PROSPECTUS
THE QUAKER FAMILY OF FUNDS
A Family of No Load Mutual Funds
The investment objective of the Quaker Enhanced Stock Market Fund, the Quaker
Core Equity Fund, the Quaker Aggressive Growth Fund, the Quaker Small-Cap Value
Fund, and the Quaker Sector Allocation Equity Fund is to provide long-term
capital growth. These Funds strive to achieve this objective by investing
primarily in equity securities of domestic U.S. companies, although each Fund
pursues this objective through a differing investment policy and portfolio
composition. The investment objective of the Quaker Fixed Income Fund is to
generate current income, preserve capital and maximize total returns through
active management of investment grade fixed income securities.
While there is no assurance that any of the Funds will achieve its investment
objective, each Fund endeavors to do so by following the investment policies
described in this Prospectus. Each Fund has a net asset value that will
fluctuate in accordance with the value of its portfolio securities. An investor
may invest, reinvest or redeem shares at any time.
Quaker Funds, Inc.
1288 Valley Forge Road
Post Office Box 987
Valley Forge, Pennsylvania 19482
The Funds are no load diversified series of the Quaker Investment Trust (the
"Trust"), a registered open-end management investment company. This Prospectus
sets forth the information about the Funds that a prospective investor should
know before investing. Investors should read this Prospectus and retain it for
future reference. Additional information about the Funds has been filed with the
Securities and Exchange Commission and is available upon request and without
charge. You may request the Statement of Additional Information, which is
incorporated in this Prospectus by reference, by writing the Funds at Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, or by calling
800-220-8888.
Investment in any of the Funds involves risks, including the possible loss of
principal. Shares of the Funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, and such shares are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency.
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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus and the Statement of Additional Information is
November 14, 1996.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY ........................................................ 3
FEE TABLE ................................................................. 5
INVESTMENT OBJECTIVE AND POLICIES ......................................... 6
RISK FACTORS .............................................................. 14
INVESTMENT LIMITATIONS .................................................... 15
FEDERAL INCOME TAXES ...................................................... 16
DIVIDENDS AND DISTRIBUTIONS ............................................... 17
HOW SHARES ARE VALUED ..................................................... 17
HOW SHARES MAY BE PURCHASED ............................................... 17
HOW SHARES MAY BE REDEEMED ................................................ 20
MANAGEMENT OF THE FUNDS ................................................... 21
OTHER INFORMATION ......................................................... 25
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer or
other person is authorized to give any information or make any representations
other than those contained in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The Funds The Quaker Family of Funds (the "Funds") are no load
diversified series of the Quaker Investment Trust (the
"Trust"), a registered open-end management investment
company organized as a Massachusetts business trust. See
"Other Information - Description of Shares".
Offering Price Shares in the Funds are offered at net asset value. The
minimum initial investment is $25,000. The minimum
subsequent investment is $250. See "How Shares May be
Purchased".
Investment Objectives The Quaker Enhanced Stock Market Fund, the Quaker Core
Equity Fund, the Quaker Aggressive Growth Fund, the
Quaker Small-Cap Value Fund, and the Quaker Sector
Allocation Equity Fund (collectively herein the "Equity
Funds") are Funds which invest primarily in equity
securities of domestic U.S. companies. The primary
investment objective of each Equity Fund is to provide
shareholders with long-term capital growth. Realization
of current income is not a significant investment
consideration, and any income realized will be
incidental to each Fund's objective. The investment
objective of the Quaker Fixed Income Fund (the "Fixed
Income Fund") is to generate current income, preserve
capital and maximize total returns through active
management of investment grade fixed income securities.
To the extent practicable, the Fund generally will
remain fully invested in fixed income securities. The
Fund intends to invest generally in investment grade
bonds. For more detailed information regarding the
investment objectives and policies of each Fund, please
see "Investment Objective and Policies".
Special Risk
Considerations Although the Equity Funds will invest primarily in
common stocks traded in U.S. securities markets, they
will each focus on specific objectives which will
present both potential rewards and special risk
considerations. Some of the Equity Funds will focus on
or include investments in small capitalization
companies. Accordingly these Funds may be subject to
greater fluctuations in net asset value than those Funds
which invest in larger capitalization companies. The
Aggressive Growth Fund may also make short sales of
securities, an investment technique entailing greater
than average risk to the extent utilized. Short selling
is considered to be of a speculative nature. The
Aggressive Growth Fund and the Sector Allocation Equity
Fund may also engage in options transactions, which
present special risks.
While the Fixed Income Fund will invest primarily in
"high quality" investment grade bonds, some of the
Fund's investments may include mortgage and asset-backed
securities, collateralized mortgage obligations, and
other mortgage derivative products which involve certain
risks. All the Funds' investments may include illiquid
securities and securities purchased subject to a
repurchase agreement or on a "when-issued" basis, which
involve certain risks. The Funds may borrow only under
certain limited conditions (including to meet redemption
requests) and not to purchase securities. It is not the
intent of the Funds to borrow except for temporary cash
requirements. Borrowing, if done, would tend to
exaggerate the effects of market and interest rate
fluctuations on the Funds' net asset value until repaid.
See "Risk Factors".
Managers Subject to the general supervision of the Trust's Board
of Trustees and in accordance with each Fund's
investment policies, professional investment advisory
firms have been selected to direct the day to day
investment management of each Fund. Fiduciary Asset
Management Co. of St. Louis, Missouri manages both the
Quaker Enhanced Stock Market Fund and the Quaker Fixed
Income Fund. Fiduciary Asset Management manages over
$2.6 billion in assets. West Chester Capital Advisors,
Inc. of West Chester, Pennsylvania manages the Quaker
Core Equity Fund's investments. West Chester Capital
manages over $54 million in assets. DG Capital
Management, Inc. of Wayland, Massachusetts manages the
Quaker Aggressive Growth Fund's investments. DG Capital
Management is a new investment advisory firm, although
its principal has significant investment management
experience. Aronson + Partners of Philadelphia,
Pennsylvania manages the Quaker Small-Cap Value Fund's
investments. Aronson manages over $660 million in
assets. Logan Capital Management, Inc. of Philadelphia,
Pennsylvania manages the Quaker Sector Allocation Equity
Fund's investments. Logan Capital manages over $175
million in assets. For its advisory services, each
Advisor receives a monthly fee based on the Fund's daily
net assets. For the Quaker Core Equity Fund, the Quaker
Aggressive Growth Fund, the Quaker Small-Cap Value Fund,
and the Quaker Sector Allocation Equity Fund, the
Advisors are compensated at the annual rate of 0.75%.
For the Quaker Enhanced Stock Market Fund the Advisor is
compensated at the annual rate of 0.50%. For the Quaker
Fixed Income Fund the Advisor is compensated at the
annual rate of 0.45%. See "Management of the Funds".
Dividends Capital gains, if any, are paid at least once each year
by each Fund. Income dividends, if any, are paid at
least annually by the Equity Funds. The Fixed Income
Fund intends to distribute a dividend monthly. Dividends
and capital gains distributions are automatically
reinvested in additional shares at net asset value
unless the shareholder elects to receive cash. See
"Dividends and Distributions".
Distributor and
Distribution Plan Quaker Securities, Inc. (the "Distributor") serves as
distributor of shares of the Funds. Under the Funds'
Distribution Plan, expenditures by the Funds for
distribution activities may not exceed 0.25% of average
net assets annually and will be funded entirely through
investment advisory fees payable to the Funds'
investment advisors and will not be paid directly by the
Funds. See "How Shares May Be Purchased" and
"Distribution Plan".
Sponsor and
Shareholder Servicing Shareholder servicing activities will be performed by
Quaker Funds, Inc. (the "Fund Sponsor"), an affiliate of
the Distributor. Shareholder service fees will generally
be payable to the Fund Sponsor in the amount of 0.25% of
average net assets annually. The maximum shareholder
service fee for the Enhanced Stock Market Fund and the
Fixed Income Fund will not exceed 0.20% and 0.15% of
average net assets, respectively. See "Management of the
Funds-Sponsor of the Funds".
Redemption of
Shares There is no charge for redemptions, other than those
charges associated with wire transfers of redemption
proceeds. Shares may be redeemed at any time at the net
asset value next determined after receipt of a
redemption request by a Fund. A shareholder who submits
appropriate written authorization may redeem shares by
telephone. See "How Shares May Be Redeemed".
Money Market Fund The Custodian of the Funds, The Fifth Third Bank, has
agreed to make available the Fountain Square U.S.
Treasury Obligation Fund, a money market fund not
affiliated with the Quaker Family of Funds, for
automatic transfer of redemption proceeds and/or
dividends paid on a shareholder's account with the
Funds. Further information and a Fountain Square U.S.
Treasury Obligation Fund prospectus may be obtained by
calling the Quaker Family of Funds at 800-220-8888.
<PAGE>
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Funds for the current fiscal year. The information is intended
to assist the investor in understanding the various costs and expenses borne by
each Fund, and therefore indirectly by its investors, the payment of which will
reduce an investor's return on an annual basis.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases
(as a percentage of offering price) NONE
Sales load imposed on reinvested dividends NONE
Deferred sales load NONE
Redemption fee * NONE
Exchange fee NONE
* Each Fund imposes a $10 charge for wiring redemption proceeds.
<TABLE>
Annual Fund Operating Expenses3
(as a percentage of average net assets)
<CAPTION>
Core Equity
Aggressive Growth Enhanced
Small-Cap Value Stock Fixed
& Sector Allocation Market Income
<S> <C>
Investment advisory fees 0.75%(1) 0.50%(1) 0.45%(1)
12b-1 fees 0.00%(1) 0.00%(1) 0.00%(1)
Shareholder servicing fees 0.25%(2) 0.20%2 0.15%(2)
Other expenses 0.35% 0.30% 0.30%
----- ----- -----
Total operating expenses 1.35%(3) 1.00%(3) 0.90%(3)
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, whether or
not you redeem at the end of the period, assuming a 5% annual return: 1 Year 3
Years
Core Equity Fund $14 $43
Aggressive Growth Fund $14 $43
Small-Cap Value Fund $14 $43
Sector Allocation Equity Fund $14 $43
Enhanced Stock Market Fund $11 $35
Fixed Income Fund $ 9 $29
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
1 Up to 25% of the investment advisory fee may be paid for distribution
activities relating to the Funds. Each Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"), which provides that the Fund may pay certain distribution expenses
up to 0.25% of its average net assets annually. All amounts paid for
distribution activities will be funded entirely through investment advisory fees
payable to the Funds' investment advisors and will not be paid directly by the
Funds. See "How Shares May Be Purchased - Distribution Plan".
2 Each Fund has adopted a Shareholder Servicing Agreement which provides that
the Fund will pay a shareholder servicing fee to the Funds' Sponsor, Quaker
Funds, Inc., in the amount of 0.25% of the average daily net assets of the Fund,
except the shareholder servicing fee will be limited to 0.20% for the Enhanced
Stock Market Fund and 0.15% for the Fixed Income Fund. See "Management of the
Funds-Sponsor of the Funds".
3 The "Total operating expenses" shown above are based upon contractual
amounts and other operating expenses estimated to be incurred by each Fund for
the current fiscal year. Each Advisor, the Administrator and the Fund Sponsor
have agreed to a reduction in the fees payable to it in an amount that limits
"Total operating expenses" (exclusive of interest, taxes, brokerage fees and
commissions, and extraordinary expenses) to the total expense ratios as a
percentage of net assets noted in each column. There can be no assurance that
the Advisor's, Administrator's and Fund Sponsor's fee waivers will continue in
the future.
See "How Shares May Be Purchased" and "Management of the Funds" below for more
information about the fees and costs of operating the Funds. The assumed 5%
annual return in the example is required by the Securities and Exchange
Commission. The hypothetical rate of return is not intended to be representative
of past or future performance of the Funds; the actual rate of return for the
Funds may be greater or less than 5%. Further information about the performance
of each Fund will be contained in the Annual Report of that Fund, a copy of
which, when available, may be obtained at no charge by calling the
Administrator.
INVESTMENT OBJECTIVE AND POLICIES
Quaker Enhanced Stock Market Fund
Investment Objective. The investment objective of the Quaker Enhanced Stock
Market Fund (the "Enhanced Stock Market Fund") is to provide shareholders with
long-term capital growth. Realization of current income will not be a
significant investment consideration, and any such income realized should be
considered incidental to the Enhanced Stock Market Fund's objective. The
Enhanced Stock Market Fund strives to achieve its investment objective by
investing primarily in equity securities of domestic U.S. companies. While there
is no guarantee that the Enhanced Stock Market Fund will meet its investment
objective, it seeks to achieve its objective through the investment policies and
techniques described herein. The Enhanced Stock Market Fund's investment
objective and fundamental investment limitations may not be altered without the
prior approval of a majority of the Enhanced Stock Market Fund's shareholders.
The Enhanced Stock Market Fund will seek to achieve this objective by investing
in a portfolio with a diversification, market capitalization and volatility risk
approximating the diversification, capitalization and volatility levels of the
S&P 500, while seeking to identify sectors and individual securities which offer
the opportunity to exceed the total return of the S&P 500 Index. The Fund
portfolio may contain up to 300 issues (40% fewer than the S&P 500 Index), and
may not contain a representation of all sectors comprising the S&P 500 Index. In
sharp contrast to funds whose stated investment objective is a passive tracking
of performance to the S&P 500 Index (funds whose investment objective is
maintenance of a portfolio substantially identical to the S&P 500 Index), the
Enhanced Stock Market Fund is actively managed with constant attention to
proprietary models designed to track the S&P 500 Index in risk and volatility,
yet exceed the S&P 500 in potential price appreciation.
Investment Selection. The Enhanced Stock Market Fund will seek to achieve its
objective through active security and sector analysis, utilizing a proprietary
statistical model of historical and current data and related correlation
predictions of equity price performance. The Fund seeks to develop a diverse
portfolio of stocks selected from approximately 1400 domestic equity securities
with market capitalizations within a similar range of the market capitalization
of those domestic equity securities comprising the S&P 500 Index. From this
universe of 1400 equities, Fiduciary Asset Management ("FAM"), investment
advisor to the Enhanced Stock Market Fund, will construct a portfolio of
approximately 200 equities utilizing a number of quantitative and qualitative
criteria, based on historical statistical factors with quantifiable correlation
to market equity valuation. Company factors known as Common Factors including,
but not limited to size; earnings/price; book/price; financial leverage; foreign
income; labor intensity and dividend yield are examined.
FAM further tracks and examines criteria on each company relative to that
company's earnings; trading volume; analyst projected earnings per share;
diffusion of analysts' projection of earnings; relative strength of stock price;
among other criteria. Each company is also compared to financial and stock price
valuation criteria with peer companies in the same industry sectors. Relative
valuation and attractiveness is then determined to identify securities within
these industry sectors with expected superior possibilities of price strength.
Construction of the Enhanced Stock Market Fund is highly quantitative and is
dependent on extensive maintenance and analysis of statistical data relating to
each company in which the Enhanced Stock Market Fund may invest.
Quaker Core Equity Fund
Investment Objective. The investment objective of the Quaker Core Equity Fund
("Core Equity Fund") is to provide shareholders with long-term capital growth.
Realization of current income, while of secondary significance, will be an
investment consideration. Any such income realized should be considered
incidental to the Core Equity Fund's objective. The Core Equity Fund strives to
achieve its investment objective by investing primarily in equity securities of
domestic U.S. companies. While there is no guarantee that the Core Equity Fund
will meet its investment objective, it seeks to achieve its objective through
the investment policies and techniques described herein. The Core Equity Fund's
investment objective and fundamental investment limitations may not be altered
without the prior approval of a majority of the Core Equity Fund's shareholders.
Investment Selection. The Core Equity Fund will invest primarily in the equities
of large capitalization, well established companies, with substantial market
shares in their respective industry groups and markets, favorable balance sheet
criteria, strong earnings and cash flows, and reasonable expectations for
continued profit growth. West Chester Capital Advisors ("West Chester"),
investment advisor to the Core Equity Fund, will conduct an ongoing analysis of
the financial health and prospects for share price increases of existing and
potential portfolio companies. This will include analysis of fundamental traits
associated with both growth companies (increasing revenues, earnings, cash
flows, market share) and value companies (low share price/book value, low
debt/total capital, low price/earnings ratios) among other factors.
