QUESTAR FUNDS INC, 485APOS, 2000-08-15

QUESTAR FUNDS INC
485APOS, 2000-08-15

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REGISTRATION NO. 333-46323
ICA No. 811- 08655

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 2000

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933:

Pre-Effective Amendment No. ___

Post-Effective Amendment No. ___

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940:

Pre-Effective Amendment No.___
Post-Effective Amendment No. ___

(Check Appropriate Box or Boxes)

QUESTAR FUNDS,INC.
------------------
(Exact Name of Registrant as Specified in Charter)

The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
-------------------------
(Address of Principal Executive Offices)(Zip Code)

(631) 951-0500
(Registrant's Telephone Number, Including Area Code)

Michael Miola
Questar Funds, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
HAUPPAUGE, NEW YORK 11788
(Name and Address of Agent For Service)

WITH A COPY TO:
---------------

Thomas R. Westle, Esq.
Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022

AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE
-----------------------------------------------
(Approximate Date of Proposed Public Offering)

SHARES OF COMMON STOCK
----------------------
(Title of Securities Being Registered)

<PAGE>

It is proposed that this filing will become effective (check
appropriate box):

[ ] immediately upon filing pursuant to paragraph (b).
[ ] on (date) pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(1).
[ ] on (date) pursuant to paragraph (a)(1).
[X] 75 days after filing pursuant to paragraph (a)(2).
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

<PAGE>

AZZAD/DOW JONES ISLAMIC INDEX FUND

(AN ENHANCED SHARI`AH COMPLIANT MUTUAL FUND BASED ON THE
EXTRA LIQUID VERSION OF THE DOW JONES ISLAMIC MARKET INDEX)

PROSPECTUS DATED ________, 2000

[LOGO]

The Azzad/Dow Jones Islamic Index Fund (the "Fund"), a series of
Questar Funds, Inc., seeks to provide investors with annual returns which, after
expenses, match or exceed the annualized performance of the U.S. component
securities of the Dow Jones Islamic Market Extra Liquid Index, a sub-index of
the Dow Jones Islamic Market Index.

This Prospectus, dated __________, 2000, concisely describes the
information about the Fund that you ought to know before investing. Please read
it carefully before investing and retain it for future reference. A Statement of
Additional Information ("SAI") about the Fund, dated ____________, 2000, is
available free of charge. The address of the Company is Questar Funds, Inc., The
Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York 11788 or
telephone (877) XXX-XXXX. The SAI has been filed with the Securities and
Exchange Commission and is incorporated in its entirety by reference in this
Prospectus.

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

- 1 -

<PAGE>

TABLE OF CONTENTS

RISK RETURN SUMMARY..........................................

PERFORMANCE..................................................

FEES AND EXPENSES............................................

INVESTMENT STRATEGIES........................................

COMPLIANCE WITH SHARI`AH LAW.................................

MAIN RISKS...................................................

MANAGEMENT...................................................

YOUR ACCOUNT.................................................

HOW TO OPEN AN ACCOUNT AND PURCHASE SHARES...................

HOW TO SELL (REDEEM) SHARES..................................

WHEN AND HOW NAV IS DETERMINED...............................

DISTRIBUTIONS................................................

FEDERAL TAX CONSIDERATIONS...................................

PERFORMANCE COMPARISONS......................................

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT......

COUNSEL AND INDEPENDENT AUDITORS.............................

FINANCIAL HIGHLIGHTS.........................................

ORGANIZATION.................................................

FOR MORE INFORMATION.........................................

- 2 -

RISK RETURN SUMMARY

The following discussion describes the investment objective and
principal investment strategies and risks of the Fund. The investment objective
is a fundamental policy and cannot be changed without the approval of a majority
of the Fund's outstanding shares. As with any mutual fund, there can be no
guarantee that the investment objective of the Fund will be achieved.

[GRAPHIC OMITTED]
INVESTMENT OBJECTIVES

The Fund's investment objective is to provide investors with annual
returns which, after expenses, match or exceed the annualized performance of the
U.S. components of the Dow Jones Islamic Market Extra Liquid Index ( the
"IMXL")1, a sub-index of the Dow Jones Islamic Market Index ("DJIM"). The DJIM
is a globally diversified compilation of equity securities considered by Dow
Jones' Shari`ah Supervisory Board to be compliant with Shari`ah law.

[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its investment objective by investing
substantially all of its net assets in the U.S. component securities of the
IMXL, an unmanaged index that tracks the 100 most liquid U.S. and non-U.S.
securities listed on the DJIM. The investment adviser, Azzad Asset Management,
Inc., seeks to achieve and maintain a correlation between the Fund's investment
portfolio and the U.S. component securities of the IMXL of at least 0.95, after
expenses. A correlation of 1.00 would mean that the Fund and U.S. component
securities of the IMXL were perfectly correlated.

The Fund seeks to achieve its investment objective only in strict
conformity with the body of Islamic laws known as SHARI'AH. All component stocks
of the DJIM and IMXL have been screened and approved by Dow Jones' Shari`ah
Supervisory Board to ensure their compliance with Shari`ah law. In addition, the
Fund's management and investment processes are subject to the regular review and
approval of an independent SHARI'AH Supervisory Board convened by the Fund to
ensure compliance with these principles.

--------
1 "Dow Jones", "Dow Jones Islamic Market Index" and "Dow Jones Islamic Market
Extra Liquid Index " are service marks of Dow Jones & Company, Inc. Dow Jones
has no relationship to the Fund's investment adviser other than the licensing of
the Dow Jones Islamic Market Index and its service marks for use in connection
with the Fund. This Fund is not sponsored, endorsed, sold, or promoted by Dow
Jones and Dow Jones makes no representation regarding the advisability of
investing in the Fund.

2 All dividend payments to the Fund will be subject to a purification process
(see description of the purification of income from dividends on Page 7)
according to the methodology formulated by Dow Jones and approved by the Azzad
Shari`ah Board. A portion of each dividend may be deemed prohibited as it
relates to interest income earned by a particular company in the IMXL. The
portion of the dividend deemed prohibited will be treated as interest income and
will be segregated to the charitable account.

- 3 -
<PAGE>

TEMPORARY DEFENSIVE STRATEGY

The Fund may also, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal investment strategies
in order to respond to adverse market, economic, political or other unfavorable
conditions. Under these circumstances, the Fund may invest a substantial portion
of its assets in high quality, short-term debt securities and money market
instruments, provided however, that any interest income earned from such
investments are disgorged and donated to qualified charities in accordance with
the purification policies and procedures established by the Azzad Shari'ah Board
(See "Treatment of Interest Income" on Page 10). These short-term debt
securities and money market instruments include commercial paper, certificates
of deposit, bankers' acceptances, and U.S. Government securities. When the Fund
is making such defensive investments, the Fund may not achieve its investment
objective.

[GRAPHIC OMITTED]

PRINCIPAL RISKS OF INVESTING IN THE FUND. The Fund is subject to the following
principal investment risks:

- MARKET RISK. The net asset value of the Fund will fluctuate based on
changes in the underlying value of the U.S. component securities of the
IMXL. The U.S. stock markets are generally susceptible to volatile
fluctuations in market price. Market prices may be adversely affected
by an issuer's having experienced losses or by the lack of earnings or
by the issuer's failure to meet the market's expectations with respect
to new products or services, or even by factors wholly unrelated to the
value or condition of the issuer. The value of the U.S. component
securities of the IMXL is also subject to the risk that a specific
segment of the stock market underperforms the overall market, thereby
decreasing the value of companies comprising such segment. Under any of
these circumstances, the value of the Fund's shares and its total
return will fluctuate and your investment may be worth more or less
than your original cost when you redeem your shares.

- ISLAMIC SHARI'AH INVESTMENT RISK. It is possible that the restrictions
placed on investments, in particular the prohibition on interest
bearing investments and the cost of donations by the Portfolio of parts
of dividends which are attributable to interest related activities, may
result in the Fund underperforming other mutual funds with similar
investment objectives which are not subject to Islamic Shari'ah
restrictions.

- IMPERFECT CORRELATION. The correlation between the performance of the
Fund and the U.S. component securities of the IMXL may be affected by
the Fund's expenses, changes in securities markets, changes in the
composition or dividend yield ranking of the IMXL and the timing of
purchases and redemptions of Fund shares.

- RISKS OF NON-DIVERSIFICATION. Because the Fund is non-diversified, it
may have greater exposure to volatility than other mutual funds.
Because a non-diversified fund may invest a larger percentage of its
assets in the securities of a single company than diversified funds,
the performance of that company can have a substantial impact on the
fund's share price.

- PASSIVE MANAGEMENT OF PORTFOLIO SECURITIES. Notwithstanding the
allocation of 25% of the Fund's net assets to the 10 U.S. component
securities of the IMXL with the highest dividend yield, the investment
adviser employs a passive investment management approach and does not
intend to change the composition of the Fund's investment portfolio
based on its own economic, financial or market analysis. Therefore, the
Fund may not liquidate these securities if they underperform or suffer
a sharp decline.

- 4 -

<PAGE>

You could lose money on your investment in the Fund, or the Fund may
not perform as well as other possible investments. The Fund does not constitute
a balanced or complete investment program and the net asset value of its shares
will fluctuate based on the value of the securities held by the Fund.

WHO MAY WANT TO INVEST IN THE FUND

We designed the Azzad/Dow Jones Islamic Index Fund for investors
desiring an investment alternative that is consistent with Islamic principles
and who seek one or more of the following:

- high long-term growth;

- a stock fund to complement a portfolio of more conservative
investments;

- a stock fund that uses an enhanced indexed-oriented investment
strategy; or

- a stock fund that invests solely in U.S. companies.

The Fund may NOT be suitable for you if:

- You need regular income or stability of principal;
- You are pursuing a short-term goal or investing emergency reserves; or
- You are pursuing an investment strategy that is inconsistent with
Sharia`ah Law.

PERFORMANCE

No prior performance information for the Fund is being presented
because, to date, the Fund has not had annual returns for a full year.

FEE TABLES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund:

SHARES
------
Shareholder fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchase (as a%
of offering price) None
Maximum Deferred Sales Charge (Load) (as a%
of lower of original purchase price or redemption proceeds) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
Distributions None
Redemption Fee (as a% of amount redeemed, if applicable) None
Exchange Fee None

- 5 -
<PAGE>

ANNUAL FUND OPERATION EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees 0.25%
Other Expenses 1.00%(1)
--------
Total Annual Operating Expenses 2.25%(1)
Fee Waiver and Reimbursement --%
--------
Net Expenses 2.25%
=======

(1) Other Expenses and Total Annual Operating Expenses are estimated.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME
PERIODS INDICATED AND THEN REDEEM ALL OF YOUR SHARES AT THE END OF THESE
PERIODS. THE EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RATE OF RETURN
EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH YOUR
ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COST FOR
THE FUND WOULD BE:

1 YEAR 3 YEARS
------ -------
$228 $703

INVESTMENT STRATEGIES

The Fund invests substantially all of its net assets in the U.S.
component securities of the Dow Jones Islamic Market Extra Liquid Index
("IMXL'), an unmanaged sub-index of the Dow Jones Islamic Market Index ("DJIM").
The IMXL consists of common stocks of 100 U.S. and non-U.S. companies which
represent the 100 most liquid companies listed in the DJIM by Dow Jones &
Company, Inc. ("Dow Jones"). The IMXL is derived from the DJIM through the
implementation of rigorous liquidity requirements intended to filter out the
most thinly traded large capitalization companies and most actively traded small
capitalization companies, such as trading volume and volatility, transaction
costs and turnover rate, as well as tracking error and correlation coefficients
relative to the DJIM. The investment adviser seeks to achieve and maintain a
correlation between the Fund's investment portfolio and the U.S. component
securities of the IMXL of at least 0.95, after expenses. A correlation of 1.00
would mean that the performances of the Fund and the U.S. component securities
of the IMXL were perfectly correlated.

The investment adviser will allocate 75% of the Fund's net assets to
each of the U.S. component securities of the IMXL according to the weightings
assigned to such securities in the IMXL (after adjustment to reflect the
exclusion of all non-U.S. component stocks). When U.S. companies are eliminated
from or added to the IMXL by Dow Jones, the Fund will adjust the investment
portfolio to reflect these changes. The Fund will sell out the positions of the
companies that are eliminated by Dow Jones from the IMXL, including those
affected in the highest dividend-yield basket, then buy in new positions of the
companies added following notice to the Fund by Dow Jones of changes made to the
index. While the Fund intends to hold portfolio securities for the long term,
these changes to Fund positions will be made, with no regard to any propsed
holding period, within 5 trading days of Dow Jones' notice to the Fund.

