International Corp.* 3,300 91,575
-----------
368,625
-----------
MEDICAL - SYSTEMS/SERVICES - 4.2%
Advance ParadigM, Inc.* 4,800 63,600
Omnicare, Inc. 4,000 94,000
-----------
157,600
-----------
TOTAL MEDICAL SCIENCE 895,963
-----------
TECHNOLOGY - 38.8%
TECHNOLOGY-COMMUNICATIONS - 16.1%
3Com Corp.* 2,000 65,500
Celeritek, Inc.* 3,000 33,000
General Motors Corp. - Class H 2,000 108,500
Lucent Technologies, Inc. 2,400 126,600
MRV Communications, Inc.* 3,600 80,100
QUALCOMM, Inc.* 1,500 84,562
Tellabs, Inc.* 3,000 108,375
-----------
606,637
-----------
TECHNOLOGY-COMPUTER SOFTWARE/HARDWARE - 17.8%
Atmel Corp.* 3,300 78,994
Cisco Systems, Inc.* 1,700 81,812
Computer Sciences Corp.* 1,000 61,750
Dell Computer Corp.* 2,100 142,013
EMC Corp.* 2,000 71,000
Open Market, Inc.* 6,000 59,250
Oracle Corp.* 2,400 92,550
Sun Microsystems, Inc.* 3,000 86,625
-----------
673,994
-----------
TECHNOLOGY-SYSTEMS/SERVICES - 4.9%
National Data Corp. 2,700 95,512
Rockwell International Corp. 1,400 90,825
-----------
186,337
-----------
TOTAL TECHNOLOGY 1,466,968
-----------
POLLUTION - WASTE MANAGEMENT - 6.7%
IMCO Recycling, Inc. 7,000 $ 102,375
Republic Industries, Inc.* 1,100 38,156
U.S. Filter Corp.* 3,600 111,150
-----------
251,681
-----------
FINANCIAL AND INSURANCE - 5.8%
Finova Group, Inc. 900 60,863
Life USA Holding, Inc.* 8,000 80,000
UICI* 3,400 77,775
-----------
218,638
-----------
FOOD - 4.6%
Dekalb Genetics Corp. 1,200 63,900
Worthington Foods, Inc. 5,600 109,200
-----------
173,100
-----------
AUTO MANUFACTURING - 3.5%
A.S.V., Inc.* 6,800 130,900
-----------
ELECTRICAL COMPONENTS - 3.0%
Raychem Corp. 1,400 115,325
-----------
INDUSTRIAL - DIVERSIFIED - 3.0%
Thermo Electron Corp.* 2,000 61,750
Zoltek Companies, Inc.* 2,000 50,750
-----------
112,500
-----------
PAPER PRODUCTS - 2.7%
Mosinee Paper Corp. 3,000 102,750
-----------
OILFIELD EQUIPMENT - 2.4%
Oceaneering International, Inc.* 5,800 90,625
-----------
SPECIALTY CHEMICALS - 1.9%
Nalco Chemical Co. 2,000 74,750
-----------
TOTAL COMMON STOCK 3,633,200
(Cost $3,753,296) -----------
TOTAL INVESTMENTS AT VALUE - 96.1% 3,633,200
OTHER ASSETS IN EXCESS OF LIABILITIES - 3.9% 148,776
-----------
NET ASSETS - 100.0% $ 3,781,976
===========
* Non-income producing securities.
See accompanying notes to financial statements.
- 25 -
<PAGE>
PRAGMA INVESTMENT TRUST
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Financial Statements included in Part A:
Financial Highlights for the Year Ended March 31,
1997
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, March 31,
1997
Statement of Operations for the Year Ended March
31, 1997
Statement of Changes in Net Assets for the Year
Ended March 31, 1997
Financial Highlights for the Year Ended March 31,
1997
Notes to Financial Statements, March 31, 1997
Portfolio of Investments, March 31, 1997
(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
Countrywide Fund Services, Inc.
- 26 -
<PAGE>
(ii) Accounting Services Agreement with
Countrywide Fund Services, Inc.
(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with
Countrywide Fund Services, Inc.
(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 June 30, 1997, there are 61 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:
- 27 -
<PAGE>
"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
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
- 28 -
<PAGE>
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."
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.
- 29 -
<PAGE>
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
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. - Chairman of the Adviser.
Chairman of the Board of the Registrant.
(ii) John H. Alban, III - President of the
Adviser.
President of the Registrant.
(iii) B. David Cranfill - Senior Vice President of
the Adviser.
(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
- 30 -
<PAGE>
be maintained by the Registrant at its offices located at 7150
Greenville Avenue, Suite 101, Dallas, Texas 75231 as well as
at the offices of the Registrant's transfer agent located at
312 Walnut 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.
- 31 -
<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 1st
day of August, 1997.