The majority of the holdings in the Core Equity Fund will be equity securities
of companies whose total market capitalization exceeds $5 billion, which in
aggregate will have trailing growth rates in excess of the S&P 500 average,
dividend yields in line with the S&P 500 average, and price/earnings ratios
approximating that of the S&P 500 average. The Fund places an emphasis on equity
securities of larger capitalization companies. The current yield (current
dividend divided by the current share price) is a secondary investment
criterion. Securities in the Fund portfolio will be selected from those equities
listed on major U.S. exchanges. Up to 25% of the Core Equity Fund may be
invested in securities that do not satisfy some or all of the above criteria.
The Core Equity Fund's portfolio will be constructed of 60-80 equity securities
representing the major industry group classifications which comprise the S&P 500
Index. West Chester begins with an analysis of the recent price performance and
relative valuation of major industry groups within the S&P 500. Fund target
weighting for each industry group is then determined. The weighting of each
industry group will range from a minimum of one-half of the S&P 500 weighting in
a particular industry group, to a maximum weighting of twice the S&P 500
weighting in a particular industry group. West Chester will make determinations
as to the relative weightings among industry groups based on qualitative and
quantitative analysis of the industry groups themselves, and of individual
companies within each industry group. West Chester does not anticipate frequent
or aggressive shifting of industry group weightings within the portfolio.
Quaker Aggressive Growth Fund
Investment Objective. The investment objective of the Quaker Aggressive Growth
Fund ("Aggressive Growth Fund") is to provide shareholders with long-term
capital growth. Realization of current income will not be a significant
investment consideration, and any such income realized should be considered
incidental to the Aggressive Growth Fund's objective. The Aggressive Growth Fund
strives to achieve its investment objective by investing primarily in equity
securities of domestic U.S. companies. While there is no guarantee that the
Aggressive Growth Fund will meet its investment objective, it seeks to achieve
its objective through the investment policies and techniques described herein.
The Aggressive Growth Fund's investment objective and fundamental investment
limitations may not be altered without the prior approval of a majority of the
Aggressive Growth Fund's shareholders.
Investment Selection. The Aggressive Growth Fund's portfolio will include a
limited number of equity securities of those companies which DG Capital
Management ("DGCM"), investment advisor to the Aggressive Growth Fund, feels
show a high probability of superior prospects for growth. Many of the portfolio
companies will be small capitalization companies, which may exhibit more
volatility than medium and large capitalization companies. In selecting
portfolio companies, DGCM relies heavily on developing and maintaining contacts
with management, customers, competitors and suppliers of current and potential
portfolio companies. DGCM attempts to invest in those companies undergoing
positive changes that have not been recognized by security analysts and the
financial press. Lack of recognition of these changes often causes securities to
be less efficiently priced. DGCM believes these companies offer unique and
potentially superior investment opportunities.
While portfolio securities are generally acquired for the long term, they may be
sold under any of the following circumstances:
a) the anticipated price appreciation has been achieved or is no longer
probable;
b) the company's fundamentals appear, in the analysis of DGCM, to be
deteriorating;
c) general market expectations regarding the company's future performance exceed
those expectations held by DGCM;
d) alternative investments offer, in the view of DGCM, superior potential for
appreciation.
The Aggressive Growth Fund also utilizes the investment strategy of short
selling securities in the universe of securities monitored by DGCM. DGCM
believes that the volatility of the Aggressive Growth Fund will be reduced, and
potential investment gain will be enhanced, through use of a conservative short
selling technique. The Aggressive Growth Fund will limit short selling to 25% of
its net assets. In addition, DGCM employs tight trading stops on securities sold
short to reduce the trading risk present in short selling. Short selling
involves the sale of borrowed securities. At the time a short sale is effected,
the Fund incurs an obligation to replace the security borrowed at whatever its
price may be at the time the Fund purchases the security for delivery to the
lender. When a short sale transaction is closed out by delivery of the
securities, any gain or loss on the transaction is taxable as a short term
capital gain or loss.
Since short selling can result in profits when stock prices generally decline,
the Aggressive Growth Fund in this manner can, to a certain extent, hedge the
market risk to the value of its other investments and protect its equity in a
declining market. The Fund could at any time, however, suffer both a loss on the
purchase or retention of one security, if that security should decline in value,
and a loss on a short sale of another security, if the security sold short
should increase in value. When a short position is closed out, it may result in
a short term capital gain or loss for federal income tax purposes. To the extent
that in a generally rising market the Fund maintains short positions in
securities rising with the market, the net asset value of the Fund would be
expected to increase to a lesser extent than the net asset value of a fund that
does not engage in short sales.
No short sale will be effected which will, at the time of making such short sale
transaction and giving effect thereto, cause the aggregate market value of all
securities sold short to exceed 25% of the value of the Aggressive Growth Fund's
net assets. The value of the securities of any one issuer that have been shorted
by the Fund is limited to the lesser of 2% of the value of the Aggressive Growth
Fund's net assets or 2% of the securities of any class of the issuer. To secure
the Fund's obligation to replace any borrowed security, the Fund will place in a
segregated account an amount of cash or U.S. Government Securities equal to the
difference between the market value of the securities sold short at the time of
the short sale and any cash or U.S. Government Securities originally deposited
with the broker in connection with the short sale (excluding the proceeds of the
short sale). The Fund will thereafter maintain daily the segregated amount at
such a level that the amount deposited in the account plus the amount originally
deposited with the broker as collateral will equal the greater of the current
market value of the securities sold short, or the market value of the securities
at the time they were sold short.
The Aggressive Growth Fund may only engage in short sale transactions in
securities listed on one or more national securities exchanges or on the NASDAQ.
The Aggressive Growth Fund may also engage in options trading to the extent
described in "Investment Securities Available to Certain Equity Funds" below.
Quaker Small-Cap Value Fund
Investment Objective. The investment objective of the Quaker Small-Cap Value
Fund ("Small-Cap Value Fund") is to provide shareholders with long-term capital
growth. Realization of current income will not be a significant investment
consideration, and any such income realized should be considered incidental to
the Small-Cap Value Fund's objective. The Small-Cap Value Fund strives to
achieve its investment objective by investing primarily in equity securities of
domestic U.S. companies. While there is no guarantee that the Small-Cap Value
Fund will meet its investment objective, it seeks to achieve its objective
through the investment policies and techniques described herein. The Small-Cap
Value Fund's investment objective and fundamental investment limitations may not
be altered without the prior approval of a majority of the Small-Cap Value
Fund's shareholders. Investment Selection. The Small-Cap Value Fund's portfolio
will include a broadly diversified number of U.S. equity securities of those
companies which Aronson + Partners ("Aronson"), investment advisor to the
Small-Cap Value Fund, feels show a high probability of superior prospects for
above average total return. The portfolio companies will generally be small
capitalization companies, which may exhibit more volatility than medium and
large capitalization companies. The universe of securities eligible for
inclusion in the Small-Cap Value Fund will be those equity securities with
market capitalizations consistent with the universe of securities included in
the Russell 2500 Index, with an ultimate selection of 140-160 stocks for
investment by the Small-Cap Value Fund.
Under normal conditions, at least 65% of the Small-Cap Value Fund's total assets
will be invested in equity securities of small capitalization companies. For
these purposes "small capitalization" companies will be defined as those
companies whose market capitalizations of up to $1 billion. The remaining
portion of the Small-Cap Value Fund's total assets may be invested in equity
securities of medium and large capitalization companies, and other investments
described herein, although under normal conditions Aronson anticipates that 65%
to 80% of the Fund's assets will be invested in small capitalization companies.
In selecting portfolio companies, Aronson focuses on asset rich and earnings
rich companies, selling at relatively low market valuations, with attractive
growth and momentum characteristics. The Small-Cap Value Fund intends to remain
fully invested at all times, subject to a minimum cash balance maintained for
operational purposes.
The investment process is sequential, including data base screening,
classification of equities into peer groups or sectors, and, ultimately,
multifactor valuation.
A broad universe of U.S. securities is screened to identify a subset of issues
with ample trading volume, a number of years of operating history, and
capitalizations no larger than the companies in the Russell 2500 Index. The
resulting stocks are divided into 11 peer groups or sectors.
Within each group, the most attractive stocks are identified by considering a
number of balance sheet and income statement criteria, Wall Street analysts'
reports on book value, earnings (actual and forecasted), return on assets, and
price and earnings estimate revisions. The weight of each stock selection
variable is dependent on each stock's sector and fundamental characteristics. A
diversified portfolio is created with sector weights aligned to the Russell 2500
Index and individual security weightings determined to balance industry and
other risk characteristics.
Quaker Sector Allocation Equity Fund
Investment Objective. The investment objective of the Quaker Sector Allocation
Equity Fund ("Sector Allocation Fund") is to provide shareholders with long-term
capital growth. Realization of current income will not be a significant
investment consideration, and any such income realized should be considered
incidental to the Sector Allocation Fund's objective. The Sector Allocation Fund
strives to achieve its investment objective by investing primarily in equity
securities of domestic U.S. companies. While there is no guarantee that the
Sector Allocation Fund will meet its investment objective, it seeks to achieve
its objective through the investment policies and techniques described herein.
The Sector Allocation Fund's investment objective and fundamental investment
limitations may not be altered without the prior approval of a majority of the
Sector Allocation Fund's shareholders.
Investment Selection. The emphasis of the Sector Allocation Fund is, as the name
of the Fund suggests, to allocate the weightings in various industry sectors
within the Fund portfolio to take advantage of anticipated shifts in the economy
and interest rates. Valuation, future earnings growth rates, and technical
market factors are also evaluated when the sector selection process is
implemented. The Fund will not own all sectors nor a broadly diverse portfolio
of many different issues and industry groups. Rather, the Fund will focus on
specific sectors within the 198 various sectors monitored by Logan Capital
Management ("Logan Capital"), investment advisor to the Sector Allocation Fund,
concentrating on at least 25 and up to 99 equity issues, within a smaller
universe of sectors. Logan Capital will select individual securities in the
Sector Allocation Fund from those equity securities of companies without regard
to market capitalization, although the average holding's capitalization is
likely to exceed 250 million. Market capitalization is one criterion for
analysis within the Fund portfolio, effected with a shift from larger to smaller
capitalization securities, or smaller to larger capitalization securities, based
on anticipated shifts in the risk/reward ratio. Equity securities will generally
have trailing earnings growth rates in excess of the S&P 500 average, dividend
yields below the S&P 500 average, and Price to Earnings (P/E) ratios greater
than the S&P 500 average. The Sector Allocation Fund may also engage in options
trading to the extent described in "Investment Securities Available to Certain
Equity Funds" below.
Logan Capital seeks to manage the Sector Allocation Fund by employing a
portfolio selection process which first examines macroeconomic trends and their
potential impact on both the overall U.S. economy and in turn the domestic and
global equity markets. Major components examined include the interest rate
environment and projections for rate changes; analysis of trends in Gross
Domestic Product; trends in the Consumer Price Index; relative strength or
weakness of the U.S. dollar versus other major currencies; and analysis of data
relating to productivity in the U.S. workforce.
After constructing an internal model of projected macroeconomic trends and
factors, Logan Capital makes an analysis of the probable effect of the projected
data on specific sectors and specific industries. Upon identifying a universe of
potential securities derived from the above parameters, the Sector Allocation
Fund portfolio will be constructed of 25-99 holdings representing Logan
Capital's target sector classifications and weightings. Logan Capital will make
determinations as to the relative weightings among sectors based on qualitative
and quantitative analysis of the sectors themselves, and of individual companies
within each sector. Under certain circumstances cash equivalents may be held as
a specific sector awaiting either a buying opportunity or a change in economic
conditions.
Investment Securities Available to Certain Equity Funds
Both the Aggressive Growth Fund and the Sector Allocation Fund may invest up to
10% of their respective total assets in options on equity securities, options on
equity indices, and options on equity industry sector indices. These options may
be utilized to hedge certain market risks which the investment advisor may
determine, from time to time, exist in the equity markets or in individual
equity issues, or may be used to provide a viable substitute for direct
investment in, and/or short sales of, specific equity securities. Investments in
call and put options are considered speculative, due to the time premium imputed
in the daily value of options, a premium which declines with time, independent
of the change and/or stability of the underlying equity security, market index
or industry sector index.
A call option gives the holder (buyer) the right to purchase a security at a
specified price (the exercise price) at any time before a certain date (the
expiration date). The writer receives a premium (less a commission) for writing
the option. This premium would partially or completely offset any decline in
price. A put gives the holder (buyer) the right to sell a security to the writer
(seller) at a predetermined price (the exercise price) on or before a set date
(the expiration date). The buyer pays a premium to the writer for the right to
sell the underlying shares at the exercise price instead of at the then
prevailing market price. A stock index option generally operates like an option
covering specific securities, except that delivery of cash rather than the
underlying securities is made. A stock index option obligates the seller
(writer) to deliver, and gives the holder (buyer) the right to take delivery of,
cash upon exercise of the option in an amount equal to the difference between
the exercise settlement value of the underlying index on the day the option is
exercised and the exercise price of the option, multiplied by the specified
index "multiplier". The stock index will fluctuate based on changes in the
market values of the stocks included in the index. Each of the Funds will set
aside permissible liquid assets in a segregated account to secure its potential
obligations under its options positions, and such account will include only
cash, U.S. Government Securities and other liquid high-grade debt securities.
The Aggressive Growth Fund's and the Sector Allocation Fund's ability to use
index options transactions successfully depends upon the degree of correlation
between the index on which the option is written and the securities that the
Fund owns or the market position that it intends to acquire; the liquidity of
the market for options, which cannot be assured; and the Advisor's skill in
predicting the movement of stock indices and implementing options transactions
in furtherance of the Aggressive Growth Fund's and the Sector Allocation Fund's
respective investment objectives. Successful use by the Funds of stock index
options will depend primarily on the Advisor's ability to correctly predict
movements in the direction of the stock markets. This skill is different from
the skills and expertise needed to predict changes in the prices of individual
stocks. If the Advisor forecasts incorrectly the movement of interest rates,
market values and other economic factors, the Fund would be better off without
using this hedging technique. Both the Aggressive Growth Fund and the Sector
Allocation Fund will write (sell) stock index options for hedging purposes or to
close out positions in stock index options that the Fund has purchased. The
Aggressive Growth Fund and the Sector Allocation Fund may only write (sell)
"covered" options. Risks associated with options transactions generally include
possible loss of the entire premium and the inability to effect closing
transactions at favorable prices. Brokerage commissions associated with buying
and selling options are proportionately higher than those associated with
general securities transactions.
Investment Securities Common to all Equity Funds
Each of the Funds described above is an equity fund (the "Equity Funds"). Stocks
held in the portfolios of the Equity Funds will generally be traded on either
the New York Stock Exchange, American Stock Exchange or the over-the-counter
market. Foreign securities may be held in the form of American Depository
Receipts ("ADRs"). ADRs are foreign securities denominated in U.S. dollars and
traded on U.S. securities markets.
The equity securities in which the Equity Funds may invest include common stock,
convertible preferred stock, straight preferred stock, and investment grade
convertible bonds. Each Equity Fund may also invest up to 5% of its net assets
in warrants or rights to acquire equity securities (other than those acquired in
units or attached to other securities). See "Investment Limitations".
All of the Equity Funds may make short sales against the box, i.e. short sales
made when the Funds own securities identical tho those sold short.
Because of the inherent risk of foreign securities over domestic issues, the
Equity Funds will limit foreign investments to those traded domestically as
American Depository Receipts (ADRs). ADRs are receipts issued by a U.S. bank or
trust company evidencing ownership of securities of a foreign issuer. ADRs may
be listed on a national securities exchange or may trade on the over the counter
markets. The prices of ADRs are denominated in U.S. dollars while the underlying
security may be denominated in a foreign currency.