- 6 -

<PAGE>

The investment adviser seeks to enhance the performance of the
investment portfolio by allocating 25% of the Fund's net assets equally among a
basket of the top 10 U.S. component securities of the IMXL with the highest
dividend yield. The list of the 10 highest dividend-yielding stocks of the IMXL
will be reviewed, and adjusted if necessary, on the last trading day of the
sixth month following the prior revision date. The positions in the basket
established from the prior list will remain intact until the last position
purchased in the basket from the prior list reaches its 12 month expiration
date. On the trading day following expiration of the prior list, all daily
investment receipts will be invested in the stocks appearing on the revised
list. When the last position purchased in the basket from the prior list reaches
the end of the 12 month holding period, the positions will be transferred or
rolled into the stocks appearing on the most recently reviewed and revised list.
If certain stocks from the expiring list appear in the revised list, then the
related positions will be held until such a time when they fail to appear on a
subsequently revised list. If certain stocks from the expiring list fail to
appear on a revised list, then the related positions in the basket will be sold
on the first trading day of the month following the change. The proceeds from
the sale of these positions will be allocated equally to the stocks of the
revised list on the next trading day.

The Fund intends to invest at least 75% of its net assets in each of
the U.S. component securities of the IMXL according to the weightings assigned
to such securities in the IMXL (after adjustment to reflect the exclusion of all
non-U.S. component stocks), provided that the Fund has a sufficient amount of
assets to do so. If the Fund does not have sufficient assets to replicate the
IMXL, the Fund will invest in a representative sample of the U.S. component of
the IMXL. The purpose of selecting the representative sample is to achieve,
under normal conditions, a correlation between the performance of the Fund's
investment portfolio and the performance of the U.S. component securities of the
IMXL of at least 0.95, after expenses. A correlation of 1.00 would be a perfect
correlation, in which the net asset value of the Fund increases or decreases in
exact proportion to changes in the net asset value of the U.S. component
securities of the IMXL. The Fund will select portfolio securities on the basis
of computer-generated statistical data in order to develop a portfolio that
replicates the entire U.S. component of the IMXL in terms of liquidity, industry
weighting, market capitalization and other characteristics such as beta,
price-to-book ratios, price-to-earnings ratios and dividend yield. This method
of stock selection is generally referred to as the "optimization" method. As the
assets of the Fund grow, it is anticipated the holdings of the Fund will be
increased to include all of the U.S. component securities of the IMXL in exact
proportion to their representation in the IMXL.

- 7 -

<PAGE>

COMPLIANCE WITH SHARI`AH LAW

The Fund is designed to provide investors with an investment
alternative that is consistent with the body of Islamic laws known as Shari`ah.
The purpose of the Fund is to earn HALAL profits or profits which are allowable
and in strict conformity with the precepts of Islamic Shari`ah. Generally,
Shari`ah requires that investors share in profit and loss, that they receive no
usury or interest income (RIBA), and that they do not invest in a business that
is not permitted under Islamic principles.

The general tenets of Shari`ah law were first articulated in the Qur'an
and then given concrete form in the words and practice (the Sunnah) of the
Prophet Muhammad, upon him be peace. Over the centuries, the Islamic laws
regulating business, finance, and the marketplace in general kept apace of
developments and, through an inner dynamic called IJTIHAD, remained relevant and
vital. In recent years, too, Islamic law has been refined and interpreted in
light of the modern business environment, and many of its precepts have been
analyzed with respect to current business practices and capital structures. In
the modern marketplace, compliance with Shari`ah laws has become a complex
matter requiring application of qualitative and quantitative standards, both at
the time of investment and on a continuous basis. It has therefore become
imperative that Islamic financial institutions have a means of keeping abreast
with current Islamic scholarship and interpretations.

DOW JONES SHARI'AH STOCK SELECTION PROCESS AND CRITERIA

All component stocks of the DJIM are carefully screened for compliance
with the principles of Shari`ah law and approved for inclusion in the DJIM by
the Dow Jones Shari`ah Supervisory Board. Accordingly, since the IMXL is a
sub-index of the DJIM, each component stock of the IMXL has been approved by Dow
Jones' Shari`ah Supervisory Board by virtue of its inclusion in the DJIM and are
deemed eligible for investment by the Fund.

Dow Jones' selection process for Shari`ah compliant stocks begins by
excluding those firms who do not meet specific business line and financial
requirements. The criteria and key features established by the Dow Jones
Shari`ah Supervisory Board for the purpose of selecting companies for inclusion
in the DJIM and, in turn, the IMXL, are as follows:

Specifically, Dow Jones excludes firms whose products or services
include:

Alcohol
Pork related products
Conventional financial services (banking,
insurance, etc.) Entertainment (hotels,
casinos/gambling, cinema, pornography, music, etc.)
Tobacco
Defense

These incompatible lines of business are removed from the "universe" of
stocks considered for the DJIM. Other companies classified in other industry
groups may also be excluded if they are deemed to have a material ownership in
or revenues from prohibited business activities. After removing companies with
unacceptable primary business activities, the remaining universe is tested by
three financial-ratio "filters". The purpose is to remove companies with
unacceptable financial ratios.

- 8 -
<PAGE>

The filters exclude companies if:

- Total debt divided by total assets is equal to or greater than 33 1/3%.
(Note: total debt = short term debt + current portion of long-term debt
+long-term debt).

- Accounts receivables divided by total assets is equal to or greater than
47%. (Note: accounts receivables = current receivables + long-term
receivables).

- Non-operating interest income divided by operating income is equal to or
greater than 9%.

Companies that pass these screens are included in the DJIM investable
universe, from which IMXL components are selected.

DUTIES OF THE DOW JONES SHARI'AH SUPERVISORY BOARD AND THE AZZAD
SHARI'AH SUPERVISORY BOARD

SELECTION OF SECURITIES

The Fund relies solely on the Dow Jones Shari`ah Supervisory Board to
set the criteria used to determine whether common stocks are Shari`ah compliant
and to establish the composition of the DJIM and IMXL. Any changes to the
selection criteria are made in the sole discretion of the Dow Jones Shari`ah
Supervisory Board and the Fund will not alter or deviate from such criteria
based on its own analysis of Shari`ah law. Accordingly, any change by Dow Jones
in the composition of the DJIM, based on noncompliance with Shari`ah law, and
which affects the U.S. component of the IMXL, will also be reflected in the
composition of the Fund's investment portfolio within a reasonable period of
time under then current market conditions.

FUND POLICIES AND BUSINESS PRACTICES

To ensure that the investment policies and general business practices
of the Fund also comply with the precepts of Shari`ah law, the Adviser has
convened the Shari`ah Supervisory Board affiliated with the advisor to supervise
and review Fund policies and procedures (the "Azzad Shari`ah Board"). On a
monthly basis, the Azzad Shari`ah Board monitors the Fund's investment
activities and reviews the Fund's management and compliance procedures based on
Islamic financial law (fiqh al mu`amalat) and current Shari`ah scholarship,
interpretations, and practices. The Azzad Shari`ah Board also meets annually for
a more comprehensive review and reports on the results of their findings
annually in a report to the Board of Directors of the Fund. The Azzad Sharia`ah
Board also has primary responsibility for implementing the Fund's policies in
connection with the purification of interest income (RIBA).

The Azzad Shari`ah Board is comprised of three renowned Shari`ah
scholars versed in modern investment disciplines. The Board is chaired by Shaykh
Yusuf Talal DeLorenzo of the United States of America and also includes Shaykh
Dr. Mohamed Ali EL-Gari of the Kingdom of Saudi Arabia and Shaykh Nizam Yaquby
of Bahrain. Additional biographical information on each Azzad Shari`ah Board
member is provided below:

Shaykh Yusuf Talal DeLorenzo Shaykh Yusuf Talal DeLorenzo is currently a
Shari'ah consultant/advisor and
translator/researcher for the institution of
Islamic Banking, London, and PCS Inc.,
Reston, Virgina. He holds an M.A. in Islamic
Studies from Jami'ah al Ulum al Islamiyah
(Karachi) and is a doctoral candidate at the
Hartford Seminary. Shaykh DeLorenzo produced
the first systematic academic translation in
English of legal rulings issued by Shari'ah
advisory boards on the operations of Islamic
Bank Rulings on the Operations of Islamic
Banks. He has also authored original
research in Islamic studies, including
Islamic banking and law, in English, Arabic
and Urdu.

Shaykh Dr. Mohamed Ali EL-Gari Dr. Mohamed Ali EL-Gari is the director of
Saudi Arabia the Center for Research in
Islamic Economics at King Abdulaziz
University in Jeddah. He is also a member of
the OIC Fiqh Council. Dr. EL-Gari serves as
a consultant to Islamic banks and has served
on the consulting committee that counseled
the Government of Pakistan on the
Islamization of its banking system. Dr.
EL-Gari holds a Ph.D.in Economics from the
University of California.

Shaykh Nizam Yaquby Shaykh Nizam Yaquby is a renowned Shari'ah
scholar and advisor to numerous Islamic
banks and companies, including Abu Dhabi
Islamic Bank, Islamic Investment Company of
the Gulf, Bahrain and the Arab Islamic Bank,
Bahrain. He pursued traditional Islamic
studies in Mecca, India and Morocco under
the guidance of eminent Islamic scholars,
including Shaykh Abdullah Al-Farisi and
Shaykh Muhammad Salah Al-Abbasi. He holds a
B.A.in Economics and Comparative Religion
from McGill University, Toronto. He is a
Ph.D. candidate in Islamic Law at the
University of Wales. Shaykh Yaquby has
published several books on Islam law and is
a frequent speaker at Islamic conferences.

TREATMENT OF INTEREST INCOME

Shari`ah principles require that an investor receiving any "impure"
income divest the same by distribution to charity. In order to comply with these
requirements, any interest income which has been determined by the Azzad
Sharia`ah Board to be prohibited under the precepts of Shria`ah will be
segregated from the Fund's custody account and maintained in a separate account
for donation to qualified charities. The present policy of the Fund is to
segregate 100% of any interest earned for allocation to the charity account. The
purification of income from dividends will be carried out in accordance with a
methodology formulated by Dow Jones and approved by the Azzad Shari`ah Board
that is based on precise data that is maintained and provided by Dow Jones to
the Fund on a daily basis.

MAIN RISKS

MARKET RISK. The net asset value of the Fund can be expected to
fluctuate based on changes in the value of the securities in the Fund's
investment portfolio. The stock market is generally susceptible to volatile
fluctuations in market price. Market prices of securities in which the Fund
invests may be adversely affected by an issuer's having experienced losses or by
the lack of earnings or by the issuer's failure to meet the market's
expectations with respect to new products or services, or even by factors wholly
unrelated to the value or condition of the issuer. The value of the securities
held by the Fund are also subject to the risk that a specific segment of the
stock market does not perform as well as the overall market. Under any of these
circumstances, the value of the Fund's shares and total return will fluctuate,
and your investment may be worth more or less than your original cost when you
redeem your shares.

- 10 -

<PAGE>

RESTRICTIONS ON INVESTMENTS. The IMXL and Fund's restricted ability to
invest in certain market sectors, such as financial companies and fixed-income
securities limits opportunities and may increase the risk of loss during
economic downturns. Also, because Islamic principles preclude the use of
interest paying instruments, the Fund does not maximize current income since
reserves remain in cash.

PASSIVE MANAGEMENT OF FUND. With regard to the purchase of U.S.
component securities of IMXL and the Fund's replication of the U.S. component of
the IMXL, the investment adviser employs a passive investment management
approach and does not change the composition of the portfolio's equity position
based on its own economic, financial or market analysis. The inclusion of a
security in the Fund's portfolio does not reflect an opinion by the investment
adviser regarding the particular security's attractiveness as an investment. In
the event that a particular portfolio security underperforms or suffers a sharp
decline in market value, the Fund may not liquidate the investment unless such
liquidation is initiated by Dow Jones and reflected in the IMXL. Under these
circumstances, the net asset value of the Fund may decline, negatively impacting
the value of your investment.

RISK OF INVESTING IN INDUSTRIES REPRESENTED IN THE U.S. COMPONENT
SECURITIES OF THE IMXL. Investing in the various industries represented in the
IXML will expose the Fund to a broad variety of risk factors. The risks that
could adversely affect the value of your investment in the Fund include: changes
in economic conditions and interest rates, the exposure of companies within
these industries to foreign economic and political developments and currency
fluctuations, the ability of companies to pass their products through regulatory
bodies, changes in the spending patterns of consumers, the creation of new
technology which might make obsolete the technology sold, serviced, utilized, or
otherwise relied upon by companies held by the Fund, and the fluctuation of
energy prices.

MANAGEMENT

BOARD OF DIRECTORS AND AZZAD SHARI`AH BOARD

The business of the Fund is managed under the direction of the Board of
Directors (the "Board") of the Company in conjunction with the Azzad Shari`ah
Board. The Board formulates the general policies of the Fund and meets
periodically to review the Fund's performance, monitor investment activities and
practices, and discuss other matters affecting the Fund. The Azzad Shari`ah
Board ensures that the Fund's policies, procedures and general business
practices are conducted in strict conformity to the principles of Shari`ah law.