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 August 1, 1997
- ------------------------
John H. Alban, Jr. of the Board
and Trustee
/S/ JOHN H. ALBAN, III President August 1, 1997
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John H. Alban, III and Trustee
/S/ MARK J. SEGER Treasurer August 1, 1997
- ------------------------
Mark J. Seger
- ------------------------ Trustee
Ted C. Hager*
- ------------------------ Trustee By:/S/ TINA D. HOSKING
William L. Hutton* Tina D. Hosking
Attorney-in-Fact*
August 1, 1997
- ------------------------ Trustee
John B. Lamb*
- ------------------------ Trustee
William B. Snyder*
- ------------------------ Trustee
James C. Tappan*
- ------------------------ Trustee
John Robert Thomas*
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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.
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated as of February 28, 1997 between PRAGMA
INVESTMENT TRUST (the "Trust"), an Ohio business trust, PRAGMA,
INC. ("PRAGMA"), a Texas corporation, and COUNTRYWIDE FUND
SERVICES, INC. ("Countrywide"), 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 Countrywide to perform on behalf of the Trust the
services as hereinafter described; and
WHEREAS, Countrywide 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 Countrywide agree as follows:
1. EMPLOYMENT. PRAGMA, being duly authorized, hereby employs
Countrywide to perform those services described in this Agreement.
Countrywide 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, Countrywide 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, Countrywide shall supply (i) non-investment related statistical and
research data, (ii) internal regulatory compliance services, and (iii) executive
and administrative services. Countrywide 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)
<PAGE>
necessary materials for meetings of the Trust's Board of Trustees unless
prepared by other parties under agreement with PRAGMA or the Trust. Countrywide
shall provide personnel to serve as officers of the Trust if so elected by the
Board of Trustees; provided, however, that PRAGMA shall reimburse Countrywide
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. Countrywide 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
Countrywide for the periods and in the places required by Rule 31a-2 under the
Investment Company Act of 1940.
4. AUDIT, INSPECTION AND VISITATION. Countrywide 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 Countrywide's obligations under
this Agreement, PRAGMA shall pay Countrywide, 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.
Countrywide shall not be required to reimburse the Trust or PRAGMA for (or have
deducted from its fees) any expenses in excess of expense limitations imposed by
certain state securities commissions having jurisdiction over the Trust.
6. INDEMNIFICATION OF COUNTRYWIDE. Countrywide 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 Countrywide 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
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<PAGE>
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 Countrywide under this Agreement or
by reason of reckless disregard by any of such persons of the obligations and
duties of Countrywide under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, 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 Countrywide 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 Countrywide, 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 Countrywide may sustain or incur or which may be asserted against
Countrywide by any person, by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide 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 Countrywide 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 Countrywide 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
Countrywide or any affiliated person of Countrywide from providing services for
any other person, firm or corporation, including other investment companies;
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations under this Agreement.
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<PAGE>
8. COMPLIANCE WITH GOVERNMENT RULES AND REGULATIONS. The parties hereto
acknowledge and agree that nothing contained herein shall be construed to
require Countrywide to perform any services for PRAGMA or the Trust which
services could cause Countrywide 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 Countrywide, 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 Countrywide 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 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,
- 4 -
<PAGE>
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 COUNTRYWIDE. Countrywide represents and warrants
that no legal proceedings or regulatory investigations are pending against
Countrywide which could have a material impact on the operations or financial
condition of Countrywide. Countrywide 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. Countrywide 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 Countrywide.
Countrywide further agrees that it will immediately notify PRAGMA and the Trust
of any material change in the ownership or control of Countrywide.
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 Countrywide 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 III
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:/S/ ROBERT G. DORSEY
Its: President
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<PAGE>
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between PRAGMA
INVESTMENT TRUST (the "Trust"), an Ohio business trust, PRAGMA, INC. ("PRAGMA"),
a Texas corporation, and COUNTRYWIDE FUND SERVICES, INC. ("Countrywide"), 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 Countrywide to provide the Trust with
certain accounting and pricing services, and Countrywide 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.
Countrywide is hereby appointed to provide the Trust with
certain accounting and pricing services, and Countrywide accepts such
appointment and agrees to provide such services under the terms and conditions
set forth herein.
2. CALCULATION OF NET ASSET VALUE.
Countrywide will calculate the net asset value of each series
of the Trust and the per share net asset value of each series of 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. Countrywide 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, Countrywide may contract with, and rely upon market
quotations provided by, outside services.
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<PAGE>
3. BOOKS AND RECORDS.
Countrywide 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. Countrywide 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. Countrywide 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 Countrywide
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 Countrywide 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.
Countrywide 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, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
Countrywide 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.