Under normal conditions, at least 90% of the Equity Funds' total assets will be
invested in equity securities. Warrants and rights will be excluded for purposes
of this calculation. As a temporary defensive measure, however, the Equity Funds
may invest up to 100% of their respective total assets in investment grade
bonds, U.S. Government Securities, repurchase agreements, or money market
instruments. When the Equity Funds invest their assets in investment grade
bonds, U.S. Government Securities, repurchase agreements, or money market
instruments as a temporary defensive measure, they are not pursuing their stated
investment objective. Under normal circumstances, however, the Equity Funds will
hold money market or repurchase agreement instruments for funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio
securities, to allow for shareholder redemptions and to provide for Fund
operating expenses.
Quaker Fixed Income Fund
Investment Objective. The investment objective of the Quaker Fixed Income Fund
("Fixed Income Fund") is to generate current income, preserve capital and
maximize total returns through a portfolio of investment grade fixed income
securities. While there is no guarantee that the Fixed Income Fund will meet its
investment objective, it seeks to achieve its objective through the investment
policies and techniques described in this Prospectus. The Fixed Income Fund's
investment objective and fundamental investment limitations described herein may
not be altered without the prior approval of a majority of the Fixed Income
Fund's shareholders.
The Fixed Income Fund is designed for tax-exempt institutional investors such as
pension and profit-sharing plans, endowments, foundations, employee benefit
trusts, and individuals. Corporations and individual investors may invest in the
Fixed Income Fund, although investment decisions of the Fixed Income Fund will
not be influenced by any federal tax considerations, other than those
considerations that apply to the Fixed Income Fund itself.
Investment Policies. Fiduciary Asset Management ("FAM"), investment advisor to
the Fixed Income Fund, focuses first on establishing the optimal duration target
for the Fixed Income Fund's portfolio. The target duration generally will be
similar to the duration of the popular bond market indices (e.g. Salomon
Brother's Broad Investment Grade Index, Shearson Lehman Aggregate Index). The
duration of the Fixed Income Fund portfolio may be lengthened when yields appear
abnormally high, and duration may be shortened when yields are abnormally low.
FAM then looks for value in the shape of the yield curve. FAM attempts to target
cash flows (portfolio securities' maturities plus coupon payments) at the
incrementally high points of the yield curve.
FAM then examines the relative valuation of U.S. Treasury securities versus
mortgage backed securities, asset backed securities, corporate bonds and U.S.
agency securities using option adjusted yield spread analysis. These spreads are
compared against their historic spread ranges and current conditions which could
cause spreads to change. This process results in a relative ranking for each
sector, which then is used to determine which sectors should be over or under
weighted versus the broad bond market indices.
Within each sector individual security selection is based on qualitative and
quantitative analysis of that security's expected performance relative to its
corresponding sector. All securities will be of investment grade quality as
determined by Moody's Investors Service, Inc. ("Moodys"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff & Phelps
("D&P"), or if no rating exists, of equivalent quality in the determination of
FAM.
Duration. Duration is an important concept in FAM's fixed income management
philosophy. "Duration" and "maturity" are different concepts and should not be
substituted for one another for purposes of understanding the investment
philosophy and limitations of the Fixed Income Fund. FAM believes that for most
fixed income securities duration provides a better measure of interest rate
sensitivity than maturity. Whereas maturity takes into account only the final
principal payments to determine the price risk of a particular fixed income
security, duration weights all potential cash flows - principal, interest and
reinvestment income - on an expected present value basis, to determine the
`effective life' of the security.
U.S. Government Securities. The Fixed Income Fund may invest a portion of its
portfolio in U.S. Government Securities, defined to be U.S. Government
obligations such as U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury
bills, obligations guaranteed by the U.S. Government such as Government National
Mortgage Association ("GNMA") as well as obligations of U.S. Government
authorities, agencies and instrumentalities such as Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal
Agricultural Mortgage Corporation ("FAMC"), Federal Home Administration ("FHA"),
Federal Farm Credit Bank ("FFCB"), Federal Home Loan Bank ("FHLB"), Student Loan
Marketing Association ("SLMA"), and The Tennessee Valley Authority. U.S.
Government Securities may be acquired subject to repurchase agreements. While
obligations of some U.S. Government sponsored entities are supported by the full
faith and credit of the U.S. Government (e.g. GNMA), several are supported by
the right of the issuer to borrow from the U.S. Government (e.g. FNMA, FHLMC),
and still others are supported only by the credit of the issuer itself (e.g.
SLMA, FFCB). No assurance can be given that the U.S. Government will provide
financial support to U.S. Government agencies or instrumentalities in the
future, other than as set forth above, since it is not obligated to do so by
law. The guarantee of the U.S. Government does not extend to the yield or value
of the Fund's shares.
Mortgage Pass-Through Certificates. Obligations of GNMA, FNMA and FHLMC include
direct pass-through certificates representing undivided ownership interests in
pools of mortgages. Such certificates are guaranteed as to payment of principal
and interest (but not as to price and yield) by the issuer. For securities
issued by GNMA, the payment of principal is backed by the full faith and credit
of the U.S. Government. Mortgage pass-through certificates issued by FNMA or
FHLMC are guaranteed as to payment of principal by the credit of the issuing
U.S. Government agency. Securities issued by other non-governmental entities
(such as commercial banks or mortgage bankers) may offer credit enhancement such
as guarantees, insurance, or letters of credit. Mortgage pass-through
certificates are subject to more rapid prepayment than their stated maturity
date would indicate; their rate of prepayment tends to accelerate during periods
of declining interest rates or increased property transfers and, as a result,
the proceeds from such prepayments may be reinvested in instruments which have
lower yields.
Collateralized Mortgage Obligations. The Fixed Income Fund intends to invest in
collateralized mortgage obligations ("CMOs"), which are generally backed by
mortgage pass-through securities or whole mortgage loans. CMOs are usually
structured into classes of varying maturities and principal payment priorities.
The prepayment sensitivity of each class may or may not resemble that of the
CMOs collateral depending on the maturity and structure of that class. CMOs pay
interest and principal (including prepayments) monthly, quarterly or
semi-annually. Most CMOs are AAA rated, reflecting the credit quality of the
underlying collateral; however, some classes carry greater price risk than that
of their underlying collateral. FAM will invest in CMO classes when its internal
analyses indicate their characteristics and interest rate sensitivity fit the
investment objective and policies of the Fixed Income Fund.
Other Mortgage Related Securities. In addition to the mortgage pass-through
securities and the CMOs mentioned above, the Fixed Income Fund may also invest
in other mortgage derivative products if FAM views them to be consistent with
the overall policies and objective of the Fixed Income Fund.
FAM expects that governmental, government-related and private entities may
create other mortgage-related securities offering mortgage pass-through and
mortgage collateralized instruments in addition to those described herein. As
new types of mortgage-related securities are developed and offered to the
investment community, FAM will, consistent with the Fixed Income Fund's
investment objective, policies and quality standards, consider making
investments in such new types of mortgage-related securities.
Asset-Backed Securities. In addition to CMOs, other asset-backed securities have
been offered to investors backed by loans such as automobile loans, credit card
receivables, marine loans, recreational vehicle loans and manufactured housing
loans. Typically asset-backed securities represent undivided fractional
interests in a trust whose assets consist of a pool of loans and security
interests in the collateral securing the loans. Payments of principal and
interest on asset-backed securities are passed through monthly to certificate
holders and are usually guaranteed up to a certain amount and time period by a
letter of credit issued by a financial institution. In some cases asset-backed
securities are divided into senior and subordinated classes so as to enhance the
quality of the senior class. Underlying loans are subject to prepayment, which
may reduce the overall return to certificate holders.
If the letter of credit is exhausted and the full amounts due on underlying
loans are not received because of unanticipated costs, depreciation, damage or
loss of the collateral securing the contracts, or other factors, certificate
holders may experience delays in payment or losses on asset-backed securities.
The Fixed Income Fund may invest in other asset-backed securities that may be
developed in the future. The Fixed Income Fund will invest only in asset-backed
securities rated A or better by Moody's S&P, Fitch, or D&P, or if not rated, of
equivalent quality as determined by FAM.
Floating Rate Securities. The Fixed Income Fund may invest in variable or
floating rate securities that adjust the interest rate paid at periodic
intervals based on an interest rate index. Typically floating rate securities
use as their benchmark an index such as the 1, 3 or 6 month LIBOR, 3, 6 or 12
month Treasury bills, or the Federal Funds rate. Resets of the rates can occur
at predetermined intervals or whenever changes in the benchmark index occur.
Corporate Bonds. The Fixed Income Fund's investments in corporate debt
securities will be based on Wall Street credit analysis and value determination
by FAM. FAM's selection of bonds or industries within the corporate bond sector
is determined by, among other factors, historical yield relationships between
bonds or industries, the current and anticipated credit of the borrower, and
call features as well as supply and demand factors. All corporate securities
will be of investment grade quality as determined by Moody's, S&P, Fitch, and
Duff & Phelps, or if no rating exists, of equivalent quality in the
determination of FAM. This limitation is described in greater detail in
"Investment Limitations - Investment Grade Securities". FAM will monitor
continuously the ratings of securities held by the Fixed Income Fund and the
creditworthiness of their issuers. For a more complete description of the
various bond ratings for Moody's, S&P, Fitch and D&P, see Appendix A to the
Statement of Additional Information.
Investment Securities Common to all Quaker Funds
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities and to provide for shareholder redemptions and operating
expenses of each Fund. Money market instruments mature in thirteen months or
less from the date of purchase and may include U.S. Government Securities,
corporate debt securities (including those subject to repurchase agreements),
bankers acceptances and certificates of deposit of domestic branches of U.S.
banks, and commercial paper (including variable amount demand master notes)
rated in one of the two highest rating categories by any of the nationally
recognized statistical rating organizations or if not rated, of equivalent
quality in the Advisor's opinion. The Advisor may, when it believes that
unusually volatile or unstable economic and market conditions exist, depart from
a Fund's investment approach and assume temporarily a defensive portfolio
posture, increasing a Fund's percentage investment in money market instruments,
even to the extent that 100% of the Fund's total assets may be so invested.
U.S. Government Securities. Each Fund may invest a portion of its portfolio in
U.S. Government Securities, as defined under "Investment Objective and
Policies-Quaker Fixed Income Fund-U.S. Government Securities" above.
Repurchase Agreements. The Funds may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Funds will not enter into any repurchase agreement which will
cause more than 10% of their net assets to be invested in repurchase agreements
which extend beyond seven days or other illiquid securities. In the event of the
bankruptcy of the other party to a repurchase agreement, a Fund could experience
delays in recovering its cash or the securities lent. To the extent that in the
interim the value of the securities purchased may have declined, the Fund could
experience a loss. In all cases, the creditworthiness of the other party to a
transaction is reviewed and found satisfactory by the Advisor. Repurchase
agreements are, in effect, loans of Fund assets. The Funds will not engage in
reverse repurchase transactions, which are considered to be borrowings under the
1940 Act.
Investment Companies. In order to achieve its investment objective, each Fund
may invest up to 10% of the value of its total assets in securities of other
investment companies. Each Fund may invest in any type of investment company
consistent with the Fund's investment objective and policies. A Fund will not
acquire securities of any one investment company if, immediately thereafter, the
Fund would own more than 3% of such company's total outstanding voting
securities, securities issued by such company would have an aggregate value in
excess of 5% of the Fund's total assets, or securities issued by such company
and securities held by the Fund issued by other investment companies would have
an aggregate value in excess of 10% of the Fund's total assets. To the extent a
Fund invests in other investment companies, the shareholders of that Fund would
indirectly pay a portion of the operating costs of the underlying investment
companies. These costs include advisory, management, brokerage, shareholder
servicing and other operational expenses. Shareholders of the Fund would then
indirectly pay higher operational costs than if they owned shares of the
underlying investment companies directly.
Real Estate Securities. The Funds will not invest directly in real estate
(including limited partnership interests), but may invest in readily marketable
securities secured by real estate or interests therein or issued by companies
that invest in real estate or interests therein. The Funds may also invest in
readily marketable interests in real estate investment trusts ("REITs"). REITs
are generally publicly traded on the national stock exchanges and in the
over-the-counter market and have varying degrees of liquidity. Although the
Funds are not limited in the amount of these types of real estate securities
they may acquire, it is not presently expected that within the next 12 months a
Fund will have in excess of 5% of its total assets in real estate securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Funds and the specific securities and investment
techniques that may be employed by each Fund, including the risks associated
with repurchase agreements, and for the Fixed Income Fund, the risks associated
with mortgage and asset-backed securities, collateralized mortgage obligations,
and other mortgage derivative products. The Aggressive Growth Fund may also make
short sales of securities, an investment technique entailing greater than
average risk to the extent utilized, and considered to be of a speculative
nature. The Aggressive Growth Fund and the Sector Allocation Fund may also
engage in options transactions which present special risks. A more complete
discussion of certain of these securities and investment techniques and their
associated risks is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of each Equity
Fund's portfolio consists of common stocks, it may be expected that its net
asset value will be subject to greater fluctuation than a portfolio containing
mostly fixed income securities. Moreover, by focusing the Equity Funds'
investments on specific sectors of the market, the Equity Funds may be subject
to greater share price fluctuations than a more diversified fund. The Small-Cap
Value Fund will invest primarily in small capitalization companies while many of
the portfolio companies in the Aggressive Growth Fund will be small
capitalization companies. Moreover, the Sector Allocation Fund's investments
will include companies whose market capitalization is below the average market
capitalization of the S&P 500. Accordingly, these Funds may be subject to
greater fluctuations than funds that invest in larger capitalization companies.
Because there is risk in any investment, there can be no assurance that any Fund
will achieve its investment objective. The fixed income securities in which the
Fixed Income Fund will invest (and in which the Equity Funds may invest) are
subject to fluctuation in value. Such fluctuations may be based on movements in
interest rates or from changes in the creditworthiness of the issuers, which may
result from adverse business and economic developments or proposed corporate
transactions, such as a leveraged buy-out or recapitalization of the issuer. The
value of a Fund's fixed income securities will be generally vary inversely with
the direction of the prevailing interest rate movements. Should interest rates
increase or the creditworthiness of an issuer deteriorate, the value of a Fund's
fixed income securities would decrease in value, which would have a depressing
influence on the Fund's net asset value. Although certain of the U.S. Government
Securities in which the Funds may invest are guaranteed as to timely payment of
principal and interest, the market value of the securities, upon which the
Funds' net asset values are based, will fluctuate due to the interest rate risks
described above. Additionally, not all U.S. Government Securities are backed by
the full faith and credit of the U.S. Government. Moreover, principal on the
mortgages underlying certain of the Fixed Income Fund's investments may be
prepaid in advance of maturity, which prepayments tend to increase when interest
rates decline, presenting the Fund with more principal to invest at lower
interest rates.
Portfolio Turnover. The Funds sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, each Fund's portfolio turnover generally will not
exceed 100% in any one year. The degree of portfolio activity affects the
brokerage costs of the Funds and other transaction costs related to the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences.
Borrowing. Each Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and 15% of its total assets to meet redemption requests
which might otherwise require untimely disposition of portfolio holdings. To the
extent the Funds borrow for these purposes, the effects of market price
fluctuations on portfolio net asset value will be exaggerated. If, while such
borrowing is in effect, the value of a Fund's assets declines, the Fund could be
forced to liquidate portfolio securities when it is disadvantageous to do so.
The Fund would incur interest and other transaction costs in connection with
borrowing. The Funds will borrow only from a bank. No Fund will make any
investments if the borrowing exceeds 5% of its total assets until such time as
repayment has been made to bring the total borrowing below 5% of its total
assets.