THE ADVISER

Azzad Asset Management, Inc. (the "Adviser"), 8201 Greensboro Drive,
Suite 1000, McLean, Virginia 22102, serves as investment adviser to the Fund.
Subject to the general supervision and control of the Azzad Shari`ah Board and
the Board, the Adviser makes investment decisions for the Fund. The Adviser is a
privately held corporation that is registered as an investment adviser with the
U.S. Securities & Exchange Commission. The Adviser was incorporated in the State
of Delaware on June 9, 2000. The company was initially formed as Zad Asset
Management, LLC in the State of Virginia on August 4, 1997 and was converted
into a corporation under Delaware in June, 2000 under the current name.

- 11 -

<PAGE>

The Adviser has been the investment advisor and manager to the Azzad
Growth Fund, LP since 1997. The Azzad Growth Fund, LP is a private placement
Delaware limited partnership. The partnership had assets of $6,234,422 (as
audited by Ernst & Young, LLP) as of December 31, 1999 and is styled as a
small-capitalization portfolio of common stocks. Azzad Growth Fund, LP was
formed on October 15, 1997 and commenced operations on February 12, 1998. The
partnership is structured as the "master" component of a "master/feeder" fund
structure, with an offshore feeder fund named Azzad Investments, Ltd. domiciled
in the Cayman Islands and a domestic U.S. feeder, the Azzad Growth Fund, LP, a
Delaware limited partnership.

Under the terms of its investment advisory agreement with the Fund, the
Adviser is responsible for formulating the Fund's investment programs and for
making day-to-day investment decisions and engaging in portfolio transactions.
The Adviser also furnishes corporate officers, provides office space, services
and equipment and supervises all matters relating to the Fund's operations. For
its services, the Adviser receives an advisory fee at an annual rate of 1.00% of
the average daily net assets of the Fund.

PORTFOLIO MANAGER

F. SCOTT VALPEY is the Executive Vice President of Azzad Management,
Inc., the investment advisor to the fund. Mr. Valpey practiced as a professional
pension and investment consultant from 1983 to 1999, and was registered as a
general securities principal (NASD Series 24) with Raymond James Financial
Services, Inc., member NASD/SIPC, a division of Raymond James Financial, member
New York Stock Exchange, a publicly traded company (symbol RJF/NYSE.)
Previously, Mr. Valpey was Director of Pension Services for Johnston, Lemon &
Company, Incorporated, an investment-banking firm in Washington, D.C. Mr. Valpey
has over 17 years of investment management and financial services experience. He
has professionally managed investments and portfolios for private individuals,
corporations, pension funds, institutions and foreign investors.

ADMINISTRATOR

American Data Services, Inc. ("ADS"), The Hauppauge Corporate Center,
150 Motor Parkway, Hauppauge, New York 11788, provides various services to the
Fund. As of the date of this Prospectus, ADS provided administrative, fund
accounting and stock transfer services to retail and institutional mutual funds
with approximately $4 billion of total assets through its offices in New York,
Denver, and Los Angeles.

ADS provides all administrative services necessary for the Fund,
subject to the supervision of the Board.

- 12 -

<PAGE>

DISTRIBUTOR

AmeriMutual Fund Distributors, Inc. ("the Distributor"), an affiliate
of ADS, is a registered broker-dealer and member of the National Association of
Securities Dealers, Inc. Under its Distribution Agreement with the Fund, the
Distributor acts as the Fund's agent in connection with the offering of its
shares. The Distributor may enter into arrangements with banks, broker-dealers
or other financial institutions through which investors may purchase or redeem
shares and may, at its own expense, compensate persons who provide services in
connection with the sale or expected sale of shares of the Fund.

YOUR ACCOUNT
[GRAPHIC OMITTED]

TYPES OF ACCOUNTS

If you are making an initial investment in the Fund, you will need to
open an account. You may establish the following types of accounts:

INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS. Individual and sole
proprietorship accounts are owned by one person; joint accounts can have two or
more owners. All owners of the joint account must sign written instructions to
purchase or redeem shares or to change account information exactly as their
names appear on the account. If you elect telephone privileges, however,
redemption requests by telephone may be made by any one of the joint account
owners.

UNIFORM GIFT OR TRANSFER TO MINOR ACCOUNTS (UGMA, UTMA). Depending on
the laws of your state, you can set up a custodial account under the Uniform
Gift (or Transfers) to Minors Act. These custodial accounts provide a way to
give money to a child and obtain tax benefits. To open a UGAM or UTMA account,
you must include the minor's social security number on the application and the
custodian, or trustee, of the UGMA or UTMA must sign instructions in a manner
indicating trustee capacity.

CORPORATE AND PARTNERSHIP ACCOUNTS. To open a corporate or partnership
account, or to send instructions to the Fund, the following documents are
required:

- For corporations, a corporate resolution signed by an authorized person
with a signature guarantee.

- For partnerships, a certification for a partnership agreement, or the
pages from the partnership agreement that identify the general partners.

An authorized officer of the corporation or other legal entity must
sign the application.

TRUST ACCOUNTS. The trust must be established before you can open a trust
account. To open the account you must include the name of each trustee, the name
of the trust and provide a certification for trust, or the pages from the trust
document that identify the trustees.

- 13 -

<PAGE>

RETIREMENT ACCOUNTS. The Fund offers IRA accounts, including traditional IRA,
Roth IRA, Rollover IRA, SEP-IRA, SIMPLE IRA and Keogh accounts. Fund shares may
also be an appropriate investment for other retirement plans. Before investing
in any IRA or other retirement plan, you should consult your tax advisor.
Whenever making an investment in an IRA be sure to indicate the year in which
the contribution is made.

DISTRIBUTION AND SERVICE (RULE 12B-1) PLAN

The Fund has adopted a Distribution and Service Plan (the "Plan"),
pursuant to Rule 12b-1 under the Act (the "Rule") that allows the Fund to pay
distribution fees for the sale and distribution of its shares. The Rule provides
that an investment company which bears any direct or indirect expense of
distributing its shares must do so only in accordance with a plan permitted by
the Rule. The Plan provides that the Fund will compensate the Distributor by
paying the Distributor a monthly fee equal to 0.25% of its average daily net
assets, on an annual basis, to enable it to provide marketing and promotional
support to the Fund, shareholder servicing and maintaining shareholder accounts
and to make payments to broker-dealers and other financial institutions with
which it has written agreements and whose clients are Fund shareholders for
providing distribution assistance. Fees paid under the Plan may not be waived
for individual shareholders. Because these fees are paid out of the Fund's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

Shareholder servicing agents and broker-dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the shareholder servicing agents and
broker-dealers. In addition, shareholder servicing agents and broker-dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in the Fund directly may impose charges, limitations,
minimums and restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. Accordingly, the net return to
investors who invest through shareholder servicing agents and broker-dealers may
be less than by investing in the Fund directly. An investor should read the
Prospectus in conjunction with the materials provided by the shareholder
servicing agent and broker-dealer describing the procedures under which Fund
shares may be purchased and redeemed through the shareholder servicing agent and
broker-dealer.

BECAUSE THESE DISTRIBUTION AND SHAREHOLDER SERVICE FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, THE FEES MAY, OVER TIME, INCREASE THE
COST OF INVESTING IN THE FUND AND MAY COST INVESTORS MORE THAN OTHER TYPES
OF SALES LOADS.

HOW TO OPEN AN ACCOUNT AND PURCHASE SHARES

Once you have chosen the type of account and a class of shares, you are
ready to establish an account.

GENERAL INFORMATION

The Fund does not issue share certificates.

You will receive quarterly statements and a confirmation of each
transaction. You should verify the accuracy of all transactions in your account
as soon as you receive your confirmation.

During unusual market conditions, the Fund may temporarily suspend or
discontinue any service or privilege.

- 14 -

<PAGE>

MINIMUM INITIAL PURCHASES

The Fund accepts investments in the following minimum amounts:

Type of Account Minimum Minimum
Initial Subsequent
Investment Investment
---------- ----------

Individual, Sole proprietorship or
Joint accounts $1,000 $250

Corporate, partnership or trust
accounts $1,000 $250

Uniform Gift or Transfer to a Minor
Accounts (ugma, utma) $500 $100

Individual Retirement Accounts (IRA)
$500 $100

The Fund or Adviser may waive or lower these minimums in certain cases.
YOU MUST COMPLETE AND SIGN AN APPLICATION FOR EACH ACCOUNT YOU OPEN WITH THE
FUND.

The price for Fund shares is the Fund's net asset value per share (NAV)
plus any applicable sales charge. We determine the NAV as of the close of
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) every
day that the Exchange is open. We will price your order at the next NAV
calculated after the Fund accepts your order. For more information on how we
price shares, see "WHEN AND HOW NAV IS DETERMINED" on page 22.

METHOD OF PURCHASE

BY TELEPHONE

To open an account by telephone, call (877) XXX-XXXX to obtain an
account number and instructions. We will take information necessary to open your
account, including social security or tax identification number, over the phone.

After you have obtained an account number, you may purchase shares of
the Fund by wiring federal funds. Your bank may charge a fee for doing this. You
should instruct your bank to wire funds to:

- 15 -

<PAGE>

Union Bank of California
ABA # 122000496
Attention: DOMESTIC CUSTODY
Account # XXXXXXXXXX
F/B/O: Azzad/Dow Jones Islamic Index Fund
Shareholder Account No. ___________________

You will then need to mail a signed account application to:

Azzad/Dow Jones Islamic Index Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132

BY MAIL

You may also open an account by mailing a completed and signed account
application, together with a check, to:

Azzad/Dow Jones Islamic Index Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132

AUTOMATIC INVESTMENT PLANS

You may invest a specified amount of money in the Fund once or twice a
month on specified dates. These payments are taken from your bank account by
automated clearinghouse ("ACH") payment.

To open an Automatic Investment Plan account ("AIP"), call or write to
us to request and "Automatic Investment" form. Complete and sign the form, and
return it to us along with a voided check for the bank account from which
payments will be made.

TRANSACTIONS THROUGH THIRD PARTIES

If you invest through a broker or other financial institution, the
policies and fees charged by that institution may be different than those of the
Fund. Banks, brokers, retirement plans and financial advisors may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your financial institution
or retirement plan for further information.

HOW TO PAY FOR YOUR PURCHASE OF SHARES

You may purchase shares of the Fund by check, automated clearinghouse
payment, or wire. All payments must be in U.S. dollars.

CHECKS. All checks must be drawn on U.S. banks and made payable to "Azzad/Dow
Jones Islamic Index Fund." No other method of check payment is acceptable (for
instance, you may not pay by travelers check).

- 16 -

<PAGE>

ACH PAYMENTS. Instruct your financial institution to make an ACH (automated
clearinghouse) payment to us. These payments typically take two days. Your
financial institution may charge you a fee for this service.

WIRES. Instruct your financial institution to make a Federal funds wire payment
to us. Your financial institution may charge you a fee for this service.

LIMITATIONS ON PURCHASES

The Fund reserves the right to refuse any purchase request,
particularly requests that could adversely affect the Fund or its operations.
This includes those from any individual or group who, in the Fund's view, is
likely to engage in excessive trading (usually defined as more than four
exchanges out of the Fund within a calendar year).

CANCELED OR FAILED PAYMENTS

The Fund accepts checks and ACH transfers at full value subject to
collection. If your payment for shares is not received or you pay with a check
or ACH transfer that does not clear, your purchase will be canceled. You will be
responsible for any losses or expenses incurred by the Fund or the Transfer
Agent, and the Fund may redeem other shares you own in the account as
reimbursement. The Fund and its agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.. IF WE CANCEL YOUR PURCHASE
DUE TO NON-PAYMENT, YOU WILL BE RESPONSIBLE FOR ANY LOSS THE FUND INCURS. WE
WILL NOT ACCEPT CASH OR THIRD-PARTY CHECKS FOR THE PURCHASE OF SHARES.

HOW TO SELL (REDEEM) SHARES OF THE FUND

You have the right to sell ("redeem") all or any part of your shares
subject to certain restrictions. Selling your shares in the Fund is referred to
as a "redemption" because the Fund buys back its shares. We will redeem your
shares at the net asset value next computed following receipt of your redemption
request in proper form. See "Redemption Procedures - By Mail" below.

We will mail your redemption proceeds to your current address or
transmit them electronically to your designated bank account. Except under
certain emergency conditions, we will send your redemption to you within seven
days after we receive your redemption request. During unusual market conditions,
the Fund may suspend redemptions or postpone the payment of redemption proceeds,
to the extent permitted under the Federal securities laws. Delays may occur in
cases of very large redemptions, excessive trading or during unusual market
conditions. If you purchase your shares by check, the Fund may delay sending the
proceeds from your redemption request until your check has cleared. This could
take up to 15 calendar days.

The Fund cannot accept requests that specify a certain date for
redemption or which specify any other special conditions. Please call 1-877-
XXX-XXXX for further information. WE WILL NOT PROCESS YOUR REDEMPTION REQUEST IF
IT IS NOT IN PROPER FORM ("REDEMPTION PROCEDURES - BY MAIL"). WE WILL NOTIFY YOU
IF YOUR REDEMPTION REQUEST IS NOT IN PROPER FORM.

