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.
<TABLE> <S> <C>
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<NAME> PRAGMA INVESTMENT TRUST - PRAGMA PROVIDENCE FUND
<S> <C>
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