Illiquid Investments. Each Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, each Advisor determines the liquidity of its Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for a Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
Forward Commitments and When-Issued Securities. The Fixed Income Fund may
purchase when-issued securities and commit to purchase securities for a fixed
price at a future date beyond customary settlement time. The Fixed Income Fund
is required to hold and maintain in a segregated account until the settlement
date, cash, U.S. Government Securities or high-grade debt obligations in an
amount sufficient to meet the purchase price. Purchasing securities on a
when-issued or forward commitment basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in value of the Fixed Income Fund's other
assets. In addition, no income accrues to the purchaser of when-issued
securities during the period prior to issuance. Although the Fixed Income Fund
would generally purchase securities on a when-issued or forward commitment basis
with the intention of acquiring securities for its portfolio, the Fixed Income
Fund may dispose of a when-issued security or forward commitment prior to
settlement if FAM deems it appropriate to do so. The Fixed Income Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
Investment Grade Securities. The Fixed Income Fund intends to limit its
investment purchases to high quality investment grade securities. The securities
industry defines investment grade securities as obligations which, in FAM's
opinion, have the characteristics described by S&P, Fitch, Moody's, D&P or other
recognized rating services in their four highest rating grades. For S&P, Fitch
and D&P those ratings are AAA, AA, A and BBB. For Moody's those ratings are Aaa,
Aa, A and Baa. Although considered to be of "investment grade" quality,
securities rated BBB by S&P, Fitch, and D&P or Baa by Moody's, while normally
exhibiting adequate protection parameters, have speculative characteristics. For
a description of each rating grade, see Appendix A to the Statement of
Additional Information. The Fixed Income Fund intends to limit its portfolio to
a more restrictive quality criteria, limiting portfolio investments to those
securities in the three highest ratings, rated at least A by Moody's, S&P, Fitch
or D&P, or if not rated, of equivalent quality as determined by FAM. There may
also be instances in which FAM purchases bonds that are rated A by one rating
agency and not rated or rated lower than A by other rating agencies. The final
determination of quality and value will remain with FAM.
Other Investment Limitations. To limit each Fund's exposure to risk, the Trust
has adopted certain investment limitations. Some of these restrictions are that
the Funds will not: (1) issue senior securities, borrow money or pledge their
assets, except that they may borrow from banks as a temporary measure (a) for
extraordinary or emergency purposes, in amounts not exceeding 5% of each Fund's
total assets or, (b) in order to meet redemption requests, in amounts not
exceeding 15% of their total assets (the Funds will not make any investments if
borrowing exceeds 5% of their respective total assets), (and except that the
Aggressive Growth Fund may engage in short sales of securities to the extent
described herein); (2) make loans of money or securities, except that each Fund
may invest in repurchase agreements (but repurchase agreements having a maturity
of longer than seven days are subject to the limitation on investing in illiquid
securities); (3) invest more than 10% of their net assets in illiquid
securities; (4) invest in securities of issuers which have a record of less than
three years' continuous operation (including predecessors and, in the case of
bonds, guarantors), if more than 5% of their total assets would be invested in
such securities; (5) purchase or sell commodities, commodities contracts, real
estate (including limited partnership interests, but excluding readily
marketable securities secured by real estate or interests therein, readily
marketable interests in real estate investment trusts, or readily marketable
securities issued by companies that invest in real estate or interests therein)
or interests in oil, gas, or other mineral exploration or development programs
or leases (although it may invest in readily marketable securities of issuers
that invest in or sponsor such programs or leases); (6) with respect to 75% of
Fund 0% of the outstanding voting stock of any one issuer; (7) write, purchase,
or sell puts, calls, straddles, spreads, or combinations thereof, or futures
contracts or related options, except that the Aggressive Growth Fund and the
Sector Allocation Fund may engage in options transactions to the extent
described herein; (8) invest more than 5% of their net assets in warrants; and
(9) make short sales of securities or maintain a short position, except short
sales "against the box" (and except that the Aggressive Growth Fund may engage
in short sales of securities to the extent described herein). Investment
restrictions (1), (2), (5), (6), and (9) are deemed fundamental, that is, they
may not be changed without shareholder approval. See "Investment Limitations" in
the Statement of Additional Information for a complete list of investment
limitations.
If the Board of Trustees of the Trust determines that any Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in this Prospectus, or in the
Statement of Additional Information, as being fundamental, is non-fundamental.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's portfolio securities will not constitute a violation of such
limitation.
FEDERAL INCOME TAXES
Taxation of the Funds. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust as a separate regulated investment
company. Each series of the Trust (each of the Funds) intends to qualify or
remain qualified as a regulated investment company under the Code by
distributing substantially all of its "net investment income" to shareholders
and meeting other requirements of the Code. For the purpose of calculating
dividends, net investment income consists of income accrued on portfolio assets,
less accrued expenses. Upon qualification, the Funds will not be liable for
federal income taxes to the extent earnings are distributed. The Board of
Trustees retains the right for any series of the Trust to determine for any
particular year if it is advantageous not to qualify as a regulated investment
company. Regulated investment companies, such as each series of the Trust, are
subject to a non-deductible 4% excise tax to the extent they do not distribute
the statutorily required amount of investment income, determined on a calendar
year basis, and capital gain net income, using an October 31 year end measuring
period. The Funds intend to declare or distribute dividends during the calendar
year in an amount sufficient to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Funds or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Funds from long-term capital gains, whether received
in cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time an investor has owned shares in the
Funds. Capital gain distributions are made when a Fund realizes net capital
gains on sales of portfolio securities during the year. Dividends and capital
gain distributions paid by the Funds shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of each Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of
the Trust).
The Trust will inform shareholders of each Fund of the source of their dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Funds is correct and
that the investor is not subject to 31% withholding for previous under-reporting
to the Internal Revenue Service (the "IRS"). Investors will be asked to make the
appropriate certification on their application to purchase shares. If a
shareholder of any of the Funds has not complied with the applicable statutory
and IRS requirements, the Fund is generally required by federal law to withhold
and remit to the IRS 31% of reportable payments (which may include dividends and
redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. Each Equity Fund will pay income dividends, if
any, at least annually. Each Fund will distribute net realized capital gains, if
any, at least annually. The Fixed Income Fund intends to pay income dividends,
if any, monthly.
Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the
respective Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Administrator at 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. That request must be
received by the Administrator prior to the record date to be effective as to the
next dividend. Each shareholder will receive a quarterly summary of his or her
account, including information as to any reinvested dividends. Tax consequences
to shareholders of dividends and distributions are the same if received in cash
or in additional shares of the Funds.
In order to satisfy certain requirements of the Internal Revenue Code, each Fund
may declare special year-end dividend and capital gains distribution during
December. Such distributions, if received by shareholders by January 31, are
deemed to have been paid by the Funds and received by shareholders on December
31 of the prior year.
There is no fixed dividend rate, and there can be no assurance of the payment of
any dividends or the realization of any gains.
HOW SHARES ARE VALUED
Net asset value of each Equity Fund is determined at 4:00 p.m., New York time,
Monday through Friday, except on business holidays when the New York Stock
Exchange is closed. Net asset value of the Fixed Income Fund is determined at
3:00 p.m., New York time, Monday through Friday, except on business holidays
when the New York Stock Exchange and/or the Federal Reserve Banking System is
closed. The net asset value of the shares of each Fund for purposes of pricing
sales and redemptions is equal to the total market value of its investments,
less all of its liabilities, divided by the number of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by each Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the latest quoted sales price, if available, at the time of valuation,
otherwise, at the latest quoted bid price. Temporary cash investments with
maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
Fixed income securities will ordinarily be traded on the over-the-counter
market. When market quotations are not readily available, fixed income
securities may be valued based on prices provided by a pricing service. The
prices provided by the pricing service are generally determined with
consideration given to institutional bid and last sale prices and take into
account securities prices, yields, maturities, call features, ratings,
institutional trading in similar groups of securities, and developments related
to specific securities. Such fixed income securities may also be priced based
upon a matrix system of pricing similar bonds and other fixed income securities.
Such matrix system may be based upon the considerations described above used by
other pricing services and information obtained by the pricing agent from the
Advisors and other pricing sources deemed relevant by the pricing agent.
HOW SHARES MAY BE PURCHASED
Assistance in opening accounts and a purchase application may be obtained by
calling 800-220-8888, or by writing to the Administrator at the address shown
below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Funds. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
each Fund's net asset value next determined after your order is received by the
Administrator in proper form as indicated herein. Since the Quaker Family of
Funds are offered only on a no-load basis, a broker dealer may charge a
transaction fee for settlement services.
The minimum initial investment is $25,000 in the Trust. Investors may allocate
their investment among the various series (Funds) of the Trust. If an initial
investment is made in only one Fund, the minimum initial investment is $25,000.
The minimum subsequent investment is $250. The Funds may, in the Distributor's
sole discretion, accept certain accounts with less than the stated minimum
initial investment. You may invest in the following ways:
Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable and addressed to the applicable Fund, 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069.
Subsequent investments in an existing account in any Fund may be made at any
time in minimum amounts of $250 by sending a check payable and addressed to the
Fund, 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069. Please enclose the stub of your account statement and
include the amount of the investment, the name of the account for which the
investment is to be made and the account number.
Purchases by Wire. To purchase shares by wiring federal funds, the Administrator
must first be notified by calling 800-220-8888 to request an account number and
furnish the Administrator with your tax identification number. Following
notification to the Administrator federal funds and registration instructions
should be wired through the Federal Reserve System to: **** Wachovia Bank of
North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For the Quaker Core Equity Fund
Acct #6763-020577
For the Quaker Aggressive Growth Fund
Acct #6761-020578
For the Quaker Small-Cap Value Fund
Acct #6769-020579
For the Quaker Sector Allocation Equity Fund
Acct #6767-020580
For the Quaker Enhanced Stock Market Fund
Acct #6765-020576
For the Quaker Fixed Income Fund
Acct #6765-020581
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire contain all the information and that the
Administrator receive prior telephone notification to ensure proper credit. A
completed application with signature(s) of registrant(s) must be mailed to the
Administrator immediately after the initial wire as described under "Purchases
by Mail" above. Investors should be aware that some banks may impose a wire
service fee.
General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Administrator reserves the right to reject any application
or investment. Orders become effective, and shares are purchased at, the next
determined net asset value per share after an investment has been received by
the Administrator, which is as of 4:00 p.m., New York time, Monday through
Friday, exclusive of business holidays. Orders received by the Administrator and
effective prior to such 4:00 p.m. time will purchase shares at the net asset
value determined at that time. Otherwise, your order will purchase shares as of
such 4:00 p.m. time on the next business day. For purposes of the Fixed Income
Fund, the foregoing references to 4:00 p.m. will instead be to 3:00 p.m., New
York time, Monday through Friday, exclusive of business holidays. For orders
placed through a qualified broker-dealer, such firm is responsible for promptly
transmitting purchase orders to the Administrator.
If checks are returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any Fund
of the Trust already owned by any purchaser whose order is cancelled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Distributor, at its sole
discretion, may allow payment in kind for Fund shares purchased by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of the net asset value of the
Fund. See the Statement of Additional Information for additional information on
purchases in kind.
The Administrator is required by federal law to withhold and remit to the IRS
31% of the dividends, capital gains distributions and, in certain cases,
proceeds of redemptions paid to any shareholder who fails to furnish the
Administrator with a correct taxpayer identification number, who under-reports
dividend or interest income or who fails to provide certification of tax
identification number. Instructions to exchange or transfer shares held in
established accounts will be refused until the certification has been provided.
In order to avoid this withholding requirement, you must certify on your
application, or on a separate W-9 Form supplied by the Administrator, that your
taxpayer identification number is correct and that you are not currently subject
to backup withholding or you are exempt from backup withholding. For
individuals, your taxpayer identification number is your social security number.
Distribution Plan. Quaker Securities, Inc., 1288 Valley Forge Road, Post Office
Box 987, Valley Forge, Pennsylvania 19482 (the "Distributor"), is the national
distributor for the Funds under a Distribution Agreement with the Trust. The
Distributor may sell Fund shares to or through qualified securities dealers or
others. Jeffry H. King, a Trustee of the Trust, controls the Distributor.
The Trust has adopted a Distribution Plan (the "Plan") for all Funds pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Funds may reimburse any
expenditures to finance any activity primarily intended to result in sale of the
shares of the Funds, including, but not limited to, the following: (i) payments
to the Distributor and its agents, securities dealers, and others for the sale
of shares of the Funds; (ii) payment of compensation to and expenses of
personnel who engage in or support distribution of shares of the Funds; and
(iii) formulation and implementation of marketing and promotional activities.
The categories of expenses for which reimbursement is made are approved by the
Board of Trustees of the Trust. Expenditures by the Funds pursuant to the Plan
are accrued based on the average daily net assets of each Fund and may not
exceed 0.25% of average net assets for each year elapsed subsequent to adoption
of the Plan. All expenditures under the Plan will be funded entirely from
investment advisory fees payable to the Funds' investment advisors and will not
be paid directly by the Funds. The Investment Advisory Agreements entered into
by the Funds and each of the investment advisors provides for the payment of
such distribution fees and expenses from the investment advisory fees payable
thereunder.
The Plan may not be amended to increase materially the amount to be spent under
the Plan without shareholder approval. The continuation of the Plan must be
approved by the Board of Trustees annually. At least quarterly the Board of
Trustees must review a written report of amounts expended pursuant to the Plan
and the purposes for which such expenditures were made.
The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of the Funds. Compensation may
include financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Funds, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may not
use sales of the Funds' shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Funds or their shareholders.
Exchange Feature. Investors will have the privilege of exchanging shares of any
Fund for shares of any other Fund of the Trust. An exchange involves the
simultaneous redemption of shares of one series and purchase of shares of
another series at the respective closing net asset value next determined after a
request for redemption has been received, and is a taxable transaction. Shares
of each Fund may be exchanged for shares of any other series of the Trust at the
net asset value plus that series' sales charge, if any. Exchanges may only be
made by investors in states where shares of the other series are qualified for
sale. An investor may direct the Administrator to exchange his shares by writing
to the Administrator at its principal office. The request must be signed exactly
as the investor's name appears on the account, and it must also provide the
account number, number of shares to be exchanged, the name of the series to
which the exchange will take place and a statement as to whether the exchange is
a full or partial redemption of existing shares.
A pattern of frequent exchange transactions may be deemed by the Distributor to
be an abusive practice that is not in the best interests of the shareholders of
the Funds. Such a pattern may, at the discretion of the Distributor, be limited
by that Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The
Distributor will consider all factors it deems relevant in determining whether a
pattern of frequent purchases, redemptions and/or exchanges by a particular
investor is abusive and not in the best interests of the Funds or its other
shareholders.
A shareholder should consider the investment objectives and policies of any
series into which the shareholder will be making an exchange, as described in
the prospectus. The Board of Trustees of the Trust reserves the right to suspend
or terminate, or amend the terms of, the exchange privilege upon 60 days written
notice to the shareholders.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum), which will be automatically invested in
shares at the public offering price on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of each Fund may be redeemed (the Funds will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Administrator, whether by mail or telephone, prior to
4:00 p.m. New York time, Monday through Friday, except for business holidays,
will redeem shares at the net asset value next determined at that time.
Otherwise, your order will redeem shares as of such 4:00 p.m. time on the next
business day. For purposes of the Fixed Income Fund, the foregoing references to
4:00 p.m. will instead be to 3:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. There is no charge for redemptions from the
Funds, other than the charges for wiring of redemption proceeds. You may also
redeem your shares through a broker-dealer or other institution, who may charge
you a fee for its services.
The Board of Trustees reserves the right to involuntarily redeem any account
having a net asset value of less than $25,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account net asset value up to $25,000 or more during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Administrator at 800-220-8888, or write to the address shown below.
Regular Mail Redemptions . Your request should be addressed to The Nottingham
Company, 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069. Your request for redemption must include:
1) Your letter of instruction specifying the account number, and the number
of shares or dollar amount to be redeemed. This request must be signed by
all registered shareholders in the exact names in which they are
registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3)Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Funds may delay forwarding a redemption
check for recently purchased shares while they determine whether the purchase
payment will be honored. Such delay (which may take up to 15 days from the date
of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases the net asset value next determined after
the receipt of the request for redemption will be used in processing the
redemption. The Funds may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Funds to dispose of securities
owned by them, or to fairly determine the value of their assets, and (iii) for
such other periods as the Commission may permit.
Telephone and Bank Wire Redemptions. The Funds offer shareholders the option of
redeeming shares by telephone under certain limited conditions. The Funds will
redeem shares when requested by the shareholder if, and only if, the shareholder
confirms redemption instructions in writing.
The Funds may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Shareholder name and account number;
2) Number of shares or dollar amount to be redeemed;
3) Instructions for transmittal of redemption funds to the shareholder; and
4) Shareholder signature as it appears on the application then on file with
the Funds.