REDEMPTION PROCEDURES

BY MAIL

- 17 -

<PAGE>

To redeem shares by mail, prepare a written request including:

- Your name(s) and signature(s)
- The name of the Fund, and your account number
- The dollar amount or number of shares you want to redeem
- How and where to send your proceeds
- A signature guarantee, if required (see "Signature Guarantee Requirements"
below)
- Any other legal documents required for redemption requests by
corporations, partnerships or trusts.

Mail your request and documentation to:

Azzad/Dow Jones Islamic Index Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132

BY WIRE

You may only request payment of your redemption proceeds by wire if you
have previously elected wire redemption privileges on your account application
or a separate form.

Wire requests are only available if your redemption is for $10,000 or
more.

To request a wire redemption, mail or call us with your request (See
"By Mail"). If you wish to make your wire request by telephone, however, you
must have previously elected telephone redemption privileges.

BY TELEPHONE

We accept redemption requests by telephone only if you have elected
telephone redemption privileges on your account application or a separate form.

To redeem shares by telephone, call us with your request. You will need
to provide your account number and the exact name(s) in which the account is
registered. We may also require a password or additional forms of
identification.

Your proceeds will be mailed to you or wired to you (if you have
elected wire redemption privileges - See "By Wire" above)

Telephone redemptions are easy and convenient, but this account option
involves a risk of loss from unauthorized or fraudulent transactions. We will
take reasonable precautions to protect your account from fraud. You should do
the same by keeping your account information private and by reviewing
immediately any account statement and transaction confirmations that you
receive. Neither the Fund nor the Transfer Agent will be responsible for any
losses due to telephone fraud, so long as we have taken reasonable steps to
verify the caller's identity.

- 18 -

<PAGE>

AUTOMATIC REDEMPTION

If you own shares of the Fund with an aggregated value of at least
$10,000, you may request a specified amount of money from your account once a
month or once a quarter on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Automatic requests must be
for at least $100.

To set up periodic redemptions automatically, call or write us for an
"Automatic Redemption" form. You should complete the form and mail it to us with
a voided check for the account into which you would like the redemption proceeds
deposited.

SIGNATURE GUARANTEE REQUIREMENTS

To protect you and the Fund against fraud, signatures on certain
requests must have a "signature guarantee." For requests made in writing a
signature guarantee is required for any of the following:

- Redemption of over $5,000 worth of shares
- Changes to a record name or address of an account
- Redemption from an account for which the address or account registration
has changed within the last 30 days
- Sending proceeds to any person, address, brokerage firm or bank account
not on record
- Sending proceeds to an account with a different registration (name or
ownership) from yours
- Changes to automatic investment or redemption programs, distribution
options, telephone or wire redemption privileges, any other election in
connection with your account. A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but NOT from a notary public.

SMALL ACCOUNTS

If the value of your account falls below $500 ($250 for UGMA and IRA
accounts), the Fund may ask you to increase your balance. If the account value
is still below $500 after 30 days, the Fund may close your account and send you
the proceeds. The Fund will not close your account if it falls below $500 solely
as a result of a reduction in your account's market value.

REDEMPTION IN KIND

The Fund reserves the right to make redemptions "in kind" -- payment of
redemption proceeds in portfolio securities rather than cash -- if the amount
requested is large enough to affect Fund operations (for example, if the amount
of the redemption is the greater of $250,000 or 1% of the Fund's net assets).

- 19 -

<PAGE>

TRANSFERRING REGISTRATION

You can transfer the registration of your shares in the Azzad/Dow Jones
Islamic Index Fund to another owner by completing a transfer form and sending to
Azzad/Dow Jones Islamic Index Fund c/o American Data Services, Inc., P.O. Box
5536, Hauppage, New York 11788-0132.

LOST ACCOUNTS

The Transfer Agent will consider your account "lost" if correspondence
to your address of record is returned as undeliverable, unless the Transfer
Agent determines your new address. When an account is "lost," all distributions
on the account will be reinvested in additional shares of the Fund. In addition,
the amount of any outstanding (unpaid for six months or more) checks for
distributions that have been returned to the Transfer Agent will be reinvested
and the checks will be canceled.

HOW TO CONTACT THE FUND

For more information about the Fund or your account, you may write to
us at:

Azzad/Dow Jones Islamic Index Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132

Or you may call us toll free at 1-877- XXX-XXXX

WHEN AND HOW NAV IS DETERMINED

The value of a single share of the Fund is known as its "net asset
value" per share or "NAV." The Fund's NAV per share is normally calculated by
the administrator of the Fund as of the close of the regular session of trading
on the New York Stock Exchange ("NYSE") (normally 4:00 p.m., Eastern time) on
each weekday except days when the NYSE is closed. The Fund's NAV may be
calculated earlier, however, if trading on the NYSE is restricted or as
permitted by the Securities and Exchange Commission (SEC).

If a security or securities that the Fund owns are traded when the NYSE
is closed (for example, on a foreign exchange or in an after-hours market) the
value of the Fund's assets may be affected on days when the Fund is not open for
business. In addition, trading in some of the Fund's assets may not occur on
days when the Fund is open for business.

The Fund's NAV is determined by taking the market value of all
securities owned by the Fund (plus all other assets such as cash), subtracting
all liabilities and then dividing the result (net assets) by the number of
shares outstanding.

The Fund's securities are valued primarily on the basis of market
quotations. Certain short-term securities are valued on the basis of amortized
cost. If market quotations are not readily available for a security or if a
security's value has been materially affected by events occurring after the
close of the exchange or market on which the security is principally traded (for
example, a foreign exchange or market), that security may be valued by another
method that the Board of Directors believes accurately reflects fair value. A
security's valuation may differ depending on the method used for determining
value.

- 20 -

<PAGE>

DISTRIBUTIONS

As a shareholder, you are entitled to your share of the Fund's net
income and capital gains on its investments. The Fund passes substantially all
of its earnings along to its investors as distributions, except for interest
income, 100% of which is donated by the Fund to qualified charities in
accordance with policies and procedures established by the Shari'ah Supervisory
Board. When the Fund earns dividends from stocks and interest from bonds and
other debt securities and distributes these earnings to shareholders, it is
called a dividend distribution. The Fund realizes capital gains when it sells
securities for a higher price than it paid. When net long-term capital gains are
distributed to shareholders, it is called a capital gain distribution. Net
short-term capital gains are considered ordinary income and are included in
dividend distributions.

--------------------------------------------------------------------------------
LONG-TERM VS. SHORT-TERM CAPITAL GAINS:
--------------------------------------------------------------------------------
- Long-term capital gains are realized on securities held for more than one
year and are part of your capital gain distribution.
--------------------------------------------------------------------------------

- Short-term capital gains are realized on securities held less then one year
and are part of your dividend distributions
--------------------------------------------------------------------------------

The Fund distributes dividends and capital gains, if any, annually. All
distributions are reinvested in additional shares, unless you elect to receive
distributions in cash. For Federal income tax purposes, distributions are
treated the same whether they are received in cash or reinvested. Shares become
entitled to receive distributions on the day after the shares are issued.

If you have elected to receive distributions in cash, and the postal or
other delivery service returns your check to the Fund as undeliverable, you will
not receive interest on amounts represented by the uncashed checks.

FEDERAL TAX CONSIDERATIONS

Your investment will have tax consequences that you should consider.
Some of the more common federal tax consequences are described here but you
should consult your tax consultant about your particular situation. Although it
is not an investment objective, the Fund's Adviser will attempt to take into
account the tax consequences of its investment decisions. However, there may be
occasions when the Adviser's investment decisions will result in a negative tax
consequence for the Fund's shareholders.

TAXES ON DISTRIBUTIONS. The Fund operates in a manner such that it will not be
liable for Federal income or excise tax. Distributions of net investment income
or short-term capital gain are taxable to you as ordinary income. Distributions
of long-term capital gain are taxable to you as long-term capital gain,
regardless of how long you have held your shares.
Distributions may also be subject to state and local taxes.

The Fund will mail reports containing information about the Fund's
distributions during the year to you after December 31 of each year (by January
31st). Consult your tax advisor about the Federal, state and local tax
consequences in your particular circumstances.

TAXES ON REDEMPTIONS OF SHARES. The sale of Fund shares is a taxable transaction
for Federal income tax purposes. Your taxable gain or loss is computed by
subtracting your tax basis in the shares from the redemption proceeds. Because
your tax basis depends on the original purchase price and on the price at which
any dividends may have been reinvested, you should keep your account statement
so that you or your tax preparer will be able to determine whether a sale will
result in a taxable gain or loss.

- 21 -

<PAGE>

"BUYING A DIVIDEND." All distributions reduce the net asset value of the Fund's
shares by the amount of the distribution. Unless your investment is in a
tax-deferred account, you may wish to avoid buying shares of the Fund shortly
before a distribution. If you do, you will pay the full pre-distribution price
for your shares and then receive part of your investment back as a taxable
distribution.

TAX WITHHOLDING. The Fund may be required to withhold U.S. federal income tax at
the rate of 31 percent from all taxable distributions and form proceeds from
certain sales payable to shareholders who fail to provide the Fund with their
correct taxpayers identification number or to make required certifications, or
who have been notified by the IRS that they are subject to backup withholding.
Any such withheld amounts may be credited against the shareholder's U.S. federal
income tax liability.

PERFORMANCE COMPARISONS

Advertisements and other sales literature may refer to the Fund's total
return. The total return for the one, five and ten-year periods (or for the life
of the Fund until the Fund is in existence for such longer periods) through the
most recent calendar quarter represents the average annual compounded rate of
return on an investment of $1,000 in the Fund invested at the public offering
price, plus any applicable sales load. Total return may also be presented for
other periods. All data are based on past investment results and do not predict
future performance. Investment performance, which will vary, is based on many
factors, including market conditions, portfolio composition and Fund operating
expenses. Investment performance also often reflects the risks associated with
the Fund's investment objectives and strategies. These factors should be
considered when comparing the Fund's investment results with those of other
mutual funds and other investment vehicles.

Quotations of investment performance for any period when an expense
limitation is in effect will be greater than if the limitation had not been in
effect. Fund performance may be compared to that of various indexes.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Union Bank of California, located at 350 California Street, San
Francisco, California 94104, serves as custodian for the Fund's cash and
securities. The Custodian does not assist in, and is not responsible for,
investment decisions involving assets of the Fund. American Data Services, Inc.,
the Fund's Administrator, located at The Hauppauge Corporate Center, 150 Motor
Parkway, Hauppauge, New York 11788, also serves as the Fund's transfer and
dividend disbursing agent. The Fund pays the Administrator the greater of $900
per month or $9.00 per year per account, plus out-of-pocket expenses, for
rendering such transfer and dividend agency services.

- 22 -

<PAGE>

COUNSEL AND INDEPENDENT AUDITORS

Legal matters in connection with the issuance of shares of common stock
of the Fund are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New
York, New York 10022. McCurdy & Associates, CPAs, Inc., 27955 Clemens Road,
Westlake, Ohio 44145, have been selected as independent auditors for the Fund.

FINANCIAL HIGHLIGHTS

Because the Fund has been in operation for less than a year, no
financial highlights are being reported for the Fund at this time.

ORGANIZATION

The Azzad/Dow Jones Islamic Index Fund is a series of Questar Funds,
Inc., a Maryland corporation that is registered with the SEC as an open-end,
management investment company. It is not intended that meetings of the Fund's
shareholders be held except when required by Federal or Maryland state law. All
shareholders of the Fund are entitled to vote at shareholders' meetings. From
time to time, large shareholders may control the Fund.

FOR MORE INFORMATION

ADVISER AZZAD ASSET MANAGEMENT, INC.
8201 GREENSBORO DRIVE, SUITE 1000
MCLEAN, VIRGINIA 22102
LEGAL COUNSEL STEPHANIE DJINIS
LAW OFFICES OF STEPHANIE DJINIS
2918 JONES BRANCH DRIVE
SUITE 600
MCLEAN, VIRGINIA 22102
INDEPENDENT AUDITORS MCCURDY AND ASSOCIATES CPA'S, INC.
27955 CLEMENS ROAD
WESTLAKE, OH 44145
ADMINISTRATOR, TRANSFER AGENT AMERICAN DATA SERVICES, INC.
AND FUND ACCOUNTANT 105 MOTOR PARKWAY
HAUPPAUGE, NEW YORK 11788
CUSTODIAN UNION BANK OF CALIFORNIA, N.A.
350 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104

The following documents are available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments is available in the Fund's annual and semi-annual reports
to shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal
year.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI provides more
detailed information about the Fund and is incorporated by reference
into this Prospectus.