Countrywide 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.
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<PAGE>
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 Countrywide 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 Countrywide on the last business day of
such month. PRAGMA shall also promptly reimburse Countrywide for the cost of
external pricing services utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for PRAGMA or the Trust which services could cause Countrywide 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 Countrywide, 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 Countrywide.
10. REFERENCES TO COUNTRYWIDE, PRAGMA AND THE TRUST.
The Trust or PRAGMA shall not circulate any printed matter
which contains any reference to Countrywide without the prior written approval
of Countrywide, excepting solely such printed matter as merely identifies
Countrywide 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 Countrywide in draft form,
allowing sufficient time for review by Countrywide and its counsel prior to any
deadline for printing.
Countrywide 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 Countrywide. Countrywide will
submit printed matter
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<PAGE>
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 Countrywide's
control, Countrywide shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. Countrywide
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.
12. INDEMNIFICATION OF COUNTRYWIDE.
Countrywide 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 Countrywide 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
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, 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 Countrywide 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 Countrywide, 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 Countrywide may sustain or incur or which may be asserted against
Countrywide by any person, by reason of, or as a result of: (i)
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any action taken or omitted to be taken by Countrywide 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 Countrywide 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 Countrywide 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 Countrywide, (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 Countrywide 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 Countrywide's duties or responsibilities under
this Agreement is designated by the Trust or by PRAGMA by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of PRAGMA, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
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14. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide 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 COUNTRYWIDE
Countrywide represents and warrants that no legal proceedings
or regulatory investigations are pending against Countrywide which could have a
material impact on the operations or financial condition of Countrywide.
Countrywide 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. Countrywide 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 Countrywide. Countrywide further
agrees that it will immediately notify PRAGMA and the Trust of any material
change in the ownership or control of Countrywide.
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 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.
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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 purpose shall be 7150 Greenville Avenue, Suite 101,
Dallas, Texas 75231 and that the address of Countrywide 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.
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23. FORCE MAJEURE.
If Countrywide 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.
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 III
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:/S/ ROBERT G. DORSEY
Its: President
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SCHEDULE A
COMPENSATION
FOR FUND ACCOUNTING AND PORTFOLIO PRICING:
PRAGMA will pay Countrywide 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 February 28, 1997 by and between PRAGMA
INVESTMENT TRUST (the "Trust"), an Ohio business trust, PRAGMA, INC. ("PRAGMA"),
a Texas corporation, and COUNTRYWIDE FUND SERVICES, INC. (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 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.
<PAGE>
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 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
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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 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
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<PAGE>
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, 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 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.
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<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
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.
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 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.
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<PAGE>
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;
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.
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<PAGE>
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.
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.
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<PAGE>
23. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
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 the T/A 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 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.
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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. The T/A 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 the T/A. The T/A 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 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
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<PAGE>
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 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.
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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 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 THE T/A
The T/A represents and warrants that no legal proceedings or
regulatory investigations are pending against the T/A which could have a
material impact on the operations or financial condition of the T/A. The T/A
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. The T/A 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 the T/A. The T/A further agrees that it
will immediately notify PRAGMA and the Trust of any material change in the
ownership or control of the T/A.
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.
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
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<PAGE>
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.
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.
- 14 -
<PAGE>
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.
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 III
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:/S/ ROBERT G. DORSEY
Its: President
- 15 -
<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
- 16 -
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
of our report dated April 16, 1997 and to all references to our Firm included
in or made as part of this Post-Effective Amendment No. 2.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
July 31, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001005706
<NAME> PRAGMA INVESTMENT TRUST - PRAGMA PROVIDENCE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 3,753,296
<INVESTMENTS-AT-VALUE> 3,633,200
<RECEIVABLES> 163,897
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 132,805
<TOTAL-ASSETS> 3,929,902
<PAYABLE-FOR-SECURITIES> 142,745
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,181
<TOTAL-LIABILITIES> 147,926
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,160,200
<SHARES-COMMON-STOCK> 415,677
<SHARES-COMMON-PRIOR> 50,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (258,128)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (120,096)
<NET-ASSETS> 3,781,976
<DIVIDEND-INCOME> 11,627
<INTEREST-INCOME> 10,837
<OTHER-INCOME> 0
<EXPENSES-NET> 52,490
<NET-INVESTMENT-INCOME> (30,026)
<REALIZED-GAINS-CURRENT> (258,128)
<APPREC-INCREASE-CURRENT> (120,096)
<NET-CHANGE-FROM-OPS> (408,250)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 366,602
<NUMBER-OF-SHARES-REDEEMED> 925
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,281,976
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,490
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52,490
<AVERAGE-NET-ASSETS> 3,516,435
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> (.83)
<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
<PAGE>
</TABLE>