The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Funds may not be redeemed by wire on
days on which your bank, and/or the Funds' Custodian, is not open for business.
You can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Administrator. (See
"Signature Guarantees" below.) The Distributor reserves the right to restrict or
cancel telephone and bank wire redemption privileges for shareholders, without
notice, if the Distributor believes it to be in the best interest of the
shareholders to do so. During drastic economic and market conditions, telephone
redemption privileges may be difficult to implement.
There is currently a $10 charge by the Funds for wire redemptions, to cover the
Funds' cost of executing the wire transfer. This charge will be automatically
deducted from the shareholder's account by redemption of shares in the account.
The shareholder's bank or brokerage firm may also impose a charge for processing
the wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Administrator at 800-220-8888. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Administrator. Telephone redemption privileges authorize the Administrator
to act on telephone instructions from any person representing himself or herself
to be the investor and reasonably believed by the Administrator to be genuine.
The Funds will employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine, and if they
do not follow such procedures, the Funds will be liable for any losses due to
fraudulent or unauthorized instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine.
Transfer on Redemption to Money Market Account. Shareholders wishing to have
redemption proceeds and/or income and capital gain dividends transferred into an
account in their name in a money market fund may so indicate on their Account
Application. The Fifth Third Bank, Custodian of the Quaker Family of Funds, has
made availabe the Fountain Square U.S. Treasury Obligation Fund for use of Fund
shareholders. Purchases and/or transfers into the Treasury Obligation Fund may
only be made after the shareholder has received the current prospectus will be
sent. For further information and a prospectus please call the Quaker Family
of Funds at 800-220-8888.
Systematic Withdrawal Plan. A shareholder who owns shares of one of the Funds
valued at $10,000 or more at current net asset value may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. Call or write the Fund for an application form. See the Statement of
Additional Information for further details.
Signature Guarantees. To protect your account and the Funds from fraud,
signature guarantees are required to be sure that you are the person who has
authorized a change in registration, or standing instructions, for your account.
Signature guarantees are required for (1) change of registration requests, (2)
requests to establish or change exchange privileges or telephone redemption
service other than through your initial account application, and (3) requests
for redemptions in excess of $50,000. Signature guarantees are acceptable from a
member bank of the Federal Reserve System, a savings and loan institution,
credit union (if authorized under state law), registered broker-dealer,
securities exchange or association clearing agency, and must appear on the
written request for redemption, establishment or change in exchange privileges,
or change of registration.
MANAGEMENT OF THE FUNDS
Trustees and Officers. Each Fund is a series of the Quaker Investment Trust (the
"Trust"), an investment company organized as a Massachusetts business trust in
1990. The Board of Trustees of the Trust is responsible for the management of
the business and affairs of the Trust. The Trustees and executive officers of
the Trust and their principal occupations for the last five years are set forth
in the Statement of Additional Information under "Management of the Fund -
Trustees and Officers". The Board of Trustees of the Trust is primarily
responsible for overseeing the conduct of the Trust's business. The Board of
Trustees elects the officers of the Trust who are responsible for its and the
Funds' day-to-day operations.
Advisor to the Quaker Enhanced Stock Market Fund & the Quaker Fixed Income Fund.
Subject to the authority of the Board of Trustees, Fiduciary Asset Management
Co. ("FAM") provides the Enhanced Stock Market Fund and the Fixed Income Fund
(for purposes of this section, the "Funds") with a continuous program of
supervision of the Funds' assets, including the composition of each Fund's
portfolio, and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities, pursuant to an
Investment Advisory Agreement ("Advisory Agreement") with the Trust.
FAM is registered under the Investment Advisors Act of 1940. Registration of FAM
does not involve any supervision of management or investment practices or
policies by the Securities and Exchange Commission. FAM was established as a
Missouri corporation in 1994. FAM currently serves as investment advisor to over
$2.6 billion in assets. While it has no prior experience advising an investment
company, FAM has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Funds, to individuals, banks and
thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations and corporations since its inception in 1994. FAM's
address is 8112 Maryland Avenue, Suite 310, Clayton, Missouri 63105. FAM is
controlled by John L. Dorian and Charles D. Walbrandt.
John L. Dorian has been responsible for day-to-day management of the Enhanced
Stock Market Fund's portfolio since its inception. Mr. Dorian has been with FAM
since April 1995. Previously Mr. Dorian was a Managing Director and Portfolio
Manager with First Quadrant Corp., Pasadena, California.
Wiley D. Angell has been responsible for day-to-day management of the Fixed
Income Fund's portfolio since its inception. Mr. Angell has been with FAM since
its inception in June 1994. Previously Mr. Angell was Corporate Director, Fixed
Income Portfolio Manager with General Dynamics Corporation.
Under the Advisory Agreement with the Trust, FAM receives a monthly management
fee equal to an annual rate of 0.50% of the average daily net asset value of the
Enhanced Stock Market Fund. FAM may periodically voluntarily waive or reduce its
advisory fee to increase the net income of the Enhanced Stock Market Fund.
Under the Advisory Agreement with the Trust, FAM receives a monthly management
fee equal to an annual rate of 0.45% of the average daily net asset value of the
Fixed Income Fund. See footnote 3 to the Fee Table regarding FAM's agreement to
reduce its fee, if necessary, to limit operating expenses and maintain the
expense ratio of the Fund.
Advisor to the Quaker Core Equity Fund. Subject to the authority of the Board of
Trustees, West Chester Capital Advisors, Inc. ("West Chester") provides the Core
Equity Fund with a continuous program of supervision of the Core Equity Fund's
assets, including the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to an Investment Advisory Agreement
("Advisory Agreement") with the Trust.
West Chester is registered under the Investment Advisors Act of 1940.
Registration of West Chester does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. West
Chester was established as a Pennsylvania corporation in 1994. West Chester
currently serves as investment advisor to over $54 million in assets. While it
has no prior experience advising an investment company, West Chester has been
rendering investment counsel, utilizing investment strategies substantially
similar to that of the Core Equity Fund, to individuals, pension and profit
sharing plans, trusts, estates, charitable organizations and corporations since
its inception in 1994. West Chester's address is 106 South Church Street, West
Chester, Pennsylvania 19382. West Chester is controlled by Bruce L. Marra, CFA
and Thomas F. McKeon.
Messrs. Marra and McKeon have shared responsibility for day-to-day management of
the Fund's portfolio since its inception. Both have been with West Chester since
October 1994. Previously Mr. Marra was a senior officer with Valley Forge Asset
Management; and Chief Investment Officer with Wilmington Trust. Mr. McKeon was
previously a portfolio manager with Valley Forge Asset Management; a registered
representative with New England Securities; and a market maker on the floor of
the Philadelphia Stock Exchange. Under the Advisory Agreement with the Trust,
West Chester receives a monthly management fee equal to an annual rate of 0.75%
of the average daily net asset value of the Fund. See footnote 3 to the Fee
Table regarding West Chester's agreement to reduce its fee, if necessary, to
limit operating expenses and maintain the expense ratio of the Fund.
Advisor to the Quaker Aggressive Growth Fund. Subject to the authority of the
Board of Trustees, DG Capital Management, Inc. ("DGCM") provides the Aggressive
Growth Fund with a continuous program of supervision of the Aggressive Growth
Fund's assets, including the composition of its portfolio, and furnishes advice
and recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to an Investment Advisory Agreement
("Advisory Agreement") with the Trust.
DGCM is registered under the Investment Advisors Act of 1940. Registration of
DGCM does not involve any supervision of management or investment practices or
policies by the Securities and Exchange Commission. DGCM was established as a
Massachusetts corporation in 1996. DGCM is a newly formed investment advisory
firm. While it has no prior experience advising an investment company, the
principal of DGCM has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Aggressive Growth Fund, to
individuals, banks and thrift institutions, pension and profit sharing plans,
trusts, estates, charitable organizations and corporations since 1985. DGCM's
address is 8 Waybridge Lane, Wayland, Massachusetts 01778. DGCM is controlled by
Manu Daftary.
Mr. Daftary has been responsible for day-to-day management of the Fund's
portfolio since its inception. He has been with DGCM since July 1996. Previously
Mr. Daftary was a portfolio manager with Greenville Capital Management during
1995 and early 1996; was Senior Vice President/Portfolio Manager with Hellman,
Jordan Management Company from 1993-1995; was co-manager of the institutional
growth stock portfolio with Geewax, Terker & Company from 1988-1993.
Under the Advisory Agreement with the Trust, DGCM receives a monthly management
fee equal to an annual rate of 0.75% of the average daily net asset value of the
Fund. See footnote 3 to the Fee Table regarding DGCM's agreement to reduce its
fee, if necessary, to limit operating expenses and maintain the expense ratio of
the Fund.
Advisor to the Quaker Small-Cap Value Fund. Subject to the authority of the
Board of Trustees, Aronson + Partners ("Aronson") provides the Small-Cap Value
Fund with a continuous program of supervision of the Small-Cap Value Fund's
assets, including the composition of its portfolio, and furnishes advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to an Investment Advisory Agreement
("Advisory Agreement") with the Trust.
Aronson is registered under the Investment Advisors Act of 1940. Registration of
Aronson does not involve any supervision of management or investment practices
or policies by the Securities and Exchange Commission. Aronson was established
as a Pennsylvania corporation in 1984. Aronson currently serves as investment
advisor to over $660 million in assets. Aronson has been rendering investment
counsel, utilizing investment strategies substantially similar to that of the
Small-Cap Value Fund, to individuals, banks and thrift institutions, pension and
profit sharing plans, trusts, estates, charitable organizations and corporations
since its inception in 1984. Aronson's address is 230 South Broad Street, 20th
Floor, Philadelphia, Pennsylvania 19012. Aronson is controlled by Theodore R.
Aronson.
Mr. Aronson has been responsible for day-to-day management of the Fund's
portfolio since its inception. He has been with Aronson since August 1984.
Previously Mr. Aronson was a partner with Addison Capital Management.
Under the Advisory Agreement with the Trust, Aronson receives a monthly
management fee equal to an annual rate of 0.75% of the average daily net asset
value of the Fund. See footnote 3 to the Fee Table regarding Aronson's agreement
to reduce its fee, if necessary, to limit operating expenses and maintain the
expense ratio of the Fund.
Advisor to the Quaker Sector Allocation Equity Fund. Subject to the authority of
the Board of Trustees, Logan Capital Management, Inc. ("Logan Capital") provides
the Sector Allocation Fund with a continuous program of supervision of the
Sector Allocation Fund's assets, including the composition of its portfolio, and
furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities, pursuant to an Investment
Advisory Agreement ("Advisory Agreement") with the Trust.
Logan Capital is registered under the Investment Advisors Act of 1940.
Registration of Logan Capital does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor was established as a Pennsylvania corporation in 1993. Logan Capital
currently serves as investment advisor to over $175 million in assets. While it
has no prior experience advising an investment company, Logan Capital has been
rendering investment counsel, utilizing investment strategies substantially
similar to that of the Sector Allocation Fund, to individuals, banks and thrift
institutions, pension and profit sharing plans, trusts, estates, charitable
organizations and corporations since its inception in 1993. Logan Capital's
address is One Liberty Place, Suite 2700, Philadelphia, Pennsylvania 19103.
Logan Capital is controlled by Al D. Besse, Charles A. Knott, Jr., David P.
Harrison, Dana H. Stewardson, and Stephen S. Lee.
Charles A. Knott, Jr. has been responsible for day-to-day management of the
Fund's portfolio since its inception. Mr. Knott has been with Logan Capital
since its inception in November 1993. Previously Mr. Knott was Chief Investment
Strategist with Mercer Capital Management, Philadelphia, Pennsylvania. Prior to
November 1993, Mr. Knott was Senior Investment Officer at Fidelity Bank,
Philadelphia, Pennsylvania.
Under the Advisory Agreement with the Trust, Logan Capital receives a monthly
management fee equal to an annual rate of 0.75% of the average daily net asset
value of the Fund. See footnote 3 to the Fee Table regarding Logan Capital's
agreement to reduce its fee, if necessary, to limit operating expenses and
maintain the expense ratio of the Fund.
General Advisor Duties. Each Advisor supervises and implements the investment
activities of their respective Fund, including the making of specific decisions
as to the purchase and sale of portfolio investments. Among the responsibilities
of each Advisor under the Advisory Agreement is the selection of brokers and
dealers through whom transactions in the Funds' portfolio investments will be
effected. Each Advisor attempts to obtain the best execution for all such
transactions. If it is believed that more than one broker is able to provide the
best execution, each Advisor will consider the receipt of quotations and other
market services and of research, statistical and other data and the sale of
shares of the Fund in selecting a broker. Research services obtained through
Fund brokerage transactions may be used by the Advisor for its other clients
and, conversely, each Fund may benefit from research services obtained through
the brokerage transactions of the Advisor's other clients. The Advisors may also
utilize a brokerage firm affiliated with the Trust, such as the Distributor, if
it believes it can obtain the best execution of transactions from such broker,
subject to periodic review of such executions and procedures by the Board of
Trustees. For further information, see "Investment Objective and Policies -
Investment Transactions" in the Statement of Additional Information.
Administration. The Trust has entered into a Fund Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. Subject to the
authority of the Board of Trustees, the services the Administrator provides to
each Fund include coordinating and monitoring any third parties furnishing
services to the Funds; providing the necessary office space, equipment and
personnel to perform administrative and clerical functions for the Funds;
preparing, filing and distributing proxy materials, periodic reports to
shareholders, registration statements and other documents; and responding to
shareholder inquiries. For these administrative and oversight services, the
Administrator receives a fee at the annual rate of 0.175% of the average daily
net assets of each Fund on the first $50 million; 0.150% of the next $50
million; and 0.125% of its average daily net assets in excess of $100 million.
The Administrator also serves as the Funds' transfer agent. As transfer agent,
it maintains the records of each shareholder's account, answers shareholder
inquiries concerning accounts, processes purchases and redemptions of the Funds'
shares, acts as dividend and distribution disbursing agent and performs other
shareholder services functions for a monthly fee based on the number of
shareholders in each Fund, subject to a monthly minimum of $500.
The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of each Fund's net asset
value. For these services, the Administrator currently receives a base monthly
fee of $2,000 for accounting and recordkeeping services for each Fund. The
Administrator also charges each Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month, analyzed monthly.
See footnote 3 to the Fee Table regarding the Administrator's agreement to
reduce its fee, if necessary, to limit operating expenses and maintain the
expense ratio of the Fund.
The Administrator was formed as a North Carolina corporation in 1988. With it
affiliates and predecessors, the Administrator has been operating as a financial
services firm since 1985. Frank P. Meadows III is the firm's Managing Director
and controlling shareholder.
Sponsor of the Funds. Quaker Funds, Inc., an entity affiliated with the Funds'
Distributor, will engage in shareholder servicing activities for the Funds not
otherwise provided by the Funds' Administrator or Custodian, for which it will
receive a fee at the annual rate of 0.25% of the average daily net assets of the
Funds, except the shareholder servicing fee will be limited to 0.20% for the
Enhanced Stock Market Fund and 0.15% for the Fixed Income Fund. Pursuant to a
Shareholder Servicing Agreement adopted by the Trust for each Fund, Quaker
Funds, Inc. will provide oversight with respect to each Fund's investment
advisor, arrange for payment of investment advisory and administrative fees,
coordinate payments under each Fund's Distribution Plan, develop communications
with existing Fund shareholders, assist in responding to shareholder inquiries,
and will provide other shareholder servicing services. Laurie Keyes, Jeffry H.
King and Peter F. Waitneight, each of whom is a Trustee of the Trust, control
Quaker Funds, Inc. Mr. King also controls the Distributor. Quaker Funds, Inc.
was formed as a Pennsylvania corporation in 1996 and is located at 1288 Valley
Forge Road, Suite 76, Valley Forge, Pennsylvania. See footnote 3 to the Fee
Table regarding the Sponsor's agreement to reduce its fee, if necessary, to
limit operating expenses and maintain the expense ratio of the Fund.