You may obtain free copies of both reports and the SAI, request other
information and discuss your questions about the Fund by contacting the Fund at:

AZZAD/DOW JONES ISLAMIC INDEX FUND
C/O AMERICAN DATA SERVICES, INC.
P.O. BOX 5536
HAUPPAUGE, NEW YORK 11788-0132
1-877-XXX-XXXX

You can also review the Fund's reports and SAI by visiting the Public
Reference Room of the Securities and Exchange Commission at 450 Fifth Street,
NW, Washington, DC 20549. Please call 800-SEC-0330 to learn the Public Reference
Room's business hours. You may request copies of the Fund's reports and SAI, for
a fee, by writing to the Public Reference Room at this address, or by e-mailing
your request to [email protected]. You may also download a free, text-only
version from the Commission's Internet website at www.sec.gov.

Investment Company Act File Number: 811-08655

- 24 -
<PAGE>

QUESTAR FUNDS, INC.

AZZAD/DOW JONES ISLAMIC INDEX FUND

(AN ENHANCED SHARI`AH COMPLIANT MUTUAL FUND BASED ON THE
EXTRA LIQUID VERSION OF THE DOW JONES ISLAMIC MARKET INDEX)

STATEMENT OF ADDITIONAL INFORMATION

_______________________, 2000

TABLE OF CONTENTS

PAGE
----

Investment Objective, Policies and Restrictions....................... 2
Directors and Executive Officers......................................15
Investment Advisory and Other Services................................16
Shareholder Servicing & Distribution Plan.............................18
Portfolio Transactions and Allocation of Brokerage....................20
Taxation..............................................................21
Ownership of Shares...................................................22
Purchase of Shares....................................................22
Dividends and Distributions...........................................22
Net Asset Value ......................................................22
Performance Comparisons...............................................23
Redemption of Shares..................................................24
Counsel and Independent Auditors......................................25
Other Information.....................................................25
Appendix..............................................................25

This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Fund's Prospectus dated _______________, 2000. Copies of
the Prospectus may be obtained from the Fund by writing the Fund's Administrator
at American Data Services, Inc., The Hauppauge Corporate Center, 150 Motor
Parkway, Hauppauge, New York 11788 or by calling (631) 951-0500.

- 1 -
<PAGE>

GLOSSARY

As used in this SAI, the following terms have the meanings listed.

"ADS" means American Data Services, Inc., the administrator, fund accountant,
and transfer and distribution disbursing agent of the Fund.

"Adviser" means Azzad Asset Management, Inc.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Corporation" means the Questar Funds, Inc., a Maryland corporation that is
registered with the SEC as an open-end, management investment company, commonly
referred to as a "mutual fund".

"Custodian" means the custodian of the Fund's assets.

"Fund" means the Azzad/Dow Jones Islamic Index Fund, a separate series of the
Company.

"Moody's" means Moody's Investors Service.

"NRSRO" means a nationally recognized statistical rating organization.

"NAV" means net asset value.

"SEC" means the U.S. Securities and Exchange Commission.

"S&P" means Standard & Poor's.

"U.S. Government Securities" means obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

"1933 Act" means the Securities Act of 1933, as amended.

"1940 Act" means the Investment Company Act of 1940, as amended.

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

The Fund's investment objective is to provide investors with annual
returns which, after expenses, match or exceed the annualized performance of the
U.S. components of the Dow Jones Islamic Market Extra Liquid Index (the
"Index")1, a sub-index of the Dow Jones Islamic Market Index ("DJIM"). The DJIM
is a globally diversified compilation of equity securities considered by Dow
Jones' Shari`ah Supervisory Board to be compliant with Shari`ah law.

--------
(1) "Dow Jones", "Dow Jones Islamic Market Index" and "Dow Jones Islamic Market
Extra Liquid Index " are service marks of Dow Jones & Company, Inc. Dow Jones
has no relationship to the Fund's investment adviser other than the licensing of
the Dow Jones Islamic Market Index and its service marks for use in connection
with the Fund. This Fund is not sponsored, endorsed, sold, or promoted by Dow
Jones and Dow Jones makes no representation regarding the advisability of
investing in the Fund.

- 2 -

<PAGE>

The Fund seeks to achieve its investment objective by investing
substantially all of its net assets in the U.S. component securities of the
IMXL, an unmanaged index that tracks the 100 most liquid U.S. and non-U.S.
securities listed on the DJIM. The investment adviser seeks to achieve and
maintain a correlation between the Fund's investment portfolio and the U.S.
component securities of the IMXL of at least 0.95, after expenses. A correlation
of 1.00 would mean that the Fund and U.S. component securities of the IMXL were
perfectly correlated.

TEMPORARY DEFENSIVE STRATEGY

A summary of the Fund's investment policies is set forth in the
Prospectus. Additional information regarding the Fund's investment risks,
policies and restrictions is set forth below.

INVESTMENT POLICIES AND ASSOCIATED RISKS

The following discussion supplements the disclosure in the prospectus
about the Fund's investment techniques, strategies and risks. The Fund is
designed for investment of that portion of an investor's funds which can
appropriately bear the special risks associated with certain types of
investments (e.g., investments in common stocks pursuant to an enhanced
indexed-oriented investment strategy consistent with the body of Islamic laws
known as Shari`ah). Unless otherwise noted, the policies described in this
Statement of Additional Information are not fundamental and may be changed by
the Board of Directors. As all investment securities are subject to inherent
market risks and fluctuations in value due to earnings, economic and political
conditions and other factors, the Fund can give no assurance that its investment
objective will be achieved.

----------
(2) All dividend payments to the Fund will be subject to a purification process
(see description of the purification of income from dividends on Page 7)
according to the methodology formulated by Dow Jones and approved by the Azzad
Shari`ah Board. A portion of each dividend may be deemed prohibited as it
relates to interest income earned by a particular company in the IMXL. The
portion of the dividend deemed prohibited will be treated as interest income and
will be segregated to the charitable account.

- 3 -
<PAGE>

RISKS OF INVESTING IN PORTFOLIO SECURITIES

The Fund will invest solely in the U.S. component securities of the Dow
Jones Islamic Market Extra Liquid Index which are all common stocks. The Fund
will not invest in any other type of equity security. Common stock represents
the residual ownership interest in an issuer and is entitled to the income and
increase in the value of the assets and business of the entity after all of its
obligations and preferred stock are satisfied.

An investment in the Fund should be made with an understanding of the
risks inherent in an investment in equity securities, including the risk that
the general condition of the stock market may deteriorate. Common stocks are
susceptible to general stock market fluctuations and to volatile increases and
decreases in value according to various unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction and global or
regional political, economic and banking crises. In addition to the general
risks and considerations of equity investing, the Fund is subject to the
specific risks associated with the specific investments discussed below.

FUNDAMENTAL INVESTMENT RESTRICTIONS

The Fund is operated under the following investment restrictions which
are deemed fundamental policies and may be changed only with the approval of the
holders of a "majority of the outstanding voting securities" as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), of the Fund. As
used in this Part B, the term "majority of the outstanding voting securities" as
defined in the 1940 Act currently means the vote of (i) 67% or more of the
voting securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.

The Fund may not:

(1) Borrow money or pledge its assets except in an amount not to exceed 1/3 of
the current value of its net assets and in a manner not to contravene the
policies and procedures of Islamic Shari'ah principles, it may borrow money as a
temporary measure for extraordinary or emergency purposes, and except that it
may pledge, mortgage or hypothecate not more than 1/3 of such assets to secure
such borrowings (it is intended that money will be borrowed only from banks and
only to accommodate requests for the redemption of Fund shares, while effecting
an orderly liquidation of investment portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations).

(2) Earn interest on its capital except as permitted by the policies and
procedures established by the Azzad Shari'ah Board;

(3) Purchase any security which is not included in the U.S. component of the Dow
Jones Islamic Market Extra Liquid Index;

(4) Hold uninvested cash in interest bearing deposits or invest such uninvested
cash in a manner that would not be in compliance with Shari'ah law principles;

(5) Acquire the securities of one issuer if upon such purchase the value of the
Fund's holdings of such securities would exceed 10% of its net assets;

(6) Invest in fixed income investments, except as permitted by the policies and
procedures established by the Azzad Shari'ah Board;

(7) Underwrite securities issued by other persons except insofar as it may
technically be deemed an underwriter under the Securities Act of 1933, as
amended (the "1933 Act") in selling a portfolio security;

- 4 -

<PAGE>

(8) Purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts in the ordinary
course of business (the freedom of action to hold and to sell real estate
acquired as a result of the ownership of securities is reserved);

(9) Concentrate its investments in any particular industry unless such
concentration is reflected in the U.S. component of the Dow Jones Islamic Market
Extra Liquid Index;

(10) Issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder or if such issuance is prohibited by Shari'ah law.

Except as required by the 1940 Act or the Code, if any percentage
restriction on investment or utilization of assets is adhered to at the time an
investment is made, a later change in percentage resulting from a change in the
market values of the Fund's assets or purchases and redemptions of shares will
not be considered a violation of the limitation.

DIRECTORS AND EXECUTIVE OFFICERS

The following table contains information concerning the directors and
officers of Questar Funds, Inc., (the "Company"), and their principal
occupations during the past five years. Directors who are interested persons, as
defined by the 1940 Act, are indicated by asterisk.

NAME (AGE) AND PRINCIPAL OCCUPATION AND OTHER
ADDRESS BUSINESS EXPERIENCE DURING THE POSITIONS HELD WITH THE
------- PAST FIVE (5) YEARS COMPANY
------------------- -------

<S> <C> <C>
DANIEL ABRAMSON (49) President and Chief Executive Officer, Director
c/o Dunhill Staffing Systems, Inc. Dunhill Staffing Systems, Inc.
150 Motor Parkway (1994-Present), having joined Dunhill in
Hauppauge, NY 11788 1986 as a franchise owner in Providence,
RI. He served as Franchise Advisory
Council President (1990-1992) and is
a member of the National Association
of Personnel Services, a trade
organization.

PHILIP A. CAPALONGO (44) Managing Director in Capital Investments Director
211 Mill River Road Partners, an investment banking firm.
Oyster Bay, NY 11771 Prior thereto, he served in a number of
senior management positions at
TeleTechnologies, a technology company, and
Michaels, Edgar & Phillips, an
investment banking firm.

ANTHONY J. HERTL, (50) Colobaugh Pond Chief Financial and Administrative Officer Director
Road for Marymount College, Tarrytown, New York
Croton-on-Hudson, NY 10520 since 1996. Prior thereto, he served in a
number of senior management positions at
Prudential Securities Inc. from 1983-1996.
Mr. Hertl spent ten (10) years at Arthur
Andersen & Co. and is a Certified Public
Accountant.

<PAGE>

*MICHAEL MIOLA (48) Chief Executive Officer of American Data Chief Executive Officer,
The Hauppauge Corporate Center Services, Inc. President and
150 Motor Parkway Director
Hauppauge, New York 11788

DONALD SMITH (52) President, Don Smith Realty (1971-1999). Director
Don Smith Realty Director of Avalon Capital, Inc., a
81 North Maple Avenue closed-end investment company.
Ridgewood, NJ 07450

</TABLE>

In addition to Mr. Miola as Chief Executive Officer and President, the
other officers of the Corporation are Michael Wagner, Treasurer and James
Colantino, Secretary. Each of the officers is employed by the Administrator.

The members of the Audit Committee of the Board of Directors are
Messrs. Hertl, Smith and Abramson. Mr. Hertl acts as the chairperson of such
committee. The Audit Committee oversees the Fund's financial reporting process;
reviews audit results and recommends annually to the Company a firm of
independent certified public accountants.

Those Directors who are officers or employees of the Administrator or
its affiliates receive no remuneration from the Fund. Each disinterested
Director receives a fee from the Fund for each regular quarterly and in-person
special meeting of the Board of Directors attended. Members of the Board who are
not affiliated with the Adviser or the Administrator receive an annual fee of
$1,000 plus $500 for each Board meeting attended. The Fund will pay a pro rata
portion of the Directors' fees and expenses based on the net assets of the Fund
and the other series of the Company. In addition, each Director who is not
affiliated with the Adviser or the Administrator is reimbursed for expenses
incurred in connection with attending meetings.

The following table sets forth the compensation received by each
Director of the Company during the Fund's fiscal year ending February 29, 2000.
Directors who are interested persons of the Company, as defined by the 1940 Act,
are indicated by asterisk.

- 6 -
<PAGE>

---------------------------- --------------------- ------------------ -------------------- ---------------------
(1) (2) (3) (4) (5)
---------------------------- --------------------- ------------------ -------------------- ---------------------
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT ESTIMATED ANNUAL FROM FUND AND FUND
NAME OF PERSON, POSITION COMPENSATION FROM BENEFITS ACCRUED BENEFITS UPON COMPLEX PAID TO
EACH FUND(3) AS PART OF FUND RETIREMENT DIRECTORS
EXPENSES
---------------------------- --------------------- ------------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
Daniel Abramson NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
Philip A. Capalongo NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
Anthony Hertl NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
Donald Smith NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
*Michael Miola
Director NONE NONE NONE NONE
---------------------------- --------------------- ------------------ -------------------- ---------------------

<FN>
1. The Officers and Directors of the Fund as a group own less than 1% of all of
the Fund's equity securities.

</FN>
</TABLE>

AZZAD SHARI`AH BOARD

To ensure that the investment policies and general business practices
of the Fund comply with the precepts of Shria`ah law, the Fund has convened an
independent Shari`ah Supervisory Board to supervise and review Fund policies and
procedures (the "Azzad Shari`ah Board"). On a monthly basis, the Azzad Shari`ah
Board monitors the Fund's investment activities and reviews the Fund's
management and compliance procedures based on Islamic financial law (fiqh al
mu`amalat) and current Shari`ah scholarship, interpretations, and practices. The
Azzad Shari`ah Board also meets annually for a more comprehensive review and
reports on the results of their findings annually in a report to the Board of
Directors of the Fund. The Azzad Sharia`ah Board also has primary responsibility
for implementing the Fund's policies in connection with the purification of
interest income (RIBA).

Shaykh Yusuf Talal DeLorenzo Shaykh Yusuf Talal DeLorenzo is currently a
Shari'ah consultant/advisor and
translator/researcher for the institution of
Islamic Banking, London, and PCS Inc.,
Reston, Virginia. He holds an M.A. in
Islamic Studies from Jami'ah al Ulum al
Islamiyah (Karachi) and is a doctoral
candidate at the Hartford Seminary. Shaykh
DeLorenzo produced the first systematic
academic translation in English of legal
rulings issued by Shari'ah advisory boards
on the operations of Islamic Bank Rulings on
the Operations of Islamic Banks. He has also
authored original research in Islamic
studies, including Islamic banking and law,
in English, Arabic and Urdu.

- 7 -

<PAGE>

Shaykh Dr. Mohamed Ali Eligari Dr. Mohamed Ali EL-Gari is the director of
Saudi Arabia the Center for Research in
Islamic Economics at King Abdulaziz
University in Jeddah. He is also a member of
the OIC Fiqh Council. Dr. EL-Gari serves as
a consultant to Islamic banks and has served
on the consulting committee that counseled
the Government of Pakistan on the
Islamization of its banking system. Dr.
EL-Gari holds a Ph.D. in Economics from the
University of California.

Shaykh Mizam Yaquby Shaykh Mizam Yaquby is a renowned Shari'ah
scholar and advisor to numerous Islamic
banks and companies, including Abu Dhabi
Islamic Bank, Islamic Investment Company of
the Gulf, Bahrain and the Arab Islamic Bank,
Bahrain. He pursued traditional Islamic
studies in Mecca, India and Morocco under
the guidance of eminent Islamic scholars,
including Shaykh Abdullah Al-Farisi and
Shaykh Muhammad Salah Al-Abbasi. He holds a
B.A.in Economics and Comparative Religion
from McGill University, Toronto. He is a
Ph.D. candidate in Islamic Law at the
University of Wales. Shaykh Yaquby has
published several books on Islam law and is
a frequent speaker at Islamic conferences.

INVESTMENT ADVISORY AND OTHER SERVICES

The investment adviser for the Fund is Azzad Asset Management, Inc.
(the "Adviser"). The Adviser will act as such pursuant to a written agreement
which, after its initial two-year period, must be annually re-approved by the
Board of Directors. The address of the Adviser is 8201 Greensboro Drive, Suite
1000, McLean, Virginia 22102. The Adviser can also be contacted by telephone at
(703) 847-8127.

CONTROL OF THE ADVISER
_____________________________ each own __________% of the issued and
outstanding shares of common stock of the Adviser.

INVESTMENT ADVISORY AGREEMENT

The Adviser acts as the investment adviser of the Fund under an
Investment Advisory Agreement approved by the Board of Directors (including a
majority of the Directors who are not parties to the agreement, or interested
persons of any such party).

The Investment Advisory Agreement will terminate automatically in the
event of its assignment. In addition, the Agreement is terminable at any time,
without penalty, by the Board of Directors of the Company or by vote of a
majority of the Fund's outstanding voting securities on not more than 60 days'
written notice to the Adviser, and by the Adviser on 60 days' written notice to
the Company. Unless sooner terminated, the Agreement shall continue in effect
for more than two years after its execution only so long as such continuance is
specifically approved at least annually by either the Board of Directors or by a
vote of a majority of the outstanding shares of the Fund, provided that in
either event such continuance is also approved by a vote of a majority of the
Directors who are not parties to such Agreement, or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval.

- 8 -

<PAGE>

Under the Investment Advisory Agreement, the Adviser provides the Fund
with advice and assistance in the acquisition and disposition of the Fund's
investments. All investment decisions are subject to review by the Board of
Directors of the Company and the Azzad Shari`ah Board. The Adviser is obligated
to pay the salaries and fees of any affiliates of the Adviser serving as
officers of the Company or the Fund.

The same security may be suitable for the Fund or other private
accounts managed by the Adviser. If and when the Fund or two or more accounts
simultaneously purchase or sell the same security, the transactions will be
allocated as to price and amount in accordance with arrangements equitable to
the Fund or account. The simultaneous purchase or sale of the same securities by
the Fund and other accounts may have a detrimental effect on the Fund, as this
may affect the price paid or received by the Fund or the size of the position
obtainable or able to be sold by the Fund.

CODE OF ETHICS

Personnel of the Adviser may invest in securities for their own account
pursuant to a Code of Ethics which has been adopted by the Company and the
Adviser that sets forth all employees' fiduciary responsibilities regarding the
Fund, establishes procedures for personal investing and restricts certain
transactions. For example, all personal trades in most securities require
pre-clearance, and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation to trades
by the Fund and on short-term trading have been adopted.

ADMINISTRATOR

The Administrator for the Fund is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds through its offices in New
York, Denver and Los Angeles.

Pursuant to an Administrative Service Agreement with the Fund, the
Administrator provides all administrative services necessary for the Fund,
subject to the supervision of the Board of Directors. The Administrator will
provide persons to serve as officers of the Fund. Such officers may be
directors, officers or employees of the Administrator or its affiliates.

The Administrative Service Agreement is terminable by the Board of
Directors of the Company or the Administrator on sixty days' written notice and
may be assigned provided the non-assigning party provides prior written consent.
The Agreement shall remain in effect for two years from the date of its initial
approval, and subject to annual approval of the Board of Directors for one-year
periods thereafter. The Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Administrator or
reckless disregard of its obligations thereunder, the Administrator shall not be
liable for any action or failure to act in accordance with its duties
thereunder.

Under the Administrative Service Agreement, the Administrator provides
all administrative services, including, without limitation: (i) provides
services of persons competent to perform such administrative and clerical
functions as are necessary to provide effective administration of the Fund; (ii)
overseeing the performance of administrative and professional services to the
Fund by others, including the Fund's Custodian; (iii) preparing, but not paying
for, the periodic updating of the Fund's Registration Statement, Prospectus and
Statement of Additional Information in conjunction with Fund counsel, including
the printing of such documents for the purpose of filings with the Securities
and Exchange Commission and state securities administrators, preparing the
Fund's tax returns, and preparing reports to the Fund's shareholders and the
Securities and Exchange Commission; (iv) preparing in conjunction with Fund
counsel, but not paying for, all filings under the securities or "Blue Sky" laws
of such states or countries as are designated by the Distributor, which may be
required to register or qualify, or continue the registration or qualification,
of the Fund and/or its shares under such laws; (v) preparing notices and agendas
for meetings of the Board of Directors and minutes of such meetings in all
matters required by the 1940 Act to be acted upon by the Board; and (vi)
monitoring daily and periodic compliance with respect to all requirements and
restrictions of the Investment Company Act, the Internal Revenue Code and the
Prospectus.

- 9 -

<PAGE>

The Administrator, pursuant to the Fund Accounting Service Agreement,
provides the Fund with all accounting services, including, without limitation:
(i) daily computation of net asset value; (ii) maintenance of security ledgers
and books and records as required by the Investment Company Act; (iii)
production of the Fund's listing of portfolio securities and general ledger
reports; (iv) reconciliation of accounting records; (v) calculation of yield and
total return for the Fund; (vi) maintaining certain books and records described
in Rule 31a-1 under the 1940 Act, and reconciling account information and
balances among the Fund's Custodian and Adviser; and (vii) monitoring and
evaluating daily income and expense accruals, and sales and redemptions of
shares of the Fund.

ADMINISTRATOR'S FEES

For the services rendered to the Fund by the Administrator, the Fund
pays the Administrator a monthly fee based on the Fund's average net assets. The
Fund also pays the Administrator for any out-of-pocket expenses. These fees are
set forth in the Fund's Prospectus.

In return for providing the Fund with all accounting related services,
the Fund pays the Administrator a monthly fee based on the Fund's average net
assets, plus any out-of-pocket expenses for such services.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT

Union Bank of California serves as custodian for the Fund's cash and
securities (the "Custodian"). Pursuant to a Custodian Agreement, it is
responsible for maintaining the books and records of the Fund's portfolio
securities and cash. The Custodian does not assist in, and is not responsible
for, investment decisions involving assets of the Fund. American Data Services,
Inc., the Administrator, also acts as the Fund's transfer and dividend agent.

DISTRIBUTOR

Pursuant to a Distribution Agreement, AmeriMutual Funds Distributors,
Inc. (the "Distributor") has agreed to act as the principal underwriter for the
Fund in the sale and distribution to the public of shares of the Fund, either
through dealers or otherwise. The Distributor has agreed to offer such shares
for sale at all times when such shares are available for sale and may lawfully
be offered for sale and sold.

SHAREHOLDER SERVICING AND DISTRIBUTION PLAN

The Fund has adopted a Distribution and Service Plan (the "Plan"),
which was reviewed and approved by a majority of the disinterested directors of
the Company, pursuant to Rule 12b-1 under the Act (the "Rule"). The Rule
provides that an investment company which bears any direct or indirect expense
of distributing its shares must do so only in accordance with a plan permitted
by the Rule. The Plan provides that the Fund will compensate the Distributor for
certain expenses and costs incurred in connection with providing marketing and
promotional support to the Fund, shareholder servicing and maintaining
shareholder accounts, to compensate parties with which it has written agreements
and whose clients own shares of the Fund for providing servicing to their
clients ("shareholder servicing") and financial institutions with which it has
written agreements and whose clients are Fund shareholders (each a
"broker-dealer") for providing distribution assistance and promotional support
to the Fund, which is subject to a maximum of 0.25% per annum of each Fund's
average daily net assets. Fees paid under the Plan may not be waived for
individual shareholders.

Each shareholder servicing agent and broker-dealer will, as agent for
its customers, among other things: answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
each may be effected and certain other matters pertaining to the Fund; assist
shareholders in designating and changing dividend options, account designations
and addresses; provide necessary personnel and facilities to establish and

- 10 -

<PAGE>

maintain shareholder accounts and records; assist in processing purchase and
redemption transactions; arrange for the wiring of funds; transmit and receive
funds in connection with customer orders to purchase or redeem shares; verify
and guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; furnish quarterly and
year-end statements and confirmations within five business days after activity
in the account; transmit to shareholders of the Fund proxy statements, annual
reports, updated prospectuses and other communications; receive, tabulate and
transmit proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as either the
Fund or a shareholder thereof may request.

The Plan, the shareholder servicing agreements and the form of
distribution agreement each provide that the Adviser or the Distributor may make
payments from time to time from their own resources which may include the
advisory fee and the asset based sales charges and past profits for the
following purposes: (i) to defray the costs of and to compensate others,
including financial intermediaries with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions of the Fund; to compensate certain financial
intermediaries for providing assistance in distributing the Fund's shares; (ii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors; and (iii) to defray the cost of the preparation and
printing of brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including the
salaries and/or commissions of sales personnel in connection with the
distribution of the Fund's shares. The Distributor will determine the amount of
such payments made pursuant to the Plan with the shareholder servicing agents
and broker-dealers with whom it has contracted, provided that such payments made
pursuant to the Plan will not increase the amount which the Fund is required to
pay the Distributor for any fiscal year under the shareholder servicing
agreement or otherwise.

Shareholder servicing agents and broker-dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the shareholder servicing agents and
broker-dealers. In addition, shareholder servicing agents and broker-dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in the fund directly may impose charges, limitations,
minimums and restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. Accordingly, the net yield to
investors who invest through shareholder servicing agents and broker-dealers may
be less than realized by investing in the Fund directly. An investor should read
the Prospectus in conjunction with the materials provided by the shareholder
servicing agent and broker-dealer describing the procedures under which Fund
shares may be purchased and redeemed through the shareholder servicing agent and
broker-dealer.

In accordance with the Rule, the Plan provides that all written
agreements relating to the Plan entered into by the Fund, the Distributor or the
Adviser, and the shareholder servicing agents, broker-dealers, or other
organizations, must be in a form satisfactory to the Board of Directors. In
addition, the Plan requires the Fund and the Distributor of the Fund to prepare,
at least quarterly, written reports setting forth all amounts expended for
distribution purposes by the Fund and the Distributor pursuant to the Plan and
identifying the distribution activities for which those expenditures were made
for review by the Board of Directors.