Custodian. The Fifth Third Bank (the "Custodian"), 38 Fountain Square Plaza,
Cincinnati, Ohio 45263, serves as Custodian of the Funds' assets. The Custodian
acts as the depository for the Funds, provides safekeeping for their portfolio
securities, collects all income and other payments with respect to portfolio
securities, disburses monies at the Funds' request and maintains records in
connection with its duties.
Other Expenses. Each Fund is responsible for the payment of its expenses. These
include, for example, the fees payable to the Advisor, or expenses otherwise
incurred in connection with the management of the investment of the Funds'
assets, the fees and expenses of the Custodian, the fees and expenses of the
Administrator, the fees and expenses of Trustees, outside auditing and legal
expenses, all taxes and corporate fees payable by each Fund, Securities and
Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. Each Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust will be
charged to that series, and expenses not readily identifiable as belonging to a
particular series will be allocated by or under procedures approved by the Board
of Trustees among one or more series in such a manner as it deems fair and
equitable.
OTHER INFORMATION
Description of Shares. The Trust was organized as a Massachusetts business trust
on October 24, 1990 under a Declaration of Trust. The Declaration of Trust
permits the Board of Trustees to issue an unlimited number of full and
fractional shares and to create an unlimited number of series of shares. The
Board of Trustees may also classify and reclassify any unissued shares into one
or more classes of shares.
When issued, the shares of each series of the Trust will be fully paid,
nonassessable and redeemable. The Trust does not intend to hold annual
shareholder meetings; it may, however, hold special shareholder meetings for
purposes such as changing fundamental policies or electing Trustees. The Board
of Trustees shall promptly call a meeting for the purpose of electing or
removing Trustees when requested in writing to do so by the record holders of a
least 10% of the outstanding shares of the Trust. The term of office of each
Trustee is of unlimited duration. The holders of at least two-thirds of the
outstanding shares of the Trust may remove a Trustee from that position either
by declaration in writing filed with the Custodian or by votes cast in person or
by proxy at a meeting called for that purpose.
Shareholders of the Trust will vote in the aggregate and not by series (Fund) or
class, except as otherwise required by the 1940 Act or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular series or class. Matters affecting an
individual series, include, but are not limited to, the investment objectives,
policies and restrictions of that series. Shares have no subscription,
preemptive or conversion rights. Share certificates will not be issued. Each
share is entitled to one vote (and fractional shares are entitled to
proportionate fractional votes) on all matters submitted for a vote, and shares
have equal voting rights except that only shares of a particular series are
entitled to vote on matters affecting only that series. Shares do not have
cumulative voting rights. Therefore, the holders of more than 50% of the
aggregate number of shares of all series of the Trust may elect all the
Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust, therefore, contains provisions which are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust and
its shares.
Reporting to Shareholders. Each Fund will send to its shareholders annual and
semi-annual reports; the financial statements appearing in annual reports for
each Fund will be audited by independent accountants. In addition, the
Administrator, as transfer agent, will send to each shareholder having an
account directly with that Fund a quarterly statement showing transactions in
the account, the total number of shares owned and any dividends or distributions
paid. Inquiries regarding any Fund may be directed in writing to 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069
or by calling 800-220-8888.
Calculation of Performance Data. From time to time the Funds may advertise their
average annual total return. The "average annual total return" of each Fund
refers to the average annual compounded rates of return over 1, 5 and 10 year
periods that would equate an initial amount invested at the beginning of a
stated period to the ending redeemable value of the investment. The calculation
assumes the reinvestment of all dividends and distributions, includes all
recurring fees that are charged to all shareholder accounts and deducts all
nonrecurring charges at the end of each period. If the Fund has been operating
less than 1, 5 or 10 years, the time period during which the Fund has been
operating is substituted.
In addition, each Fund may advertise other total return performance data. This
data shows as a percentage rate of return encompassing all elements of return
(i.e. income and capital appreciation or depreciation); it assumes reinvestment
of all dividends and capital gain distributions. Such other total return data
may be quoted for the same or different periods as those for which average
annual total return is quoted. This data may consist of a cumulative percentage
rate of return, actual year-by-year rates or any combination thereof. Cumulative
total return represents the cumulative change in value of an investment in each
Fund for various periods.
From time to time the Fixed Income Fund may also advertise its yield. The
"yield" of a Fund is computed by dividing the net investment income per share
earned during the most recent practicable period stated in the advertisement by
the maximum offering price per share on the last day of the period (using the
average number of shares entitled to receive dividends). For the purpose of
determining net investment income, the calculation includes among expenses of
the Fund all recurring fees that are charged to all shareholder accounts and any
nonrecurring charges for the period stated.
The total return and yield of each Fund could be increased to the extent the
Advisor, the Administrator or the Fund Sponsor may waive all or a portion of
their fees. Total return and yield figures are based on the historical
performance of each Fund, show the performance of a hypothetical investment, and
are not intended to indicate future performance. The Funds' quotations may from
time to time be used in advertisements, sales literature, shareholder reports,
or other communications. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
<PAGE>
THE QUAKER FAMILY OF FUNDS
PROSPECTUS
November 14, 1996
DISTRIBUTOR
Quaker Securities, Inc.
1288 Valley Forge Road, Suite 75
Valley Forge, Pennsylvania 19482
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
ADMINISTRATOR
& TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
INDEPENDENT AUDITORS
Deloitte & Touche, LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
FUND SPONSOR
Quaker Funds, Inc.
1288 Valley Forge Road, Suite 76
Valley Forge, Pennsylvania 19482
INVESTMENT ADVISORS
Aronson + Partners
Philadelphia, Pennsylvania
DG Capital Management
Wayland, Massachusetts
Fiduciary Asset Management
St. Louis, Missouri
Bellevue, Washington
Logan Capital Management
Philadelphia, Pennsylvania
West Chester Capital Advisors
West Chester, Pennsylvania
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE QUAKER FAMILY OF FUNDS
November 14, 1996
Series of
QUAKER INVESTMENT TRUST
105 North Washington Street, Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 800-220-8888
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES ......................................... 2
INVESTMENT LIMITATIONS .................................................... 4
NET ASSET VALUE ........................................................... 6
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ............................ 6
DESCRIPTION OF THE TRUST .................................................. 7
ADDITIONAL INFORMATION CONCERNING TAXES ................................... 8
MANAGEMENT OF THE FUNDS ................................................... 9
SPECIAL SHAREHOLDER SERVICES .............................................. 12
ADDITIONAL INFORMATION ON PERFORMANCE ..................................... 14
APPENDIX A - DESCRIPTION OF RATINGS ....................................... 16
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus dated November 1, 1996 for the
Quaker Enhanced Stock Market Fund, the Quaker Core Equity Fund, the Quaker
Aggressive Growth Fund, the Quaker Small-Cap Value Fund, the Quaker Sector
Allocation Equity Fund, and the Quaker Fixed Income Fund (individually a "Fund"
and collectively the "Funds"), as the Prospectus may be amended or supplemented
from time to time, and is incorporated by reference in its entirety into the
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Funds should be made solely upon the information
contained herein. Copies of the Funds' Prospectus may be obtained at no charge
by writing or calling the Funds at the address and phone number shown above.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement each Fund's investment objective and policies
as set forth in the Prospectus for each Fund. The Funds, organized in 1996, have
no prior operating history.
Additional Information on Fund Instruments. Attached to this Additional
Statement is Appendix A, which contains descriptions of the rating symbols used
by Rating Agencies for fixed income securities in which the Funds may invest.
Investment Transactions. Subject to the general supervision of the Trust's Board
of Trustees, the Advisor to each Fund is responsible for, makes decisions with
respect to, and places orders for all purchases and sales of portfolio
securities for the Fund managed by such Advisor.
The annualized portfolio turnover rate for each Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of each Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and each Fund may engage in short term trading to achieve its
investment objectives.
Purchases of money market instruments by the Funds are made from dealers,
underwriters and issuers. The Funds currently do not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, which may include a dealer mark-up, or otherwise involve
transactions directly with the issuer of an instrument.
Normally, most of the Funds' fixed income portfolio transactions will be
principal transactions executed in over the counter markets and will be executed
on a "net" basis, which may include a dealer mark-up. With respect to securities
traded only in the over the counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Funds may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. A Fund will engage
in this practice, however, only when the Advisor to each Fund, in its sole
discretion, believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor to
each Fund will seek to obtain the best overall terms available for each Fund. In
assessing the best overall terms available for any transaction, each Advisor
shall consider factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. The sale of
Fund shares may be considered when determining the firms that are to execute
brokerage transactions for the Funds. In addition, the Advisor to each Fund is
authorized to cause the Fund to pay a broker-dealer which furnishes brokerage
and research services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond and
government securities markets and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor to each Fund and does
not reduce the advisory fees payable by the Funds. The Trustees will
periodically review any commissions paid by the Funds to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Funds. It is possible that certain of
the supplementary research or other services received will primarily benefit one
or more other investment companies or other accounts for which investment
discretion is exercised by an Advisor. Conversely, the Funds may be the primary
beneficiary of the research or services received as a result of securities
transactions effected for such other account or investment company.
The Advisor to each Fund may also utilize a brokerage firm affiliated with the
Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Since the Distributor is a registered securities
broker-dealer, it is anticipated that the Distributor may execute transactions
on behalf of the Funds, for which it will receive brokerage commissions and
fees, subject to the obligations of best execution.
The Funds will not execute portfolio transactions through, acquire securities
issued by, make savings deposits in or enter into repurchase agreements with an
Advisor or an affiliated person of an Advisor (as such term is defined in the
1940 Act) acting as principal, except to the extent permitted by the Securities
and Exchange Commission ("SEC"). In addition, a Fund will not purchase
securities during the existence of any underwriting or selling group relating
thereto of which the Advisor to the Fund, or an affiliated person of the Advisor
to the Fund, is a member, except to the extent permitted by the SEC. Under
certain circumstances, the Funds may be at a disadvantage because of these
limitations in comparison with other investment companies that have similar
investment objectives but are not subject to such limitations.
Investment decisions for each Fund will be made independently from those for any
other Fund and any other series of the Trust, if any, and for any other
investment companies and accounts advised or managed by the Advisor to each
Fund. Such other investment companies and accounts may also invest in the same
securities as a Fund. To the extent permitted by law, an Advisor may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for another Fund or other investment companies or accounts in
executing transactions. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another Fund or another
investment company or account, the transaction will be averaged as to price and
available investments allocated as to amount, in a manner which the Advisor to
each Fund believes to be equitable to the Funds and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
or sold by a Fund.
Repurchase Agreements. Each Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to each Fund will consider the creditworthiness of the vendor. If
the vendor fails to pay the agreed upon resale price on the delivery date, the
Fund will retain or attempt to dispose of the collateral. A Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Funds will not enter into any repurchase agreement which will
cause more than 10% of their net assets to be invested in repurchase agreements
which extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Funds. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When a Fund acquires a Banker's
Acceptance the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest bearing debt obligation of a bank. Commercial Paper is an unsecured,
short term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest bearing instrument. The Funds will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Funds only through the Master Note program of
the Funds' custodian bank, acting as administrator thereof. The Advisor to each
Fund will monitor, on a continuous basis, the earnings power, cash flow and
other liquidity ratios of the issuer of a Master Note held by a Fund.
Illiquid Investments. Each Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor to each Fund determines the liquidity of a Fund's investments and,
through reports from each Advisor, the Board monitors investments in illiquid
instruments. In determining the liquidity of a Fund's investments, the Advisor
to each Fund may consider various factors including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers in the
marketplace, (3) dealer undertakings to make a market, (4) the nature of the
security (including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the Fund's
rights and obligations relating to the investment). Investments currently
considered by the Funds to be illiquid include repurchase agreements not
entitling the holder to payment of principal and interest within seven days. If
through a change in values, net assets or other circumstances, a Fund were in a
position where more than 10% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
Options Trading. The Aggressive Growth Fund and the Sector Allocation Fund may
also purchase or sell put and call options for hedging purposes. This is a
highly specialized activity that entails greater than ordinary investment risks.
Regardless of how much the market price of the underlying security increases or
decreases, the option buyer's risk is limited to the amount of the original
investment for the purchase of the option. However, options may be more volatile
than the underlying securities, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying securities. A listed call option gives the purchaser of the
option the right to buy from a clearing corporation, and a writer has the
obligation to sell to the clearing corporation, the underlying security at the
stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is in consideration for undertaking the obligations under the option contract. A
listed put option gives the purchaser the right to sell to a clearing
corporation the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. Put and call options purchased by the Aggressive Growth Fund and
the Sector Allocation Fund will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices. The
obligation of the Aggressive Growth Fund or the Sector Allocation Fund to sell a
security subject to a covered call option written by it, or to purchase a
security subject to a secured put option written by it, may be terminated prior
to the expiration date of the option by the Fund executing a closing purchase
transaction, which is effected by purchasing on an exchange an option of the
same series (i.e., same underlying security, exercise price and expiration date)
as the option previously written. Such a purchase does not result in the
ownership of an option. A closing purchase transaction will ordinarily be
effected to realize a profit on an outstanding option, to prevent an underlying
security from being called, to permit the sale of the underlying security or to
permit the writing of a new option containing different terms on such underlying
security. The cost of such a liquidation purchase plus transaction costs may be
greater than the premium received upon the original option, in which event that
Fund will have incurred a loss in the transaction. An option position may be
closed out only on an exchange that provides a secondary market for an option of
the same series. There is no assurance that a liquid secondary market on an
exchange will exist for any particular option. A covered call option writer,
unable to effect a closing purchase transaction, will not be able to sell the
underlying security until the option expires or the underlying security is
delivered upon exercise with the result that the writer in such circumstances
will be subject to the risk of market decline in the underlying security during
such period. Either Fund will write an option on a particular security only if
that Fund's Advisor believes that a liquid secondary market will exist on an
exchange for options of the same series which will permit the Fund to make a
closing purchase transaction in order to close out its position.
When the Aggressive Growth Fund or the Sector Allocation Fund writes a covered
call option, an amount equal to the net premium (the premium less the
commission) received by the Fund is included in the liability section of the
Fund's statement of assets and liabilities as a deferred credit. The amount of
the deferred credit will be subsequently marked-to-market to reflect the current
value of the option written. The current value of the traded option is the last
sale price or, in the absence of a sale, the average of the closing bid and
asked prices. If an option expires on the stipulated expiration date or if
either Fund enters into a closing purchase transaction, it will realize a gain
(or loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold), and the deferred credit related to such
option will be eliminated. Any gain on a covered call option may be offset by a
decline in the market price of the underlying security during the option period.
If a covered call option is exercised, the Aggressive Growth Fund or the Sector
Allocation Fund may deliver the underlying security held by it or purchase the
underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received, and the Fund will
realize a gain or loss. If a secured put option is exercised, the amount paid by
the Fund for the underlying security will be partially offset by the amount of
the premium previously paid to the Fund. Premiums from expired options written
by the Aggressive Growth Fund or the Sector Allocation Fund and net gains from
closing purchase transactions are treated as short-term capital gains for
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.
Stock Index Options. The Aggressive Growth Fund and the Aggressive Growth Fund
and the Sector Allocation Fund may purchase or sell put and call stock index
options for hedging purposes. Stock index options are put options and call
options on various stock indexes. In most respects, they are identical to listed
options on common stocks. The primary difference between stock options and index
options occurs when index options are exercised. In the case of stock options,
the underlying security, common stock, is delivered. However, upon the exercise
of an index option, settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises the index option receives
an amount of cash if the closing level of the stock index upon which the option
is based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the stock index and the exercise price
of the option expressed in dollars times a specified multiple. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
The Aggressive Growth Fund and the Sector Allocation Fund may purchase call and
put stock index options in an attempt to either hedge against the risk of
unfavorable price movements adversely affecting the value of either Fund's
securities, or securities either Fund intends to buy, or otherwise in
furtherance of that Fund's investment objectives. The Aggressive Growth Fund and
the Sector Allocation Fund will sell (write) stock index options for hedging
purposes or in order to close out positions in stock index options which that
Fund has purchased.