OTHER EXPENSES

The Fund pays certain operating expenses that are not assumed by the
Adviser, the Administrator or any of their respective affiliates. These
expenses, together with fees paid to the Adviser, the Administrator and the
Transfer Agent, are deducted from the income of the Fund, respectively, before
dividends are paid. These expenses include, but are not limited to,
organizational costs and expenses of officers and Directors who are not
affiliated with the Adviser, the Administrator or any of their respective
affiliates, taxes, interest, legal fees, custodian fees, audit fees, brokerage

- 11-

<PAGE>

fees and commissions, fees and expenses of registering and qualifying the Fund
and their shares for distribution under federal and various state securities
laws, the expenses of reports to shareholders, shareholders' meetings and proxy
solicitations.

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

The Fund's assets are invested by the Adviser in a manner consistent
with its investment objective, policies, and restrictions and with any
instructions the Board of Directors may issue from time to time. Within this
framework, the Adviser is responsible for making all determinations as to the
purchase and sale of portfolio securities and for taking all steps necessary to
implement securities transactions on behalf of the Fund.

U.S. Government securities generally are traded in the over-the-counter
market through broker-dealers. A broker-dealer is a securities firm or bank that
makes a market for securities by offering to buy at one price and sell at a
slightly higher price. The difference between the prices is known as a spread.

In placing orders for the purchase and sale of portfolio securities for
the Fund, the Adviser will use its best efforts to obtain the best possible
price and execution and will otherwise place orders with broker-dealers subject
to and in accordance with any instructions the Board of Directors may issue from
time to time. The Adviser will select broker-dealers including, the Distributor,
to execute portfolio transactions on behalf of the Fund primarily on the basis
of best price and execution.

When consistent with the objectives of prompt execution and favorable
net price, business may be placed with broker-dealers who furnish investment
research or services to the Adviser. Such research or services include advice,
both directly and in writing, as to the value of securities; the advisability of
investing in, purchasing or selling securities; and the availability of
securities, or purchasers or sellers of securities; as well as analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. To the extent portfolio
transactions are effected with broker-dealers who furnish research services to
the Adviser, the Adviser receives a benefit, not capable of evaluation in dollar
amounts, without providing any direct monetary benefit to the Fund from these
transactions. The Adviser believes that most research services obtained by it
generally benefit several or all of the investment companies and private
accounts which it manages, as opposed to solely benefiting one specific managed
fund or account.

Transactions on U.S. stock exchanges, commodities markets and futures
markets and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, the Adviser may receive brokerage and research services and other
similar services from many broker-dealers with which the Adviser may place the
Fund's portfolio transactions and from third parties with which these
broker-dealers have arrangements. These services include such matters as general
economic and market reviews, industry and company reviews, evaluations of
investments, recommendations as to the purchase and sale of investments,
newspapers, magazines, pricing services, quotation services, news services and
personal computers utilized by the Adviser. Where the services referred to above
are not used exclusively by the Adviser for research purposes, the Adviser,
based upon its own allocations of expected use, bears that portion of the cost
of these services which directly relates to their non-research use. Some of
these services are of value to the Adviser and its affiliates in advising
various of their clients (including the Fund), although not all of these
services are necessarily useful and of value in managing the Fund. The
management fee paid by the Fund is not reduced because the Adviser and its
affiliates receive these services even though the Adviser might otherwise be
required to purchase some of these services for cash.

- 12 -
<PAGE>

As permitted by Section 28(e) of the 1934 Act, the Adviser may cause
the Fund to pay a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to the Adviser an amount of disclosed commission
for effecting securities transactions on stock exchanges and other transactions
for the Fund on an agency basis in excess of the commission which another
broker-dealer would have charged for effecting that transaction. The Adviser's
authority to cause the Fund to pay any such greater commissions is also subject
to such policies as the Directors may adopt from time to time. The Adviser does
not currently intend to cause any Fund to make such payments. It is the position
of the staff of the Securities and Exchange Commission that Section 28(e) does
not apply to the payment of such greater commissions in "principal"
transactions. Accordingly, the Adviser will use its best effort to obtain the
most favorable price and execution available with respect to such transactions,
as described above.

Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.

TAXATION

The Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Code. By so qualifying, the Fund will not
incur federal income or state taxes on its net investment income and on net
realized capital gains to the extent distributed as dividends to shareholders.

Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, the Fund must distribute during each calendar
year an amount equal to the sum of (a) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (b) at
least 98% of its capital gains in excess of capital losses (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31st of the
calendar year, and (c) all ordinary income and capital gains for previous years
that were not distributed during such years.

Under the Code, dividends derived from interest, and any short-term
capital gains, are taxable to shareholders as ordinary income for federal and
state tax purposes, regardless of whether such dividends are taken in cash or
reinvested in additional shares. Distributions made from the Fund's net realized
long-term capital gains (if any) and designated as capital gain dividends are
taxable to shareholders as long-term capital gains, regardless of the length of
time Fund shares are held. Corporate investors are not eligible for the
dividends-received deduction with respect to distributions derived from interest
on short-or long-term capital gains from the Fund but may be entitled to such a
deduction in respect to distributions attributable to dividends received by the
Fund. A distribution will be treated as paid on December 31st of a calendar year
if it is declared by the Fund in October, November or December of the year with
a record date in such a month and paid by the Fund during January of the
following year. Such distributions will be taxable to shareholders in the
calendar year the distributions are declared, rather than the calendar year in
which the distributions are received.

Distributions paid by the Fund from net long-term capital gains (excess
of long-term capital gains over long-term capital losses), if any, whether
received in cash or reinvested in additional shares, are taxable as long-term
capital gains, regardless of the length of time you have owned shares in the
Fund. Distributions paid by the Fund from net short-term capital gains (excess
of short-term capital gains over short-term capital losses), if any, whether
received in cash or reinvested in additional shares are taxable as ordinary
income. Capital gains distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year. Realized capital gains
are not expected to be a significant or predictable part of the Fund's
investment return.

Any redemption of the Fund shares is a taxable event and may result in
a capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares.

- 13 -

<PAGE>

Dividend distributions, capital gains distributions, and capital gains
or losses from redemptions and exchanges may also be subject to state and local
taxes.

Ordinarily, distributions and redemption proceeds paid to Fund
shareholders are not subject to withholding of federal income tax. However, 31%
of the Fund's distributions and redemption proceeds must be withheld if a Fund
shareholder fails to supply the Fund or its agent with such shareholder's
taxpayer identification number or if the Fund shareholder who is otherwise
exempt from withholding fails to properly document such shareholder's status as
an exempt recipient.

The information above is only a summary of some of the tax
considerations generally affecting the Fund and its shareholders. No attempt has
been made to discuss individual tax consequences. To determine whether the Fund
is a suitable investment based on his or her tax situation, a prospective
investor may wish to consult a tax advisor.

VOTING AND OWNERSHIP OF SHARES

Each share of the Fund has one vote in the election of Directors.
Cumulative voting is not authorized for the Fund. This means that the holders of
more than 50% of the shares voting for the election of Directors can elect 100%
of the Directors if they choose to do so, and, in that event, the holders of the
remaining shares will be unable to elect any Directors.

Shareholders of the Fund and any other future series of the Company
will vote in the aggregate and not by series except as otherwise
required by law or when the Board of Directors determines that the
matter to be voted upon affects only the interest of the shareholders
of a particular series. Pursuant to Rule 18f-2 under the 1940 Act, the
approval of an investment advisory agreement or any change in a
fundamental policy would be acted upon separately by the series
affected. Matters such as ratification of the independent public
accountants and election of Directors are not subject to separate
voting requirements and may be acted upon by shareholders of the
Company voting without regard to series.

PURCHASE OF SHARES

Shares of the Fund may be purchased at the net asset value per share
next determined after receipt of an order by the Fund's Distributor in proper
form with accompanying check or other bank wire payment arrangements
satisfactory to the Fund. The Fund's minimum initial investment is $2,000
(except for retirement accounts for which the minimum initial investment is
$1,000) and the minimum subsequent investment is $100.

DIVIDENDS AND DISTRIBUTIONS

Net investment income, if any, is declared as dividends and paid
annually. Substantially all the realized net capital gains for the Fund, if any,
are also declared and paid on an annual basis. Dividends and distributions are
payable to shareholders of record at the time of declaration.

Distributions are automatically reinvested in additional Fund shares
unless the shareholder has elected to have them paid in cash.

The net investment income of the Fund for each business day is
determined immediately prior to the determination of net asset value. Net
investment income for other days is determined at the time net asset value is
determined on the prior business day. See "Purchase of Shares" and "Redemption
of Shares" in the Prospectus.

- 14 -

<PAGE>

NET ASSET VALUE

The method for determining the Fund's net asset value is summarized in
the Prospectus in the text following the heading "Valuation of Shares." The net
asset value of the Fund's shares is determined on each day on which the New York
Stock Exchange is open, provided that the net asset value need not be determined
on days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.

PERFORMANCE COMPARISONS

Total return quoted in advertising and sales literature reflects all
aspects of the Fund's return, including the effect of reinvesting dividends and
capital gain distributions and any change in the Fund's net asset value during
the period.

The Fund's total return must be displayed in any advertisement
containing the Fund's yield. Total return is the average annual total return for
the 1-, 5- and 10-year period ended on the date of the most recent balance sheet
included in the Statement of Additional Information, 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 investment of $1000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1000 payment made at the
beginning of the 1-, 5- or 10-year periods at the end of the 1-, 5-or 10-year
periods (or fractions thereof).

Because the Fund has not had a registration in effect for a full year,
the period during which the registration has been effective shall be
substituted.

Average annual total return is calculated by determining the growth or
decline in value of a hypothetical historical investment in the Fund over a
stated period and then calculating the annual compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant throughout the period. For example, a cumulative total return
of 100% over 10 years would produce an average annual total return of 7.18%,
which is the steady annual rate that would result in 100% growth on a compounded
basis in 10 years. While average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that the Fund's
performance is not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to actual
year-to-year performance.

In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount and may be calculated for a
single investment, a series of investments, or a series of redemptions over any
time period. Performance information may be quoted numerically or in a table,
graph, or similar illustration.

The Fund's performance may be compared with the performance of other
funds with comparable investment objectives, tracked by fund rating services or
with other indexes of market performance. Sources of economic data that may be
considered in making such comparisons may include, but are not limited to,

- 15 -

<PAGE>

rankings of any mutual fund or mutual fund category tracked by Lipper Analytical
Services, Inc. or Morningstar, Inc.; data provided by the Investment Company
Institute; major indexes of stock market performance; and indexes and historical
data supplied by major securities brokerage or investment advisory firms. The
Fund may also utilize reprints from newspapers and magazines furnished by third
parties to illustrate historical performance.

The agencies listed below measure performance based on their own
criteria rather than on the standardized performance measures described in the
preceding section.

Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated by
Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of performance
periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset category.

Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent the fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 1-year, 3-year, 5-year, 10-year and overall performance. The
performance factor for the overall rating is a weighted-average assessment of
the fund's 1-year, 3-year, 5-year, and 10-year total return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.

CDA/Weisenberger's Management Results publishes mutual fund rankings
and is distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year,
5-year and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of sales charges or fees.

Independent publications may also evaluate the Fund's performance. The
Fund may from time to time refer to results published in various periodicals,
including Barrons, Financial World, Forbes, Fortune, Investor's Business Daily,
Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The
Wall Street Journal.

REDEMPTION OF SHARES

Redemption of shares, or payment for redemptions, may be suspended at
times (a) when the New York Stock Exchange is closed for other than customary
weekend or holiday closings, (b) when trading on said Exchange is restricted,
(c) when an emergency exists, as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable, or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or (d)
during any other period when the Securities and Exchange Commission, by order,
so permits, provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in (b)
or (c) exist.

Shareholders who purchased shares through a broker-dealer other than
the Distributor may also redeem such shares by written request to the Transfer
Agent which shares are held by the Transfer Agent at the address set forth in
the Prospectus. To be considered in "good order", written requests for
redemption should indicate the dollar amount or number of shares to be redeemed,
refer to the shareholder's Fund account number, including either the social
security or tax identification number. The request should be signed in exactly
the same way the account is registered. If there is more than one owner of the
shares, all owners must sign. If shares to be redeemed have a value of $5,000 or
more or redemption proceeds are to be paid by someone other than the shareholder
at the shareholder's address of record, the signature(s) must be guaranteed by
an "eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member

- 16 -

<PAGE>

firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee. The Transfer
Agent may reject redemption instructions if the guarantor is neither a member of
nor a participant in a signature guarantee program. Signature guarantees by
notaries public are not acceptable. The purpose of a signature guarantee is to
protect shareholders against the possibility of fraud. Further documentation
will be requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by facsimile
will not be accepted. Unless other instructions are given in proper form, a
check for the proceeds of the redemption will be sent to the shareholder's
address of record.