The Aggressive Growth Fund and the Sector Allocation Fund's use of stock index
options is subject to certain risks. Successful use by the Funds of options on
stock indexes will be subject to the ability of each Advisor to correctly
predict movements in the directions of the stock market. This requires different
skills and techniques than predicting changes in the prices of individual
securities. In addition, either Fund's ability to effectively hedge all or a
portion of the securities in its portfolio, in anticipation of or during a
market decline through transactions in put options on stock indexes, depends on
the degree to which price movements in the underlying index correlate with the
price movements in that Fund's portfolio securities. Inasmuch as each Fund's
portfolio securities will not duplicate the components of an index, the
correlation will not be perfect. Consequently, the Aggressive Growth Fund and
the Sector Allocation Fund will bear the risk that the prices of its portfolio
securities being hedged will not move in the same amount as the prices of that
Fund's put options on the stock indexes. It is also possible that there may be a
negative correlation between the index and each Fund's portfolio securities that
would result in a loss on both such portfolio securities and the options on
stock indexes acquired by the Aggressive Growth Fund and the Sector Allocation
Fund.
INVESTMENT LIMITATIONS
Each Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose, means, with respect to
a Fund, the lesser of (i) 67% of the Fund's outstanding shares represented in
person or by proxy at a meeting at which more than 50% of its outstanding shares
are represented, or (ii) more than 50% of its outstanding shares. Unless
otherwise indicated, percentage limitations apply at the time of purchase.
As a matter of fundamental policy, each Fund may not:
(1) Issue senior securities, borrow money, or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of its total assets or (b) in
order to meet redemption requests, in amounts not exceeding 15% of its total
assets; the Fund will not make any investments if borrowing exceeds 5% of its
total assets until such time as total borrowing represents less than 5% of
Fund assets (except that the Aggressive Growth Fund may engage in short sales
of securities to the extent described in the Prospectus);
(2) With respect to 75% of its assets, invest more than 5% of the value of its
total assets in the securities of any one issuer or purchase more than 10% of
the outstanding voting securities of any class of securities of any one issuer
(except that securities of the U.S. Government, its agencies and
instrumentalities are not subject to this limitation);
(3) Invest 25% or more of the value of its total assets in any one industry or
group of industries (except that securities of the U.S. Government, its
agencies and instrumentalities are not subject to this limitation);
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Purchase or sell commodities or commodities contracts, real estate
(including limited partnership interests, but excluding readily marketable
securities secured by real estate or interests therein, readily marketable
interests in real estate investment trusts, readily marketable securities
issued by companies that invest in real estate or interests therein, or
mortgage-backed securities for the Fixed Income Fund as described in the
Prospectus) or interests in oil, gas, or other mineral exploration or
development programs or leases (although it may invest in readily marketable
securities of issuers that invest in or sponsor such programs or leases);
(6) Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from an
underwriter for an issuer may be deemed to be an underwriter under the federal
securities laws;
(7) Make short sales of securities or maintain a short position, except short
sales "against the box", and except that the Aggressive Growth Fund may engage
in short sales of securities to the extent described in the Prospectus; (a
short sale is made by selling a security the Fund does not own; a short sale
is "against the box" to the extent that the Fund contemporaneously owns or has
the right to obtain at no additional cost securities identical to those sold
short) (while each Fund has reserved the right to make short sales "against
the box", the Advisor to each Fund (other than the Aggressive Growth Fund) has
no present intention of engaging in such transactions);
(8) Participate on a joint or joint and several basis in any trading account in
securities; or
(9) Make loans of money or securities, except that the Fund may (i) invest in
repurchase agreements and commercial paper; (ii) purchase a portion of an
issue of publicity distributed bonds, debentures or other debt securities; and
(iii) acquire private issues of debt securities subject to the limitations on
investments in illiquid securities.
The following investment limitations are not fundamental, and may be changed
without shareholder approval. As a matter of non-fundamental policy, each Fund
may not:
(1) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of bonds,
guarantors) if more than 5% of its total assets would be invested in such
securities;
(2) Invest more than 10% of its net assets in illiquid securities; for this
purpose, illiquid securities include, among others (a) securities for which no
readily available market exists or which have legal or contractual
restrictions on resale, (b) fixed time deposits that are subject to withdrawal
penalties and have maturities of more than seven days, and (c) repurchase
agreements not terminable within seven days;
(3) Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together own
more than 5% of such issuer's securities;
(4) Write, purchase, or sells puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options (except that the Aggressive
Growth Fund and the Sector Allocation Fund may engage in options transactions
to the extent described in the Prospectus);
(5) Invest in warrants, valued at the lower of cost or market, exceeding more
than 5% of the value of the Fund's net assets; included within this amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange; warrants
acquired by the Fund in units or attached to securities may be deemed to be
without value; or
(6) Purchase any securities on margin except in connection with such short-term
credits as may be necessary for the clearance of transactions.
Whenever any fundamental investment policy or investment restriction states a
maximum percentage of assets, it is intended that if the percentage limitation
is met at the time the investment is made, a later change in percentage
resulting from changing total or net assets values will not be considered a
violation of such policy.
NET ASSET VALUE
The net asset value per share of each Fund is determined at 4:00 p.m. (3:00 p.m.
for the Fixed Income Fund), New York time, Monday through Friday, except on
business holidays when the New York Stock Exchange, or the Federal Reserve
Banking System for the Fixed Income Fund, is closed. The New York Stock Exchange
recognizes the following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day.
Any other holiday recognized by the New York Stock Exchange will be considered a
business holiday on which each Fund's net asset value will not be determined.
The net asset value per share of each Fund is calculated separately by adding
the value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" a Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to a Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Declaration of Trust, determinations
by the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets, with respect to a Fund are conclusive.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of each Fund are offered and sold on a continuous basis and
may be purchased through authorized investment dealers or directly by contacting
the Distributor or the Funds. Selling dealers have the responsibility of
transmitting orders promptly to the Funds. The public offering price of shares
of each Fund equals net asset value. Quaker Securities, Inc. (the "Distributor")
serves as Distributor of shares of the Funds. See "How Shares May Be Purchased"
in the Prospectus.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for each Fund pursuant to Rule 12b-1 under the 1940 Act (see "How Shares May Be
Purchased - Distribution Plan" in the Prospectus). Under the Plan each Fund may
expend up to 0.25% of its average net assets annually to finance any activity
which is primarily intended to result in the sale of shares of the Fund,
provided the Trust's Board of Trustees has approved the category of expenses for
which payment is being made. All expenditures under the Plan will be paid
entirely through the investment advisory fees payable to the Fund's investment
advisors. Potential benefits of the Plan to the Funds include savings to the
Funds in transfer agency costs, benefits to the investment process from growth
and stability of assets and maintenance of a financially healthy sponsoring
organization.
All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by the Funds will be borne by such
persons without any reimbursement from the Funds. Subject to seeking best price
and execution, the Funds may, from time to time, buy or sell portfolio
securities from or to firms that receive payments under the Plan.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan for each Fund and the Distribution Agreement with the Distributor have
been approved by the Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the Plan or any
related agreements, by vote cast in person or at a meeting duly called for the
purpose of voting on the Plan and such Agreement. Continuation of the Plan and
the Distribution Agreement must be approved annually by the Board of Trustees in
the same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan with
respect to each Fund is in the best interest of shareholders of that Fund and
that there is a reasonable likelihood of its providing a benefit to such Fund,
and the Board of Trustees has made such a determination for the current year of
operations under the Plan. The Plan and the Distribution Agreement may be
terminated at any time without penalty by a majority of those trustees who are
not "interested persons" or by a majority vote of the Fund's outstanding voting
stock. Any amendment materially increasing the maximum percentage payable under
the Plan must likewise be approved with respect to any Fund by a majority vote
of the Fund's outstanding voting stock, as well as by a majority vote of those
trustees who are not "interested persons." Also, any other material amendment to
the Plan must be approved by a majority vote of the trustees including a
majority of the independent Trustees of the Trust having no interest in the
Plan. In addition, in order for the Plan to remain effective, the selection and
nomination of Trustees who are not "interested persons" of the Trust must be
effected by the Trustees who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plan. Persons authorized to
make payments under the Plan must provide written reports at least quarterly to
the Board of Trustees for their review.
Redemptions. Under the 1940 Act, each Fund may suspend the right of redemption
or postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. Each Fund may also suspend or
postpone the recordation of the transfer of shares upon the occurrence of any of
the foregoing conditions.
In addition to the situations described in the Prospectus under "How Shares may
be Redeemed," each Fund may redeem shares involuntarily to reimburse the Fund
for any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on October 24, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of six series, as follows: the Quaker Enhanced
Stock Market Fund and the Quaker Fixed Income Fund, both managed by Fiduciary
Asset Management, Inc. of St. Louis, Missouri; the Quaker Core Equity Fund
managed by West Chester Capital Advisors, Inc. of West Chester, Pennsylvania;
the Quaker Aggressive Growth Fund managed by DG Capital Management, Inc. of
Wayland, Massachusetts; the Quaker Small-Cap Value Fund managed by Aronson +
Partners of Philadelphia, Pennsylvania; and the Quaker Sector Allocation Equity
Fund managed by Logan Capital Management, Inc. of Philadelphia, Pennsylvania.
The number of shares of each series shall be unlimited. The Trust does not
intend to issue share certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as each Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Funds, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A series
or class is affected by a matter unless it is clear that the interests of each
series or class in the matter are substantially identical or that the matter
does not affect any interest of the series or class. Under Rule 18f-2, the
approval of an investment advisory agreement, a Rule 12b-1 plan, or any change
in a fundamental investment policy would be effectively acted upon with respect
to a series only if approved by a majority of the outstanding shares of such
series. However, the Rule also provides that the ratification of the appointment
of independent accountants, the approval of principal underwriting contracts and
the election of Trustees may be effectively acted upon by shareholders of the
Trust voting together, without regard to a particular series or class.
When used in the Prospectus or this Additional Statement, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the shares of the Trust
or the applicable series or class present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Trust or the applicable series or
class.
When issued for payment as described in the Prospectus and this Additional
Statement, shares of each Fund will be fully paid and non-assessable.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting each Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including each Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
Another requirement for qualification as a regulated investment company under
the Code is that less than 30% of a series' gross income for a taxable year must
be derived from gains realized on the sale or other disposition of the following
investments held for less than three months: (l) stock and securities (as
defined in Section 2(a) (36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; or (3) foreign currencies (or
options, futures or forward contracts on foreign currencies) that are not
directly related to a series' principal business of investing in stocks or
securities (or options and futures with respect to stocks or securities).
Interest (including original issue discount and, with respect to certain debt
securities, accrued market discount) received by a series upon maturity or
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of this requirement. However, any other income which is attributable
to realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. Each
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including each Fund, will designate any distribution
of long term capital gains as a capital gain dividend in a written notice mailed
to shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including each Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including each Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Depending upon the extent of each Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, each
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of a
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
MANAGEMENT OF THE FUNDS
Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:
<TABLE>
<S> <C>
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
Howard L. Gleit, 56 Of Counsel
Trustee Zapruder & Odell
401 City Avenue, Suite 415 Bala Cynwyd, Pennsylvania since 1994
Bala Cynwyd, Pennsylvania previously, Partner
Pepper, Hamilton & Scheetz
Philadelphia, Pennsylvania 1991-93
Everett T. Keech, 56 Chairman and CEO
Trustee Pico Products, Inc.
One Tower Bridge, Suite 501 Lakeview Terrace, California
West Conshohocken, Pennsylvania
Laurie Keyes, 46* Chief Operating Officer
Trustee Quaker Securities, Inc.
Suite 75 Valley Forge, Pennsylvania
1288 Valley Forge Road (Distributor to the Quaker Family of Funds)
Valley Forge, Pennsylvania
Jeffry H. King, 53* Chairman and CEO
Trustee and Chairman Quaker Securities, Inc.
Suite 75 Valley Forge, Pennsylvania
1288 Valley Forge Road (Distributor to the Quaker Family of Funds)
Valley Forge, Pennsylvania
Kevin J. Mailey, 44 Senior Vice President
Trustee Penn Square Management Co.
2650 Westview Drive Wyomissing, Pennsylvania
Wyomissing, Pennsylvania
Louis P. Pektor III, 45 President
Trustee Ashley Development Company
961 Marcon Boulevard, Suite 300 Allentown, Pennsylvania since 1993
Allentown, Pennsylvania President
Greystone Capital
Allentown, Pennsylvania since 1993
previously, Executive Vice President
Wall Street Mergers & Acquisitions
Allentown, Pennsylvania
J. Hope Reese, 35 Comptroller, The Nottingham Company, Rocky Mount, North
Treasurer and Assistant Secretary Carolina (Administrator to the Quaker Family of Funds), since 1995;
105 North Washington Street previously, Cash Manager, Law Companies Group,
Rocky Mount, North Carolina 27802 Atlanta, Georgia, since 1993; previously,
Financial Manager, MGR Food Services, Atlanta, Georgia, since 1992;
previously Accounts Receivable Manager, Coca-Cola Bottling Co.,
Atlanta, Georgia
C. Frank Watson III, 26 Vice President
Secretary and Assistant Treasurer The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina (Administrator to the Quaker Family
Rocky Mount, North Carolina 27802 of Funds), since 1992; previously,
Student
University of North Carolina
Chapel Hill, North Carolina
Peter F. Waitneight, 54* President
Trustee and President Quaker Funds, Inc.
Suite 76 Valley Forge, Pennsylvania 1996;
1288 Valley Forge Road (Sponsor to the Quaker Family of Funds)
Valley Forge, Pennsylvania previously, President, Paragon Financial Consulting
Malvern, Pennsylvania 1995-96;
previously, Marketing Director
Turner Investment Partners
Berwyn, Pennsylvania 1993-95;
previously, Chief Financial Officer
Radnor Corporation
Radnor, Pennsylvania 1991-93
</TABLE>
* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his or her position with one of the Advisors, the
Distributor, or the Sponsor to the Trust.
There are no family relationships between the Trustees and executive officers of
the Trust, except between Ms. Keyes and Mr. King, who are married.
The officers of the Trust will not receive compensation from the Trust for
performing the duties of their offices. Each Trustee who is not an "interested
person" of the Trust receives a fee of $2,000 each year plus $250 per meeting
attended in person and $100 per meeting attended by telephone. All Trustees are
reimbursed for any out-of-pocket expenses incurred in connection with attendance
at meetings.
Principal Holders of Voting Securities. As of November 1, 1996, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of each Fund. On
the same date the following shareholders owned of record more than 5% of the
outstanding shares of beneficial interest of the Funds. Except as provided
below, no person is known by the Trust to be the beneficial owner of more than
5% of the outstanding shares of the Funds as of November 1, 1996.
<TABLE>
<S> <C>
QUAKER ENHANCED STOCK MARKET FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Fiduciary Asset Management 10 shares 100.000%**
8112 Maryland Avenue, Suite 310
Clayton, Missouri 63105
QUAKER CORE EQUITY FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
West Chester Capital Advisors 10 shares 100.000%**
106 South Church Street
West Chester, Pennsylvania 19382
QUAKER SECTOR ALLOCATION EQUITY FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Logan Capital Management 10 shares 100.000%**
One Liberty Place, Suite 2700
Philadelphia, Pennsylvania 19103
QUAKER SMALL-CAP VALUE FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Aronson + Partners 10 shares 100.000%**
230 South Broad Street
20th Floor
Philadelphia, Pennsylvania 19012
QUAKER AGGRESSIVE GROWTH FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
DG Capital Management 10 shares 100.000%**
8 Waybridge Lane
Wayland, Massachusetts 01778
QUAKER FIXED INCOME FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Fiduciary Asset Management 10 shares 100.000%**
8112 Maryland Avenue, Suite 310
Clayton, Missouri 63105
</TABLE>
* The shares indicated are believed by the Trust to be owned both of record and
beneficially.
** Pursuant to applicable SEC regulations, this shareholder is deemed to control
the indicated Fund.
Investment Advisor. Information about the investment advisor to each Fund (each
the "Advisor") and its duties and compensation as Advisor is contained in the
Prospectus.