Share purchases and redemptions are governed by Maryland law.

COUNSEL AND INDEPENDENT ACCOUNTANTS

OTHER INFORMATION

The Adviser has been continuously registered with the Securities
Exchange Commission (SEC) under the 1940 Act since ______________. The Company
has filed a registration statement under the Securities Act of 1933 and the 1940
Act with respect to the shares offered. Such registrations do not imply approval
or supervision of the Fund or the Adviser by the SEC.

For further information, please refer to the registration statement and
exhibits on file with the SEC in Washington, D.C. These documents are available
upon payment of a reproduction fee. Statements in the Prospectus and in this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.

- 17 -

<PAGE>

PART C
------

ITEM 23.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
(a) Articles of Incorporation (See Note 1)
(b) Bylaws (See Note 1)
(c) Not Applicable.
(d)(1) Investment Advisory Agreement (Imperial Financial Services
Fund) (See Note 2)
(d)(2) Form of Investment Advisory Agreement (Aii Aggressive Trading
Fund) (See Note 2)
(d)(3) Form of Investment Advisory Agreement (MacroTrends Fund;
Pheonix Management Fund; and Kaminski Poland Fund)(See Note
3)
(d)(4) Form of Investment Advisory Agreement (Azzad/Dow Jones
Islamic Index Fund) (See Note 4)
(e)
(f) Not Applicable.
(g) Form of Custody Agreement (See Note 5)
(h) Administrative Service Agreement (Imperial Financial Services
Fund) (Aii Aggressive Trading Fund (See Note 2)
(h)(1) Form of Administrative Service Agreement (MacroTrends Fund;
Pheonix Management Fund (See Note 5)
(h)(2) Form of Transfer Agency Agreement (See Note 2)
(i) Opinion of Spitzer & Feldman P.C. as to the legality
of the securities being registered, including their
consent to the filing thereof and as to the use of
their names in the Prospectus (Imperial Financial
Services Fund)(See Note 1)
(i)(1) Consent of Spitzer & Feldman P.C. (Aii Aggressive Trading
Fund)(See Note 2)
(i)(2) Consent of Spitzer & Feldman P.C. (MacroTrends Fund) (See
Note 3)
(i)(3) Consent of Spitzer & Feldman P.C. (Pheonix Management Fund)
(See Note 3)
(i)(4) Consent of Spitzer & Feldman P.C. (Kaminski Poland Fund) (See
Note 3)
(j) Consent of McCurdy & Associates, CPAs, Inc.,
independent auditors (Imperial Financial Services
Fund) (See Note 2)
(j)(1) Consent of McCurdy & Associates (Aii Aggressive Trading Fund)
(See Note 3)
(j)(2) Consent of McCurdy & Associates (MacroTrends Fund)(See Note
3)
(j)(3) Consent of McCurdy & Associates (Pheonix Management Fund)
(See Note 3)
(j)(4) Consent of McCurdy & Associates (Kaminski Poland Fund))(See
Note 3)
(k) Not Applicable.
(l) Subscription Letter (See Note 2)
(m) Distribution (12b-1) Plan (Imperial Financial Services
Fund)(See Note 2)
(m)(1) Distribution (12b-1) Plan (Aii Agressive Trading Fund)(See
Note 2)
(m)(2) Distribution (12b-1) Plan (MacroTrends Fund; Pheonix
Management Fund (See Note 5)
(m)(3) Distribution (12b-1) Plan (Azzad/Dow Jones Islamic Index
Fund) (See Note 4)
(n) Not Applicable.
(n) Rule 18f-3 Plan (See Note 5)
Other Exhibits Not Applicable

<PAGE>

Notes to Exhibits:

(1) Filed with the Securities and Exchange Commission as an Exhibit to the
Registrant's Registration Statement (Reg. No. 333-46323) on February 13,
1998.

(2) Filed with the Securities and Exchange Commission as an Exhibit to
Pre-Effective Amendment No. 2 to the Registration Statement (Reg. No.
333-46323) on January 25, 1999.

(3) Filed with the Securities and Exchange Commission as an Exhibit to
Post-Effective Amendment No. 4 to the Registration Statement (Reg. No.
333-46323) on December 10, 1999.

(4) File Herewith

(5) To Be Filed by Future Amendment

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not applicable.

ITEM 25. INDEMNIFICATION.

(a) In accordance with Section 2-418 of the General Corporation Law of
the State of Maryland, Article NINTH of the Registrant's Articles of
Incorporation provides as follows:

"NINTH:(1) The Corporation shall indemnify (i) its currently acting
and former directors and officers, whether serving the Corporation or
at its request any other entity, to the fullest extent required or
permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the
procedures and to the fullest extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the
Board of Directors or the By-Laws and as permitted by law. Nothing
contained herein shall be construed to protect any director or officer
of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. The
foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled.
The Board of Directors may take such action as is necessary to carry
out these indemnification provisions and is expressly empowered to
adopt, approve and amend from time to time such by-laws, resolutions
or contracts implementing such provisions or such indemnification
arrangements as may be permitted by law. No amendment of the charter
of the Corporation or repeal of any of its provisions shall limit or
eliminate the right of indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal.

(2) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment Company
Act of 1940, no director or officer of the Corporation shall be
personally liable to the Corporation or its stockholders for money
damages; provided, however, that nothing herein shall be construed to
protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office. No amendment of the charter of the Corporation
or repeal of any of its provisions shall limit or eliminate the
limitation of liability provided to directors and officers hereunder
with respect to any act or omission occurring prior to such amendment
or repeal."

<PAGE>

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.

C2
<PAGE>

(a) Retirement Planning Company of New England, Inc. serves as investment
adviser to Imperial Financial Services Fund. The description of
Retirement Planning Company of New England, Inc., under the Caption
"Management - The Adviser" and "Management - The Adviser" in the
Prospectus and Statement of Additional Information, constituting
certain of Parts A and B, respectively, of this Registration Statement,
are incorporated by reference herein.

Retirement Planning Company of New England, Inc. is: One Richmond
Square, Providence, RI 02906. The following are the directors and officers of
Retirement Planning Company of New England, Inc., including any business
connections of a substantial nature that they have had in the past two years.
Unless other indicated, the address of any other business connection is also:
One Richmond Square, Providence, RI 02906. Set forth below are the names of the
directors and officers of the Adviser:

NAME TITLE BUSINESS CONNECTION
---- ----- -------------------
David W. Allaire President, CEO, and Director

Michael R. Laliberte CFO and Director

(b) Pheonix Investment Management, Inc. serves as investment adviser to the
Pheonix Management Fund. The description of Pheonix Investment Management, Inc.,
under the Caption "Management - The Adviser" and "Management - The Adviser" in
the Prospectus and Statement of Additional Information, constituting certain of
Parts A and B, respectively, of this Registration Statement, are incorporated by
reference herein.

The address of Pheonix Investment Management, Inc. is: 2090 Palm Beach
Lakes Blvd., Suite 700, West Palm Beach, FL 33409. The following are the
directors and officers of Pheonix Investment Management, Inc., including any
business connections of a substantial nature that they have had in the past two
years. Unless other indicated, the address of any other business connection is
also: 2090 Palm Beach Lakes Blvd., Suite 700, West Palm Beach, FL 33409. .

NAME TITLE BUSINESS CONNECTION
---- ----- -------------------

Michael W. Burnick President and CEO Pheonix Investments, Inc.

Michael S. Robinson Executive Vice-president Contractors Success
Group, Brentwood, TN;
Service Experts, Inc.,
Brentwood, TN

Thomas D. Abrams Director Pheonix Investments, Inc.
(2/97 - Present); Capital
Research Corp.
(2/97 - 6/98)

<PAGE>

(c) Yale Research and Management Co., Inc., serves as investment adviser to
MacroTrends Funds. The description of Yale Research and Management Co., Inc.,
under the Caption "Management - The Adviser" and "Management - The Advisor" in
the Prospectus and Statement of additional Information, constituting certain of
Parts A and B, respectively, of this Registration Statement, are incorporated by
reference herein.

The address of YaleFunds Management and Research Co. is 3980 Howard
Hughes Parkway, Suite 400, Las Vegas, NV 89109. The following are the directors
and officers of YaleFunds Management and Research Co., including any business
connections of a substantial nature that they have had in the past two years.
Unless otherwise indicated, the address of any other business connection is also
3980 Howard Hughes Parkway, Suite 400, Las Vegas, NV 89109.

NAME TITLE BUSINESS CONNECTION
---- ----- -------------------

Yi Yale Wang President American Fronteer Financial Corp.
3800 Paradise Road, Las Begas, NV
89109 (3/98 - 8/99);
Presidential Brokerage, Inc. 3753
Howard Hughes Pkwy, Las Vegas, NV
89109 (3/97 - 3/98)

(d) Azzad Asset Management, Inc. serves as investment adviser to the Azzad/Dow
Jones Islamic Index Fund. The description of Azzad Asset Management, Inc., under
the Caption "Management - The Adviser" and "Management - The Adviser" in the
Prospectus and Statement of Additional Information, constituting certain of
Parts A and B, respectively, of this Registration Statement, are incorporated by
reference herein.

The address of Azzad Asset Management, Inc. is 8201 Greensboro Drive,
Suite 1000, McLean, VA 22102. The following are the directors and officers of
Azzad Asset Management, Inc., including any business connections of a
substantial nature that they have had in the past two years.

NAME TITLE BUSINESS CONNECTION
---- ----- -------------------
<S> <C> <C>
Bashar Qasem President, Chief Executive Founder, Ideal Network
Officer, Director Systems, Fairfax, VA

F. Scott Valpey Executive Vice President Professional pension &
Investment Advisor investment consultant, general
Officer, Director securities principal (NASD
Series 24), Raymond James
Financial Svcs, Inc. (1983-99)

Khalid Al-Subaihi Director Al-Irshad Trade Corporation &
Al-Fajer Printing Press
Company (1995-present)

<PAGE>

Ziad Bassam Mohammed AlBassam Director Chairman, Dar Al-Balagh
Broadcasting Group, Info-Win
Company and the Internet
Society

Khalid Hamed Zainy Director President, Petrostar
Co. Ltd.,
(1975-present);
President, Star
Navigation Co.,
Ltd., Arabian Marine
& Terminal Services
Co., Ltd., And
Middle East Marine &
General Insurance
Co., Jeddah.
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS.

(a) The principal underwriter of the Company's shares, AmeriMutual
Funds Distributors, Inc., currently acts as a principal underwriter,
depositor or investment adviser for the following other investment
companies:

iMillennium Capital Trust

AmeriMutual Funds Distributors, Inc., is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers. AmeriMutual Funds
Distributors, Inc., is an indirect wholly-owned subsidiary of Orbitex
Financial Services Group, Inc.

(b) The following table contains information with respect to each
director, officer or partner AmeriMutual Funds Distributors, Inc.,.
<TABLE>
<CAPTION>

NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
ADDRESS* UNDERWRITER REGISTRANT
-------- ----------- ----------

<S> <C> <C>
Christopher Klutch Director, President, CEO None

Vali Nasr General Principal, Financial None
and Operations Principal

Nathan O'Steen Vice President, General None
Principal, Chief Compliance
Officer

Richard E. Stierwalt Director, Chief Operations None
Officer

<FN>

* Unless otherwise indicated, all addresses are: The Hauppauge Corporate Center,
150 Motor Parkway, Hauppauge, NY 11788
</FN>
</TABLE>

<PAGE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

The accounts and records of the Company required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are located,
in whole or in part, at the office of the Administrator, American Data Services,
Inc., The Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York
11788 and custodial records which are maintained at the offices of the Custodian
for the Imperial Financial Services Fund at Firstar Bank, N.A. at 615 East
Michigan Street, Milwaukee, Wisconsin 53202 and at the offices of the Custodian
for MacroTrends Fund, Phoenix Management Fund and Azzad/Dow Jones Islamic Index
Fund at Union Bank of California, N.A. at 350 California Street, San Francisco
California 94104.

ITEM 29. MANAGEMENT SERVICES

Not applicable.

ITEM 30. UNDERTAKINGS.

Not applicable.

C6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hauppauge and State of New York, on the 19th day of
July, 2000.

QUESTAR FUNDS, INC.

By: /S/ MICHAEL MIOLA
------------------------
Michael Miola, President

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 date indicated.

/S/ MICHAEL MIOLA Director, Chairman of the August 15, 2000
-----------------
Michael Miola Board and Chief Executive Officer

/S/ DANIEL ABRAMSON Director August 15, 2000
----------------
Daniel Abramson

/S/ PHILIP CAPALONGO Director August 15, 2000
----------------
Philip Capalongo

/S/ ANTHONY HERTL Director August 15, 2000
--------------
Anthony Hertl

/S/ DONALD SMITH Director August 15, 2000
------------
Donald Smith

The above persons signing as Directors are all of the members of the Company's
Board of Directors.