Compensation of the Advisor with regards to the Quaker Core Equity Fund, the
Quaker Aggressive Growth Fund, the Quaker Small-Cap Value Fund, and the Quaker
Sector Allocation Equity Fund, based upon each Fund's average daily net assets,
is at the annual rate of 0.75%. Compensation of the Advisor with regards to the
Quaker Enhanced Stock Market Fund, based upon the Fund's average daily net
assets, is at the annual rate of 0.50%. Compensation of the Advisor with regards
to the Quaker Fixed Income Fund, based upon the Fund's average daily net assets,
is at the annual rate of 0.45%. Under each Advisory Agreement, the Advisor to
each Fund is not liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the performance of such Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Advisor in the
performance of its duties or from its reckless disregard of its duties and
obligations under the Agreement.
The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company (the "Administrator"), 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which
the Administrator receives a fee at the annual rate of 0.175% of the average
daily net assets of each Fund on the first $50 million; 0.150% of the next $50
million; and 0.125% of its average daily net assets in excess of $100 million.
In addition, the Administrator currently receives a base monthly fee of $2,000
for accounting and recordkeeping services for each Fund. The Administrator also
charges each Fund for certain costs involved with the daily valuation of
investment securities and is reimbursed for out-of-pocket expenses. The
Administrator charges a minimum fee of $3,000 per month per Fund for all of its
fees taken in the aggregate, analyzed monthly.
The Administrator will perform the following services for each Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (9) take such other action with respect to the Fund as
may be necessary in the opinion of the Administrator to perform its duties under
the agreement.
The Administrator also serves as each Fund's transfer agent and dividend
disbursing agent and will provide certain accounting and pricing services for
each Fund. As transfer agent, the Administrator will receive a monthly fee based
on the number of shareholders in each Fund, subject to a monthly minimum of
$500.
Distributor. Quaker Securities, Inc. (the "Distributor"), 1288 Valley Forge
Road, Post Office Box 987, Valley Forge, Pennsylvania 19482, acts as an
underwriter and distributor of each Fund's shares for the purpose of
facilitating the registration of shares of the Fund under state securities laws
and to assist in sales of Fund shares pursuant to a Distribution Agreement (the
"Distribution Agreement") approved by the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
each Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party. Sponsor. Quaker Funds, Inc. (the "Sponsor"),
1288 Valley Forge Road, Post Office Box 987, Valley Forge, Pennsylvania 19482,
acts as sponsor for each Fund and provides certain shareholder services (more
thoroughly described in the Prospectus) pursuant to a Shareholder Servicing
Agreement between the Trust and the Sponsor for each Fund approved by the Board
of Trustees of the Trust. The Shareholder Servicing Agreement may be terminated
by each party upon 60 days prior written notice to the other party.
Custodian. The Fifth Third Bank (the "Custodian"), 38 Fountain Square Plaza,
Cincinnati, Ohio 45263 serves as custodian for each Fund's assets. The Custodian
acts as the depository for each Fund, holds in safekeeping its portfolio
securities, collects all income and other payments with respect to portfolio
securities, disburses monies at the Fund's request and maintains records in
connection with its duties as Custodian. For its services as Custodian, the
Custodian is entitled to receive from each Fund an annual fee based on the
average net assets of the Fund held by the Custodian.
Independent Accountants. The firm of Deloitte & Touche LLP, 2500 One PPG Place,
Pittsburgh, Pennsylvania 15222, serves as independent accountants for the Funds,
and will audit the annual financial statements of the Funds, prepare each Fund's
federal and state tax returns, and consult with the Funds on matters of
accounting and federal and state income taxation.
SPECIAL SHAREHOLDER SERVICES
Each Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Administrator will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
net asset value on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Administrator.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. Each Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Funds. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Funds. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the
Funds upon sixty days written notice or by a shareholder upon written notice to
the Funds. Applications and further details may be obtained by calling the Funds
at 800-220-8888, or by writing to:
The Quaker Family of Funds
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Purchases in Kind. Each Fund may accept securities in lieu of cash in payment
for the purchase of shares in the Fund. The acceptance of such securities is at
the sole discretion of the Advisor to each Fund based upon the suitability of
the securities accepted for inclusion as a long term investment of the Fund, the
marketability of such securities, and other factors which the Advisor may deem
appropriate. If accepted, the securities will be valued using the same criteria
and methods as described in "How Shares are Valued" in the Prospectus.
Transactions involving the issuance of shares in a Fund for securities in lieu
of cash will be limited to acquisitions of securities (except for municipal debt
securities issued by state political subdivisions or their agencies or
instrumentalities) which: (a) meet the investment objectives and policies of the
Fund; (b) are acquired for investment and not for resale; (c) are liquid
securities which are not restricted as to transfer either by law or liquidity of
market; and (d) have a value which is readily ascertainable (and not established
only by evaluation procedures) as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange, or NASDAQ.
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem their securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Funds to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein each Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the applicable Fund at the address shown herein. Your request should
include the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (See the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Fund and the yield of the Fixed
Income Fund may be quoted in advertisements, sales literature, shareholder
reports or other communications to shareholders. Each Fund computes the "average
annual total return" of each Fund by determining the average annual compounded
rates of return during specified periods that equate the initial amount invested
to the ending redeemable value of such investment. This is done by determining
the ending redeemable value of a hypothetical $1,000 initial payment. This
calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return. ERV = ending redeemable value at the end
of the period covered by the computation of a hypothetical $1,000 payment made
at the beginning of the period. P = hypothetical initial payment of $1,000. n =
period covered by the computation, expressed in terms of years.
Each Fund may also compute the aggregate total return of each Fund, which is
calculated in a similar manner, except that the results are not annualized. The
calculation of average annual total return and aggregate total return assume
that there is a reinvestment of all dividends and capital gain distributions on
the reinvestment dates during the period. The ending redeemable value is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations. These performance quotations should not be considered as
representative of the performance of the Funds for any specified period in the
future.
The yield of the Fixed Income Fund is computed by dividing the net investment
income per share earned during the period stated in the advertisement by the
maximum offering price per share on the last day of the period. For the purpose
of determining net investment income, the calculation includes, among expenses
of the Fund, all recurring fees that are charged to all shareholder accounts and
any nonrecurring charges for the period stated. In particular, yield is
determined according to the following formula:
Yield =2[(A - B + 1)6-1]
CD
Where: A equals dividends and interest earned during the period; B equals
expenses accrued for the period (net of reimbursements); C equals average daily
number of shares outstanding during the period that were entitled to receive
dividends; D equals the maximum offering price per share on the last day of the
period.
Each Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, each Fund may compare its performance to
the S&P 500 Index. The Fixed Income Fund may also compare its performance with
the Salomon Brothers Broad Investment Grade Index. The Small-Cap Value Fund may
also compare its performance with the Russell 2500 Index. Comparative
performance may also be expressed by reference to a ranking prepared by a mutual
fund monitoring service or by one or more newspapers, newsletters or financial
periodicals. Each Fund may also occasionally cite statistics to reflect its
volatility and risk. Each Fund may also compare its performance to other
published reports of the performance of unmanaged portfolios of companies. The
performance of such unmanaged portfolios generally does not reflect the effects
of dividends or dividend reinvestment. Of course, there can be no assurance that
any Fund will experience the same results. Performance comparisons may be useful
to investors who wish to compare a Fund's past performance to that of other
mutual funds and investment products.
Of course, past performance is not a guarantee of future results.
Each Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, each Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specific period of
time.
Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Investors may use such indices in addition to the Funds' Prospectus to obtain a
more complete view of each Fund's performance before investing. Of course, when
comparing a Fund's performance to any index, factors such as composition of the
index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for each Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time each Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. Each Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). Each Fund may also depict the historical performance
of the securities in which the Fund may invest over periods reflecting a variety
of market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
Each Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
Comparative information about the yield of the Fixed Income Fund and about
average rates of return on certificates of deposits, bank money market deposit
accounts, money market mutual funds, and other similar types of investments may
be included in Fixed Income Fund communications. A bank certificate of deposit,
unlike the Fixed Income Fund's shares, pays a fixed rate of interest and
entitles the depositor to receive the face amount of the certificate at
maturity. A bank money market deposit account is a form of savings account which
pays a variable rate of interest. Unlike the Fixed Income Fund's shares, bank
certificates of deposit and bank money market deposit accounts are insured by
the Federal Deposit Insurance Corporation. A money market mutual fund is
designed to maintain a constant value of $1.00 per share and, thus, a money
market fund's shares are subject to less price fluctuation than the Fixed Income
Fund's shares.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Funds may generally acquire from time to time fixed income securities that
meet the following minimum rating criteria ("Investment Grade Debt Securities")
or, if unrated, are in the Advisor's opinion comparable in quality to Investment
Grade Debt Securities. The Fixed Income Fund, however, intends to limit its
portfolio to a more restrictive quality criteria, limiting portfolio investment
to those securities in the three highest ratings, as described below, or if not
rated, of equivalent quality as determined by the Advisor to the Fixed Income
Fund. The various ratings used by the nationally recognized securities rating
services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Funds may invest should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating is evaluated independently. Ratings are
based on current information furnished by the issuer or obtained by the rating
services from other sources that they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for debt in higher rated
categories.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds may have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes and
is to be considered as an upper medium grade obligation. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such debt lacks outstanding investment characteristics
and in fact has speculative characteristics as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very moderate and not
well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated
in the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
F-1+.
A - Bonds that are rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse impact
on these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation. The following summarizes
the three highest ratings used by Fitch for short-term notes, municipal notes,
variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have satisfactory degree of assurance
for timely payment, but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
<PAGE>
PART C
QUAKER INVESTMENT TRUST
FORM N1-A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements:
To be filed by Post-Effective Amendment
b) Exhibits
<TABLE>
<S> <C>
(1) Declaration of Trust - Amended and Restated Declaration of
Trust-Incorporated by reference 8/29/96
(2) By-Laws - Amended and Restated By-Laws-Incorporated by reference
8/29/96
(3) Not Applicable
(4) Not Applicable - the series of the Registrant do not issue
certificates
(5) (a) Investment Advisory Agreement for Quaker Enhanced Equity Index
Fund-Incorporated by reference 8/29/96
(b) Investment Advisory Agreement for Quaker Core Equity
Trust-Incorporated by reference 8/29/96
(c) Investment Advisory Agreement for Quaker Aggressive Growth
Fund-Incorporated by reference 8/29/96
(d) Investment Advisory Agreement for Quaker Small Cap Value
Fund-Incorporated by reference 8/29/96
(e) Investment Advisory Agreement for Quaker Sector Rotation Equity
Fund-Incorporated by reference 8/29/96
(f) Investment Advisory Agreement for Quaker Fixed Income
Fund-Incorporated by reference 8/29/96
(6) (a) Distribution Agreement for Quaker Enhanced Equity Index
Fund-Incorporated by reference 8/29/96
(b) Distribution Agreement for Quaker Core Equity Trust-Incorporated by
reference 8/29/96
(c) Distribution Agreement for Quaker Aggressive Growth Fund-Incorporated
by reference 8/29/96
(d) Distribution Agreement for Quaker Small Cap Value Fund-Incorporated
by reference 8/29/96
(e) Distribution Agreement for Quaker Sector Rotation Equity
Fund-Incorporated by reference 8/29/96
(f) Distribution Agreement for Quaker Fixed Income Fund-Incorporated by
reference 8/29/96
(7) Not Applicable
(8) Custodian Agreement - Incorporated by reference; filed on 7/20/93
(9) (a) Fund Accounting, Dividend Disbursing & Transfer Agent and Administration
Agreement-Incorporated by reference 8/29/96
(10) Opinion and Consent of Counsel-Incorporated by reference 11/12/96
(11) Consent of Auditors-Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) (a) Plan of Distribution under Rule 12b-1 for Quaker Enhanced Equity
Index Fund-Incorporated by reference 11/12/96
(b) Plan of Distribution under Rule 12b-1 for Quaker Core Equity
Trust-Incorporated by reference 11/12/96
(c) Plan of Distribution under Rule 12b-1 for Quaker Aggressive Growth
Fund-Incorporated by reference 11/12/96
(d) Plan of Distribution under Rule 12b-1 for Quaker Small Cap Value
Fund-Incorporated by reference 11/12/96
(e) Plan of Distribution under Rule 12b-1 for Quaker Sector Rotation
Equity Fund-Incorporated by reference 11/12/96
(f) Plan of Distribution under Rule 12b-1 for Quaker Fixed Income
Fund-Incorporated by reference 11/12/96
(16) Computation of Performance-to be filed by Post-Effective Amendment
(17) (a) Copies of Powers of Attorney-Not applicable
(b) Financial Data Schedules-to be filed by Post-Effective Amendment
(18) Not applicable
</TABLE>
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with Registrant.
<PAGE>
ITEM 26. Number of Record Holders of Securities
As of November 14, 1996, the number of record holders of each class
of securities of Registrant was as follows:
Number of
Title of Class Record Holders
Quaker Enhanced Equity Index Fund 0
Quaker Core Equity Trust 0
Quaker Aggressive Growth Fund 0
Quaker Small Cap Value Fund 0
Quaker Sector Rotation Equity Fund 0
Quaker Fixed Income Fund 0
ITEM 27. Indemnification
Reference is hereby made to the following sections of the
following documents filed or included by reference as exhibits
hereto:
Article VII, Sections 5.4 of the Registrant's Declaration of
Trust, Article XIV Section 8(b) of the Registrant's Investment
Advisory Agreements, Section 8(b) of the Registrant's
Administration Agreement, and Section (6) of the Registrant's
Distribution Agreements.
The Trustees and officers of the Registrant and the personnel of
the Registrant's administrator are insured under an errors and
omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by
Rule 17g-1 under the Investment Company Act of 1940.
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled
"Trustees and Officers" for the activities and affiliations of
the officers and directors of the Investment Advisors of the
Registrant. Except as so provided, to the knowledge of
Registrant, none of the directors or executive officers of the
Investment Advisors is or has been at any time during the past
two fiscal years engaged in any other business, profession,
vocation or employment of a substantial nature. The Investment
Advisors currently serve as investment advisors to numerous
institutional and individual clients.
ITEM 29. Principal Underwriter
(a) Quaker Securities, Inc. is underwriter and distributor for The
Quaker Family of Mutual Funds and does not serve as underwriter
or distributor for any other investment companies.
(b)
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
Jeffry H. King Chairman & CEO Chairman
1288 Valley Forge Rd
Valley Forge, PA
Laurie Keyes Chief Operating Officer Trustee
1288 Valley Forge Rd
Valley Forge, PA
(c) Not applicable
ITEM 30. Location of Accounts and Records
<PAGE>
All account books and records not normally held by the Custodian and
the Investment Advisors are held by the Registrant, in the offices
of The Nottingham Company, Administrator to the Registrant.
The address of The Nottingham Company is 105 North Washington
Street, P.O. Drawer 69, Rocky Mount, North Carolina 27802-0069.
ITEM 31. Management Services
The substantive provisions of the Fund Accounting, Dividend
Disbursing & Transfer Agent and Administration Agreement, as
amended, between the Registrant and The Nottingham Company are
discussed in Part B hereof.
ITEM 32. Undertakings
Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effetive date on this Post-Effective Amendment to
Registrant's 1933 Act registration statement.
Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the latest annual report of each series of
Registrant to shareholders upon request and without charge.
Registrant undertakes to call a meeting of shareholders, at the
request of at least 10% of Registrant's outstanding shares, for the
purpose of voting upon the question of removal of a Trustee or
Trustees and to assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940.
<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 Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Rocky Mount, State of North Carolina on the
23rd day of August 1996.
QUAKER INVESTMENT TRUST
By: * /s/ PETER F. WAITNEIGHT
Peter F. Waitneight
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ C. FRANK WATSON III
C. Frank Watson III
Secretary
*/s/ PETER F. WAITNEIGHT
Peter F. Waitneight
Trustee and President
*/s/ JEFFRY H. KING
Jeffry H. King
Chairman
*/s/ LAURIE KEYES
Laurie Keyes
Trustee
*/s/ HOWARD L. GLEIT
Howard L. Gleit
Trustee
/s/ EVERETT T. KEECH
Everett T. Keech
Trustee
*/s/ KEVIN J. MAILEY
Kevin J. Mailey
Trustee
*/s/ LOUIS P. PEKTOR III
Louis P. Pektor III
Trustee
*/s/ J. HOPE REESE
J. Hope Reese
Treasurer
